Crain's Detroit Business, March 13, 2017 issue by Crain's Detroit Business

MARCH 13 - 19, 2017

Power outage primer

Second stage: family business

The business costs of power failures, Page 3

When and how to look outside the family for leadership, Page 18

Management

Manufacturing

Williams Int’l in talks for major Pontiac move

Aircraft engine maker considering former film site By Kirk Pinho kpinho@crain.com

A deal for property bigger than the Pontiac Silverdome site is in the works that could bring a large defense contractor to the Oakland County seat. While nothing has been finalized, Commerce Township-based Williams International Co. LLC is getting close to bringing potentially

hundreds of jobs to the Pontiac site where “Batman vs. Superman” was filmed during the days of Michigan’s generous film incentives before such work fizzled. As currently planned, Williams International, which develops and builds small gas turbine engines for cruise missiles, planes and drones, would buy more than 550,000 square feet of space and 120 acres of adja-

cent land that would be developed into a new manufacturing plant, according to multiple sources familiar with the talks who requested anonymity. Williams International did not respond to multiple requests for comment. Two sources said the company is also looking at other states — Alabama and Utah, where the company

has a production facility in Ogden — as possible locations. In 2003, Crain’s reported that the company opened a plant in Huntsville, Ala., the previous year. The sources said a vacant 368,000-square-foot office building, the 185,000-square-foot Michigan Motion Picture Studios LLC movie studio building and the site of a demolished General Motors trucking plant would be sold to Williams. SEE WILLIAMS, PAGE 28

SPECIAL REPORT: CRAIN’S MICHIGAN BUSINESS

Full steam ahead

usinesses are growing in the Blue Water region, the craft beer is brewing, and the pace of development continues to accelerate. Through it all, philanthropists, business owners, educators, and real estate developers are collaborating in innovative ways to build competitive talent pipelines, attract investors to new ventures, and invigorate downtown life. Read about the investment firm that chose to locate its $19 million fund in St. Clair instead of Chicago, the brewery that’s planning a $5 million, 10,000-beer-barrel expansion, a “reverse scholarship” that pays people to relocate to the area, and more in our Crain's Michigan Business special report, Page 10

PHOTO COURTESY ST. CLAIR COUNTY ECONOMIC DEVELOPMENT ALLIANCE

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Rock Connections to add 500 workers by year’s end

NEWSPAPER

Gilbert’s call center business continues to grow, Page 3

EMS story reveals Duggan playbook By Chad Livengood clivengood@crain.com

Quicken Loans founder Dan Gilbert, Detroit’s single largest job-provider and downtown landlord, recently asked Mayor Mike Duggan whether he’s always been a handson CEO. The mayor, who is seeking re-election, welcomed the softball question. Yes, he replied, of course. Mike Duggan: In the joint ap- Data focus moved pearance be- needle on EMS. fore a friendly crowd of Gilbert employees, Duggan told a story that he doesn’t normally tell in public that attempted to burnish his own image as a boss who demands — and gets — results. It was a rare glimpse into a mayoral management style that has a relentless focus on measurable data — and no excuses — by a leader with deep experience both in and out of government. “What you find in government is it usually doesn’t work very well,” said Duggan, a former Detroit Medical Center CEO. “We agree with that,” Gilbert replied. “And it doesn’t execute details very well,” Duggan said. “So things like the ambulance not showing up for a half hour was because nobody hired the EMTs, nobody repaired the ambulances — it was a whole lot of details. So I had to build a culture in the city of people committed to managing the details.” Duggan revealed at a March 1 meeting of 300 executives from Gilbert’s family of companies that he demoted Emergency Medical Services Superintendent Sean Larkins in August 2014 after Larkins gave “excuses” about why average EMS response times were stuck at 12 minutes. SEE DUGGAN, PAGE 28

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 1 3 , 2 0 1 7

MICHIGAN BRIEFS State Commission: Consider abolishing Board of Education A commission convened to offer reforms to Michigan’s troubled education system recommends a major shift in oversight power to the governor's office — and the possible abolition of the State Board of Education. The report by Michigan’s 21st Century Education Commission, released Friday, forwards two proposals that would grant the governor authority to appoint board of education members, while a third proposal would have the governor appoint the state superintendent and “abolish” the SBE. Currently, the eight-member board is elected directly by statewide vote. “This approach recognizes that the governor is in charge of education and the public has clear accountability measures if they are not pleased with the outcomes,” the report states. The highly anticipated report also appears to offer support for the continued use of a state assessment that is aligned with the Common Core state standards. But commissioners could not reach a policy consensus on two other divisive issues in state public education — Michigan’s expansive char-

ter school landscape, and the state’s generous schools-of-choice law, under which more than 120,000 students attend a public school outside of district boundaries. The 25-member commission, created by Gov. Rick Snyder early last year, was charged with recommending long-term, course-altering changes to the state’s floundering K-12 education system. Michigan public schools have slid into the bottom tier of states nationally over the past decade despite frequent efforts at reform. Adding more urgency to the challenge are projections showing that the next decade is likely to produce a serious shortage of college graduates or certificate holders to fill the skilledjob openings of employers in the state. The 146-page report proposes a series of other reforms that would cost upwards of $2 billion more a year if fully funded. Among recommended reforms was more funding for at-risk students in high-poverty schools, a strategy the study estimates could cost anywhere from $110 million to $900 million a year. The report also proposed better teacher preparation, with heightened certification requirements and mandated year-long residency training as part of the fouryear college teaching degree.

INSIDE

Michigan is turning to the public for new ideas and plans to offer a prize to whoever comes up with a way to stop Asian carp from entering the Great Lakes.

Michigan to offer prize in Asian carp fight Faced with the threat that Asian carp could enter the Great Lakes, Michigan is turning to the public for new ideas and plans to offer a prize to whoever comes up with a way to stop the voracious fish, The Associated Press reported. Michigan’s global search challenge comes after the U.S. government and others have spent hundreds of millions searching for a

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solution to stop the carp from entering the world’s largest freshwater system. If they aren’t stopped, officials fear the aggressive fish will crowd out prize native fish and hamper recreational boating in large sections of the lakes, which stretch from Minnesota, Wisconsin and Michigan in the west to New York and Pennsylvania in the east and from Ontario, Canada, in the north to Illinois, Indiana and Ohio in the south.

DEALS & DETAILS

Report: Incentives not used effectively

nior economist Timothy Bartik, estimates that incentives offered by state and local governments across the U.S. totaled $45 billion in 2015 — three times higher than in 1990. Yet many states, Michigan included, don’t effectively target their incentives programs at industries that pay the highest wages or spend the most on research and development. In Michigan, incentive costs grew 16 percent from 1990 to 2015, even as the state scaled back its incentives programs shortly after Gov. Rick Snyder took office in 2011. “We have a long way to go to improve incentives,” Bartik told reporters on a conference call ahead of the report’s release.

Michigan had higher business incentive costs in 2015 than some neighboring states, even after the state jettisoned many of the tax incentives it once offered, new research shows. Incentive costs in Michigan, as a percentage of the state’s economy, were 49 percent higher than in Ohio, 35 percent higher than in Illinois and 27 percent higher than in Wisconsin, according to a report out today from the W.E. Upjohn Institute for Employment Research in Kalamazoo. Of neighboring states surveyed, only Indiana had higher incentive costs. The report, written by Upjohn se-

KEITH CRAIN

MARY KRAMER

OPINION

PEOPLE

RON FOURNIER

RUMBLINGS

WEEK ON THE WEB

COMPANY INDEX: SEE PAGE 29

ENERGIZING MICHIGAN’S

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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 // M A R C H 1 3 , 2 0 1 7

LISA SAWYER/CRAIN’S DETROIT BUSINESS

Employment

Nonprofits

Microloans give women entrepreneurs a boost By Sherri Welch swelch@crain.com

LARRY PEPLIN

Shevawn Cage works at the Rock Connections call center in Detroit. The company has doubled its workforce since moving into the building next to Ford Field and I-375 last May.

Rock Connections to add 500 workers this year By Chad Livengood clivengood@crain.com

A call center company spun off from Quicken Loans' telephone-focused mortgage sales operation is planning to add 500 employees by year's end and looking for additional office space in downtown Detroit. Rock Connections, a five-year-old call center and part of Quicken Loans founder Dan Gilbert's family of companies, has reached capacity with 800 employees in its building at

1900 Saint Antoine next to Ford Field, said Victor You, CEO of Rock Connections. The fast growth adds teeth to Gilbert’s observation that call centers could be a growth industry for Detroit and create a “point of entry” to jobs for residents. And the company is adding customers outside Gilbert’s own vast array of corporate holdings. “We’ve outgrown that building, and now we’re looking for new office

space downtown, or additional I should say,” You said in an interview with Crain's. The company has doubled its workforce since moving into the building next to Ford Field and I-375 last May. Rock Connections is hiring 50 new employees each month, You said. “Our goal is to get to 1,300 team members by the end of this year," You said. SEE ROCK, PAGE 29

Microloans and a pitch competition launched by the Michigan Women’s Foundation over the past few years to support women entrepreneurs are quietly helping to create jobs. The foundation is among a growing number of groups making small, high-risk loans of under $50,000 to entrepreneurs that banks won’t touch. The loans are helping people like Jess Sanchez McClary, founder of McClary Bros. drinking vinegars, get an early start they might not otherwise have had because their credit isn’t good enough, they have little or no collateral and often haven’t produced any revenue yet. With a $40,000 loan from the foundation made in 2015, McClary was able to purchase a semi-automatic

MUST READS OF THE WEEK Taking aim at tumors

Ann Arbor’s HistoSonics gains new leadership, funding, Page 4

bottle-labeling machine and to make a part-time employee full-time. Perhaps more importantly, the loan boosted her confidence, McClary said, and helped her establish business credit. It was the first loan she secured for her startup, then three years old. “We went from having to have cash up front to being able to get net terms and getting 30 or 45 days to pay for materials,” McClary said. That made a huge difference in the company’s cash flow and set it on a path for growth. McClary Bros. is one of 85 companies that have benefited from $1.23 million in microloans made by the foundation since mid-2014 and/or $335,000 in prize money awarded through its business plan pitch competition over the past five years. SEE LOANS, PAGE 29

Retail’s real impact Ron Fournier: A trip to two stores shows how businesses’ impact echoes through decades, Page 8

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 1 3 , 2 0 1 7

HistoSonics gains new leadership, funding, turns focus to oncology By Tom Henderson thenderson@crain.com

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HistoSonics Inc., an Ann Arbor-based maker of ultrasonic medical devices aimed at shrinking or destroying cancer tumors, has a new CEO, a new chief medical officer and a new $8.2 million round of venture-capital funding to pay for upcoming human trials. Mike Blue, a veteran executive at oncology-device companies, has been recruited to the University of Michigan spinoff from Minneapolis, where he had been vice president of sales for NeuWave Medical Inc., a company that made minimally invasive devices that used microwaves to shrink soft-tissue lesions. It was sold last year to a unit of Johnson & Johnson. Previously, Blue had been vice president of sales in the interventional lung solutions division of Covidien and was a regional sales manager for the interventional oncology business at Boston Scientific. “I’ve spent 17 years in interventional oncology, and HistoSonics affords me the chance to continue my career in oncology,” said Blue, who replaced Christine Gibbons as president and CEO. She remains with the company as COO. Blue said the $8.2 million in funding was the first close on HistoSonics’ Series B round, with a second and final close of $5 million scheduled for early in the second quarter. “We’ve got a real opportunity to develop a new platform for cancer care,” he said. Joining him at HistoSonics is Fred Lee, M.D., who had been a co-founder and chief medical officer at NeuWave, a portfolio company of Madison, Wis.based Venture Investors LLC, which invested $1.55 million of the $8.2 million for HistoSonics and previously led the $14.2 million Series A round the company raised after it was spun off from UM in 2009. Joining Venture Investors in this funding round are the Grand Angels of Grand Rapids; the University of Michigan’s Wolverine Venture Fund; The MINTS (Michigan Investment in New Technology Startups) program at UM; Hatteras Venture Partners of Durham, N.C.; Fletcher Spaght Ventures of Boston; TGap Ventures of Kalamazoo; and Early Stage Partners of Cleveland. Originally, HistoSonics, which employs 12, planned to focus on noninvasively shrinking swollen prostates as well as targeting cancerous tumors but will focus, now, on oncology. “Based on a growing body of preclinical evidence and changing market dynamics, the decision was made to focus all efforts on cancer and, in the short term, specifically liver cancer,” said Blue. Measured by five-year survival rates, liver cancer is the second-deadliest cancer and not very responsive to chemotherapy and radiation. Its fiveyear survival rate is 17 percent, compared with 7 percent for pancreatic cancer, the deadliest kind, according to the American Cancer Society. “Pancreatic cancer will be our sec-

TOM HENDERSON

Mike Blue, a veteran executive at oncology-device companies, has been recruited as president and CEO of HistoSonics. ond target after liver cancer,” Blue said. “I’m extremely enthusiastic we were able to recruit Mike Blue as our CEO and Dr. Fred Lee as our senior medical adviser,” said Jim Adox, who runs the Ann Arbor office of Venture Investors. “I know Mike and Fred well and have first-hand confidence in their capabilities.” Lee will remain in Wisconsin, where he runs an animal lab at the University of Wisconsin, where he is doing pre-clinical work for HistoSonics on 30 pigs. He also has a medical

practice treating cancer patients. Lee will help oversee a 10-patient study that is scheduled to be done in the third quarter this year by a surgeon in Spain named Dr. Joan VidalJove, a surgical oncologist. Patients will be reviewed two months after their surgery to monitor healing and tumor shrinkage. “We’ll know a lot more about the regulatory pathway after we finish this confirmation study,” said Blue. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 1 3 , 2 0 1 7

Autobooks closes $5.5 million venture capital round By Tom Henderson thenderson@crain.com

Troy-based Autobooks LLC, which won the runner-up prize of $100,000 at last November’s Accelerate Michigan Innovation event in Detroit, has closed on a Series A round of venture capital of $5.5 million. Previously, the company raised a seed round of $2 million. Autobooks is a startup that offers bundled payment and accounting software to small companies, which is made available to them through their banks or credit unions. Autobooks licenses the technology to the financial institutions, which then makes a profit by offering it to their customers. “Banks like that because they are looking to increase their non-interest revenue,” said Autobooks CEO Steve Robert. Leading the round was Pittsburgh-based Draper Triangle Ventures. Joining the round as a strategic investor was the Lansing-based Michigan Credit Union League, which will help Autobooks add revenue by marketing it to the league’s members throughout Michigan as well as to 3,800 credit unions nationally to which the league provides services. Joining the round was Detroit Venture Partners, a venture-capital firm affiliated with Dan Gilbert; and Baird Capital of Chicago. Autobooks was founded by the founders of Troy-based Billhighway, a software company that provided integrated payment processing for associations and large not-for-profit organizations. It was bought by Naperville, Ill.-based BluePay in February 2016. “We like Autobooks because it has an experienced team with a previous high-value exit, when they sold Billhighway to BluePay,” said Jonathan Murray, who manages Draper’s Ann Arbor office. “The first wave of fintech [financial technology] companies focused on disintermediating banks from their customers, but they found that to be hard to do. The current generation is finding it productive to partner with banks, and that is what Autobooks is doing,” he said. Billhighways’ three co-founders launched Autobooks in 2015. Vince Thomas is still the CEO at Billhighway. The other two left that company to run Autobooks, Robert as CEO, and Aaron Schmid as COO. The Michigan Credit Union League invested through the CU Solutions Group, a Livonia-based subsidiary that offers marketing and technology assistance to some 3,600 credit unions and 80 million members in 48 states. “CUSG invested in Autobooks because credit unions want to help their small business members with tools that help them be successful, not just provide them with capital to grow their businesses,” said Dave Adams, the MCUL’s president and CEO. “We’re excited to see what this venture will produce.” Robert said the company, which has 10 employees and hopes to add 10 more within a year, hopes to move

to Detroit soon. “It’s something the team feels pretty strongly about,” he said. One of the newest employees is Henry Balanon, who became chief product officer in October. Previously, he co-founded Detroit Labs LLC, a portfolio company of Detroit Venture Partners that does custom app development for corporations, and later co-founded Stratos Inc. of Ann Arbor. In October, Balanon was named as one of 50 people to know in IT in Michigan. In 2012, Robert was named by Crain’s as chief information officer of the year at a company with revenue

between $10 million and $100 million a year. In its presentation at Accelerate Michigan Innovation, Autobooks projected revenue of $50,000 last year, $750,000 this year, $4 million in 2018, $20 million in 2019 and $100 million in 2020. Last May, the company was one of 35 Midwest companies chosen to make pitches for capital at the annual Michigan Growth Capital Symposium, which brings in hundreds of would-be investors from around the country. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

TOM HENDERSON

Steve Robert, (left) CEO; Henry Balanon, chief product officer; and Aaron Schmid, COO, of Autobooks LLC.

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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 // M A R C H 1 3 , 2 0 1 7

Legislators question lack of health plan involvement in report By Jay Greene jgreene@crain.com

Some Michigan lawmakers say they will push back on an expected recommendation by a state agency that would leave managed-care companies out of a push to integrate Medicaid physical and mental health care funding. The Michigan Department of Health and Human Services is putting the final touches on a report, ordered by the state Legislature last year, that would seek to better combine delivery of physical and mental health care. The report is expect-

ed by Wednesday. Rep. Edward “Ned” Canfield, R-Sebewaing; Sen. Mike Shirkey, R-Clarklake; and Sen. Jim Marleau, R-Lake Orion, said they believe improving the $2.4 billion behavioral health Medicaid system should also include recommendations for pilot studies on an integrated financing approach with managed care, as Gov. Rick Snyder proposed early last year. Medicaid behavioral health is now funded through and managed by regional public mental health authorities. At issue in the current debate is how much of a role managed-care

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companies, which now manage physical Medicaid care, should have in the behavioral health system. Regardless of whether the MDHHS report contains the recommendations, Canfield and Marleau, who both chair subcommittees on MDHHS appropriations in the House and Senate, respectively, told Crain's they believe most legislators will consider all options to improve quality, enhance care coordination and communication, and to reduce clinical and administrative costs. Legislative hearings are expected to begin soon on the report by what is known as Section 298 Facilitation Workgroup. “This is an important topic for many legislators,” said Canfield, a family physician in Michigan’s Thumb. “Mental health is big in every county, and it is a priority for the speaker,” Tom Leonard, R-DeWitt. Canfield said Edward Canfield: discussions he An important topic has had with other legislators for many. — several of whom, including Leonard, declined to talk on the record with Crain's about the upcoming mental health report — have made it clear to him that many want to consider health plan pilot projects and other ideas as they go about improving and reforming the Medicaid behavioral and physical health financing and deliv-

ery systems. “I think we will get recommendations from both” the department and from the Section 298 Workgroup, said Canfield, chair of the MDHHS appropriations subcommittee. “The recommendations from the workgroup, from what I have seen, is a wish list, an idealized plan of what a perfect mental health program would look like. I don’t know (the state has) the financial wherewithal for that.” Shirkey, who chairs the Senate health policy committee, said he also wants an integrated system to improve clinical outcomes and deliver more services to people than the current system. He said he is open to health plans managing the Medicaid-funded system. “We need to look at the amount of money we spend and how it is managed on this physical health and behavioral health system that is not integrated,” Shirkey Mike Shirkey: said. “I want imWants an integrated system. provement, not just in costs but in outcomes. We spend so much money now.”

Controversial background In February 2016, Gov. Rick Snyder’s proposed 2017 state budget included a provision that could have allowed the state’s health plans to administer $2.4 billion in Medicaid behavioral health funding, starting Oct. 1. Currently, 10 prepaid inpatient health plans, which are operated by the public mental health system, manage the funding and contract with mental health agencies and providers. Mental health advocates strenuously objected to HMOs taking over the entire system, and the issue has been contentious the past 12 months between the two sides and the state. After meeting more than a dozen times, the Section 298 Workgroup issued a 91-page draft report to the state Legislature in January. Bob Sheehan, CEO of the Michigan Association of Mental Health Boards, was happy with the outcome and asked the Legislature to adopt the workgroup’s recommendations in their entirety. He said the report recommends good ideas to improve services to mental and behavioral health patients and will ultimately lead to greater coordination of services. “This report is powerful because it was developed using an inclusive stakeholder-focused development process that reflects a person-centered approach to health care,” Sheehan said in an email to Crain’s. “It underscores, as a fundamental principle, the core role of Michigan’s public mental health system in managing and providing behavioral health and intellectual/developmental disability services, while setting the stage for continued innovation.”

However, Dominik Pallone, executive director of the Michigan Association of Health Plans, said his HMO members were so unhappy with the Section 298 report that the association decided to publish a “minority report” last month that outlines their objections to the report and proposals for integration. “The workgroup recommendations do very little, if anything, to improve system integration,” Pallone said. “They may be helpful in improving the behavioral health system, but there is little in the proposals designed at making changes with the intent of improving system and service integration.” Pallone said he is disappointed that the workgroup report so far does not include and evaluate any health plan “carve-in” approaches involving behavioral and physical health. A carve-in means that health plans would incorporate behavioral health services into their contracts. PIHPs also could incorporate physical health services into their contracts. “So far the general feedback we have received from legislators is they expected the department to come back with recommendations for financing models and policies that improve integration,” Pallone said. “However, the boilerplate puts the responsibility on the workgroup to consider pilot programs, not the department.” Pallone said he believes many lawmakers were hoping that the department and workgroup would bring a solution back that showed a path toward improving integration. But Sheehan is adamant that HMO pilot proposals should not be allowed because the fundamental principles of the workgroup reform concluded that the behavioral health system should remain a public system. “(That) would eliminate, from consideration, any HMO proposal that would have a private HMO (for-profit or non-profit) managing the Medicaid behavioral health benefit,” Sheehan said. In a statement, MDHHS spokeswoman Angela Minicuci said the department believes it has followed the intent of the Legislature's revised boilerplate by allowing the Section 298 Workgroup to make its recommendations in the report. The workgroup overwhelmingly is composed of advocates of improving the current public mental health system. Minicuci said the workgroup report to the Legislature does not include integrated financing models either proposed by the health plans or any PIHP, the 10 regional public bodies that receive and manage the Medicaid behavioral health funding. “All of the financing model categories are being summarized by the workgroup except for the Medicaid health plan or prepaid inpatient health plan payer integration category,” Minicuci said. “The majority of the workgroup agreed that this category of proposals did not align with the principles of the work done by the workgroup so far.” Jay Greene: (313) 446-0325, Twitter: @jaybgreene

C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // M A R C H 1 3 , 2 0 1 7

Essen Bioscience sold to German pharma equipment supplier for $320M

Arborland Center in Ann Arbor sold last week for $102 million to New York City-based Brixmor Property Group Inc.

By Tyler Clifford tclifford@crain.com

BRIXMOR PROPERTY GROUP INC.

Ann Arbor retail center sells for $102 million By Kirk Pinho kpinho@crain.com

A 404,000-square-foot Ann Arbor retail center has sold for $102 million to New York City-based Brixmor Property Group Inc. Arborland Centerâ&#x20AC;&#x2122;s previous owner was Stamford, Conn.-based real estate investment trust AmCap Inc. Key tenants of the shopping center at 3600 Washtenaw Ave. at I-94 are The Kroger Co., DSW Inc., Marshalls Inc., a Nordstrom Inc. Rack store, Starbucks Corp. and Ulta Salon, Cosmetics & Fragrance Inc., according to a news release. Brixmor (NYSE: BRX) owns three other Ann Arbor properties, the release stated. Mark Horgan, chief investment

officer for Brixmor, said the purchase brings its Michigan portfolio to 20 retail properties totaling just more than 4 million square feet. He said Brixmor also owns properties in Westland, Southfield, Redford Township, Sterling Heights and elsewhere around Detroit. â&#x20AC;&#x153;Our corporate strategy is that we seek to cluster investments in markets that we know well. Ann Arbor and Arborland fit that very well,â&#x20AC;? Horgan said. He said there are no immediate large-scale capital expenditure plans but things like parking lots and landscaping are expected to be improved. The deal, which amounts to $252.48 per square foot, brings Brix-

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morâ&#x20AC;&#x2122;s Ann Arbor portfolio to about 1 million square feet. Horgan said the property is about 96 percent occupied. According to a marketing brochure from Farmington Hills-based Landmark Commercial Real Estate Services Inc., which leased the property to tenants, the asking rent is $18 per square foot. Horgan said Brixmor will handle the majority of the tenant leasing as well as property management. Farmington Hills-based Friedman Integrated Real Estate Solutions LLC had the management contract. According to its website, Brixmorâ&#x20AC;&#x2122;s real estate portfolio has more than 500 properties totaling more than 86 million square feet.

Ann Arbor-based Essen BioScience Inc. will be acquired by a global pharmaceutical and laboratory equipment supplier for $320 million, the biotechnology company said. The acquisition, expected to close in the first quarter, will allow Germany-based Sartorius Group to expand its big data portfolio in bioanalytics, according to the news release. The company entered the bioanalytics field after it acquired IntelliCyt Corp. of New Mexico for $90 million in 2016. Essen was owned by Rye, N.Y.based private equity firm SFW Capital Partners, which acquired a strategic stake in the company in 2014 from co-founders Kirk Schroeder and Brad Neagle. They founded the company in 1999. â&#x20AC;&#x153;With the Essen real-time, live-cell analysis platform, we will add another key technology for advancing and accelerating drug discovery applications to our lab divisionsâ&#x20AC;&#x2122; portfolio,â&#x20AC;? Sartorius CEO Joachim Kreuzburg said. â&#x20AC;&#x153;This powerful technology offers important synergies with our IntelliCyt business. Going forward, Sartorius will be able to provide our customers the broadest and, we believe, the most innovative portfolio

â&#x20AC;&#x153;This powerful technology offers important synergies with our IntelliCyt business.â&#x20AC;? Joachim Kreuzburg, Sartorius

for cell analysis in the industry.â&#x20AC;? Essen reached double-digit growth over the past few years and expects 2017 sales to reach $60 million. The company employs about 150 people with sales operations in the United Kingdom and Japan. Essen manufactures and sells instruments, software, reagents and consumables that allow researchers to remotely image and measure cellular processes. â&#x20AC;&#x153;We are excited to become part of Sartorius as a â&#x20AC;&#x2DC;Center of Excellenceâ&#x20AC;&#x2122; and build an industry-leading cell analytics portfolio together with the IntelliCyt business,â&#x20AC;? Essen President and CEO Brett Williams said in a statement. â&#x20AC;&#x153;This is not only a great opportunity to build upon Essenâ&#x20AC;&#x2122;s market-leading position, but also to continue development and introduction of transformative solutions for life sciences.â&#x20AC;?

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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 // M A R C H 1 3 , 2 0 1 7

OPINION

Gimmickry Store closings bring back memories of lives touched is not policy A

he Snyder administration is offering up to $1 million to any member of the public who comes up with an idea for stopping the voracious Asian carp, which consumes the nutrients and habitats of native fish that are the centerpiece of the $7 billion Great Lakes sport fishing industry. We’ve got an idea: State and federal political leaders could do their jobs. Gov. Rick Snyder is conflating gimmickry with policy. Asian carp have been making their way north up the Mississippi River watershed and Illinois River for more than three decades. Most efforts have failed to contain or kill off the rapidly multiplying species. Most scientists and hydro-engineers have concluded the only way to stop the Asian carp from invading the Great Asian carp Lakes is by physically separating have been the Illinois watermaking their ways created over a way north up century ago. R e e n g i n e e r ing the Mississippi the Chicago-area River waterways used for watershed and freight and releasing storm water Illinois River and treated wastefor more than water is estimated cost several bilthree decades. to lions of dollars — a cost the federal government would likely have to absorb. Rather than rally his fellow Republicans in Lansing and Washington behind a real solution, Snyder is punting to the public. It’s not like the Great Lakes states are short on political clout these days. Donald Trump owes his presidency to voters in Ohio, Pennsylvania, Wisconsin and Michigan. His vice president, Mike Pence, is the former governor of Indiana. Trump’s chief of staff, Reince Priebus, is from Wisconsin, as is U.S. House Speaker Paul Ryan. These and other leaders need to come to grips with the true cost of stopping this fish from spoiling the recreational treasure and economic engine of the largest group of freshwater lakes in the world.

retail business is more than a bottom line. It’s a service and a comfort and a touchstone for its customers. A truly great business makes gut-level connections to the people and communities it serves. Seldom has this resonance been more apparent to metro Detroiters than with the imminent closing of two retail icons: The last link to Hudson’s at Eastland Center in Harper Woods and, in the west-side suburb of Garden City, the nation’s first Kmart. My mother grew up a mile or so from Eastland on the same block she raised her four children. My wife, Lori, grew up a few blocks from the original Kmart, which stretches most of a block on Ford Road, just west of Middle Belt. This is how I found myself on two separate Sundays shopping with the two of the most important women in my life. My mother and my wife helped me understand how a business can shape lives and echo through decades.

A mother’s memories “Right here,” mom said, planting her feet in front of an empty glass case at a desolate Macy’s in Eastland. “Right here is where I sold ties for Hudson’s.” For a moment, my 74-year-old mother is 16 again. The year is 1958: The mall just outside the northeast corner of Detroit opened a year ago, and young Florence Sharp has landed the job at Hudson’s through a Junior Achievement program at Denby High School in Detroit. “We had to wear dark skirts and white blouses.” Mom’s mind leaps forward five years, when Eastland is still an open-air mall and she sees my great-grandfather sitting on a bench outside Hudson’s at lunch time. He comes here every day to chat with his brother, his neighbors and strangers. “He loved visiting here.” Now it’s 1968 in mom’s head: Her 5-yearold son opens the door to Hudson’s for a stranger who happens to be former G. Mennen “Soapy” Williams. “That boy is going places,” Williams says, nodding at me, “because he already knows to open doors.” Mom beams. Five years later: She’s standing in a blocklong line outside Hudson’s to get her four young children immunizations at the mall. “Polio shots.” And now she’s back in the present, planted

RON FOURNIER Editor/Publisher

Ron Fournier is editor and publisher of Crain’s Detroit Business. Catch him and Crain’s Group Publisher Mary Kramer at 6:10 a.m. Mondays on the Paul W. Smith show on WJR AM 760.

RON FOURNIER

Pat and Mary Anne Burke of St. Clair Shores at the Macy’s at Eastland Mall.

in front of an empty glass case in a store that will close March 19, the Hudson’s turned Marshall Field’s turned Macy’s that meant so much to this blue-collar neighborhood. “This was a meeting place,” she said on a chilly Sunday in March. “This was a place we worked, and shopped and fell in love. A part of me is closing with the store.” Mary Anne Burke nodded her head. The 60-year-old St. Clair Shores resident was shopping at Macy’s with her husband, Pat, when I pulled her into our conversation. Hudson’s is where Burke came on her wedding day to get her hair done. It’s where she bought dresses for her two daughters’ weddings. Like my mom, Burke is still trying to replicate the recipe to Hudson’s famous Maurice Salad. “I’m here to say goodbye to Hudson’s,” she said. Call it Hudson’s, Marshall Field’s or Macy’s — this place is more than bricks and mortar to Burke. “It’s part of growing up. It’s part of my history.”

Attention Kmart shoppers We were greeted by half-empty shelves and a beige tile floor pocked with holes the side of car tires. “This is the original floor,” Lori gasped as we walked into her Kmart, which opened

three months before Lori was born in 1962. “It smells the same.” She pointed to the store’s southwest corner, where there used to be a lunch counter. “I always wanted to eat there, but my mother wouldn’t let me,” Lori said. “We couldn’t afford it.” She came from a middle-class family with priorities: Rather than buy snacks, Lori’s mother made sure her two daughters left Kmart with the latest Nancy Drew book. “I fell in love with reading here,” said Lori, who grew up to be a bookstore manager. I noticed an elderly couple pawing through sweatshirts and asked them if they had memories of this Kmart. “You bet,” said Frank Pongracz, 77, who lives nearby with his wife, Judith, 76. She nodded her head while folding a shirt. “They ought to have talked to the neighbors before closing,” Judith said. “I don’t think they care about us anymore,” Frank said. “They used to.” “I’m kind of concerned because for people like us from Garden City, we don’t have a lot of stores around,” said Judith. “We’re going to have to drive too far.” Lori frowned. “This is part of the neighborhood.” “We love it,” Judith replied. “It wasn’t just the prices and products. It was the atmosphere, that feeling that you were part of the community. For many people, this was the place you came to shop together.” Frank put his left hand around Judith and steered her toward their buggy, shaking my hand and saying goodbye. “I hope,” he paused. “I hope we can find another place.”

He is staying the course Judging from headlines, just about every politician recently elected to an office in Michigan inherited a mess of some sort. Wayne County Executive Warren Evans is no exception. When he took office, the county was a financial mess. He and his bright young team put their heads down and went to work trying to make some sense from the fiscal chaos and corruption that had plagued the county for decades. Last week, Evans gave his annual State of the County address. The

KEITH CRAIN Editor-in-chief

progress the county has made since taking office in January 2015 is quite remarkable. Certainly the challenge is not over. But it's an optimistic as-

sessment of the current situation. The elephant in the room is the unfinished jail on Gratiot Avenue, an eyesore standing at one of the major entryways to Detroit's downtown district. There is no easy solution. Dan Gilbert, who owns the Greektown Casino-Hotel behind the jail site, has made a substantial offer to move the jail and county courthouse to another site. Whether that offer holds up to county analysis remains to be seen, but this difficult decision will have to be made very shortly.

Meanwhile, much of the county's business seems to be on track and, most importantly, on budget. At a time when all government agencies are getting increased pressure to spend more money on all sorts of local entitlements, it's refreshing to see Evans' moderate approach that appears to be creating the unthinkable: a surplus. But spending pressure on government agencies is staggering. Infrastructure needs alone are intimidating. Wayne County has an impressive list of companies and

assets — two of the Big 3 automakers are headquartered within the county borders, along with two airports — and miles and miles of roads, water and sewerage lines, many of them needing to be rebuilt. There may be times when Evans may mumble to himself, asking why he ever ran for his job. But he has put together a fine team that has taken on the challenges. He is doing a good job in a tough environment. He is staying the course.

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 1 3 , 2 0 1 7

Michigan National innovator Stoddard’s saga offers some lessons for today Stanford “Bud” Stoddard died on Feb. 26 in Utah at the age of 86. For years, Stoddard was synonymous with Michigan National Bank — the bank he helped to build and his father, Howard Stoddard, founded. Then he was, in effect, kicked out of his own bank, though technically, he resigned in 1983 when accused of misapplying $700,000 in bank funds. He spent years thereafter suing regulators and his own bank in what can be described as a big hot mess for what was then Mi c h i g a n ’s fifth-largest bank — in an era when we HAD a lot of M i c h i gan-headquarStanford “Bud” Stoddard: Pushed tered banks. (In Crain’s 20th anthe envelope in niversary issue, banking. we listed the Stoddard v. Michigan National Corp. battle as one of the region’s 20 top business feuds.) Like his dad before him (the elder Stoddard introduced the first drive-up window service at a Michigan bank), Bud Stoddard was a pioneer. I think my first credit card was issued by Michigan National back in the 1970s — a card that was a predecessor to Visa. He was an early adopter of ATMs. And Michigan National was the first major Michigan bank to open on Saturdays. But he pushed the envelope. And was described by employees and colleagues as autocratic. Which sometimes happens, even in publicly traded companies, when the CEO is so closely aligned with the institution’s very DNA. One of the regulators’ accusations, as I recall, was that he used bank funds to share the cost of family members’ weddings. But Stoddard argued they were justified because, after all, the guests were also clients and customers. Another issue was putting a bank branch in a building in which he had a partial ownership interest. As former Michigan banking commissioner Patrick McQueen put it: “He did not understand the concept of ‘conflict of interest.’” Stoddard successfully appealed an initial conviction on wrongdoing. His battles went on for years, culminating in the late 1990s when he waged his last major battle against regulators who thwarted his attempt to start another bank. In 1996, Crain’s offered this opinion on its editorial page: That the Federal Deposit Insurance Corp seemed vindictive in its refusal to extend deposit insurance to Stoddard when he was trying to form that new bank — a bank that had the regulatory blessing of Michigan’s banking commissioner. So why bring it up now? Michigan National is a memory. Through mergers and acquisitions, it is somewhere within the banks Bank

MARY KRAMER Group Publisher

of America acquired in Michigan. But the Stoddard era recalls a time when Michigan had a handful of strong, locally domiciled banks — banks whose lenders could make decisions on loans. Banks

that had strong philanthropic connections to the community. Stoddard’s saga also reminds us that regulators can be vigorous when they want to be. Compare the pursuit against Stoddard by federal watchdogs to what happened after the financial meltdown that began in 2008. Some people have never recovered financially from that mess. Homes lost. Big banks lied. But last I checked, though fines were levied, only one banker — at a lower-tier investment bank in New York — ever went to jail. By contrast, never, in all the

years of point-counterpoint in Stoddard’s battles with the regulators, was it proven that any of his behavior put any depositors’ money at risk. Ditto for shareholders. Michigan National was an innovator because of the guy at the top. Bad behavior in the banking industry was partly responsible for that mortgage-related meltdown that began nearly 10 years ago. So Washington created new regulations — Dodd-Frank — to protect consumers. But those protections and layers of new complexities have also slowed the pace of new bank formations.

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

A Federal Reserve Bank white paper in 2014 reported that from 1990 until 2008, more than 2,000 new banks were formed. But from 2009 until 2013, only seven new banks were formed nationwide. In Michigan? There have been two, both in 2009: Grand River Bank in Grandville, southwest of Grand Rapids, and the Ann Arbor State Bank. Banks that lend to business — especially smaller community banks lending to small business — are essential to the economy. I bet Bud Stoddard knew that. Not sure how many people in Congress do.

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 1 3 , 2 0 1 7

CRAIN’S MICHIGAN BUSINESS: ST. CLAIR COUNTY

The Community Foundation of St. Clair County transformed a former strip mall plaza into a community gathering spot. COMMUNITY FOUNDATION OF ST. CLAIR

A partner and ally Michigan’s fastest-growing community foundation invests in St. Clair’s development More coverage inside: n War Water Brewery plans $5 million, 10,000-barrel expansion, Page 11 n Investment firm feels right at home in St. Clair County, Page 13 n St. Clair County bridges talent gap by forging connections with students, Page 14 n Business picks up for towing industry software service, Page 16

By Tom Henderson thenderson@crain.com

The Port Huron-based Community Foundation of St. Clair County has taken a proactive approach to community development, providing zero- or low-interest loans to both for-profit and nonprofit development projects and serving as an intermediary between entrepreneurs, wouldbe investors and city and township officials. Now it’s creating a $1 million pool of money to co-invest along with angel investors in promising startups in the area. “We’re just starting to get the word out on the fund,” said Randy Maiers, the foundation’s president and CEO since 2002. He said the fund will provide seed-stage capital of between $50,000 and $100,000, with further participation possible as companies grow. Maiers said the foundation’s active involvement in development is responsible for bringing in new donations and helping build its endowment. In 2016, the Johnson Center for Philanthropy at Grand Valley State University put the foundation’s growth for the five years ending in 2015 at 76 percent, the highest growth rate for any community foundation with at least $20 million in assets in Michigan. Since Maiers joined the foundation, its endowment has grown from $17 million to $65 million, a direct response to the nonprofit’s economic development activities. “Over the last four years, our total gifts received have ranged from a low of $4.3 million to a high of $7.9 million. Our community has accepted the community foundation as a partner and ally in the regional effort to grow prosperity and economic well-being,” he said. Maiers is particularly proud of a project the foundation funded in 2014 with the cooperation of the Downtown Development Authority

“The recession forced us to start thinking and stop relying on Lansing and Washington to come in and save us.” Randy Maiers, president and CEO, Community Foundation of St. Clair

of St. Clair, when he spent $750,000 to turn a parking lot and expanse of drab, crumbling concrete into a community gathering spot in front of the Riverview Plaza overlooking the St. Clair River. The plaza owners donated the area to the foundation, which now owns it. The redeveloped plaza has two fire pits, benches overlooking the water, grass in place of concrete and a skating rink in the winter. The plaza has hosted weddings, concerts and a beer-and-wine festival, and has helped spark economic development in the area. One example? A new craft brewer, War Water Brewery Inc., which became a tenant in the plaza after one of its co-founders, Kris Paul, heard about the foundation’s development plans there and called Maiers for details. Paul had been considering expanding his family’s Indiana-based brewery operations to St. Clair. (See related story, page 11). Maiers subsequently arranged a meeting between Paul, bankers, would-be investors and city officials about the prospective new brewery in town.

“Randy was very helpful, and that meeting helped convince us to expand here,” said Paul. Maiers said the Great Recession was the impetus for the foundation’s increased focus on actively promoting community development. “We realized our region needed to be more strategic,” said. “The recession forced us to start thinking and stop relying on Lansing and Washington to come in and save us.” The Riverview Plaza development was one example of the foundation’s willingness to own land as part of its mission. Another? Buying an abandoned bank branch in the heart of downtown Port Huron that had once belonged to the failed Citizens Bank. Today it’s the foundation’s headquarters. “We moved in a year ago,” said Maiers. “Our board made a statement: Let’s buy a vacant building and rehab it. Now, we love where we’re at. We believe in owning property if it promotes economic development.” The foundation also owns an art studio in Port Huron called Studio 1219 that it opened in 2005; it’s now the region’s largest public art center and gallery. And in 2011, the community foundation used waterfront property donated by philanthropist James C. Acheson and his wife Suzanne to create the Blue Water River Walk at the confluence of the St. Clair River and Black River. Maiers’ office window looks out across Military Street to a new condo and retail development on the Black River called the Black River Harbor Place that was developed by the Witt family, prominent area developers. Maiers said the foundation provided a loan of $50,000 to help finance the project. “It was contingent on them making the back of the project open to public access, so boaters and kayakers on the river could tie up,” he said. SEE GROWING, PAGE 12

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 1 3 , 2 0 1 7

SPECIAL REPORT: ST. CLAIR COUNTY

St. Clair’s War Water Brewery plans $5M, 10,000-barrel expansion Tom Henderson thenderson@crain.com

War Water Brewery Inc., one of Michigan’s newest craft breweries, is about to get much larger, thanks to a $5 million expansion plan that includes condos overlooking the St. Clair River, a restaurant, retail shops — and a lot more beer. The brewery was incorporated in December 2014 and started making and selling beer in July 2015 in 1,000 square feet in Riverview Plaza, a strip center in the heart of the small city of St. Clair. Plans are to boost annual production from 500 barrels a year to 10,000. War Water co-founder Kris Kris Paul: Expand- Paul credits the Port Hued operations in his old home town. ron-based Community Foundation of St. Clair County for a crucial introduction to city officials, local bankers and would-be investors in 2014, when he was looking to expand his family’s brewing business in Indiana to his old home town. At the time, the community foundation was spending $750,000 to

Five War Water brands are distributed throughout Michigan and Indiana. convert a parking lot and ugly concrete walkway in front of Riverview Plaza into a community courtyard that would eventually include outdoor firepits, a lawn, benches for watching freighters go by and an ice rink in the winter, and would be used for weddings, beer and wine festivals and concerts. Paul heard about that renovation and called Randy Maiers, the foundation’s president and CEO, to talk about his tentative plans for a brewery and tap room in St. Clair. At the subsequent meeting that Maiers helped convene, “We talked

KRIS PAUL

about why we should bring a brewery into St. Clair. It was clear that everyone in the meeting had done their homework. There were some early tweaks of community resistance to a brewery, but generally people were very receptive,” said Paul. And customers were receptive, too — so much so that Paul and his brother and partner, Kevin, have purchased the 50,000-square-foot central portion of the plaza for $500,000 in a deal that closed March 1. The central portion, unlike the rest of the plaza, is two stories high. Ac-

cording to Kris Paul, plans include tearing out the first-floor ceiling in the middle of that central portion, allowing for 22-foot ceilings for the brewery/pub and restaurant portion of the development. On the second floor, on either side of the open space, there will be a total of six condos facing the river. Retail plans for the first floor include a deli and what Kris Paul describes as “a glorified farmers’ market.” Architectural plans should be finished by April 1, with the brewery hitting its expanded capacity of 10,000 barrels a year by the fourth quarter. Kris Paul said he estimates the brewery expansion will cost about $2.5 million, the condo build-out about $1.5 million and the development of 10,000-12,000 square feet of retail space about $500,000. Paul, who is now 43, spent a few of his childhood years in St. Clair. “My brother and I were two Irish boys who were pulled out of Corktown in Detroit kicking and screaming in the late 1970s,” he said, referring to Kevin, who is 48. The family moved when the brothers’ parents opened a hair salon in St. Clair called Dennis and Susan’s. Coincidentally, the salon was in the very same 1,000 square feet in

Riverview Plaza the brewery now occupies. The city of St. Clair, just 3.6 square miles, had a population of 5,485 in 2010. War Water is an outgrowth of a pub called the Brockway Public House that the brothers and Kevin’s wife, Lainie, opened in 2005 in Carmel, Ind. Kevin and his wife owned a software company there called Blue Horseshoe Solutions. Kris Paul was a metal-processing engineer with RCO Engineering Inc. in Roseville. He quit in 2014 to work full time as a brewer. “Kevin and I were the dreamers. Lainie kept us grounded and focused and helped us create what today is a very successful Irish pub,” Paul said. Lainie died of breast cancer two years ago. In 2014, the Pauls got into the craft brewery business when they opened the Danny Boy Beer Works in the village of West Clay, an affluent suburb of Carmel. The 6,000-square-foot facility was quickly brewing at full capacity. Even before it was up and running, Kris was trying to convince Kevin to expand operations into their old hometown. SEE BREWERY, PAGE 12

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 1 3 , 2 0 1 7

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SPECIAL REPORT: ST. CLAIR COUNTY

BREWERY FROM PAGE 11

“It took me a year to convince my brother why he should invest in St. Clair,” Kris said. Maiers praised the Pauls for seeing other businesses in Riverview Plaza as partners and not competitors. For example, there is a Hungry Howie’s pizza a few storefronts away. Customers in the brewery can get on a tablet, order a pizza and have it delivered a few minutes later to their table. War Water currently offers a limited appetizer menu, including large soft pretzels, nachos and chili con queso. In warmer weather, customers are welcome to bring in food from food trucks parked nearby. The Pauls are the Class A shareholders in War Water. The meeting that Maiers organized helped generate what Kris described as a “fair amount of Class B shareholders” and lending support from traditional bankers. Maiers said his foundation is interested in investing in the expansion and renovation if more funding is needed. The brothers don’t have formal titles. Kevin handles brewing, taproom operations and distribution in Indiana. Kris runs brewing and distribution in Michigan. Kris’ wife, Andrea, a kindergarten teacher in Port Huron who is finishing work for a master brewer certificate, helps handle the financials. The War Water name grew out of reading Kris Paul did on the area’s history. He came across an article on the Internet about 60 years of warfare on the Great Lakes from 1754 to 1814, involving native Americans, colonists, the British and the French. “I thought, ‘Why not War Water?’” said Kris Paul. War Water brewed 100 barrels of beer the second half of 2015 and got to 500-barrel capacity last year. Five brands are distributed throughout Michigan and Indiana — Training Day, an American pale ale; Rock-nRolla, an imperial pale ale; Mac Daddy, a strong Scottish Ale; Miss Ginger Witte, a wheat beer; and Black IPA. All five come in cans and kegs. Gerry’s Distributing Co. distributes War Water beer to retailers in St. Clair County. Imperial Beverage Co. distributes to retailers in the rest of the state. Six large flatscreen TVs perch high on the wall above the bar that runs along one side of the front room of the brewery. Beneath them, on chalkboards, are the names and descriptions of other tap beers available only on-site, including Hand of God, Swing Oil and Danny Brau. War Water employs 16 part- and full-time employees now, and Kris expects to employ about 50 by the time all the renovation and expansion is finished. “Five years ago, I never thought we could have done this here. It’s very exciting, an honor and a privilege,” said Paul. Tom Henderson: 231-499-2817 Twitter: TomHenderson2

COMMUNITY FOUNDATION OF ST. CLAIR

The Blue Water River Walk runs for a mile along the St. Clair River waterfront.

GROWING FROM PAGE 10

“We have a focus on development that draws people downtown. We like projects that bring people downtown at nights and on weekends. We’re not going to finance a new office for an insurance company, for example,” he said. Another investment was a $90,000 loan last year to help Casey’s Pizza and Subs expand its kitchen. “Two retired school teachers own it. It’s on the south side of town, and it’s one of the hottest restaurants in Port Huron,” he said. The foundation’s most recent investment is $50,000 in the Inn at Water Street, a boutique hotel that broke ground in Marine City in October. It is

a 29,000-square-foot, $4.2 million project with 26 hotel rooms and four condominiums on the third and top floor. The Inn at Water Street is an example, said Maiers, of local municipalities and government authorities taking a more regional approach. “Marine City was not in competition with Port Huron,” he said. The project received a $642,000 Community Revitalization grant from the Michigan Economic Development Corp., $3,500 from the St. Clair County Brownfield Redevelopment Authority and a $167,000 loan and $249,000 grant from the Michigan Department of Environmental Quality. Proof that such cooperation works? “The last seven or eight years, this region has blossomed,” he said.

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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 // M A R C H 1 3 , 2 0 1 7

SPECIAL REPORT: ST. CLAIR COUNTY

Investment firm Otsi Keta Capital feels right at home in St. Clair By Tom Henderson thenderson@crain.com

Who needs to be based in Chicago when you can call St. Clair, Mich., home? That’s the philosophy of Otsi Keta Capital LLC, a boutique investment firm in St. Clair that relocated from Chicago to St. Clair in 2011. Despite Chicago’s reputation as the financial center of the Midwest, the firm finds natural advantages to doing business in St. Clair. It’s easier to find companies where traditional Wall Street investment firms aren’t looking. And it gives them the opportunity to invest in smaller companies that share their values. “St. Clair was always in the ultimate plan for our home base. I choose to live here with my family because of the way of life in St. Clair, the school system, and the proximity to one of the best bodies of water in North America. A wonderful place to raise a family,” said co-founder and managing partner Bill Schwarz. After starting their business in Chicago in 2010, a shift in policy helped spur their move back to Michigan.

“The rules governing our business were crystal clear for Illinois in 2010 and more gray in Michigan,” said Schwarz. But after Michigan streamlined rules governing investment firms, managing partner Fred Rollins and Schwarz moved their company to Port Huron, setting up shop in an office above a vacant storefront. They stayed in Port Huron for two and a half years, then rented office space in a stately old house on South Third Street in downtown St. Clair, two blocks from the St. Clair River. When the house came on the market in 2015, they bought it. Today, their two-person operation occupies the top floor. They rent the rest of it out. Schwarz, 48, grew up in St. Clair. He was still a student at Michigan State University when he bought a seat on the Winnipeg Commodity Exchange and began his trading career. Later he was a trader at Detroit-based Olde Discount Corp. and then with W.R. Hambrecht and Co. LLC in San Francisco. Rollins, 46, who grew up in nearby Algonac, was a management consultant before becoming a principal at the San Francisco invest-

ment banking firm of Swander, Pace and Co., focusing on mergers and acquisitions. Though they both worked in San Francisco, they didn’t meet until they had moved back to the Midwest and were introduced by a mutual friend. The recession was in full swing, and they thought it was a good time to carry out the adage “buy low, sell high.” “We wanted to invest in small companies because they had been the most hammered,” said Rollins. Rollins and Schwarz are more than general partners in their firm; they are investors, too. Their families have invested about 30 percent of the $19 million currently in their Otsi Keta Focus Fund LP, a narrowly-focused fund that targets smallcap publicly traded companies based in the Midwest, generally with an enterprise value of less than $2 billion. “We stand shoulder to shoulder with our investors,” said Rollins. The fund has about 30 limited partners, including high-net-worth individuals and family offices. Why focus on the Midwest? Roll-

TOM HENDERSON

Fred Rollins and Bill Schwarz, managing partners of Otsi Keta Capital LLC, have found advantages to doing business in St. Clair. ins and Schwarz say it is easier to scout undervalued companies here because there is limited coverage by traditional Wall Street analysts, and they like the traditional Midwest values often ingrained in management. “The Midwestern footprint has quite a few of these businesses. Why look further than your backyard?” said Schwarz. “Our Midwest focus aligns our investment strategy with our beliefs — hard work, self-reliance and time can equate to success. If you are willing to stay within your investable parameters and not grow for growth’s sake, you can have outsized returns.” “We think companies in the Mid-

west are overlooked. There are great opportunities out there,” said Rollins. One of their early investors was Paul Mitchell, who in January joined the U.S. House of Representatives as a Republican congressman from the 10th district. He was one of the early investors in Otsi Keta in 2011. Mitchell, who had recently got a cash windfall, liked Otsi Keta’s Midwest focus. The windfall came from the sale in 2010 of St. Clair-based Ross Education LLC by Detroit-based Huron Capital Partners LLC. Mitchell was a co-owner of Ross, a health care education company. SEE OTSI KETA, PAGE 17

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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 // M A R C H 1 3 , 2 0 1 7

SPECIAL REPORT: ST. CLAIR COUNTY

St. Clair County bridges talent gap by forging connections with students By Allison Torres Burtka Special to Crain’s Detroit Business

Businesses in St. Clair County are struggling to fill their open positions. Because the county’s economy is based on manufacturing, recruiting for manufacturing positions represents the biggest need, said Dan Casey, CEO of the St. Clair County Economic Development Alliance (EDA). “Across the state of Michigan, there’s a huge talent gap. It’s partially due to people retiring from the industry, and it’s also due to fact that a lot of young people just don’t seem to have a great interest in working in manufacturing.” To address this problem, several local organizations and companies have found ways to engage high school and college students. Among them: summer talent camps that EDA and the St. Clair County Regional Educational Service Agency (RESA, the county’s intermediate school district) run for students who have just graduated. Through the camps, which are focused primarily on manufacturing, graduates work full time for seven weeks, followed by a twoweek internship with area companies, concluding with a job fair. The camps are tailored to the compa-

ST. CLAIR COUNTY COMMUNITY COLLEGE

Students receive hands-on training in the manufacturing trades at St. Clair County Community College. Local employers are trying new ways to bridge the skills gap and fill jobs. nies’ needs — the EDA surveys manufacturers to identify their hiring needs in certain areas. For the

past two years, the greatest need has been computer numerical control (CNC) machining, Casey said.

The county’s most-needed skill sets also include engineering, welding, and quality control, as

well as computer programming, Casey said. Demand is also high for workers in the construction trades, such as bricklayers, carpenters, pipefitters, and electricians. “We focus on trying to connect young people to careers,” Casey said. RESA, EDA, and other educational partners have developed a countywide career and college readiness system that is being implemented in the county’s seven school districts. The program is supported by career counselors who connect students with job providers. The talent gap seems to have worsened in recent years. “I think it’s harder for employers to match up skills they need with the talent available,” said John Bierbusse, executive director of the Macomb/St. Clair Workforce Development Board, which provides training that will “upscale individuals who are not quite prepared for the labor market.” Apprenticeship programs have withered in the last 30 or 40 years, tracking the decline in organized labor, Bierbusse said. To help fill the gap, the development board is working closely with community colleges and training providers. SEE SKILLS, PAGE 15

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SPECIAL REPORT: ST. CLAIR COUNTY

SKILLS FROM PAGE 14

Employers welcome students Some employers are connecting with high school and college students directly. A Port Huron company that makes clutch return spring packs, P.J. Wallbank Springs Inc., has partnered with colleges to develop a rotational program that allows students to learn how the company operates — and apply what they’re learning in school. “We accommodate a student’s schedule,” said Mary Gilbert, the company’s human resources manager. Students work either part time while taking classes or full time during school breaks in a program that’s similar to an apprenticeship program. “Students rotate among the company’s different groups to learn the whole operation, and the trainers share their knowledge with new people,” Gilbert said. PTM Corporation in Fair Haven has teamed up with RESA to bring in high school juniors and seniors for a two-year program that teaches them manufacturing and some skilled trades. It’s not a formalized program, but it gives high school students skills and helps make them employable, said Donna Russell-Kuhr, president

and CEO of the company, which produces metal stampings. The program lets students see if they want to pursue a career in manufacturing. “It’s an avenue for them to try,” she said. It gives them “a leg up on most people who don’t know anything about manufacturing.” After their two years, students walk away with skills such as blueprint reading and some engineering, and then they can pursue a more specialized area at the community college, she said. “We’re teaching them a trade, and in four to six years, they will have marketable skills, they will be able to provide for a family, and they will be able to be productive citizens,” Russell-Kuhr said. Russell-Kuhr lauded the collaboration among the community college, RESA, and the EDA, which has allowed the private and public sectors to “put our words and ideas into action and see things getting done,” she said. In St. Clair County, “we have a ‘we’re going to make things happen’ attitude.” To retain good employees, it’s important for companies to provide jobs that allow for a good quality of life, Russell-Kuhr said, noting that her last few hires came to the company for that reason. Gilbert agreed. “You need the right environment, development opportunities, benefits, and flexibility to keep

people,” she said, adding that a company’s involvement in the community figures into that. “Potential candidates want to see that you’re not only building your company but also helping your community” through supporting charities and sponsoring community events, for example.

Come for the education, stay for the jobs Baker College in Port Huron requires its students to get hands-on experience. “Students work part time and volunteer in the community, building ties that can keep them in the area after graduation,” said Dan Kenny, the college’s director of admissions. “Strong advisory boards for Baker College programs also help students connect locally and can increase the likelihood that they will choose to stay in the county.” The Culinary Institute of Michigan, part of Baker College, has succeeded in attracting students from throughout the state as well as from other states, and many of its students are finding jobs in the area after graduation, including in Port Huron’s burgeoning restaurant scene. One of the efforts that has appealed to students is housing tailored to culinary students’ needs. “Providing quality student housing adjacent to the CIM beginning in 2015 has attracted students from areas outside the county,”

“The reverse scholarship is a huge incentive. For people who want to move back, it’s an extra push.” Chelsea Beeler-Khabbaz, a medical laboratory scientist at McLaren Port Huron

Kenny said. The culinary institute has also established a feeder program with the local intermediate school district.

A new approach Attracting and retaining talent is “a huge Midwest problem,” said Randy Maiers, president and CEO of the Community Foundation of St. Clair County. “The brightest and best are moving away and not coming home.” In 2016, the Community Foundation launched a “reverse scholarship” program that gives recent college graduates a financial incentive to move back to the county. It’s the first program of its kind in the United States. Last summer, the program awarded four reverse scholarships of $10,000 each, and it plans to expand its financial offerings. Chelsea Beeler-Khabbaz, a medical laboratory scientist at McLaren Port Huron, grew up in Port Huron and wanted to move back after working elsewhere in Michigan. “In high

school, the majority of people wanted to get out,” she recalled, but “Port Huron has more to offer now.” “The reverse scholarship is a huge incentive,” Beeler-Khabbaz said, and it helped her pay down her student debt. “For people who want to move back, it’s an extra push.” Muray Darling is another awardee. A veterinarian in Fort Gratiot who moved back from North Carolina, she missed the area’s sense of community. She and Beeler-Khabbaz agree that more of their peers seem to be interested in moving back. “There already are young, educated professionals moving back home,” Maiers said, and the applications show that “many more are on the fence and are burdened by student debt.” “We have a great place to live, and we have water resources that most communities would die for,” Casey said. “It’s just a matter of making people aware,” which the EDA is tackling through a branding campaign and other initiatives.

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SPECIAL REPORT: ST. CLAIR COUNTY

Business picks up for towing industry software service Tom Henderson thenderson@crain.com

Business is booming for Towbook LLC, a St. Clair-based provider of cloud-based software services for the towing industry. Revenue will approach $3 million this year, according to partner Tom Bacon, and the company just added 1,700 square feet of space to the 3,300 it had in Riverview Plaza in downtown St. Clair. Towbook was founded in 2007 as a sideline business for Dan Smith, 31, who was the chief technology officer from 2002-2012 for Detroit-based funeralOne, a technology and consulting company that designs web sites for funeral homes and creates tribute videos for grieving families. Smith, a native of St. Clair, has been a full-time software developer since he was 16. He developed a zeal for coding when he was given a book on how to code in QBasic when he was 10. Smith got the idea for Towbook when he worked on a freelance project for the Marysville Police Department in 2004, creating software to help police keep track of towed vehicles. Three years later, he decided to create a cloud-based software for municipalities and the towing industry, a sideline project that turned into a fulltime venture in 2012. That’s when he was joined by Bacon, 51, who helped capitalize Towbook’s expansion and became a part-

TOM HENDERSON

Dan Smith, (left) CEO, and Tom Bacon, partner, of Towbook LLC in St. Clair. ner in the company. “I helped cover some expenses for the business as we got going, and we both did the traditional ‘live without a salary’ for several years,” he said. Bacon, who has a computer science degree from Central Michigan University, worked in logistics for Ford Motor Co. for 10 years, then ran the Detroit area office of Silicon Valley-based WhereNet Corp., a company that used radio-frequency identification (RFID) to help companies track their assets. “That exposed me to the startup world,” said Bacon. And to the potential profits: WhereNet was acquired in 2007 by Zebra Technologies Corp. for $126 million. Bacon stayed there another two and a half years, then went to work for funeralOne, where he met Smith.

Soon, they decided to make Towbook a full-time affair. “We made the decision ... to build a company in St. Clair and invest in our community,” said Bacon. “We wanted to do our part to bring these kinds of high-paying jobs to our community.” The company has 18 employees and is looking to hire three to five more. Towbook now claims more than 1,000 customers throughout the U.S. and in Australia, Canada and Malaysia, with its app available for iPhones and Android devices. It has plans to expand into fleet-management services for companies with service trucks in the field. Smith said there are several competitors in the towing field, including Beacon Software of Cleveland, but SEE TOWBOOK,PAGE 17

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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 // M A R C H 1 3 , 2 0 1 7

SPECIAL REPORT: ST. CLAIR COUNTY

OTSI KETA FROM PAGE 13

In 2005, Huron bought a majority stake in Ross. Five years later, Huron made what was then the best exit in the private equity firmâ&#x20AC;&#x2122;s history, selling the business to a New York private-equity company for $232 million, a return on investment of almost 19 times. Huron was honored as having the deal of the year by Crainâ&#x20AC;&#x2122;s at its annual M&A awards in 2011. Mitchell divested most of his stock in the company at the time Huron sold its stake and remained chairman of Ross for another year. â&#x20AC;&#x153;I thought Otsi Ketaâ&#x20AC;&#x2122;s structure and focus made a good deal of sense. Theyâ&#x20AC;&#x2122;ve done better than the market as a whole, significantly better than I would have thought,â&#x20AC;? said Mitchell, who said he has continued to invest in Otsi Keta following his initial investment. â&#x20AC;&#x153;I appreciate how accessible Bill and Fred are. When you see the market going wacky, and you need

to talk to someone, theyâ&#x20AC;&#x2122;ll always take your call,â&#x20AC;? he said. Rollins and Schwarz typically hold positions for two to three years. They currently have 17 portfolio companies. According to Rollins, the fund has had a return of more than 100 percent in six years, after fees and expenses, living up to the firmâ&#x20AC;&#x2122;s name, which is Iroquois for â&#x20AC;&#x153;good hunting.â&#x20AC;? That return has been fueled by some recent profitable exits. In November, Chicago-based Inteliquent Inc. (Nasdaq: IQNT), a telecom network provider, was bought for nearly $800 million by Chicago-based GTCR LLC, a private-equity company. â&#x20AC;&#x153;That was a three-year investment that did very well for us,â&#x20AC;? said Rollins. Another good exit involved stock in Patrick Industries of Elkhart, Ind. Rollins said Otsi Keta bought shares in the company from January to May 2014, at prices ranging from $22.63 a share to $27.77. They sold the stock in January and February at prices ranging from $80.31 a share to $81.01. Unlike traditional private equity

funds, Rollins and Schwarz donâ&#x20AC;&#x2122;t have to distribute proceeds to limited partners following the sale of portfolio companies. Instead, they invest the money back into the fund, which they hope to eventually build to $100 million. Its current largest portfolio company is Wabash National Corp. (NYSE: WNC), a maker of truck and trailer products. Rollins said Otsi Keta is the antithesis of the activist hedge funds that garner headlines by lobbying for more board representation or launching hostile takeovers. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re not activists. If we disagree with management, we walk with our feet,â&#x20AC;? said Rollins. He said the firm is largely industry agnostic, but avoids software, biotech and turnarounds. â&#x20AC;&#x153;We want to invest in businesses we understand. We avoid companies where we donâ&#x20AC;&#x2122;t have an insight. A company might have a molecule that kills cancer, but thatâ&#x20AC;&#x2122;s not something we understand,â&#x20AC;? said Rollins.

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TOWBOOK FROM PAGE 16

his customers are happy to sing Towbookâ&#x20AC;&#x2122;s praises. â&#x20AC;&#x153;Towbook continues to be innovative and pushes the envelope for this industry,â&#x20AC;? said Ty Lambert, U.S. sales manager for TomTom Telematics in Vancouver, Wash. TomTom is a preferred partner of Towbook, whose software coordinates towing and billing for towtruck companies equipped with TomTom GPS systems. That towing is often coordinated in collaboration with insurance companies. For example, Lambert said, when State Farm customers call the toll-free number for road-side assistance, they are actually routed to a company under contract with State Farm that in turn notifies Towbook of the need for a tow truck. Towbookâ&#x20AC;&#x2122;s software then finds the nearest available driver. Mark Denson is CEO of On Site Towing in Houston, which contracts with apartment and office complexes

to tow vehicles that donâ&#x20AC;&#x2122;t belong in their parking lots. The company was one of Towbookâ&#x20AC;&#x2122;s first customers. Denson said he was frustrated with what was then a labor-intensive paper system. A Google search for automated solutions led him to the fledgling Towbook. â&#x20AC;&#x153;I called numerous software companies, and Towbook was the only one willing to speak to me and develop what I needed,â&#x20AC;? he said. The practice then was for drivers to tow vehicles to an impound lot, fill out paper forms documenting what was towed and to where, then deliver the forms back to the managers of the complexes the cars had been towed from. Now, everything is done by drivers in their trucks and documentation is transmitted by email. â&#x20AC;&#x153;I have been very happy with Towbook. Theyâ&#x20AC;&#x2122;ve helped me grow my business so much,â&#x20AC;? said Denson, who says his competitors are now using Towbook, too. â&#x20AC;&#x153;We were picking up so much business, I needed the

competition to start using them so I wouldnâ&#x20AC;&#x2122;t be swamped.â&#x20AC;? Denson said his business has increased with Towbook, but he has also cut overhead dramatically. Before moving to an automated system, he had nine trucks and 18 drivers; now, he handles a much bigger tow load with nearly half the cost of labor and equipment. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s been a tremendous savings,â&#x20AC;? said Denson. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

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SPECIAL REPORT: SECOND STAGE

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Why family owned companies should look beyond kin for key roles By Rachelle Damico

Special to Crain’s Detroit Business

Megan Ackroyd (left) and Erin Koch, production manager, with a variety of savory pies and pastries at Ackroyd’s Scottish Bakery in Redford Township. A third generation family business, Ackroyd’s looked outside to hire a manager.

For many traditional family businesses, the leading generation looks to the upcoming one to fill key roles. However, there are situations where hiring a family member isn’t possible. The next generation may be too young, or other relatives may not be interested or have the right skill set. “There probably aren’t enough family members to do all of the things that have to be done,” said Richard Segal, principal at West Bloomfield-based Segal Consulting Inc. “At some point, you probably have to expand.” Family business owners looking to continue or grow the company should consider hiring managers outside of the family. Rejeana Heinrich, associate director at the Stevens Center for Family Business at Saginaw Valley State University, said non-family members in key roles typically do better than family members because they have the emotional distance that is necessary to be more objective. “It’s hard to hire a family member for a big role,” Heinrich said. “Families get torn apart over it.”

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PHOTO BY LARRY PEPLIN

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 1 3 , 2 0 1 7

SPECIAL REPORT: SECOND STAGE

Tips to keep in mind when hiring an outside executive By Rachelle Damico

Special to Crain’s Detroit Business

Richard Segal, principal at West Bloomfield-based Segal Consulting Inc., said the rules are different when it comes to hiring an outside executive to join a family business. “That outside member needs to know exactly what they are getting into — they are joining a family business,” Segal said. “It’s a business cultural issue.” Here are some things to keep in mind when hiring someone outside of the family for a key role:

1. Learn to let go. Many family business owners will spend a lot of time finding, hiring and training an outside manager, but then fail to step back and allow the new manager to lead the company. David Wujciak, owner and CEO of Flint-based Qualified Temporary Services Inc., said although letting go is hard for business owners, it’s necessary. “Take your hands off the wheel and let somebody else go with it — you get new ideas and a fresh approach,” he said. “A lot of businesses hit a certain level and don’t grow after that, and I suspect failure to let go is part of that. Let those fresh ideas flow.”

2. Make sure they fit within the family company’s culture. It’s key that an outside executive can fit in well with the family business’ culture. “They have to be able to interact well with the family members,” Segal said. “If you’re bringing some-

one in to do a job, can they do the job and can they get along?" Jamie Michelson, president and CEO of Troy-based Simons-Michelson-Zieve Inc., said fitting into the company’s culture is a factor in deciding whether a candidate is hired. “Because it’s a longstanding family business, there’s certain things about the place that you start to know, who might be successful here and who might not be,” he said. That’s also true for Redford Township-based Ackroyd Scotch Bakery and Sausage Inc., which does business as Ackroyd’s Scottish Bakery. Owner Megan Ackroyd said that the company let a former employee go because they did not fit in with the company’s culture and values. “Identify the characteristics of what you’re looking for in a person and be able to keep those in mind,” Ackroyd said. “Ask questions that can help you discover what they’re about and if they present the qualities you’re looking for.”

FAMILY FROM PAGE 18

Carolyn Riegler, a director of Bloomfield Hills-based consulting firm O’Keefe & Associates Consulting LLC, said bringing in an outside executive can help bring creativity and out-of-the-box thinking to an entrenched family business. “The ability for somebody to come in who’s got decades of experience and who really knows their stuff can bring a breath of fresh air to a company,” Riegler said. In this month’s Second Stage, Crain’s talked to experts who specialize in family business — as well as a small, medium and large family company — about why family companies should consider hiring for key roles outside of the family business.

1. Hiring an outside manager will give your company a new perspective. A non-family member can bring a

“I think a lot of entrepreneurs are too caught up thinking they’re the only one that can run the business.” David Wujciak, Qualified Staffing

fresh perspective to a company’s family dynamic. “I think a lot of entrepreneurs are too caught up thinking they’re the only one that can run the business,” said David Wujciak, owner and CEO of Flint-based Qualified Temporary Services Inc., which does business as Qualified Staffing. “You start to do things a certain way every time, and it isn’t always the more effective way,” he said. The staffing company has 28 offices throughout the country. An acquisition planned for this month will add another five offices, as well as an office in Canada. The company employs 130 full-

time workers and about 10,000 temporary workers who receive W-2s. Wujciak owns the company with his wife, Diane Wujciak. His brother, Michael Wujciak, joined the company about three years ago to assume general manager responsibilities for two IT companies Qualified Staffing acquired. Wujciak no longer runs the company’s operations; he resigned as president in 2016. “I didn’t want to be the one making all the decisions all the time,” Wujciak said. “I viewed my organization as strong if it could do well without (me) around all the time.” Wujciak hired an outside manager, Doug Billot, in 2001. After seeing how strong Billot’s management skills were, Wujciak promoted him to general manager in 2003, allowing him to manage the company’s day-to-day responsibilities. “He’s more analytical and cerebral,” Wujciak said. “He thinks things through in an entirely different way than I do.” SEE FAMILY, PAGE 20

It’s Good to Be Flexible

3. Don’t let one person do the hiring. To ensure someone will fit into the family business company culture, hiring should be done by committee, and not an individual. Michelson said to keep hiring fair at SMZ, a group of both family and non-family leaders make the hiring decisions together. “There’s a number of people involved for the interview and review process for open positions that help determine if someone is a fit,” he said. “Different people hear and see different things in candidates.”

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Wujciak promoted Billot to president in 2015. He handles the company’s hiring and firing. “He pulled together a team that works well together,” Wujciak said. Wujciak said his accomplishments include engineering the company’s many acquisitions and playing a big role in growing the company organically from a sales standpoint. “The company has grown tremendously because of it,” he said.

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Hiring non-family members for key roles helps companies communicate more effectively. “Families communicate in certain ways — sometimes very clear and direct, and other times indirect or passive,” said Jamie Michelson, president and CEO of third-generation family company Simons-Michelson-Zieve Inc. “It’s really about bringing objectivity to it.” The privately held advertising agency was founded in 1929 and employs 50. The Troy-based company’s clients include the Detroit Red Wings, Detroit Tigers, Mackinac Island’s Grand Hotel and the Michigan Lottery. Within the past two years, SMZ has added many key roles outside of the family dynamic — including its executive creative director, vice president and director of finance and administration. Michelson said hiring a diverse staff is necessary for the advertising company to remain successful. “Advertising agencies are only as good as their mash-up of people from different backgrounds, perspectives and points of view,” Michelson said. “That’s what makes it work.” Outside executives can also help serve as a mediator between family and non-family member employees. Throughout her career, Riegler has worked with more than 70 family companies. She said many times in her role she acted as a family counselor or business therapist. “I’ve worked with a father and son who couldn’t be more opposite in their thinking and their ideas, and I’ve had to bring them together,” Riegler said. “(Outside executives) are able to evaluate and give

“Families communicate in certain ways — sometimes very clear and direct, and other times indirect or passive. It’s really about bringing objectivity to it.” Jamie Michelson, Simons-Michelson-Zieve Inc.

unbiased opinions of strategies and business plans.”

3. Hiring an outside manager can help raise new issues. Hiring an outside manager can help a family company uncover issues. Megan Ackroyd and her father Allan Ackroyd own third-generation family company Ackroyd Scotch Bakery and Sausage Inc., which does business as Ackroyd’s Scottish Bakery. The Redford Township-based company was founded in 1949, employs 11 and ships its Scottish baked goods nationwide. Ackroyd’s promoted a non-family member employee to the position of production manager in 2016. “It’s bringing different experience and different knowledge to the table,” Megan Ackroyd said. Megan Ackroyd said the production manager took charge by organizing the company’s storage, labeling items and allowing the company to access ingredients in a timelier manner. “My dad and I have similar personality traits — we both don’t like minutia,” she said. “It needed to be stored and organized better.” Megan Ackroyd said the production manager also helps lighten the day-to-day operations load for her and her father, allowing them more time to work on the business. The company plans to expand their bakery by opening a retail store and production facility around the Ferndale or Royal Oak area within the next 12-18 months. “As we continue down our path of growth, we have full intentions of hiring additional management outside of our family,” Megan Ackroyd said. “There’s simply no way to grow without doing so.”

4. Hiring outside managers are good for a company’s morale. An outside executive can help non-family employees feel like they’re being listened to and appreciated.

Riegler said outside executives help retention rates because they serve as a sounding board for non-family employees’ grievances and inequities. “They can be the voice of the employees,” Riegler said. “Employees will sometime perceive favoritism or unfair practices in terms of promotions and pay raises among the family members.” Outside executives are also better at holding employees accountable. “A non-family member can and frequently does serve in that role of making sure people are held accountable and applying policies and procedures,” Heinrich said. Non-family members who are hired for key roles can also help bridge the generational gap between the current leading generation and the next generation. “They will make sure the right decisions are being made, while still being in a position to groom and serve as a role model and a coach for the upcoming generation,” Heinrich said. They can also bridge the gap between family and non-family employees. “Frequently the non-family executive will be able to listen and hear the non-family employees in a way the family members don’t,” Heinrich said.

5. Hiring an outside manager can help with transition planning. Hiring an outside manager can help ensure a family company can make it to the next generation of leadership. If something happens to the family company’s leader, such as injury or death, it can lead to huge financial consequences for the company. A factor in Wujciak’s decision to step back from the company and promote his outside general manager as president was to ensure his company would be prepared for a disaster, rather than having someone without prior knowledge walk into the company blindly and try to run it. “If something happens to me I would like to know that this organization can move along,” he said.

“They can be the voice of the employees. Employees will sometime perceive favoritism or unfair practices in terms of promotions and pay raises among the family members.” Carolyn Riegler, O’Keefe & Associates Consulting LLC

C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // M A R C H 1 3 , 2 0 1 7

CRAIN'S LIST: LARGEST MICHIGAN FAMILY-OWNED BUSINESSES Ranked by 2016 revenue Company Address Rank Phone; website

Year founded First-generation owner

Percent of business family-owned

Revenue 2016/2015

Percent change

$17,900.0 B $16,900.0 C

5.9%

1934 Hendrik Meijer

Hank Meijer, executive chairman, grandson; Doug Meijer, director, grandson

Other family members in management with relation to the first-generation owner

Meijer Inc. 2929 Walker Ave. NW, Grand Rapids 49544 (616) 453-6711; www.meijer.com

Amway 7575 Fulton St. E., Ada 49355-0001 (616) 787-1000; www.amwayglobal.com

8,800.0 9,500.0

-7.4

1959 Jay Van Andel and Rich DeVos

Steve Van Andel, chairman, son of co-founder Jay Van Andel; Doug DeVos, president, son of cofounder Rich DeVos

100

Kelly Services Inc. 999 W. Big Beaver Road, Troy 48084 (248) 362-4444; www.kellyservices.com

5,276.8 5,518.2

-4.4

1946 William Russell Kelly

Terence Adderley, chairman, son

Meridian Health Plan 1 Campus Martius, Detroit 48226 (313) 324-3700; corp.mhplan.com

3,732.0 3,365.5

10.9

1997 David Cotton

Jon Cotton, president, Meridian Health Plan of Michigan, son; Sean Cotton, president, Meridian Technologies, son; Michael Cotton, COO, son

100

Ilitch companies 2211 Woodward Ave., Detroit 48201 (313) 471-6600; www.ilitchcompanies.com

3,400.0 3,300.0

3.0

1959 Michael and Marian Ilitch

Christopher Ilitch, president and CEO, Ilitch Holdings Inc., son

100

Plastipak Holdings Inc. 41605 Ann Arbor Road, Plymouth 48170 (734) 455-3600; www.plastipak.com

2,689.4 2,856.7 D

-5.9

1967 William P. and Mary E. Young

William C. Young, president and CEO, son

Barton Malow Co. 26500 American Drive, Southfield 48034 (248) 436-5000; www.bartonmalow.com

2,425.5 1,780.3

36.2

Moroun family holdings 12225 Stephans Road, Warren 48089 (586) 939-7000; NA

2,218.5 F 2,311.2 F

-4.0

1937 T.J. Moroun

Sherwood Food Distributors LLC 12499 Evergreen Road, Detroit 48228 (313) 659-7300; www.sherwoodfoods.com

2,154.9 2,181.3

-1.2

1969 Earl Ishbia and Alex Karp

2,130.4 2,001.5

6.4

The Suburban Collection 1795 Maplelawn Drive, Troy 48084 (877) 471-7100; www.SuburbanCollection.com

1948 Richard Fischer

2,050.0 1,830.0

12.0

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

1969 Herbert W. Kaufman

Haworth Inc. 1 Haworth Center, Holland 49423 (616) 393-3000; www.haworth.com

1,940.0 G 1,820.0

6.6

Serra Automotive Inc.

1,838.8 1,612.1

Walbridge

Howard Ishbia, executive vice president, sales and marketing, son; Jason Ishbia, executive vice president, finance and CFO, son; Joel Ishbia, executive vice president, inventory management, son; Gary Karp, executive vice president, corporate affairs and general counsel, son; David Ishbia, sales, son; Scott Ishbia, IT, son David T. Fischer, chairman and CEO, son; David Fischer Jr., president and COO, grandson; Zachary Fischer, director, grandson

100

Alan J. Kaufman, chairman, president and CEO, son; Daniel J. Kaufman, corporate vice president, grandson

100

1948 G.W. Haworth

Dick Haworth, chairman emeritus, son; Matthew Haworth, chairman, grandson

100

14.1

1973 Albert M. Serra

Joseph Serra, president, son

100

1,450.0 1,432.0

1.3

1916 John Rakolta H

John Rakolta Jr., chairman and CEO, son; John Rakolta III, EVP and CAO, grandson

Wolverine Packing Co.

1,280.0 1,268.0

0.9

Soave Enterprises LLC

1,193.0 1,232.0

-3.2

1961 Anthony Soave

Angelique Soave, vice president, daughter; Andrea Soave Provenzano, vice president, daughter

100

The Diez Group 8111 Tireman Ave., Dearborn 48126 (313) 491-1200; www.thediezgroup.com

1,152.0 1,079.0

6.8

1973 Gerald Diez

April Diez, vice chairman, daughter; Gerald Diez Jr., president, son; Sherry Diez, vice president, daughter; Mark Diez, vice president, son

100

Zeigler Auto Group

1,000.2 926.4

8.0

1975 Harold Zeigler

Aaron Zeigler, president, son

100

Garber Management Group Inc.

946.6 849.3

11.5

1907 Guy S. Garber

Richard J. Garber, president, grandson

Bissell Homecare Inc.

900.0 900.0

0.0

1876 M.R. Bissell

Mark J. Bissell, CEO and chairman, fourth generation great-grandson; Max M. Bissell, global accounts manager, fifth generation; M. Catherine Bissell, director corporate affairs

100

United Shore Financial Services LLC

857.0 510.1

68.0

1986 Jeffrey Ishbia

Mat Ishbia, president and CEO, son

100

LaFontaine Automotive Group 4000 W. Highland Road, Highland Township 48357 (248) 887-4747; www.thefamilydeal.com

816.8 768.4

6.3

1980 Michael T. LaFontaine

Ryan LaFontaine, dealer, son; Kelley LaFontaine, dealer, daughter; Michael T. LaFontaine Jr., dealer/LaFontaine Global Director, son

100

Kenwal Steel Corp.

774.0 910.0

-14.9

1947 Sol Eisenberg

Kenneth Eisenberg, chairman and CEO, son; Stephen Eisenberg, president, Burns Harbor, grandson

100

Woodward Ave., Suite 300, Detroit 48226 14 777 (313) 963-8000; www.walbridge.com Rivard, Detroit 48207 15 2535 (313) 259-7500; www.wolverinepacking.com E. Lafayette, Detroit 48207 16 3400 (313) 567-7000; www.soave.com

Stadium Drive, Kalamazoo 49008 18 4201 (269) 375-4500; www.zeigler.com S. Washington Ave., Saginaw 48601 19 999 (989) 790-9090; www.garberauto.com Walker Ave., Grand Rapids 49544 20 2345 (616) 453-4451; www.bissell.com E. Maple Road, Troy 48083 21 1414 (855) 888-8737; www.unitedshore.com

Manuel Moroun, son, and Matthew Moroun, grandson, both hold several executive positions.

E. Hill Road, Grand Blanc 48439 13 3118 (810) 694-1720; www.serrausa.com

1924 Ryan Maibach, president, CEO and chairman, grandson; Doug Maibach, executive vice chairman, Ben Maibach Jr. E son; Ben Maibach III, chief community officer, son

W. Warren Ave., Dearborn 48126 23 8223 (313) 739-1000; www.kenwal.com

1937 Jim Bonahoom, president, son; Roger Bonahoom, vice president, son; Jay Bonahoom, vice Alfred Bonahoom president grandson

100

This list of family-owned businesses is an approximate compilation of the largest such businesses in Michigan. Art Van Inc., which had $660 million in 2016 revenue, is no longer on this list because Art Van Elslander, chairman and founder sold the company to Boston-based private equity firm Thomas H. Lee Partners in February. It is not a complete listing but the most comprehensive available. Crain's estimates are based on industry analyses and benchmarks, news reports and a wide range of other sources. Unless otherwise noted, information was provided by the companies. For some companies, the founders were later bought out by another family. Actual revenue figures may vary. NA = not available.

B Supermarket News Top 75 estimate. C Supermarket News estimate. D Estimated revenue includes acquisition of APPE packaging division of LaSeda de Barcelona Group in July 2015. E Founded in 1924 as C.O. Barton Co. by Carl Osborn Barton. The Maibach family acquired majority control in 1961. F Crain's estimate. G From MiBiz. H George B. Walbridge and Albert H. Aldinger founded the company in 1916. John Rakolta Sr. bought the company in 1963 with business partner Robert Robillard. LIST RESEARCHED BY SONYA D. HILL

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 1 3 , 2 0 1 7

Jimmy John’s Field adds more premium seating By Bill Shea bshea@crain.com

The owner of Jimmy John’s Field in Utica has added five premium tables that he expects to generate $500,000 for his United Shore Professional Baseball League. Called Park View Diamond Tables, they’re four-seat half-moon shaped tables on the stadium’s second level, and they lease for $20,000 annually under five-year agreements. The developmental baseball league, which begins its second season in May, had 18 such tables (at field level) in 2016 that leased for the same terms — creating $1.8 million in revenue over the life of the leases. The new tables at the 1,900-seat stadium were installed in the offseason along the first base side, replacing a pair of drink rail areas along the second-story concourse. Rochester sports entrepreneur Andy Appleby, who financed the $16 million stadium and league startup cost, said there is demand for adding premium tables. They’re leased by companies, with Andy Appleby: some splitting There’s demand for more premium the cost and sharing the tables. game tickets. If the demand is greater that expected — premium seating information for 2017 is now being given to potential buyers — more tables could be added. “There’s a possibility that we add an additional five on the other side this year or someday, but nothing definite in the plans,” he said. The stadium also has 24 suites of varying configurations and locations that lease under five- to seven-year deals, and cost $35,000 to $55,000 annually. At a minimum, Appleby is generating $4.2 million in long-term suite revenue, and likely more. Two suites remain available for lease this season, and Appleby predicted they’ll sell before the season begins. The stadium and league also have naming rights, signage, and other corporate sponsorship deals that brought in $3 million last season. Among the companies with suite or other corporate sponsorship deals at the ballpark are Budweiser, General Motors Co., Ford Motor Co., AAA, Scotts Miracle-Gro Co., Pepsi and Birmingham-based Belfor USA. In 2015, Troy-based mortgage lender United Shore Financial Services LLC signed a 10-year deal to put its name on Appleby’s baseball league, and Champaign, Ill.-based Jimmy John’s Franchise LLC and its franchisees jointly signed a 10-year contract for the stadium name. Appleby said last year that the league was profitable, but didn’t disclose specifics. It’s been so successful that he intends to announce a deal for a new ballpark elsewhere

later this year that would open in 2018. The USBPL, which added a fourth team at Jimmy John’s Field for this season, is for players age 18 to 25 who haven’t been signed by Major League Baseball’s affiliated farm teams. The league has a baseball academy system aimed at improving player skills, and it saw nine USPBL players signed to the minors. Appleby’s concept is a 75-game May-September schedule, played round-robin style, mainly on week-

nights and weekends — the most attractive weather and free time for families. He sells the ballpark experience as offering elite-level customer service and ballpark cleanliness for both fans and corporate sponsors. The USPBL had 500 season ticket holders last season, a number Appleby said he’ll grow by 25 percent for this season. It averaged 3,200 per game, and sold out 42 of 75 games last season at Jimmy John’s Field, which sits alongside M-59.

These half-moon tables rent for $20,000 a season on a five-year contract at Jimmy John’s Field.

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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 // M A R C H 1 3 , 2 0 1 7

McGregor Fund takes aim at poverty, safety net programs By Sherri Welch swelch@crain.com

The Detroit-based McGregor Fund has shifted its grant areas to focus more strongly on alleviating poverty and strengthening the social safety net in Metro Detroit and away from funding arts, culture and education. Made after a year of assessment across the community, the changes build on the founders Tracy and Katherine McGregor’s legacy of supporting basic needs and responding to the disconnection that many vulnerable people feel from the progress Detroit is making, said McGregor Fund President Kate Levin Markel. McGregor hadn’t looked at the city in a fresh way since its bankruptcy, she said, noting it’s incumbent on the foundation’s board and staff to periodically reinterpret its grantmaking areas to ensure they reflect the most pressing needs of the time. After reviewing where other foundations are working, now, McGregor came to the realization that support for basic needs services is needed now more than ever, Markel said. “The concentration of poverty is not moving in the city and other parts of the region.” “We are at a moment in our long life where we feel we need to 100 percent commit our work in support of our poorest neighbors,” she said. In early childhood education there is now a big commitment from other funders including the Kresge Foundation, W.K. Kellogg Foundation and soon, the Ralph C. Wilson Jr. Foundation, Markel said. Cultural and educational organizations could still see grants from McGregor, but they would need to fall into three new or expanded areas: J Basic needs such as food, shelter and access to primary medical care, building on earlier support. J Recovery and restorative services for people who have experienced abuse or trauma and/or have substance abuse problems, expanding earlier support. J Proven skill-building programs that lead to broader personal and career choices for teens and adults living in poverty, a new area of funding for McGregor. The majority of safety net services are funded by government, and that support has been declining for many years, Markel said. Though foundation support can’t replace government funding, “we feel there’s a lot of work to be done and we’re going to intensify our focus,” she said. The McGregor Fund is a private foundation established in 1925 by the McGregors “to relieve the misfortunes and promote the well-being of mankind.” Its assets totaled $162 million as of June 30, 2016.

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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 // M A R C H 1 3 , 2 0 1 7

CALENDAR

UPCOMING EVENTS

J The State of Relations Between Cuba and the U.S. and Future Opportunities. 11:30 a.m.-1:30 p.m. March

21. Detroit Economic Club. Find out what’s next and learn about future opportunities in Cuba. Westin Book Cadillac. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org. CFA Detroit Speaker Series Lunch Featuring Adrian Cronje. Noon-1:30 J

p.m. March 21. Certified Financial Analyst Society Detroit. Speaker: Adrian Cronje, CFA chief investment officer and founding partner of Balentine, Adrian Cronje on “An Industry Wake Up Call: What is the Real Threat to Our Industry and How to Turn it into Opportunity?” $45. The Community House, Birmingham. Contact: Michelle Doran, phone: (734) 546-2390; email: info@cfadetroit.org J Tech Takeover: Safe Human-Robot Collaboration. 8:30-10:30 a.m. March

22. Automation Alley. Technology distributor and integrator Behco-MRM leads a discussion on the safety aspects of using collaborative robotics. Topics will include systems level issues, safety audits, smart considerations and risk assessment. A panel discussion and Q-and-A period will follow. Speakers will include: Brent Bartson, technical manager for Universal Robots; Elena Dominguez, safety consultant, Pilz Automation Safety; Ryan Groat, senior engineer, Panther Global Technologies; Adam Boike, application engineer, Behco-MRM. Automation Alley. $20. Email: events@ automationalley.com; phone: (800) 427-5100. 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 Talent Outlook: Detroit Drives Degrees. 8-10:30 a.m. March 23. Detroit

Regional Chamber. Leaders from the higher education, business, government and nonprofit and philanthropic sectors meet to offer perspectives from the private and public sector, and highlight work the Detroit Drives Degrees (D3) initiative is doing to strengthen the talent pipeline and meet the growing demands of employers. Detroit Athletic Club. $35 members; $70 nonmembers. Contact: Maggie Greaney, (313) 5960482; website: detroitchamber.com J Big Data and Business Analytics Symposium. 8 a.m.-6 p.m. March 24.

Wayne State University. This symposium focuses on managing and analyzing the data captured through marketing, product development, manufacturing, distribution, sales, and service in a global setting. Gain insights on identifying big data opportunities, developing business cases, and using analytics to drive business success. Wayne State Student Center Building. $40. Contact: Mark Garrison, phone: (313) 5775683; email: mgarrison@wayne.edu J Expanding Education and Access Through Public Media. 11:30 a.m.-1:30

p.m. March 24. Detroit Economic Club. Paula Kerger, president and CEO, PBS, will share insights into PBS’ efforts to remain relevant amid a changing media environment. Townsend Hotel, Birmingham. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org. 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. J 9th Annual Trade Secrets with Connie Holzer. 6-9:30 p.m. March 29. JVS. Key-

note 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 go-

DEALS & DETAILS CONTRACTS

Fourmidable Group Inc., Bingham Farms, has been appointed as management agent for The Griswold, 1117 Griswold St., a 80-unit apartment community in Detroit. Website: fourmidable.com.

tor City Comic Con, owned by Motor City Comics & Conventions, Farmington Hills; Caucus Club restaurant, Detroit; and a book by Charles Mok “Testosterone: Strong Enough For A Man, Made For A Woman,” Shelby Township. Website: ckcagency.com.

J CKC Agency, Farmington Hills, a public relations and media services firm, has added three accounts: Mo-

EXPANSIONS

Worksighted Inc., Holland, an IT

Connie Holzer

ing into an economic tailspin. Troy Marriott. $150. Contact: Judy Strongman, phone: (248) 233-4213; email: jstrongman@jvsdet.org; website: jvsdet.org/ tradesecrets.

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

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. Conversational Intelligence. 8-10 a.m. March 30. Inforum. Learn the five “essentials” used by conversationally intelligent people. Lab leader is Erika Alessandrini, president/ CEO, Strategies for Success. Denso International America, Southfield. $85. Contact: inforummichigan.org.

The Culture of Accountability. 7-9 a.m. March. 31. The Business Roundtable. Stanley Targosz III, CEO of Education Planning Resources, will speak on how stronger cultures of accountability lead to higher performance and commitment within companies. Birmingham Country Club. $35 person, $350 table of eight and branding opportunities. Contact: Christa Moxon, phone: (269) 685-7829; email: christa.moxon@ thebusinessrt.org; website: thebusinessrt.org.

Staying Relevant in a Noisy World. 7:30-9 a.m. April 4. Leadership Oakland. Joyce Jenereaux, former publisher and president of the Detroit Free Press and Michigan.com, on leadership and business lessons she learned Joyce Jenereaux along the way. MSU Management Education Center, Troy. $32 members; $36 nonmembers. Website: leadershipoakland.com. J

J Women in Politics: The Path to Public Office. 5-7:30 p.m. April 10. Info-

rum. Hear from elected women of-

services provider, opened at 28800 Beck Road, Wixom. Telephone: (248) 498-4285. Website: worksighted. com. J Tubby’s Sub Shops Inc., Clinton Township, has opened a store at 501 E. Michigan Ave., Ypsilanti. Telephone: (734) 483-5227. Website: tubbys.com.

STARTUPS

Allen Michael Experience, Southfield, a hair salon, has opened at

fice-holders about their political journeys. What does it take to run for public office and what does it take to stay there? Speakers: Ruth Johnson, Michigan Secretary of State; Sherry Gay-Dagnogo, former Detroit City Council staff member and state representative of Michigan’s 8th District serving northwest Detroit; and Anne Mervenne, president of Mervenne & Co., Moderator is Kelly Rossman-McKinney, CEO and principal of Truscott Rossman. Great Lakes Culinary Center, Southfield. $50 member; $70 nonmember. Contact: inforummichigan.org J BLM Leadership Summit on Fiscal Stability. Noon-5 p.m. April 17. Busi-

ness Leaders for Michigan. Discussion on how to work together toward the future for Michigan and local communities. Radisson Hotel, Lansing. $50. Contact: Jennifer Hayes, phone: (313) 259-5400; email: jenniferh@businessleadersformichigan. com. J Who Do You Trust? Leading in an Era of Populism. 11:30 a.m.-1:30

p.m. April 19. Detroit Economic Club. Richard Edelman, president and CEO of Edelman, will discuss the 2017 Edelman Trust Barometer and actions business leaders can take to climb back from a position of deteriorated trust, and ultimately restore belief in a system that too many believe has failed them. MotorCity Casino Hotel, Detroit. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org. J Positive organization development: A new change equation that’s changing everything. 4-5:30 p.m. April 24.

Center for Positive Organizations. Speaker: David Cooperrider, university distinguished professor and Fairmount Santrol Professorship, Weatherhead School of Management, Case Western Reserve University. Ross School of Business, University of Michigan. Free. Website: positiveorgs.bus.umich.edu

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.

29193 Northwestern Highway, Southfield. Telephone: (248) 9906484. Website: allenmichaelvirginhair.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.

PEOPLE: SPOTLIGHT Nick Karmanos joins children’s fund Nick Karmanos, former chief fundraiser for the Barbara Ann Karmanos Cancer Institute, joined the Detroit C h i l d r e n ’s Fund as its chief advancement officer. And he’s recruited two Nick Karmanos other former fundraisers of the cancer institute to the Detroit Children’s Fund. Karmanos served as senior vice president of institutional relations at the Karmanos Cancer Institute for 16 years before leaving in September.

Beaumont names two board members Ronald Hall Jr., CEO of Bridgewater Interiors LLC, and William Goldsmith, co-founder of Nantucket Capital Management LLC, have been appointed to Beaumont Health’s 15-member Ronald Hall Jr. board. Hall, 48, has served on B e a u m o n t ’s Health Audit and Compliance Committee since Beaumont Health formed in 2014 and is William Goldsmith at the helm of Detroit-based Bridgewater Interiors. Goldsmith, 64, has served as chairman of Beaumont Health Investment Committee since its inception and is a managing member of Nantucket Capital Management. S. Evan Weiner, COO and executive vice president of Edw. C Levy Co., is stepping down from the board.

SpartanNash names new CEO Grand Rapids-based grocery store chain SpartanNash’s president and COO David Staples will assume the role of CEO when its current chief, Dennis Eidson, retires. Eidson will continue as the chairman of the company’s board of directors after he retires as CEO in late May. SpartanNash also appointed Staples to the board of directors. He has been on the company’s executive team for 17 years.

March 13, 2017

ETROIT C R A I N ’ S D E T R OC I RAIN T B’SUDS I N EBSUSINESS S // M A R C H 1 3 , 2 0 1 7

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Snyder’s last chance for education reform A new report on how to overhaul Michigan’s under-performing public school system could be Gov. Rick Snyder’s last chance to make meaningful education reform before his term ends next year. During his more than six years in office, education reform has arguably been Snyder’s kryptonite — every time he touches the controversial and deeply emotional subject, something seems to go awry. The Republican governor’s struggle to find his footing with this issue started with the ambitious Education Achievement Authority, an entity created in 2011 through an interlocal government agreement between Snyder’s emergency manager in Detroit Public Schools and Eastern Michigan University. The EAA took over 15 chronically failing Detroit schools in the fall of 2012. The results have been rocky, at best. The school reform entity was almost immediately plagued by high staff and student turnover, financial problems and leadership problems under former Chancellor John Covington, who was picked by Snyder’s office and spent a lot of time attending out-of-state education conferences. Snyder spent most of the 20132014 legislative session trying to get lawmakers to give the EAA permanent school district status. The proposal bounced back and forth in the two chambers, but never made it to governor’s desk. Democrats pilloried the EAA as a “failed experiment,” and some Republican lawmakers were deeply skeptical about whether it would work. In May 2013, I broke a story for The Detroit News about a group of state officials, technology experts and charter school interests working on a project to create a new low-cost, tech-centered public education model. The task force had good intentions — save taxpayers money, improve achievement outcomes and create new choices for parents. It had all of the hallmarks of Snyder’s governing ethos. But the government officials involved were using their private emails, presumably to evade the state’s public records laws. And one of the group’s leaders, Lansing attorney Richard McLellan, gave the mission a name that just smelled funny to the state’s public education establishment: “skunk works.” The group was devising a voucher-like school funding model without any input from educators. Snyder quickly distanced himself from “skunk works,” even though public records revealed McLellan formed the task force at the urging of Snyder aide Rich Baird. McLellan was the author of another Snyder-assigned report on school finance reform to create an “any time, any place, any pace”-

During his more than six years in office, education reform has arguably been Snyder’s kryptonite.

funding formula to replace the state’s 38-year-old School Aid Act. That report is collecting dust on the shelves of education lobbyists in Lansing. Tackling big education issues largely took a backseat until Snyder spent most of 2015 and half of 2016 convincing the Republican-controlled Legislature to rescue Detroit Public Schools from its $617 million debt, which posed a threat to the state’s credit rating. Snyder couldn’t convince lawmakers that Detroit needed a citywide commission to put DPS and charter schools on the same playing field and better manage where schools operate in a city with an abundance of schools in some pockets and “education deserts” in others. But when Snyder runs into roadblocks in the Lansing bureaucracy, the former venture capitalist tries alternate routes. The EAA was Snyder’s attempt to bypass the Granholm-era School Reform Office, created within the Michigan Department of Education. The reform office was seen as ineffective because it has never forced the closure of a single failing school. When it became clear that the EAA’s days were numbered, Snyder used his executive authority to move the School Reform Office from the education agency — which he has no constitutional control over — to the Department of Technology, Management and Budget. The decision cut the Department of Education entirely out of the school-closing decision process. In January, the School Reform Office rolled out a plan to close 38 persistently low-performing schools, including 25 in Detroit. The closure plan sparked instant blowback that seemed to catch the governor’s office off guard. In a reversal, Snyder turned to Superintendent of Schools Brian Whiston and the Department of Education for help. Whiston proposed a 18-month reprieve for the schools to show academic improvement through an agreement that most of the school districts are expected to sign onto — avoiding closures for another school year. It’s been one setback after another for Snyder on education reform. On Friday, the governor’s 21st Century Education Commission released a sweeping list of policy proposals to “transform, not tinker” with an education system that ranks closer to the bottom than the

CHAD LIVENGOOD top in student achievement across the United States. Michigan fourth graders rank 41st in reading and 48th among children from higher-income families. “The urgency could not be greater. While it is difficult to face, the data are clear: Michigan children are falling behind,” the commission wrote in the first paragraph of its 21-page

executive summary. The commission proposed an annual increased taxpayer investment in education topping $2 billion, including up to $900 million a year in additional funding for high-risk poverty areas like Detroit where literacy rates are in steady decline. The bipartisan panel called for empowering the governor to run the education department instead of a statewide partisan Board of Education. It also encouraged the consolidation of 540 individual school districts. The commission said Michigan students need universal free access to 4-year-old public preschool and community college, which the au-

thors said could help address a looming talent crisis for the state. “By 2025, 65 percent of jobs in Michigan will require a postsecondary credential, and our workforce is not yet prepared to meet these new demands,” the commission wrote. “Only 36 percent of Michiganders over 25 years of age have earned an associate degree or higher — ranking Michigan 34th for degree attainment.” With another gubernatorial election on the horizon, there’s a lot of opportunity for Gov. Snyder to tackle education reform once more — but not a lot of time to do it. 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 // M A R C H 1 3 , 2 0 1 7

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By Bill Shea bshea@crain.com

If you want to buy your seat from Joe Louis Arena or the Palace of Auburn Hills after the Red Wings and Pistons leave for their new home, sit tight. Nearly six months after Crain’s first reported that the Red Wings want to see equipment and fixtures at city-owned Joe Louis auctioned to the public — including the highly sought original seats — nothing has happened. Why? Olympia Development, which runs the Red Wings’ business operations, says it’s still in the process of inventorying everything inside the arena, and it doesn’t expect to formalize a deal with the city until this summer. Olympia and the team also have been busy finishing the new $635 million arena scheduled to open in September, a spokeswoman said. As for the Palace of Auburn Hills, there are no plans to sell anything because the building’s fate hasn’t been decided. Joe Louis Arena, on the other hand, is set to be demolished and the waterfront land used for commercial development. Olympia since last year has been cataloging everything inside Joe Louis, which the city built for $57 million and opened in 1979. The inventory is to determine what will be moved to the new arena, what must be replaced, what

JOE LOUIS ARENA

Most permanent arena fixtures, such as the seats, are city property. Joe Louis falls under the Detroit Building Authority. can be sold, what can be donated, and what belongs to the city. The new arena is expected to include heritage displays from both teams. Any sale is expected to use a third-party auction service that specializes in such work. “We’re still doing inventory. Then we’re working on a deal with the city. Then we’d finalize a decision on a third party. Then we’d decide on who leads and revenue sharing,” said Jennifer Arapoff, director of marketing and communications at Olympia Entertainment. She added that third-party vendors are being vetted for a possible

auction, which could occur near the time Little Caesars Arena opens. While the split of sale proceeds hasn’t yet been negotiated with the city, some or all of the money could be earmarked for charities, Arapoff said, and some fixtures could simply be donated. Most permanent arena fixtures, such as the seats, are city property. Joe Louis falls under the Detroit Building Authority, under the authority’s Municipal Parking Department. The mayor’s office was unaware of Olympia’s preliminary talks with the city about an auction, so it declined to comment until it has more information. Seats are of special interest because there is an active market for them among sports fans, nostalgia buffs, sports bars, and longtime season ticket holders who want their specific chair. Seats from demolished sports venues can sell for a few hundred dollars into the thousands. “Anything of that vintage, because it’s the Red Wings, they’re going to have a successful sale,” said vintage seat broker Sean Walsh in an October conversation with Crain’s. A lifelong Red Wings fan who has owned Cleveland-based vintage sports chair seller Original Stadium Seats since 1987, Walsh said he has a waiting list of people who want Joe Louis Arena seats. Fans also are interested in everything from arena signs to fixtures. The Palace faces an unknown future, meaning it’s too soon to talk about the sale of any fixtures. Like the Red Wings, the team will determine what it wants to move to Little Caesars Arena and to a new team headquarters and practice facility that it will open in 2018 in New Center. “Nothing has been determined on the future of the Palace other than we won’t be playing basketball (there) next year,” Pistons spokesman Kevin Grigg said via email. The Pistons began a three-year, $6 million replacement of all of the Palace’s 20,000 seats in 2015, under a deal with Grand Rapids-based Irwin Seating Co. The third phase of the seating project, which included replacing more than 10,000 upper bowl seats this summer, is now on hold. Bill Shea: 313 (446-1626) Twitter: @Bill_Shea19

C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // M A R C H 1 3 , 2 0 1 7

University of Michigan endowment banks on funds that make loans By Janet Lorin Bloomberg News

The University of Michigan is betting its endowment can make money on loans to small businesses from Barcelona to Beijing. The endowment, valued at $10.5 billion as of Dec. 31, has added more managers who specialize in lending â&#x20AC;&#x201D; through private credit, distressed and other forms of debt â&#x20AC;&#x201D; according to annual reports and other public documents. The strategy accounted for about 30 percent of new managers the endowment invested with in the year through June 30. The board of regents approved commitments of about $400 million to these managers. Endowments, pensions and other institutional investors are looking for yield at a time of low-return expectations. A quarter of private-debt investors in a recent survey by research firm Preqin Ltd. said their portfolios outperformed expectations last year and a majority said they plan to increase allocations in 2017.

Filling void Private credit is backed mostly by non-bank financial firms looking to fill a void left by banks that cut back on loans to hold more capital under Dodd-Frank provisions. â&#x20AC;&#x153;Where regulations have caused a

â&#x20AC;&#x153;This area has emerged as the supply and demand dynamic has changed in that marketplace, thus providing investors with a more attractive return relative to the risks assumed.â&#x20AC;? Ken Shimberg, Mercer Investments Inc.

bit of a gap, theyâ&#x20AC;&#x2122;re filling the gap,â&#x20AC;? said Bill Bonawitz, director of municipal research at PNC Capital Advisors, which manages about $7 billion in municipal assets. Michiganâ&#x20AC;&#x2122;s endowment didnâ&#x20AC;&#x2122;t disclose fees charged for these commitments, the length of the investments or rates of returns. Rick Fitzgerald, a spokesman for the school, declined to provide additional information. Michigan, the 10th largest U.S. college endowment, had investments with about 250 managers as of June 30, and the school has invested in multiple funds with some of them.

The fund also isnâ&#x20AC;&#x2122;t a new investor in credit strategy â&#x20AC;&#x201D; about 10 of its existing managersâ&#x20AC;&#x2122; investment approaches use mortgage strategies, for example. â&#x20AC;&#x153;This area has emerged as the supply and demand dynamic has changed in that marketplace, thus providing investors with a more attractive return relative to the risks assumed,â&#x20AC;? said Ken Shimberg, who oversees investments for endowments and foundations at Mercer Investments Inc. and formerly worked at Brown Universityâ&#x20AC;&#x2122;s endowment. Investments in Michiganâ&#x20AC;&#x2122;s endowment declined 1.4 percent for the year ended June 2016. The fund has been led by chief investment officer L. Erik Lundberg since 1999.

Spain, China Michiganâ&#x20AC;&#x2122;s board of regents approved at least one additional commitment to similar lending strategies in fiscal 2016 that isnâ&#x20AC;&#x2122;t listed in the annual report of current investments. The fund also received approval from the board to add more managers

since June 30, including as much as $70 million to a pair of Asia credit funds founded by executives who ran Lehman Brothersâ&#x20AC;&#x2122; Asia special situations group. Michigan invested with nine credit-related managers in the year ended June 30, including Black Toro Capital Fund II, to which the school committed about $53 million. The fund lends to new, small or financially distressed clients in Spain. Abax Global Capital makes loans to small- and medium-sized enterprises that are based in China or have a significant Chinese connection. The school committed $40 million to its fund. The school also committed $50 million to Emet Capital Management for its New York-based fund that invests in distressed municipal bonds collateralized by student and senior housing.

More lending The Trump administration has said it plans to loosen financial services regulations, which could impact this

pocket of investments. â&#x20AC;&#x153;If the president continues on his path of deregulation, banks will be back lending to lower- and middle-market companies in the near future, which could constrain the amount of potential opportunities,â&#x20AC;? for these funds, said David Fann, chief executive officer of TorreyCove Capital Partners, which advises institutional investors on alternative assets. Since endowments categorize investments differently, itâ&#x20AC;&#x2122;s not easy to discern if the private lending strategies are considered fixed income, private equity, absolute return or an opportunistic allocation, Fann said. Of the about 30 of Michiganâ&#x20AC;&#x2122;s new managers in fiscal 2016, half were in absolute return, which includes hedge funds. The endowment also increased the number of managers in its energy strategy. At least seven managers, mostly from hedge funds, who were listed in the 2015 report donâ&#x20AC;&#x2122;t appear the following year. These include value investor Grantham, Mayo, Van Otterloo & Co., and Highclere International Investors.

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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 // M A R C H 1 3 , 2 0 1 7

DUGGAN

times for the most urgent calls were approaching 20 minutes, more than twice the national average for big cities, Roach said. “He’s delivered amazing results,” Roach said of Larkins. “You can’t count the human impact that that’s had in terms of the lives that have been saved.”

FROM PAGE 1

The mayor charged Larkins with lowering emergency response times to the national average of eight minutes when he appointed Larkins to run the troubled department in February 2014 — a month after Duggan took office and in the middle of the city’s bankruptcy. “After six months he came in and did a report and he was still at 12 minutes and he did a report for 15 minutes and said it wasn’t his fault,” Duggan told Gilbert during an on-stage appearance at the Quicken Loans family of companies “reunion” at Cobo Center. After the weekly Wednesday morning cabinet meeting — which Duggan boasted can be “a rigorous affair” — the mayor demoted Larkins. “I brought him in after the meeting and I terminated him. I moved him to someplace else,” Duggan told Gilbert and his associates. “I said, ‘I’m not really interested in listening to whose fault it is. It no longer counts how good your excuses are.’ I put somebody else in the job.” Duggan’s frank discussion about personnel matters with Gilbert — which a Crain’s reporter was allowed into the meeting to watch — showed the mayor’s demanding side, which he acknowledged asks a lot of department directors. Duggan spokesman John Roach confirmed Larkins was replaced by Lt. Angela Turner before returning about four months later for a “second tour of duty.”

Back in the job During the on-stage interview with Gilbert, Duggan didn’t name Turner by name, but disclosed that she didn’t last long. “The person who was in the job

WILLIAMS FROM PAGE 1

The properties, at 1999 Centerpoint Parkway and 2100 S. Opdyke Road, are owned by entities tied to the studio’s ownership group, led by entrepreneur Linden Nelson. Nelson said he has “no idea” about a pending deal, and that the $60 million studio, which opened in early 2011, has no new movies slated to be filmed there because “there’s no money” coming from the state’s nixed film incentive program put in place during Gov. Jennifer Granholm’s administration. The studio’s fate is not known, nor is that of Williams International’s current headquarters at 2280 E. West Maple Road at Welch Road. Thirteen miles to the northeast, the new headquarters would be in a city that has struggled for years.

Bright spots in Pontiac Pontiac, which has median household income of $28,505 and per capita income of just $15,864, less than a year ago emerged from the oversight of a state emergency manager after years of financial mismanagement and an economic blow dealt to it when automakers started pulling out.

Accountability

COURTESY ROCK VENTURES

Detroit Mayor Mike Duggan chatted with Quicken Loans’ Dan Gilbert about leadership and management. essentially stressed out in four months and quit,” the mayor said. By January 2015, Larkins was back in the top job at the EMS department and oversaw a recruit graduation ceremony that month. “The guy who I had replaced came in to see me and he said ‘I learned my lesson. If you give me another chance, I’ll produce.’ I’ve never done that before. I put him back in,” Duggan said. During the mid-morning talk with Gilbert, Duggan said he had just come from the weekly 9 a.m. Wednesday cabinet meeting, where Larkins reported the progress the mayor had demanded three years ago. “He reported today he has transformed that department — they’re making eight minutes,” Duggan said. “And I said to him, ‘Your personal growth as a manager has made life safer for every person in the city of

Detroit. You’re doing a helluva job.’” Sydney Zack, second deputy commissioner of the Detroit Fire Department and Larkins’ supervisor, also was temporarily displaced during Duggan’s management shakeup. “My philosophy was you don’t need the title to do the work,” Zack said in an interview. “And behind the scenes, we just kept doing the work.” When Larkins returned to the top post at EMS, he focused on hiring more emergency medical technicians, buying and equipping more rigs, installing a new computer-assisted dispatch system and changing emergency response processes. “It’s not just manpower, it’s not just rigs,” Larkins said in an interview. “It was the whole system that had to be put in place, tweaked or restarted from scratch.” Detroit went from six EMS trucks

in service before Duggan took office to up to 37 on the road during peak afternoon and night-time hours. The department went from 160 emergency medical technicians to 215 today and budget authorization to hire 60 more medics this year, Larkins said. “I’ve learned so much from (Duggan) about leadership and about how to motivate people and just the overall process improvement,” said Larkins, a 22-year veteran of EMS department. Duggan’s demand for data to analyze the department’s processes fueled the changes, Zack said. “When Mayor Duggan came in and set an expectation of how long does it take to do X, Y and Z, that’s when we started picking those times apart,” Zack said. As Duggan took the reins at City Hall in January 2014, EMS response

Department stores that once lined the city’s downtown in the 1950s left between 1962-64, when what was then known as the Pontiac Mall (now Summit Place Mall in Waterford Township) opened a few miles northwest, said Robert Gibbs, principal of Birmingham-based Gibbs Planning Group, who grew up in the city. But in recent months, several new projects have sprung to the surface. Compuware Corp. founder Peter Karmanos Jr. announced last year he was moving three of his Mad Dog Technology LLC firms into the Riker Building downtown, and BoonEx Inc., an Australian technology company, said earlier this year that it is pursuing a purchase of the Phoenix Center. The company was also expected to buy the Ottawa Towers office buildings to the south at the Woodward Loop, but that plan fell through because they were not large enough for the company’s needs, according to a report last month in The Oakland Press. And Pontiac-based general contractor George W. Auch Co. plans to build a new 20,000-square-foot headquarters downtown at 65 University Drive that is expected to be complete in a year on nearly 4 acres of former General Motors land. The city’s budget has gone from a $12 million shortfall to an $11 mil-

lion-plus surplus this fiscal year, said Mayor Deirdre Waterman. She said she “has no knowledge” of a pending deal for Williams International but said she would welcome a company “of that caliber” and what would be hundreds of jobs to the city, which does not have a major defense industry base. An economic development representative for Oakland County Executive L. Brooks Patterson did not respond to requests for comment. Patterson, through a spokesperson, declined comment. In his State of the County speech last month, Patterson said two defense companies would be bringing 1,000-plus jobs to the county. One of them is Livonia-based AM General, which announced plans to move its engineering and product development center to Auburn Hills, creating 55 jobs. But not all is rosy in the city. Crime remains a problem. More than 35 percent of its population still lives in poverty, according to the U.S. Census Bureau. Its unemployment rate is 9.5 percent; statewide, it’s 5.4.

Crain's reported had employed some 2,000 workers during the Cold War in the 1970s and 1980s (current employment figures are not known, although following the Cold War the company trimmed staff to around 800). The company was awarded $11.5 million in defense contracts (plus $1.3 million in subcontracts) in FY 2016 and $10 million in FY 2015, according to USAspending.gov. In FY 2014, it had a total of $40.8 million in contracts, with $33.2 million of that as a subcontractor. So far in fiscal 2017, which began Oct. 1, the company has received $300,000 in contracts. The company began in 1955 after Sam Williams, its founder, left Chrysler Corp. as an engineer and started the company using $3,000 in savings. Williams, who died in 2009 at age 88, was renowned for his patented invention of the small “fanjet engine” used in the development of several small business jets, Crain’s wrote in its obituary for Williams. A member of the National Inventors Hall of Fame and the National Aviation Hall of Fame, Williams was also honored with awards from Presidents Jimmy Carter, Ronald Reagan and Bill Clinton. Crain’s reported that the company had $200 million in revenue in 2004. Williams’ son, Gregg, succeeded him as chairman of the company.

A pioneering company There’s no shortage of jobs at Williams International, which in 1998

Duggan said there’s “nothing personal” about the accountability he’s demanding of his top managers. “Everybody has talent and if you grow, you make a huge impact and you’re rewarded,” the mayor said. “And if you don’t want to have that kind of accountability, you need to go work for somebody else.” Gilbert related the mayor’s management style to his own experiences with replacing longtime employees with “more motivated” and talented recruits. “And when that other person you finally recruit replaces (them), it’s not like years or even months, it’s like within days and a week, you’re like ... what the hell? Why did we wait so long?” Gilbert told Duggan. “Look at this difference. It’s not a little difference, it’s massive. It’s a lesson I’m always trying to remind myself.” Duggan worked in multiple management positions from Wayne County to the Suburban Mobility Authority for Regional Transportation bus service and the DMC. He ended the discussion by trying to piggyback on Gilbert’s comments about personnel decisions. “Once in a while after one week I look the other way and say, ‘What did I do?’ but most of the time, most of the time, I get it right,” Duggan said. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

‘Batman,’ ‘Transformers’ The studio’s financial backers other than Nelson are John Rakolta Jr., CEO of Detroit-based Walbridge Aldinger; and the Taubman family. Ari Emanuel, brother of Chicago Mayor and former White House Chief of Staff Rahm Emanuel, had been an investor but his interest was bought out some time ago, Nelson said last week. Located at the site of a former General Motors truck plant and office complex, the studio is where “Oz, the Great and Powerful,” “Batman vs. Superman: Dawn of Justice” and the “Transformers” series were filmed, among other projects. The film incentives started in 2007 under Granholm as tax credits; they became cash rebates in 2011, and Snyder signed legislation in 2015 to eliminate them. The budget he signed that year prior to the bill eliminating the incentives cut them in half, from $50 million to $25 million. The studio was heavily financed with public funds — including $18 million in bonds backed by the Michigan State Employees Retirement System — through a range of programs. The city of Pontiac, financially in distress at the time, also granted tax abatements. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

C R A I N ’ S D E T R O I T B U S I N E S S // M A R C H 1 3 , 2 0 1 7

ROCK FROM PAGE 3

Rock Connections provides call center services for Quicken Loans, Meridian Health Plan, Blue Cross Blue Shield of Michigan and companies affiliated with General Motors Co., You said. In addition to inbound and outbound calling for sales and lead generation, the company provides customer support services and appointment-setting, as well as email and text message direct marketing. About 300 Detroiters work at Rock Connections, You said. “A big chunk of the folks they’ve hired come from Detroit and the neighborhoods," Gilbert said March 1 during a company convention at Cobo Center. "You don’t need a college degree, maybe not even high school (diploma) if you’re good enough and you present well." You's leadership and the growth at Rock Connections were featured at the convention, which Gilbert's team calls the “Family of Companies reunion.” Gilbert also discussed Rock Connections during an onstage interview of Detroit Mayor Mike Duggan. A Crain's reporter was given access to cover the company meeting. The company is marketing itself as a call center that can generate revenue for clients instead of the “cents on the dollar ... savings” model of

LOANS FROM PAGE 3

At the end of last year, all but two of the companies were operating, with a collective 232 employees, according to newly released information from the foundation. Largely woman-owned startups, with just over half also minority-owned, the companies went on to leverage an additional $7 million in funding. Collectively, they reported just under $9.5 million in revenue for 2016. The foundation’s fledgling microloan program is funded with state microloan fund dollars, Community Reinvestment Act funds from local banks and donations from the foundation’s “Power of 100 Women” group of donors. It’s helping women who would not otherwise have had the funding needed to launch a business. “We’re breaking through that barrier, giving access to capital to people who could never have gotten it before,” said President and CEO Carolyn Cassin. Made through the foundation’s

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LARRY PEPLIN

Rock Connections provides call center services for Quicken Loans, Meridian Health Plan, Blue Cross Blue Shield of Michigan and companies affiliated with General Motors Co. overseas call centers, You said. “Why would we not create this right here in Detroit rather than Nebraska, India, the Dakotas or wherever it might be?” Gilbert told Duggan. The mayor agreed. “I think the call center has real opportunity,” Duggan said. “Detroiters want to work. We’ve just got to create the opportunity.” Call centers are known for having high turnover in employees. Rock Connections has a 26 percent attrition rate, according to You. But that includes employees who leave for another job within Gilbert’s family of companies, including Quicken Loans or the online mort-

gage giant’s in-house title company, Title Source, You said. Meridian has contracted with Rock Connections to do customer service for Medicaid patients, You said. Meridian shares its headquarters with Quicken Loans inside the former Compuware building at One Campus Martius, which the health care company co-owns with Gilbert. The company, which has telecommunications licenses in all 50 states, also sells automotive warranties for an Illinois company that You declined to identify. Rock Connections moved downtown in October 2012 and was originally housed inside the Qube, the

former Chase Tower. The company then moved into the One Detroit Center, which Gilbert bought for $100 million in 2015. In May 2016, Rock Connections moved into the building at 1900 Saint Antoine, which sits across Gratiot Avenue from the stalled Wayne County jail site that Gilbert is trying to buy to build a $1 billion mixed-use development. The call center company is now working with Gilbert's real estate management company, Bedrock LLC, to find additional square footage in downtown Detroit that “aligns with our campus,” You said.

$1.29 million revolving loan fund, the microloans are high-risk, made to people who could not get a bank loan, she said. Applying for a loan is really intimidating for a lot of entrepreneurs, said McClary, who was turned down for a conventional loan through her bank before applying for the Michigan Women’s Foundation loan. “It’s very scary to feel like you’re just going to be told no.” It wasn’t until three years after the launch of her business that McClary, then a participant in the Goldman Sachs 10,000 Small Businesses initiative, felt confident enough to approach the Michigan Women’s Foundation for a microloan. Armed with new knowledge of how to put together a strong business plan proposal for funding, she applied and secured the three-year, $40,000 microloan from the foundation in a matter of weeks. Alternative lenders like the Michigan Women’s Foundation are lending to “the human side,” assessing each person and their idea, rather than just the numbers, McClary said.

The loan was a turning point for her young company. Today, McClary Bros.’ drinking vinegars are served in more than 1,000 locations across 27 states. The Detroit-based company employs five people and has posted between $500,000 and $550,000 each of the past two years. It’s set to more than double revenue this year as it moves into private label products, McClary said. Since launching the microloan program in 2014, the foundation has made 52 loans. This year, it’s set a target to do 36, Cassin said. The loans range from $2,500$50,000, with an average loan amount of $23,800. While six or seven of the companies loaned money are behind in their payments, none have gone into default or walked away, Cassin said. The foundation is modifying payment amounts to help those struggling to afford the payments and offering extra support to help them expand their businesses. “Women are a good investment. They pay their money back,” Cassin said. A big part of what’s helping the companies the foundation has invested in succeed is guidance from its network of 400 mentors, most of whom are women, Cassin said. Mentors work with startup companies and others looking to grow to develop business plans and strategies. They also pick the finalists for the “Dolphin Tank” business plan pitch competition, a gentler version of the television show “Shark Tank,” along with the winners. In addition to its women’s entrepreneurship programs, the Michigan Women’s Foundation provides youth programming to help develop the

next generation of women leaders and leads fundraising efforts to fund testing of the Detroit Police Departments’ thousands of backlogged rape evidence kits, in addition to its programs supporting women entrepreneurs. It’s operating on a $2.2 million budget this year. The results the Michigan Women’s Foundation is seeing with its microloans and other entrepreneur programming are comparable to those of another NEI grantee, ProsperUs Detroit, NEI Director Pamela Pam Lewis: Lewis said in an Potential for email. growing jobs. ProsperUs, an entrepreneurial training and small business lending program for Detroit residents, is a collaboration between Global Detroit, Southwest Solutions and other community groups. Since 2014, it has made $500,000 in microloans to 29 businesses, which have since created 75 jobs, Lewis said. Those organizations, with others, like Kiva Detroit, are among an increasing number of alternative lending models entering the Detroit market, she said. Since May 2015, Kiva, through its fiduciary, the Build Institute, has made loans totaling $146,450 to 24 individuals. “We see significant potential in programs like these for growing new jobs and businesses in our region,” Lewis said.

INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: Ackroyd’s Scottish Bakery

Otsi Keta Capital LLC

Autobooks LLC

Qualified Temporary Services Inc.

Brixmor Property Group

Quicken Loans

Rock Connections

Community Foundation of St. Clair

Essen Bioscience Inc.

Simons-Michelson-Zieve Inc.

HistoSonics Inc.

Towbook LLC

McGregor Fund

United Shore Professional Baseball

Michigan Women’s Foundation Olympia Development

3 26

War Water Brewery Inc. Williams International Co. LLC

11 1

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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 // M A R C H 1 3 , 2 0 1 7

THE WEEK ON THE WEB MARCH 4-10

Evans: Gilbert’s jail plan must 'get better'

usinessman Dan Gilbert’s criminal justice complex proposal has to “get better” if he’s going to win approval of Wayne County officials to abandon plans to finish the long-delayed downtown jail project, county executive Warren Evans said in his annual State of the County address. Wayne County remains closer to a deal with Chicago-based Walsh Construction to finish the jail on Gratiot Avenue than with Gilbert’s Rock Ventures to move the jail, county courthouse and juvenile detention center to county-owned land on East Forest Avenue, Evans said. “The county is making good progress with Walsh toward finishing Gratiot. The Rock proposal is going to have to get better and move faster,” Evans said during an hour-long address to an invitation-only crowd of 700 people at the Ford Community & Performing Arts Center in Dearborn. Evans suggested that Gilbert’s proposal to build the county a $420 million jail, county courthouse and juvenile detention center on Forest Avenue east of I-75 may not be as fast of a solution to the county’s jail needs as restarting the Gratiot Avenue project, which has sat idle since the summer of 2013.

COMPANY NEWS J Nine hospitals in Michigan were recognized by Ann Arbor-based Truven Health Analytics in its annual list of 100 top hospitals. Truven, which analyzes data on more than 3,000 hospitals in clinical and operational performance areas, included on its list Beaumont Hospital in Royal Oak, Providence-Providence Park Hospital in Southfield, and St. Joseph Mercy hospital in Ann Arbor. J Construction crews at Little Caesars Arena in Detroit’s downtown area began installing the location’s ice rink to be used by the Detroit Red Wings. The playing surface will sit about 40 feet below street level and the Detroit Pistons’ basketball court will be erected over the ice during the concurrent seasons. J Gary Naeyaert, head of a school choice lobbying group founded by U.S. Education Secretary Betsy DeVos, resigned after coming under fire from Democrats for making an off-color remark about domestic violence during a Senate committee hearing. Naeyaert was the Great Lakes Education Project’s top lobbyist in Lansing. J Quicken Loans’ lending volume rose $17 billion to a record high of $96 billion in 2016, fueled by $7 billion from the Detroit-based lender’s new Rocket Mortgage product. J Penske Automotive Group Inc. acquired Jaguar and Land Rover dealerships in Paramus, N.J. The Bloom-

1 million

manufacturing in the new facility, scheduled to open in spring 2018. J New York-based investment companies Certares LP and Vanwall Holdings LLC purchased family-owned Guardian Alarm Co., headquartered in Southfield. The sale of Guardian Alarm, one of the biggest independent security firms in the country, closed Wednesday. The company did not release terms of the deal.

193

OTHER NEWS

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

The amount of DTE Energy Co. and Consumers Energy Co. customers affected by severe winds that battered the region and downed thousands of power lines.

The number of employees Troy-based Inteva Products LLC will lay off at its Adrian plant as a result of a program with one of the company’s largest customers, General Motors Co., coming to a close.

$1.8 million

The price tag of the Warren Valley Golf Course, which cash-strapped Wayne County plans to sell to a residential housing developer.

field Hills-based company expects to add about $215 million in revenue from the deal with the Prestige Family of Fine Cars. J General Motors Co. announced it will lay off 1,100 workers at its Lansing Delta Township plant, ending the third shift because one of its products — the GMC Acadia SUV — is moving to Spring Hill, Tenn. J Centric TV’s “Queen Boss,” a reality show featuring African-American women entrepreneurs, crowned Detroiter Nailah Ellis-Brown, founder of Ellis Island Tropical Tea, its first winner. She took home $25,000. J A subsidiary of Switzerland-based OC Oerlikon started construction on a new $50 million manufacturing and research facility in Plymouth Township. New York-based Oerlikon Metco (US) Inc. will make alloy powders for 3-D printing and additive

J A Wayne County judge denied Ambassador Bridge owner Manuel “Matty” Moroun’s request to dismiss condemnation proceedings on properties he owns in the pathway of construction of the Gordie Howe International Bridge. Moroun’s legal team has a “long history of taking action to delay” the building process, Judge Robert Colombo Jr. said. J The Macomb County Community Mental Health Authority is preparing for $12.4 million in planned Medicaid managed care cuts from the Michigan Department of Health and Human Services on April 1 that will touch many aspects of the authority’s operations. The cuts are part of the state’s 5-year-old regional funding redistribution program. J Oakland University will spend $51 million to overhaul its student center and expand parking on its Rochester Hills campus. The renovations will be funded by bonds totaling $124 million, which the university has also allocated for other university projects. J After a several-year hiatus, the Great Lakes chapter of the United States-Mexico Chamber of Commerce relaunched in Southeast Michigan. Jeff Jorge, principal, international growth services practice leader and Latin America-U.S. services desk leader at Baker Tilly Virchow Krause LLP, reintroduced the chamber, which advocates for growth and cooperation between businesses in the U.S. and Mexico.

DETROIT INSTITUTE OF ARTS

The Detroit Institute of Arts recently acquired 14 pieces of African American art, including this work, “Three Queens,” from Wadsworth Jarrell, founder of Chicago’s AfriCOBRA artists collective born from the Civil Rights Movement. The works are currently on display at the DIA.

RUMBLINGS Sphinx leaders to receive Kennedy Center awards Sphinx Organization Founder Aaron Dworkin and President & Artistic Director Afa Dworkin are set to receive the Kennedy Center Award for the Human Spirit for their work to increase diversity in the arts in Detroit and across the U.S. over the past 20 years. The award recognizes citizen artists who present and produce the arts in their communities and deepen the effect of arts and arts education at a local, state or national level. The Dworkins will be honored during the Washington, D.C.based center’s May 8 spring gala, along with fellow Human Spirit Award honorees, former Citigroup Chairman and CEO Sanford Weill and his wife, Joan, for their support of performing arts organizations across the U.S.

Sphinx Organization Artistic Director Afa Dworkin and Founder Aaron Dworkin.

Duggan targets communications in Detroit Mayor Mike Duggan is getting ready to add a new communicator on his staff who will be charged with getting information about city services in the hands of low-income and elderly residents who may not be connected to the internet. During a March 1 chat with businessman Dan Gilbert at Cobo Center, the mayor told a crowd of roughly 300 tech-savvy executives from Gilbert's family of companies that the city might turn back the clock in how it communicates with residents. “We’re actually talking about going back to old-fashioned things like newsletters delivered to homes to let you know when the leaf pickup is,” Duggan said. “When is the leaf pickup?” Gilbert asked, generating laughter

from his employees. “Uh, the leaf pickup is in the fall,” Duggan replied. Duggan said he's trying to “plug a hole” in the city’s communication to residents with a new aide. “I’m about to hire somebody who I think is probably a recognizable name for most of you who is going to come in and do that messaging for us,” Duggan said. Gilbert pressed the mayor for the individual's name. “He needs to tell his boss he’s leaving before I announce it,” Duggan replied. “So we’re down to 50 percent of the population,” Gilbert replied to Duggan’s gender identifier. Duggan spokesman John Roach said Friday the city was not ready to announce the hire.

RoboCop ‘Easter egg’ found in rendering RoboCop is seemingly alive and well, chilling on the east Detroit riverfront. If you look closely at a conceptual rendering of Franklin Street provided in the Detroit RiverFront Conservancy’s east riverfont plan that was unveiled last week, you can see the fictional cyborg police officer standing next to a little girl among a throng of people. Robert Kraemer, co-founder and principal of Detroit-based Kraemer Design Group PLC, which provided historic preservation consulting on the east riverfront plan, said Easter eggs are not unusual to find in renderings. The riverfront renderings were done by Chicago-based Skidmore, Owings & Merrill LLP. “It varies in context broadly, anything from an internal joke kind of thing versus just something fun,” he said. “I know that in the past, back in the days when a lot of hand render-

SKIDMORE, OWINGS & MERRILL LLP

RoboCop appears in a rendering of Franklin Street as presented in a plan for the east riverfront.

ings were done, oftentimes I used to remember seeing more of that, someone being truly an artist and putting their own touches on it.” “RoboCop,” the 1987 movie starring Peter Weller, is set in Detroit. There has been an ongoing crowd-funded effort since the Dave Bing administration to get a statue of the bionic cop erected in the city.

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