Crain's Detroit Business, Feb. 20, 2017 issue by Crain's Detroit Business

FEBRUARY 20 - 26, 2017

A mini-boom in home construction?

Cottage Inn bakes up a growth plan Pizza chain looks to expand in Midwest — and to China, Page 4

Fewer homes are on the market, spurring demand for new building, Page 3

Entrepreneurship

For Moosejaw co-founder, a whirlwind of big deals By Annalise Frank afrank@crain.com

For most entrepreneurs, the sale of a business they started is an achievement of a lifetime. For Robert Wolfe, it’s just another week. Wal-Mart Stores Inc.’s purchase last week of Madison Heights-based outdoor apparel and gear retailer Moosejaw for $51 million even surprised its co-founder. When the company’s first store opened, “I was 21 years old and I had no idea what I was doRobert Wolfe: ing,” said Wolfe, Co-founded who still owned a MooseJaw and minority share in CrowdRise. the company at the time of the sale. “I would have never, ever anticipated that this would have happened.” It was the second sale of one of Wolfe’s startups this year, after the January sale of the crowdfunding site CrowdRise to GoFundMe. Wolfe is still CEO of CrowdRise. Wolfe said he hasn’t “even taken 10 seconds off” since the sale of either company. He said he has no intention of leaving CrowdRise, a company he adores,

any time soon. But if he could see himself doing something else much further down the line, it would be advising and possibly investing in startups with his brother Jeffrey. They recently helped their cousin Anthony Mendelson start California-based Mighty Audio. “It isn’t something I’ve investigated at all” as an option for the future, Wolfe said. But “we have some experience in startups. … We’ve made all the mistakes before.” Moosejaw will continue to operate its online sales at Moosejaw.com and 10 existing storefronts, Wal-Mart said in a statement. Moosejaw’s locations include downtown Detroit, Birmingham and Ann Arbor. The company vows to maintain its independent identity as part of the retail world’s biggest goliath, but WalMart adds financial and marketing muscle that could help it expand. “We’ll still be selling the same brands, same marketing voice, but have a much bigger budget, I suppose you’d say,” said Eoin Comerford, Moosejaw’s CEO. Comerford and his team will oversee outdoor retail across all of WalMart U.S. e-commerce properties as part of a change in how those sales are structured, Wal-Mart spokesman Ravi Jariwala told Crain’s. Moosejaw’s expertise, rich visual marketing material and wealth of SEE MOOSEJAW, PAGE 18

Mike Ilitch

OLYMPIA ENTERTAINMENT

Mike Ilitch’s fix-up of the Fox Theatre was one of the most consequential restoration projects in Detroit history, and in 1990, he accepted the National Preservation Award from the National Trust for Historic Preservation.

Ilitch: A complex legacy

Fox restoration a jewel, but tensions over demolitions simmered By Kirk Pinho kpinho@crain.com

In 1990, Mike Ilitch accepted the National Preservation Award from the National Trust for Historic Preservation for the renovation of the Fox Theatre. Fifteen years later, preservationists stood in front of a bulldozer to try to stop his demolition of the Ilitch-owned Madison-Lenox Hotel. The controversial 2005 demolition in the run-up to Super Bowl XL illustrates just how complex — and sometimes testy — Ilitch’s relationship was with the historic

preservation community, which lauds him for his restoration of the Fox but laments what it views as unnecessary levelings of old buildings. The Fox was one of most consequential restoration projects in the city’s history. It was a $12 million grenade that Ilitch, who died Feb. 10, threw at the notion that Detroit wasn’t a good place to do business or invest. But the national award and other plaudits that project won weren’t on Nancy Finegood’s mind 12 years ago when she did something she had never done before and hasn’t done since. The executive director of the

Mike Ilitch

SEE ILITCH, PAGE 21

Who owns the Tigers? Family plan a matter of trust By Bill Shea bshea@crain.com

TYLER CLIFFORD/CRAIN’S DETROIT BUSINESS

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It’s a simple question with a somewhat complex answer: Who owns the Detroit Tigers? Mike Ilitch, who bought the team for $85 million in 1992, died Feb. 10 at age 87. Because his widow, Marian Ilitch, owns MotorCity Casino Hotel, she is prohibited from inheriting the Tigers under Major League Baseball’s rule that forbids team owners from having any stake in gambling operations. That complicates the ownership question for the Tigers in ways it doesn’t for the Ilitch-owned Detroit Red Wings; the National Hockey

Chris Ilitch: Runs the team’s operations.

Marian Ilitch: Owns MotorCity Casino.

League has no such prohibitions. As part of estate and succession planning, the Tigers at some point were put into a trust, and Christo-

pher Ilitch, the son of Mike and Marian who has run the team’s dayto-day business operations since 2004, became the de facto owner and chief executive of the Tigers upon his father’s death. He ultimately will decide the financial direction of the franchise, and the ownership change comes after the team’s senior management had already signaled that the era of Mike Ilitch’s free spending on players is over. The actual owner of the team is the trust, however, and such trusts offer a way around MLB’s gambling rules. SEE TIGERS, PAGE 22

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MICHIGAN BRIEFS MC Sports files Chapter 11, plans liquidation sales Grand Rapids-based MC Sports filed for Chapter 11 bankruptcy last week and said it planned liquidation sales at all 68 of its stores in seven states, including three in Southeast Michigan. The privately held sporting goods company cited poor holiday sales, increased competition, the growth of e-commerce and the “blurring of distribution channels” as being among its challenges. MC Sports’ plan to wind down and sell off its merchandise won the interim approval of a U.S. Bankruptcy Court judge on Thursday. It was not immediately clear what would happen to MC Sports’ approximately 1,300 employees. Among its stores are locations at Lakeside Mall in Sterling Heights, Briarwood Mall in Ann Arbor and Town Square Shopping Center in Brighton. MC Sports opened its first store in Grand Rapids in 1946.

MICH-CELLANEOUS

J A Republican-led House panel voted to cut Michigan’s income tax next year and eliminate it over a number of decades despite “serious concerns” lodged by Gov. Rick Snyder’s administration, AP reported. Supporters said the bill, approved

MC SPORTS

The MC Sports store at Lakeside Mall in Sterling Heights is among three locations in Southeast Michigan.

7-4, would fulfill a nearly decade-old promise to reduce the 4.25 percent tax to 3.9 percent after it was raised to help balance the budget in 2007. Opponents said the reduction would cost the state’s $10.5 billion general fund $680 million in revenue next budget year and $1.1 billion the following year at a time the budget will tighten due to other tax cuts and policy changes. J The owner of two inns in northern Michigan is challenging a room tax that is used to promote tourism around Sleeping Bear Dunes National Lakeshore, AP reported. David Gersenson, who runs Sylvan Inn and Lakeshore Inn in Glen Arbor, filed a lawsuit last week that could impact the more than 50 tourism agencies around the state that rely on the special room tax. Gersenson said he can effectively advertise on his own and that the 5 percent tax collected by

INSIDE

Sleeping Bear Dunes Visitors Bureau violates his First Amendment rights. State law allows tourism agencies to levy a tax if lodging owners vote. A similar lawsuit was dropped last year after a Cheboygan County resort owner sold his property. J Although automakers expect a drop in auto sales this year after a spike in 2016, Comerica Bank projects Michigan’s economy will grow 2.6 percent in 2017 on the heels of automaker investments. The Dallas-based bank, in its latest Michigan Economic Outlook, said new technology developments such as autonomous vehicles will spur new economic activity. J The Michigan Public Service Commission said all power providers met or exceeded a requirement to supply 10 percent of their electricity from renewable sources in 2015, AP reported. The standard will increase to 12.5 percent in 2019 and to 15 percent in 2021. The MPSC said the 10 percent standard has led to the development of more than 1,670 megawatts of new renewable energy projects, mostly wind farms. J Gov. Rick Snyder named former state Rep. Aric Nesbitt as Michigan lottery commissioner. The Lawton native, will replace M. Scott Bowen, who is resigning to pursue private-sector work. J Ron Weiser, a former chairman of

ilitchbusiness.wayne.edu

the Michigan Republican Party and a prominent Ann Arbor real estate developer, was unanimously elected as chairman again after Ronna Romney McDaniel stepped down to become head of the national party. Weiser was elected to the University of Michigan board of regents last year and was ambassador to the Slovak Republic under President George W. Bush. J LG Chem Michigan Inc. announced an expansion project that could yield upward of 150 new jobs at its headquarters in Holland, MiBiz reported. The manufacturer of lithium ion battery cells said it will begin construction of the 100,000-squarefoot expansion in March and expects the project to conclude in August. The company did not share how much it invested in the project. J High-end luxury carpet manufacturer Scott Group Custom Carpets LLC acquired Grand Rapids crosstown rival PWV Studios Ltd., MiBiz reported. PWV makes luxury carpets for business aviation, commercial and high-end residential markets. The acquisition will allow the Scott Group to expand its product line into the business aviation market and offer additional textures and patterns. J US Farathane in Port Huron expects to add 155 jobs through the summer, The Times Herald in Port Huron reported. Most are manufac-

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COMPANY INDEX: SEE PAGE 22 turing positions, with 20 technical positions. The company is expanding its workforce, currently at around 330, because of a contract signed with Chrysler in November. Fulfilling the contract will require the company to expand to an additional building and purchase more equipment. J A new addition to the luxurious The H Residence development in downtown Midland is Gratzi, an upscale Italian restaurant. The 200-seat eatery, with an unspecified opening date, is owned and operated by Mainstreet Ventures, the Ann Arbor-based company behind The Real Seafood Co. in Bay City and Ann Arbor, MLive.com reported. Mainstreet operates a similar Italian restaurant, also called Gratzi, in Ann Arbor.

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Real estate

Health care

Ordinance would require affordable housing

McLaren Flint at odds with state, Fieger on water crisis

Detroit rule targets home projects of 20 units or more

By Chad Livengood clivengood@crain.com

By Kirk Pinho kpinho@crain.com

A proposed Detroit ordinance would require developers to make 20 percent of their units affordable for low-income renters. The plan, being worked on by Detroit City Council member Mary Sheffield and Mayor Mike Duggan’s administration, would be another requirement for developers, just a few months after city voters approved an ordinance requiring those seeking large projects to negotiate benefits for the surrounding community. “The development community prefers to have clear guidelines and expectations,” Sheffield said. “If they know what we are requiring, it’s written; they prefer that to coming in and not exactly knowing. I don’t think it’s going to hinder the process and slow anything down.” As currently written, the draft ordinance would require developers of residential projects with at least 20 units make 20 percent of them affordable based on area-median income if they are built on city-owned land or in city-owned buildings, or receive funding from the city through things such as a Community Development Block Grant or HOME Investment Partnership Program that come to the city through the U.S. Department of Housing and Urban Development. The ordinance has not yet been introduced. Richard Hosey II, who owns Detroit-based Hosey Development LLC and is a partner with Detroit-based Capitol Park Partners LLC, said he understands the intent of the ordinance. But, he said, it's important to ensure the rules don't hinder development. “The issue is making sure that it’s always financially feasible,” said Hosey, who is also a member of the Downtown Development Authority board of directors. “Because there are fewer incentives available to help get things across the finish line, it’s a careful balance to make sure it’s not stopping development, especially in the expanse of the city.” SEE HOUSING, PAGE 19

and Jay Greene jgreene@crain.com

in Lake Orion near Squirrel and Dutton roads with 111 homes ranging from $350,000 to $450,000. More than half of those have been sold, Wertheimer said. Sure enough, SEMCOG shows modest increases in building permits issued every year since 2009. Still, the 5,519 issued last year pale in comparison to the 16,471 issued in 2000. Howard Fingeroot, managing partner of Bloomfield Hills-based Pinnacle Homes, says his homebuilding company’s sales last year were the highest they’ve been — even in December, traditionally a slow sales month. “December was actually the strongest sales month of the year for new homes,” he said. A report released last week by Realcomp Ltd. II said that home and condo sales fell 0.1 percent from 3,778 in January 2016 to 3,775 last month in Wayne, Oakland, Macomb

McLaren Flint Hospital is ensnarled in a high-stakes fight with the state’s health department and attorney Geoffrey Fieger over its handling of a deadly outbreak of Legionnaires’ disease linked to Flint’s water contamination crisis. The long-simmering battle with the Michigan Department of Health and Human Services burst into full public view last week when the state agency used condemnatory language to describe the hospital as “unsanitary” and a potential hazard for patients. The state health agency has focused its attention on McLaren Flint because 10 of 12 people who died in Genesee County’s 2014-15 Legionnaires’ outbreak had contact with McLaren before contracting the respiratory disease. Only two patients were genetically connected to legionella bacteria found at the hospital. However, a third person with the same strain of Legionnaires’ had no contact with McLaren, which is part of a statewide, multibillion-dollar hospital chain that includes McLaren Pontiac and McLaren Mt. Clemens. McLaren Flint officials say the state is trying to shift blame for its failure to act on the legionella outbreak in 2014 and 2015 when at least 78 other people in Genesee County became sick with the flu-like and sometimes deadly disease. The finger-pointing between McLaren and state health officials is backdropped by Attorney General Bill Schuette’s lingering criminal investigation into the Flint water crisis and a looming $100 million civil lawsuit against McLaren over the Legionnaires’ deaths. “You’ve got criminal, civil, administrative and then add in politics. I don’t think you could make for a more toxic situation,” said Peter Henning, a law professor at Wayne State University. “This is going to take years to sort out.” Last week, DHHS took extraordinary measures to impose an

SEE BUILD, PAGE 19

SEE WATER, PAGE 17

KIRK PINHO/CRAIN’S DETROIT BUSINESS

The Stonegate subdivision in Lake Orion near Squirrel and Dutton roads will have 111 homes ranging from $350,000 to $450,000.

New housing shows growth as fewer homes ready to sell Steep drop in inventory spurs increase in residential construction By Kirk Pinho kpinho@crain.com

Buyers are having an increasingly difficult time finding move-in-ready homes in metro Detroit, helping drive an increase in new homes being built. But don’t expect the region to come close to the housing boom of the early and mid-2000s, which helped bring the national economy to its knees by 2008. Rather, the market for new construction is looking increasingly healthy for homebuilders. More than 11,000 single-family building permits were issued every year, and nearly 87,000 in all, from 2000 to 2005 in the region, according to Southeast Michigan Council of Governments data. But with the region reeling from an economic uppercut, in 2009 there were just 1,331, the fewest this century. And the number of homes available for sale has plummeted, according to Farmington Hills-based

Realcomp Ltd. II, which tracks sales, median sale prices and how quickly homes are sold. In January 2016, there were 18,194 listings. By last Howard Fingeroot: month, there Saw strong sales in were just December. 10,172, a 44.1 percent plunge. And this January’s numbers were not an aberration: In each of the last several months, year-over-year on-market listings have fallen by at least 38 percent. “There is not a lot of really good used homes for sale, so we are seeing some slow growth,” said Randy Wertheimer, CEO of Farmington Hills-based builder Hunter Pasteur Homes. For example, the company is building the Stonegate subdivision

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Cottage Inn Pizza growing in Midwest, looks to open 200 locations in China By Kurt Nagl knagl@crain.com

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COTTAGE INN

Ann Arbor-based Cottage Inn Pizza is expanding with 10 locations in Indiana, Illinois and Ohio as it prepares for even more growth in China. The 10 Midwest locations are set to either open or be in development by the end of the year, according to a news release. Owned by the Michos family, Cottage Inn operates more than 50 locations â&#x20AC;&#x201D; most of them franchised â&#x20AC;&#x201D; in Michigan, Ohio, Florida and North Carolina. Nine delivery locations in the Ann Arbor and Lansing markets are corporate-owned, as well as two full restaurants in Ann Arbor, including the original that opened in 1948, said Deborah Masse, senior vice president at Cottage Inn. The investment required to open a Cottage Inn Pizza franchise is $200,000-$350,000. â&#x20AC;&#x153;Our pizza is a mainstay of both college students and families in Michigan, and now weâ&#x20AC;&#x2122;re ready to bring our brand to pizza lovers across the country,â&#x20AC;? Masse said. This Midwest expansion coincides with the companyâ&#x20AC;&#x2122;s efforts to grow internationally, with up to 200 locations planned to open in China over the next 15 years. Cottage Inn opened its first and only restaurant in China in Qingdao late last year. â&#x20AC;&#x153;Chinaâ&#x20AC;&#x2122;s population and love of the western world, especially pizza, is reason enoughâ&#x20AC;? to expand there, Masse said. â&#x20AC;&#x153;Since Pizza Hut has been in China for a while, our investors say the Chinese people are looking forward to more choices, something new.â&#x20AC;? The pizza chain has partnered with Chinese investment group Kaixin-ke Catering to develop the restaurants. They hope to open 30 stores by the end of 2018, and 30 more every two years through 2030. The expansion will begin in Qingdao and ideally spread to Shanghai and Beijing. That ambitious plan â&#x20AC;&#x153;depends on the developersâ&#x20AC;&#x2122; reach with investors and how far they can go,â&#x20AC;? Masse said.

The restaurants in China will be primarily full service, with menu tweaks to cater to the culture, including offerings like Durian fruit, seafood and vegetables not common in the U.S. â&#x20AC;&#x153;It was evident that going out to eat is more fitting for the culture in China, although the Cottage Inn Pizza restaurants in China will offer delivery through third-party vendors and do offer pickup as well,â&#x20AC;?

Masse said. When competitor Dominoâ&#x20AC;&#x2122;s Pizza dipped its toe into the Chinese market, it found tough going for a while. Ann Arbor Township-based Dominoâ&#x20AC;&#x2122;s has nearly 100 stores in China, primarily around Beijing and Shanghai, but got off to a slow start there due to localsâ&#x20AC;&#x2122; eating habits. Now, Domino's is seeing more growth in the country.

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Beaumont to commercialize its mobile oxygen tank/IV system By Jay Greene jgreene@crain.com

BEAUMONT HEALTH

Beaumont health care equipment planner Rocco Ottolino (right) tests the design features of a mobile oxygen tank/IV carrier he and clinical engineer Greg Megahan developed. Joe Tuchman, president of RiseMobility LLC, which is marketing the device, is posing as a patient for the test.

Beaumont Hospital clinical designers Greg Megahan and Rocco Ottolino were asked in 2014 by nurses in the Royal Oak hospital’s pulmonary mobility unit to find a safer and less expensive way for patients to get mobility exercises. Patients in pulmonary units are attached to multiple medical devices, including heavy oxygen tanks for breathing and delicate IV infusion lines for medicine delivery. They also often need to move around hospital floors for exercise. When they do, sometimes two or three nurses or aides must accompany them to keep the medical devices from falling off the rolling carts or the tubes from crossing or crimping. Assisting patients to move around safety is costly from a staffing perspective and can potentially lead to accidents if staff members aren’t careful. Megahan, a clinical engineer, and Ottolino, a health care equipment planner, felt there must be a better way. “There is a need for a nurse and other staff members to help ambulate patients on oxygen,” said Ottolino. “What they had available to them wasn’t sufficient. It had an IV pole with an infusion or medicine pump, and an oxygen tank on a rolling cart that required many people to help” with because it is large, heavy and unbalanced. Over a series of shifts, Megahan, a clinical engineer, and Ottolino observed the mobility exercises with the patients. They analyzed the problem with the existing IV/oxygen tank carriers. Then they came up with an innovative solution — a metal clamp that secures all medical devices with a single mount on a four-wheeled rolling cart. If the product tests underway in the Beaumont's 35-bed pulmonary unit are successful, which so far they appear to be, the mobile IV/oxygen tank holder may be commercialized and sold to other hospitals. Beaumont has signed a licensing and marketing agreement with a Detroit-based startup company, RiseMobility LLC, headed by Joe Tuchman, an Oakland University business school graduate. “I did market research to see if the product was viable,” Tuchman said. “I called 50 hospitals in Michigan, Illinois and Wisconsin to find out what problems they had (with IV poles on rolling carts) and if they were interested in a solution.” Tuchman then needed to find a manufacturer that would mass-produce the devices for much less than the $300 it cost Beaumont to build in its machine shop. He found Opus Mach, a startup manufacturer in Warren. “They were able to do it for $63. Beaumont bought 12 to test.” Richard Kennedy, vice president of the Beaumont Research Institute, said the invention is a relatively straightforward design to improve SEE MOBILE,PAGE 7

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MOBILE FROM PAGE 6

patient care, safety and staff efficiency. “This will free up hands and minimize the number of people needed to help transport people with oxygen tanks,” Kennedy said. Kennedy also oversees the Beaumont Commercialization Center, which tests employee ideas and pursues patents for innovations. “This is a perfect example of how Beaumont, Oakland University and its graduates can improve patient safety and care,” Kennedy said. “Beaumont wants to be more involved in local companies, and the technologies we can develop can have applications elsewhere.”

“This will free up hands and minimize the number of people needed to help transport people with oxygen tanks.” Richard Kennedy, Beaumont Research Institute

complete the trial stage this month and make the devices available to departments, which could include pulmonary and intensive care units. “It will take time for people to incor-

porate this into their budgets,” he said. Ottolino said they did not estimate cost savings because it is difficult to prove. “This will save nurses time and require less nurses to ambulate patients,” he said. So far, Tuchman said he has received interest from the MidMichigan Medical Center in Midland and St. John’s Hospital in Detroit. “They are waiting on more feedback from the test,” he said Once he has the test results, Tuchman plans to start selling the devices for about $120 each using traditional phone sales and has a website, www.detroitmedicalsupply.com, where he can sell through the internet. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

Penske completes acquisition of U.K. used car dealership CarShop By Tyler Clifford tclifford@crain.com

Penske Automotive Group Inc. completed its acquisition of United Kingdom-based CarShop, the auto retailer announced Thursday. The Bloomfield Hills-based company said it expects the deal to generate about $340 million in annual revenue. CarShop, founded in 1999, operates five large-scale retail locations in Europe that specialize in high-quality used vehicles. “The acquisition of CarShop complements our existing core auto retail business and furthers

Design features After talking with nurses and evaluating older mobile oxygen/IV designs, Ottolino said he and Megahan in mid-2014 approached Joseph Kobryn, Beaumont’s instrument maker, with their design. Kobryn, who got his start in the automotive industry, had a few extra ideas and the first prototype was built. Oakland University was contacted in late 2015. “The staff loved it. They didn’t have to worry about the old ones breaking,” said Ottolino, adding that none of the oxygen tank carriers actually broke but sometimes nurses heard the IV poles make cracking sounds. “The ones staff used were temporary, just a snap on and off design. We wanted something durable.” Ottolino explained there are other IV/oxygen tank poles on the market, but most are insufficiently strong and fall over too easily. Beaumont's IV/oxygen tank holder design features include the following: a top and base that are more closely in line with the size of the oxygen tanks; tanks that rest in the base and are stabilized with a top bracket; and an adjustable spine applicable for shorter and longer tanks. Ottolino said Beaumont’s design ensures that no matter how the device is rotated, it will not tip over. It also was designed and tested to ensure it rolls smoothly on a variety of types of floors. Megahan said their design has four screws to hold the pole onto the cart. Other designs have two screws with wing nuts, he said. “We are always considering patient safety and felt we needed a durable one that could be used by one staff member,” Ottolino said. As part of the ongoing evaluation, the 12 purchased devices from Opus Mach are being tested on the 35-bed pulmonary floor. One unanticipated problem, however, has slowed down the evaluation. “Other units are poaching them. IV poles (on rolling carts) are not exclusive to any one room. They are moved with the patient. When a patient goes to another floor, the pole goes with them,” Ottolino said. “We have the devices wandering away, and getting them back is like a needle in a haystack in a 1,100-bed hospital.” Still, Megahan said they hope to

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our diversification strategy within the transportation services industry,” Penske Automotive Group Chairman Roger Penske said in a statement. “The CarShop acquisition along with the acquisition of CarSense in the United States strengthens our position in our core markets and provides scalable future growth opportunities.” Last month Penske said that it will retain CarShop’s 500 employees and name. Penske said that annual used car sales in the U.K. are almost three times that of new vehicle sales.

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OPINION

A beautiful friendship with our readers

disappointed reader wrote: “Have been a subscriber and reader of Crain’s Detroit Business for over 30 years. Always enjoy the news and the ‘behind the scenes’ columns. There is news in Crain’s that can’t be found in other publications. Recently though, maybe with a change in leadership, the publication has taken a new route and there seems to be an overabundance of news with a strong political vein and I find that troublesome! Articles such as … ‘Local biz worries …,’ ‘Resettlement agencies ...,’ ‘Duggan’s future …’ and ‘Rise up, Detroit …’ are just some examples of a new political focused trend. If this is the new philosophy and trend, count me out!” This is a business publication and it always will be. But we live and work in hyper-politicized times, which means part of Crain’s mission is to help readers navigate the unruly intersection of public policy and business. I replied to the subscriber, Bill Kalmar of Lake Orion, who gave me permission to publish his notes and name. “Hello, Bill. Two of the stories you mentioned happened to be my opinion column: Just one man’s opinion, designed to provoke thought and action, and even disagreement. Please feel free to write your opinion on the mayor’s re-election or the president’s order and we will likely publish it. “Our pages are your pages. “The other two stories came from straight-news reporting. We asked local business leaders how the president’s order might affect the business community and reported to you what they told us. No fear or favor.” One of the columns that jarred Bill Kalmar (and, judging from my inboxes, many other readers) was my Feb. 6 argument against President Trump’s executive order on immigration, based on moral, organizational and economic grounds. While the column was accurate and the topic is important to Crain’s readers, I regret my preachy tone. The emotionally charged language (“Rise up, metro Detroit. Lean in. Speak out”) was, in hindsight, at least a tad arrogant. I haven’t been back home long enough to make a call to action. Also, I should have led with the economic argument rather than save it for the column’s conclusion. Finally, I should have known that some people would read the column and assume I’m an anti-Trump liberal, a narrowed mind. In my old life in the nation’s capital, I saw how Democrats misconstrued my critical coverage of Hillary Clinton as proof that I’m conservative.

RON FOURNIER Editor/Publisher

Here’s the simple fact about my politics: I’m an independent. I cover issues objectively. ... Where others see red or blue, I see gray. Here’s the simple fact about my politics: I’m an independent. I cover issues objectively and form my opinions freely. I don’t respect either party. Where others see red or blue, I see gray. I’m not perfect. I’m not predictable. I’m not political. I’m just a new publisher and editor who writes columns — the new guy in town who wants to tell your stories and help nudge our community toward a common good. I will make you happy some days, angry on others, as I slowly earn your trust as a business columnist, editor and publisher. Like reader Bill Kalmar, you might need to set me straight. As our email exchange continued, Bill told me: “Guess I will monitor the ‘new direction’ of Crain’s Detroit Business and respond when I feel passionate about something … .” I replied: “Hi, Bill. Please do respond and push and criticize. That’s what friends do. “The paper reports the news and uncovers stories that other outlets might have missed. Its columnists frame that news with analysis and even opinions to challenge Detroit’s big thinkers. People like you.” Bill quickly replied with a quote from “Casablanca,” the movie classic. “Louis,” he wrote, “I think this is the beginning of a beautiful friendship.” I think he’s right. Ron Fournier is editor and publisher of Crain’s Detroit Business. Catch his take on business news at 6:10 a.m. Mondays on the Paul W. Smith show on WJR AM 760.

Clash over closings reignites interest in citywide education commission W

est Michigan businesswoman Betsy DeVos’ ascension to U.S. education secretary and renewed uncertainty in Detroit's public schools could be an opportunity to finish an overhaul of how public education is delivered to Detroit children. The month-old Detroit Board of Education and Mayor Mike Duggan have threatened to sue Gov. Rick Snyder’s administration to stop the state School Reform Office’s plans to shutter 25 public schools in Detroit. Duggan and the board members contend the Detroit Public Schools Community District hasn't been given a chance to turn around failing schools after they just got relieved of crushing debt by the Legislature. They also argue that the School Reform Office has no concrete plan for where the estimated 18,000 students in Detroit should attend school next year — a point the Snyder administration hasn’t disputed. The latest city-state hostilities have some Detroit business leaders thinking it’s time to reignite debate over creation of a citywide commission that could have the power to open new innovative schools and close poor-performing schools in Detroit — regardless of who operates them. “If it turns out that the mayor and the school board and the governor and the (School Reform Office) are going to get embroiled in a lawsuit, then I think we need to dust off our (Detroit Education Commission) proposal and pass that,” said John Rakolta Jr., chairman and CEO of Walbridge Aldinger Co. This would require all sides to set aside their talking points and preconceived notions about each other’s interests — just as the coalition leaders did two years ago. Rakolta co-chaired the coalition of

CHAD LIVENGOOD clivengood@crain.com Twitter: @ChadLivengood

Detroit business, philanthropic, civic, education and religious leaders who pushed Snyder and Duggan in 2014 to endorse the creation of the Detroit Education Commission. The Coalition for the Future of Detroit Schoolchildren was as diverse of a coalition as anyone can remember in recent history of Detroit. The cochairs varied from Rakolta to the Rev. Wendell Anthony, president of Detroit Branch NAACP. Politically, those two men are polar opposites. As coalition leaders envisioned, the Detroit Education Commission could better organize a fractured system of public schools run by a dozen charter school authorizers, Detroit Public Schools and the Education Achievement Authority, an entity Snyder created in 2012 in a Hail Mary attempt to turn around the worst of Detroit’s worst-in-the-nation public schools. Snyder, Duggan and the coalition got the $617 million financial lifeline they sought to relieve DPS of crushing debt, most of which was piled up by a succession of emergency managers that ran the state’s largest school system from 2009 until Jan. 1. The Republican-controlled Michigan Senate voted in favor of the commission, an idea that was championed by Goeff Hansen, a GOP senator from Oceana County. Hansen saw

the value in bringing organization, strategy and accountability to all public schools in Detroit — regardless of the adults or institution in charge. But the commission concept died in the Michigan House of Representatives, where the powerful school choice lobby wielded its influence over first- and second-term members in an election year. One of the leading opponents of the DEC was the Great Lakes Education Project, or GLEP, a group Betsy DeVos founded in the early 2000s after two stints as chair of the Michigan Republican Party. GLEP, which operates both as an education reform advocacy group and a political organization that influences the outcome of Republican primaries, considered the commission a way for the government to prop up DPS at the expense of charter schools. The School Reform Office, or SRO, which is under Snyder’s control, has effectively assumed the role of the Detroit Education Commission, deciding which schools close. But unlike the commission concept, the SRO has no real plan for providing alternative solutions to the Detroit children in these schools. The SRO’s own letter to Detroit parents provided other school options for their children that were almost entirely outside of the city limits. The list included far-flung places like Anchor Bay, Monroe, South Lyon and Whitmore Lake. Duggan says the SRO’s letter has caused parents to begin looking for other school options outside of the city, raising the specter that the school closures could fuel more population loss for Detroit at a time when SEE CLOSINGS,PAGE 9

A tough choice on jail issue Every day, I get to see the very bad reminder of Robert Ficano’s misjudgment on the never-completed Wayne County jail. It is certainly a millstone around County Executive Warren Evans’ neck, and I am sure that no one would like the issue settled more than Evans. And last week, just to make matters worse, a bunch of protesters took over the county meeting room where commissioners were deciding whether to fund reviews of competing proposals on that unfinished jail. They were protesting the jail. Not the new jail, not the unfinished jail, but any jail. They would like something else being done with the money earmarked for some jail. It would appear that they are simply against any sort of civil order and prefer some sort of anarchy. Meanwhile, Evans has to take a look at a couple of choices and flip a coin to decide. Neither choice seems very appealing, but sooner or later

KEITH CRAIN Editor-in-chief

we have to pick between ugly and lousy. Now I am the first to admit that the 3-year-old unfinished jail is just about right across the street from our offices. Sort of a Detroit version of Alcatraz: Pretty unattractive, but you get used to it after a couple of years. Dan Gilbert and Pistons owner Tom Gores have been dangling a tempting offer in front of Evans to swap that site, put the jail and courts farther north and build a soccer stadium where the jail is

supposed to be. It sounds like a great idea, but like all plans such as this, the devil is in the details. And it appears that Evans has hired a few devils to sort out the details for him, delaying the decision-making for a while longer. The idea of adding a soccer stadium to this sports complex downtown makes a lot of good sense, clustering them all together, but the taxpayers are growing weary of footing the bill for sports stadiums. We will have to find out just how much it would cost to move everything in our justice system out of downtown. We don’t even know whether their idea for a soccer team will have the support that baseball, football, basketball and hockey already have in our city. Warren Evans will have to figure that out. But let’s not get mad at him if he rejects the plan. We will just have to wait and see.

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Family business focus at Ilitch school could help other firms Mike Ilitch Arena? I heard a couple of people last week wonder if the Ilitch family would rename the new sports arena in the late patriarch’s honor. My guess is that Ilitch himself would be the first to veto that idea. Little Caesars Arena supports the brand he and his wife built from a one-store pizza joint to a more than $3 billion-ayear operation, the largest takeout pizza chain in the country and the third-largest pizza company in the country (behind its No. 2 rival, Ann Arbor-based Domino’s, and Pizza Hut). Why not promote the brand where it all started? Crain’s Detroit Business covered that growth, but it hasn’t always been easy. The Ilitches own a fiercely private company that happens to have a huge, public-facing impact. A couple times in the mid- and late 1990s, we ran stories about the size and the financials of the company, details gleaned from financial disclosures required by the certain states, depending on their franchise laws. Mike Ilitch, who was always intensely secretive about the company’s financial information, was upset. And he showed up at our office in person to let Keith Crain know just how much, asking that he kill one of the stories. But it was public information, Keith told him. And the pizza company was fueling so many other great investments in Detroit — the Red Wings and Tigers, to name two — that it was a good business story, too. The story ran. But Ilitch told Crain that Little Caesars would have to get out of franchising. Instead, Little Caesars lawyers, in effect, created a separate company that handled franchising matters — and it apparently didn’t have to report the parent company’s financials. That was the last time, to our knowledge at Crain’s Detroit Business, that any news

MARY KRAMER Group Publisher

organization ever obtained the company’s financial statements. At that time, the pizza company was just over $1 billion in revenue. As the company grew, it professionalized its management in the pizza business,

but still kept vestiges of the “momand-pop” roots where it all started. And an Ilitch — Christopher — is now the family leader of the combined family-owned enterprises. This is a family that could have been Detroit royalty, but you didn’t see the Ilitches or their seven adult children out on the social circuit so much. But you often saw them at the games. I just don’t think the family has ever gotten used to being in the public spotlight. Maybe last week’s outpouring of love and respect for the patriarch will let them relax a bit more. The many lasting impacts of Mike and Marian Ilitch have been well

chronicled over the past week. Their investment and the move of the Little Caesars headquarters to the Fox Theatre earned Mike the Crain’s Newsmaker of the Year award for 1987. In 2016, he and son Christopher were honored — for an even bigger investment in the new Little Caesars Arena and The District Detroit development that will surround it. And Marian Ilitch has been on our list of Most Influential Women, not just for her role in the family businesses but as owner of MotorCity Casino Hotel. Recently, the Ilitch family gave Wayne State University $40 million to rename and build the Mike Ilitch

School of Business. It’s under construction just north of the arena. I have a modest suggestion: Family-owned business built the Ilitch empire. There have been rough patches over the years, including the parts various siblings played — or didn’t play — in the kingdom. Maybe a focus on “family business” at the Ilitch School of Business would help other companies learn how to navigate the delicate relationships that every family business has, regardless of size. How about an additional investment in an endowed professorship in family business in Marian Ilitch’s name?

Whether it’s old money with new needs or new money with old desires, it has to be wisely managed to endure. Consider the distinctive wealth management approach of Greenleaf Trust. Privately held with approximately $9B in assets under management, a commitment to fiduciary excellence, and a client centric culture that eliminates conflicts of interest, we help you make the most of your wealth, so you can make the most of your life. Let’s talk.

CLOSINGS the city's business and philanthropic communities have bet big on a comeback. DeVos, a powerful Republican Party donor whose money has made and destroyed political careers, was never publicly engaged in that debate over the future of education in Detroit. She stayed in the background as GLEP and other allied pro-charter school lobbying interests beat back creation of a commission of gubernatorial and mayoral appointees that they believed would put restrictions on where free market-oriented charter operators could set up schools. As DeVos takes over the nation’s education agenda, Rakolta thinks she should get publicly involved in Detroit and explain why there shouldn’t be some semblance of school organization and accountability in Michigan's largest city. “Now that she’s secretary of education, I think she owes us a direct response to that,” Rakolta said. “We need to know where she stands on the unregulated aspect of charter schools in the state of Michigan.” Chad Livengood: (313) 446-1654 Twitter: @CradLivengood

3 4 9 7 7 wo o dwa r d av e n u e b i r m i n g h a m , m i 4 8 0 0 9

g r e e n l e a f t ru st. c o m

248.530.6200

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SPECIAL REPORT: BUSINESS INSURANCE

Measuring the risks of climate change

Insured losses from natural disasters Year

Natural catastrophes

Insured losses (billions)

2005

161

$124.2

2006

141

$14.8

2007

152

$27.5

2008

150

$48.8

2009

140

$24.4

2010

177

$47.0

2011

181

$125.8

2012

170

$74.0

2013

167

$36.6

2014

191

$28.7

2015

198

$27.8

Source: Swiss Re

GETTY IMAGES/ISTOCKPHOTO

Insurance industry tries to come to grips with potential losses from extreme events By Michael Lee malee@crain.com

Climate change presents a knotty problem — and big risks — for insurers. Severe weather events such as hurricanes, tornadoes and droughts are expected to occur with more frequency as the climate warms up, experts say. That presents the risk of greater losses for insurers to cover damage claims. There were 198 natural disasters worldwide in 2015, according to the most recent annual report by Swiss Re, the most it has ever recorded, though the $28 billion in losses stemming from them was relatively low for recent years be-

cause no hurricanes made landfall in the U.S. Though politically controversial, the notion of climate change is not controversial among insurers. The industry is working to come to grips with how to measure the risks as scientists study the effects on a world in which the five warmest years in records dating to 1880 have all occurred since 2010.

Measuring the risk At their core, insurers are in the business of measuring and assigning a value to risk. Precisely measuring the future risk of climate change is difficult because insurers base their pricing and risk assessments on historical data. A changing climate means that data could become of less use. “Climate change can throw a wrench into

the system by causing fundamental shifts in the location, frequency, and intensity of extreme events,” said Eric Robinson, senior scientist at risk-management firm AIR Worldwide in Boston. In the long term, that uncertainty is complicated by the fact that the concentration of homes and businesses in an area will change over time, and construction practices will also change. That means predicting an insurer’s exposure over a long period can be difficult and isn’t usually reflected in the models, Robinson said. “Thirty years ago, houses were smaller, people were more spread out. On top of these changes there are also things like changes in building codes and building practices,” Robinson said. “All of these combine to create a lot of uncertainty as to what the average annual loss might look like 50 years from now.”

How prepared is the industry? A report from the Boston-based corporate sustainability nonprofit Ceres released last October found that only 22 out of 148 insurers received its high quality marks on a survey that measured governance, climate risk management, use of catastrophe modeling to evaluate and manage risk, greenhouse gas management and stakeholder engagement. That figure had doubled from the group’s previous report two years before. For its part, a coalition of the largest insurers called the Smarter, Safer Coalition in a 2015 report called on the federal government to shift its efforts toward disaster preparedness and mitigation to help reduce losses as the expectation of weather-related damages increases. SEE RISKS,PAGE 11

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Bills would expand nonprofits’ ability to raise funds in charity poker games By Sherri Welch swelch@crain.com

Legislation that would expand the ability of nonprofits to raise money through charity poker games and preserve permanent poker rooms’ ability to profit at some level from them is back on the table. The bills come in the wake of significant declines in charitable gaming in Michigan over the past six years as the state has tightened regulations of the games and halted them at permanent poker rooms where illegal activities were taking place. Last year, poker game fundraisers hosted by Michigan nonprofits brought in $93.5 million, less than half of the $197.3 million they raised in 2011, according to numbers self-reported by nonprofits to the Michigan Gaming Control Board, which regulates the games. Net profit to charities decreased along the same lines to $8.8 million in 2016 from $17.4 million in 2011. During the same period, the number of charities hosting games dropped to 911 from 2,720, and the number of licensed events declined to 2,619 last year from 7,894. A multiyear battle between nonprofits and poker rooms on one side and the Michigan Gaming Control Board on the other, led to turnover in the rules regulating the games up until June 2015, when the current rules took effect. Those rules have limited the ability for permanent poker rooms to profit from the games and required more charity representatives to be present at the charity Texas Hold ’Em games, among other things. Sen. Rick Jones, who introduced Senate Bill 35 in January, and State Rep. Tom Barrett, who introduced duplicate House Bill 4081, say the current rules are too restrictive, both for nonprofits and for permanent poker rooms.

RISKS FROM PAGE 10

Much of the work being done on adjusting risk models for climate change and unusual weather events is being done by the large European reinsurers, the companies that help insure other insurers against catastrophic losses. Munich Re, Swiss Re and Lloyds of London are among those Ceres cites in its report as leading on such adjustment. It’s an area in whichU.S. insurers could improve, said Rod Taylor, a managing director with Aon Risk Solutions, which has a Southfield office. “In the U.S., there are very few companies that have any kind of public policy on climate change,” he said. He said the industry also faces risks on its own side of the financial ledger. “One area where they haven’t done much is to look at their own investments to see whether their own portfolios have risks from climate change,” he said. In some cases, Taylor said, the patchwork of state regulation on how insurers can price coverage gets in the way.

“We need to codify into statute exactly what the rules are so all the charities can earn a few bucks” to support their missions. Sen. Rick Jones

There was a system in place for a decade that was working fine, Jones said. He agrees with Rick Kalm, executive director of the Gaming Control Board, that there were “a few bad apples” and supports going after them. “However, (Kalm) has been so onerous and Scrooge-like, he’s made it impossible for most of these charities to continue with this form of revenue raising,” Jones said. Nonprofits can’t replace what they’ve raised through the poker games with candy and cookie sales, Jones said. “We need to codify into statute exactly what the rules are so all the charities can earn a few bucks” to support their missions, he said. Part of the concern is that the Gaming Control Board would go further in regulating, Barrett said, blocking permanent poker rooms from hosting the games on behalf of nonprofits. The board has suggested it could grant more licenses for charities if the organizations hosted the games on their own grounds, but part of the problem is many don’t have their own buildings to host the games, “and some feel they shouldn’t have to,” he said. “We would like to stipulate that the permanent poker rooms would not be prohibited by rule. ... The Gaming Control Board has shown an intent to really cut (rooms) out, and we don’t think they should be. They’re provid“The one thing they’re really good at is data,” he said. That data could be used to properly price and sell policies by ZIP code according to risk, but state-by-state regulations limit their ability to do that, and companies have generally gotten out of the flood insurance business, leaving that coverage to federally funded programs. “Their models are sophisticated enough to price risk for any environment,” Taylor said.

Risks in Michigan Though the best-known risks from climate change are along the coasts because of fears that sea levels could rise, a 2014 study by a 60-person federal advisory committee highlighted risks to fisheries and tourism from increased erosion of Great Lakes beaches and risks to the forests of northern Michigan. Agriculture could benefit from longer growing seasons but also would be threatened by heightened risks of drought, according to the report, called the Third National Climate Assessment, raising uncertainty for sellers of crop insurance.

ing a service.” The Michigan Gaming Control Board is closely monitoring the legislation and will provide Gov. Rick Snyder with a thorough analysis if it progresses through the Legislature, said communication specialist Mary Kay Bean said in an email last week. Criminal activity tied to “millionaire parties” was a reality when Snyder shifted regulation of them to the Michigan Gaming Control Board from the Michigan State Lottery in 2011, she said. “Michigan law does not authorize ‘charitable poker rooms.’ Yet many places ran games illegally on behalf of the charities and operated like casinos without oversight or accountability,” Bean said, which led to corruption and illegal activities. The state was forced to halt games at 24 locations, and more than 30 individuals have pleaded guilty to crimes ranging from embezzlement to charitable gaming law violations. As a result of tighter regulations, many popular places operating as permanent poker rooms prior to the new rules, such as Snooker’s Poker Room in Utica, no longer function as millionaire party locations. But the state has authorized new locations for the games, and today there are more locations hosting millionaire parties on a regular basis than existed before the administrative rules took effect, Bean said. “Although more locations now may host millionaire parties than were operating a few years ago, the large-volume operations processing more than $25 million a year in chip

sales as Snookers once did no longer exist,” she said. With limits the gaming control board has placed on the amounts that can be paid to the location and the supplier — no more than 45 percent of gross profits can go to cover costs — the net profit to nonprofits from the games increased the past two years to $8.8 million in 2016 from $6.9 million in 2014. Last year, judges ordered $106,000 in restitution to charities for millionaire party-related crimes, Bean said. “Based on our research, Michigan has one of the biggest casino-style charitable gaming programs of its kind in America ... in the past three years, we’ve authorized 30,000 millionaire party games, which resulted in about $270 million in chip sales.” As passed out of the Senate Feb. 9, SB 35 would amend the Traxler-McCauley-Law-Bowman Bingo Act to, among other things, allow $20,000 in chips to be in play during a millionaire party event or up to $80,000 if the nonprofit licensee is not using dealers from a supplier and is hosting fewer than four days of events. In that case, the amount in play would be $80,000 divided by the number of days the event is being hosted. Currently, chip sales are limited to $15,000 per day. It would also reduce the number of representatives that must be on hand from the benefiting charity or nonprofit to two from the current requirement of three. At the same time, the legislation would uphold some of the current rules, including:

J Allowing nonprofits to apply for each year to four, and allowing each to be used for up to four consecutive days of games. J Allowing two millionaire party events to take place concurrently at any single location and limiting the number of events to take place at a location to no more than four per week. J Allowing games to take place from 8 a.m.-2 a.m. the next day. J Prohibiting players from using chips to tip dealers. J Limiting expenses to no more than 45 percent of gross profit. J Prohibiting nonprofits from renting poker tables, chips and other equipment, from a location owner or lessor. The Lansing-based Michigan Charitable Gaming Association recognized there were some bad actors at the time the governor moved oversight of the millionaire parties to the Michigan Gaming Control Board, said Executive Director Katharine Hude. And it applauds the board’s efforts to address issues. “Our contention is they’ve done a good job of cleaning up some of those lingering bad actors ... but they keep insisting there are bad actors (still) out there,” she said. The legislation introduced by Jones and Barrett will take away “arbitrary decision making” from the Gaming Control Board, Hude said. “If it’s codified, our charities know exactly what to expect and the Gaming Control Board knows what to expect.”

Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

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CRAIN'S LIST: LARGEST MICHIGAN BUSINESS INSURANCE AGENCIES AND COMPANIES Ranked by 2016 revenue Company Address Rank Phone; website

Top executive(s)

H.W. Kaufman Financial Group Inc./Burns & Wilcox Ltd. 30833 Northwestern Highway, Farmington Hills 48334 (248) 932-9000; www.kaufmanfinancialgroup.com

Alan Jay Kaufman chairman, president and CEO

Meadowbrook Inc. 26255 American Drive, Southfield 48034-6112 (248) 358-1100; www.meadowbrook.com Aon Corp. (Aon Risk Solutions) 3000 Town Center, Suite 3000, Southfield 48075 (248) 936-5200; www.aon.com

3 4 5

Brown & Brown of Detroit 35735 Mound Road, Sterling Heights 48310 (586) 977-6300; www.bbdetroit.com Arthur J. Gallagher & Co. 30150 Telegraph Road, Suite 408, Bingham Farms 48025 (248) 203-0626; www.ajg.com

Revenue ($000,000) 2016

Premium Revenue volume ($000,000) Percent ($000,000) 2015 change 2016

Employees Jan.2017 Michigan/ Total U.S.

Worldwide employees Jan.2017

Insurance category

$2,050.0

$1,830.0

12.0%

$2,050.0

275 1,551

1,721

Insurance Company

Kenn Allen B president and CEO

146.0

135.0

8.1

718.6

347 928

928

Insurance Agency, Insurance Company

Carol Williams resident managing director, CEO, Aon Risk Solutions Paul Barbick Michigan market leader, Aon Hewitt Todd Piersol, executive vice president; Angela Garner, president; Paul Glantz and Doug Shepson, administration Bryan Hirn area president, benefits and HR consulting Ryan Isaacs area president, Insurance & Risk Management Nina Maggart Southfield office head

135.3

130.0

4.1

0.0

180 36,000

72,000

Insurance Company

62.9

75.0

-16.1

371.3

514 7,561

7,591

Insurance Agency

56.0

46.0

21.7

193 NA

24,790

Insurance Agency

54.0

51.2

5.5

291 9,713

30,280

Insurance Company

Marsh One Towne Square, Suite 100, Southfield 48076 (248) 945-5600; www.marsh.com

Marsh & McLennan Agency LLC - Michigan 3331 W. Big Beaver Road, Suite 200, Troy 48084 (248) 822-8000 and (734) 525-2463; www.mma-mi.com

Thomas McGraw CEO, Michigan

36.8

32.4

13.6

1,581.4

140 140

140

Insurance Company

LSG Insurance Partners 2600 S. Telegraph Road, Suite 100, Bloomfield Hills 48302 (248) 332-3100; www.lsgip.com

Jay Schreibman president and CEO

34.3

32.5

5.3

1,372.0

95 109

109

Insurance Agency

Valenti, Trobec, Chandler Inc./VTC Insurance Group 1175 W. Long Lake Road, Troy 48098 (248) 828-3377; www.vtcins.com

Alan Chandler president and CEO Terry Griffin COO Robert Trobec CFO/executive VP Jim Kapnick CEO

31.1

29.2

6.3

177.5

151 155

155

Insurance Agency

29.4

27.3

7.7

300.0

157 157

157

Insurance Agency

Hylant Group

Patrick McDaniel president, Detroit Office

27.3

25.7

6.1

404.5

148 651

651

Insurance Agency

Michigan Financial Cos. Inc.

Nick Valenti president and CEO

17.1

17.7

-3.5

15.6

91 119

119

Insurance Company

Daly Merritt Insurance

Martin Daly president and CEO

12.4

12.1

2.1

127.5

60 4,000

4,025

Insurance Agency

The Huttenlocher Group 1007 W. Huron, Waterford Township 48328 (248) 681-2100; www.hgway.com

David Huttenlocher CEO

11.8 C

6.3 C

87.3

79 NA

Insurance Agency

A. E. Mourad Agency Inc. 28277 Dequindre Road, Madison Heights 48071 (248) 336-1600; www.aemourad.com

Anthony Mourad president Peter Mourad and Steve Mourad vice presidents Stefano Vannelli president, CEO and owner

10.8

9.9

9.0

620.3

17 19

Insurance Agency

8.5

8.2

3.7

300.0

56 56

Insurance Agency

Oswald Cos.

Catherine Kosin senior vice president, Detroit market leader

8.0

0.0

40.0

31 368

368

Insurance Company

KIG Korotkin Insurance

Kenneth Korotkin president

7.8

7.3

6.6

60.0

49 49

Insurance Agency

Capital Insurance Group

Robert Moglia Jr., president; Edmund George, Tom Moglia, Donn Johnson, vice presidents

6.0

4.6

30.4

0.0

26 26

Insurance Agency

J.S. Clark Agency Inc. 25900 W. 11 Mile Road, Suite 210, Southfield 48034 (248) 355-9600; www.jsclarkagency.com

Joel Clark president and CEO

5.1

5.0

3.7

0.0

29 29

Insurance Agency

Johnston Lewis Associates Inc. 575 E. Maple Road, Troy 48083 (248) 528-2400; www.johnstonlewis.com

Jay Sawmiller president and CEO Mike Cardella and Dan Wilhelm vice presidents Ron Kosmal, chairman and CEO; Paul Murad, president; Jayson Bass, vice president

5.0

4.7

6.4

38.0

33 33

Insurance Agency

4.4

4.1

7.7

34.0

34 34

Insurance Agency

M. Paul Venegas president Regina Goodman co-owner

3.4

3.3

3.0

31.0

15 15

Insurance Agency

Kapnick Insurance Group

Chicago Road, Troy 48083 10 769 (248) 352-4455; www.kapnick.com Frank Lloyd Wright Drive, Suite J4100, Ann Arbor 48105 11 24 (734) 741-0044; www.hylant.com Northwestern Highway, Suite 1300, Southfield 48034 12 28411 (248) 663-4700; www.michiganfinancial.com Biddle Ave., Wyandotte 48192 13 3099 (734) 283-1400; www.dalymerritt.com

14 15

Ralph C. Wilson Agency Inc.

Telegraph Road, Suite 100, Southfield 48086 16 26026 (800) 638-1174; www.rcwa.net Woodward Ave., Suite 201, Bloomfield Hills 48304 17 39572 (248) 433-1466; oswaldcompanies.com Northwestern Highway, Suite 400, Southfield 48033 18 26877 (248) 352-5140; www.getkig.com W. Square Lake Road, Bloomfield Hills 48302 19 1263 (248) 333-2500; www.capitalinsuranceagent.com

20 21

Allied Insurance Managers Inc.

S. Blvd. E., Suite 110, Rochester Hills 48307 22 1055 (248) 853-0930; www.alliedinsmgr.com

Goodman Venegas Insurance Agency Inc. 2800 Livernois, Suite 170, Troy 48083 (248) 740-9090; www.goodmanvenegas.com

This list is an approximate compilation of the largest such agencies in Michigan. It is not a complete listing but the most comprehensive available. Unless otherwise noted, information was provided by the companies. Companies with headquarters elsewhere are listed with the address and top executive of their main Michigan office. NA = not available.

B Replaced Robert Cubbin as president and CEO in November. C Southeast Michigan revenue only. LIST RESEARCHED BY SONYA D. HILL

C R A I N ’ S D E T R O I T B U S I N E S S // F E B R U A R Y 2 0 , 2 0 1 7

CALENDAR TUESDAY FEB. 21

J Young Professionals Panel — The Changing Face of Leadership. 7:30-9 a.m. Leadership

Oakland. Moderator: Jennifer Korman, Mercedes-Benz Financial Services. Panelists: Talisa Norton, co-owner/COO, All Pro Color; Sara Stoddard, chief of emergency management, Oakland County Homeland Security Division; Jordan Twardy, community and economic development director, city of Ferndale. MSU Management Education Center, Troy. $32 members; $36 nonmembers. Website: leadershipoakland.com. J

Inside the CEO Mind. 8-10 a.m. Detroit Re-

gional Chamber. Shinola President Jacques Panis talks about the Shinola business model, its reputation as a leader in the Detroit resurgence and his professional career. Following his presentation, audience members are invited to participate in a question-and-answer session. College for Creative Studies, Detroit. $30 chamber members; $50 nonmembers. Preregistration is required. Contact: Marianne Alabastro, phone: (313) 596-0479; e-mail: malabast@detroitchamber.com; website: detroitchamber.com/events.

THURSDAY FEB. 23

Garden Fresh Entrepreneur David Zilko. 7:30-9

a.m. Inforum. Dave Zilko founded his first specialty food company more than 20 years ago with a $2,500 credit card loan. He remains an equity partner in several food-oriented enterprises, but exited active involvement in the industry when he engineered the sale of Garden Fresh Gourmet, makers of the No. 1 brand of fresh salsa in North America, to the Campbell Soup Co. for $231 million in 2015. Zilko is now an investor in and CEO of Fuel Leadership LLC, a company dedicated to elevating professional performance through events and digital media. Gem Theater, Detroit. $50. Website: inforummichigan.org.

FRIDAY FEB. 24

The State of Manufacturing 2017: A New Way Forward. 11:30 a.m.-1:30 p.m. Detroit Economic

Prize-winning editorial page editor for the Detroit Free Press. MotorCity Casino Hotel, Detroit. $159 chamber members; $235 nonmembers. Contact: Sarah Nagel, phone: (313) 596-0384; email: snagel@detroitchamber.com.

J Trump Economics and Its Impact on the Middle Class. 11:30 a.m.-1:30 p.m. March 7. Detroit

Economic Club. Speaker Neera Tanden, president, Center for American Progress. Townsend Hotel, Birmingham. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org. J Asian Pacific American Chamber of Commerce 14th Annual East-West Business Connection. 9:30

a.m.-3:30 p.m. March 8. Global business networking event, comprised of Asian and U.S. businesses and minority business enterprises throughout the Midwest. Edward Village, Dearborn. $70 APACC members; $95 nonmembers; $100 walk-ins. Contact: Leonie Teichman, phone: (248) 430-5855; email: leonie@ apacc.net. J Economic Prospects for the U.S. and Regional Economy in 2017-2018. 11:30 a.m.-1:30 p.m.

March 16. Detroit Economic Club. Stuart Hoffman, senior vice president and chief economist at PNC Financial Services Group, will share his insights on Trump policy impacts and he will forecast important indicators such as U.S. energy production, unemployment and interest rates, the stock market and consumer spending. Westin Book Cadillac, Detroit. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org. Real Estate Forecast Breakfast. 8-9:30 a.m. March 23. Birmingham Chamber of Commerce. New housing trends in southeast Michigan and the developments in Detroit. Speakers: Dan Elsea, president, brokerage services, Real Estate One; Mike McNally, vice president, operations, Olympia Development; Michael Stoskopf, Home Builders Association of Southeastern Michigan. The Reserve, Birmingham. $40 members; $50 nonmembers. Website: bbcc.com.

Club. Jay Timmons, president and CEO, National Association of Manufacturers, speaks on today’s industry, the latest on the Trump administration, the new Congress and manufacturing in America. Westin Book Cadillac, Detroit. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org.

UPCOMING EVENTS

Vistage Executive Breakfast. 7-10:30 a.m. Feb.

28. Vistage Michigan. Includes keynote “What in the World Is Going On? A Global Intelligence Briefing for Executives” by Herb Meyer, former special assistant to the director of the CIA during the Reagan administration. Troy Marriott. Free. Contact: Anna Morton, phone: (586) 443-5880, Ext. 205; email: amorton@vistage michigan.com; website: http://michigan. vistage.com/event/feb28/ 2017 Detroit Policy Conference: Reigniting an Innovative Spirit. 7:30 a.m. March

Mike Duggan

2. Detroit Regional Chamber. Toni Griffin, founder of Urban Planning for the American City, will deliver a keynote address, and Detroit Mayor Mike Duggan will have a one-on-one conversation with Stephen Henderson, Pulitzer

9th Annual Trade Secrets with Connie Holzer. 6-9:30 p.m. March 29. JVS. Keynote speaker Connie Holzer, owner of Tom Holzer Ford, who has built it into one of the top Ford dealerships in the country. Holzer took over the dealership when her husband died in 2006, at the same time the country was going into an economic tailspin. Troy Marriott. $150. Contact: Judy Strongman, phone: (248) 233-4213; email: jstrongman@ jvsdet.org; website:jvsdet.org/tradesecrets.

J Who Do You Trust? Leading in an Era of Populism. 11:30 a.m.-1:30 p.m. April 19. Detroit Eco-

nomic Club. Richard Edelman, president and CEO of Edelman, will discuss the 2017 Edelman Trust Barometer and actions business leaders can take to climb back from a position of deteriorated trust, and ultimately restore belief in a system that too many believe has failed them. MotorCity Casino Hotel, Detroit. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org.

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

C R A I N ’ S D E T R O I T B U S I N E S S // F E B R U A R Y 2 0 , 2 0 1 7

DEALS & DETAILS EXPANSIONS

Ghafari Associates LLC, Dearborn, a global engineering, architecture, process design, consulting and construction services firm, has opened a firm at 211 W. Fort St., Suite 510, Detroit. Telephone: (313) 502-5474. Website: ghafari.com. J

J Capital Title Insurance Agency, Southfield, has opened at 7030 Gateway Park, Clarkston. Telephone: (248) 625-4210. Website: capitaltitle.net.

MOVES

Balanced Home Care has moved its office from 189 E. Big Beaver Road, Troy, to 2125 Butterfield Drive, Suite 299, Troy. Telephone: (248) 528-2600. Website: balancedhomecare.com. J

J Re/Max Eclipse has moved its office from 5744 Williams Lake Road, Waterford Township, to 4468 W. Walton Blvd., Waterford Township. Telephone: (248) 599-3124. Website: eclipseagents.com. J Gardner Builders Inc., Troy, a design and build specialist, has opened at the Michigan Design Center, 1700 Stutz Drive, Suite 106, Troy. Telephone: (248) 649-4772. Website: gardnerbuilders.com.

NEW PRODUCTS

Meritor Inc., Troy, launched a virtual reality app that customers can use to learn about the company’s products during a virtual ride in a semi-truck. Website: meritor.com. J

NEW SERVICES

Bluestone Executive Communications, Birmingham, began offering executive etiquette training with new programs in fine dining, international protocol, digital decorum and manners. Website: bluestoneexec.com. J

Real Estate Litigation Experience

In Your Corner.

J Community & Home Supports Inc., Detroit, a provider of resource navigation, case management and support services to the homeless, began a new permanent housing program through a $504,620 contract with the U.S. Department of Housing and Urban Development. CHS will be providing housing to 35 households of chronically homeless people who have disabilities. Website: chsinc.org.

Ŷ Real estate litigation in state and federal courts, landlord-tenant and lease disputes Ŷ Construction lien and quiet title matters.

STARTUPS

FranCPA PLLC, Southfield, an accounting and consulting services firm to franchise businesses, has opened at 20750 Civic Center Drive, Suite 418, Southfield. Telephone: (248) 331-5465. Website: francpapllc.com. J

Deals & Details guidelines. Email cdbdepartments@crain.com. Use any Deals & Details item as a model for your release, and look for the appropriate category. Without complete information, your item will not run. Photos are welcome, but we cannot guarantee they will be used.

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Focus: Hope puts eyes on basics in IT program By Sherri Welch swelch@crain.com

Focus: Hope, which has struggled to find its workforce development niche in recent years, is among the agencies playing a central role in a program quietly launched by the city last fall to train Detroiters at all skill levels for information technology jobs. It’s a shift for Focus: Hope, which is perhaps best known for manufacturing job training. The Tech Hire program is creating a pipeline of IT employees to work for Detroit companies, with additional training services provided by Southwest Solutions and Grand Circus, under the Detroit Employment Solutions Corp.’s management. It’s a model, the city said, for how the program is approaching creation of a talent pipeline for the Mayor’s Workforce Board’s other industry focus areas: health care, manufacturing, construction/skilled trades and retail/hospitality/entertainment. And it’s likely to get a mention in Mayor Mike Duggan’s State of the City address Tuesday, given that Focus: Hope is hosting the event on its northwest Detroit campus. Though Focus: Hope’s network technician apprenticeship is part of the offerings included in the TechHire program, a large part of the role it’s playing is in making sure people have the basics. “We are really good, as an organization, (in) working with people who have barriers in their lives, to get them to a point where they can be workforce-ready,” CEO Jason Lee said last week. The programs that Focus: Hope is noted for, such as its Earn and Learn program, which helps open job opportunities for people ages 18-24 and formerly incarcerated and chronically unemployed adults, and now the TechHire program, all center around giving people the skills they need to be workforce-ready, Lee said. They include ensuring that people have adequate math and reading skills, soft skills like an understanding of the need to show up to work on time, and problem-solving and conflict-resolution skills. “Those are things we know we teach very well,” Lee said. “The issue for the organization is we never really marketed those pieces as a commodity.” Focus: Hope’s board approved a larger focus on basic skills training at the end of January, Lee said. As it figures out what its workforce development programmatic lineup should be, it’s talking with local employers that have funded specific training it’s provided to see what other manufacturing and IT training is still in demand. But it’s clear that all companies have seen issues on the work-readiness front of some of their employees, he said. When the news broke in January that it would have to lay off 120 of the 252 employees contracted to auto-

“We’d like to add more trainings, more pathways into employment, as we quantify employer demand.” Jeff Donofrio, director of workforce development for the city of Detroit

motive supplier Android Industries in March in response to production cutbacks, Focus: Hope got calls from companies offering to take some of the afNicole Sherardfected employFreeman: DESC ees. president and CEO. “We talked to several companies … and asked what (they) need from a workforce,” Lee said. “Everybody said the same thing: We want people who want to come to work, who can think on their own and can be trainable.” “That’s a space we work very well in. Whether we do the training or whether the company does the (hands-on) training, we can figure that out. But we can get you that workforce that is willing and ready to learn.” Focus: Hope launched the initial cohort of basic skills for 26 people in the TechHire program in October. The 10-week program included remedial reading and math education as needed to bring people up to 10thor 11th-grade math and reading levels, soft-skills training and training in additional areas including customer service, problem-solving and advanced Excel work to prepare them for an entry-level IT career working in a call center or on a help desk, making $11-$13 per hour, or go onto other immediate job opportunities. Participants of the “Accelerator” or basic-skills tier of the TechHire program also receive an introduction to IT careers available to them in Detroit. “The hope is the entry-level jobs are a steppingstone into a middle-skill job, a middle-class life,” said Jeff Donofrio, director of workforce development for the city of Detroit. TechHire trainees who choose to can go on to a second tier of IT training, either the network technician apprenticeship Focus: Hope provides or a preapprenticeship at Grand Circus to prepare them for an apprenticeship at area employers, at companies like Blue Cross Blue Shield of Michigan, DTE Energy Co., GalaxE.Solutions Inc., Marketing Associates and Quicken Loans. Twenty-three people graduated from the inaugural basic skills cohort provided by Focus: Hope in December, and 10 of them went on to second-tier IT training at Grand Circus. “Grand Circus is saying the folks who came through the Focus: Hope training are the best-qualified apprenticeship candidates they’ve seen so far,” Donofrio said. The other 13 people who came

through the first-tier training are all somewhere along the job placement spectrum with employers, from employed to interviewing or preparing for interviews, said DESC President and CEO Nicole Sherard-Freeman. The network technician and software developer jobs, which can command $15 per hour during apprenticeships and about $25 per hour in a full-time position, according to Donofrio, could be a ticket into the middle class. “One of our biggest challenges is finding jobs inside the city for Detroiters,” said Donofrio. TechHire is “helping Detroiters get into family sustaining, middle-class jobs and employers find local talent that is desperately needed for the jobs that are being created in the city,” he said. Southwest Solutions launched the second cohort of basic skills training as part of the TechHire program with 12 trainees in January, and Focus: Hope is set to start a third basic skills cohort in July. DESC did not disclose the dollar amount of grants made to the TechHire training providers but said it is combining federal Workforce Innovation and Opportunity Act dollars that come to the city for adult training, with a $2 million grant from the Ralph C. Wilson Jr. Foundation to fund the program over the next four years. The program is expected to create 100-200 training spots per year for each of the next four years, Donofrio said. “We’d like to add more trainings, more pathways into employment, as we quantify employer demand,” he said. “We don’t want the ‘train and pray’ initiatives where you train someone and hope they get a job at the end.” The TechHire program gives Detroiters who would not otherwise have had a chance to consider an IT job or career that option, Sherard-Freeman said. “It’s that basic set of skills that opens a door for them.” People who were fortunate enough to have jobs in high school gained those skills. But for many years, there were too few opportunities for young Detroiters to gain work experience, she said. With employee input, DESC and the other organizations working on TechHire have found there’s a large demand for those soft skills, Sherard-Freeman said. “What we’re finding from employers is that the demand for that training is broader and deeper than any of us knew,” she said. Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

PEOPLE: SPOTLIGHT Federal-Mogul Holdings adds co-CEO in shakeup Federal-Mogul Holdings LLC has named Bradley Norton as the new co-CEO and CEO of the Southfield-based auto parts supplier’s motor parts division.

R a i n e r Jueckstock will

remain as the other co-CEO of the company and CEO of Bradley Norton its powertrain division. Norton will succeed Daniel Ninivaggi, who had served in that position since 2014. He was CEO of Icahn Enterprises LP, the parent company of Federal-Mogul, from 2010-14. Ninivaggi will return to Icahn Enterprises, where he will serve as managing director of the parent company’s automotive segment. The changes are effective March 8. Federal-Mogul had struggled since emerging from bankruptcy in 2008, reporting a net loss of $45 million in 2009 and a net loss of $117 million in 2012. The company has since implemented cost-cutting strategies, including the closure or downsizing of seven plants. Billionaire investor Carl Icahn will take full ownership of Federal-Mogul in a $300 million deal. Norton joined Federal-Mogul’s motor parts division in 2014 as senior vice president and general manager. He previously was president of Freudenberg-NOK, a Plymouth Township sealing technologies supplier.

McLaren Oakland tabs Buxton as president, CEO Barton Buxton was named president and CEO of the McLaren Oakland medical center in Pontiac. He replaces Chad Grant, who left in December to become president and CEO McLaren at Flint. Barton Buxton Buxton, 55, will transition to the 328-bed medical center after serving as president and CEO of McLaren Lapeer Region for more than 13 years and managing the McLaren Homecare Group for two years. In his new role, Buxton will also provide administrative support to McLaren Clarkston. Before joining the McLaren group, Buxton was COO of Crittenton Hospital Medical Center in Rochester, associate vice president of Tulane University Hospital and Clinic in New Orleans, associate professor and sports medicine

program director at Georgia Southern University and sports medicine program director at the University of Hawaii.

Broder & Sachse promotes Hurwitz Birmingham-based development company Broder & Sachse Real Estate Services named Lee Hurwitz as

its new president. Hurwitz, who joined the company in 1996, was previously CIO. Lee Hurwitz Hurwitz, 44, replaces John Hamburger, who joined Southfield-based Signature Associates Inc. in November as its senior vice president of property and asset management. Hurwitz joined Broder & Sachse as assistant property manager, then was property manager from 1997 to 2000. He was director of property management from 2000 to 2003. Broder & Sachse has been active in downtown Detroit recently, developing the newly opened The Scott at Brush Park development, which has 199 units at Woodward Avenue and Erskine Street, and The Albert apartments in Capitol Park, among others. Broder & Sachse also has an affiliated construction company, Sachse Construction Inc., which is based in Detroit and run by Todd Sachse.

Michigan tech group appoints top officers The Michigan Council of Women in Technology Foundation announced it is appointing Carey Pachla, a Novi resident who heads Ohiobased IT consulting firm Fast Switch Ltd., as president. The Dearborn-based nonprofit Carey Pachla group also said Rebecca Bray, who had been serving as its vice president of events, will be general vice president, assuming Pachla’s previous role. Pachla, 47, is president of Fast Switch and has worked there since 2003. Bray, 38, is chief sales officer of Epitec, a Southfield-based technology talent search agent. She has been with the company since 1998. Pachla and Bray will start their new roles immediately and serve for one year. Pachla replaces Cindy Warner, who had led the foundation since 2014.

February 20, 2017

WATER FROM PAGE 3

independent monitor to oversee water testing and sanitation at the hospital, at McLaren’s expense, and accused McLaren of not following protocols recommended by the U.S. Centers for Disease Control and Prevention. McLaren Flint CEO Chad Grant shot back Thursday, saying MDHSS did not sufficiently protect the public against an outbreak of Legionnaires’ disease while Flint was using the Flint River as its source of drinking water. The state and county health departments never notified the public or all area physicians about the spike in Legionnaires’ cases until January 2016 — three months after it ended. A recent report by Bridge Magazine raised questions about whether a spike in pneumonia deaths in Genesee County in 2014 and 2015 may have been additional cases of undiagnosed Legionnaires’ disease that doctors did not test for because they didn’t know about the outbreak. McLaren’s Grant promised to comply by March 10 with the state order to submit documents on improvements to its water quality management plan, which he said already is a best practice designed by a national water quality expert and follows CDC recommendations.

The Fieger factor Complicating matters for McLaren: Fieger, the bombastic Southfield-based plaintiffs attorney, is suing McLaren hospital and state environmental officials for $100 million on behalf of Legionnaires’ survivors hospitalized at McLaren and the estate of Debra Kidd, a 58-year-old woman who died from Legionnaires’ in July 2015 after being treated for a persistent headache at McLaren. Fieger has refused to accept McLaren’s contention that Flint’s corrosive water during between April 2014 and October 2015 was the leading factor in causing legionella bacteria to thrive inside the city’s damaged water pipelines. “McLaren knew people were dying … and they didn’t tell anybody,” Fieger said in an interview with Crain’s. McLaren officials told Crain’s they reported both cases of patients contracting Legionnaires’ disease to the CDC and that MDHHS has access to such reports. In McLaren’s corner appears to be Attorney General Bill Schuette, whose special team investigating Flint’s water crisis sought to shield the hospital and the Genesee County Health Department from being investigated by MDHHS. Schuette’s office contends the protective order was necessary to preserve the integrity of its criminal investigation of MDHHS officials. In December, a Michigan Court of Appeals panel tossed out the protective order a Genesee County judge granted McLaren and Genesee County health officials that had shut out the state health department for months. Fieger thinks the order was an effort by Schuette to extend criminal and civil immunity to McLaren. “They’re all scratching each other’s back. It’s 100 percent political,” Fieger said.

Page17 17

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Schuette’s critics believe he’s using the Flint investigation to propel an allbut-certain bid for governor in 2018. The Republican attorney general has repeatedly said the probe is focused on bringing justice to Flint residents “without fear or favor” to all involved. A spokeswoman for Schuette declined to comment for this story because of the ongoing investigation. Last September, Schuette’s special prosecutor sent MDHHS Director Nick Lyon a letter saying Lyon was a “target” of the investigation. Lyon has not been charged with any crimes, and Schuette has not ruled out any other state officials, including Gov. Rick Snyder, from being charged.

Bacterial testing McLaren and DHHS are at odds over whether the hospital has adequately disinfected areas of the hospital where legionella bacteria can grow in water pipelines and be transmitted through respirators, air conditioning cooling towers and hot tubs. The state agency used a confirmed mid-November case of Legionnaires’ to justify the order. In what appears to be a defense against Fieger and the state health department, McLaren officials are insisting the source of the bacteria was Flint’s corrosive river water. In its defense, McLaren has hired legionella expert Janet Stout, M.D., a Pittsburgh-based clinical and environmental biologist. Stout, who is credited with discovering the link between legionella in hospital water systems and Legionnaires’ disease in 1982, contends Flint’s municipal water was a conducive environment for legionella bacteria to grow. Flint switched from Detroit’s Lake Huron pipeline to the Flint River for its drinking water source in April 2014 as a cost-savings measure while a new regional pipeline to Lake Huron was being built. Flint’s lack of corrosion-controlling chemicals damaged pipelines and joints, allowing bacteria to flourish inside the city’s troubled water system, Stout said. “Without that switch, those conditions for legionella to multiply within the buildings in Flint, Michigan would not have occurred,” said Stout, a research associate professor at the University of Pittsburgh. Victor Yu, M.D., Stout’s business partner at Special Pathogens Laboratory, a legionella-testing lab in Pittsburgh, is listed as an expert witness in Schuette’s criminal charging documents against former Flint Emergency Managers Darnell Earley and Gerald Ambrose. Stout said she first tested McLaren’s water around September 2015, just before Snyder’s office moved to switch Flint back to Detroit’s water system after the discovery of high levels of lead. Stout said Yu was not involved in her work for McLaren.

The 2014 test Last week, the state health department attempted to cast doubt on Stout’s long-standing conclusion that Flint’s water was to blame for the legionella outbreak. DHHS released a copy of a Dec. 23,

2014, letter McLaren received from a consultant at Environmental Testing & Consulting Inc. about the firm’s tests of water supply lines going into the Flint hospital. “It seems that the supply water coming from the City of Flint is not contributing to the Legionella issues at McLaren and that any issues are likely internal to the hospital system,” ETC Vice President Jeremy Westcott wrote in the letter. McLaren Flint officials told Crain’s that the ETC test only took samples for a two-week period in December when water temperature conditions were unlikely to produce any legionella. McLaren also confirmed that no follow-up tests were conducted on incoming water. “This is a snapshot in time and does not reflect conditions at any other time period, including from warmer months,” McLaren spokeswoman Rosemary Plorin said in an email. “At the time the hospital received the letter, it had already begun making investments in its program to monitor and treat the water it purchases from the City of Flint.” DHHS obtained Westcott’s letter on Jan. 31 in a batch of McLaren records turned over by the Genesee County Health Department. The local health department obtained them from Genesee County Prosecutor David Leyton’s office, which is working with Schuette’s special prosecutor, Todd Flood, on the wide-ranging probe of the Flint water crisis. The state health department had no access to McLaren’s records for nearly six months while the protective order was in place. Lyon said the letter suggested McLaren was more aware of its own internal plumbing issues than the hospital has previously acknowledged. “They certainly were put on notice that their hospital was a potential source of the problem as early as December 2014,” Lyon told Crain’s. Henning, the Wayne State law professor, said the conflicting consultant’s report “calls into question the strength” of the attorney general’s case that Flint’s water was solely to blame for the legionella outbreak. “It makes Todd Flood’s case that much more difficult,” Henning said. Westcott said he couldn’t comment on ETC’s work for McLaren because the health care system remains a client. But Westcott said he’s never been contacted by the attorney general’s office, county prosecutor or any other law enforcement agency regarding the legionella outbreak at McLaren. Stout said the findings of ETC that the legionella may have been growing inside the building is “not unusual.” “The fact that it was negative coming into the building in this report from ETC is normal,” Stout said. Stout also declined to reveal any details about her own legionella investigation, such as whether it focused on water coming into the building or testing at various locations inside the hospital. “I can’t comment specifically about findings at McLaren,” she said. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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Lockhart’s BBQ team plans District Detroit restaurant By Annalise Frank afrank@crain.com

INAUGURAL 2017-18 SEASON

The owners of Lockhart’s BBQ are seeing opportunities in metro Detroit, and they want in. Owners Drew Ciora and Rick Ghersi are “in talks” to open a full-service restaurant in The District Detroit, Ciora said. Lockhart’s BBQ is the first known potential retail tenant for the 50-block district of retail, restaurants and entertainment under construction around Little Caesars Arena. With two Texas-style sit-down barbecue joints — the original opened in Royal Oak in 2010 and the second in Lake Orion in 2015 — Ciora and Ghersi are planning to grow their smoked-meat success by expanding out of their traditional model to take advantage of the growing fast-casual trend with new locations dubbed Lockhart’s BBQ Shacks. If Lockhart’s BBQ closes on a deal for the specific District Detroit spot it’s looking at, Ciora said, his guess is that construction would start before the end of the year. Messages were left with District Detroit media relations staff seeking comment. “We love it down there,” Ciora said. “We love what they’re developing. We’ve been fortunate enough to see their nice models and display they have, and it’s just fantastic, having four professional teams within a stone’s throw away down there.” There is a lot on the horizon for Ciora, 48, and Ghersi, 57. They are also scouring Southeast Michigan

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industry relationships made the company a good choice to manage the national retail giant’s outdoor online sales effort, Jariwala said. The Moosejaw team will decide which items will be available on the five Wal-Mart-owned sites — Walmart.com, Moosejaw.com, Hayneedle.com, Shoebuy.com and Jet.com — and manage the overall outdoor gear online shopping experience, he said. Wal-Mart made the move as it aims to grow its e-commerce division, which made $14 billion in sales for its fiscal year that ended Jan. 31, 2016. “Wal-Mart and Amazon are really going to be defining e-commerce here in the near future, and for Moosejaw to be at the epicenter of that is just extremely exciting,” Comerford said. The purchase of Moosejaw, “one of the earliest hybrid companies in terms of both brick-and-mortar and online,” makes a lot of sense as Wal-Mart acquires websites like Jet. com and faces what many analysts would call its biggest challenge, Amazon.com Inc., said Ken Nisch, chairman of Southfield-based JGA. JGA designs branded environments

“We love it down there. We love what they’re developing.”

for future Lockhart’s BBQ Shack locations. Ciora said they could be locking down two spots soon, possibly in Wixom and Northville, or elsewhere in Oakland or Macomb County. The Shacks will be “upscale, quick-serve style,” Ciora said. “They’re smaller, they’re easier to build out, they’re less expensive to build and ... it’s an opportunity to grow quicker.” Customers will walk up to a counter lined with traditional barbecue offerings and either create a custom plate or select a sandwich or salad off the menu. A couple of servers will also monitor the dining room, refilling drinks, clearing tables and taking additional requests. Ciora and Ghersi said they plan to open two to three Lockhart’s BBQ Shacks in the next year to 14 months. If that goes well, they'll expand to between 10 and 30 locations, aiming to put up four or five new locations per year. “It seems there’s a trend toward going smaller. People are enjoying the fast-casual (concept) more … just from our research and what we’ve read,” Ciora said. The fast-casual trend isn’t anything new, but the concept somewhere between fast food and sit-

down has gained traction and fame as high-profile chains like Chipotle Mexican Grill Inc. and Panera Bread capitalize on it. The Lockhart’s partners opened their most recent location a year ago at 37 E. Flint St. in Lake Orion. In the first full year there, they’ve seen sales of nearly $2.5 million. The original restaurant in Royal Oak makes about $3.3 million per year in sales, Ciora said. They’re best known for their brisket, a “very Texas thing,” Ciora said. He and Ghersi first came together to open the Detroit Beer Co. downtown in 2003 with Mike Pelsz. Then, in 2010, the two saw an opportunity to bring Texas smokehouse flavor to Southeast Michigan with Lockhart’s. Ghersi is from Fraser, while Ciora hails from Texas, where he grew up eating wood-smoked brisket served with sliced pickles and a hunk of white bread. So that’s how they plate it at Lockhart’s. They smoke all meat on premise, purely with wood. That tradition will continue at the Shack locations, despite the size difference. Ideally they'll be 3,000 square feet, Ciora said. That’s about half the size of the full restaurants, which are 5,700 and 7,000 square feet, but they’ll still feature a similar open kitchen design. As for fast-casual pricing, “our goal is no more expensive than we have, and possibly a little cheaper,” Ciora said. But it depends on issues such as location and rent. “We have a couple of sites we’re very fond of right now,” he said. “We’re just excited to keep growing.”

for customers. A tough spot could be the companies Moosejaw works with, Nisch said. Many can be protective of their distribution. Moosejaw sells products from 400 brands, with big brand names including The North Face and Patagonia. The company will aim to widen the number of brands available on Wal-Mart’s sites and fill in any gaps, Comerford said. Some brands have already said they want their gear listed on a Wal-Mart e-commerce market, while others want to continue working with Moosejaw individually, he said. He did not identify specific brands. In the transition, Moosejaw’s leadership “is sticking together,” Comerford said. The company, which employs more than 350 — not counting seasonal workers — will remain in metro Detroit. Comerford could not release revenue details, but estimates from Internet Retailer show Moosejaw saw about $97.2 million in online sales in 2015, a 16 percent increase from the previous year. As for any backlash on the choice to align with the Arkansas-based retail giant, which has been criticized by labor groups for low wages and for its foreign-made goods, Comerford said he was happy to discover

the breadth of Wal-Mart’s sustainability initiatives — a topic extremely important to outdoor product retailers. Moosejaw was founded in 1992 when Robert Wolfe and David Jaffe opened the first store. Jaffe sold his share to Wolfe the following year. Then Moosejaw sold a majority stake to Dallas-based private-equity firm Parallel Investment Partners in 2007. Wolfe and his siblings, Julie and Jeffrey, maintained stakes in the company after the acquisition. They were minority shareholders and Robert Wolfe was on the board until the sale to Wal-Mart, Comerford said. Glencoe Capital LLC, a Chicago-based private-equity firm with offices in Birmingham, invested in Moosejaw in 2009, and with Parallel Investment Partners helped Moosejaw double its revenue, according to a Glencoe Capital statement. New York City-based W Capital Partners bought out Glencoe Capital in 2013, Comerford said. Robert Wolfe was a Crain’s Detroit Business 40 under 40 honoree in 2004. Robert and Jeffrey co-founded CrowdRise in 2010. Following the sale, CrowdRise will retain its brand and focus on charitable fundraising, while GoFundMe coordinates online fundraising for individuals.

Drew Ciora, Lockhart’s BBQ

C R A I N ’ S D E T R O I T B U S I N E S S // F E B R U A R Y 2 0 , 2 0 1 7

HOUSING

BUILD

The draft ordinance includes a provision that would allow a waiver of its requirements if the rules “would have a significant negative impact on the economics of the residential housing project thus rendering it unviable.” It would also require that the units remain affordable for at least 30 years after an issuance of a certificate of occupancy. The ordinance would require 10 percent of the units to be affordable to those making 80 percent of AMI; 5 percent affordable to those making 60 percent of AMI; and 5 percent affordable to those making 50 percent of AMI. If a developer failed to abide by the ordinance, fines would be assessed and then deposited in a fund geared toward promoting and prioritizing affordable housing and increasing accessibility to it. Last year, the city hired New York City-based real estate consulting firm HR&A Advisors Inc. to study the Detroit rental market and provide advisory services on an affordable housing plan. The contract was extended and is for $357,200. According to a study prepared by HR&A, 97 percent of rental units are affordable — meaning that the household spends no more than 30 percent of its monthly income on rent and utilities — for those making 80 percent of AMI. Eighty-six percent are affordable for those making 60 percent of AMI and 67 percent are affordable to those earning 50 percent of AMI. However, just 23 percent of the units are affordable for those making 30 percent or less of AMI. For a family of four, 80 percent of AMI was $53,520 per year, while 60 percent of AMI was $40,140 and 50 percent of AMI was $33,450, according to the report. The 30-percent-of-AMI limit was $20,070. The affordable rent, including utilities, for those families was $1,338, $1,003, $836 and $452 per month, respectively. Detroit is significantly more rent-burdened than Michigan and the nation as a whole, according to the report. Fifty-nine percent of families in the city paid at least 30 percent of their income toward housing costs, compared to 50 percent in Michigan and 48 percent nationwide. And 19 percent of Detroit households paid more than 50 percent of their income on housing costs, compared with 10 percent in Michigan and 11 percent nationwide, the report says.

and Livingston counties. That mirrors the 0.1 percent drop in year-over-year home sales from December. Yet the median sales price rose 6.7 percent from $142,000 to $151,500 year-over-year in January and 7.2 percent from $149,200 to $159,900 year-overyear in December. Much of that is being caused by the 44.1 percent inventory drop. That is also driving quicker sales as buyers look for move-in-ready homes: The average listing was on the market

FROM PAGE 3

Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

BANKRUPTCIES The following businesses filed for bankruptcy protection in U.S. Bankruptcy Court in Detroit Feb. 10-16. Under Chapter 11, a company files for reorganization. J Sweet Three LLC, 42757 Woodward Ave., Detroit, voluntary Chapter 11. Assets and liabilities not available.

FROM PAGE 3

KIRK PINHO/CRAIN’S DETROIT BUSINESS

More than half of the homes in the Stonegate subdivision in Lake Orion have been sold.

46 days last month, down from 54 days in January 2016, a 14.8 percent drop. There was an 8.5 percent drop, from 47 to 43 days, year-over-year in December. Market conditions like these and others — such as low interest rates — make builders optimistic, in spite of construction cost increases caused by hikes in labor and materials costs. “This year, going into 2017, I see an uptick in new construction. I think we are going to see an uptick higher than what we’ve seen,” Fingeroot said. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

“HOW CAN I KEEP MORE OF MY PROFITS?” When your business is more energy efficient, it’s also more profitable—and DTE Energy wants to help make that happen. Take John Logiudice, owner of Florentine Pizzeria, for example. DTE worked with him to make some small changes that led to big savings. Simply installing a programmable thermostat, sink aerators, LED bulbs and a pre-rinse spray valve in the kitchen saved John around 10% a month on his energy bill. If you’d like to manage energy use to save money at your business, visit dteenergy.com/savenow.

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ILITCH FROM PAGE 1

Michigan Historic Preservation Network allowed her employees to stand in front of a bulldozer in an ultimately futile effort to spare a historic but dilapidated building from being demolished. The building under fire was the Madison-Lenox Hotel downtown across from the Detroit Athletic Club; the owner of the two-building hotel was Ilitch, the billionaire owner of Little Caesars, the Detroit Red Wings and the Detroit Tigers. “The Madison-Lenox certainly was a pivotal point, but there were a number of hands in that decision,” said James Turner, owner of Detroit-based Turner Restoration LLC, who was a volunteer with the Preservation Wayne (now called Preservation Detroit) group. Francis Grunow, who battled the city and Ilitch over the Madison-Lenox demolition, has since come to understand why the decision to level the building was made. “It’s a different time, obviously,” he said. “What might have been true as far as development in the city in 2005 and 2006 is different, especially in downtown. I just have to wonder, in terms of that one particular property, would that building be under renovation now and be home to hundreds of people? I think it would.”

Developers ranging from Dan Gilbert to Richard Karp to David Di Rita have been buying and renovating historic buildings downtown in the last several years amid a wave of investment. But Ilitch was the pioneer when he moved his employees downtown from Farmington Hills nearly 30 years ago. “I do believe the Ilitches have done a lot of good for the city,” Grunow said. “But ... there are still a lot of preservation opportunities. There is huge potential upside. The opportunity is now more than ever, and myself and others saw that opportunity. We were frustrated that someone with so much resources didn’t see the structures and historic assets as opportunities to take a risk to do what we thought was the right thing.” It wasn’t just the Madison-Lenox demolition that rankled preservationists. You can also look to the demolition of the Adams Theatre/Fine Arts Building on Grand Circus Park and the Chin Tiki restaurant in Cass Corridor, which was far less historic, as examples of Ilitch buildings being razed. More recently, in July 2015, Ilitch’s Olympia Development of Michigan imploded the historic Louis Kamper-designed Park Avenue Hotel — which had “ZOMBIELAND” spelled out in graffiti across its top story.

THE DISTRICT DETROIT

A conceptual rendering of the exterior of Little Caesars Arena, which is now under construction, as part of the District Detroit. That decision was made with the approval of the Detroit Historic District Commission over objections from historic preservationists. The next-door historic Eddystone Hotel was spared, and is expected to be redeveloped as apartments in the District Detroit plan, which is to be anchored by the now-under-construction Little Caesars Arena. “They were both structurally sound,” said Finegood. “We requested that both buildings be saved. That ‘compromise’ was due to the view that the arena was more important to Detroit’s economy than saving an-

other building.” The most prominent one Ilitch did save is the 5,041-seat Fox Theatre, which he bought in 1987 and spent 18 months restoring, according to HistoricDetroit.org, which chronicles Detroit history and buildings. Former Gov. Jim Blanchard, who led the state from 1983 to 1991, said that before Ilitch renovated the Fox, the historic theater “was really rough around the edges and not attractive.” “After the renovation, it was fabulous,” he said. Ilitch’s use of the historic theater’s

front office space for his Little Caesars headquarters stood out in 1989, Blanchard said. “Some people criticized him for getting subsidies, using Detroit pension money, but the reality is he was doing it — nobody else was doing it,” Blanchard said. “Nobody else would. They were all building their stuff in the suburbs. Period.” Jay Lambrecht, owner of Bookie’s Bar & Grill in the shadow of the District Detroit project that spans 50 city blocks, understands some people’s frustration with Ilitch holding on to land for long periods without redeveloping it, or tearing buildings down. “But as time has gone on and you’ve seen the investment opportunities in the city, I think you kind of see the bigger picture now,” he said. “I felt the frustration, too. But at the end of the day, like him and his investments or not, you have to give him credit where credit is due.” Turner realizes that Ilitch wasn’t unilaterally making demolition decisions. “We had a city that was looking at nothing with any creative thought about development,” he said. “The city wanted development at any cost downtown, and it didn’t matter which buildings stood in its way.” Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB Chad Livengood contributed to this report.

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