Crain's Detroit Business, Feb. 27, 2017 issue by Crain's Detroit Business

FEBRUARY 27 - MARCH 5, 2017

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Crain’s Detroit Business top stories, page 3 Businesses in the footprint of the Howe Bridge wait, worry over prices on buyouts. State’s cash-strapped cities take aim at Proposal A’s limits.

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FEBRUARY 27 - MARCH 5, 2017

Technology drove year’s biggest moves in Michigan

More trouble for Russell owner Kefallinos’ tenants want money back from landlord, Page 5

Government

Strapped cities take aim at Proposal A

A look at Crain’s Biggest Deals for 2016, Page 8

Real estate

Many bridges left to cross

By Lindsay VanHulle

Crain’s Detroit Business/Bridge Magazine

LANSING — Dan Gilmartin has a warning for Michigan’s policymakers: The way the state funds its cities is squeezing them dry. Local governments across the state need to do a better job at sharing services and cutting costs, said Gilmartin, executive director and CEO of the Michigan Municipal League, which advocates on behalf of cities and villages. But cities also are limited in how much money they can bring in, even if residents were willing to tax themselves more — and that, he said, is something Lansing has to fix. Gilmartin and some other leaders are floating a politically tricky fix: An update to Proposal A, the voter-approved 1994 Michigan constitutional amendment that caps property tax increases. That solution would be a hard sell, but the fact that they’re talking about it at all is telling. It’s part of a backdrop of other extreme money measures being bandied about in Lansing, including proposals to roll back or eliminate the state’s income tax — to the concern of Gov. Rick Snyder — and restructure public retirement plans that have become a financial crisis. The outcome will have ramifications for Michigan’s competitiveness nationally, not least of which are the long-term fiscal health of the state’s cities and their ability to attract talent. Backers of updating Proposal A are aiming for changes they say won’t change the law’s original intent. Adopted partly to rein in ballooning property tax bills in the 1990s, the provision works by capping annual growth in property values, but some local leaders say it’s holding down revenue in a way that hadn’t been seen until the recession sent property values plummeting. In exchange for limiting annual growth in homeowners’ property tax bills, voters agreed to raise the state’s sales tax by two percentage points — it has been 6 percent ever since — and dedicate the money to K-12 schools. SEE PROPOSAL A, PAGE 29

LARRY PEPLIN

The Central Transport trucking terminal on Jefferson Avenue is owned by Ambassador Bridge owner Manuel “Matty” Moroun, a prominent foe of a new publicly owned bridge.

MDOT not paying enough for parcels in Delray, businesses say By Chad Livengood clivengood@crain.com

On a narrow and mostly deserted street in southwest Detroit’s Delray neighborhood, Gordy Ebsch has run a small machine shop since 1999, tailoring his services to nearby heavy industrial clients. But the 20,000-square-foot building on South Post Street that houses Ebsch’s Delray Mechanical Corp. sits at the base of where the new Gordie Howe International Bridge is supposed to land in Michigan. That puts Ebsch’s business in the crosshairs of the Michigan Department of Transportation, which is in the midst of a massive undertaking to buy up 634 parcels of residential and commercial land for the bridge, a plaza and connection to I-75. For Ebsch, MDOT’s purchase of-

KURT NAGL/CRAIN’S DETROIT BUSINESS

Delray Mechanical Corp. sits at the base of where the proposed Gordie Howe International Bridge is supposed to land in Michigan. fer for his building is not matching the cost of relocating his welding fabrication and custom machining business to another suitable produc-

tion space in southwest Detroit near his clients in the cement, asphalt, aggregate, steel and railroad industries. “It’s very difficult in Detroit to find

property that matches what I have,” said Ebsch, who has operated his business in southwest Detroit since 1988. “There’s such a big gap here. I don’t know how it’s going to get solved.” More likely than not, the gap between MDOT’s market-rate offer and the cost of Ebsch to uproot his small business will be decided by a Wayne County Circuit Court judge. “We’re going to litigate that for the rest of our lives when they finally file it,” said Alan Ackerman, an eminent domain attorney who is representing Delray Mechanical and several other businesses in the pathway of the bridge. MDOT’s land acquisition for the bridge — estimated to cost upward of $370 million — faces a big and SEE DELRAY, PAGE 25

United Way turns 100 — and takes over our front page

he cover of this week’s Crain’s is a bit different. The 30 companies whose logos are featured on this week’s Page 1 sponsored the eight-page section inside this week’s issue, which was produced by United Way for Southeastern Michigan in partnership with Crain Content Studio, the custom publishing division of Crain’s Detroit Business. In other words, these companies paid for an unprecedented takeover of our cover to celebrate a milestone for an organization that has a history of building relationships that improve lives in metro Detroit. Those companies are a small fraction of the more than 650 Detroit-area businesses that partner with United Way through corporate gifts, workplace campaigns or by encouraging employees to volunteer. The United Way tribute section paid for by those logos appears after Page 12.

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MICHIGAN BRIEFS State Senate passes brownfield cleanup bill Michigan municipalities moved a step closer to getting incentives for developers to redevelop brownfield sites, as the state Senate passed legislation last week that assists developers with the financial burden of cleaning up such sites. The legislation would let developers keep a portion of taxes collected after the projects are completed to recoup some costs of cleaning up the site. MIThrive is a coalition of economic development organizations, cities and chambers of commerce from around the state that supports the legislation. Several projects in Detroit could benefit, and Dan Gilbert and his team were among the leading architects of the bills last year, before they failed to advance at the end of the legislative term. The incentive would require developers to meet minimum investment thresholds to qualify for the tax capture, starting at $500 million in Detroit and are lower based on a city’s population. Tax captures would be capped at $40 million annually, and the state could approve no more than five projects per year. GOP Sen. Ken Horn of Frankenmuth, who introduced the bills, said

FILE PHOTO

The stalled Wayne County jail site, which has been proposed as a new home of a professional soccer facility, is a potential brownfield cleanup locale.

they were substantially changed from bills that failed to clear the Legislature last year. MIThrive adjusted the focus of the campaign from Detroit and Gilbert to other Michigan cities, in part to convince outstate lawmakers and their constituents to support the incentive. The bills now move to the House, where they died last year.

Family Christian Stores to cease operations Family Christian LLC, a faith-related retail company with more than 240 locations in 36 states, is shutting its doors. The Grand Rapids-based book, music and religious supply seller announced last week it was ending its 85 years in business, due to falling sales and changing shopper behaviors. The company, which employs

INSIDE

more than 3,000 across the U.S., has locations in Troy, Taylor and Sterling Heights, according to its website. It also sells products online and through catalogs, and has run a variety of charitable initiatives. Family Christian struggled after it filed for bankruptcy in 2015, company President Chuck Bengochea said in a statement. It had become a nonprofit business two years before that.

MICH-CELLANEOUS

The Republican-controlled Michigan House last week failed to approve an income tax cut, rejecting the plan after a lengthy session and the unsuccessful cajoling of some resistant members of the majority. The legislation would lower the 4.25 percent tax to 4.05 percent by 2019 and then to 3.9 percent by 2021 as long as the state savings, or rainy-day, fund is not below $1 billion, AP reported. The 52-55 vote — three short of the minimum number needed to move the bill to the GOP-led Senate — came at 1:45 a.m. Thursday after the measure again underwent revisions. Republican Gov. Rick Snyder had voiced concerns about the budget implications of a tax cut. J Menominee-based L.M. Foods LLC claimed the assets of the former Muskegon-based Plumb grocery J

store company and took over operation of its three stores, in Muskegon, North Muskegon and Whitehall, MLive.com reported. Plumb Inc. ceased operations Feb. 12 after more than 80 years. Plumb’s assets were seized by secured creditor L.M. Foods, but the assets’ value did not satisfy the debts owed. J The city of Muskegon continues to pay infrastructure costs for a languishing proposed casino site downtown, and the property owners continue to not pay property taxes that would offset those costs, MLive.com reported. The Harbor 31 SmartZone will cost the West Michigan city’s general fund an anticipated $275,000 this year. The lack of development, and accompanying property taxes, resulted in the city being saddled with most of the payments on bonds that were sold to develop the area for a technology business park. The SmartZone is located at the former Teledyne Continental Motors industrial site. J Spectrum Health stands to regain more than $747,000 it paid in property taxes after successfully earning

BANKRUPTCIES

CALENDAR

CLASSIFIED ADS

DEALS & DETAILS

KEITH CRAIN

OPINION

OTHER VOICES

PEOPLE

RON FOURNIER

RUMBLINGS

WEEK ON THE WEB

COMPANY INDEX: SEE PAGE 30 tax-exempt status on a medical center in Grand Rapids Charter Township, MiBiz reported. A Michigan Tax Tribunal judge ruled Spectrum Health Medical Group’s Integrated Care Campus meets state law and a Michigan Supreme Court ruling on what constitutes a charitable health care venture deserving of tax-exempt status. The township was ordered to return property taxes collected on the $48 million care campus that Spectrum opened in 2014.

Correction An item on Page 23 of the Feb. 20 issue incorrectly named the owner of Grosse Pointe Woods-based Marathon Cable Co. His name is Jud Utley.

ENERGIZING MICHIGAN’S

Future

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Building the electric transmission infrastructure that will power the future. www.itc-holdings.com

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Development

Russell Industrial Center’s owner has issues at other buildings

Pioneer Detroit real estate investor Kefallinos hit with class-action lawsuit in 2014 By Kirk Pinho kpinho@crain.com

Michael Byrd’s 85-year-old mother, who uses a wheelchair, can’t visit him in his home in the John R Apartments in Detroit’s historic Brush Park neighborhood. That’s because Byrd, a 54-year-old who drives charter buses and sometimes referees basketball games, lives in a building where there is no wheelchair ramp. The elevator often doesn’t work. “You would think that in 2017 that people wouldn’t still have to live in these conditions,” he said. The building, Dennis located at John R Kefallinos: and Adelaide Bought real estate Street, is one of in Detroit for at least 11 owned decades. by Detroit real estate investor Dennis Kefallinos, who has been buying real estate in the city for decades and whose Russell Industrial Center at I-75 and Clay

MUST READS OF THE WEEK

was ordered evicted last week due to safety concerns. Now Byrd, and dozens of other current and former tenants in Kefallinos-owned buildings, want some of their money back.

Potential “catastrophe” It’s been more than two years since a class-action lawsuit was filed against various companies owned by Kefallinos. The plaintiffs, represented by Troy-based law firm The Oliver Law Group PC, say in the 2014 complaint that they leased apartments or lofts from Kefallinos when he knew he had no certificates of occupancy for any of the buildings and that there were safety hazards. They are in the damages phase of a class-action lawsuit; so far, three groups of current and former tenants have submitted claims, and a fourth and final one is expected to in the coming weeks. Kefallinos, who did not respond to a message seeking comment, said in SEE INVESTOR, PAGE 30

Michael Byrd lives in the Kefallinos-owned John R Apartments in Detroit’s historic Brush Park neighborhood.

Culture

Finance

State of the area’s arts

Splitting audience could make UM’s $240M athletics debt a heavier lift

A virtuous circle around cars

By Bill Shea bshea@crain.com

Ron Fournier: How a nonprofit is putting people on wheels, and putting people in jobs, Page 6

High-rent district? Rumblings: How the Hudson’s site building could bump up downtown rents, Page 31

LARRY PEPLIN

Leonard Slatkin

David DiChiera

He is the first university arts presenter to receive a National Medal of Arts. He came to UMS from Washington, D.C., where he was a management consultant. Under his leadership, UMS’s budget has quadrupled and the organization has commissioned, co-commissioned or co-produced more than 60 works in dance, theater and music. A National Endowment of the Arts Opera Honors Award winner, DiChiera, 81, came to Michigan in the early 1960s to teach at Oakland University. He wound up launching the Michigan Opera Theatre, transforming a rundown adult movie theater into Detroit’s Music Hall, and raising

The University of Michigan athletic department sits atop $240 million in debt at a time when several major college athletics programs are grappling with enormous and potentially crippling debt loads. Fueling that peril are ESPN subscriber losses that sap revenue from a network whose gargantuan spending on college football TV broadcast rights is a vital revenue stream for major universities. Other worries are the ongoing struggle to monetize content — how do you make money on Snapchat? — to an audience consuming college sports in dizzying arrays of formats, and the trend of dwindling football crowds for some schools. Unlike its some of its cashstrapped peers, Michigan has a packed Big House on fall Saturdays, deep-pocket donors, an elite credit rating, and it expects its share of TV money to keep increasing — a mix the university expects to give it the financial maneuverability to readily pay what it owes and to keep borrowing to build or refurbish its facilities. But the potential threat on the

SEE ARTS, PAGE 26

SEE DEBT, PAGE 28

Ken Fischer PHOTOS BY LARRY PEPLIN

As they prepare to leave posts, longtime leaders talk funding, audience and the future By Leslie D. Green

Special to Crain's Detroit Business

In four months, metro Detroit’s arts world will change significantly. That’s when David DiChiera resigns after 46 years as artistic director of the Michigan Opera Theatre, Leonard Slatkin prepares for his 10th and last season as conductor and music director of the Detroit Symphony Orchestra, and Ken Fischer ends his 30-year role as president of the University Musical Society. “They are losses to the state,” said John Bracey, executive director for Michigan’s Council for Arts and Cultural Affairs. Slatkin, 72, is a National Medal of Arts winner and seven-time Gram-

my Award winner renowned for his conducting, his composing and his love of American music. He came to Detroit from Washington, D.C., where he led the National Symphony. At the end of this season, the Los Angeles native will also step down from his post as conductor and music director for the Orchestre National de Lyon in France. Fischer, 72, is only the sixth president in the 137-year history of UMS.

“They are losses to the state.” John Bracey, executive director for Michigan’s Council for Arts and Cultural Affairs

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OPINION

KEITH CRAIN Editor-in-chief

A virtuous circle around cars

Can spring be far behind? Probably

just watched a 2001 cherry red Oldsmobile change the lives of two people. First was Ricardo Beecham, a 40-year-old felon training to be a mechanic out of a shop run by Vehicles for Change, a nonprofit based in northeast Detroit’s struggling Osborn neighborhood. Beecham wiped his long, oil-slicked fingers across his pants before shaking my hand. “It’s hard finding a good job out of jail,” he said. As part of his training, Beecham helped repair a 2001 Oldsmobile Alero with 113,000 miles. Second was Myesha Harris, a single mother of two children who desperately needed transportation to work, school and church. She had no car nor credit until Vehicles for Change sold her the same 2001 Oldsmobile Alero for $965, including a six-month, 6,000-mile warranty and a AAA Michigan membership. “Oh my God!” she said when Beecham’s instructor, Issac Small III, handed her the keys Tuesday morning. Small smiled. His trainee is a step closer to being a licensed mechanic, and Harris now has a car — the same cherry red Oldsmobile nursed onto the road by Beecham’s steady hand. “It’s a virtuous circle,” Small said. The circle began in Baltimore, where Martin Schwartz launched Vehicles for Change to solicit car donations and sell the vehicles at low rates to needy and worthy families. Since 1999, the nonprofit has provided cars to more than 5,000 families who can prove they have a job or a job offer and need a car to stay employed. The average recipient experiences a $7,000 annual boost in pay within the first year of ownership, according to a study conducted by the program. Nearly 90 percent of recipients used their cars to take children to after-school activities and tutoring. “For a lot of people, having a car — even a beat-up old car — is transformational,” Schwartz told me over breakfast recently in Eastern Market. “What a car can mean for people is the difference between poverty and success.” A cousin of Jim Schwartz, the former Detroit Lions head coach, Martin Schwartz expanded to Detroit in 2015 after being encouraged by his friend Luis Perez, who left the team’s head office that same year. Since coming to Detroit, Vehicles for Change has put 42 low-income residents in cars. By the end of the year, said Director of Operations Teresa McFadden, the total will be 65. The program works like this:

LARRY PEPLIN

Myesha Harris, her fiance Douglas Watts and Vehicles for Change instructor Issac Small III pose with Harris’ 2001 Oldsmobile Alero after Harris received the keys.

“For a lot of people, having a car — even a beat-up old car — is transformational.” Martin Schwartz, Vehicles for Change

RON FOURNIER Editor/Publisher

Ron Fournier is editor and publisher of Crain’s Detroit Business. Catch his take on business news at 6:10 a.m. every other Monday on the Paul W. Smith show on WJR AM 760 and in his blog at www.crainsdetroit.com. J People and institutions donate cars to Vehicles for Change. (You can donate here: https://www.vehiclesforchange.org/) J The cars are fixed and serviced. Until recently, that work was done by corporate sponsor Belle Tire. J Potential buyers are referred to the program by the Wayne County Metropolitan Community Action Agency, which seeks people with the greatest need and ability to benefit from reliable transportation. J One Detroit Credit Union loans recipients the price of each car at 8.9 percent interest. Vehicles for Change guarantees the loans. J Each car costs $850. The AAA membership and warranty raise the price to $965. With interest, that’s $85 per month for a year. Ninety percent of the recipients

are single mothers like Harris, living in neighborhoods with poor public transportation and few jobs. Harris works in a distant suburb. “This vehicle is going to change my life because I’ll be able to make sure I can get my 8-year-old to school every day. I’ll make sure my attendance is great at work. And I’ll always have the opportunity to go to church events now,” she said. This year, Schwartz fully replicated his Baltimore model by opening a training center that is giving nine people, including Beecham, a chance to earn six state certifications in mechanics while fixing and servicing the donated vehicles. During training, they earn $8.50 an hour 40 hours per week, with $1 per hour set aside to purchase a set of tools. Mechanics can’t get work without tools. Once certified in the six categories, a new mechanic has an average starting salary of $35,000 or so. A bit more training, and they can earn close to six figures. “I can make ends meet without this program,” Beecham told me. “But with these certifications, I can make the money a family needs to thrive.” Beecham, who served 14 years in

prison for armed robbery and attempted murder, is one of five ex-inmates in the current nine-person training class — all vetted for the program by the Detroit Economic Employment Solutions Corp. There is only one woman in the class, 26-year-old Chynna Penson of Detroit, who said she left her job as a home health care aide to learn a new trade. Until she enrolled in the program this year, Penson said, “I knew nothing about cars. I could put gas in them and I could tell when the brakes were going bad — but that’s it. Now I’m certified to fix brakes.” Penson lives in one of the poorest neighborhoods in a city starving for opportunity. One-fourth of low-income households in Detroit are without cars, according to data provided by the program. Only 60 percent of working-age Detroit residents live near a transit stop, and just 22 percent of all Detroit jobs are reachable via public transit in fewer than 90 minutes. “A lot of us are stuck here in this neighborhood unless we’re lucky enough to get a car and a job,” Penson said, flashing a deep-dimpled smile beneath her Superman ski cap. “I’m a lucky woman.”

After last week’s weather, there did not seem to be much reason to head south for a vacation. To say the weather in Detroit was unseasonable would be an understatement. But last weekend also marked the first game of the Tigers’ spring training in Florida. That’s enough to convince us spring is right around the corner. Businesses all over Southeast Michigan were poised to leap into action and put out all their spring and summer merchandise. Clothing stores were about to display their summer fashions. Everyone was excited to welcome spring weather. Whoo! This is Michigan, folks, and it was nothing more than a cruel hoax to make us all think that this was it. Before you cancel your spring vacation and drag your motorcycle up along with your lawnmower, remember we still haven’t seen the first of March yet. As much as we all wish for spring, except for the skiers and snowmobile owners, it is just nature playing a trick. Whether you want it or not, we still have a quite a few weeks until spring. And heading into this past weekend, we had storm alerts that could produce some snow. Michigan does have four seasons. And yes, as we all know, merchandise changes right along with those seasons. We’re not like California or Florida, where they have the same merchandise all year long. Those poor folks have never seen a clearance sale for seasonal changes. My favorites are the retailers who go from snowblowers or snowmobiles to motorcycles. It’s all about the seasons. My guess is that retailers in places with seasonal changes may sell more than retailers in single-season states. In Michigan, we have all sorts of clues for our seasonal changes. When Thanksgiving rolls around, we know snow is coming. And when the Grapefruit League has its first game, I can always look forward to warmer weather. The pro basketball and hockey playoffs are other clues, along with my favorite, March Madness. But chances are pretty good, even if you are a rabid believer in global warming, that Mother Nature is good for at least one or maybe two good snowstorms before we see the winter clearance sales. It has been an exceptionally mild winter — so far. Spring is not far ahead, but beware the Ides of March.

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New immigration rules, DeVos have consequences for business Crain's Detroit Business Publisher/ Editor Ron Fournier addressed President Donald Trump's executive order on immigration in his Feb. 2 column, asking “How can this be good for your business, your city, your country?” Here are some concerns addressing the need to develop and sustain the technologically skilled workforce required today. Detroit’s business environment has been harmed by the unintended consequences of two recent well-intentioned but poorly considered federal actions: the new immigration restrictions, along with an inexperienced education secretary interested more in a single, religion-driven issue than the broad range of educational concerns needed to develop a highly skilled workforce. As a member of Detroit’s analytics community, I have written before how high-tech education makes a crucial difference in today’s economy, including the commercial benefits immigrants with advanced degrees bring to our shores. Our new education secretary, Betsy DeVos, seeks to reduce enrollment in public schools in favor of private, religious-based schools sometimes marked by selective support for modern science. Without proper input from business leaders, this can focus technological education toward fewer people. The increasing difficulty in finding enough employees with the technological skills required for today’s economy hurts business growth, limits new product development and

Deadline nears for Crain’s 2017 Twenty in their 20s Do you know a 20-something to watch? The deadline is fast approaching to nominate a local rising star for Crain’s Twenty in their 20s. Likely candidates include upand-comers who have made waves within a company, shown success or originality as an entrepreneur, or made a local impact in some other demonstrable way. Candidates are not limited to any particular field or industry and may come from the corporate world, creative industries, nonprofits or social entrepreneurship. Winners will be profiled in the May 1 edition and honored at an awards event. The deadline to nominate someone is Tuesday. Once nominated, nominees will receive an email with a link to the form. The deadline for nominees to fill out their forms is March 7. The nominee MUST be 29 or younger on May 1, 2017. Visit crainsdetroit.com/nominate to make your nomination today. For questions about the awards or this nomination program, please contact Special Projects Coordinator Keenan Covington at (313) 446-0417 or kcovington@crain.com.

OTHER VOICES David Corliss

Corliss is a statistical astrophysicist who works in enterprise analytics and serves as vice president of the metro Detroit chapter of the American Statistical Association.

increases costs. Both the travel bans and insufficient support for public schools in providing a highly skilled workforce have the unintended effect of hurting our global competiveness by reducing the number of employees in science, technology, engineering and mathematics. While vetting of immigrants is certainly needed, vetting of new government rules is also necessary to prevent sudden, harmful shifts in policy. Inadequately considered changes in government rules can leave business plans in disarray. Employers are left uncertain if their known and trusted employees can — or will want to —

remain in this country. Faced with a hostile immigration environment and weakening public schools for their children, what is to prevent people with newly minted master’s degrees from establishing their careers in more-welcoming places? National leaders in Germany, Canada and other countries have reached out to those worried by the travel ban with a voice clearly heard in engineering centers and graduate schools across America. Our global competitiveness has been injured by a lack of due consideration of the business impact of new policies.

American business interests are best served by thorough vetting of immigrants based on realistic risk criteria rather than only national origin or religion and a strong public education system to produce an abundance of high-tech workers. Chamber of Commerce representatives and other business leaders need to be a part of the conversation at national, state and local levels to promote the technology needed for business growth. Working together with business leaders, federal policy can do more to foster, rather than hinder, creation of the products and jobs of the future.

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SPECIAL REPORT: FINANCE

GETTY IMAGES/ISTOCKPHOTO

Technology drove Michigan’s mergers and acquisitions last year By Dustin Walsh dwalsh@crain.com

Michigan merger and acquisition activity is dominated by technology and market share grabs. In 2016, most of Crain’s Biggest Deals fell in those categories, thanks to a favorable lending market and new technologies demands in the market space. And despite uncertain federal tax and trade policy, impending interest rate hikes and a slowing global market, M&A experts don’t predict that to change this year. “Really, last year should have been heavily influenced by uncertainty in the economy and the election,” said Cliff Roesler, co-founder and partner at Birmingham-based investment bank and M&A advisory firm Angle Advisors LLC. “And if you look at the calendar, it’s a long time Cliff Roesler: for a recession ... but the Economy still not U.S. economy still hasn’t fully recovered. fully recovered from the recession, so there’s still been some running room and that’s what we saw last year and continue to see today.” Canada’s largest utility owner, Fortis Inc., paid $11.3 billion for Novi-based ITC Holdings Corp., a deal with a 33 percent premium over ITC’s trading price. Power companies have been grappling with flat demand and rising costs. ITC, whose transmission lines earned the highest return on capital in the U.S. utility space, offered promising growth to Fortis.

Inside n American Axle & Manufacturing Holdings Inc.’s move to acquire Metaldyne Performance Group Inc. in a $3.3 billion deal is an operational win, Page 9 n Piston Group is set to become the largest minority-owned supplier with its $175 million acquisition of Takata Corp. subsidiary Irvin Automotive Inc., Page 9 n Bank consolidation is ongoing, and Arbor Bancorp Inc. secured expansion with its $33.3 million acquisition of Birmingham Bloomfield Bancshares Inc., Page 9 n IBM Corp. is becoming a major player in the health care space, particularly after its acquisition of Ann Arbor-based Truven Health Analytics for $2.6 billion, Page 10 n Stryker Corp. expanded its emergency medical services business with the acquisition of Physio-Control International Inc. for $1.28 billion, Page 10 n Crain’s list of the biggest deals of 2016, Pages 11-12 n For a searchable database of the deals, see crainsdetroit.com/bigdeals

American Axle & Manufacturing Holdings Inc. was stagnating as axles offer limited technological advancement in the burgeoning connected, autonomous and alternative propulsion automotive space. Its pending $3.3 billion acquisition of Metaldyne Performance

Group Inc. provides American Axle a new powertrain components product portfolio as well as a niche in the foundry industry and an expanded presence in Europe. The Detroit-based supplier has also struggled for nearly 20 years to diversify away from its former parent company, General Motors Co. The Metaldyne deal will drop its reliance on GM from more than 65 percent of its revenue now to 41 percent upon closing with expectations to reduce it to 32 percent by 2020. “Technology was definitely the driving factor in 2016,” said Steven Hilfinger, former COO for the Michigan Economic Development Corp. and partner at law firm Foley & Lardner LLP in Detroit. “Especially locally, as companies look at how to accelerate development of autonomous and connectSteven Hilfinger: ed vehicles. They can do that internally, but the fastTechnology a est way to close the techdriving factor. nology gap is to make an acquisition.” GM sought to jump ahead of its peers on autonomous driving with the $581 million acquisition of San Francisco startup Cruise Automation. The 4-year-old Cruise created an aftermarket kit that allows buyers to convert cars into autonomous vehicles. The kit was originally designed for the Audi A4 and S4 models. GM, however, plans to integrate the technology into its own autonomous vehicles, which it began

testing on Michigan roadways this year. Liquidity has also made strategic buyers acquisition hungry. Reports indicate the S&P 500 is sitting on $1.5 trillion in investment capital due to apprehension tied to the Great Recession. “There’s so much existing liquidity in the market,” said Tim Melton, partner-in-charge at Jones Day LP in Detroit. “There’s not a lot of other areas to see good returns, so (companies) are looking to invest that somewhere, and acquisitions is a great place right now.” Kalamazoo-based medical device maker Stryker Corp. has held more than $3 billion in cash since coming out of the downturn in 2011, up from under $2 billion prior to the recession. Stryker closed on several deals in 2016, including the $2.8 billion acquisition of artificial hips and knees maker Sage Products Inc. and the $1.28 billion acquisition of ambulatory defibrillator maker Physio-Control International Inc. Health care and automotive are expected to remain active M&A sectors in 2017, but regulatory uncertainty does have the potential to sideline many deals, Hilfinger said. “There’s definitely a lot of regulatory policy changes in the pipeline,” Hilfinger said. “Some of it could foster M&A, such as changes in antitrust policy, but others could constrain the market.” Big questions remain under a new administration in the White House. President Donald Trump and Congress are working to repeal and replace the Affordable Care Act, which will likely have major consequences for the health care industry. SEE DEALS, PAGE 10

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SPECIAL REPORT: CRAIN’S BIGGEST DEALS 2016

$175 million acquisition

$3.3 billion deal

Metaldyne merger diversifies American Axle By Dustin Walsh dwalsh@crain.com

American Axle & Manufacturing Holdings Inc.’s move to acquire Metaldyne Performance Group Inc. in a $3.3 billion deal is an operational win. The merged companies will generate nearly $7 billion in revenue and reduce Detroit-based American Axle’s reliance on its largest customer, General Motors Co. GM now accounts for about 66 percent of the company’s revenue. The integration of MPG will reduce GM to 41 percent of sales with plans

to reduce that further to 32 percent by 2020. MPG’s shareholders will see a benefit, receiving a 0.5 share of the newly combined company. New York City David Dauch: private equity American Axle firm American CEO/chairman. Securities Inc. hit a home run with the deal, which is expected to close by June 30. The firm acquired

Metaldyne LLC in 2012 for $820 million, three years after high debt and slumping sales forced Metaldyne into Chapter 11 bankruptcy. American Securities rolled two of its other suppliers, HHI Group Holdings and Grede Holdings LLC, into Metaldyne to form MPG in 2014, then launched a $150 million initial public offering later that year. American Securities, now a 76 percent shareholder in MPG, will see a payout of more than $693 million, coupled with 25.6 million in shares, or 23 percent, of the new company, under the deal with American Axle.

Arbor Bancorp continues consolidation dwalsh@crain.com

Bank consolidation is ongoing, and Arbor Bancorp Inc., parent company of the Bank of Ann Arbor, secured expansion with the acquisition of Birmingham Bloomfield Bancshares Inc. in January. Birmingham Bloomfield shareholders receive $16.50 in cash for each share of common stock, with a total transaction value of about

Piston Group deals for Takata subsidiary By Dustin Walsh dwalsh@crain.com

$33.3 million bank transaction

By Dustin Walsh

PISTON GROUP

Vinnie Johnson, a former Detroit Pistons guard, has overseen the growth of Piston Group.

$33.3 million. The deal was announced last July. The combined entity will have about 225 employees and eight branches in Washtenaw, Wayne and Oakland counties. It will have about $1.5 billion in total assets and about $1.2 million in assets under management. The Bank of Birmingham will continue to operate under that name until banking sys- Tim Marshall: tems have been integrated. It is estimated that Bank of Ann Arbor will happen by summer. CEO/president.

Redford Township-based parts assembler Piston Group is set to become the largest minority-owned supplier with its $175 million acquisition of Takata Corp. subsidiary Irvin Automotive Inc. The deal adds Irvin’s interiors manufacturing operations and propels Piston toward what the company expects will be $2.8 billion in revenue by 2018. Takata put Irvin on the market in February in search of a lifeline in the wake of the Japanese parent compa-

ny’s airbag recall — the largest recall in automotive history. Vinnie Johnson, a former Detroit Pistons guard who is CEO of Piston, has overseen the supplier’s growth from just $570 million in revenue in 2012 to a projected $1.8 billion in 2016, nearly doubling its revenue from 2015. Piston has been growing with contracts from Ford Motor Co. and others. In 2012, Johnson’s other entity, V. Johnson Enterprises LLC, announced the formation of a new joint venture with Valeo SA called Detroit Thermal Systems LLC.

Your deal gets done here. Coshocton County Memorial Hospital Association Acquisition of assets of LC Drug and Alcohol Testing Associates, Inc.

MCM Capital Partners Acquisition of Action Industries, Ltd., Torsion Source LLC, Torsion Plastics, LLC and Flex Brush LLC

Sale to Prime Healthcare Foundation, Inc. in Chapter 11

Ohio Travel Bag Manufacturing Co.

Flint Group North America Corporation Acquisition of American Inks and Coatings

Pocono Mountain Recovery Center Sale of stock to CRC Health, LLC (a public healthcare company)

Sale to Zorro Capital, LLC

Gulfstream Polo, LLC $30 million sale of polo club to Pulte Homes

Kirtland Capital Partners Sale of Precision Dialogue to RR Donnelley

PT Liquidation Corp.

f/k/a Premier Tool & Die Cast Corp.

Sale to MV Metal Products & Solutions, LLC

Quaker Steak & Lube Sale to TravelCenters of America pursuant to Bankruptcy Code § 363

Zacara Farm Purchase of assets of De Garmo Marketing

$24 million recapitalization of multi-tenant industrial flex warehouse portfolio

$27 million sale of equestrian polo facility

mcdonaldhopkins.com

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 7 , 2 0 1 7

SPECIAL REPORT: CRAIN’S BIGGEST DEALS 2016

DEALS

$2.6 billion transaction

FROM PAGE 8

Truven deal a major health care move for IBM By Dustin Walsh dwalsh@crain.com

IBM Corp. is becoming a major player in the health care space, particularly after its April 2016 acquisition of Ann Arbor-based Truven Health Analytics for $2.6 billion. The acquisition, at the time it closed, represented IBM’s fourth health care-related deal in less than a year, according to Bloomberg. IBM has invested heavily in analytics services to the health care industry in recent years to integrate into its Watson Health business unit, Bloomberg reported. The integration of Truven boosted Watson Health with information on more than 300 million patients. Truven is a software company that provides cloudbased data management and analytics to more than 8,500 clients, including hospitals, insurers and government agencies. It’s best known for its annual Top 100 Hospitals, an analysis of health system performance. The company has 20 offices in Europe, Canada,

IBM Watson Health’s global headquarters is in Cambridge, Mass.

IBM

Asia, Latin America and the U.S., including Denver and Chicago.

$1.28 billion acquisition

Stryker expands emergency medical services By Dustin Walsh dwalsh@crain.com

Medical technology company Stryker Corp. expanded its emergency medical services business with the acquisition of Physio-Control International Inc. for $1.28 billion. Physio-Control develops and manufactures cardiac devices such as automated external defibrillators and is expected to complement Kalamazoo-based Stryker’s emergency medical services offerings, which include ambulance cots and cot equipment,

stair chairs and health care facility evacuation equipment. Redmond, Wash.-based Physio-Control had been owned by Bain Capital Private Equity since 2011. Physio-Control’s products are the second-biggest source of emergency medical services company spending after ambulance cots, and most of its products share the same customer base as Stryker, Stryker CEO Kevin Lobo said during a conference call announcing the deal. Physio-Control reported $503 million in sales in fiscal 2015.

For automotive, uncertainty over trade policy looms. The U.S. House of Representatives has floated a tax plan that calls for a 20 percent border adjustment tax — which will negatively impact nearly every automaker and supplier. The renegotiation of the North American Free Trade Agreement is also set to begin later this year. “Since the election, the optimism about the economy has grown, but the uncertainty has shifted,” Roesler said. “We’re not worried about the economy, but about trade barriers and whether there’s going to be additional incentives for manufacturing in the U.S. Strategic buyers are now paralyzed; decisions about where to manufacture or look to acquire components are all jammed up until this plays out.” Regulation and policy didn’t impact deals in 2016, according to a November KPMG M&A survey. Only 4 percent of respondents indicated that regulatory changes killed or delayed an M&A deal in the past two years. Of deals that didn’t tran-

spire, 36 percent indicated valuation issues and 22 percent cited issues uncovered during due diligence. Business-positive policy changes are also afoot, including potential tax depreciation expansions, reduced corporate tax rate and relaxing of antitrust rules. These could, potentially, push deals across the finish line even if other regulatory changes create issues, Hilfinger said. The U.S. is expected to remain an M&A hot spot in 2017 — 79 percent of respondents of the KPMG survey said deal activity will take place in the U.S. — but the dollar will be the X factor. Tax and border policy is expected to cause the dollar to rise, making U.S. companies more expensive for foreign buyers, but opening up international deals, Melton said. “The exchange rate issue is going to impact deals, but we don’t know to what extent,” Melton said. “If the dollar strengthens, we may see fewer local deals, but the large enterprises that are interested in doing deals, they’ll get it done anyway.” Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

A F e e - O n l y We a l t h M a n a g e m e n t G r o u p Kevin Lobo: Stryker chairman/ CEO.

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

CRAIN'S LIST: LARGEST MERGERS & ACQUISITIONS OF 2016 Rank

1 2

Acquirer name

Target

Fortis Inc., Canada; GIC Pte. Ltd., ITC Holdings Corp., Novi Singapore

American Axle & Manufacturing Holdings Inc., Detroit

Metaldyne Performance Group Inc., Southfield

Davies Ward Phillips & Vineberg LLP; Skadden, Arps, Slate, Meagher & Flom LLP; White & Case LLP; Goldman Sachs; Scotiabank Shearman & Sterlng LLP; Greenhill & Co.; J.P. Morgan Chase

Jones Day; Simpson Oct. 14, Thacher & Bartlett LLP; 2016 Barclays; Lazard Ltd.; Morgan Stanley

As a result of the closing, ITC was delisted from the New York $11,300.0 Stock Exchange. ITC shareholders received $22.57 per share and 0.7520 shares of Fortis for every ITC share.

Weil Gotshal; Bank of America Merrill Lynch

American Axle acquired MPG for $1.6 billion in cash and stock and the assumption of $1.7 billion in debt. Metaldyne was acquired by American Securities in 2012 and merged with Grede Holdings LLC and HHI Group Holdings LLC — both majorityowned by American Securities — to form MPG in 2014. Sold by prviate equity firm Madison Dearborn, Sage had sales of $430 million in fiscal 2015, compared with $9.95 billion for Stryker. Truven offers IBM 8,500 clients, including U.S. federal and state government agencies, employers, health plans, hospitals and others. Dematic, owned by private equity firm AEA Investors and the Ontario Teachers’ Pension Plan, had sales of about $1.8 billion in 2015.

8 9

Chemical Financial Corp., Midland

Talmer Bancorp., Troy

Coherent Inc. Santa Clara, Calif.

Rofin-Sinar Technologies Inc., Plymouth

Ningbo Joyson Electronic Corp., China

Key Safety Systems Inc., Sterling Heights

Teijin Ltd., Japan

Continental Structural Plastics Inc., Auburn Hills

General Motors Co., Detroit

Cruise Automation Inc., San Francisco, Calif.

4 5 6 7

Stryker Corp., Kalamazoo

10 11 12 13 14

Mann + Hummel Holding GmbH, Affinia Group Holdings Inc., Germany Ann Arbor Kellogg Co., Battle Creek

Ritmo Investimentos SA, Brazil

MBK Partners Ltd., Hong Kong; Simone FC Co. Ltd.; South Korea

GST AutoLeather Inc., Southfield

Icahn Enterprises LP, New York

Federal-Mogul Holdings Corp., Southfield

Ally Financial Inc., Detroit

15 16 17

20 21 22

April 8, 2016 Nov. 11, 2016

$1,300.0

April 5, 2016

Physio-Control, sold by Bain Capital Private Equity, makes devices such as defibrillators for emergency treatment of cardiac arrests. The deal created a bank with about $16 billion in assets and about 250 branches.

$1,280.0

June 2, 2016

May 6, 2016 Dec. 31, 2016

Pending

TradeKing Group Inc., Charlotte, N.C.

SpartanNash Co., Grand Rapids

Caito Foods Service Inc., Indianapolis

Morgan, Lewis & Bockius LLP; Deutsche Bank

Jan. 31, 2017

Mecaplast Group, France

Key Plastics LLC, Livonia

Horizon Global Corp., Troy

Westfalia-Automotive GmbH, Eversheds LLP; Jones Day; Wells Fargo Germany; Terwa BV, Securities LLC Netherlands KPMG Corporate Finance Moelis & Co.; SMBC Irvin Automotive Inc., LLC Nikko Securities Inc. Pontiac

Piston Group, Redford

SRS Industries LLC, Ludington

Envision Healthcare Holdings Inc., Greenwood Village, Colo.

Emergency Physicians Medical Group PC, Ann Arbor

Blue Wolf Capital Partners, New York

U.S. operations of Tenon Ltd., Grand Rapids

Mori Hamada & Matsumoto; Nomura Holdings Inc. Morrison & Foerster LLP

$2,100.0

In a multi-seller deal, DTE acquired outright Appalachia Gathering System and a 55 percent stake in Stonewall Gas Gathering from M3 Midstream and Vega Energy Partners.

May 12, 2016

Angle Advisors LLC; Lazard

$2,600.0

Oct. 20, 2016

Dec. 31, 2016

Davies Ward Phillips & Vineberg LLP; Manatt, Phelps & Phillips LLP Souza, Cescon, Barrieu & Flesch Advogados; Credit Suisse

$2,800.0

At the closing, Sun issued Carefree 3.3 million shares of its $1,680.0 common stock valued at $225 million, and $1.46 billion in cash.

Nelson Mullins Riley & Sept. 1, Scarborough LLP; Keefe, 2016 Bruyette & Woods Inc. Norton Rose LLP; Nov. 8, Greenhill & Co. 2016

Citi Bank; UBS

$3,300.0

June 9, 2016

Pending

UACJ Corp., Japan

Warner, Norcross & Judd LLP; Sandler O’Neill + Partners LP Capital Management Services Inc.; Wilson Sonsini Goodrich & Rosati; Barclays Gibson, Dunn & Crutcher; Haitong Securities Co. Ltd. Foley & Lardner LLP; Nomura Group

April 1, 2016

Richards, Layton & Finger PA; Houlihan Lokey, Inc. Sullivan & Cromwell LLP; Cooley LLP; Bank of Goldman Sachs America Merrill Lynch

18 19

Sage Products Inc., Cary, Ill.

Pending

Description

Value of transaction ($000,000)

Target advisers

Sullivan & Cromwell LLP; Kirkland & Ellis LLP; J.P. Morgan Chase Madden, Jiganti, Moore & Sinars LLP; Barclays International Business Machines Truven Health Analytics Inc., Cravath, Swaine & Moore Pillsbury Winthrop LLP; UBS Shaw Pittman LLP; Corp., Armonk, New York Ann Arbor Goldman Sachs Kion Group AG, Germany Dematic Corp., Grand Rapids Cravath, Swaine & Moore Credit Suisse; Deutsche LLP; Fried, Frank, Harris, Bank; J.P. Morgan Shriver & Jacobson LLP; Chase Goldman Sachs Sun Communities Inc., Southfield Carefree Communities Inc., Jaffe Raitt Heuer & Weiss PC; Citigroup Scottsdale, Ariz. Jones Day; Wells Fargo Nexus HealthCapital DTE Energy Co., Detroit Appalachia Gathering Securities LLC LLC System,Pennsylvania; Stonewall Gas Gathering, West Virginia Stryker Corp., Kalamazoo Physio-Control International Skadden, Arps, Slate, Meagher & Flom LLP Inc., Redmond, Wash.

Date effective

Acquirer advisers

June 1, 2016

Dec. 31, 2016 Oct. 4, 2016 Sept. 28, 2016 May 31, 2016 April 8, 2016 Dec. 1, 2016

$1,204.0

Laser developer Coherent paid $32.50 per share for solid-state $942.0 lasermaker Rofin-Sinar, which was removed from trading on the NASDAQ. Key Safety, a maker of automotive safety parts such as a seatbelts and airbags, will operate as an independent subsidiary headquartered in Sterling Heights. Through the acquisition, Teijin aims to secure North American sales channels for automotive composite products through CSP, which will become a wholly owned subsidiary of Teijin. The deal for the autonomous vehicle technology company involved $291 million in cash and approximately $290 million in new common stock issuances. Affinia produces aftermarket oil, fuel, air and coolant filters and is best known as the owner of Wix and Filtron filter brands.

$920.0

$825.0

$581.0

$513.1

Ritmo is a controlling shareholder of Parati SA, Afical Ltda. and $431.7 Pádua Ltda. (Parati Group), a Brazilian food group with brands including Parati, Pádua, Minueto, Zoo Cartoon and Hot Cracker biscuits. One of the largest suppliers of auto interiors leather, GST was $400.0 sold by Japan-based equity firm Advantage Partners LLP. Icahn sought the remaining 18 percent of shares of FederalMogul not owned in February 2016 and was able to secure a deal in January 2017 for $10 per share. TradeKing became a wholly-owned subsidiary of Ally and about $4.5 billion in client assets. The business has about 260,000 brokerage-funded accounts and 20,000 daily average revenue trades. It has about $4.5 billion in client assets. SpartanNash acquired Caito’s produce distribution business, fresh-cut produce business, and its Fresh Kitchen facility, due to open early in 2017 in Indianapolis. Sold by Minnesota-based private equity firm Wayzata Investment, Key Plastics would provide expansion in the U.S., Germany and China for Mecaplast. The businesses, collectively known as Westfalia, were acquired from an investor consortium led by Germany-based DPE Deutsche Private Equity.

$304.0

The acquisition adds Irvin's interiors manufacturing operations to Piston's assembly and sequencing business. Irvin, sold by Takata Corp., will operate independently under Piston Group. Doing business as Whitehall Industries, SRS is an extruder and fabricator of aluminum components and assemblies for the automotive industry. The deal provided Envision with more than 500 clinical providers staff at 37 facilities in Michigan, Illinois, Indiana, Ohio, Iowa and Delaware. The company is now based in Grand Rapids and operates under a new name, Novo Building Products LLC. Novo is a manufacturer and distributor of speciality building products.

$175.0

$275.0

$217.5 $200.0 B

$186.1

$155.0

$120.0 $110.0 C

Source: Company submissions, Crain's research and Bloomberg News. Many transactions had multiple sources of information. In some cases, more than one estimated value of a transaction exists. In those cases, Crain's has chosen the value it believes to be most accurate. The list does not include all 2016 transactions, only those valued at $10 million or more. It is not a complete listing but the most comprehensive available.

B Crain's estimate. C Estimate based on original offer. LIST RESEARCHED BY CRAIN'S STAFF

SEE PAGE 12

C R A I N â&#x20AC;&#x2122; 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 7 , 2 0 1 7

CRAIN'S LIST: LARGEST MERGERS & ACQUISITIONS OF 2016 Rank

Target

Penske Automotive Group Inc., Bloomfield Hills

CarSense, Philadelphia

Pending

OpenText Corp., Canada

ANXeBusiness Corp., Southfield

May 2, 2016

NuVasive Inc., San Diego

Biotronic NeuroNetwork LLC, DLA Piper LLP; Bank of America Merrill Lynch Ann Arbor

Wuxi Gissing Auto Parts Co. Ltd., China

ConForm Technologies LLC, Doeren Mayhew & Co. PC Angle Advisors LLC Detroit Technologies LLC and DTI Enterprises LLC, Bingham Farms

Nov. 1, 2016

Wuxi Gissing acquired a majority stake in the family of companies that supply textile wheel well liners, load floors, underbody shields, interior trim parts, non-woven fabric and fiber to the auto industry.

Investor group led by Torque Capital Group LLC, New York

Remy light vehicle aftermarket business, Auburn Hills

Oct. 31, 2016

Sold by BorgWarner Inc., the deal includes seven manufacturing $80.0 plants in Mexico, Ohio, Oklahoma, Belgium, Tunisia and Hungary.

Huron Capital Partners LLC, Detroit

Systems Inc., Germantown, Wisc.

May 1, 2016

Takara Bio USA Holdings Inc., Mountain View, Calif.

Rubicon Genomics Inc., Ann Arbor

Pending

Huron, along with limited partner Duchossois Capital $75.0 Management, acquired a majority stake in Systems, a manufacturer of hydraulic, pneumatic, and mechanical loading dock leveling equipment. Rubicon Genomics was spun out from the University of $75.0 Michigan in 2000 to do contract research for other companies.

Exco Technologies Ltd., Canada

AFX Industries LLC, Port Huron

April 5, 2016

AFX is a supplier of leather and leather-like interior trim components to the North American automotive industry.

$73.0

CIE Automotive SA, Spain

Century Plastics Inc., Shelby Township

Pending

CIE acquired the remaining 35 percent of Century. It acquired the initial stake in 2012.

$68.8

Ford Smart Mobility LLC, Dearborn

Chariot Transit Inc., San Francisco, Calif.

Sept. 9, 2016

Chariot provides van shuttle transportation using routes based on customer demand.

$65.0 C

Universal Forest Products Inc., Grand Rapids

idX Corp., Earth City, Mo.

Sept. 19, 2016

Management buyout

MFC Netform Inc., Shelby Township

Allergan PLC, Parsippany, NJ

RetroSense Therapeutics LLC, Ann Arbor

U.S. Farathane Holdings Corp., Auburn Hills

Tepso Plastics Mex SA de CV, Weil, Gotshal & Manges LLP Mexico

Prophet Equity LP, Southlake, Texas

Total Plastics Inc., Kalamazoo

Piramal Pharma Solutions, India

Ash Stevens Inc., Riverview

Stryker Corp., Kalamazoo

Stanmore Implants Worldwide Ltd., England

Sullivan & Cromwell LLP

Huron Capital Partners LLC, Detroit

Good Sportsman Marketing LLC, Grand Prairie, Texas

Crowe Horwath LLP; Dykema Gossett PLLC

Huron Capital Partners LLC, Detroit

InterVision Systems LLC, Santa Clara, Calif.

27 28 29 30 31 31 33 34 35 36 37 38 38 40

KPMG; Honigman Miller Schwartz and Cohn LLP

Spartan Motors USA Inc., Charlotte

Arbor Bancorp. Inc., Ann Arbor

46 47 48

Boston Plastics (Shanghai) Pte. Ltd., China

Whirlpool Corp., Benton Harbor

Brasmotor SA, Brazil

Neogen Corp., Lansing

Preserve International plant and Tetradyne LLC, Memphis, Tenn.

Randal Bellestri, Oxford

Models & Tools Holdings Inc., Shelby Township

49 50

Godfrey & Kahn SC

Wilson Sonsini

Burr Pilger Mayer Inc.; Honigman Miller Schwartz and Cohn LLP Varnum, Riddering, Smeal Fire Apparatus Co.. Schmidt & Howlett LLP; Snyder, Neb. Donnelly Penman & Partners Varnum, Riddering, Birmingham Bloomfield Bancshares Inc., Birmingham Schmidt & Howlett LLP; Keefe, Bruyette & Woods Inc.

U.S. Farathane Holdings Corp., Auburn Hills

McDermott Will & Emery

Angle Advisors LLC; Honigman Miller Schwartz and Cohn LLP

41 42

Target advisers

July 5, 2016

Description

Value of transaction ($000,000)

Acquirer name

Acquirer advisers

Date effective

CarSense has five locations; two in Philadelphia, two in $105.0 B Pittsburgh and one in southern New Jersey and is expected to add $350 million in revenue to Penske. ANXeBusiness, a provider of cloud-based information exchange $104.6 services to the U.S. automotive and health care industries, was sold by Leidos Holdings Inc. Biotronic, a provider of intraoperative neurophysiological $98.0 monitoring services, was acquired in an all cash deal. $96.0

The transaction value was paid through cash and borrowings under revolving credit facility. Universal also advanced $92.9 million to idX to retire its outstanding debts. March 30, Management acquired the manufacturer of cold formed 2016 components for drivelines and transmissions from inactive shareholders. Sept. 6, Allergan paid $60 million for RetroSense, but also agreed to 2016 potential regulatory and commercialization payments for its novel gene therapy for the treatment of vision impairment. Jan. 13, With the acquisition of Tepso Plastics Mex, US Farathane will 2016 have 13 plants in the U.S. and Mexico.

$64.8

March 15, Total, a distributor and fabricator of plastic shapes including 2016 rod, sheet and tubing, was sold by A.M. Castle & Co.

$55.0

$63.0

$60.0

Morrison & Foerster Aug. 31, LLP; Honigman Miller 2016 Schwartz and Cohn LLP; Wells Fargo Securities LLC April 29, 2016

The deal included $42.95 million in cash plus an earn-out consideration capped at $10 million.

$53.0

Stanmore manufactures custom and off-the-shelf implants for limb salvage surgery for adults and children with cancer.

$52.1

Porter Hedges LLP

June 1, 2016

$50.0

Paradigm Counsel LLP

May 1, 2016

Huron, along with the company's management, invested in an undisclosed ownership stake in the designer and distributor of hunting equipment. Huron, with other investors, took a ownership stake in the IT service company, which has three offices in California and one in Washington. Smeal manufactures commercial pumpers, stainless steel tankers and aerial ladder platforms for fire trucks. The acquisition also includes Smeal's subsidiaries, U.S. Tanker Co. and Ladder Tower Co. Birmingham Bloomfield shareholders received $16.50 in cash for each share of common stock. The combined entity has about 225 employees and eight branches in Washtenaw, Wayne and Oakland counties. Sold by Baird Capital, Boston Plastics is a manufacturer of plastic-injected components for automotive. Deal was a combination of cash and stock. Already controlled by Whirlpool, the manufacturer seeks to acquire the outstanding shares, amounting to less than a percent of Brasmotor's common stock. Sold by Preserve International Inc., Preserve and Tetradyne manufacture livestock and food processing industries' cleaners and disinfectants. Plants in Turlock, Calif. and Memphis, Tenn. are now owned by Neogen. Bellestri, a private industrialist and former owner of Odyssey Industries in Lake Orion, reentered the market after being sentenced to prison in 2014 for a scrap metal scam. Models & Tools was sold by Altus Capital.

Pending

Warner, Norcross & Judd LLP; Donnelly Penman & Partners

Jan. 6, 2017

Jan. 23, 2016 Souza, Cescon, Barrieu Pending & Flesch Advogados; Banco Itau BBA April 30, 2016

Angle Advisors LLC

June 30, 2016

$50.0

$36.3

$33.0

$32.0

$30.3

$24.1

$22.0 B

B Crain's estimate. C Business Insider estimate. LIST RESEARCHED BY CRAIN'S STAFF

CRAIN’S DETROIT BUSINESS // FEBRUARY 27, 2017

SPONSORED CONTENT

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fundraising is important, but so is employee satisfaction. So we try a variety of ways to engage employees in the work of United Way through fun activities.” To learn more, visit www. LiveUnitedSEM.org/get-help

Group Publisher, Crain Communications Inc.

“Kids come to school to eat.” Not just to learn, but in many cases, to get their meals. Even though child poverty rates within Detroit are above 50 percent, two and a half times higher than the state average, according to the American Community Survey, I was stunned upon hearing this statement from a Detroit educator. And in the summer? What’s to eat? That’s the question many kids face. So United Way for Southeastern Michigan, with a handful of for-profit and nonprofit partners, stepped up in recent years with a “Meet Up and Eat Up” breakfast and lunch program. More than 1.3 million healthy meals were served last summer alone. That’s just one of the ways United Way, 100 years strong this year, continues to serve basic needs in our region. But there’s more. Aided by funding from various corporate sponsors, including a $27.1 million grant from the GM Foundation, United Way led the charge to increase Detroit’s graduation rates -- which were some of the lowest in the nation. Today, those schools reached an aggregate graduation rate just over 80 percent. This work has transitioned into College and Career Pathways in 15 schools, with plans to expand to more than 20. Earlier this month, I met a student from Cody High School who is eligible to become a Detroit firefighter after he graduates thanks to these efforts. To celebrate these and other wins for the community, Crain’s Detroit Business’ Content Studio worked with United Way to create the section you’re reading now. The logos of the companies on Page 1 of this week’s Crain’s Detroit Business and the ads in this section made this possible. And, as a proud board member of United Way, I’m pleased that Crain’s donated two of the eight pages to the cause. The 100th anniversary is reason enough, but we also wanted to recognize the ways United Way has transformed itself over the years to be more than a grant-making pass-through collector of funds. Today’s United Way focuses on specific issues and problems in our region, working with many partners to find ways to move the needle. More than 650 companies in metro Detroit participate in one way or another – either with a corporate gift, a workplace campaign (sometimes both) and days of employee volunteering. When FCA’s CEO, Sergio Marchionne, was considering the commitment of serving as chair during the 2012-2013 campaign, he visited the United Way office in Detroit and listened to 2-1-1 calls. And he brought his leadership team of 200 to listen, too. That proved to be a powerful reason to helm the campaign. United Way’s 2-1-1 helpline, which takes calls all day, every day, provides resources like shelter and food. Marchionne, who is now serving his second stint as campaign chair, said he likes United Way’s goal of tackling “systemic changes” by bringing public, private and nonprofit sectors together to focus on change. “Handouts are not the long-term solution,” he says. Marchionne compares some of the problems people face to the problems Chrysler faced. “No one can forget that we were doomed to fail, to disappear, causing a social disaster of unimaginable dimension. But someone gave us faith and hope. “We all, at Chrysler, have experienced what it means to get a second chance. When we look at United Way, the service it provides is fundamentally no different. It is devoted to giving people a chance to build or rebuild a future, a better one.” That’s a cause we can all get behind. This year. Every year.

CRAIN’S DETROIT BUSINESS // FEBRUARY 27, 2017

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Steve Sinclair and his but just as importantly, if you wife, Crystal, are committed want to do community service to making Southeastern or you want to participate in a Michigan a better community particular way, we absolutely and are instilling that sense of support you and we’ll make service within their son and sure we do everything we can daughter. That’s why in July to help you with those goals.” 2016, the South Lyon family So it’s fitting that more volunteered at a United Way for companies are turning to United Southeastern Michigan Meet Way to help create meaningful Up and Eat Up Block Party. volunteer experiences for their The outdoor summer events employees. serve free, healthy meals to “Corporations have become children and offer community increasingly interested in social resources to attendants. For responsibility, and giving the Sinclairs, Meet Up and their employees opportunities Eat Up provided a chance to to volunteer is a great way demonstrate to to do that,” their kids the said Angela “Having that impact they could Beckman, sense of make. United Way for “I wanted to Southeastern corporate show our kids that involvement in Michigan’s they can make a director of the community volunteer huge difference,” Crystal Sinclair is important to engagement. said. “It’s “Volunteering me and other important for my makes staff employees at kids to be able to feel more understand that.” connected to Lear.” The Sinclairs their community, were connected and like their to the volunteer company makes opportunity through Steve a difference.” Sinclair’s job at Lear Corp., Volunteerism has been a a United Way partner that part of United Way since the encourages employee organization’s inception in volunteerism. It’s a facet of his 1917. workplace that Steve Sinclair Now, the organization said he loves. leverages its corporate And it’s good for business, relationships to connect too. A Gallup poll on the State volunteers with the of the American Workplace community’s greatest needs, found that businesses that focus from collecting donations and on employee engagement saw serving meals to mentoring increases in productivity and students and providing free tax profitability. preparation. “The idea of giving back In April, the organization to the communities where we expects to substantially live and work started with our increase volunteer opportunities founders, and it’s always been through a new online platform a part of who we are,” says that will serve as a one-stop Ray Scott, vice president and shop connecting nonprofits, president of seating at Lear. volunteers and corporations. “Our employees have the To learn more, visit www. ability to give back financially, LiveUnitedSEM.org/volunteer.

Photo credit: Bruce Unwin

The Sinclair family attended a United Way for Southeastern Michigan summer Meet Up and Eat Up Block Party, where community members can enjoy a free meal and games while learning about community resources and volunteer opportunities. The Sinclairs are longtime United Way donors.

Eaton + United Way

100 years of shaping better tomorrows

Eaton has a proud tradition of employee giving that began over a century ago and has grown with our business. We are delighted to partner with the United Way to help build stronger communities. To learn more, visit the Community area on eaton.com/sustainability

CRAIN’S DETROIT BUSINESS // FEBRUARY 27, 2017

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Photo credit: Bruce Unwin

Donni Johnson was able to find shelter and get back on her feet with help from United Way’s 2-1-1 referral service.

utilities and other basic needs. “After my money ran out, I didn’t know what else to do, so I called 2-1-1,” Johnson said. DTE has been instrumental in both 2-1-1 and LSP, helping launch the local 2-1-1 service in 2005. “Not only did DTE Energy help bring 2-1-1 to Southeastern Michigan, but our company has been a champion of the services 2-1-1 provides to our customers and communities,” said Mark Stiers, president and COO of DTE Gas. “It aligns completely with our aspiration to be a force for prosperity with our community.” Annually, nearly 300,000 people contact 2-1-1, which is available 24/7/365. Utilities, financial assistance, food and shelter are some of the most requested 2-1-1 services. Like Johnson, two-thirds of 2-1-1 callers earn some

CONGRATULATIONS TO UNITED WAY

100 Years. 50,000,000 Lives. Immeasurable Impact. Yazaki believes in building a better world and shaping the human experience. We applaud United Way’s commitment to creating opportunities, empowering youth and inspiring wellness in communities across the world.

form of income, said Hassan Hammoud, director of 2-1-1 at United Way for Southeastern Michigan. “These people are not looking for a handout — they’re underinsured and underemployed,” he said. “They have income, but it’s not a livable wage.” With the help of 2-1-1, Johnson found a shelter and was connected to housing services that allowed her to eventually find a new home. While Johnson’s story had a happy ending, not everyone’s does. In 2015 there were 16,040 homeless people in Detroit, according to the Homeless Action Network of Detroit. That’s why in addition to 2-1-1, United Way also advocates for public policies that invest in programs offering food, shelter and medical assistance. To learn more, visit www. LiveUnitedSEM.org/get-help.

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Donni Johnson was blindsided when she found out she and her kids were being evicted from the home she had lived in for 30 years. Unbeknownst to Johnson, her landlord fell behind on taxes. Johnson had a low-paying job, and because of her limited income, her rental applications were denied. Johnson’s story is a common one, where one accident, illness or mishap can uproot an entire family. Johnson was familiar with United Way’s services, because she was a customer of the DTE Energy Low Income Self-sufficiency Plan (LSP), a program supported by United Way that offers utility bill assistance. Through that experience, Johnson learned about United Way’s 2-1-1 helpline, the region’s leading referral service for food, shelter,

CRAIN’S DETROIT BUSINESS // FEBRUARY 27, 2017

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Donning safety gear and wielding a fire hose isn’t the norm for most high school classrooms, but for students at Cody High School’s Medicine and Community Health Academy, it’s just one example of a new shift taking place in education. Thanks to funding from JPMorgan Chase, the Skillman Foundation, the Ford Foundation and the Ford Motor Company Fund, United Way for Southeastern Michigan is partnering with local schools to ensure that students not only graduate, but that they graduate prepared for a career or college. The schools focus on teaching students skills they’ll need to excel in a workplace environment, like critical thinking, communication,

collaboration and creativity as well as college preparatory courses. United Way brings in corporate partners to offer regional industry opportunities so that students can learn about advanced manufacturing, health care and engineering. “We want these diplomas to have power,” said Tanya Heidelberg-Yopp, COO at United Way. “When Linked Learning students graduate, they have skills employers want to pay for and they have the background needed to hit the ground running at a college or university or apprenticeship program.” At Cody, that power comes in the form of Firefighter I and II certifications, which are state requirements for firefighters, and which graduates of the

program will have by the time they receive their diplomas. Lieutenants from the Detroit Fire Department serve as instructors for the firefighting program, putting students through the same training any Detroit fire cadet would receive. They’re also mentors for the students, sharing advice about life, job interviews and the future over meals and during downtime in class. “For this group specifically, the amount of growth I’ve seen in them is just exponential,” said Detroit Fire Department Lt. Jamal Mickles, one of the instructors. “I’m blown away by it.” To learn how your business can support students, email LiveUnited@LiveUnitedSEM. org.

Photo credit: Bruce Unwin

Cody Medicine and Community Health Academy students train to become certified firefighters.

Driving a Brighter Future For more than 65 years, Ford Motor Company Fund has worked to improve people’s lives, investing $1.5 billion to support innovative programs in Community Life, Education, Safe Driving and the Ford Volunteer Corps.

Congratulations to United Way on 100 years of service. Ford is proud of our decades of collaboration in support of the community.

w w w.communit y.ford.com #fordgivesback @fordfund _

CRAIN’S DETROIT BUSINESS // FEBRUARY 27, 2017

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By Dave Phillips

Life is controlled chaos for the Potts family of Rochester, according to parents Ayana and Paul. The duo never has a dull moment when it comes to parenting their three biological and three adopted children: Ajani, 13; Khamani, 11; Amari, 9; Anaya, 8; Jabari, 6; and Samaya, 5. Thanks to United Way for Southeastern Michigan, the family is getting some help through a tool called the Ages and Stages Questionnaire, which gauges their children’s developmental progress. Available online, the questionnaire takes about 10 minutes to complete. It guides parents through an easy-tounderstand developmental checklist and covers ageappropriate communication,

motor skills, problem-solving and personal/social skills. A specialist sends results to parents and provides tips if a child needs help getting on track. It helped the Potts family identify and correct delays in Jabari and Samaya’s development, and thanks to an investment by United Way, is available to parents and caregivers for free in Wayne, Oakland and Macomb counties. It’s just one example of how United Way is helping prepare children for lifelong success. United Way was awarded a $6 million Social Innovation Fund grant in 2011, which allowed the organization to increase its impact by partnering and funding local nonprofits that specialize in child development programs and methodologies.

Photo credit: Bruce Unwin

Paul Potts reads a story to his daughters. He and his wife, Ayana, use resources provided by United Way for Southeastern Michigan, like the Ages and Stages Questionnaire, to make sure their children are hitting their developmental milestones.

As part of the Social Innovation Fund’s stipulations, United Way must match the grant, as do its partner sub-grantees, turning a $6 million investment into $18 million. The results of United Way and its partners on positively impacting the lives of children has been so successful that the organization was awarded a second $6 million SIF grant in 2016. United Way’s investment in Child Development has made all the difference for the Potts family. “Knowing that we have resources available, it gives so much empowerment to the parent,” Paul said. “We just hope that more parents learn about it, because it changed our family structure.” To learn more, visit www.bibtobackpack.org

Clark Hill Celebrates 100 Years of United Way for Southeastern Michigan Clark Hill has been a proud partner of the United Way for Southeastern Michigan for many years. We applaud their mission to mobilize the caring power of Detroit and Southeastern Michigan to improve communities and individual lives in measurable and lasting ways. Making a positive difference in the communities we serve is one of Clark Hill’s leading values. clarkhill.com

CRAIN’S DETROIT BUSINESS // FEBRUARY 27, 2017

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Photo credit: Bruce Unwin

Volunteers create care packages for new mothers as part of a Women United-led volunteer event at the Feb. 2 Women Thrive Conference, an event celebrating women in leadership. The care packages include blankets and clothing for newborns, as well as United Way for Southeastern Michigan resources for new parents.

Women United is a dynamic, philanthropic group comprising the region’s leading business women that supports United Way for Southeastern Michigan’s Child Development work. Members give, advocate and volunteer in order to ensure that parents and caregivers have the tools they need to help

We are committed to making the community a better place to live, work and learn

their children be successful. Members of Women United can also participate in exclusive networking events. “I joined Women United because I know how powerful women can be when they come together to make a difference,” said member Aimee Argel. To learn more, email LiveUnited@LiveUnitedSEM.org

Visit us online

csr.bosch.us and bosch.us

The Bosch Builds team packs and sorts food at Gleaners Community Food Bank, an agency supported by United Way for Southeastern Michigan.

Bosch Legacy - Crain 6x6 FINAL.indd 1

2/14/17 12:44 PM

CRAIN’S DETROIT BUSINESS // FEBRUARY 17, 2017

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United Way for Southeastern Michigan Board of Directors Lizabeth Ardisana - Chair ASG Renaissance

Rick Blocker

Metro Detroit AFL-CIO

Mark Petroff - Vice Chair

Beth Chappell

Mark W. Stiers - Treasurer

Mark Davidoff

Deborah Macon - Secretary

Andrew Echt

Marketing Associates LLC

DTE Energy

Community Leader

Tonya Allen

Detroit Economic Club Deloitte LLP

Arbor Investments Group LLC

Frank W. Ervin, lll

The Skillman Foundation

Elizabeth A. Alvarez EY

Michigan Minority Supplier Development Council

David Foltyn

Honigman Miller Schwartz & Cohn

Bryan Barnhill

City of Detroit, Mayor’s Office

Lisa V. Ford

Community Leader

Charles E. Hall

Leslie A. Murphy

UAW, Region 1

Murphy Consulting Inc.

Ed Siaje

Brian Harlow

Heather Paquette

Fiat Chrysler Automobiles

KPMG LLP

Srikant Inampudi

Sandra E. Pierce

Clark Hill PLC

McKinsey & Company

Huntington National Bank

Hassan Jaber

Michael Ritchie

ACCESS

Comerica Bank

Ford Motor Company Fund and Community Services

James Jacobs

Lynda Rossi

U.S. Trust - Bank of America Private Wealth Management

Reginald M. Turner James G. Vella Ken Whipple

Consumers Energy, Retired

Blue Cross Blue Shield of Michigan & Blue Care Network

Macomb Community College

Steven Kiefer

Ray Scott

General Motors Company

Lear Corporation

Mary Kramer

Crain’s Detroit Business

United Way for Southeastern Michigan Campaign Cabinet Sergio Marchionne - Chair

Cathy Cornell

Norwood Jewell

John Rakolta, Jr.

Mark W. Stiers

Scott Adams

Charles Crews

Jeff Kalinowski

David Sanders

James Verrier

Olga Alavanou

Kenneth Dallafior

Gordon Krater

Raymond Scott

Rick Westenberg

Sheela Manyam

Aaron Sikora

Dennis Williams

Brad Simmons

D. Scott Winchip

Fiat Chrysler Automobiles Eaton

Comerica

CMS Energy

Yazaki

Blue Cross Blue Shield of Michigan & Blue Care Network

Lizabeth Ardisana

Joe Fadool

ASG Renaissance

UAW

Fiat Chrysler Automobiles Plante Moran PPLC

Jeffrey Aughton

BorgWarner Inc.

Blue Cross Blue Shield of Michigan & Blue Care Network

David Girodat

Walt Bartels

Fifth Third Bank

Neil Marchuk

Rick Blocker

John Bridge

Fiat Chrysler Automobiles

Deloitte LLP

Fiat Chrysler Automobiles Metro Detroit AFL-CIO General Motors Company

Adient

Regan Grant

Mark Petroff

Brian Harlow

Barbara Pilarski

Lorron James

Christopher Preuss

James Group International

Marketing Associates LLC Fiat Chrysler Automobiles Delphi Automotive LLP

Walbridge

DTE Energy

BorgWarner Inc.

Lear Corporation

General Motors Company

PwC

UAW President’s Office

Ford Motor Company

Robert Bosch LLC

Matthew Simoncini Lear Corporation

Bill Smith

American Axle & Manufacturing Inc.

Lisa Smith

Ford Motor Company

AAA Michigan AAA Life Insurance Company Adient American Axle & Manufacturing Inc. Applebaum Family Foundation ASG Rennaissance Bank of America Blue Cross Blue Shield of Michigan & Blue Care Network BorgWarner Inc. Clark Hill PLC CMS Energy Cooper Standard Deloitte LLP DTE Energy Eaton Fiat Chrysler Automobiles Fifth Third Bank Ford Motor Company Lisa & Bill Ford Gallagher-Kaiser General Motors Company Kelly Services Inc KPMG LLP Lear Corporation Marketing Associates LLC Miller Canfield MSX International PwC Robert Bosch LLC United Auto Workers Yazaki North America Inc

BACK COVER -- --

THANK YOU “Coming together is a beginning; keeping together is progress; working together is success!” - Henry Ford Nearly 5 years ago, we assembled a dynamic group of volunteers to accomplish an unprecedented goal for United Way for Southeastern Michigan. Our task: to drastically increase individual supporters in the Alexis de Tocqueville Society. Starting at 37th in the national membership ranks, we are now at 11th and on our way to a top 5 ranking by June 30th. We salute your extraordinary spirit and dedication in pursuit of this lofty goal.

You are truly the best and we thank you!

Lisa and Bill Ford

Co-Chairs, Alexis de Tocqueville Initiative Elizabeth A. Alvarez & Joe Klecha Jill Bryant & Robert Coury Margie Dunn & Mark Davidoff Kerry Doman Regan Grant

Marcia Holland-Turner & Reginald Turner Anke & Hans-Werner Kaas Rebecca Kress & David Sanders Carey Oven & Deven Ross Eileen & Mark Petroff

Bobbi & Stephen Polk Barika & Jonathan Quarles Michael Shields Mel Stephens Gwen & Evan Weiner

100YEARS ®

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 7 , 2 0 1 7

Rothwell: State should focus on fiscal health, development, mobility

Crain’s Detroit Business reporter Lindsay VanHulle recently sat down with Rothwell to discuss the organization’s top policy priorities. Below is a condensed version of their interview. Gov. Rick Snyder has created a task force to look at possible legislative solutions to municipal underfunding of pensions and retiree health care. Obligations are estimated to top $10 billion statewide. How do we tackle this issue? Let’s preserve benefits. Let’s not talk about this as dealing with unfunded liabilities, because we sound like bean counters. And you need to be sensitive to people in all of this. You’ve said that the state’s economic development incentives don’t go far enough to help large corporate or community development projects. Why the effort now to create new incentives? We feel there’s a real opportunity right now, kind of regardless of what you think about what’s going on in Washington. There is clearly a move to repatriate more jobs back to the U.S., and that’s going to present an opportunity for states. ... We know that our tools for larger projects are not as effective, and so there’s legislation that would create a new business incentive called Good Jobs for Michigan (that would capture some income taxes). It was introduced last

“There is clearly a move to repatriate more jobs back to the U.S., and that’s going to present an opportunity for states.” Doug Rothwell, Business Leaders for Michigan

year (and will be) reintroduced again this year in March. There’s also the brownfield redevelopment package (that passed last week in the Senate). It’s going to be tough. In this Legislature, there’s a lot of folks that have concerns about the role of economic development. We get that, certainly with the tax credits that just are still out there. ... This program is needed for us to be able to get new revenue coming into the state that wouldn’t be here but for this incentive. It’s interesting that legislation to create new incentives is being led by Republican lawmakers. The GOP often has come out against incentives for ideological or philosophical reasons. We’ve done an analysis of who the states are that are competing the most against us, and they’re led by Republican governors with Republican legislatures. ... Our point to them is, look, this is not — outside of Michigan, this is not seen as a partisan issue. Are caps and sunset clauses reasonable when considering incentives? We’re fine with that. ... We think that the program will prove its worth, and that if it doesn’t, then it ought to be sunsetted. But if it proves its worth, I think there’s going to be a lot of support for extending it for as long as it needs to be. There’s no cost here. If you don’t get the jobs, the state’s not out any money at all. If you do get the jobs, you’re actually still ahead because we’re only capturing one revenue source: personal income taxes. You said you’re happy to see Snyder set aside money in his 2018 budget proposal as a “down payment” to invest in Michigan’s infrastructure. Aside from that, what other investments are needed? He knows — we know — it needs to be more. How do you do it? Well, we’d ideally like to see user fees increased. That means gas taxes, for example. The likelihood of that is probably very slim given they just did this (in 2015), but maybe if the federal government comes up with a big infrastructure proposal, maybe we can revisit that. ... We’re still feeling like there’s some possibility of progress on infrastructure. I think the big question is: How far does Washington go in terms of how much progress we can make? That is the big unknown. But we should be ready. We should be having those conversations and (be) ready so that when Washington moves, we can move fast. I’m sure that

whatever they do is going to require some state match. They’re not just going to give money out. And we really don’t have that match available right now. I mean, again, what they passed in the road bill (in 2015) was barely sufficient just to meet our repair needs, let alone new construction. You said PricewaterhouseCoopers will lead Business Leaders for Michigan’s upcoming bestpractices study of K-12 education in other states. What do you hope to learn? We’re not trying to change the whole education system as we know it. We’re trying to say: What are some things that can be done that really would have impact (on student outcomes)? That may mean that you have to change governance, that may mean that you have to change finances, but that’s not how we’re going at it. On the topic of mobility, what does Michigan need to do next? The question is: What more can we do? And so we’ve asked McKinsey (& Co.), who actually came up with our Mobility 1.0 plan about four years ago, to say what’s 2.0 look like? Because a lot of that original plan has already been implemented: Planet M was called for, (American Center for Mobility) was called for, the World Mobility Leadership Forum we did this fall. So we’ve ticked off a lot of those to-dos. How can the state build on the autonomous vehicle legislation adopted last year? As of right now, Michigan’s legislative standing is state of the art. What we don’t know is what comes next. My guess is, is that there will need to be things done in the legal area, for liability insurance and the like that we don’t even know right now what that looks like. What do you think should be included in any next-generation mobility strategy? The other big one is talent. That was part of Mobility 1.0, but I’m not sure — of all the things that we called for, that’s the one that feels to me that we still don’t have maybe a really good handle on in terms of what specific skills and talents and how much (we’ll need). And remember, part of it is: How do we redeploy people that may be affected by this change in mobility? You know, truck drivers, for example. If commercial trucks are affected by autonomous driving and you need fewer truck drivers, well, then, what do we do there? ... Now’s the time to start thinking about it. Lindsay VanHulle: (517) 657-2204 Twitter: @LindsayVanHulle

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LANSING — Doug Rothwell says Michigan still has a long way to go to become a top-10 state economically, despite recent improvements. “Every time the nation gets a cold, we get pneumonia,” said Rothwell, president and CEO of Business Leaders for Michigan. “We came out of this deep trough in the recession of the last decade, and so the numbers look relatively good because you’re coming off such a low base. But if you look at where we stand in absolute terms, we’re still average to slightly below average on most of the metrics that you would find most important for economic growth.” The group he leads, which includes the CEOs of many of the state’s largest companies, has set out five priorities to help the state improve: J Long-term state fiscal health, including dealing with unfunded retirement liabilities, preventing local financial emergencies and allowing Snyder-era financial practices to continue into the future. J Creating more economic development tools, including business incentives. J Investing in infrastructure. J Building Michigan’s talent pool. Business Leaders for Michigan, the state’s business roundtable, will commission studies this year looking at best practices from other states regarding K-12 education and how job training is delivered for employers. Findings could be ready in early 2018. J Developing the next to-do list to support Michigan’s burgeoning mobility industry.

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C R A I N â&#x20AC;&#x2122; 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 7 , 2 0 1 7

Report: Wayne State financials for 2016 look the best in years By Jay Greene

â&#x20AC;&#x153;We have taken cuts and they have taken some pain, but they have to be done. The reality is expenditures and revenue have to be better aligned.â&#x20AC;?

jgreene@crain.com

Your trust. Your triumphs. We care about both. Weâ&#x20AC;&#x2122;re here to help. If you are in VHDUFK RI ĂąH[LEOH Ă°QDQFLQJ VROXWLRQV IRU \RXU EXVLQHVV WDON WR XV DERXW DVVHW EDVHG OHQGLQJ

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The good news is that Wayne State University posted a net $33.4 million gain on designated fund operations in 2016 after at least four consecutive years of running deficits, according to university officials. But after paying off an accumulated $39 million deficit run up over the past several years at Wayne Stateâ&#x20AC;&#x2122;s School of Medicine and two related entities, the university ended up with a $6.2 million net loss, said Bill Decatur, WSUâ&#x20AC;&#x2122;s CFO, in an interview with Crainâ&#x20AC;&#x2122;s. WSU President M. Roy Wilson, M.D., was clearly happy when he shared the universityâ&#x20AC;&#x2122;s unaudited results with medical school faculty members at last Decemberâ&#x20AC;&#x2122;s holiday party. He also praised the medical school for much higher performance in 2016 compared with previous years. â&#x20AC;&#x153;The university, after years of deficits, has a surplus,â&#x20AC;? Wilson told the doctors. â&#x20AC;&#x153;It is that positive from the university that will help bluntâ&#x20AC;? the deficit at the medical school and its affiliates. But in the fall of 2015, a Wayne State internal audit found major problems in how the medical school accounted for its faculty salaries and other expenses. â&#x20AC;&#x153;We found a shell game was going on (at the medical school) and it was at least $30 million in deficitâ&#x20AC;? for 2015, said Wilson. â&#x20AC;&#x153;We have taken cuts and they have taken some pain, but they have to be done. The reality is expenditures and revenue have to be better aligned.â&#x20AC;? After further cost cuts this year, Wayne State officials expect the medical school deficit to shrink to $12 million this year and $5.5 million in 2018 with break-even projected for fiscal 2019 ending Sept. 30. But another financial problem the university found was that one of the medical schoolâ&#x20AC;&#x2122;s affiliate entities, the Funds for Research and Medical Education, was being misused and grossly underfunded. FRME was inappropriately being used as a pass-through account for salaries, benefits, research and development costs for the medical schoolâ&#x20AC;&#x2122;s 19 departments, Wayne State officials said. Decatur said one of the strategies employed by the university to straighten out medical school finances was to pay off the FRMEâ&#x20AC;&#x2122;s $10 million accumulated deficit from past years and return FRME to its traditional role. The FRME was originally designed as the deanâ&#x20AC;&#x2122;s discretionary fund for office costs, recruiting, new projects and other initiatives to promote the medical school. It is now funded by a 5 percent â&#x20AC;&#x153;deanâ&#x20AC;&#x2122;s taxâ&#x20AC;? on medical school departments. â&#x20AC;&#x153;There will be no (medical school) salaries paid out of FRMEâ&#x20AC;? anymore, Decatur said. â&#x20AC;&#x153;The salaries will be paid by (departments and University Physician Group, the medical schoolâ&#x20AC;&#x2122;s practice group).â&#x20AC;?

M. Roy Wilson

Decatur said 2016 represents the â&#x20AC;&#x153;end of major cleanup workâ&#x20AC;? for FRME. â&#x20AC;&#x153;The prior administration had moved the school of medicine costs to FRME, and the university had been paying those salaries, getting some reimbursement from FRME,â&#x20AC;? he said. It all worked relatively well for a time. But about two years ago, FRME became unable to make payments of payables to the university, Decatur said. That was about the time that Decatur and David Hefner, vice president of medical affairs, were hired by Wayne State. â&#x20AC;&#x153;We began an investigation of FRME and found $29 million of expenditures of FRME by the university,â&#x20AC;? Decatur said. â&#x20AC;&#x153;FRME had been sending over money, but applied it to past yearsâ&#x20AC;&#x2122; receivables. We still had $10 million on the books from past years.â&#x20AC;? The total owed was $39 million. Decatur said the medical school had no viable way to repay the university. â&#x20AC;&#x153;We all agreed to write it down from an accounting standpoint. Not write it off,â&#x20AC;? he said. After the university did that, Decatur said the operating surplus became a â&#x20AC;&#x153;negative $6.2 million.â&#x20AC;?

Improved finances Meanwhile, total revenue has been steadily increasing the past two years at Wayne State, far exceeding a rise in operating expenses, according to audited financial statements. Projections for 2017 also look positive, Decatur said.

For example, total revenue, which includes state appropriations, tuition, gifts, grants and investment income, rose 1.4 percent to $875 million in 2016 from $863 million the year before. In 2015, total revenue rose faster, up 6.7 percent from $809 million in 2014, primarily because of higher levels of donations and investment income gains. On the other hand, total expenses, which increased 2.1 percent in 2015, declined by 1.1 percent in 2016, dropping to $846 million from $856 million in 2015. Total expenses were $838 million in 2014. Decatur said expenses in 2016 were $17 million less than budgeted, primarily because of a decrease in total compensation to faculty members, lower utility costs because of milder weather and about $8 million in budgetary savings by schools, colleges and departments, Decatur said. â&#x20AC;&#x153;Operating expenses went down in instructional areas because some faculty positions were vacated (through retirements and resignations),â&#x20AC;? Decatur said. â&#x20AC;&#x153;We had savings in the schools and colleges, and expenses came in below budget from being frugal.â&#x20AC;? For fiscal 2017 that ends Sept. 30, Decatur said, the university is on budget for another good financial year. â&#x20AC;&#x153;The approved budget is balanced,â&#x20AC;? he said. â&#x20AC;&#x153;This means that if current trends continue, the university should end the fiscal year with positive net income.â&#x20AC;? Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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CALENDAR TUESDAY FEB. 28

Vistage

Executive

Breakfast.

7-10:30 a.m. 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@vistagemichigan. com; website: michigan.vistage. com/event/feb28.

THURSDAY MARCH 2

2017 Detroit Policy Conference: Reigniting an Innovative Spirit. 7:30 a.m. J

Detroit Regional Chamber. Toni Griffin, founder of Urban Planning for the American City, will deliver a keynote address, along with mainstage and concurrent sessions on philanthropy, urban mobility and economic d e v e l o p m e nt. Speakers also include Detroit Police Chief James Craig and Chris Ilitch Christopher Ilitch, president and CEO of Ilitch Holdings Inc. MotorCity Casino Hotel, Detroit. $209 members; $285 nonmembers. Contact: Andrea Rayburn, phone (313) 596-0340; email arayburn@detroitchamber.com

FRIDAY MARCH 3

J U.S.-Mexico Trade Relationship: A Discussion With Mexico’s Secretary of Economy. 11:30 a.m.-1:30 p.m. De-

troit Economic Club. Ildefonso Guajardo Villarreal, secretary of economy, Mexico, will provide his country’s perspective on the trade relationship between Michigan and Mexico and the road ahead for the North American Free Trade Agreement. MotorCity Casino Hotel, Detroit. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org.

UPCOMING EVENTS

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

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. Asian Pacific American Chamber of Commerce 14th Annual East-West Business Connection. 9:30 a.m.-3:30

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 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. J

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. J Putting Social Media to Work for Your Business. 6-9 p.m. March 28.

Schoolcraft College. Discover how to select and manage the right social media platform(s) for products or services. Jeffress Center, Schoolcraft College, Livonia. $45. Contact: Sara Gumina, phone: (734) 462-4438; email: sgumina@schoolcraft.edu; website: sbdcmichigan.org.

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J 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. Great Lakes Business Intelligence and Big Data Summit. 8 a.m.-5 p.m. J

March 30. WIT Inc. Attendees will learn best practices and success stories to help them capitalize on big data, business intelligence, analytics and data visualization opportunities. Troy Marriott. $169. Contact: Erin Adair-Guy, phone: (248) 6415900, ext. 244; email: bisummit@witinc.com; website: greatlakesbisummit.com.

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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.

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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.

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

DEALS & DETAILS ACQUISITIONS & MERGERS

 EXX Inc., Las Vegas, has entered an agreement for Newcor Inc., Rochester Hills, an automotive manufacturer of machined products, to be acquired by CIE Automotive S.A., Bilboa, Spain, a manufacturer and supplier of automotive components and subassemblies. Websites: newcor.com, cieautomotive.com.

Lending, from Stearns Lending LLC, Santa Ana, Calif. Websites: flagstar. com, stearns.com. Motor City Industrial LLC, Hazel Park, an industrial distributor of specialty fasteners, has acquired EMCO Inc., Charlotte, N.C., a supplier of electrical, mechanical, fluid power and automation products. Website: motorcityindustrial.com. 

Soaring Pine Capital, Birmingham, a Simon Group Holdings company, has acquired ETI Tech Inc., Dayton, Ohio, a provider of flight hardware parts for military aircraft and ground support equipment for the aerospace defense industry. Website: soaringpine.com.

MRPR CPAs & Advisors, Southfield, a certified public accounting firm, has merged with Rhoades, Doehrer & Associates PLLC, Saline, an affiliate of Hantz Rhoades Doehrer. The combined firm will maintain offices in Southfield and Saline. Website: mrpr.com.

Flagstar Bancorp Inc., Troy, has acquired a delegated correspondent lending business, Residential Mortgage Delegated Correspondent

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NEW SERVICES

Local Search Association, Troy, a not-for-profit industry association of media companies, agencies and technology providers that helps businesses market to local consumers, has launched the LSA Digital Marketer Certification Program to help small businesses find reputable digital marketing partners. Website: thelsa.org. 

 Duo Security Inc., Ann Arbor, a cloud-based access provider, will collaborate with Intel Corp., Santa Clara, Calif., a technology company, to provide native Universal Second Factor support. Websites: duo.com, intel.com.

zipLogix LLC, Fraser, a real estate technology company, teamed with HomeActions LLC, Green Cove Springs, Fla., an e-prospecting and client relationship platform for real estate agents, for users of zipForm to access HomeActions’ marketing services. Websites: ziplogix.com, homeactions.net.

PEOPLE: SPOTLIGHT

Grines to leave as VP of DMC heart institute

Cindy Grines, M.D., resigned as vice president of academic and clinical affairs at Detroit Medical Center’s Car-

diovascular Institute to become chief of cardiology at Northwell

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Swift Biosciences Inc., Ann Arbor, a biotechnology company, announced the Accel-NGS XL library prep kit, for whole genome se

 Realcomp II Ltd., Farmington Hills, has an agreement with data company Remine, Falls Church, Va.,

quencing on Pacific Biosciences platforms. Website: swiftbiosci.com.

 Esys Automation, Auburn Hills, an automation solutions provider, has launched a mobile-friendly website. Website: esysautomation.com.

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

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Cindy Grines

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est health system in New York. At Northwell, effective May 1, Grines will become chief of cardiology for Hofstra medical school and academic chief of cardiology for the 21-hospital health system. Grines was vice chief of cardiovascular medicine at Beaumont Hospital in Royal Oak for two decades before leaving for DMC in 2011. She is known nationally for her research in acute myocardial infarction and has initiated the Primary Angioplasty in Myocardial Infarction studies. The research has revolutionized the management of heart attack patients.

Detroit tabs Khaldun as health department head The city’s medical director,

Joneigh Khaldun, M.D., was pro-

moted to run the Detroit

FINANCIAL SERVICES Joseph S. Vig

Board Member Monroe Bank & Trust Monroe Bank & Trust Joseph Vig joins the Monroe Bank & Trust Board of Directors. Mr. Vig is Principal and CEO of J.S. Vig Construction Company, a commercial construction company based in Taylor, and with offices in Ann Arbor. He runs the daily activities, including all construction operations and financial planning. Under his leadership, the company has firmly established itself as one of Michigan’s most active and experienced providers of construction services with the successful completion of over 1,500 projects.

Kristine L. Barann

Monroe Bank & Trust Board Member Monroe Bank & Trust Kristine Barann joins the Monroe Bank & Trust Board of Directors. Ms. Barann has served as President at Baker College of Allen Park since 2014. Her prior roles at the collage have included adjunct professor of accounting, member of its board of regents and VP of finance. With 25 years of finance, consulting and managerial experience, Ms. Barann served as the business manager for Trenton Public Schools, finance director for the city of Allen Park and manager with a regional public accounting firm

John J. Fulgenzi

Stephen W. Talbot

Board of Directors SE MI Chapter of the National Electrical Contractors Association (NECA) The Southeastern Michigan chapter of the National Electrical Contractors Association (NECA), leaders in commercial, public, industrial and residential electrical construction announce the appointment of John J. Fulgenzi to its board of directors. The announcement was made by NECA executive vice president, Tom Mittlebrun. Fulgenzi began as a NECA member and estimator at Doublejack Electric in Royal Oak, Michigan in 1997. He later became vice president and then president of the company in 2016. The Southeastern Michigan chapter of the National Electrical Contractors Association (NECA), leaders in commercial, public, industrial and residential electrical construction, announce the appointment of Stephen W. Talbot to its board of directors. Talbot is president of the Talbot Corporation and Talbot Associates, P.C., Consulting Electrical Engineers in Livonia, Michigan. Founded in 1971, the company specializes in the design and construction of critical electrical infrastructure.

FINANCIAL SERVICES Kurt M. Hocker

Senior Vice President, Director, Capital Markets Flagstar Bank Kurt Hocker joined Flagstar Bank as senior vice president and director of Capital Markets. He previously held numerous leadership roles during his 25-year career at Union Bank of California, including executive vice president of Commercial Capital Markets. Hocker is leading Flagstar’s expanded capital markets activities and directing a new team to execute capital markets solutions for clients, including loan syndications, secondary market trading, and access to other capital providers.

RETAIL Wendy Silverman

Head of Residential and Commercial Divisions Scott Shuptrine Interiors Wendy leads the day-today growth and development of the commercial division, using her expertise to oversee design projects from inception to finalization. She and her team of expert designers provide counsel and direction for transforming properties, such as the revival of the Caucus Club and Utica Sports Park, to create functional solutions to fulfill customers’ visions. Silverman formerly owned and operated Silverman Design, an awardwinning, full-service design company.

Health Department af-

ter former public health chief Abdul ElSayed resigned. Khaldun, Joneigh Khaldun the new executive director and health officer of the city health department, had been El-Sayed’s medical director since July 2016. El-Sayed left to make a bid for the Democratic Party’s nomination for governor in 2018. Khaldun returned to Detroit last summer. She had been chief medical officer and assistant commissioner for clinical services for Baltimore’s health department.

Catastrophic claims group names Clinton Former state treasurer Kevin Clinton has been named executive director of the Michigan Catastrophic Claims Association. He will replace Gloria Freeland, who is set to retire in March after a 40year career and serving as executive director for 25 years. The association also named Ann Flood, former director of the Michigan Department of Insurance and Financial Services, to the new position of assistant executive director. Clinton was Michigan treasurer in 2013-15 and insurance commissioner and director of the DIFS under Gov. Rick Snyder.

February 27, 2017

Page 2525

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

DELRAY FROM PAGE 3

final hurdle with the remaining viable businesses in Delray, a blight-ridden and isolated neighborhood that has been waiting for the bridge to come for more than a decade. Ackerman declined to specify MDOT’s offer for Delray Mechanical but said it was less than $20 per square foot and Ebsch needs at least $75 per square foot to build new or rehab existing industrial space in Detroit. “Their offer is a fraction of what they’re going to need to move anywhere,” Ackerman said. “And a fraction with a high denominator.” Andrew Doctoroff, who is Gov. Rick Snyder’s top adviser for the bridge project, said the state is “very sensitive” to the impact the project is having on existing businesses in Delray. “The governor for a whole host of reasons is very committed to making sure that the community is treated equitably and any adverse impacts are limited and fully mitigated,” he said. As of last week, MDOT had purchased or taken control of 394 of the 634 parcels, 62 percent of the land needed for the project, said Matt DeLong, administrator of MDOT’s development services division. MDOT has commenced condemnation proceedings against the owners of 30 commercial or industrial parcels and plans to file 30 more lawsuits within the next two weeks if property owners don’t accept the department’s purchase offers, DeLong said. Condemnation is MDOT’s last resort to acquire land needed for a $4.5 billion bridge project that President Donald Trump and Canadian Prime Minister Justin Trudeau recently hailed as a “vital economic link between our two countries.” “We think it’s very important for folks to appreciate that condemnation is a healthy part of the process, even though people think it’s adversarial,” Doctoroff said. Inside the footprint of the bridge and customs and toll plaza, there are eight businesses of varying size still operating as most residents have relocated and MDOT’s contractors speed up housing demolitions this spring. The most prominent business is a 42-acre Central Transport trucking terminal on Jefferson owned by Ambassador Bridge owner Manuel “Matty” Moroun, who has fought construction of a new publicly owned Detroit River crossing for more than a decade. Up to one-third of Moroun’s 300bay distribution center and a fueling station will likely have to be torn down to make way for the bridge landing and space for construction operations. Moroun owns 21 mostly vacant parcels of land within the project’s boundaries, and the billionaire trucking mogul is using those properties to mount a multifaceted legal challenge to construction of the bridge.

after the church rejected the department's $411,000 purchase offer, disagreeing with the appraisal. The congregation is in the process of moving into a smaller church building at 2004 Scotten Ave. that has less classroom space and doesn’t have a gym like the Fort Street church, Pastor Kevin Casillas said. “We’re not going to have what we currently have, facility-wise and capacity-wise,” Casillas said. “We don’t feel we’re being made whole.” Ackerman, who also is representing the church, said that case will go to trial later this year. Down the street from the 110-yearold church, the Detroit Friends Meeting are now going through a condemnation proceeding with MDOT over their building at 6227 W. Fort St. after the state offered the group of Quakers $105,000 for their property. “For us to move someplace comparable is going to cost more money than what they’re offering,” said Peter Dale of Livonia, the 22-member Quaker congregation’s recording clerk. The Detroit Friends Meeting building and Baptist church on Fort Street lie in the path of flyover bridges that will connect I-75 to the Gordie Howe plaza and Detroit River bridge. Dale said the small group of Quakers was ready to move a decade ago when state officials first approached it about needing its land for the infrastructure project. The Quakers had visions of moving into a space on John R Street, Cass Avenue or even Woodward Avenue — years before Midtown’s development boom sent real estate prices soaring. “With all of this delay, our location has now become totally unaffordable,” Dale said. “We’re not trying to hold up the state — we just want to get something that’s functional now. But things are just expensive now.”

Beyond biz

Changing costs

Businesses in Delray aren’t the only property owners butting heads with MDOT in court over the cost of relocating in Detroit. Last October, MDOT used condemnation to take First Latin American Baptist Church at 6205 W. Fort St.

The $370 million in land acquisition costs in Delray is a moving target, MDOT officials say, and could change depending on the outcome of buying up the remaining property. MDOT officials declined to comment on specific parcels that are

LISA SAWYER/CRAIN’S DETROIT BUSINESS

clearly in the path of publicly disclosed plans for the bridge, which the Canadian government has pledged to finance through a public-private partnership. State officials also would not address questions about whether land from the LaFarge North America cement plant and McCoig Concrete mixing plant on the Detroit River would be sought for the bridge. Design plans show the bridge passing over the air space of both properties en route to Moroun’s trucking terminal property along Jefferson Avenue. Ackerman is representing most of the businesses located inside a 2-square-mile area where the bridge’s customs plaza and toll lanes will be located. His clients include Peerless Metal Powders Inc. on South Military Street; Edward W. Duffy Co., a mechanical tubing and piping supplier on West Jefferson Avenue; Rye Gentry Trucking Inc. on Jefferson; and John Johnson Co., an automotive and industrial textiles manufacturer on Waterman Street. The other owners declined to comment, said Ackerman, who is managing partner of Ackerman Ackerman & Dynkowski PC in Bloomfield Hills. Ackerman also is representing Fort Iron & Metal, which operates a sprawling indoor scrap metal and salt storage facility between South Livernois and South Crawford streets. That facility has 60-foot ceilings to accommodate raw materials storage, Ackerman said, making it difficult for the owner to find a comparable move-in-ready facility in Detroit. “The offers that are coming are inhibiting the ability to move,” Ackerman said. “These people want to be in business.” Under state law, MDOT’s purchase offers to commercial and industrial property owners are based on comparable sales. The department also reimburses business owners for reasonable and necessary moving expenses and pays up to $25,000 for a company to re-establish its operations elsewhere. “If your property is worth $500,000 ... in Delray, that’s how much you’re going to get paid,” DeLong said. “If it

costs you $700,000 to buy a property somewhere else, we’re still only going to pay you $500,000.” “That’s what the statute says and we

JOB FRONT SURVEY

follow the statute,” DeLong added. Ackerman is not working for Moroun, who has hired former Attorney General Mike Cox to wage his legal battles. Because of Moroun’s litigation fighting condemnation of his trucking terminal and 21 other parcels within the bridge footprint, MDOT officials are guarded about specific acquisitions, declining to discuss why certain business properties have received purchase offers and others have not. Ackerman’s practice has focused solely on condemnation since 1973. He has been involved in some of the state’s largest eminent domain cases, including General Motors’ leveling of the Poletown neighborhood for construction of the Detroit-Hamtramck plant in the early 1980s. In Delray, Ackerman said MDOT’s purchasing strategy is “more cold, calculating” than he’s ever seen before. “If they want to protect people and make them whole, it can be done,” Ackerman said. “I don’t get a sense right now that they give a hoot. I’m hoping I’m wrong.” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

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

ARTS FROM PAGE 5

$62 million to reopen the old Capitol Theatre as the Detroit Opera House. Crain’s sat down with them and discussed funding, technology, education, challenge, tough decisions, next steps and much more. This interview has been edited for length and clarity.

On their responsibilities Slatkin: If you’re a music director, you have not only your rehearsals and performances to do, but you have a load of administrative work. You have to interact with your board, you have to interact with your patrons, you are involved in fundraising. In addition to those responsibilities, you still need a lot of time for study. As opposed to the violinist or the pianist or the singer who has unlimited time by themselves to practice, we don’t. Because who wants a full symphony orchestra in their living room? So it is purely a matter of communication between you and the person who has written the piece; you’re sitting and studying the piece, you’re learning it, you’re trying to get the sound of it up in your head. DiChiera: A lot of it was getting the community excited about having another cultural institution in the city and finding the support for it,

but then the artistic part has been putting the seasons together, casting the operas, auditioning singers. Slatkin: Wasn’t there an opera company before you at all? Ever? DiChiera: No. There was a woman who did some things but it was very, very small. She was a singer. Fischer: My late mentor Patrick Hayes desegregated the theaters of Washington D.C. So, I came infused with this notion of “everybody in and nobody out.” We needed to get out of the tower and build relationships with communities of very rich cultures with which we had no relationship — the Arab-American community, African and African-American communities, the Latin community, especially in Mexicantown, and the diversity of Asian populations. We spent the ’90s building those kinds of relationships and also with other arts organizations. It was just incumbent upon us to do this.

On revival DiChiera: The opera company has been focused from the very beginning on the revitalization of the city. Fischer: Amen. DiChiera: I actually had a lot of pushback when I started this. People would say to me, “An opera company in Detroit? You don’t do that in this kind of town.” I was doing what people thought was not doable, and that was fine, because that really energiz-

es you. If you really want something and believe that it’s possible, it just keeps you going. I started the company in ’71, four years after the riots, and people were not coming into the city. When I opened the Music Hall in ’71 — it had been closed for years — people thought this was wild. They said, “Why aren’t you doing this in Troy or something?” And I said, “Absolutely not. This is the center of cultural life in a major city like this.” Then we opened the opera house. And since, the whole area has been redeveloped. I always thought it was about two things: It was the arts to enrich people, but at the same time it was to revitalize the city. Slatkin: A lot of people said I shouldn’t come here because they anticipated a lot of problems, not just for the orchestra but for the city. But I like a challenge. It’s not fun otherwise. But the first year, I was only available for five weeks because of prior commitments. That doesn’t count as a first-year music director. The second year, I had a heart attack. I was out for three months. That doesn’t count as a music director. The third year, there was no season because they went on strike for half a year. So my work really didn’t begin until six years ago, and because of all that, my job changed. I thought I was going to help build the orchestra — there was a five-year gap between

my predecessor and me where the orchestra just began to disintegrate because there was no artistic leadership. But now my job really was to rebuild the institution, and not just the musical end, but the administrative side. We were just kind of hanging on here. Our attendance was horrible. The highest we got in the first three years was 62 percent of the house. It was a good night if we had that. Immediately I took a page out of the orchestra playbook during the strike. They went out and they played at community venues out in the suburbs. I said right away, “We have to keep that. We have to establish that.” And now we have seven partner venues for concerts each year. People are starting to trust enough to come down as well. We went up from 62 to 92 percent.

On donors and funding Slatkin: We used to be able to go to a donor and say, “We need X dollars,” without anything attached. Now you have to be really specific about what you want that money for. Fischer: Another thing you see more often is return on investment. What am I getting for what I’m doing? How can you prove to me that’s it’s providing a benefit? It used to be that we didn’t have to do so much of that. Now it’s not a bad thing to sit down with a donor and say, “These

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are benefits you’ll garner from this.” We had not had corporate support when I arrived. Fortunately, I had some experiences in Washington serving as a consultant with Pacific Telesis Group and Eli Lilly on how you have to be thinking about the corporate objectives when you’re talking to an arts group. If you can point out how providing support can also be an opportunity to reward employees, to stimulate new business, to bring in customers — that is often the argument we make beyond “it’s good for you.” Slatkin, to DiChiera: You must have, in the old days, gone door to door. DiChiera: Oh, absolutely. Slatkin: I suspect that David and I can probably say the same thing: We’ve done better than anybody thought we would do, but we still have a lot to do because of private fundraising. Fischer: A presenter is in a different situation. We have corporate, foundation, government, individual [support]. And then I have the University of Michigan. But they provided us no general fund or student fee support until fiscal year 2002. I said, “What’s your mission?” They said, “Teaching, research and service.” And I said, “When you think of us what do you think?” They said, “Oh, you’re part of the service mission.” I said, “Excuse me, can I show you what we’re doing in education?” We

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had all of our stuff to show them. “How are you supporting our research mission?” I said, “Well, we’ve commissioned 40 new works in dance theater and music in the last 10 years, and every time those works are performed in Suntory Hall in Japan, in the Barbican (Centre) of London, at the Chantilly of Paris, they bear the name of the University of Michigan and you haven’t paid a dime for it.” That prompted them asking, “How can we help you?” Fischer: Now the Trump administration [is] suggesting we need to just eliminate the National Endowment for the Arts and the Humanities. Slatkin: But we’ve heard that before. The amount of money, the total amount of his budget, it’s more symbolic than anything else. DiChiera: It doesn’t equal that much. Fischer: It doesn’t equal the expense of a military jet. Slatkin: No! DiChiera: We’re a piece of a jet. You always have to keep looking for different sources. Fischer: You never give up. You keep the fight on.

On the key to survival Fischer: The real key is to shore up the holes in early education. Slatkin: We have to take it on ourselves. My musicians volunteer to do community outreach, to do teaching. One of [our] largest youth programs is the Wu Family Academy. You come on a Saturday, there are 550 kids. They break down into about five orchestras, they get instruments, they get classes. DiChiera: The schools are so without anything in terms of the arts. We go into the schools, we take singers, we do small scenes and so forth. And then you need to pay for the busing, because now they don’t even have any money for busing. Slatkin: When you move it to education, you do a little better with people who find that of interest. DiChiera: People care about education. They know that there’s nothing in the public schools. Slatkin: When I was in high school in Los Angeles in the early ’60s, we had three choruses, two bands and an orchestra. We had a composer in residence. When I arrived here, I met with the then-acting superintendent of the public schools, Robert Bobb. And he boasted that 30 percent of Detroit Public Schools had arts education. I looked him in the eye and said, “That means 70 percent don’t.” And that’s not just a phenomenon of Detroit. That’s a nationwide one, and it’s starting to creep into the world situation. So we decided we would stream our concerts and find a way to get them into the schools. Our education concerts are seen by a minimum of 40,000 people on the day we do them. We have to do that stuff now, where the government — either the federal, state or local level — isn’t.

the diversity of the city by working with and bringing African-American singers into the programming. I gave people like Kathleen Battle their professional career debuts. That was really important to me, because we were taking things into the schools and into the community. These young people had to see themselves on that stage. They had to realize that this wasn’t just some foreign thing for people who were not like they were. Fischer: The Michigan Opera Theatre, UMS and the Arts League of Michigan joined together in a three-year program to celebrate African-American arts and to help build audiences. We did the Nutcracker together, the Alvin Ailey American Dance Theater and in the final year we produced our own program on the history of black church music in Detroit, working with The Winans in the late ’90s. Next year, we’ll come back to Detroit with another ballet. These have been wonderful collaborations for us, getting out of Ann Arbor, being able to work with colleagues here in Detroit including Mosaic Youth Theater, Sphinx Organization, Arab American National Museum and a number of others. DiChiera: Because I’m so focused on diversity, if I’m casting a role and there are two sopranos who are of equal talent and one of them is either Latino or African-American, that’s my decision. I make that decision because it is important for us

to have diversity on that stage. In past times with opera companies, it was not done. There are still parts of this country, if you’re casting an opera like Romeo and Juliet, the idea of having Romeo as an African-American and Juliet as Caucasian is a difficult thing for some companies. Slatkin: Less now than it was. DiChiera: Yes, less now. Slatkin: I can look back and say there are things that I could have done better. But there are a couple of things I am proud of. We commissioned a cello concerto from an Arab-American — Mohammed Fairuz. When that commission came through, I said, “I want that commission played in a synagogue.” DiChiera: I was there. Slatkin: It was the symbolism of saying: It’s music. You’re going to learn something about the culture. DiChiera: Exactly. Fischer: Aaron Dworkin [founder of Sphinx Organization] has been a real champion of diversity in classical music. He’s been told by so many orchestras, “Aaron, you don’t see many people in the orchestra like you because they’re just not out there.” He’s challenged that for the last 20 years, believing they’re out there. They just need to be identified, encouraged and rewarded. This is a critical issue for all of us. I’d say we’re pleased with changes that we’ve made on our stages in dance, theater and music, but we

all need to look to our boards of directors, to our staffs, to have them be the best possible reflection of the wonderful diversity we find here in Southeast Michigan.

On the future

On advice for their successors

Slatkin: At the end of this season, I relinquish my post in France. At the end of next season, I step down here. I just can’t deal with the administration part any more. It’s too hard for me. I only want to do about 20 to 30 weeks of conducting a year. My second book comes out in October; I’ve already started on a third one. I’m doing some teaching. I’m doing some arranging. So, there are other projects I’m moving into now. Fischer: I’m going to stay active in the professional organizations that I am in. I have an opportunity to teach a course in arts leadership. I have grandchildren on the West Coast that I want to spend time with. I am open to other prospects as long as I can still have time with family. And I’m working on a book. DiChiera: I’ll be retired at the end of this season in terms of my official capacity. I decided that 46 years of running a company should be about it. I have started writing a book. And the book is not just about the evolution of the company but about the city of Detroit. Because I was creating, running and developing a cultural institution at that time. I also want to do a little more

Slatkin: My hope is they will build on the ideas they consider successful but really bring something new and fresh. Don’t be stale. Do something bold. Do something that continues to put the orchestra on the map. And don’t harm the orchestra at all — don’t destroy what’s been built. I want to make sure that whatever part we’ve played in the rebuilding of this city continues. Fischer: My successor [Matthew VanBesien, current president of the New York Philharmonic] is a little older than my son, so if he wants to he can have 30-plus years in this gig. I would just advise to listen and learn. I was not prepared for this gig at all. I’ve got a fabulous staff that I hope he can find a way to continue to grow. DiChiera: We have maestro Stephen Lord, who for several years is going to act as artistic voice. Wayne Brown is here as CEO. My advice is to make this company evolve even more. There’s so many directions that it can go. I would like to see us do something like summer programs on the riverfront — where we expand our footprint outside of the opera house in a more significant way.

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On diversity DiChiera: I really wanted to make sure that what we were doing reflects

composing, which I have not had time to do. If I can find the right subject, I want to write a second opera.

Contact Pete Roth at pgroth@varnumlaw.com

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DEBT FROM PAGE 5

horizon is real and increasingly less distant, something acknowledged by Michigan administrators. “We watch very closely with what’s happening to ESPN,” said Kevin Hegarty, UM’s executive vice president and chief financial officer. A look at UM’s financials shows that its athletics debt stems from spending on new venues and renovations such as expansion of Michigan Stadium and construction of the football team’s Al Glick Field House. Millions more are owed for interest. The $240 million in Maize-andBlue borrowing accounts for one of the nation’s largest college athletic department debt loads, but unlike some other struggling schools, UM’s administration is confident that its reputation, budget controls and credit rating are enough to keep it out of trouble. UM is keenly aware of a catastrophe taking place out West. In the first week of the new year, Bloomberg Businessweek published an analysis of college athletics debt highlighted by the University of California at Berkeley, which may have to slash its number of intercollegiate teams because of a $22 million athletic department budget deficit last year on $445 million in debt. The rest of the story explains the origins of the college sports debt crisis — mainly the arms race for bigger and better facilities, especially for football — and how schools are coping. The analysis showed Michigan, based on 2014 data, as being among the top 10 in athletic department debt nationwide. But while there is worry in Berkeley, there’s guarded optimism in Ann Arbor. As CFO, Hegarty is UM’s top financial mind and its budget steward. In a conversation with Crain’s, he outlined why the debt load isn’t worrisome. Namely, the reputation and credit rating allow the school to borrow money at favorable rates, administrators budget smartly, and deep-pocket donors writing big checks reduce the need to borrow, he said. But first, a look at the numbers.

The budget Michigan’s fiscal 2016-17 athletic department budget of $161 million includes a $15 million debt payment for eight projects, including $9.2 million for the 2011 Michigan Stadium renovation, according to UM Athletic Director Warde Manuel’s June 2016 operating budget report to the university’s board of regents. The budget predicts an $800,000 surplus while factoring in a 4 percent annual increase in costs. A more detailed breakdown of the athletic department’s current debt shows $371 million in principal and interest payments for 10 projects through 2046, according to information supplied by the university under a Freedom of Information Act request by Crain’s. That breakdown shows the athletic department’s annual debt payments will leap to more than $20 million beginning in 2019 before leveling off to about $15.7 million annually from 2022-36 — provided the department

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takes on no new debt, an unlikely scenario as the department seeks to upgrade older facilities and build new ones to remain competitive. Hegarty said the athletic department can absorb the increased annual debt payments because revenue is expected to rise equally quickly. UM could end up paying less than $371 million if it pays off principal sooner, which reduces or eliminates interest — the same as with a home mortgage or auto loan. The interest part of the equation is purely theoretical. Hegarty’s office is constantly seeking lower rates to drive down payments. The athletic department currently has $131 million in interest payments on the books through 2048, but Hegarty stresses that the amount will change as the university seeks to refinance debt, and it could pay down its borrowing early thanks to donations and other revenue sources. It also will take on new debt, such as for the plan approved recently to spend $21 million to refurbish the Oosterbaan Field House for the football team. “We are constantly in the market, looking for opportunity to take advantage of reduced interest rates,” Hegarty said. “We’ll manage that down as much as we can.” That said, UM certainly will pay a large chunk of that interest, just as homeowners who stay in their home pay far more than the list price over a 30-year mortgage. But unlike a homeowner, UM isn’t going to sell the football stadium to move elsewhere.

Budget controls, options The athletic department itself opted not to say much about its budget and debt, instead deferring to Hegarty and the board of regents. A departmental spokesman did issue a short statement. “Operating expenses go directly against revenues and Michigan has been able to balance its budget while operating independently as a self-sufficient entity. We accept no university or state monies. This long-term debt is less than 10 percent of our operating budget,” Kurt Svoboda, UM’s associate athletic director for external communications and public relations, said via email. The athletic department declined to make Manuel or any senior department business staff available to discuss finances and debt. Internally, the athletic department plays it cautious with assumptions in its budgeting and debt estimates, Hegarty said. The principal and interest payments last year were a couple of million dollars less than budgeted, thanks to that conservative planning and efforts to refinance rates. “We plan conservatively,” said Hegarty, who noted that Michigan has $2.1 billion in total debt for the entire university. Additionally, the athletic department has been modest in its pricing for tickets and premium seating, Hegarty said. If trouble emerged, there’s room to charge more. “Michigan had followed a real, real affordability path,” he said. “They do have headroom to price up if they need to.” The athletic department also could lease its facilities for more events,

something it traditionally has not done, Hegarty said. It brought in money from leasing the Big House for elite-level exhibition soccer matches in recent years. If financial problems ever emerged, Michigan can always turn to its alumni for help, too. “We as a campus have enjoyed very strong donor sponsorships in terms of gifts,” Hegarty said. Most notably, the athletic department — it has about 900 student-athletes and 350 coaches and staff for 31 teams — is using a $100 million donations from alumnus Stephen Ross to pay for its new south athletic campus.

back with interest, he said. He noted that UM’s preference is to use its savings and donations instead of debt financing. “We have a lot of cash on the balance sheet, and we use it to finance a lot of capital projects,” he said. “Very few projects are 100 percent leveraged with debt.” When the university does issue debt, the markets consider UM bonds a safe investment, and when the football team is successful, investor confidence can grow, Hegarty said. “People like University of Michigan bonds,” he said. “People want to invest in winners. It can drive revenue.”

Keeping tabs

The great uncertainty

Hegarty said he instituted monthly financial review meetings as part of his overall plan to more closely track how self-funding parts of the university handle their finances. “It’s a good time to bond with Warde’s team, to work on problems together. It’s been a huge positive,” he said. The ground rule for the athletic department taking on debt is simple: “When the time comes, they’re going to have to have the money. The institution isn’t going to provide that money,” Hegarty said. In other words, the university as a whole ultimately backs the bonds, but the athletic department has to convince the administration that it can pay off the spending without trouble. And that’s been working. “The regents are very comfortable where we are debt-wise and operationally,” Hegarty said. Mark Bernstein, chairman of UM’s board of regents, said he’s keenly aware of the athletic department’s debt and is OK with it because of the university’s fiscal position. “I am mindful of the issues related to our debt obligations, and feel comfortable given our debt capacity related to the university as a whole and athletics in particular,” he said. The athletic department debt is backed by the university as whole, which has a AAA bond rating from Moody’s Investors Service. That allows Michigan to borrow money at advantageous rates for lower-cost long-term investments, said Bernstein, who was elected regent in 2012 and is president of Farmington-based The Sam Bernstein Law Firm PLLC. The debt level and questions about future revenue streams are on the regent’s radar, he added. “No doubt it is something that needs to be constantly evaluated. Athletics, both college and professional, are in a fragile place,” Bernstein said.

At first, it seems silly that major schools would worry about broadcast rights money. After all, the Big Ten recently signed six-year deals with ESPN and Fox Sports worth a combined $2.64 billion. Those deals begin in the fall, and UM is expected to nearly double its share of broadcast revenue to about $40 million. But there are cracks in the paint. In 2013, ESPN had 99 million subscribers. It now has 90 million, its lowest subscriber base since 2005. Daniel Salmon, analyst at BMO Capital Markets, recently estimated that ESPN could lose about 4 percent of subscribers in fiscal 2017. Other insiders say the losses could be even worse. And those ex-subscribers take with them cash ESPN uses to fuel its billions of dollars in professional and college sports broadcast rights deals. On the other hand, a PricewaterhouseCoopers sports industry report from October predicts that media rights spending will increase, from $18.2 billion this year to $21.2 billion by 2020. That’s nearly double the total broadcast rights spending in 2011, which was $10.8 billion. The uncertainty breeds varying levels of concern. Specifically, the proliferation of platforms and ways in which college sports are delivered to consumers raises financial questions, according to Karen Weaver, a sports-management professor at Drexel University and specialist in college media rights. There are no simple TV deals any more. Fans increasingly consume games on their mobile devices, and some indulge only in stats, highlights and specialized content that isn’t pure game action. So, advertisers are not going to pay the networks a premium for content split among channels, the theory goes. “That makes it difficult to monetize as efficiently and effectively,” Weaver said. “It’s enormously frustrating to a media industry that detests uncertainty and change.” UM’s administration is confident that fans will continue to consume Michigan sports on whatever platform they prefer, and advertising and subscriptions will follow. “I do believe this is sustainable in the long term, therefore the demand for our content will continue,” Bernstein, the top regent, said. “There always will be a passionate following, and that’s what puts us in the driver’s seat with regard to the revenue model.”

Paybacks If a financial crisis did erupt and debt default loomed, the athletic department would have to repay any bailout by the university as a whole. “If things did go bad for athletics — I’d give that a low probability — the University of Michigan at large would be obligated to backstop that obligation,” Hegarty said. Instead, the university could write the athletic department an internal loan from cash on the overall balance sheet, and the department would pay it

Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

Michigan projects Major athletic projects that account for the $240 million in athletic department debt. Interest payments on that debt are not included: Donald R. Shepherd Softball Center Budget: $5.3 million Current debt: $3.4 million Project: Construction of a 10,200-square-foot softball facility that includes player and coach locker rooms, staff offices, a team meeting room, athletic medicine and fitness spaces, hydrotherapy pools and support space. Status: Completed in 2014 Michigan Stadium Budget: $226 million Current debt: $129 million Project: A 400,000-square-foot addition of two multi-story masonry structures on both the east and west sides of the stadium includes 83 suites and 3,000 club seats, other improvements. Status: Completed in 2011 Al Glick Field House Budget: $26.1 million Current debt: $10.1 million Project: A new 104,000-squarefoot field house for the football team, along with 3,000 square feet of renovated space in the Schembechler Hall locker room. Status: Completed in 2009 William Davidson Player Development Center Budget: $23.2 million Current debt: $17.4 million Project: A 57,000-square-foot facility for the men’s and women’s basketball teams built adjacent to Crisler Arena. Status: Completed in 2011 Crisler Center Budget: $52 million Current debt: $37.9 million Project: Renovation of arena infrastructure and replacement of seating, and new construction of about 63,000 square feet for new spectator entrances, retail space, ticketing areas and private club space. Status: Completed in 2013 Stephen M. Ross Athletic South Competition and Performance Complex Budget: $168 million Current debt: $33.5 million Project: Construction of 280,000 square feet of space for the future home for men’s and women’s track and field, cross country, lacrosse, soccer, and women’s rowing teams. Much of the funding will come from the $100 million donation from alumnus Stephen Ross. Status: Estimated completion in winter 2018 Source: University of Michigan

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PROPOSAL A FROM PAGE 3

Researchers estimated that just 14 percent of local retiree health care plans in Michigan were funded in 2014, compared with about 78 percent of local pension systems, with more than $10 billion in estimated unfunded health care obligations alone. That’s a big bill that will come due eventually or municipalities risk not being able to provide the promised benefits; unlike pensions, health care for retirees is not constitutionally protected. That could prompt tough decisions on how to spend limited local resources to avoid scaling back public services. In a recent paper, two former Michigan fiscal experts who now run a consulting firm argued that deep property tax declines during the housing crisis combined with a slowly recovering tax base — in part because of the Proposal A growth caps — have created a no-win situation for cities that have lower tax bases: Either pass high millage rates to fund services, or keep tax rates low and cut services. Both high tax rates and service cutbacks “would encourage residents and businesses to move elsewhere,” wrote Mitch Bean, a former director of the nonpartisan House Fiscal Agency, and former state Treasurer Robert Kleine, who formed Great Lakes Economic Consulting LLC. “Thus, cities are caught in a vicious cycle that results in ongoing serious financial problems.” The most serious problems, as in Flint and Detroit, can lead to state financial oversight or bankruptcy. Republicans in the state House have made reforming public-employee benefits a legislative priority this term. Gov. Rick Snyder appointed a task force expected to deliver recommendations this spring on how to address the pressure from pensions and retiree health care on local budgets. Municipal advocates, Democratic lawmakers and the state Treasury have begun to raise the idea that local revenue streams should be evaluated as part of a multi-part approach to reform that includes containing costs and benefits obligations, improving efficiency in delivering services and making sure municipalities’ revenue is sustainable. The magnitude of underfunded employee legacy costs statewide has brought greater urgency to finding a solution. Plus, economists have signaled a coming slowdown in the recovery. Michigan could take an early hit if that happens, if record auto sales start to stagnate. “All three categories need to be addressed over the next year” while the economy is still growing, state Treasurer Nick Khouri said. “The thing I’m emphasizing, more than any specific policy proposal or principle, is: Now is the time to have these debates, when we have the economy at our back and we’ve got a little flexibility — not waiting until the next crisis.”

Thinking differently That doesn’t necessarily mean ac-

““For the first time in a long time in Lansing, we’re talking about this stuff,” Minghine said. “It’s really encouraging.” Tony Minghine, COO, municipal league

tion on revenue, including anything related to Proposal A, would coincide with retirement reform. The co-chairmen of Snyder’s retirement benefits committee, who have backgrounds in auditing and health care finance, told Crain’s it’s too early to say whether revenue will be among the final recommendations. However it’s done, the state and its communities need to start thinking differently about how to strike a balance between a favorable tax structure and adequately funded local services, said Tony Minghine, chief operating officer of the municipal league. People generally don’t move to a state because it has low taxes, he added. They move because they like a particular community’s quality of life. “For the first time in a long time in Lansing, we’re talking about this stuff,” Minghine said. “It’s really encouraging.” Rather than repealing or replacing Proposal A, which would require a statewide vote, associations representing cities and townships believe changes could be made by the Legislature, rather than by going back to voters. Rewriting the law in its entirety also would be a difficult task, given the voter educational campaign that would be required and the current tax-cut sentiment pervading Michigan and Washington. More than two decades after the law’s landmark passage by voters under former Republican Gov. John Engler, the limits it forced on local revenue have been tested in ways that no one could have predicted in 1994, when the economy was growing. Proposal A had two main goals — to lower property tax bills and to set up a state funding structure for public schools, which until then had been funded primarily by local property taxes. Before Proposal A, a wealthier community could have a richer school district, a gap that has shrunk over the past two decades but has not been erased. “It was the solution to the problem at that particular time,” said Judy Allen, government relations director for the Michigan Townships Association, which represents the state’s 1,240 townships. “I’m not saying it should be eliminated or thrown out. But I think it is always good to review to see if the mechanisms we have in place are working.” Under Proposal A, annual growth of an individual property’s taxable value is limited to the lesser of the inflation rate or 5 percent. While it has slashed tax bills for Michigan residents, last decade’s recession exposed a flaw that municipal leaders say has hindered their ability to recover: Property tax collections can tumble along with the housing market, but growth is capped — meaning tax revenue doesn’t grow as fast as a rebounding economy. Two strategies are under consider-

ation. The state’s Headlee Amendment, approved in 1978, requires communities to roll back their millage rates if their total property tax revenue growth exceeds inflation. Under Proposal A, when a property is sold, its taxable value reverts to the state-equalized value — equivalent to half of the property’s cash value and generally higher than its taxable value. If a community has a strong real estate market in a given year, that bump in revenue could have the adverse effect of triggering a Headlee rollback that lowers its millage rate. That could lead to a less-than-inflationary growth in a community’s revenue. The first idea would exclude so-called “pop-up” values from being used in Headlee rollback calculations. The second would be to allow a community that is growing at less than the rate of inflation to “roll up” its millage rate under Headlee — in essence, allowing a community to offset stagnant growth or declines in property values with slightly higher millage rates. A community only would be allowed to “roll up” millage rates if it hadn’t already hit its taxing cap under state law, and it wouldn’t be able to net more in tax collections than inflation. While local government leaders understood in the mid-1990s that an economic downturn could have devastating consequences for revenue, Minghine said, a healthy economy might have led them to underestimate the effect: “You never experienced those declines like that, so you never saw the math play out the way it did.” “One of the things that became really, painfully apparent during the recession was how severely limiting that was,” he said. “When you have markets that are always trending upward, those limits are masked.” No specific legislation has been introduced; rather, municipal groups have said the idea so far is a policy goal. Gideon D’Assandro, spokesman for House Speaker Tom Leonard, said House Republicans would need to see a specific proposal before they could comment. They’re focused for now on restructuring benefits, D’Assandro said.

A matter of benefits? An unsuccessful run last year by the Republican-led Legislature at the retiree benefits issue is expected to resurface this year. Snyder’s task force is made up of city and township leaders, labor groups, lawmakers and people with expertise in accounting, auditing and health care. The revenue idea is one response to solving the problem, as municipal groups contend that simply restructuring benefits won’t help them pay for benefits promised years ago.

Rather than repealing or replacing Proposal A, which would require a statewide vote, associations representing cities and townships believe changes could be made by the Legislature. Still others say cities can’t afford the benefits that have been offered, and finding ways to adjust pension and health care benefits is the first priority. “I believe there is a need to revisit Proposal A and how we fund local municipalities, but that doesn’t take away from the fact that we have a spending problem in local government,” said James Freed, Port Huron’s city manager, who estimated that 22 percent of the city’s general fund — or an $8.2 million annual contribution — will be going to address a $103 million pension liability in the next three years. Freed said his city will face a $3 million deficit on a $22 million general fund budget within the next three years, which he said is solely the result of rising annual contributions to unfunded pension liabilities. He wants to see the Legislature first reform what kinds of benefits municipalities can offer, and then authorize cities to restructure payments through bonding or revolving loan funds that could reduce annual contribution amounts. “Until we address the benefits and our spending, I don’t see how you go to the taxpayers and talk about revenue,” Freed said. “If we had every dollar of revenue sharing back, we would still be in the crisis situation.” The state hasn’t fully funded revenue sharing to local governments since the 2001 fiscal year, according to an analysis by the House Fiscal Agency. The April 2016 report by Great Lakes Economic Consulting included estimates that cuts to statutory revenue sharing, the type not provided for in the state constitution, for cities, townships, villages and counties topped $7.5 billion since 1998. Snyder proposed no increase to statutory revenue sharing next year. Instead, he proposed allowing local governments to share in $122 million in surplus funding, which is the result of the state overestimating how much money was needed to prevent funding losses for municipalities after the

elimination of Michigan’s personal property tax on some business equipment. “I have no problem looking at how we deal with long-term liability issues facing local communities. But it has to be done in context of a broken municipal financing system,” House Democratic Leader Sam Singh said. Revenue sharing cuts and the recession led mayors and city managers to downsize staff to balance budgets and minimize cuts to services. That decision today means fewer active employees are paying into municipalities’ retirement systems, Singh said.

Other solutions Other policy ideas that have circulated include updating the formula to distribute statutory revenue sharing payments to account for such criteria as population, per-capita income and the cost of services. In addition, lawmakers could consider authorizing more local taxes, including local sales taxes; smoothing out annual declines in property values by using a multiyear average; and increasing municipalities’ tax caps, according to the Citizens Research Council of Michigan. “There’s no reason to cling to anything we’ve done in the past, and anything and everything should be on the table,” said Eric Lupher, the research council’s president. The longer a solution is put off because it’s politically difficult, Gilmartin said, “we will do Dan Gilmartin: so at our own Issue “strangling peril.” our state.” “There are other issues that play more in political campaigns,” he said. “But this is slowly strangling our state.” Lindsay VanHulle: (517) 657-2204 Twitter: @LindsayVanHulle

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 7 , 2 0 1 7

INVESTOR FROM PAGE 5 www.crainsdetroit.com Editor-in-Chief Keith E. Crain Executive Vice President KC Crain Publisher/Editor Ron Fournier, (313) 446-1674 or rfournier@crain.com Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@crain.com Managing Editor/Custom and Special Projects Kristin Bull, (313) 446-1608 or kbull@crain.com Product Manager/Marketing Kim Winkler, (313) 446-6764 or kwinkler@crain.com Deputy Product Manager/Digital Carlos Portocarrero (313) 446-6056 or cportocarrero@crain.com Membership Director Nancy Hanus, (313) 446-1621 or nhanus@crain.com News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Special Projects Editor Amy Elliott Bragg, (313) 446-1646 or abragg@crain.com Design and Copy Editor Beth Jachman, (313) 446-0356 or bjachman@crain.com Research and Data Editor Sonya Hill, (313) 446-0402 or shill@crain.com Newsroom (313) 446-0329, FAX (313) 446-1687, TIP LINE (313) 446-6766

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a deposition that none of the buildings had certificates of occupancy. And it turns out the Russell Industrial Center evictions last week weren't the first time the city has ordered Kefallinos-owned buildings to be vacated. According to the lawsuit, on July 25, 2012, residents of Kefallinos' Universal Lofts building at 5805 Lincoln St. were ordered to “desist in the use of this building for residential purpose.” For his part, Kefallinos says in a deposition that the units at Universal Lofts were “always habitable” and denied that there was lead paint in one of the plaintiff’s apartments, one of the key contentions in the lawsuit. He said he requested an extension to comply with city construction rules but a clerical error resulted in a certificate of occupancy not being issued. Kefallinos also said in the deposition that he wasn't aware if from 2008-14 all of the buildings had valid certificates of occupancy because “it is not (his) Boydell Development Co.’s duty to obtain” them. A handful of the buildings appear to have since received certificates of occupancy, but not all of them. Byrd, a U.S. Army veteran who served from 1980 to 1990, still lives in the John R Apartments, paying $500 a month in a building which hasn’t been able to accept new tenants because it doesn't have a certificate of occupancy. “What freaks me out about this case is that these people could die as a result of these violations,” Alyson Oliver, managing partner of Oliver Law Group, said in an interview in early February. “That sounds melodramatic, but when one of these things goes up in flames because of the electrical wiring, it’s a catastrophe.”

Bills, raccoons pester tenants Laura Rayson, an engineer for Verizon Wireless, moved into Kefallinos’ Hudson Lofts at 1915 Fort St. in August 2011 after she relocated from New Jersey for work. She moved out in July 2015. But it took her until last month to finish paying off a utility bill first accrued while living in her $900-per-month loft. She said she got a $900 DTE Energy bill one month because the electric heaters in her large apartment were too small to heat the space. “They finally took a little off my rent, but I had to get on a payment plan,” she said. “It was happening every month.” During an interview at her law firm’s Troy office Thursday, she recounted being afraid of raccoons in the stairwell and an elevator that only worked for two months after she moved into the building, which was under construction at the time. Eventually, after nearly four years in the building, she decided to leave. “‘Forget it,’” she recalled thinking. “‘I’ll move to Grosse Pointe.’” So she did.

The 2.2 million-square-foot Russell Industrial Center in Detroit was ordered vacated by the city last week.

Dennis Kefallinos’ residential buildings n Greektown Lofts, 743 Beaubien St., 41 units n Brooklyn Lofts, 2233 Brooklyn St., 56 units n John R Apartments, 2627 John R Road, 73 units n Coat Factory Lofts, 1652 Fort

St., 62 units

n 14th Street Lofts, 2101 W. Lafayette Blvd., 40 units n Milwaukee Park, 2566 E. Grand Blvd., 123 units n Universal Lofts, 5805 Lincoln St., 40 units n Lafayette Lofts, 1301 W. Lafayette Blvd., 59 units n River Park Lofts, 227 Iron St., 107 units n Grand Lofts, 727 W. Grand Blvd., 138 units n Hudson Lofts, 1915 Fort St., 98 units

Total: 837 units

Historic downtown buildings In addition to the Russell Industrial Center and the residential buildings, Kefallinos owns several other historic properties in and around the downtown area. Among them: The 58,000-squarefoot Harvard Square Centre building at 1346 Broadway St., which was built in 1925 and which he bought in 2011 for $700,000; and the parking garage that once was the opulent Michigan Theatre and the attached Michigan Building at 220 Bagley Ave. He also owns Niki’s Pizza and Bouzouki, a strip club in Greektown; the Roosevelt Hotel at 2250 14th St., which he bought in 2010 for just $37,500 at a tax-foreclosure auction (it is now listed for sale for $3.67 million), and Shapero Hall, a former Wayne State University pharmacy school building that he purchased in 2010. The city had targeted that building for demolition, but Kefallinos staved off the wrecking ball. Kefallinos lieutenants have long talked about plans for Harvard Square Centre and Shapero Hall. None of them have come to fruition as of yet. In November 2015, Boydell General Manager Chris Mihailovich told

Crain’s that the company put Harvard Square Centre’s plans for 80 residential units on the back burner to work on other projects. Mihailovich did not respond to a message seeking comment Thursday. Two attorneys who have represented Kefallinos in the case also declined comment.

A trailblazer For all the missteps and issues with his buildings, Kefallinos was one of the early pioneers in Detroit real estate investment at a time when few saw the value in it. “It is easy in this environment to criticize, and if people have legitimate issues, so be it,” said David Di Rita, principal of Detroit-based developer The Roxbury Group, which is behind projects like the David Whitney Building restoration and The Griswold apartments atop a 10-story parking deck downtown. “But Dennis and his team were down here keeping the lights on and figuring out how to create value in Detroit real estate in a time when today’s crop of so-called saviors — myself included — were happily making our money in the suburbs.”

“Blind-sided” Kefallinos again came into the spotlight last week when the city’s Buildings, Safety, Environmental and Engineering Department demanded that his Russell Industrial Center be vacated of its more than 150 commercial tenants, citing what department director David Bell called “blatant disregard for city ordinances, laws and regulations.” The complex, which is known as a haven for artists who use the inexpensive space for studios, also houses photography and music studios, residential units, a counseling center that serves children and a fitness center, according to the city. Bell said the owners have them-

COSTAR GROUP

selves or allowed tenants to put up “walls using combustible materials, illegally installed plumbing, and heating systems in numerous units without proper permits, inspections, and approvals.” The city began receiving tips about the condition of the Russell Industrial Center shortly after a December warehouse fire killed 36 people, but the evictions were not driven by the blaze in Oakland, Calif., city building officials said. Eric Novack, project manager for Boydell Development, said last week that he felt blindsided by the city for the eviction notices. “Obviously there are some deficiencies,” Novack said. “You’re talking (about) a place that has been in operation this way for three or four decades, and suddenly the city is interested in how the Russell Industrial Center is operating? “The city has always been at our place and suddenly after this much time and this much exposure, we are suddenly on the map with the city? We are more than willing to put everything into compliance but it doesn’t seem like they want to work with us; they want to vacate the property.” During a tour of the Russell Industrial Center last week immediately following the eviction notice, brochures advertising the residential buildings Kefallinos owns were available for anyone to pick up. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

BANKRUPTCIES The following business filed for bankruptcy protection in U.S. Bankruptcy Court in Detroit Feb. 17-24. Under Chapter 11, a company files for reorganization. J Alfa Medical Equipment & Supplies Inc., 13181 W. 10 Mile Road, Oak Park, voluntary Chapter 11. Assets and liabilities are not available.

INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: American Axle & Manufacturing Holdings 8, 9

Michigan Department of Transportation

Arbor Bancorp

Michigan Opera Theatre

Birmingham Bloomfield Bancshares

Piston Group

Boydell Development

Russell Industrial Center

Business Leaders for Michigan

Stryker

8, 10

Delray Mechanical

Truven Health Analytics

Detroit Symphony Orchestra

University Musical Society

John R Apartments

University of Michigan

Metaldyne Performance Group

Wayne State University

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 7 , 2 0 1 7

THE WEEK ON THE WEB FEBRUARY 18-24 Pistons, Henry Ford unveil new facility, team HQ

deal to make Henry Ford Health System the official health care provider of the Detroit Pistons beginning with the 2017-18 season includes construction of a 100,000-square-foot training facility and corporate headquarters for the basketball team in Detroit’s New Center Area. The project, announced Friday, also will include a sports medicine, treatment and rehabilitation facility managed by the health system, the Pistons and Henry Ford said in a joint statement.

COMPANY NEWS

J The Southfield-based Area Agency on Aging 1-B named Jim McGuire, director of research, policy development and advocacy, as its acting interim CEO, following the Jan. 4 resignation of longtime CEO Tina Abbate Marzolf. Marzolf resigned for undisclosed reasons after the nonprofit held a private meeting regarding an undisclosed legal matter. J The Grosse Pointe Farms-based Ralph C. Wilson Jr. Foundation is tapping Macomb Community College President James Jacobs as a part-time senior adviser to help it develop a strategy for funding workforce development initiatives. Jacobs is to retire from MCC in June after 50 years with the college, nine as president. J New York-based shake and burger chain Shake Shack opened its first Detroit location, inside the Dan Gilbert-owned First National Building. J A new seafood and piano bar with a familiar name is set to open this spring at the Mall at Partridge Creek in Clinton Township. Muer’s Table + Bar will be led by veteran restaurateur David Muer. J Little more than a year after opening a records and novelty shop in Detroit’s Cass Corridor, Third Man Records — the record company founded by Detroit native Jack White — was set to officially open its 10,000-squarefoot vinyl pressing plant. J Bonobos, the New York Citybased luxury menswear retailer, brought its unusual “guideshop” model of shopping to Detroit when it opened its first Michigan store at 1417 Woodward Ave. J City Bark pet boutique officially opened its doors in downtown Detroit. The store moved from its original Grosse Pointe location to a 1,250-square-foot space in The Albert building at 1222 Griswold St. J Pontiac-based general contractor firm George W. Auch Co. completed the purchase of a property in downtown Pontiac from RACER Trust to build a new 20,000-square-foot headquarters to be built by 2018. J Southfield-based supplier Lear Corp. was named presenting sponsor for this year’s Detroit Grand Prix, which runs June 2-4 on Belle Isle. The IndyCar racing event will now be

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

The number of Michigan locations of J.C. Penney Co., the Texas-based retail giant, which said it will close 130 to 140 stores nationally in a bid to improve profitability. Locations will be announced in March.

$50,000

The amount of a new Patronicity crowdfunding campaign by the Michigan Urban Farming Initiative, with help from the Michigan Economic Development Corp., in an effort to transform a long-vacant building in Detroit’s North End into a community resource center.

$1.6 million

The yearly savings projected by Flint-based McLaren Health Care as a result of the overhauling of its lighting systems statewide in a collaboration with Sterling Heightsbased Future Energy Group.

called the Chevrolet Detroit Grand Prix Presented by Lear, dropping Belle Isle from its name. J Detroit high-speed internet provider Rocket Fiber and the Detroit Lions announced a 10-gig service upgrade to Ford Field’s Wi-Fi system. J The Oakland County Community Mental Health Authority announced it will be renamed Oakland Community Health Network in May. The agency is preparing to move in August from its 22,000-square-foot building in Auburn Hills to a 141,000-square-foot facility in Troy. J Detroit-based Huron Capital Partners LLC said its fire detection and security services company, Sciens Building Solutions, acquired Jacksonville, Fla.-based W.W. Gay Fire & Integrated Systems Inc. J Singapore- and San Jose, Calif.-based software and electronics system manufacturer Flex Ltd. is buying Troy-based automotive supplier AGM Automotive LLC. J Troy-based Continental Services announced it has received funding from Boston-based private equity investor New Heritage Capital LLC, which targets founder-owned businesses and backed the food management company through its Private

IPO solution. J Ann Arbor-based Clinc Inc., an artificial-intelligence startup that built Finie, a Siri-like voice-controlled app for banking, announced it has raised a funding round of $6.3 million. The current round was led by Drive Capital of Columbus, Ohio. J Live Cycle Delight, a fitness center to offer classes in cycling, yoga and weight training, is slated to open next month in Detroit’s West Village. J All three Papa Vino’s Italian Kitchen locations in metro Detroit closed after their 20-year leases expired around the same time. Indiana-based owner Quality Dining Inc. shuttered the locations in Northville, Troy and Pontiac. J Grosse Pointe nonprofit Wolverine Human Services is turning unused space at its John S. Vitale Community Center on Detroit’s east side into co-working space dubbed “The Den” to support nonprofit startups. An April 1 opening is slated.

OTHER NEWS

J In his State of the City address, Detroit Mayor Mike Duggan vowed that new practices put in place in the city’s troubled demolition program will allow contractors to tear down 10,000 blighted homes over the next two years. J State Sen. Coleman Young II announced plans to wage a campaign for mayor of Detroit portraying himself as the populist candidate taking on an establishment figurehead. He is the son of Detroit’s longest-serving mayor, Coleman A. Young. J Former President George W. Bush lauded friend and former baseball rival Mike Ilitch during an invitation-only celebration of Ilitch’s life at the Fox Theatre. Ilitch, owner of the Detroit Tigers and Red Wings and Little Caesars founder, died Feb. 10 at age 87. J Bill Ford, executive chairman of Ford Motor Co., will retire as volunteer chairman of the Detroit Economic Club in July, the DEC announced. DTE Energy Co. Chairman and CEO Gerry Anderson will replace Ford.

OBITUARIES

J Richard “Dick” Huvaere, longtime owner of Richmond auto dealership Dick Huvaere’s Richmond, died Feb. 17. He was 72. J Harry Lomason II, former president of Douglas & Lomason Co., died Feb. 12. He was 82.

The nonprofit Guest House has

GUEST HOUSE

launched a three-year, $2 million renovation of the William E. Scripps Mansion on its Lake Orion campus, with initial work largely in plaster repair. The project is slated to be complete by 2020.

RUMBLINGS

SHOP ARCHITECTS

The average office floor size in the proposed redevelopment of the J.L. Hudson’s department store site is nearly 70,000 square feet, making it one of the largest in and around downtown.

Hudson’s site project could mean steeper rents If Detroit’s tallest building rises 734 feet into the air, downtown office rental rates are likely to rise as well for certain high-end buildings. Last week, mortgage and downtown real estate titan Dan Gilbert released plans for a new building on the site of the former J.L. Hudson's department store. About 25 percent of the project’s total 1.2 million square feet is office space incorporated in the top four floors of a nine-story base. To be economically viable, Gilbert would likely have to charge office tenants at least $35 per square foot, with some experts saying even more than $40, depending on what sort of incentives the $775 million project receives. That would give wiggle room for some Class A office building own-

ers to bump their rents slightly with the argument that they remain cheaper than the Hudson’s project. “It might inspire (someone) to say $28 just went to $31,” said AJ Weiner, managing director in the Royal Oak office of JLL. Whitney Eichinger, director of communications for Gilbert’s Bedrock LLC, said rates have not yet been determined. According to a report from the local offices of Newmark Grubb Knight Frank, the average asking rent for Class A space downtown is $23.71 per square foot. Gilbert told Crain's in November that Bedrock is quoting $27 per square foot. Still, he says, his office buildings are virtually 100 percent leased.

Pewabic looks to expand studio to increase capacity Pewabic is planning an expansion of its historic building in Detroit to increase its capacity to make tile and other items amid rising demand from public projects, home renovations and retail customers. The historic pottery nonprofit estimates the 2,500-square-foot addition to its tile studio at 10125 East Jefferson Ave. will cost about $1 million. A $70,000 grant through the Michigan Council for Arts and Cultural Affairs last fall provided the seeds for a campaign to fund the project. Once Pewabic has raised about $350,000, ideally, this summer, it plans to break ground on the expansion, Executive Director Steve McBride said. The hope is to complete the project sometime in 2018. Pewabic is working with Inform Studio in Northville on the final designs for the new expansion, which will extend the historic building’s

northeast corner and run adjacent to Hurlbut Street. Last year, Pewabic invested $500,000 in capital improvements to add a production kiln for retail and architectural tile and three new kilns for its education programs and update its education courtyard and outdoor kiln area for adult education programs. It ended the year with a $400,000 surplus, on a budget of just over $3.6 million for fiscal 2016 ended Sept. 30, McBride said. It’s operating this year on a $3.7 million budget, with about twothirds of its revenue coming from the sale of tile and vessels. Another 25 percent comes through fundraising, and about 10 percent is from fees paid for its education programs. “We’ve seen a big increase (in demand) both for our giftware and our architectural tile. (But) we’ve been limited in our ability to meet the growing demand,” McBride said.

T:10.875” S:10.25”

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