Crain's Detroit Business, May 15, 2017 issue

Page 1

MAY 15 - 21, 2017

Loyola delivers Detroit’s potential

Expansion is the plan as Bigalora buys Arbor Brewing

Ron Fournier’s column. Page 6

New owners aim to triple brewing capacity. Page 3

Investment

Real estate

Banking on Detroit

Religious groups hope Detroit’s rise helps them

“It wouldn’t have happened without the fund. We wouldn’t have been able to get the money to completely renovate the building.”

By Kirk Pinho kpinho@crain.com

Kirsten Ussery, Detroit Vegan Soul

PHOTOGRAPHS BY LARRY A. PEPLIN

Detroit Vegan Soul co-owners Erica Boyd, left, and Kirsten Ussery in front of their second location on Grand River Ave. in North Rosedale Park. They borrowed $100,000 from Chase’s Entrepreneurs of Color Fund to help finance the purchase and renovation.

J.P. Morgan Chase’s latest $50M investment in Detroit is good news for small businesses in the city, but it’s also a growth opportunity for the bank By Chad Livengood clivengood@crain.com

What started as J.P. Morgan Chase & Co. CEO Jamie Dimon’s desire to help Detroit as the city was going through a historic municipal bankruptcy three years ago has morphed into a business opportunity for the nation’s largest bank. Dimon came to town in 2014 to lavish the bankrupt city with a $100 million pledge in loans and grants for small business capital, economic development initiatives and real estate projects. Last Wednesday, Dimon dis-

patched a team of his bank’s executives to deliver another $50 million pledge toward underwriting Detroit’s nascent revival. But the money is not all charity — half of it has to be repaid through long-term loans. That’s because the bankers at this Wall Street institution see opportunity brewing in the Motor City — starting with their own ledger. With 19 branches in Detroit, Chase bank controlled 64.6 percent of the retail banking market share in the city with $20.2 billion in deposits as of June 30, 2016, according

to the most recent data from the Federal Deposit Insurance Corporation. FDIC data shows deposits last

June at Chase banks in Detroit were up 36.7 percent since June 30, 2013 — just 18 days before the city sought protection from its creditors in U.S. Bankruptcy Court. The J.P. Morgan Chase Institute, a company think tank, found that 58 percent of Chase consumer spending in Detroit last year occurred at small businesses. None of the other 14 U.S. cities studied had credit and debit card spending at small businesses exceed 50 percent of all spending, according to the study. SEE CHASE, PAGE 16

Among other things, the Rev. Jim Holley prays for good weather. His church’s tight budget can depend on it. “Don’t let it rain, don't let it snow, don’t let it be a blizzard,” said Holley, who leads the Historic Little Rock Baptist Church on Woodward Avenue in Detroit. “The few people that do Jim Holley: come won’t Churches losing come.” membership. Holley, who has been at Little Rock for more than 40 years, understands from decades of experience why churches and other religious institutions are looking to their real estate assets to help shore up their bottom lines amid shrinking memberships and high costs of maintaining architecturally stunning but old buildings. Simply put, fewer people in the pews means fewer donations. “The dynamics of the church is changing to the point where we are losing membership and therefore we are losing financial resources, so you have to do something to try to have income coming outside tides and offerings,” he said. The QLine street car, which opened to the public on Friday, is driving development interest along its 3.3-mile fixed route on Woodward Avenue. On and around the Woodward corridor, eye-popping projects have been floated, including what would be the city’s tallest building at 734 feet at the former J.L. Hudson’s department store site. SEE CHURCHES, PAGE 17

© Entire contents copyright 2017 by Crain Communications Inc. All rights reserved

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rebounded after the giant’s shutdown. Page 8 Executives say state bioscience industry needs capital, tax credits to grow. Page 9

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MICHIGAN BRIEFS Mackinac conference to feature Detroit schools superintendent The incoming superintendent of the Detroit Public Schools Community District will be one of the first speakers of the Detroit Regional Chamber’s conference on Mackinac Island later this month. Gov. Rick Snyder will also unveil a series of recommendations from a commission he appointed to study trends that will shape Michigan’s economic future. Nearly 1,700 leaders in Michigan business, education, philanthropy and politics are registered to attend the Detroit chamber’s 37th annual Mackinac Policy Conference from May 31 to June 2 at the Grand Hotel. This year’s conference pillars focus on increasing economic opportunity in Detroit and outstate, positioning Michigan to be a leader in next-generation mobility and restoring civility in politics. Nikolai Vitti, Detroit’s new schools superintendent, will talk about his vision for rebuilding the state’s largest school district during a session sponsored by the Skillman Foundation on May 31, the opening day of the conference. The Detroit school board voted last month to hire Vitti to be the dis-

The Detroit Regional Chamber’s 37th annual Mackinac Policy Conference runs from May 31 to June 2 at the Grand Hotel. trict’s first superintendent since the school system was restructured last year and emerged from seven years of control by emergency managers. Vitti is the current superintendent of Duval County, Fla., schools and told his school board he will start work in Detroit by May 29, the Florida TimesUnion reported. Also on the opening day, Snyder will present the policy recommendations of his 21st Century Economy Commission, said Sandy Baruah, president and CEO of the Detroit Regional Chamber, who is also chairman of the economy commission.

Lawmaker found dead hours after arrest A Michigan lawmaker was found dead last Tuesday inside his Lansing home hours after being released on what may have been his second drunken driving arrest in less than two years, the Associated Press reported. Officers responding to a welfare check request found the body of state Rep. John Kivela about 1 p.m. at his out-of-district home just northwest of the state Capitol, Lansing police spokesman Robert Mer-

INSIDE ritt told the Associated Press. “At this point there are no obvious indications of foul play,” Merritt said. An autopsy is expected to be performed to determine how Kivela died. The third-term Democrat from Marquette in Michigan’s Upper Peninsula was arrested about 4:45 p.m. Monday when he was stopped by deputies on southbound U.S. 127 near Maple Rapids in Clinton County, Sheriff Lawrence Jerue said. Jerue said Kivela was jailed and released Tuesday on bond. He would not discuss why Kivela was arrested and said formal charges were expected to be issued at a May 18 arraignment. The Detroit Free Press reported Kivela was arrested for suspected drunken driving.

Regulators to decide fate of nuclear contract The Michigan Public Service Commission is deciding whether ending a nuclear power purchase contract would be a cost-saving decision for energy customers. The commission held back-toback public meetings in Lawrence to focus on Jackson-based Consumers Energy Co.’s plan to termi-

CALENDAR

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CLASSIFIED ADS

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DEALS & DETAILS

13

KEITH CRAIN

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OPINION

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OTHER VOICES

7

PEOPLE

14

RUMBLINGS

19

WEEK ON THE WEB

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COMPANY INDEX: SEE PAGE 18

nate a 15-year contract with Entergy Corp., headquartered in New Orleans, that began in 2007 after the latter company announced plans to shut down its Palisades Nuclear Power Plant in 2018. The original agreement let Consumers purchase nearly all of the power Palisades generates through 2022. Consumers has proposed to recover a $172 million buy-out payment through customers utility rates. A financing order application shows Consumers alleging its customers would save between $54 million and $1.1 billion by ending the contract early, despite the utility charges. The commission will decide on Consumers’ proposal by August.

Not all heroes wear capes. Crain’s Health Care Heroes recognizes today’s industry professionals who are dedicated to helping save lives and improving access to care.

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TIME IS RUNNING OUT. THE DEADLINE TO NOMINATE IS MONDAY, MAY 22. For more information and to submit a nomination visit: crainsdetroit.com/nominate

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Acquisitions

Farm + Ferment, the holding company for Bigalora and several other entities, formed ABC Brew Holding LLC to acquire Arbor Brewing Co.’s brewpub in Ann Arbor and ABC Brew Production LLC to acquire Arbor’s Corner Brewery and brewhouse in Ypsilanti.

DOUG COOMBE

Arbor Brewing acquired as brewers build statewide brands By Dustin Walsh dwalsh@crain.com

The new owners of Arbor Brewing Co. plan to capitalize on the recent trend of expanding brewpubs across the state in a bid to market Arbor’s beer to new drinkers. The owners behind Bigalora Wood Fired Cucina and Michigan Hop Alliance closed last week on a deal to acquire the Ann Arbor brewpub and Ypsilanti brewing operations from previous owners Matt and Rene Greff. Financial terms of the

MUST READS OF THE WEEK Skills gap Costs, lack of interest put damper on apprenticeship programs. Page 5

Chad Livengood Passage of brownfield bills signals shift in out-state attitudes about Detroit. Page 14

10-year agreement were not disclosed. Farm + Ferment, the holding company for Bigalora and several other entities, formed ABC Brew Holding LLC to acquire Arbor’s brewpub in Ann Arbor and ABC Brew Production LLC to acquire Arbor’s Corner Brewery and brewhouse in Ypsilanti with plans to expand its geographical reach. The company will expand annual brewing capacity in Ypsilanti from 6,000 barrels to 20,000 barrels later this year to supply at least two

new yet-to-be-determined locations in Southeast, Southwest and Northern Michigan, said Mike Collins, managing principal of Farm + Ferment. “(The expansion) will be similar to what we did with Bigalora,” Collins said. “We don’t have hard and fast objectives. We want to take advantage when we see an opportunity, but we want to make sure our current operations don’t suffer and that any new locations get the attention to get up and running successfully.”

Bigalora, founded by Chef Luciano DelSignore in Southfield in 2010, has expanded to six locations with the most recent opening in February in Rochester Hills. The other locations are in Royal Oak, Ann Arbor, Ford Field in Detroit and at the Detroit Metropolitan Airport’s McNamara Terminal. Same-store sales were up 15 percent in 2016 compared to 2015, and in 2015 same-store sales increased by 10 percent compared to 2014. SEE ARBOR, PAGE 15

“They will be separate and distinct with Bigalora focusing on its Italian offerings and Arbor with more American pub food.” Mike Messink, Farm + Ferment

Sports business

Minor leagues find major support in metro Detroit By Bill Shea bshea@crain.com

Detroit may be one of the nation’s great major league sports cities, but a couple of minor-league organizations have carved out successful niches. The semi-pro Detroit City FC soccer club in Hamtramck and the fourteam United Shore Professional Baseball League in Utica are playing to sellout crowds. Both organizations also have been able to attract enough corporate sponsorship dollars to sustain themselves. Neither has the lure of elite household name players or the windfall of lucrative TV deals, so how have they

pulled it off? The answer is a confluence of factors, sports industry insiders say: Timing, professionalism, and fan-friendly pricing in a market still recovering from the recession. “People really want to take their kids to sport events. These two particular sports both have a model where they can afford to make it work while still only charging $6 to $10 for a ticket,” said Mike Dietz, president and director of Dietz Sports & Entertainment in Farmington Hills. Here’s a look at the playbooks the USPBL and Detroit City FC have used. SEE LEAGUES, PAGE 18

KURT NAGL/CRAIN’S DETROIT BUSINESS

Fans turn out for opening day of the United Shore Professional Baseball League at Jimmy John’s Field last week.

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Fieger ‘darn serious’ about running for governor again By Chad Livengood clivengood@crain.com

EAST LANSING — Southfield trial attorney Geoffrey Fieger said Friday that he’s “darn serious� about running for the Democratic nomination for governor in 2018 — 20 years after his failed gubernatorial campaign against incumbent Republican Gov. John Engler. In an interview on WKAR TV’s “Off The Record,� Fieger said he would tap into the populist voter anger that propelled President Donald Trump into the White House — if he actually gets into the race to succeed term-limited Republican Gov. Rick Snyder. Fieger said Michigan has suffered from an “absence of vision� under Snyder and his predecessor, Democrat Jennifer Granholm. “I’ve watched the state deteriorate to the point at which we can’t travel our roads, our schools are disintegrating, we’re not paying workers what they should be paid, we’re engaging in a war on teachers,� Fieger said. Fieger, owner of the Southfield-based personal injury firm Fieger Law and probably best known as the defense attorney for right-to-die activist Jack Kevorkian in the 1990s, spent $6 million of his own money in 1998 but lost to Engler by 24 percentage points or nearly 740,000 votes. He said Friday that the political climate has changed in Michigan after Trump upset Democrat Hillary Clinton in the presidential race. The bombastic and media-savvy attorney said he'd consider running for president in 2020 if he could capture the governor's mansion next year. “If I do run for governor, I’m not going to promise not to run for president because I think ‘2020: A Clear Vision for America’ is a damn good slogan,� Fieger said. “I think that’s a lot better than Make America Great Again.� Fieger’s television advertising for his law firm has been prolific across the state for years. But in recent months, Fieger has been running ads that have more to do with American politics and governance than winning the kind of multimillion dollar personal injury judgments in which his firm specializes. The filing deadline for the August 2018 primary for governor is nearly a year away. But the early jockeying for position in the Democratic Party heated up this week when U.S. Rep. Dan Kildee of Flint Township announced he won’t run for governor. Kildee’s decision to run for re-election to Congress has made former state Senate Minority Leader Gretchen Whitmer of East Lansing the perceived frontrunner for the nomination against a

“I’ve watched the state deteriorate to the point at which we can’t travel our roads, our schools are disintegrating, we’re not paying workers what they should be paid, we’re engaging in a war on teachers.� Geoffrey Fieger

Geoffrey Fieger: Political climate has changed.

Gretchen Whitmer: Already seeking nomination.

field of lesser-known candidates that includes former Detroit Health Department Director Abdul el-Sayed. Farmington Hills attorney Mark Bernstein said this week on WJR-AM 760’s Paul W. Smith Show that he’s “very seriously� considering a bid for the Democratic nomination for governor. Fieger jumped into the 1998 governor’s race in the spring of that year, just before the filing deadline. Like last time, Fieger said he’s in no rush to make a decision about running. “Everybody’s telling me, just like they told me then, oh you’ve got to do this now because labor is going to back Mr. Bernstein or Ms. Whitmer. With what? (The unions) don’t have any money,� Fieger said On the Republican side, Attorney General Bill Schuette and Lt.

Gov. Brian Calley are widely expected to face off for the GOP nomination next year. Calley is expected to kick off his campaign May 30. Fieger dismissed Bernstein and Whitmer’s candidacies between taping of the 30-minute “Off The Record� segment for public television stations and an “overtime� segment for WKAR’s website. “I think Bernstein would be fine,� Fieger said. “He doesn’t know anything, but he’d be fine.� “I don’t know who Gretchen Whitmer is,� Fieger added. “I don’t want another Granholm. She was so weak in terms of the Legislature.� Granholm was elected governor in 2002 with no legislative experience. Whitmer spent 14 years in the Legislature until being forced out of office in 2014 by constitutional term limits. “Isn’t that a sexist statement to compare (Whitmer) to Granholm?� show host Tim Skubick asked Fieger. “I don’t know. Granholm didn’t impress me,� Fieger replied. “I don’t think it had anything to do with sexist.� During the interview, Fieger insisted he’s not floating his name for governor to inflate his well-documented ego. “I certainly don’t need the attention,� he said. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

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Costs, lack of interest put damper on apprenticeship programs By Dustin Walsh dwalsh@crain.com

AlphaUSA needs to hire die makers, electricians and maintenance workers to keep growing. Its executives are among the throng of Southeast Michigan employers lamenting the skills gap that threatens productivity, growth and the economy at large. Yet the family-owned metal fastener and engineer services supplier in Livonia ended its apprenticeship programs years ago and has no immediate plans to launch another. Alpha understands the benefits. The state offsets the costs with significant grants per apprentice. For every dollar spent on an apprenticeship program, an employer gains $1.47 on average in productivity increases, according to a recent Georgetown University study. Turnover is reduced. Skilled workers are created. But all the supplements mustered can’t revive a practice that’s been gutted of its lifeblood — workers who want in and will complete the programs. “There is, frankly, a lack of interest,” said David Lawrence, vice president and chief administrative officer for Alpha. “We keep getting approached and that the state can offset the costs, but our current employees have no interest in learning or going back to school...” The state is trying to boost learnwhile-you-work programs, which are up to 999 registered programs this year from 782 in 2014, according to the U.S. Department of Labor. However, registered apprentice programs are still down more than 50 percent since 2005 after taking a huge hit during the Great Recession. Marcia Black-Watson, administrative director for industry engagement at the state’s Talent Investment Agency, said employers have reached a tipping point where building their own workforce is critical. “Because the labor market is so tight, because we have the lowest unemployment rate we’ve seen in years, it’s become difficult to find talent in skilled occupations,” Black-Watson said. “Employers now are really considering investment to grow their own talent, and apprenticeships are one of those (investments).” Federal and state governments are trying to fuel that growth, Black-Watson said. Gov. Rick Snyder initiated the Skilled Trades Training Fund in 2013, which provides $1,500 per apprentice for classroom training, $1,500 per apprentice for wage reimbursement and allocates an additional $3,000 per new apprentice from the labor department. The use of public funds serves a purpose. Professional trades will account for more than 500,000 jobs in Michigan’s economy by 2024, accounting for 16 percent of all job growth during that period, according to the state. Skilled trades are also projected to grow 50 percent faster than the statewide average during that time and offer a median wage 45 percent higher than the median for all occupations in the state. In 2015, a new apprentice made an average of $14.51 per hour and an ap-

“We keep getting approached and that the state can offset the costs, but our current employees have no interest in learning or going back to school...” David Lawrence, AlphaUSA

prentice graduate earned $25.21 per hour. Higher-paying, more stable jobs equal more tax revenue and less reliance on social safety nets. But Anthony Carnevale, director of the Georgetown University Center on Education and Workforce in Washington, D.C., said U.S. employers still struggle to rationalize the expense of apprenticeship programs, even though there is a clear return on investment. An apprenticeship can cost an employer from $25,000 to $250,000, according to data gathered by Carnevale. “The U.S. does not have a tradition of employers being willing to pay to have people in the workplace only three days a week at their own cost,” Carnevale said. “We know that apprenticeships work, they provide higher earnings and productivity, but

no one wants it.” And despite increasing numbers joining apprenticeships, fewer have the skills they need to complete programs, Carnevale said. Between 2008 and 2015, the number of newly registered apprentices in Michigan grew 69 percent from 3,132 to 5,305, according to a November report by the Michigan Department of Technology, Management and Budget. Apprentices completing programs dropped to 765 in 2014 from 1,275 in 2012, largely due to shrinking enrollments after the Great Recession. That figure is now rising, with 878 completions in 2015 and 1,116 in 2016. Apprenticeships typically take one to four years to complete. Experts say Michigan’s strong economy may actually harm enrollments. Michigan’s unemployment rate remains low at 5.1 percent in March, down from 5.3 percent in February. “Apprentices who find higher-paying work are likely to drop out of their apprenticeship program,” said Wallace Hopp, associate dean for learning design and professor of industrial and operations engineering at the University of Michigan Ross School of Business. “And as the more qualified people find regular jobs, the apprenticeship programs are forced to dig deeper into the pool and hence wind up getting more people with problems — drug use, family issues or

just a lack of motivation — that will make them less likely to see the program through to completion.” Michael Richard, business manager and financial secretary for the International Brotherhood of Electrical Workers Local 58 in Detroit, confirmed the economy is constricting talent. Local 58, which operates its own apprenticeship school in Warren funded by its members, uses a strict entrance exam to weed out potential dropouts. But they’re struggling to fill growing demand in the construction sector, he said. The local recently began a 10-week pre-apprenticeship program to help get candidates up to speed on the requirements before enrolling in the regular program. Roughly 87 percent of its apprentices complete the program. IBEW currently has 600 in its apprenticeship program, down from a peak of 725. Richard said the program hopes to reach 725 this year, but will not commit to more even if there’s increased demand. “We have to be careful because of the cyclical nature of our industry,” Richard said. “We’re feast or famine. I can’t put people in the program only for them to be two years in and have the rug pulled out. That’d be a tragedy.” The fix, Lawrence said, is on the supply side of the workforce-educa-

tion equation: getting young people, educators, and their parents interested in the skilled trades. “We need to get to young people in middle school or before; that’s when young people are engaged on whether their future includes education or not,” Lawrence said. The state is beginning to make headway on this front. Last month, it launched the second phase of its Going Pro campaign, which is focused on increasing the visibility of skilled trades to students and parents. The campaign started last year with billboards; the second phase will now focus on educating parents and students on career choices beyond a four-year degree. Carnevale said engaging students in vocational training is now more critical than ever — because civil unrest begins with employment stagnation. “In Europe, governments focused academic reform on vocational training by passing laws because they were fearful of war and revolution. They had to do something for the workforce, and in a hurry, because they were scared,” Carnevale said. “We’ve never had that ‘come to Jesus’ moment in America. But it’s here now. Apprenticeships are the world gold standard for creating jobs. Let’s hope our (local and national) governments listen.” Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

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Men for others

OPINION

I

f you look hard enough, you can find a business story almost anywhere. Just the other day, I found one over the shoulder of a priest. His name is the Rev. Mark Luedtke, a Jesuit who runs Loyola High School on the city’s northwest side. On my visit to his modest office, Luedtke bent his lanky frame into a sofa beneath a window overlooking Pinehurst Street. Pointing a thumb over his right shoulder, Luedtke told me about a junior at his all-boys school who lives in a house across the street, the one with a blue door. “He’s a good kid. Gets good grades. But he can’t get himself here on time,” Luedtke said. “Both of his parents work the day shift and there’s nobody there to get him up in the morning.” Two other men in the room nodded their heads — Bill McGrail, director of advancement, and Terry Rhadigan, an executive at General Motors who sits on the school’s board. “So we routinely knock on his door to drag him off to school,” the priest chuckled. “It’s hard for boys to hide here. They try; they’re boys. But we find them.” How is this a business story? Well, the boy who lives behind that blue door grew up in a city filled with young men and women whose futures are linked to public and charter school systems that are unworthy of them. Given a first-class education, these young men and women could fill the talent gap that plagues every Michigan business. They could innovate southeast Michigan into a diverse economy. They could show Detroit and the world how a modern city grows prosperity while shrinking inequality. They could thrive. Unfortunately, few young Detroiters are as lucky as the boy who lives behind the blue door. While so many struggle with poverty, violence, family strife and a third-world education, the boy behind the blue door is one of 147

RON FOURNIER Publisher and Editor

Ron Fournier is publisher and editor of Crain’s Detroit Business. Catch his take on business news at 6:10 a.m. Mondays on the Paul W. Smith show on WJR AM 760.

young men who attend Loyola High School. Established in 1993 by the Archdiocese of Detroit and the Jesuit order, the school has one teacher for every nine students. Each of the students is fed three times a day at the school. They pray together every morning in a gym converted into a tiny church. They play basketball in a church converted into a huge court. Loyola’s varsity sports include football, rugby, bowling, cross country and track. Their extracurricular activities include debate, art club, Model United Nations and the National Honor Society. Juniors and seniors get work experience at local companies and nonprofits. Their salaries help defray tuition costs, contributing 15 percent of the school’s budget. To graduate from Loyola, a student must be accepted to a two- or four-year college program. Luedtke can’t force them to go, but he can make sure they earn a shot. Three Loyola alums now work at the school: dean of student formation Michael Black, director of admissions Paul Davis, and principal Wyatt Jones III. Eighty-five percent of Loyola students live in Detroit, and the rest come from surrounding communities. Almost all of them are African Americans. Luedtke concedes that other pri-

COURTESY LOYOLA HIGH SCHOOL

Michael Black, (left) dean of Student Formation and a 2001 Loyola High School graduate, Paul Davis, director of admissions, class of 2011, and Wyatt Jones III, principal, class of 1998, went on to earn college degrees and came back to work at Loyola. vate schools, and even some public/charter schools, do a lot to lift students out of poverty. He claims to have an edge in the Jesuit spirit of doing more as “men for others.” “We ask the questions, ‘Have you been fed? Are you getting enough sleep? Are you the only responsible adult at home?’ Those are the burdens our kids bring to school,” Luedtke said. “What we bring is the question, ‘Are you OK?’ Once that trust is built up, then we can teach you.” Rolling his eyes, Luedtke told me about a recent night when a student with a rocky family situation didn’t want to go home from school. A few of his classmates got wind of the boy’s plight and stayed late with him. Close to midnight, they were finally persuaded to leave the school with their parents. While Luedtke was not happy with the in-

trusion, he was proud of the boys for sticking together. “Men for others,” he smiled. Just then, the door opened and the school’s legendary new football coach glided into the room. William Tandy coached the Westside Cubs of PAL for 23 years before joining Loyola this year, sending more than 100 players to a Division I college and a half dozen to the NFL. He remembers the ones he lost, the young men who squandered their potential to poor grades or criminal behavior. That’s why his motto now is “God. Books. Ball.” “If your life isn’t in order. If your school isn’t in order,” he tells his players, “we don’t have room for you on the ballfield.” I ask the guy from GM, board member Terry Rhadigan, why Loyola is a business story. He said

the work-study program is a great way for GM to introduce the company to an untapped workforce. “These kids are our future.” McGrail agreed. “Downtown and Midtown are great, but these drive-by neighborhoods — these places people drive by while going from downtown to the suburbs — are filled with potential.” Tuition is a maximum of $4,300 per year. The average family pays $1,850. Every family pays at least $20 a month. But it costs $18,000 to educate a single student for a year, leaving a gap that can only be filled by people who donate money or sponsor the work-study program. You can contribute here: http:// loyolahsdetroit.org/home/support/ Your return on investment? Ask the boy behind the blue door — and the thousands like him.

streetcar line, and more stores and restaurants will follow. It will be interesting and exciting to watch. I am sure that this will be so successful that Detroit citizens will be clamoring for expansion of the line to cover other parts of the city: continuing north on Woodward or Jefferson Avenue to the east or Grand River to the west. The question is how difficult will it be for this small street car system to support itself or how much of a subsidy will be neces-

sary. With the huge economic byproduct, it makes sense to support the system. The only question will be at what level. It is the height of irony that Detroit is returning to a system that it tore up more than 50 years ago. It is also important to remember that there will be shifts in population over the next 50 years that could make this route obsolete. Three cheers for all the people and funders that made this happen.

Suddenly it’s yesterday

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here is something ironic that over a half a century ago, Detroit tore up all the streetcar tracks to make more room for the car. On Woodward Avenue, not only did they tear out the tracks, they made the street wider, tearing off the front accessways of businesses and churches. It worked for 50 years, but now it is time to re-introduce, in a small way, the trolley system to Detroit. To quote Neil Armstrong, this is "one small step for Man."

KEITH CRAIN Editor-in-chief

I never saw that original streetcar system that stretched well beyond Detroit’s borders. It ended in

1956. But everybody is talking about this new passenger system on Woodward that opened to the public over the weekend. I think it will be a real power as an economic development engine. Anywhere you go in the country, mass transit has spawned huge economic development. We already are seeing new businesses that have sprung up along the route and new apartments and condominiums. We’re going to see more. People will want to move near the

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What cities can learn from Detroit’s resurgence The Motor City, once one of America’s most prosperous cities and an engine of economic growth, turned in a matter of decades into one of its most distressed. The city often conjured up images of dilapidated homes, abandoned lots and communities struggling with high unemployment and high crime. For too long, Detroit was viewed as a ghost town, a warning of what can happen when too many of a city’s critical, interconnected elements go wrong. About three and a half years ago, while Detroit was still in bankruptcy, J.P. Morgan Chase Chairman and CEO Jamie Dimon directed me to take a team to the city to see what our company could do to help. What we found was a newly elected mayor with a strong team and a great vision for their city. We realized that there was an unprecedented spirit of cooperation and commitment among the city’s civic, business and nonprofit leaders. And in addition to the tremendous need, we saw that there was opportunity where the right kinds of investments, not just money, could make a real impact. So we made a big bet on Detroit’s turnaround. To help accelerate the city’s comeback, we committed to in-

OTHER VOICES Peter Scher

Scher is head of corporate responsibility and chairman of the Greater Washington Region for J. P. Morgan Chase and Co. vesting $100 million over five years along with leveraging our core business and our people’s expertise in key areas such as community development, small business lending and workforce readiness. Detroit has now turned the corner, and the innovative efforts behind the city’s resurgence offer powerful lessons for all of us — particularly for business and political leaders — on how to tackle tough challenges facing communities around the world. First, we know that cities offer the greatest potential to drive economic growth, but any future efforts must include a comprehensive approach to ensure that opportunity does not stop

at commercial corridors but extends into a city’s neighborhoods. Therefore, to achieve long-term success, we must cultivate inclusive growth strategies that connect families, entrepreneurs and distressed communities to more economic opportunities. Harnessing the power of technology to stabilize Detroit’s neighborhoods has also been a critical part of this strategy. The Motor City Mapping project uses technology developed by Loveland Technologies to digitize property information and help city officials, residents and community groups work together to transform blighted properties. The success of these efforts in Detroit has caught the attention of other city leaders seeking to deal more effectively with blight and distressed properties and make more data-driven decisions on community development. J.P. Morgan Chase is now expanding this data-mapping tool to three cities in Ohio — Cleveland, Cincinnati and Columbus — that face similar challenges. Third, supporting underserved minority entrepreneurs is critical to unleashing the power of small business as a driver of economic opportunity and is essential to a city’s transforma-

To achieve longterm success, we must cultivate inclusive growth strategies that connect families, entrepreneurs and distressed communities to more economic opportunities.

tion. Research shows that small businesses are more likely than their larger competitors to hire from distressed neighborhoods where unemployment is high. In Detroit, the fourth-largest U.S. city for the number of minority-owned businesses, programs like the Entrepreneurs of Color (EOC) Fund are proving to be a crucial component of the city’s comeback. The EOC Fund, which provides flexible financing to minority-owned businesses that lack access to traditional forms of capital and credit, has awarded 44 local businesses with $3.4 million in critical capital. Such in-

sights have helped us sharpen our focus on supporting underserved entrepreneurs and have led our firm to refine our approach and develop a model that is yielding real results. Finally, while there are many critical lessons coming out of Detroit, one of the most important is that moving the needle on complex and interconnected social and economic issues requires a comprehensive, integrated, data-driven approach — and collaboration is the linchpin. This is one of the key elements that is making Detroit’s turnaround possible and it is a lesson to which leaders in business and government should look on how to get things done. This approach and strong cross-sectoral collaboration has enabled us to exceed our initial $100 million commitment two years ahead of schedule and extend our commitment over the next two years to support the city’s continued recovery. We now expect our investment to reach $150 million by 2019. Detroit still has a long way to go, but the efforts spurring the city’s turnaround should inspire us all to take a page from its playbook, work together to solve problems and drive inclusive economic growth.

Don’t let licensing keep ex-prisoners from working Can a job keep someone out of jail? Michigan legislators seem to think so, as they are pushing a new bill that would give money to employers who hire former offenders. The need is real: Nearly one in three ex-offenders in Michigan ends up returning to prison, and many experts believe unemployment is a leading cause. But the biggest problem is not that employers can’t afford to hire former offenders. It’s that state law creates needless barriers for these job-seekers. A chief culprit is Michigan’s onerous occupational licensing laws. Under this regulatory regime, the state restricts people from legally working in certain industries unless they have a license. Acquiring a license means spending hundreds or thousands of hours on training, paying fees, and passing a “morality” review, which includes a criminal background check. More than 150 professions in Michigan require a license, including barbers, dance instructors, potato dealers, fishers, shampooers, milk samplers, manicurists, butter inspectors and even finger nail technicians. Nearly 21 percent of Michiganders need permission from the government before they are legally allowed to work in their desired field. Even flower gardeners and horse jockeys need state approval before they can earn a living. It wasn’t always this way: In 1950, approximately five percent of jobs in the United States required a license; today, it’s nearly 30 percent. Experts on both sides of the policy spectrum — from the Charles Koch Institute to the Obama White House — agree

OTHER VOICES Jordan Richardson and Jarrett Skorup

Richardson is a senior policy analyst for criminal justice reform at the Charles Koch Institute in Arlington, Va. Skorup is a policy analyst at the Mackinac Center for Public Policy in Midland. that there is little evidence that these laws protect public health or safety. Such laws are detrimental for an ex-offender’s chance to land gainful employment. People with criminal records, even if they meet all training and educational requirements, are often automatically forbidden from obtaining a state license to work. This is because Michigan laws ban people with almost any criminal record from working as school employees or health care workers. This is true even if an offender’s crime had nothing whatsoever to do with the occupation for which they seek a license. In the dozens and dozens of other occupations that require state permission, the law allows licensing agencies to use criminal records as evidence of whether someone has enough “good moral character” to join a profession. This ambiguous and subjective attribute can be used to discriminate against former offenders by forever treating

their past mistakes as a strike against them. There is a strong link between occupational licensing laws and recidivism rates — the chance someone returns to prison. A recent Arizona State University study found that states with the heaviest occupational licensing burdens experienced, on average, a nine percent increase in recidivism rates from 1997 to 2007. States with the lowest burdens — and no “good moral character” provisions — experienced a decline in recidivism rates of almost three percent, on average. The study concludes, “The greater the legal restrictions to working in a state, the higher the likelihood that an ex-pris-

oner will be turned away from entering the labor force and will return to crime.” It’s true that some restrictions on ex-offenders might make sense. Someone convicted of fraud or embezzlement, for example, may not be suited for a license in financial management. But it’s important to remember that Michigan’s occupational laws have little demonstrable impact on public safety. Instead of protecting the public and ensuring competency, most of these arbitrary laws simply serve as needless barriers to job opportunities for ex-offenders, and many other people as well. The good news is that there is mo-

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tivation in the state for change. Gov. Rick Snyder has urged the repeal of many licensing laws and has said he will not allow the state to erect additional barriers to getting a job unless they can be proven to directly protect public health and safety. Michiganders should be free to pursue their right to earn an honest living without having to overcome government-imposed obstacles. Limiting opportunity through excessive licensing hurts everyone, but especially those trying to acclimate back into productive society after serving time. If Michigan wants to reduce its recidivism rate, it should start by reforming its occupational licensing laws.

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SPECIAL REPORT: HEALTH CARE

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A decade later, Michigan pharmaceutical companies have found paths to growth By Jay Greene jgreene@crain.com

Ten years later, the pharmaceutical industry in Michigan has more than rebounded from Pfizer Corp.’s shutdown of its Ann Arbor and Kalamazoo research operations. Stephen Rapundalo, CEO of MichBio, says the industry has experienced more than an 11 percent job growth the last five years, spawning many startup companies, and is a stronger and a more diversified industry than before the giant global drugmaker left. “Overall, the ecosystem has grown and the startups, Stephen some formed by purchasRapundalo: ing (intellectual property) Ecosystem has from Pfizer, have helped digrown. versify the sector very nicely,” said Rapundalo, whose MichBio represents 160 bioscience, pharmaceutical, medical device, information technology, universities, law firms, consultants and related support companies. “That was for the better, quite frankly, because reliance on a large company could be dangerous, especially when crisis happens, you are stuck scrambling how to keep an industry going.” Since Pfizer left, such pharma companies in Michigan as ONL Therapeutics, Lycera and Millendo Therapeutics have grown in multiple ways. They include doing it the old-fashioned way of developing an innovative drug, winning grants, gaining investors, developing products and later gaining U.S. Food and Drug Administration approval for sale. An increasing number — Gemphire Thera-

peutics, Esperion Therapeutics, Essen BioScience and Diplomat Specialty Pharmacy — have also recently gone public, selling millions of dollars of shares in initial public offerings to jumpstart research and development, often leading to human clinical trials. During Pfizer’s research heyday in Southeast Michigan, the global drug company bought every pharmaceutical company that had any promise in the state, said Mina Sooch, CEO of Livonia-based Gemphire. “When they left in 2007, it was a big deal. They took all the research and development infrastructure with them and moved it to St. Louis and Groton,” Conn., said Sooch, who has been in the pharma industry in Michigan since 2000 and is the former CEO of ProNAi Therapeutics Inc. “If you didn’t want to move, you needed to find work or retire. Hundreds of scientists started up new companies, joined existing companies like Perrigo or Ash Stevens, or went to the University of Michigan.” Sara Kruse, a health care attorney with Jaffe Raitt Heuer & Weiss in Southfield, said there are a variety of ways companies can generate revenue to grow, regardless of how young or mature they are. “Biotech companies have long development and life cycles before they go to market,” said Kruse. “It takes a combination of private investors, grant funding, angel investors, then you move to the IPO route or maybe you get acquired early on and develop a strategic relationship with a larger pharmaceutical company,” she said. One good example is Lycera, which in 2015 signed an agreement with Celgene Corp. to acquire Lycera after it hits pre-specified clinical milestones for drugs in its pipeline. Lycera is developing small molecule autoimmune disease

and cancer medicines. Another good example is when Ash Stevens Inc. got a $53 million offer last August it couldn’t refuse from India-based Piramal Enterprises Ltd. Founded in 1962 by two Wayne State University professors, Ash Stevens is planning another major expansion at its Riverview manufacturing plant. Kruse said she often gets calls from inventors and scientists who have some kind of innovative product and need access to capital. “There always is this struggle, but I am seeing more companies having access to capital because you have more companies innovatJohn Freshley: Drugs to treat eye ing,” she said. ONL raised more than $4 problems. million from private investors and received other grants from Invest Michigan and the Novartis Institutes for BioMedical Research to develop drugs to treat retinal detachment and other eye problems, said CEO John Freshley. “Novartis is interested because we are developing something interesting and novel, but not yet proven. They know how to commercialize it and run trials,” Freshley said. Maureen Miller Brosnan, executive director of the Michigan Venture Capital Association in Ann Arbor, said venture capital and angel investment has been strong the past decade. In 2016, for example, life science companies in Michigan received 48 percent of the invested capital with pharmaceutical companies receiving 18 percent of that pie, according to the association’s 2017 research report. “Life sciences continues to be the focus of in-

vestment in Michigan with the industry still producing great ideas, great technologies and advances that are intriguing and inviting to investors,” said Brosnan, adding that Michigan is ranked No. 7 in the number of life sciences invention patents after national leaders California, Texas, New York, Massachusetts and Washington. While total investment in Michigan is now at $222 million in 54 startup companies, Michigan is far below the top 10 states in bioscience investments. Top states are California ($38 billion), Massachusetts ($7 billion) and New York ($6 billion). The No. 10 state was Colorado with $941 million invested in 241 startup companies. Overall, there were 141 active venture-backed startups in Michigan in 2016, which is a 48 percent increase in the last five years. Experts say the state of Michigan can do more to provide financial incentives to support the life sciences industry to attract and retain capital (see story, Page 9). Still, Sooch said the departure of Pfizer created more of an entrepreneurial environment in Michigan. “Maybe 100 companies have started since then,” she said, ranging from regulatory consulting, project management, database consulting and biotech startups. Dozens of support companies like MMS Holdings Inc., a Canton Township-based database company, and Kalamazoo-based Innovative Analytics Inc., have been founded. Pfizer’s departure also created a new generation of angel investors, as many former Pfizer executives and researchers sold companies for millions of dollars. The first Esperion, for example, was acquired by Pfizer for $1.3 billion, with multiple Michigan people benefiting. Gemphire also has mostly ex-Pfizer associates, Sooch said. SEE GROWTH, PAGE 9

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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 Y 1 5 , 2 0 1 7

SPECIAL REPORT: HEALTH CARE

Executives: Venture capital, tax credits needed for bioscience growth By Jay Greene jgreene@crain.com

Life science company executives and investors say the state of Michigan could take several big steps to further boost growth in the state’s pharmaceutical, medical device and biotechnology industries. The first, they say, is to reinstate, reorganize or refund the Venture Michigan Fund, a highly successful economic program that began in 2003 run by the 21st Century Jobs Fund under the John Engler and Jennifer Granholm administrations. The $245 million fund, which has been tapped out, generated more than $1.4 billion in additional investments to 68 bioscience companies with more than 1,500 jobs created, said the Michigan Venture Capital Association. Legislators also should restore the angel tax credit and the research and development tax credit, said Stephen Rapundalo, CEO of MichBio. “We have a governor, a former venture capitalist, who has said it is not the highest and best way for us to invest,” said Rapundalo. “Not having these tax credits has affected decisions and business investment.” The angel tax credit was phased out in 2011 under Gov. Rick Snyder when the Michigan Business Tax was set at a flat 6 percent. “We were one of the earlier states to have those incentives, and it

proved to be useful,” Rapundalo said. More than 20 states have some kind of tax credit program available to angel investors, according to the Overland Park, Kan.-based Angel Capital Association. Michigan is now only one of four states nationally without a research and development tax credit, Rapundalo said. “Not having both have made us less competitive,” he said. One of the reasons that total venture capital funds under management in Michigan declined in 2016 by 24 percent to $4 billion is because out-of-state investors slowed their funding, partially because the loss of the tax credits, said Maureen Miller Brosnan, executive director of the Michigan Maureen Miller Venture Capital Brosnan: Drop in Association. out-of-state funds. On the other hand, Brosnan said Michigan-based venture capital companies continue to increase investment in bioscience companies. But without state incentives, outside investors have moved some of their money to other states that are more generous with tax credits, she said. “Capital under management is growing in Michigan-based firms as

well, but we saw a dropoff in 2016 coming specifically from out of state capital,” Brosnan said. “Not having a program in Michigan doesn’t send a good message.” Total venture capital funds under management of firms headquartered in Michigan in 2016 grew 9 percent to $2.4 billion, said Brosnan. In addition, the number of venture capital investment professionals living, working and investing in Michigan has increased by 41 percent the last five years, generating jobs, she said. Attracting outside investors with tax credits and a matching state capital fund can pay great dividends. However, Brosnan said MVCA is not advocating the same Venture Michigan Fund model as before. “We are working hard to put a better model in place by talking with legislators about it,” she said. Mina Sooch, CEO of Gemphire Therapeutics in Livonia and past MVCA chairman, said she is convinced state government should boost financial support for bioscience if it is serious about creating jobs and competing on a national basis with other states already ahead of Michigan. “I have watched for 10 years as state programs have gone away,” Sooch said. "The tax credits are good, but they are small, just window-dressing. We need a new Ven-

ture Michigan Fund. You will really see a difference” in companies growing and expanding. Rapundalo also says he is talking with state legislators about reinstating the angel investment and research and development tax credits. No legislator has signed on yet after former Rep. Jeff Farrington, R-Utica, who championed the tax credits for years, was term limited in 2016. Last year, Farrington introduced an angel tax credit bill and had it approved in tax committee, but it died on the House floor, a victim of opposition by Snyder and associates. Farrington’s bill would have allowed investors who contribute at least $20,000 to an early stage company through a recognized seed venture capital or angel investor group to claim a 20 percent income tax credit. “The governor ironically is not supportive of that incentive. Despite that he was in venture capital in the life sciences, he believes it falls into the philosophy that you are picking winners and losers and doesn’t want government to do that,” Rapundalo said. But in a 2014 report, the W.E. Upjohn Institute in Kalamazoo concluded that state-provided financial incentives for biotech companies raises the number of star biotech scientists by about 15 percent. Employment in biotech companies is relat-

GROWTH FROM PAGE 8

“Eighty percent of biotech companies are bought, about 10 percent go IPO, but the eventual ending is sooner or later, they all belong to the top 10 pharma companies,” Sooch said.

Sale, partnership Some companies like Ash Stevens and Harvard Drug Group, which was acquired recently by Cardinal Health (NYSE: CAH), joined larger companies to access capital to grow into new markets and therapies. Former CEO Stephen Munk of Ash Stevens said the sale to Piramal has gone smoothly. Munk, who resigned April 30 after 20 years with Ash Stevens, was replaced by Vince Ammoscato, vice president of operations. Ash Stevens develops comprehensive small-molecule drug substances and has 14 FDA manufacturing approvals for active ingredient drugs, including oncology drugs Velcade, Vidaza, Clolar and Iclusig. “Piramal is starting to invest (about $8 million) and are looking at the 6 acres I purchased to expand into high-potency materials. That is exciting to see. It will cost $40 (million) to $50 million to develop” the additional property, said Munk, a research chemist who wants to hook up with an early stage bioscience company in Southeast Michigan. “There is so much happening here.” Since last summer, Munk said, Piramal has added sales personnel and opened the door to more contracting opportunities for Ash Stevens. “Sales are going slowly, but you need more bricks and mortar and you need more people,” Munk said. Over the last 15 years, Ash Stevens has tripled revenue to nearly $20 million, but Munk said the

LARRY PEPLIN

Mina Sooch, (left) president and CEO; Rebecca Bakker-Arkema, vice president for Clinical Drug Development; Erik Sims, assistant controller; Reda Jaber, director of Marketing and Business Development; Jean Pashakarnis, office manager and executive assistant; Daniela Oniciu, vice president of Research, Development and Manufacturing; Charles Bisgaier, chairman and co-founder of Livonia-based Gemphire. company struggled with garnering capital for growth. Banks were sometimes reluctant to loan money to help expand the business’ footprint and revenue, he said. But in 2013 Ash Stevens completed a 15-year, $45 million project that helped increase its production by at least 50 percent. The company added 18,000 square feet to its 30,000-square-foot manufacturing plant. It purchased a 2,250-gallon reactor bay with 500-gallon, 750-gallon and 1,000-gallon vessels for mixing compounds. “We will grow much faster now thanks to Piramal,” Munk said.

Public, private capital As Esperion, Gemphire, Diplomat and Essen have launched IPOs, giving them invest-

ment fuel for growth, Perrigo Co. LLC, founded in Allegan in 1892 and taken public in 1991, has since become a worldwide pharmaceutical company that is now based in Dublin. Rockwell Medical of Wixom, which is developing an iron-replacement drug therapy for dialysis patients, went public in 1998. “What I have seen as a consequence of the shutdown by Pfizer is that a lot of people didn’t want to leave (Michigan) and they have started something here,” said Rapundalo, who added that Pfizer still has animal research and injectible drug manufacturing in Kalamazoo and is spending more than $145 million to expand its plant there. For example, Esperion bought its ETC-1002 cholesterol-lowering small molecule compound from Pfizer and is currently in phase 2

ed to the number of star scientists, the report said. “You have to have the ideas, the intellectual property, because products are viewed by how successful, how bankable they will be in the market,” Rapundalo said. Rapundalo said the Upjohn report shows that tax incentives translate to jobs, income growth and higher wages. “Tax credits are good for our state,” he said. The angel tax credit is just one of several actions the state could take to help the pharmaceutical business in Michigan, said Sara Kruse, a health care attorney with Jaffe Law in Southfield. “We need to encourage additional people to become angels and make those Sara Kruse: Need investments in to encourage early stage cominvestment. panies,” Kruse said. “We are not seeing aggressive economic development strategy in this state,” Kruse said. “We have a lot of talent coming out of universities. There is talent here, and it can be a great place for new companies to start a business.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

FDA clinical trials. Rapid growth and a quick decision to go public is defined by the rise of Gemphire Therapeutics. From its founding in 2015 to last summer’s initial public offering with capitalization of $30 million, Gemphire took little time to try and prove its lead asset gemcabene drug, which inhibits cholesterol formation, has commercial and clinical value. “There are only a handful of IPOs in Michigan. We are fortunate to be one of them,” said Sooch. “Our IPO has been fantastic. ... We had a couple of us two years ago. Now we have 16 employees.” Sooch said Gemphire was able to sell its IPO in two years because “we have a late stage drug (gemcabene) that we licensed from Pfizer in 2011 that is in stage 2 trials.” Gemcabene is an oral once-daily drug developed to treat the large unmet medical need of patients with high cardiovascular and pancreatitis risk who are unable to reach optimal LDL cholesterol or triglyceride levels with statins or other therapies. But Sooch said young pharma companies usually start out with federal and state grants to hire staff and start research on their products. “Unless you have a rich uncle,” Sooch said, most pharma companies use a mix of grants and private investments from angel investors or venture capital funds to get going. “There are lots of types of grant funding. You can get maybe $200,000 to $1 million, but then you need larger capital” to begin a clinical trial, she said. “You can get one or two rounds of venture capital, then you go the IPO route because it is very expensive to fund phase 2 and 3 drug trials,” she said. “You look to the public market. Biotech is well received if you have a really exciting drug. It is risk-reward for many companies.” SEE GROWTH, PAGE 10

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Q&A: CHERYL GIBSON FOUNTAIN

State medical society’s first African American woman president talks history, infant mortality, Obamacare “The really cool thing about the environment we live in now is, although some things seemed onerous, good things happened.”

By Jay Greene jgreene@crain.com

Cheryl Gibson Fountain’s father, George Wesley Gibson, was an obstetrician-gynecologist and a leading member of the Detroit Medical Society and the National Medical Association. Until the late 1960s, African American doctors were excluded from membership in the American Medical Association and state medical societies, forcing black doctors to form their own medical societies and medical schools. Now, Gibson Fountain, also an OB-GYN, is the new president of the Michigan State Medical Society, the state chapter of the AMA. “When my father (now age 88) was in practice, back in the day, African American doctors were not allowed to be members of the AMA,”

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GROWTH FROM PAGE 8

But Sooch said there is a right time and a wrong time to do an IPO. “It is all about timing. Are you prepared from accounting procedures, do you have executive management to build conviction on the street and with analysts? Do you have operational talent?” Sooch said. Investors in Michigan participate in bioscience companies in a number of ways besides just providing funding. “They take a seat on the board of directors. They know many are startups and they participate in ways to turn companies into successes,” she said. When companies are acquired by larger firms or sell IPOs, Brosnan says investors cash out. “We call them exits, when they are sold to big companies or IPOs,” she said. “On average it takes 10 years. They know they need to be patient.” In Southeast Michigan, venture capital investors helped to propel companies like Millendo Therapeutics and ONL Therapeutics, both of Ann Arbor. ONL, which stands for “outer nuclear layer,” was founded by three sci-

Cheryl Gibson Fountain

said Gibson Fountain, a Detroit native who has been involved in the AMA and the NMA since she was a student at Wayne State University School of Medicine. “I was brought up with Dad, who was part of the NMA and the Detroit Medical Society. The really cool thing about the environment we live in now is, although some things seemed onerous, good things happened.”

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In 2008, Ronald Davis, a preventive medicine specialist at Henry Ford Health System and then-president of the AMA, formally apologized on behalf of the AMA’s board of trustees for the more than 100 years of excluding African Americans from membership. Davis died of pancreatic cancer at age 52 four months after that speech. “Part of what he did was historic and from that point I just moved

through to become the president of the Wayne County Medical Society. It was a natural progression when I was asked to run for the president of the Michigan State Medical Society,” said Gibson Fountain. “I want to be an advocate for patients, to ensure they have access to health care, and I am honored to do it.” Given the history of the AMA, Gibson Fountain said she is very proud to become the first African American president of the MSMS and only the fifth female as president of the 152-year-old medical society. She also is an attending physician at Beaumont Health with staff privileges at hospitals in Grosse Pointe and Royal Oak and at St. John Hospital and Medical Center in Detroit. She is the former

O MPL S A OYEES A RE

entists in 2011: Dave Zacks, a clinical physician scientist at the University of Michigan Eye Center; Jeff Jamison, ONL’s chief science officer; and the late Railli Kerppola, ONL’s former CEO and bioscience researcher. “They had an idea,” said Freshley, who became ONL’s CEO in 2013 after Kerppola passed away. “Why do patients have successful surgery for eye detachment still lose a lot of vision?” Through research, ONL scientists found that cells activate a death cycle in the eye. “By blocking that death cycle you can protect vision,” Freshley said. ONL acquired an IP, a peptide that targets the protection of liver cells. “Dave (Zacks) thought it might work good in the eye.” A patent was filed in 2013 and research continues. Freshley said ONL received phase one grant funding from the National Institutes of Health to get the company going. Over the next two years, ONL raised about $1 million in angel investment, then it received a phase 2 grant for $1.5 million. But ONL scientists discovered an improved peptide from the original one, ONL-1204, which hasn’t been approved for a patent yet.

“The problem with the first peptide is that it doesn’t go into water-based solutions very well. In order to deliver it, you need an injectable eye drug that goes into the water,” Freshley said. “We feel we have something here.” In 2016, ONL raised another $1 million in angel investment and received another federal grant from the National Eye Institute, which is part of NIH, that Michigan Economic Development Corp. matched. Freshley said a number of angel investors have bought into ONL’s concept, including East Lansing-based Capital Community Angel Investors and Massachusetts Eye and Ear in Boston. “We think we have a good idea that has a broad utility, targeting patients with retinal detachment. We think it can protect vision and improve surgical outcomes. There are other applications with age-related macular degeneration and glaucoma. Those (conditions) have millions of patients.” During the next 18 months, Freshley said ONL is expected to be ready to start human clinical trials. “At that time we will need additional capital,” he said.

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University connection Millendo Therapeutics, founded in 2012 in Ann Arbor as a University of Michigan startup, raised a record $62 million from UM’s Michigan Investment in New Technology Startups program. The UM investment allowed Millendo to go into clinical development to test a new compound, MLE4901, for the treatment of polycystic ovary syndrome, which affects up to 15 percent of women. Millendo then signed an exclusive license agreement with AstraZeneca for worldwide development and commercialization of the drug. Munk said research universities in Michigan are starting to financially invest more into researchers to develop startup biotech companies. “Harvard (University) does this on a much more massive scale. They are very far ahead,” Munk said. “We are starting to do this in Michigan, but we are far behind.” “We have great research institutions in Michigan — Wayne State, University of Michigan and Michigan State. They are driving knowledge creation,” he said. “People for-

chief of staff at the now shuttered St. John Detroit Riverview Hospital. One of Gibson Fountain’s top priorities is to make sure access to health care services through the Affordable Care Act is maintained. The AMA and the state medical society are opposed to proposals to gut Obamacare through the American Health Care Act, which U.S. House Republicans have recently approved. U.S. Senate Republicans have already expressed concerns with the possibility of removing 24 million people from Medicaid and private insurance as well as allowing states to determine whether people with pre-existing conditions pay higher premiums to stay insured. SEE NEXT PAGE

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get. That is where it begins.” For example, magnetic resonance imaging technology began in university physics research labs in the 1930s, Munk said. In the 1950s, university organic chemists developed nuclear magnetic resource instruments. By the 1980s, university scientists used NMRs to view the structure of rat brains. Soon after, NMRs turned into MRIs and diagnostic testing on humans was possible. Commercial MRI companies like GE Healthcare and Siemens Healthcare have since earned billions of dollars from the original university-based research. From the universities to the venture capital and angel investors, Rapundalo said he has see a growing interest in investing in pharmaceutical and medical device companies over the past five years in Michigan. “There is more venture capital money around, absolutely,” he said. “What is the old adage? Success breeds success. As investors see companies grow, they are more prone to put more money where there is history of success.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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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 Y 1 5 , 2 0 1 7

FROM PREVIOUS PAGE

“We need to continue to allow patients to have access to care and the coverage they need,” Gibson Fountain said. “We need to keep the 10 essential benefits in health insurance plans. We need to keep Medicaid expanded and the governor (Rick Snyder) helped us achieve that. We can improve the Affordable Care Act. But pre-existing conditions need to be covered” at currently affordable rates. In an hour-long interview, Gibson Fountain addressed other questions about her next year as MSMS president. Why is it important that you are the first African American woman president of the MSMS? Each president brings their uniqueness to the presidency ... Being the first African American female president just allows me to bring my perspectives to health care. It sends a good message to younger doctors. I can talk about the fact there is such a disparity in health care. Detroit has a

lot of health care problems: premature births, diabetes, heart disease, stroke, all are higher in the African American community. As a member of the Detroit Regional Infant Mortality Reduction Task Force, do you believe the state is doing enough to reduce the infant mortality rate in Michigan? Michigan’s infant mortality rate is 6.8 per 1,000 live births, slightly down from 7.1 in 2012, compared with 6.1 nationally and much higher in the African American population. For example, 14 of every 1,000 live African American babies born in Michigan die before their first birthdays, compared with 5 of every 1,000 Caucasian babies and 7 out of every 1,000 Hispanic babies. We have a very robust infant mortality task force. The medical society and the (Michigan Health & Hospital Association) works very well collaboratively. We are doing a lot for the health of the community. But after initially funding programs to reduce infant mortality, the state has cut

funding for it. We received only about one-third of the funding we asked for. The funding is not adequate for the people who are doing the work. We can do more. What are your thoughts on the state’s new online prescription drug reporting system that is designed to address the still-growing opioid addiction problem? We are trying to balance solutions for drug diversions. Doctors have to have the ability to appropriately deliver pain medications, but we needed a system to prevent abuses. The new Michigan Automated Prescription System has improved functionality. It helps us reduce workflow burdens and address the bad actors. You are an associate professor of obstetrics and gynecology at Oakland University’s William Beaumont School of Medicine. Do you have concerns about Snyder’s efforts to eliminate state graduate medical education funding? Any cuts to state GME would be

3

Better local service and support—Michigan-based account support and award-winning customer service.

3

Better access to dentists—Nine out of 10 Michigan dentists contract with our dental networks.

3

Better overall value—Our large networks, processing policies and fee determinations result in big savings across the board.

devastating to training physicians and would be problematic to increasing the number of physicians in Michigan. We need to fund GME and we need more residency slots. We are experiencing a decreasing number of physicians and will face a shortage by 2020. We appreciate efforts (the state Legislature made two years ago) to reinstate GME funding. How do you feel about the state Legislature’s ongoing effort to require hospitals to publicly report patient safety and quality information to a national, nonprofit organization like The Leapfrog Group? This year, the fiscal 2018 state budget calls for 25 percent withholding of GME funds to hospitals that don’t report. This is problematic to the medical society. We need improvements to address quality. There are different ways to report. I am for reporting to the Medicare IQR program. I have concerns about how the data is presented. People need good information (to make informed decisions on picking hospitals and physicians).

Health Care Heroes award deadline nears The deadline is approaching to nominate innovators and leaders for Crain’s annual Health Care Heroes program, newly expanded in its 16th year. New categories are focused on medical research that is ground-breaking and life-changing for patients and their families. To make a nomination, go to www. crainsdetroit.com/nominate. A panel of six health care judges will choose the winners and runners-up. The deadline to nominate is May 22. Overall, the eight categories recognize medical innovators and patient advocates dedicated to saving lives or improving access to care. Articles about the winners will be published in the Crain’s July 17 health care special section.

We do dental. Better. www.deltadentalmi.com

Calley stresses cooperation, increased response in opioid battle By Jay Greene jgreene@crain.com

Opioid misuse and addiction is killing thousands of people in Michigan, and Lt. Gov. Brian Calley wants to ramp up efforts to combat the problem. Calley spoke last Thursday in front of about 500 attendees of the Second Annual Opioid Abuse and Heroin Overdose Solutions Summit. The event at Burton Manor in Livonia was sponsored by the Greater Detroit Area Health Brian Calley: Addiction a health Council and the Detroit Wayne care issue. Mental Health Authority. “My question of the day to you is, can we all agree there are no throwaway lives? Everyone has value and potential,” said Calley, who was chair of the state’s Prescription Drug

and Opioid Abuse Task Force. Efforts to solve drug addiction through law enforcement have been “a spectacular failure,” Calley said, as the number of crimes, overdoses, deaths, lost lives and broken families continued to rise. “Addiction is a health care issue and requires a health care response.” While data for 2016 in Michigan won’t be available until later this year, 52,404 people died in 2015 of overdoses in the U.S., according to the U.S. Centers for Disease Control. Michigan ranks 18th in the nation for all overdose deaths, while drug-related deaths climbed from 1,553 in 2013 to 1,980 in 2015. “To overcome the epidemic, we need to work together,” Calley said. “We can't take the attitude that it is not my job. Naloxone is now available over the counter (under the name Narcon in some pharmacies). Schools, first responders, law enforcement, families are now more equipped with antidote for overdoses.” Calley also challenged the audi-

ence to help reduce the availability of opioid drugs. “I’d like to give you all assignments,” he said. “Check your medicine cabinets. Most people started opioid use with prescriptions, and most (prescriptions) were not for them.” Too many people are prescribed medications that they never use or don’t use completely. “I got a root canal and was given Vicodin. I didn’t need it. That (prescription) was at risk for being diverted” to someone for resale, recreational or pain uses. Calley said one of the main sources of opioid drugs are physicians who prescribe pain medications. In February, the Michigan Automated Prescription System went online to help doctors and other controlled substance providers more accurately track prescription drugs in an effort to combat rising overdose deaths. “How can doctors make decisions without complete information?” Calley said. “A person in withdrawal is in

real pain. They go to the ER; it is not fake.” But Calley said the old MAPS online system took 15 minutes for doctors or other prescribers to get results. The delay caused many doctors to not use the system. The new system takes about 0.9 seconds, Calley said, and more prescribers are signing up to use it. Calley suggested doctors and pain prescribers take another step to warn people about addiction risks that come with treating pain. Calley was blunt. “Oxycontin. Use as prescribed, but there is a good chance you could become addicted and it could destroy your life. Tell them that. Make sure people understand their risks. Make patients partners” in reducing addiction risks. After the meeting, Calley was asked if he is concerned that changes in the Affordable Care Act, specifically proposals in Congress to reduce federal Medicaid revenue sharing by $800 billion over 10 years, could damage Michigan’s efforts to combat opioid addiction and treatment.

Medicaid programs are a main source of treatment and counseling for people with opioid addictions. “A couple days ago (U.S. Health and Human Services Secretary Tom) Price was here in Lansing with a $16.4 million grant to help with the opioid problem,” said Calley, adding that he expects the federal government will provide more than $1.3 billion in funds over the next two years to help states combat opioid problems. The Trump administration recently created a commission to study opioid addiction headed by New Jersey Gov. Chris Christie. The $16.4 million grant to Michigan was part of 21st Century Cures Act, which was approved under the Obama administration. “The ACA (Affordable Care Act) could go into many directions,” Calley said. “There are a lot of unknowns and a lot of decisions to make in how to meet the epidemic.” But Calley said he doesn’t just want current efforts to continue. “We need to do more,” 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 Y 1 5 , 2 0 1 7

CRAIN'S LIST: LARGEST MICHIGAN HOSPITAL COMPANIES

Ranked by 2016 net revenue Company Address Rank Phone; website

Top executive(s)

Number Full-time Net patient Total net Uncompensated Licensedof equivalent Number of revenue revenue care bed employed Michigan hospitals/ $000,000) ($000,000) ($000,000) capacity/ physicians employees ambulatory 2016/2015 2016/2015 2016 occupancy Jan. 2017 Jan. 2017 facilities Major facilities

John Fox president and CEO

$4,145.3 NA

$4,373.1 $4,111.8

$57.6

3,429 67.5%

905

27,318

1

Beaumont Health B 2000 Town Center, Suite 1200, Southfield 48075 (248) 213-3333; www.beaumonthealth.org

8 174

Beaumont hospitals in Dearborn, Farmington Hills, Grosse Pointe, Royal Oak, Taylor, Trenton, Troy and Wayne

2

Henry Ford Health System 1 Ford Place, Detroit 48202 (800) 436-7936; www.henryford.com

Wright Lassiter III president and CEO

3,800.0 NA

5,703.3 C 5,000.0

391.2

2,507 NA

1,658

18,520

6 142

Henry Ford Hospital and its campuses: Macomb, West Bloomfield Twp., Wyandotte and Kingswood and Henry Ford Allegiance

Ascension Michigan 28000 Dequindre Road, Warren 48092 www.ascension.org/michigan

Gwen MacKenzie senior VP, Ascension Health, Michigan

3,469.9 NA

NA 3,364.4

227.8

3,537 NA

5,719

23,103

15 254

1,143.6

2,357 NA

NA

21,944

8 30

St. John Hospital & Medical Center, Providence and Providence Park Hospital, St. John Macomb-Oakland Hospital, St. John River District Hospital, Brighton Center for Recovery, Borgess Medical Center, Borgess-Pipp Hospital, Borgess-Lee Memorial Hospital, Genesys Regional Medical Center, St. Mary’s of Michigan, St. Mary’s of Michigan Standish and St. Joseph Health System, Crittenton Hospital Medical Center Mercy Health Muskegon and its campuses: General, Hackley, Lakeshore, Lakes Village, Mercy. Also Saint Joseph Mercy Health System and its campuses in Ann Arbor, Chelsea, Oakland and Livonia University Hospital, C.S. Mott Children's Hospital, Women's Hospital, UM Cancer Center, UM Cardiovascular Center, UM Depression Center, Kellogg Eye Center

3

4

Richard Gilfillan Trinity Health president and CEO 20555 Victor Parkway, Livonia 48152 (734) 343-1000; www.trinity-health.org

3,179.9 D 16,339.0 E 3,006.5 D 14,338.2 E

Marschall Runge EVP for medical affairs

2,846.9 2,599.7

3,066.9 2,771.7

116.0

1,043 86.0

0

16,305

3 40

McLaren Health Care Corp. G3235 Beecher Road, Flint 48532 (810) 342-1100; www.mclaren.org

Philip Incarnati president and CEO

2,696.4 2,522.0

3,710.5 3,427.9

NA

NA NA

488

22,500

12 350

Spectrum Health System 100 Michigan St. NE, Grand Rapids 49503 (616) 391-1382; www.spectrumhealth.org

Richard Breon president and CEO

2,323.4 2,098.2

5,220.5 4,625.2

NA

NA NA

885

20,707

12 180

Detroit Medical Center 3990 John R, Detroit 48201 (313) 578-2442; www.dmc.org

Tony Tedeschi CEO

1,832.1 1,807.3

1,937.8 1,927.9

103.6

1,783 56.0

152

11,370

9 80

Metro Health 5900 Byron Center Ave. SW, Wyoming 49519 (616) 252-7200; www.metrohealth.net

Michael Faas president and CEO

776.7 G 687.8 H

NA 359.0

NA

NA NA

NA

NA

NA NA

MidMichigan Health

Diane PostlerSlattery president and CEO

649.7 584.9

NA 611.0

NA

NA NA

260

3,820

5 NA

MidMichigan Medical Centers in Alpena, Alma, Clare, Gladwin, Midland and Mt. Pleasant

Covenant HealthCare 1447 N. Harrison, Saginaw 48602 (989) 583-0000; www.covenanthealthcare.com

Ed Bruff president and CEO

591.6 NA

NA 574.3

NA

643 NA

186

3,825

NA NA

Covenant HealthCare

Lakeland Health 1234 Napier Ave., St. Joseph 49085 (269) 983-8300; www.lakelandhealth.org

Loren Hamel, M.D. president and CEO

490.4 463.1

502.0 474.6

NA

NA NA

450

4,021

3 39

Hurley Medical Center

Melany Gavulic president and CEO

422.1 378.5

422.1 412.9

NA

NA NA

0

2,572

1 NA

Lakeland Medical Center, St. Joseph; Lakeland Hospital in Niles and Watervliet; Merlin and Carolyn Hanson Hospice Center, Stevensville; Center for Outpatient Services; St. Joseph Pine Ridge: A Rehabilitation and Nursing Center; Stevensville Hurley Medical Center

Dale Sowders president and CEO

219.0 NA

228.0 222.3

NA

189 NA

NA

1,598

14

Holland Hospital 602 Michigan Ave., Holland 49423 (616) 392-5141; www.hollandhospital.org

1 0

Julie Yaroch president

89.5 83.6

86.4 78.9

NA

88 NA

0

NA

NA NA

Bixby Hospital

15

ProMedica Bixby Hospital 818 Riverside Ave. , Adrian 49221 (517) 265-0900; www.promedica.org/ contactbixbyhospital

16

Sparrow Health System 1215 E. Michigan Ave., Lansing 48912 (517) 364-1000; www.sparrow.org

Dennis Swan president and CEO

10.3 964.5

1,286.3 1,277.0

7.3

820 NA

257

6,968

NA NA

Sparrow Hospital, Sparrow Carson Hospital, Sparrow Ionia Hospital, Sparrow Clinton Hospital, Sparrow Specialty Hospital

5 6

7

8 9

University of Michigan Health System F 1500 E. Medical Center Drive, Ann Arbor 48109 (734) 936-4000; www.med.umich.edu

Orchard Drive, Midland 48670 10 4005 (969) 839-3301; www.midmichigan.org

11 12

Hurley Plaza, Flint 48503 13 1(810) 262-9000; www.hurleymc.com

Bay Region, Bay Special Care, Central Michigan, Greater Lansing, Orthopedic Hospital, Lapeer Region, Clarkston, Flint, Macomb, Oakland, Northern Michigan, Northern Michigan Cheboygan, Proton Therapy Center, Port Huron, Karmanos Cancer Institute, McLaren Home Care, McLaren Medical Group Spectrum Health hospitals: Butterworth, Blodgett, Reed City, United, Kelsey, Special Care, Gerber Memorial, Zeeland Community, Helen DeVos Children's, Big Rapids, Ludington, Pennock, Lemmen-Holton Cancer Pavilion, Meijer Heart Center, Tamarac Medical Wellness and Fitness Center, Wheatlake Cancer Center Children's Hospital of Michigan, Detroit; Children's Hospital of Michigan, Troy; Detroit Receiving Hospital; Harper University Hospital; Hutzel Women's Hospital; Cardiovascular Institute; Rehabilitation Institute of Michigan; Sinai-Grace Hospital; Huron Valley Sinai Hospital. Metro Health Southwest; Rockford; Cascade; Community Clinic; Sports Medicine; Internal Medicine; MidTowne Ambulatory Surgery Center; Metro Health Park East; and The Cancer Center at Metro Health Village

Holland Hospital

This listing is an approximate compilation of the leading hospital companies based in Michigan. Net patient revenue listed is operating revenue, excluding bad debt. Total revenue is net patient revenue, investment income, non-operating or other revenue and premium revenue. It is not a complete listing but the most comprehensive available. Unless otherwise noted, information was provided by the companies directly or from state and federal filings. Companies with headquarters elsewhere are listed with the address and top executive of their main Michigan office. NA = not available.

B Includes Beaumont Health System, Oakwood Healthcare, and Botsford Hospital after merger in September 2014. C From 2016 audited financial statement. D Michigan only. E Revenue is for entire Trinity Health System with 93 hospitals and 97,000 FTEs. F Formerly University of Michigan Health System (Michigan Health Corp.). The new name took effect Jan. 9. G From Medicare report ending in June 30, 2015. H From Medicare report ending in June 30, 2014. LIST RESEARCHED BY SONYA D. HILL

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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 Y 1 5 , 2 0 1 7

DEALS & DETAILS ACQUISITIONS & MERGERS

J Regional Medical Imaging PC, Flint, radiologist owned outpatient imaging centers, acquired Central Medical Imaging, Royal Oak. Website: rmipc.net. J Oakland Standard Co., Birmingham, a private equity firm, acquired Premier Surfaces Inc., Southwest Ranches, Fla., a concrete contractor, for its countertop supply platform, Clio Holdings. Website: oaklandstandard.com. J Fluid Systems Engineering, Clinton Township, a hydraulic and pneumatic fabrication and distribution company, has been acquired by Ritter Technology, Zelienople, Pa., a

distributor of industrial motion and control products. Website: ritter1. com.

EXPANSIONS

J Tax Credits Group LLC, Cleveland, Ohio, a specialty tax consulting firm, has expanded its research and development tax credit practice to 28175 Haggerty Road, Novi. Telephone: (248) 505-8866. Website: taxcreditsgroup.com. J M&M Homecare, Livonia, a company specializing in caring for those catastrophically injured in motor vehicle or workers compensation accidents, opened an office in Lansing. Website: mmhomecare.com. J

SSAB Enterprises LLC, Lisle, Ill., a

steelmaker, has opened at 4000 Town Center, Suite 1450, Southfield. Telephone: (248) 864-2867. Website: ssab.com. J Re/Max of Southeastern Michigan, Troy, has opened a Re/Max Cornerstone at 8311 N. Wayne Road, Westland. Telephone: (734) 4444227. Website: cornerstone.remax-detroit.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.

CALENDAR TUESDAY, MAY 16

Best Practices for Managing Competing Rights in the Workplace. 9

a.m-noon. Nemeth Law PC. Attorneys will discuss best practices for employers in today’s workplace climate. Topics include: Policing Politics: polarization in the workplace; Controlling the Conversation: protected speech or hostile work environment? Culture Clash: diversity decisions that divide; Reasonably Unreasonable: when accommodating one employee disadvantages others; Religious Freedom Restoration Act: when do the employer’s religious beliefs become a defense to discrimination claims? Management Education Center, Troy. $75. Contact: Pamela Perkowski, phone: (313) 567-5921; email: pperkowski@ nemethlawpc.com; website: www. nemethlawpc.com

WEDNESDAY, MAY 17

Automotive Roundtable: Staying Relevant in a Time of Revolutionary Industry Transformation. 5-8 p.m.

Marketing and Sales Executives of Detroit. Panelists include: Julie Martin, vice president sales, Hella; Jim Seta, global vice president, automotive bearing sales, SKF USA — Automotive. Moderator: Glenn Stevens, vice president, MICHauto, Detroit Regional Chamber. Marriott, Southfield. $50 member; $65 nonmember. Website: www.msedetroit.org

UPCOMING EVENTS

ASE Compensation and Benefits Conference. 7:30 a.m.-3:30 p.m. May

23. American Society of Employers. Building and maintaining a successful rewards system that attracts, retains, and engages employees while 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.

keeping up with today’s rapidly changing business environment. Suburban Collection Showplace, Novi. $219 members; $259 nonmembers. Contact: Heather Nezich, phone: (248) 223-8040; email: hnezich@aseonline.org; website: https://www.aseonline.org/Conferences-Events/Compensation-Benefits-Conference Tech Takeover: Ransomware Rescue Manual. 8:30-10:30 a.m. May 24. Au-

tomation Alley. A cybersecurity presentation will define the different ransomware that exists and address how to avoid an attack, what to do if hit and how to protect a business. Speaker: Godfrey Nolan, president, RIIS LLC, a mobile and web development firm based in Troy. Automation Alley, Troy. Free for members; $20 nonmembers. Phone: (800) 4275100; website: automationalley.com

Agency. University of Phoenix, Southfield. $20. Website: http:// www.semea.org Tech Takeover: Collaborative and Autonomous Robots: How Do You Use These Things? 8:30-10:30 a.m.

May 31. Automation Alley. Behco-MRM, a technology distributor and integrator, on how to successfully use new robotic tools in applications including machine tending, fabrication, quality inspection and assembly. Automation Alley, Troy. Free for members; $20 nonmembers. Phone: (800) 427-5100; website: automationalley.com

Workshop: Business Model Canvas.

6-8 p.m. May 24. Ann Arbor Score. Every business needs a plan. Using the business model canvas, define the logic of a business visually on a single page using nine key building blocks. New Center Building, Ann Arbor. $10. Email: annarborscore@ scorevolunteer.org; website: http:// www.annarborarea.score.org Inforum 55th Annual Meeting Featuring Mae Jemison. 11:30 a.m.-1:30

p.m. May 25. Astronaut Mae Jemison, a scientist, doctor and crew member on Space Shuttle Endeavour, is the speaker. The Henry, Dearborn. $50 members; $75 guests. Website: inforummichigan.org. The Legal Side of Business Lunch and Learn. Noon-2 p.m. May 25. A panel

of legal experts in small business will discuss legal issues important to business. Topics include: protecting your ideas, patents, liability issues, entities, intellectual property, contracts and more. There will be an extended Q and A session. Panel: David K. Tillman, of Tillman & Tillman PLLC; Rachel Doxsie, of Doxsie Law Firm PLLC; T.L. Summerville, of Summerville Law Firm PLLC and Tenicia Moulden, of The Moulden

Lexi Thompson • Tickets • Corporate Hospitality • Pro-Am • Sponsorship Opportunities

Visit volviklpga.com or call 734.707.0789

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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 Y 1 5 , 2 0 1 7

SPOTLIGHT Dancsok leaves Community Foundation

BEDROCK LLC

Legislation creating the tax incentive structure businessman Dan Gilbert needs to erect a 52-story skyscraper in the footprint of Detroit’s former Hudson’s store got final approval in the state Senate last week.

Opinion

Quick, quiet passage of brownfield bills signals shift in out-state attitudes about Detroit Legislation creating the tax incentive structure businessman Dan Gilbert needs to erect a 52-story skyscraper in the footprint of Detroit’s former Hudson’s store got final approval in the state Senate on Tuesday. And nearly nobody noticed. In what may have seemed unimaginable just a year ago or so, the Republican-controlled Legislature passed sweeping legislation that was initially sold as something Detroit wanted. Or, more specifically, something the billionaire owner of Quicken Loans wanted — to help underwrite an eye-catching change in Detroit’s skyline, and to keep fueling downtown revitalization. Mayor Mike Duggan sounded astonished that the legislation got sent to Gov. Rick Snyder’s desk before Memorial Day as he boasted about its passage Tuesday at the Downtown Detroit Partnership’s annual meeting inside Eastern Market’s Shed 3. “Dan Gilbert dreamed this thing up six months ago and led a coalition with a lot of people here and people around the state,” Duggan said. The legislation creates a first-ofits-kind tax capture mechanism for developers to help finance redevelopment of longtime brownfield sites with a portion of new tax revenue generated on the revitalized property. Under the five-bill package, developers could keep up to 50 percent of the income tax generated by individuals working or living in the rede-

CHAD LIVENGOOD clivengood@crain.com

veloped site for up to 20 years. The legislation sets a $40 million annual limit on the amount of tax revenue developers can capture at all of the sites under the Transformation Brownfield Program. The legislation narrowly tailored a requirement that a brownfield project in a city of more than 600,000 residents — Detroit is the only such city in Michigan — must contain a minimum investment of $500 million in order to qualify for the tax incentives. Bedrock LLC, the real estate arm of Gilbert’s downtown empire, has pegged the cost of constructing a towering 734-foot building at $775 million. The tower would contain 1.2 million square feet of above-ground real estate, 250 residential units and 700 below-ground parking spaces. The Downtown Development Authority board has given Bedrock until Nov. 1 to finalize a development deal. Gilbert’s representatives thought they might need that long to get the Legislature to pass the bill. Instead, the legislation sailed through the Legislature with wide margins of 85-22 in the House and 32-6 in the Senate.

Snyder plans to sign the bills, his spokeswoman said. “This legislative package opens the door to new economic development projects that will be truly transformational for communities across Michigan and offers the potential for thousands of new jobs,” Snyder said Tuesday in a statement. But unlike past and prolonged battles in Lansing over Detroit’s lighting authority, creation of a Regional Transit Authority, the 2014 bankruptcy “grand bargain” and last year’s bailout of the city school system, this Detroit-centered legislation got buy-in from out-state legislators. At the beginning of the year, supporters were trying to rebrand the so-called “Gilbert bills” by emphasizing how the tax-capturing legislation could help fund the cleanup of urban eyesores from Jackson to Muskegon, Petoskey and Sault Ste. Marie. “We spent a lot of time dispelling the myth that Dan Gilbert was driving it,” said state Sen. Ken Horn, R-Frankenmuth, who sponsored the legislation. “It was a case study in good bipartisan cooperation." As the MiThrive Coalition sought statewide support for the legislation, Duggan has been on the road talking up Detroit’s turnaround before chambers of commerce in Brighton, Grand Rapids, Marquette, Mount Pleasant “and some cities I’ve never heard of.” The mayor told city business leaders on Tuesday that “attitudes have changed” about Detroit. Duggan said it used to be that

when he spoke out-state, people would come to him afterwards and reminisce about their roots in the city. After a speech last week in Mount Pleasant, Duggan said he was greeted with different feedback from local business owners. “The first one said, ‘My son is working in the city of Detroit.’ The second one said, ‘My niece is working in the city of Detroit,’” Duggan said. “The third one said, ‘My grandson just graduated to apply for a job in Detroit. Can you help him get a job?’” The mayor, who is running for re-election this year, sees a change in the trajectory of Michigan’s outbound college graduates headed for his city. “It’s changing right now and people around the state of Michigan are seeing Detroit as the place where their children and grandchild will go for opportunities,” Duggan said. Gilbert is capitalizing on the attitude change with his grand plans for the site of the former Hudson’s department store — one of many symbols of Detroit’s late 20th Century decline. After the House passed the legislation last week with little drama, the downtown real estate mogul reiterated that passage of the legislation will be a big boost to Detroit. “We look forward to the sight of numerous cranes in the sky of Detroit and across Michigan,” Gilbert said in a statement on Twitter. “Time to put our shovels in the dirt!” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

Marketing and communications executive Lisa Dancsok has left her position at the Community Foundation for Southeast Michigan to join the Arizona Community Foundation. She joins the Arizona Community Lisa Dancsok Foundation on Monday as chief brand and impact officer, overseeing marketing and communications, branding, strategy and analysis, market research, resource development, governance and board relations and assessing and conveying the foundation’s social and financial impact. Dancsok joined the Community Foundation last August as vice president, marketing and communications. Prior to that, she served as vice president, corporate philanthropy, marketing and communications for Rock Ventures LLC. In that role, she created and implemented the “Opportunity Detroit” marketing campaign, oversaw Rock Ventures’ philanthropy program and helped launch the annual Detroit Homecoming event. She also has served as senior vice president of marketing and legislative affairs at the Michigan Economic Development Corp. where she created the award-winning “Pure Michigan” campaign, was managing partner of D&D Advisors and held senior-level positions at Blue Cross Blue Shield of Michigan before that.

Snyder appoints Michigan Supreme Court judge Michigan appeals court Judge Kurtis Wilder has been promoted to the state Supreme Court, the Associated Press reported. Republican Gov. Rick Snyder announced the appointment last week, three weeks after Kurtis Wilder Robert Young Jr. resigned. Wilder is considered a conservative judge who has spent nearly two decades on the appeals court. Republicans have a 5-2 majority on the Supreme Court. Snyder appointee Joan Larsen is being nominated by President Donald Trump for a seat on a federal appeals court. She will continue to be a Supreme Court justice while her nomination is pending in the U.S. Senate.

May 15, 2017

ARBOR FROM PAGE 3

DelSignore brought in Collins and business partner Michel Chetcuti to form Farm + Ferment, which now owns Bigalora and his upscale Bacco Ristorante in Southfield as well as Michigan Hop Alliance farm, Northport Farms and Baia Estate Vineyard in Northern Michigan and Cloverleaf Fine Wine & Craft Beer store in Royal Oak. However, don’t get your hopes up about Bigalora’s pizza being on the menu at Arbor’s brewpubs. The two will remain completely separate entities, the company confirmed. “They will be separate and distinct with Bigalora focusing on its Italian offerings and Arbor with more American pub food,” said Mike Messink, a partner at Farm + Ferment. “The consumer won’t know the same ownership structure is behind them.” Farm + Ferment’s expansion plans for Arbor come on the heels of Grand Rapids-based Founders Brewing Co. announcing in late April that it would spend $4 million to renovate a building in Detroit’s Cass Corridor. It will be Founders’ first taproom outside of its original in Grand Rapids. Detroit-based Atwater Brewery opened a new brewpub in Grand Rapids in October, its first outside of metro Detroit. Dennis Loughlin, senior counsel and member of the craft brewery practice at law firm Warner Nor-

cross & Judd LLP, said Michigan brewers are seizing the opportunity to build their brand outside of their home brewery and retail operations. “In these cases, they are bringing the beer to the people, the neigh-

JOB FRONT

MARKET PLACE

POSITIONS AVAILABLE

AUCTIONS

û

KIRK PINHO/CRAIN’S DETROIT BUSINESS

Grand Rapids-based Founders Brewing Co. announced in late April that it would spend $4 million to renovate a building in Detroit’s Cass Corridor. It will be Founders’ first taproom outside of its original in Grand Rapids.

ENGINEERING û

borhood and community with the ability to control the lifestyle vibe of their brand,” Loughlin said. “It’s better than just being another sixpack on the store shelf (in that market).” Farm + Ferment represents the

WATERFRONT PROPERTY

VACANT LAND

UNSURPASSED

PETOSKEY AREA

STERLING HEIGHTS, MI

SURVEY ANALYZE MATCH

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first time locally that restaurateurs have acquired a brewer. Craft beer M&A activity in recent years has been dominated by larger conglomerate brewers or private equity acquiring smaller operations. In 2015, private equity-owned, Colora-

do-based Oskar Blues Brewery Co. acquired Alpine Township-based Perrin Brewing Co. and Anheuser-Busch InBev, via its Goose Island Beer Co. unit, acquired a majority stake in Fennville’s Virtue Cider. “That is what’s special about this deal,” said Joe Infante, partner and head of the alcohol beverage team at Miller, Canfield, Paddock and Stone PLC in Grand Rapids. “It’s not InBev coming in like we’ve seen elsewhere. The brand will only get better. These guys are established, very successful restaurateurs with a great reputation.” Infante served as the regulatory lawyer on the deal for Farm + Ferment, while Sarah Clarkson of Grosse Pointe-based Clarkson Law PLLC served as the transactional attorney. But Loughlin warned that the brewing business is far different than operating restaurants and doesn’t anticipate the trend of craft brewer consolidation to be led by buyers outside the industry. “Craft brew is not an easy business to be in; there’s a lot of competition these days and it’s difficult to differentiate,” Loughlin said. “Arbor is a fringe player in the scene and it takes a lot of capital and a marketing budget to compete, and that’s tough for the smaller players unless they have a real cult following. Hopefully these guys have the ability to leverage some of their other businesses.”

REAL ESTATE DESIGN & LUXURY

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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 Y 1 5 , 2 0 1 7

CHASE FROM PAGE 1

“If the city is growing and we can put more branches in and more bankers in … that is supporting our investment,” said Peter Scher, the head of corporate responsibility at J.P. Morgan Chase. To grow their investment, J.P. Morgan Chase has deployed its money and human capital beyond a bank’s normal channels of consumer and commercial lending. Scher and his team have been involved in a wide variety of initiatives across the city, from loan funds for small business growth and real estate development to helping underwrite the research and data-driven strategies for Mayor Mike Duggan’s workforce initiatives.

Detroit’s reconstituted Workforce Investment Board has put the city’s CEOs in the same room for the first time in years to work on issues affecting the workforce, said Jeff Donofrio, director of workforce development for Duggan. One initiative that came out of that board was a massive project led by Quicken Loans to digitize the high school transcripts of Detroit Public Schools graduates who need the records to get jobs. Lear Corp. donated the scanners and Quicken has provided a small army of employee volunteers to scan the documents. “This is a great example we’re trying to use to replicate around the world: If you can get the right people around the table, the right employers, the right trainers and the right data, then you

can actually begin to solve some of these challenges,” Scher said. J.P. Morgan Chase has also lent its technical support and know-how to nonprofit organizations through its Detroit Services Corps program. Since 2014, 68 J.P. Morgan Chase employees from 10 different countries have come to Detroit for three-week sessions to consult 16 nonprofits on strengthening their organizations. “It is not enough to write a check and make an investment,” Scher said.

Food business loans The bankers also have a taste for Detroit’s burgeoning food businesses. J.P. Morgan Chase invested $1.7 million in the Eastern Market’s Shed 5, creating new kitchen space for small

food producers who are looking to ramp up production and sale of their culinary creations. Detroit Vegan Soul, an all-vegan restaurant that opened in 2013 in West Village, is opening a second restaurant on the northwest side with the help of J.P. Morgan Chase’s financing. Restaurant co-owner Kirsten Ussery has borrowed $100,000 from Chase’s Entrepreneurs of Color Fund to help finance the purchase and renovation of a second building at 19614 Grand River Ave. in North Rosedale Park. She also got a $60,000 grant from the Motor City Match program to purchase and rehabilitate the building, which should be open by fall. “It wouldn’t have happened without the fund,” Ussery said. “We wouldn’t have been able to get the

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money to completely renovate the building.” Her new restaurant is a mile away from a Chase bank branch on Grand River, a corridor dominated by fast food and carry-out restaurants. “You don’t have any healthy options there,” Ussery said. “So we’re going to bring a healthy option and a restaurant where people who live in the area can actually sit down and have a meal.”

Loans repaid Following Duggan’s lead, J.P. Morgan Chase has placed an emphasis on dispensing its money in the city’s neighborhoods, where the comeback of Midtown and downtown has been slow to spread. The bank helped fund the Motor City Mapping initiative that Duggan has said was integral to reassessing the values of 380,000 properties. The citywide reassessment is credited with lowering property tax bills for more than half of Detroit’s property owners and stopping the tax foreclosure crisis from getting worse. J.P. Morgan Chase has committed a third of the $150 million toward community development, financing 21 projects and leveraging $147 million from other investors through Arlington, Va.-based Capital Impact Partners and Invest Detroit, which is affiliated with Business Leaders for Michigan. Eric Larson, CEO of the Downtown Detroit Partnership, said the Chase bank investments in Detroit have helped “validate” the business case for more outside investors to come to town. “The single most important thing we can continue to do is find outside validation and outside investment into what we all know is happening,” Larson said. “... You’ve got to get other people from outside drinking the Kool-Aid too.” Of the $50 million for community development, $40 million is dedicated to long-term flexible financing and $10 million will be granted for construction or rehabilitation of residential units and commercial space, said Kevin Goldsmith, a community development program manager at Chase bank. Chase is using Detroit to develop a “sustainable market-based approach” for lending through community development financial institutions like Invest Detroit and Capital Impact Partners, Goldsmith said. “We really do see this as not just a handout,” Goldsmith said. “This is really ... an investment in the business and serving the market-based approach here in Detroit.” Detroit businesses have defied expectations of the New York bankers. Chase bank expects $13 million of the roughly $75 million in Detroit loans to repaid by the end of 2019, Scher said. “There were people at J.P. Morgan in New York who thought we’d never see any of it back,” Scher said at Wednesday’s event. “We were fairly confident we’d start seeing it back in 10 years. But the fact that we’ve now had $7 million returned in these funds … and we can redeploy that capital back into the city, that’s something that none of us had expected.” 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 Y 1 5 , 2 0 1 7

CHURCHES FROM PAGE 1

As real estate values and development interest rise along the route, religious institutions have better options that may just be too good to refuse. Last week, Crain's reported that Ecumenical Theological Seminary, which occupies and owns the former First Presbyterian Church on Woodward at Edmund Place in Brush Park, listed the property for sale for $4.85 million. The goal, said the Rev. Stephen Butler Murray, president of the seminary, was to move into more modern space and focus its financial resources on education, not its annual $200,000-plus maintenance costs. Those costs amount to nearly 20 percent of its $1.2 million budget. But these days, it sits a block away from the soon-to-be-completed Little Caesars Arena for the Detroit Red Wings and Detroit Pistons, in what is planned as a $1 billion-plus development area called The District Detroit, which is slated for office, residential, entertainment and retail development over the next several years. “This property, for a long time, was not worth very much and now, with all of the development happening around us, we suddenly find ourselves on a property with something that has some real worth to it,” Murray said. Kevin Messier specializes in sales of institutional buildings — such as churches and schools — as associate broker for Utica-based Real Estate Professional Services Inc. He said in particular that the First Presbyterian sale represents a strong possibility to cash in on an attractive real estate market. “They want to cash in on a good thing if they can.” How the property will eventually be used following a sale is anyone’s guess, Messier said, adding that he has seen a church in Ferndale being turned into storage units and some turned into restaurants and even funeral homes. “To me the highest and best use is what it’s designed for, but these guys are looking to see if they can take advantage of the current market and what’s happening downtown.” Messier’s company’s website lists more than 60 churches for sale; it averages about 40 sales per year, he said.

Creative reuse Earlier this year, Holley and the small private Howell-based business school Cleary University announced that Cleary would use some of the Historic Little Rock’s master-leased space in the Considine Little Rock Family Center at its Detroit campus, offering classes and training programs. Holley said the school is an opportunity for members of the community to further their education. “We put a culinary school here, and after that I’m going to put a cosmetology school in the neighborhood, and we are trying to get a distribution center to repackage things so we can get jobs to people that don’t require master’s degrees and bachelor’s degrees, but high school diplomas and associates degrees,” he said. Jayson Boyers, president of

KIRK PINHO/CRAIN’S DETROIT BUSINESS

Detroit-based Exclusive Realty has the listing for the former First Presbyterian Church, the owners of which are asking $4.85 million for the building and site.

Jayson Boyers: Opportunity to come to area.

KIRK PINHO/CRAIN’S DETROIT BUSINESS

The former First Presbyterian Church opened in 1891 at Woodward Avenue and Edmund Place in Detroit. Cleary, said Historic Little Rock approached the school about putting an education center in the building, which is owned by the city as a former recreation center. Cleary subleases the space from Historic Little Rock, Boyers said. “We wanted to be a part of not just going to downtown Detroit, but be part of revitalizing a neighborhood,” Boyers said. “We saw it as an opportunity to come to the area and get people education, get them equipped for jobs.” The space, located in about 7,000 square feet, is expected to be complete in the fall and will provide education to about 200 students when “fully up and running,” Boyers said. Other projects in the Detroit area demonstrate the potential of former religious buildings. In Corktown, an old church was converted into Assemble Sound, a recording studio, community space and co-working studio for musicians near the Michigan Central Station. Assemble purchased the 1871

church from Grace-to-Grace in 2015; it had been owned by a variety of denominations since its construction shortly after the Civil War. And in Grosse Pointe Park, $1.8 million was spent converting the former Grace United Church of Christ on Lakepointe Street into Atwater in the Park, a 7,500-square-foot brew house for Detroit-based Atwater Brewing Co. When it opened in 2014, it had 40 tap handles and could seat 150 inside plus 80 in an outdoor biergarten. But not all efforts to repurpose or revitalize houses of worship are successful at first. Earlier this year, the former Temple Beth El at Woodward and Gladstone Avenue across from Holley’s church north of Grand Boulevard was the target of a crowd-funding campaign that fell short of its $100,000 goal to remodel the Albert Kahn-designed building on Woodward. Nearly $46,000 was committed, but as a Kickstarter campaign, because it didn’t get $100,000, it receives none of the $46,000. Pastor Aramis Hinds, who

Khari Brown: How do you repurpose churches?

spearheaded the fundraising campaign, was out of town last week and could not be reached for comment. In a letter to Kickstarter backers posted on the Bethel Community Transformation Center’s website, Hinds encouraged donations to the organization and wrote, “We are not giving up, and in the weeks ahead we’ll be meeting and listening to all of the feedback you give us as we re-commit ourselves to the work ahead: restoring this building and the relationships that will make it a sacred and beautiful place again.”

Reimagining church Of the 13,463 parcels in the neighborhoods surrounding Woodward north to Highland Park, 237 (1.8 percent) are classified as “religious,” according to city data compiled by Crain’s. There is a concentration north of Grand Boulevard as a few dozen parcels classified as religious pepper the area, cloistered together on Pingree and Blaine streets and Gladstone Avenue, according to city records. The Pew Research Center’s Religious Landscape Study shows declining importance of religion in Michigan in the last several years. A 2014 survey shows a drop in 4 percentage points of people who say religion is “very important,” falling from 54 percent in 2007 to 50 per-

cent, while those saying it’s “somewhat important” fell 3 percentage points from 30 percent to 27 percent. The sample size in 2007 was 1,275 and in 2014 it was 982. Attendance at religious services has also fallen, according to Pew. In 2014, 33 percent of respondents said they attended services at least once a week, a 5 percentage-point drop from 38 percent in 2007. Thirty-five percent said they attended once or twice a month or a few times a year in 2014, compared to 34 percent in 2007, while those saying they seldom or never attended rose to 32 percent in 2014, a 5-point increase from 27 percent in 2007. Khari Brown, a Wayne State University associate professor of sociology whose research focuses on religion and politics, says attendance in Detroit churches has declined in the last half-century as the population has fallen from well over 1 million people to just shy of 700,000. But in particular, he said, as some churches became not just places of worship but also heavily involved in conservative social causes, younger generations that trend liberal on those issues were turned off. “Sexual morality, abortion,” Brown said. “That is not appealing to a lot of young people, and that is part of what contributed to declines in attendance among millennials.” Therein lies one of the keys to getting people back to the pews and contributing to the bottom line, Brown said. “How do you repurpose the church, reimagine it, advertise it in a way that is not judging? Perhaps we can market ourselves as a place they would want to socialize. We are consistent with some of their ideologies of revitalizing the city, and we can take advantage of that.” Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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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 Y 1 5 , 2 0 1 7

LEAGUES www.crainsdetroit.com Editor-in-Chief Keith E. Crain Executive Vice President KC Crain Publisher/Editor Ron Fournier, (313) 446-1674 or rfournier@crain.com Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@crain.com Director, Crain Custom Content Kristin Bull, (313) 446-1608 or kbull@crain.com Product Manager/Marketing and Events Kim Winkler, (313) 446-6764 or kwinkler@crain.com Digital Product Manager Carlos Portocarrero, (313) 446-6056 or cportocarrero@crain.com Membership Director Nancy Hanus, (313) 446-1621 or nhanus@crain.com Creative Director David Kordalski, (216) 771-5169 or dkordalski@crain.com News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Special Projects Editor Amy Elliott Bragg, (313) 446-1646 or abragg@crain.com Design and Copy Editor Beth Jachman, (313) 446-0356 or bjachman@crain.com Research and Data Editor Sonya Hill, (313) 446-0402 or shill@crain.com Newsroom (313) 446-0329, FAX (313) 446-1687, TIP LINE (313) 446-6766

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FROM PAGE 3

Baseball beginnings The USPBL, which added a fourth team at Jimmy John’s Field for this season, is the brainchild of Rochester sports entrepreneur Andy Appleby, a former Detroit Pistons executive who launched his own sports marketing and services firm in 1998. He previously owned a Single-A baseball club and a British pro soccer team, experiences he’s said shaped his business strategy: Provide first-class customer service and accessible pricing to a family-friendly sports product. So, he spent $16 million to build a 1,900-seat ballpark that opened in 2016 along M-59 in Utica, and launched a three-team (now four) league of players age 18 to 25 who haven’t been signed by Major League Baseball’s affiliated farm teams. Appleby’s concept is a 75-game May-September schedule, played round-robin style, mainly on weeknights and weekends. Despite being just 25 miles away from the Detroit Tigers at Comerica Park, the concept worked: The USPBL averaged 3,200 per game, and sold out 42 of 75 games last season at Jimmy John’s Field. It opened its second season on Thursday with 4,000 fans in attendance. Appleby said the league is profitable, thanks in large part to corporate sponsorship dollars he personally secured during his years working in the industry.

Soccer success In the case of DCFC, the five founders sensed that a wave of young professionals moving into Detroit were potentially soccer fans. The sport has been gaining ground in the United States with the success of Major League Soccer and the rising popularity of European pro soccer broadcasts on TV. Rodney Fort, a University of Michigan sports economics professor, said DCFC’s success is a blend of “right place, right time, plus growth in interest in the game at large.” He also noted that the soccer club’s ownership has “deep Detroit roots and a really keen sense of its fanbase.” “We recognized that there were soccer fans across southeastern Michigan who were watching Champions League and Premier League matches on television who also craved a live soccer experience,” DCFC co-owner Todd Kropp said. Unlike the USPBL and even other soccer clubs, DCFC’s owners bucked convention on who it targets as fans. “So many teams at our level focus on building their organizations by focusing on getting kids and families to matches. That’s important for growth to be sure, but we flipped that model initially and focused more on young adults when thinking about things like the design of our merchandise and how we have leveraged social media,” Kropp said. The plan worked, and the team has witnessed per-game attendance grow from 1,200 in the first year to more than 5,000 a game last season.

Detroit City FC, which opened it sixth National Premier Soccer League season on Friday, has been noted for its millennial or hipster fanbase, especially the rowdy “Northern Guard” supporters. “After the first goal was scored at our very first match some red smoke started spreading from the supporters section. A few of us owners looked at each other and asked, ‘Do we allow smoke? I guess we do now,’” Kropp said.

The ticket advantage One significant selling point that minor league teams have over their major league competitors is ticket pricing. It’s far cheaper to take a family to a Detroit City FC match or USPBL game than to a major league game. Prices for DCFC’s matches range from $10 for general admission to $50 for VIP seating in its renovated stadium. Season tickets start at $70 for entry to at least 10 games. Admission is free to all games for children 5 and younger. In the USPBL, individual game tickets begin at $6 for lawn seats. The most expensive single-game ticket is $35 for a front-row seat. Seasons tickets for all 75 games begin at $750 and max out at $3,000, with each level of pricing linked to increasing numbers of perks. By contrast, here are the average single-game ticket prices, per Forbes, for Detroit’s four major league teams: J Tigers: $30 J Lions: $80 J Pistons: $32 J Red Wings: $60 The big league clubs each offer ticket specials and other discounts to lure fans, and many have turned to dynamic pricing that lets the market dictate ticket cost based on demand — but they still are more expensive than the minor leagues. The counter-argument, of course, is that the minors don’t offer fans the chance to see a Miguel Cabrera or Matthew Stafford. For families with small children, the lack of star players won’t matter. Appleby’s baseball stadium is especially tailored for that demographic, with a kids’ play area that includes a mini baseball diamond. Of all the major league teams locally, the Detroit Tigers target families most heavily. They allow kids to run the bases after Sunday games and have plenty of promotions tied to children and families, along with a Ferris wheel and merry-go-round. Still, a trip to a Tigers game isn’t cheap for many. Last season, the average cost for a trip to Comerica Park for four people came in at $214.52, according to the 2016 Fan Cost Index published by Chicago-based Team Marketing Report. The estimate was based on the purchase of four adult tickets at the average price of $28.88, two $5 beers, four $4.50 soft drinks, four $4.75 hot dogs, $20 parking for a single vehicle, and two $16 caps. The average fan cost index across all of MLB’s 30 clubs last season was $219.53. The USPBL offers a $58 package that includes four box seats, four hot dogs and four soft drinks.

Corporate dollars Both teams have been successful in attracting corporate sponsorships. That’s because Detroit City FC and the USPBL fill a gap in the marketplace for companies that want to advertise at ballgames, industry insiders say. “Small businesses seek opportunities to take customers to sporting events,” Dietz said. “Sports marketing is a smart play. If your budget doesn’t allow you to be a sponsor with the big four, but you want to have a presence in sports marketing, then these are your entry level platforms.” Appleby’s stadium and league 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. Companies also have bought all of the premium seating at Jimmy John’s Field: All 24 suites are leased under five- to seven-year deals that cost $35,000 to $55,000 annually, and 23 four-seat half-moon shaped tables are leased for $20,000 annually under five-year agreements. Warren-based Michigan Surgery Specialists PC leased one of the tables this season. “(The table) is mainly being used for employee engagement,” said Amanda Uppleger, the company’s business development coordinator. “This is a new local space, a great clean space and good family fun.” Detroit City FC, despite being an amateur team, has grown gross revenue by 40 to 45 percent growth annually. Although the team doesn’t disclose its finances, it has confirmed a $1 million operating budget this season. It also has financed nearly $1 million in fixes and upgrades to its stadium. As an amateur team, it doesn’t have player labor costs — they’re mostly college kids. Here’s how the team’s revenue matrix works: A quarter comes from merchandise sales while 45 percent is from season and single-game ticket sales. Another quarter is from corporate sponsorships, and the final five percent is from concession sales. Metro Detroit Chevy Dealers is the team’s title sponsor for the third straight year. Last year, the auto dealer group signed a multi-year deal that

puts its name across the front of the team’s home and away jerseys and gives it signage at the team’s Hamtramck stadium as well as on the team’s website and Facebook page. Other major corporate sponsors include Detroit-based Strategic Staffing Solutions, Better Made, MotorCity Hotel Casino, Henry Ford Health Systems and Lawrence Tech. DCFC ownership from the start knew it had to work hard to convince companies to spend money on an amateur club. “We’ve also focused on creating sponsorship activations that are unique and that stand out from what you might see at some of the larger sporting events,” Kropp said. “We crowd-sourced our jersey sponsor by having each player wear a different sponsor logo from a local small business. Many of our sponsors were bars and restaurants, so in exchange for the sponsorship of a player we planned after-match parties at the sponsor’s location to drive business and introduce people to some places that they hadn’t been to before.” Corporate funding may grow as the team seeks to become a full-time professional club in one of the country’s two second-tier leagues under Major League Soccer, a move that will require major outside investment to the tune of millions of dollars. DCFC is talking to the New York City-based North American Soccer League and the Tampa, Fla.-based United Soccer League, and hopes to make the move possibly as early as 2018. The team’s current league, the National Premier Soccer League, is a fourth-tier organization in American soccer’s organizational pyramid.

In the future It’s impossible to know if the soccer and baseball organizations will sustain their success. Detroit City FC faces a potential threat from a bid by a pair of billionaire pro basketball owners, Detroit real estate industrialist Dan Gilbert and private equity mogul Tom Gores, for a Major League Soccer expansion team that would play in a proposed soccer-specific stadium and mixeduse downtown development. MLS is adding four teams over the next few years, and it’s unclear what might become of DCFC if Detroit is awarded a team. As for baseball, attendance this season will reveal whether interest in the USPBL has worn off, Dietz said. “We’ll find out if the appetite in Year 2 is still there,” he said. Bill Shea: 313 (446-1626) Twitter: @Bill_Shea19 Crain’s reporter Kurt Nagl contributed to this story.

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

3

J.P. Morgan Chase & Co.

1

Arbor Brewing Co.

3

Jaffe Raitt Heuer and Weiss

Ash Stevens

8

Lycera

8

Bigalora

3

MichBio

8

Detroit City FC

3

Millendo Therapeutics

8

Detroit Vegan Soul

1

United Shore Professional Baseball League 3

Gemphire Therapeutics

8

IBEW

8, 9

5

19

C R A I N ’ S D E T R O I T B U S I N E S S // M A Y 1 5 , 2 0 1 7

THE WEEK ON THE WEB

RUMBLINGS

MAY 6 - 12 | For more, visit crainsdetroit.com

Alibaba wants to pair local companies with Chinese consumers

M

ichigan food entrepreneurs and farmers may gain an unlikely lifeline to expanding their businesses — the Internet in China. China’s largest e-commerce company, Alibaba Group Holdings Ltd., hopes to pair local food producers and small- and medium-sized food companies with China’s rising middle class, which is larger than the entire U.S. population, through its inaugural Gateway ‘17 event on June 20-21 at Cobo Center in Detroit. The event is driven by Alibaba’s need to expand internationally and provide Chinese consumers with high-quality products prevalent in this region, said Jack Ma, founder and chairman of Alibaba, in a Tuesday conference call with reporters. “The American Midwest is the center, where there are so many great companies and agricultural products,” Ma said. “China needs great food and food products. We badly need good food, but with the pollution we cannot produce that many food products in China.” The event, which is procurement focused, is designed to teach Michigan companies the value of Alibaba’s services, which are similar to Amazon, and to create a new market for the region’s businesses. Michigan farmers and food producers are no stranger to exporting to China, though. Agriculture is the state’s second largest export industry to China behind automotive. Exports include soybeans, feed grain, dairy and vegetables. Michigan exported $3.2 billion in products to China in 2016, making it the state’s third-largest export partner behind only Mexico and Canada. Several Michigan companies already use Alibaba’s websites, including Kellogg Co. and Whirlpool Corp., but Ma hopes the event will open up the Chinese market to small companies. “For the past 18 years, we’ve always been focused on small business,” Ma said. “And I’m a believer it’s the main driver in creating jobs. We can help small businesses globalize their market.”

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

74,000 square feet

The amount of space planned in a new downtown Royal Oak office building. Construction is scheduled to begin this week now that 85 percent of the building’s space has been pre-leased by three major tenants, including the developer.

4.1 million

The number of visitors Belle Isle Park saw in fiscal 2016, surpassing the state Department of Natural Resources’ expectations. The park also earned $514,000 in revenue, a 14 percent increase over the previous year.

35 years

The length of time the Renaissance 500 Tobacco Shoppe was a tenant in the Renaissance Center before owner Ramzi Shaya announced the business would close at the end of May after making little to nothing in the last several years. a year before and 7.8 percent from March, the Michigan Gaming Control Board reported. J A Farmington Hills-based development company is planning a new mixed-use project in Midtown that would bring the neighborhood north of downtown a new 120-room hotel and at least 65 new apartments. J StockX, part of billionaire businessman Dan Gilbert’s portfolio, announced its plans to enter the secondary watch and handbag markets. J The 2017 Quick Lane Bowl college football game will return to Ford Field in Detroit on Dec. 26, the Detroit Lions announced. The game will air on ESPN at a kickoff time to be announced later. J Dearborn-based Carhartt Inc. is applauding hard-working women for Mother’s Day with its new “All Hail

the Carhartt Woman” campaign. Metro Detroit’s 33 acute-care hospital profits were down slightly in 2015 compared with 2014. In 2015, average profits were posted at 4.6 percent of net patient revenue compared to 5.1 percent in 2014. But for-profit Detroit Medical Center and eight-hospital Beaumont Health led the way with gains in revenue, income and market share, according to the 2016 Michigan Health Market Review. J Ann Arbor-based Renaissance Venture Capital Fund has teamed with the Michigan State University Foundation to open an office in the East Lansing Technology Innovation Center. J A new gym called Area 45 Fitness that uses black lights and high intensity interval training techniques has opened at 3536 Rochester Road in Troy. J Real estate businessman Moses Shepherd is entering the oil industry with the launch of Ace Petroleum LLC, headquartered in Rosedale Park. J Autobooks LLC has moved from Troy to the Madison Building in downtown Detroit, drawn to the buzz surrounding the expanding tech startup community in the city. J Automotive supplier Roush Industries Inc. has opened an engineering center in Troy that will bring about 150 jobs to Oakland County, mostly in engineering and data science. J The restaurateurs behind Big Rock Chophouse and Griffin Claw Brewing Co. in Birmingham, Norm and Bonnie LePage, will operate the spacious anchor venue at DTE Energy Co.’s new downtown Detroit park, the Detroit-based utility announced. J TPG Capital, a San Francisco-based private equity investment firm, has made a majority investment in LLamasoft Inc., the supply chain software supplier announced. J Months after its longtime Renaissance Center destination restaurant Coach Insignia shuttered for good, the Epicurean Group planned to open its new Nomad Grill and event space at the renovated Premier Hotel by Best Western in Southfield. J The owner of Vicente’s Cuban Cuisine in downtown Detroit is opening a new restaurant on West Forest Avenue in Midtown called Bolero Latin Cuisine this summer. J

BUSINESS NEWS Detroit’s QLine streetcar system services were scheduled to begin Friday, after a decade of planning, financing, politics and construction. J Garden City Hospital has opened a new elective interventional cardiovascular program after receiving state approval last month to perform coronary angioplasty procedures. J Detroit’s three casinos reported an aggregate revenue of $121 million in April, down 1.1 percent from J

QUICKEN LOANS

Quicken Loans invested $400,000 to transform the Woodward Avenue medians from Larned Street to Campus Martius into a public park. The park opened Friday — the same day the QLine streetcar line offered its first public rides.

ANNALISE FRANK/CRAIN’S DETROIT BUSINESS

The Caucus Club in the Penobscot Building in downtown Detroit first opened in 1952.

Legendary Caucus Club restaurant re-opens

T

he Caucus Club, located in the Penobscot Building in downtown Detroit, opened for dinner last Friday, the Detroit Free Press reported. The legendary restaurant originally opened in 1952 and closed during tough economic times in 2012. Barbra Streisand famously got her start there as a lounge singer in 1961. It's now under the ownership of George Sboukis and underwent a full-scale remodel.

Executive Chef Rick Hussey's new menu will focus on steaks along with table-side Caesar salads, seafood, raw bar fare, and a modern rendition of a once-famous cocktail called the Bullshot, invented at the Caucus Club in 1952. The original cocktail recipe featured vodka and beef broth. There will be live music every evening beginning at 7 p.m., according to its website. The Caucus Club is located at 150 W. Congress St., Detroit.

Ford shareholders miffed by first virtual meeting F ord Motor Co.’s shareholders on Thursday questioned the company’s top executives about their strategy for the future — and complained about a new virtual meeting format. CEO Mark Fields, who faced scrutiny earlier this week over the company’s lagging stock price and investments in new mobility services, emphasized that Ford was moving “aggressively but also prudently” into “the biggest strategic shift in the history of our company.” Executive Chairman Bill Ford said the company “continues to succeed in the present, even as we build a foundation for greater success in the future.” That foundation involves investments in ventures not directly related to the sale of cars and light trucks. Over the past year, Fields has outlined the company’s plans to develop a fully autonomous car, expand its electrified vehicle portfolio and invest in new mobility services such as ride-sharing shuttles. But after posting a near-record pretax profit of $10.4 billion in 2016, Ford expects a decline to $9 billion pretax profit this year because of those investments in the future. The company’s stock price has continued to lag, and it was recently passed in market capitalization value by startup electric-vehicle maker Tesla. And Ford board members are put-

ting pressure on management. “We’re as frustrated as you are by the stock price,” said Bill Ford, noting that the company would continue to work on improving its core business while experimenting with the new mobility services. On vehicle quality, Fields admitted to troubles with recalls, but claimed the company was showing improvement. When one shareholder asked about plans to discontinue any cars, Fields sidestepped it by saying the company was always looking at its options. Normally held in Wilmington, Del., this was the first annual meeting held virtually. That didn’t sit well with some shareholders. John Chevedden, a longtime activist shareholder, said it was a “horrible retreat into a foxhole for the company,” and mused that perhaps Ford’s top brass “are hiding in Dearborn in the basement.” Ford said the company switched the meeting to “reach more shareholders,” and said internal metrics showed more participation than in previous years. Among shareholder proposals, voters again rejected an annual request to remove the Ford family’s special class of shares. Ford said 64.4 percent of voters were against the idea. Ford shares were trading down 2 cents at $11.02 as of 11:23 am ET.

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