Crain's Detroit Business, July 10, 2017 issue by Crain's Detroit Business

JULY 10 - 16, 2017

Omer Kayani’s Sentinl hits the stores.

Ron Fournier: What keeps you up at night? A Q-and-A with United Shore’s Mat Ishbia. Page 3

Page 3

Detroit

Battling business blight

Demolitions slow on vacant and dangerous commercial properties

By Chad Livengood clivengood@crain.com

Last September, a party store on Mt. Elliott Street on Detroit's east side burned down after the owner had walked away from the property in foreclosure, abandoning his plans to renovate the 98-year-old building following a raft of break-ins.

Businessman Noaman Nagi said he invested $40,000 in the building, only to have vandals break in more than four times, strip the store of “every piece of metal it had,” including

an air conditioner that was ripped off the roof. “I said forget it,” Nagi said. The one-time corner deli and party store has been largely forgotten for the past 10 months as a heap of the building’s charred remains lay street side at the corner of Mt. Elliott and East Ferry streets. A chimney at the back of structure dating back to 1919

is the only thing left standing amid a pile of debris. In Detroit’s historic challenge to clear out tens of thousands of blighted homes and other structures left behind by six decades of depopulation, vacant and equally dangerous commercial buildings are often the most difficult to erase from the city’s landscape.

Because commercial properties are bigger and can contain more hazardous waste, they’re more expensive to demolish, costing nearly four times as much to raze than bulldozing a single blighted house, according to city demolition data. SEE BLIGHT, PAGE 20

The former Motor City Party Store at 5471 Mt. Elliott St. burned down nearly ten months ago. A pile of debris lay next to the corner of Mt. Elliott and East Ferry streets, across the street from Trinity Cemetery. CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS

CRAIN’S MICHIGAN BUSINESS: UP NORTH

New growth for Grayling

Former lumber boomtown looks back to the forestry industry for an economic future

SunFrog uses SEO, social media to be largest T-shirt seller in U.S.

By Lindsay VanHulle

By Tom Henderson

lvanhulle@crain.com

GRAYLING — Once the playground of lumber barons, Grayling is probably more familiar to travelers as a freeway exit on the way to someplace else. That’s changing. A Chilean forestry company’s $400 million particleboard factory

just south of town is poised to transform the area’s economy. And its arrival may offer lessons for other Michigan towns on how to revive their financial fortunes. A year from now, Arauco promises, its plant, now under construction near Interstate 75, will provide upwards of 200 jobs for a city and a region sorely in need of an economic

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jolt. Up to 1,000 additional workers will be hired in the shorter term to build the 820,000-square-foot factory, roughly the size of Buckingham Palace. The significance of Arauco’s ambitions for Grayling — and, more broadly, for Crawford County — is difficult to overstate. When the factory opens, it will become the second-largest county employer, behind only Grayling’s hospital. (Camp Grayling, a National Guard training center, would drop to third.)

NEWSPAPER

SEE GRAYLING, PAGE 20

thenderson@crain.com

Josh Kent had no doubt he could run a successful internet sales business. A self-taught computer programmer, in 2002 he founded a successful computer store in Grayling called Alpine Computers, which he sold in 2015. In 2004, he founded a web design company called Alpine Websites that in 2013 was named best small business for the northwest region of Michigan by the Michigan Small Business Development Center in Traverse City.

And in 2005, he founded Kent Properties LLC, a real-estate investment firm whose holdings include office and restaurant space in redhot downtown Traverse City. So when Kent decided in 2013 to launch an online company called SunFrog LLC to sell T-shirts, success wasn’t going to come as a surprise to him. What did come as a surprise were sales volumes and revenue. SunFrog went from $1 million in sales in 2014 to $60 million in 2015 to $100 million last year — about five million shirts SEE SUNFROG, PAGE 22

More on this report: Up North << Three longtime farm families leverage new products,

technology to grow their agribusinesses. Pages 10-13 North Michigan company supplies body armor to 1 in 5 police officers. Page 14

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MICHIGAN BRIEFS

INSIDE BANKRUPTCIES

Snyder ramps up pressure for House vote on jobs bill

Menards ruling could have retail ramifications

Gov. Rick Snyder is pushing hard for a tax incentives package aimed at large companies leading up to Wednesday, the House’s only scheduled work day this month. Senate Bills 242-244, or the “Good Jobs for Michigan” package, would entice job providers and improve the state’s business climate, the governor has said. Snyder has said tax-capturing incentives are necessary for winning over big companies like Foxconn, the Taiwanese electronics giant eyeing a site in Romulus. More than a month later, the Republican governor is still pushing the GOP-controlled House to take action on the legislation before prospective employers slip away. “I understand some skepticism toward incentives ...,” Snyder wrote in a guest column in The Detroit News on Thursday, “but the overall positive impact of bringing in largescale projects cannot be understated: more supplier jobs, more spinoff jobs, more tax dollars, more tourism, more kids in schools, more families living in our great state.” Under the amended legislation awaiting a House vote, an employer that creates 3,000 or more new jobs could keep up to 100 percent of its

Months after hearing arguments, the Michigan Supreme Court has decided to stay out of a personal-injury case at a big-box store that could have consequences for retailers statewide, The Associated Press reported. The court said it will let an appeals court decision stand against Menards, the Wisconsin-based home improvement chain, which was sued after a shopper was struck by a pickup truck while pushing a cart outside a Bay City store in 2011. Virginia Rawluszki died from her injuries two years later at age 72. Her family said Menards should have installed stop signs to slow down traffic at a crosswalk. The retailer, however, said the risk of being hit in a parking lot is open and obvious — a key legal standard in Michigan that often protects property owners from liability. But two courts declined to dismiss the lawsuit. The Supreme Court, in a unanimous order Friday, said it won’t get involved, leaving an appeals court decision in favor of Rawluszki’s family and sending the case back to a Bay County judge for trial or possible settlement.

DAVID EGGERT/AP

Michigan Gov. Rick Snyder urges the Michigan House to pass economic development tax incentives on June 1 at the Detroit Regional Chamber’s Mackinac Policy Conference on Mackinac Island. Also pictured are Oakland County Deputy Executive Matt Gibb, left, and Detroit Regional Chamber President Sandy Baruah. employees’ state income taxes for up to 10 years. The state’s income tax rate is 4.25 percent. This provision appears to be targeting Foxconn, whose chairman said last week the manufacturer of Apple’s iPhone may spend up to $10 billion over five years building manufacturing plants in multiple states. The capture for such large employers is larger than what smaller employers would be eligible for. Employers that create 500 or more new jobs would get to keep up to 50 per-

cent of the state income taxes deducted from their employees’ checks for up to five years, according to the nonpartisan House Fiscal Agency. The bill also would allow for the capture of all state income taxes for employees for 10 years if an employer creates 250 or more new jobs in Michigan with an annual wage that is 125 percent of the regional average earnings. The legislation caps total tax captures at $200 million for the lifetime of the program, which would end on Dec. 31, 2019.

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OPINION

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RUMBLINGS

WEEK ON THE WEB

Judge extends suspension of aid to private schools A judge said she’s leaning toward an injunction that would stop $2.5 million in state aid for Michigan private schools, The Associated Press reported. Judge Cynthia Diane Stephens heard arguments Wednesday from lawyers for the state and a coalition of public school groups. Opponents are challenging the appropriation to private schools for fire drills, inspections and other state requirements. They said it violates the Michigan Constitution’s ban on aid for private schools. Stephens said an earlier freeze will remain in effect until at least Aug. 1 when she’ll decide whether to order an injunction.

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Management

What keeps you up at night?

United Shore CEO Mat Ishbia rallies employees as the company announces its move to Pontiac.

Six months ago, Mat Ishbia awoke from a fitful sleep worrying about his headquarters in Troy. The 275,000-square-foot office space had grown too small for United Shore’s 2,100 employees and threatened to suffocate Ishbia’s expansion plans. Staring at the ceiling, he told himself, “You better find someplace new, because this isn’t going to end well.” This column marks the first in what I hope will be an occasional series of interviews with Michigan business leaders, each starting with the same open-ended question, “What keeps you awake at night?” My goal is to learn what makes CEOs

Real Estate

Technology

JANICE FAUCHER, UNITED SHORE

Harbor House owner fights to buy building By Kirk Pinho kpinho@crain.com

The owner of the Harbor House restaurant near Greektown is fighting his landlord in court to gain ownership of the building where it has operated since 2008. It's a case that sits at the intersection of not only the hyper-competitive restaurant market in and around downtown, but also the interest in prime real estate in the area as major new developments take shape, such as Dan Gilbert and Tom Gores' proposed Major League Soccer stadium. At issue in the lawsuit is whether a lease purportedly executed in January 2014 between restaurant owner John Mighion and the Tremonti family, which owns the building, is legitimate. Mighion and the Tremontis have been locked in a legal battle since the January lawsuit was filed in Wayne County Circuit Court. The dispute is contentious, colored with secretly-recorded phone conversations peppered with expletives and allegations of invalid leases. “I did a favor for you and now you’re trying to jam it up my a-- and I’m telling you, it ain’t going to f-king happen because I told you the option (to purchase the building) was out (of the lease),” Gregory SEE HARBOR, PAGE 22

RON FOURNIER Publisher and Editor

and their companies tick. I posed the question to Ishbia, president and CEO of the mortgage wholesale giant, hours after he announced United Shore’s move to a 60-acre campus in Pontiac.

“I started looking 10 months ago casually” for more new office space “and six months ago, in December or January, I started waking up and thinking, ‘It’s about to get real now because we are about to take this (company) to the next level, which we (can’t) do because we don’t have the space. I am not going to let the building constrain our growth.”’ His answer came at the end of an epically Ishbian interview, filled sport analogies (he played basketball at Michigan State University), bromides (“If you take care of your people, business success will come”)

and boasts (“We are having the best June in 31 years”). I peppered Ishbia with cynical questions that he swatted away like bad passes. Then he politely said goodbye and waded into the company’s weekly dance party. Yes, the United Shore staff dances every Thursday afternoon for 15 minutes. With nearly 70 percent of his staff hailing from the millennial generation, Ishbia has created an atmosphere that appeals to their sense of purpose and desire for work-life balance. Overtime is frowned on, a policy dubbed “firm 40.” SEE FOURNIER, PAGE 18

A safe(ty) bet for Sentinl

Cabela’s deal gives startup jump on sales for fingerprint trigger lock “The industry is not against this technology, but it is against mandating it. As long as it’s always optional, gun owners will be interested.”

By Dustin Walsh dwalsh@crain.com

Omer Kiyani is an engineer, entrepreneur and gun advocate. The former airbag systems engineer for a German auto supplier has successfully transitioned those three characteristics into the creation of a product that could attract gun enthusiasts who want both safety and quick access to their firearms — while expanding his fledgling startup. Kiyani’s Detroit-based Sentinl LLC launched its IdentiLock, a fast-access biometric trigger lock, at roughly 75 Cabela’s stores and online this month. The product attaches to a gun’s trigger and unlocks in 300 milliseconds only when the owner, or up to three approved users, applies a fingerprint. The highly politicized gun debate is a tricky one for producers like Kiyani, an National Rifle Association member and gunshot victim himself — he was shot in the face while riding in a car in high school in what was deemed a random act. (Kiyani stresses the incident, which he fully recovered from, played little to no role in his decision to create IdentiLock.) IdentiLock, which is available for the most popular handguns, such as the Smith & Wesson 1911, Glock 17 and Sig Sauer P226, retails for $239. “I have kids, so I wanted a solution that would allow me to keep my family safe, but also allows for immediate access to the gun when I need to,” Kiyani said. “Most current systems emphasize safety, but prevent quick access. I couldn’t think of an easier way to access my own gun.”

Bill Brassard Jr., senior director of Newtown, Conn.-based National Shooting Sports Foundation

IdentiLock’s slogan is “Always Safe, Always Ready.” Other popular gun safety accessories include keyed trigger locks, which place a simple lock mechanism on the gun, but prevent speedy access to the weapon in the event the owner needs it. The 12-ounce IdentiLock uses similar fingerprint technology consumers experience on the iPhone, but with a larger, speedier sensor, Kiyani said. When fully charged, the device can maintain power for six months, if not longer.

Political issues

Omer Kiyani, founder and CEO of Detroit-based Sentinl.

SENTINL

Other producers who have combined technology with gun safety have faced some backlash. Munich, Germany-based Armatix GmbH, which manufactures a .22-caliber “smart” handgun that uses a radio frequency-enabled stopwatch to identify the authorized user so no one else can fire the weapon, has seen backlash from suspicious gun owners. SEE SENTINL, PAGE 17

MUST READS OF THE WEEK Carr Center’s future

Clark Hill expansion

Millennial questions

Telemedicine expands

Name for MLS team?

Arts group that lost home goes back to movable feast, tries to build fundraising muscles. Page 4

Addition of 100-attorney California firm makes it largest law firm based in Southeast Michigan. Page 7

Mary Kramer: The business world isn’t exactly full of ‘safe spaces’ for new graduates. Page 8

New programs aim to provide cost information, expanded specialist visits. Page 6

Rumblings: Domain name registrations suggest what Gilbert and Gores might be thinking. Page 23

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Carr Center retools, aims to build fundraising muscle By Sherri Welch swelch@crain.com

SPI ING

After moving out of the downtown Detroit building it had operated from for the past eight years following a failed bid to buy it, the Carr Center has gone back to operating from other sites around the community and is focused on elevating its programming to help increase its local and national recognition. To do so, it’s turning to programs including new, artist residencies with the likes of dance instructor, choreographer, actress and producer Debbie Allen, best-known for her role in the 1980s television show “Fame” and now “Grey’s Anatomy.” Other artists that have committed to come to Detroit for residencies at different points during the upcoming season include: Mack Avenue jazz recording artist Rodney Whitaker, Leo Davis Jr. in Sacred Music and Michael Kelly Williams, a Harlem-based sculptor who grew up in Detroit. The residencies were part of a vision the Carr Center’s late arts director, renowned jazz pianist Geri Allen, helped develop for the organization before her death late last month. The hope is an elevated profile for the Carr Center will, in turn, help the agency build new muscle to raise money from individuals, decreasing its longtime reliance on foundation and corporate supporters, Carr Center President Oliver Ragsdale Jr. said. That’s an issue not just for the Carr Center, but for African-American and Latino arts organizations across the country, said Michael Kaiser, former head of the John F. Kennedy Center for the Performing Arts in Washington, D.C., and the current chairman of the DeVos Institute of Arts Management at the University of Maryland. Kaiser has been working with the Carr Center for the past five to six years, first in group settings and more recently in one-on-one consultations designed to help strengthen the organization and put it on stable financial footing. Typically, arts organizations of color like the Carr Center were founded as community organizations, without a board of directors or a strong base of donors to support programs, Kaiser said. Individual donations make up just 10 percent, roughly, of their total support, while mainstream arts organizations supported predominantly by white patrons typically obtain about 60 percent of their contributions from individuals, he said. Foundations and government agencies eager to have organizations of color in their communities have supported them disproportionately relative to their size, Kaiser said. Consequently, the Carr Center and similar groups around the country haven’t built the large donor bases white arts groups have. With limited resources and em-

INSPIRING DESIGN

Fishbeck, Thompson, Carr & Huber, Inc.

COURTESY CARR CENTER

Oliver Ragsdale Jr. has suspended Carr Center programming for the summer while the arts organization regroups.

The hope is an elevated profile will, in turn, help the Carr Center build new muscle to raise money from individuals, decreasing its longtime reliance on foundation and corporate supporters, Carr Center President Oliver Ragsdale Jr. said. ployee counts, they’ve traditionally focused on securing the large grants and not spent time cultivating small, individual gifts and turning those into larger Michael Kaiser: gifts over time. Working with Carr “This has Center been a challenge because there are only a limited number of foundations to apply to, and governments are cutting back on funding,” said Kaiser, who is also working with the Charles H. Wright Museum of African American History, another Detroit arts organization that has struggled to gain financial stability. “That is why, and it’s an embarrassment in our country, we only have one arts organization of color ... with a budget of more than $15 million: the New York-based Alvin Ailey American Dance Theater,” he said. For comparison, three of Detroit’s highest-profile cultural organizations that traditionally have been supported by white patrons are all in or above that budget range. Michigan Opera Theatre’s budget was just under $15 million last year; the Detroit Symphony Orchestra’s

costs totaled nearly $29 million, and the Detroit Institute of Arts’s about $35 million. Founded as the Arts League of Michigan in 1991, the Carr Center moved out of the Harmonie Club Building in what is now called the Paradise Valley Cultural and Entertainment District (formerly known as Harmonie Park) at the end of May, after losing its bid to purchase the building last year and falling two years behind on its rent. It owed more than $240,000 in back rent on the Harmonie Club Building as of a year ago, after failing to pay rent since late in 2014. The debt has since been settled, Ragsdale said, without offering details. With more than $775,000 in foundation grants awarded last year, the Carr Center spent much of 2016 developing a five-year plan that would take it into a new location at an undisclosed site (something that did not come to fruition) and staffing up for its new programming, which will include one-on-one music lessons for Detroit youth at a new educational site, Plymouth Educational Center, a charter school in Midtown. The Carr Center has targeted locations in Midtown, the city’s cultural center, to be a part of what’s happening there, Ragsdale said. The group is leasing office space in the Hannan House nonprofit office center in Midtown and has forged rental agreements with Historic First Congregational Church and the Garden Theatre in Midtown and a shared programming agreement with Christ Church Cranbrook in Bloomfield Hills site for performing arts programs that will relaunch this fall after pausing for the summer. It’s negotiating a fourth performing arts space agreement in southwest Detroit and an agreement to lease visual arts space to display artwork such as paintings and sculptures. Exactly what the new space sharing arrangements will mean for the 200300 local artists who had used the Carr Center for gallery, rehearsal and performance space isn’t yet clear. The Carr Center is still evaluating how the fee structure will work as it develops working relationships with the venues, Ragsdale said. But the plan is to give artists access to space for rehearsals, exhibitions and some performances. The center is operating on a $1.3 million budget this year, up from just over $891,000 last year, when it ended the year with a $123,000 excess. The overall strategy of using “community hubs” resulted from the realization that there’s no single facility in the city available today to meet the needs of the Carr Center, Ragsdale said. “We will continue to work to develop that venue but know that it a multiyear process.” Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

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Expanded telemedicine services help patients save money By Jay Greene

$47.51 last year, Brennan said. “It is starting to really prove its value,” Brennan said. Spectrum also has signed contracts with more than 37 employers, including Steelcase, a Grand Rapids-based furniture maker, to offer MedNow to employees for after-hours appointments. “We have added travel visits for executives who travel out of the country. They can do the e-visit at home instead of taking a half-day to travel,” Brennan said.

jgreene@crain.com

Health plans and hospitals are expanding telemedicine services in new ways to help members and patients research prices and gain access to medical specialists as health insurance deductibles take a larger bite out of household budgets. Grand Rapids-based Spectrum Health and its insurance arm, Priority Health, have been adding services to their telemedicine programs that are available statewide, executives say. They join other insurers such as Blue Cross Blue Shield of Michigan and Health Alliance Plan of Michigan in adding to their online services. Most hospitals and health insurers in Michigan have developed their own telemedicine programs to create convenience and lower out-of-pocket costs for patients. They have typically started with primary care visits for such ailments as ear infections and sore throats. Over the past decade, high-deductible health plans of $1,500 or more have become more common because they typically offer lower monthly premiums than first-dollar plans. However, high deductibles also require patients to pay higher out-of-pocket costs for procedures and specialty visits, leading to a stronger desire for cost information. Priority Health’s medical cost estimator online application has saved the average member $1,000 the past three years and $6.3 million in avoided medical costs, said Nathan Foco, Priority’s senior director of market research and consumer analytics. Spectrum Health’s MedNow video medical conferencing program continues to connect physicians with patients online, said Joe Brennan, MedNow’s senior director and a former Crain's Health Care Hero. Both Priority Health and Spectrum require patients and members to first download a MyHealth dashboard online account to access the cost estimator and MedNow. Launched in 2015, Priority’s health care cost estimator is a high-tech way for people to estimate the cost of their doctor visit or hospital procedure and shop around for a lower-cost option. For example, Priority Health said the cost for knee arthroscopy surgery can range from $1,279 to a high of $11,131. A colonoscopy can cost $579 to $3,061, while a sleep study ranges from $827 to $4,243 depending on the care provider or facility. About 3,000 members per month use Priority’s cost estimator to search for procedures, Foco said. Top procedures are MRIs, colonoscopies, lab tests and knee arthroscopies. That’s 10 percent of

Joseph Brennan its membership, far above than the 3 percent industry average. Members also can use the MedNow services through Priority’s MyHealth dashboard. MedNow is a proprietary service available to anyone in Michigan any time of day. For nonemergency medical issues, Spectrum patients either call a phone number or log into their MyHealth app on a smartphone. Since it was launched last year, MedNow has treated more than 22,000 patients, including those with rashes, sore throats, sinus infections and stings. In at least 650 of those cases, MedNow helped patients avoid an emergency room or urgent care center visit. MedNow charges patients $45

HAP and Blue Cross HAP offers an online health care cost estimator to give members estimated prices on doctor visits, treatment options and procedures, Lori Rund, HAP’s vice president of product management and market intelligence, said in an email to Crain's. Rund said it shows members the average cost of treatment options in their area and what their out-ofpocket costs would be for a treatment. More information is provided on some of the tests, treatments and medications. In 2016, Blue Cross launched its own mobile cost estimator application where members can research prices on drugs and more than 1,600 medical procedures anywhere in the U.S., said Steve Goldberg, director of the Blues’

Average savings for a MedNow visit have risen to $123, up from $48 last year. “It is starting to really prove its value,” said Joe Brennan. for a video visit with up to 21 specialties and $25 for an electronic visit with medical questions, Brennan said. Priority Health members pay only the normal office copayment of $10 or $20 for their e-visit, he said. Using MedNow, Brennan said specialty appointments like mental health can cut the wait for an appointment to three or four weeks. MedNow works like this for follow-up specialty appointments: If a patient needs a follow-up visit and lives hours away from the provider, Brennan said, patients can drive a shorter distance to one of Spectrum’s remote outpatient centers, where they can access a videoconference area and communicate with their specialist hours away. Reducing health care costs also is a promise of telemedicine. On average, a low-acuity visit to the hospital emergency department costs about $370 and urgent care is about $160. So, even at a $45 charge, the savings can quickly add up both for health plan and public. Average savings for a MedNow visit have risen to $123, up from

consumer transparency. “These prices are specific to each provider’s contract with (Blue Cross), not averages across providers or what providers charge,” Goldberg said in an email to Crain's. “In Michigan, we’re happy to say we do not have any provider contracts that restrict our ability to show prices for procedures.” Goldberg said the data has been available online on Blue Cross’ website since 2012. He said quality data on physicians, hospitals and Blue Cross-certified patient-centered medical homes and several hospital-based specialty care programs are also available on www. bcbsm.com. HAP also offers telehealth services for members to doctors using a mobile phone, tablet or computer. HAP contracts with American Well, a Boston-based telemedicine company, which provides consultants with licensed and board-certified doctors on a 24/7 basis. The service is limited to treatment for nonemergency illnesses such as colds, headache, rashes, sinus infections and other minor conditions. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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Clark Hill acquisition of California firm adds 100 attorneys “We anticipated more clients would require us to have boots on the ground in (California), so we felt it made sense to find a partner.”

By Kurt Nagl knagl@crain.com

and Dustin Walsh dwalsh@crain.com

Clark Hill PLC is absorbing Los Angeles-based Morris Polich & Purdy LLP, adding nearly 100 lawyers in a deal that makes it among the largest law firms in the state. The combined firm will have 450 attorneys and Morris Polich’s offices in Las Vegas, San Francisco San Diego and Los Angeles will operate under the name Clark Hill effective July 17, according to the Detroit-based firm. The deal is just the most recent for Clark Hill, as firms locally and across the U.S. continue to seek new markets to retain and grow their client list as the legal market is stagnant overall. Further details of the acquisition were not disclosed. Grand Rapids-based Barnes & Thornburg LLP is the only larger Michigan law firm by number of attorneys, with 493 as of January. Clark Hill surpassed Detroit-based Dickinson Wright PLLC’s 440 attorneys, and Detroit-based Dykema Gossett PLLC’s 420 attorneys, with the addition of Morris Polich, according to Crain’s list of largest law firms published in April. The new offices would add to Clark Hill’s $150.5 million in reve-

John Hern Jr., Clark Hill CEO

John Hern Jr. nue in 2016, ranking 167 in the largest firms by revenue according to The American Lawyer. The combined entity would have generated $185 million in revenue last year, Clark Hill CEO John Hern Jr. said in an interview Wednesday with The American Lawyer, pushing the firm’s rank to the 150th-largest U.S. firm. Hern, in a phone call with Crain’s, said the State Bar of California strict rules on out-of-state representation triggered Clark Hill to try to find a firm to acquire. “We had a local client move to

San Francisco and they wanted their lawyers close,” Hern said. “We didn’t want to lose that client and we anticipated more clients would require us to have boots on the ground in that market, so we felt it made sense to find a partner.” After absorbing of Morris Polich, Clark Hill will have 16 offices in nine states and Washington, D.C. The acquisition also brings additional litigators, a life sciences practice and new labor and employment attorneys to the Clark Hill. Law firm mergers are on track for another record year, according to law firm consulting agency Altman Weil Inc. There were 52 mergers during the first six months of this year, up from 48 during the first six months of 2016. There were a total of 85 mergers and acquisitions in 2016 and 91 in 2015, the most ever recorded. A reduction in legal spending from corporate clients has caused

firms to expand in other markets, Altman Weil said in a recent report. Market demand for legal services has failed to return to pre-recession levels, according to Altman Weil’s 2016 survey of U.S. law firms. According to the survey of more than 800 U.S. firms, outside attorneys are losing business as more and more corporate law departments continue to bring legal worse to their in-house legal office. In the survey, 68 percent of firms reported they had lost business to corporate law departments bringing legal work in-house and another 24 percent said that practice will threaten their bottom line. In 2015, Dykema Gossett PLLC

added 118 attorneys of San Antonio-based Cox Smith Matthews; Honigman Miller Schwartz and Cohn LLP added 14 attorneys from Schopf & Weiss LLP; and Miller Canfield Paddock and Stone PLC added 10 attorneys of the former Kubasiak Fylstra, Thorpe & Rotunno PC, both in Chicago. Last year, Clark Hill acquired the Chicago-based seven-attorney firm Martin, Brown, Sullivan, Roadman & Hartnett. In 2013, Clark Hill expanded on the East Coast with the acquisition of Pittsburgh-based Thorp Reed & Armstrong LLP, adding 80 attorneys. Shortly after, it acquired Phoenix-based Folk & Associates PC. Lateral hires and acquisitions are being used as a quick way to buy market share in a low-growth environment, according to the Altman Weil survey, with 85 percent of respondents indicating they added attorneys to their firms that brought in new business.

BANKRUPTCIES The following business filed for bankruptcy protection in U.S. Bankruptcy Court in Detroit June 26-July 6. Under Chapter 11, a company files for reorganization. J Plasco Tooling & Engineering Corp., 14951 32 Mile Road, Romeo, voluntary Chapter 11. Assets and liabilities not available.

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OPINION

130 years is a long time

n spite of my feelings that the Detroit Regional Chamber should have its annual statewide policy conference in Detroit instead of a remote resort, I am completely in awe of the prosperity of the Grand Hotel, a jewel of Michigan celebrating its 130th anniversary. Having had our own company recently celebrate its centennial, I know how big an accomplishment that is for this treasure of our state. I am blessed to have known Dan Musser II, a wonderful person and a great hotelier. Running a facility the size of the Grand Hotel is impressive, but doing it for decades to such high standards is miraculous. Even more impressive is that we are talking about a hotel that is open only

KEITH CRAIN Editor in chief

a fraction of the year, which must double the difficulty. I have no doubt that Dan Musser III, Dan's son, is continuing the fine traditions of more than a century. Can you even imagine getting to the Grand Hotel 130 years ago? Once you arrived, chances are that you didn't want to leave for many days.

Today, they have made the Grand Hotel into a combination business/resort property, a difficult and fragile position. There are many business conventions that use this property annually and have done so for years. Our company runs lots of meetings around the world, and I know just how competitive this business is. When you compare this facility with others like the Greenbrier, you realize what a disadvantage the Grand Hotel has with its position hundreds of miles from any major metropolitan area. Nevertheless, the Grand Hotel has prospered for well over a century. I am sure that if the chamber moved its conference to Detroit, the Grand would continue to prosper for at least another 130 years.

Business world isn’t a ‘safe space’

ood news for recent college graduates: A survey earlier this year from Careerbuilders reported that 74 percent of employers plan to hire recent grads — the highest percentage in 10 years. So what happens when some newly minted grads — those accustomed to “politically correct” campus life and episodes of blocking speakers whose views they oppose — enter a multi-generational workforce? I posed that question on LinkedIn, inviting comments. Most people supported the idea that students should be free to protest but not suppress opposing views — as has happened on campuses from Vermont’s Middlebury College to University of California, Berkeley. And when these millennials get to the workplace? “They will have to adapt or perish,” offered Ray Byers, who retired from Ford Motor Co. after nearly four de-

MARY KRAMER Group Publisher

cades. “In the world of big business, there will be no time for ‘safe zones.’ ” Veteran food and beverage manager Eric Djordjevic, president of the Epicurean Group, observes that some — not the majority — of younger hires believe they are entitled to a utopian workplace. And though Djordjevic prizes engaging the team in decisions that affect them, “unfortunately, at the end of the day, running a business can't always be a democracy,” he said. “Always worrying about disrupting feelings/entitlements leads to medi-

ocrity in pleasing everyone.” I think back to the rough language and curmudgeonly behavior from workplace veterans in my first jobs (clerking in a shoe store, working in a fast-food joint, running machines on a third shift in a factory) and wonder how today’s grads would handle such behavior. I learned a lot by managing relationships with peers — and watching my best and worst bosses’ behaviors. Many students aren’t going after those part-time jobs in high school or even college. Emma Bowser, who teaches nursing at Madonna University, says new graduates “haven’t had to compromise their values and learn to understand another point of view.” What a shame to think after the dollars spent on tuition that some — not all, but some — students leave campus without learning the fine art of compromise. Or tolerance. Talk about onthe-job training.

LETTERS

Gilbert: Billions in impact of jail site proposal not a tough call Keith Crain’s perplexing editorial on the two Gratiot site alternatives currently being considered by Wayne County Executive Warren Evans is both puzzling and disconcerting. The piece is so kooky that I would be concerned with the impact it will have on Crain’s well-earned positive brand as the leading business news outlet in these parts. A billion-dollar development and billions more in economic impact at the entryway of downtown Detroit versus a hulking 2,200-bed county jail serving as the “symbol” of Detroit for the next half century is a tough decision? According to Mr. Crain, neither of these two options are “wonderful choices” and Warren Evans will be

“beat up either way”? The large jail and our proposed development that will create thousands of jobs are “heads you lose, tails you lose” options for Mr. Evans and Wayne County? Worse than Mr. Crain’s analysis is Mr. Crain’s introduction of the prospect that billion-dollar economic investments at the prime gateway of downtown Detroit (as common as a total solar eclipse in these parts) would just be “another stadium” or worse yet “a bunch of high-rise office towers that will probably block out the sun”? I was not aware that the proposed massive jail was going to be made of clear glass that apparently would let the sunshine through and beam into Mr. Crain’s corner office just across

the street as he ponders such “impossible decisions” as this one. If all of this sunshine traveling at the “speed of light” is going to prompt the Crain’s chairman to render such cerebral, erudite conclusions as “the simple answer is for Gilbert to pony up a few hundred more million, and everyone will be happy,” then I am not so sure that we want to let any more sunlight cross Gratiot and enter into Mr. Crain’s corner suite at Crain Communications Inc. world headquarters. It seems the golden rays are having a quite curious opposite effect and causing Mr. Crain’s thought process to move at “the speed of dark.” Dan Gilbert, Chairman, Rock Ventures, Bedrock Development

For Michigan, competition is the name of the game Across the globe, states and nations are competing for growth. Everyone needs and wants more jobs, higher incomes and greater prosperity. The real question is this: How far are leaders willing to go to win? My work in Michigan gives me a unique vantage point. As chair of Business Leaders for Michigan, I see my peers being recruited aggressively and regularly by other states. And steering a company with thousands of franchises nationally and globally, I witness firsthand the intense competitive environment facing our state — competition that’s only getting stronger. If Michigan doesn’t play to win, we risk being left behind. It’s true that we’ve made a remarkable comeback. From simplifying our tax structure to tackling and paying down long-term debt and liabilities, we again have a strong competitive foundation. Michigan has a strong base of manufacturing and innovation, as well as a growing pool of qualified talent. We should be a natural fit and selection for any company looking to grow or expand. Period. Unfortunately, too often we’re not. Other states have more tools and use them more aggressively than Michigan does to attract and grow jobs. For example, our competitors offer significantly more tax incentives to recruit businesses to their states. Michigan spends a nominal $69 million a year on such efforts, while neighboring states like Indiana ($162 million) and Ohio ($220 million) are more than double and triple that, respectively. Southern states such as Kentucky and South Carolina are investing at least $339 to $454 million annually. Headlines across just the U.S. help tell this story. “Completion of Intel facility could mean 10,000 jobs for Arizona”; “Indiana strikes gold with tech announcement” (2,000 jobs); “South Carolina’s manufacturing revival lures new businesses” (2,000 jobs); “Braidy Industries plans aluminum mill,” 550 jobs in northeastern Kentucky. All these projects were made possible by tax incentives that lured them or spurred them to grow. The bottom line is simple. Michigan is on the sidelines and losing out when it comes to attracting largescale projects with thousands of good-paying jobs. We can’t afford to let that happen. We can’t let Michigan fall behind again — not when we’ve made so much progress to date. We’ve got to do whatever it takes to grow more and better jobs right here at home. That includes making sure Michi-

OTHER VOICES J. Patrick Doyle

Doyle is president and CEO of Domino’s and chairman of the board of directors for Business Leaders for Michigan. gan has the basic but essential economic development and jobs attraction tool it needs to compete — a simple but competitive tax incentive that’s transparent, doesn’t favor one industry over another, and only pays out if jobs are created. We need an incentive that will help grow and strengthen our communities and boost our workers’ paychecks. In the years ahead, there will be even more opportunities to attract and grow good-paying jobs as America flexes its manufacturing muscle. Already, we are seeing manufacturers talk about adding jobs and investment in the United States. For example, we’ve heard about a large global manufacturer of electronic displays making imminent determinations about where in the U.S. to invest as much as $4 billion and adding around 5,000 jobs. Those are the kinds of jobs we need and want right here in Michigan. And that doesn’t account for several other projects, each with hundreds of jobs, that our communities across the state are trying to compete for right now. Michigan needs this kind of smart incentive today. While we’re doing better as a state, that doesn’t help you if you are still unemployed or underemployed. What matters most is bringing good-paying jobs and hope for some of the roughly 250,000 currently unemployed in our state. It’s more than just a potential job — it’s the ability to pay for rent, needed car repairs or buying a child’s school supplies. Improving Michigan’s competitive nature and attracting new jobs can help improve quality of life. And it’s the true reason we must strengthen our push to make Michigan more competitive in bringing companies to our state. Your help is needed. Join us in our push for the Good Jobs for Michigan legislation, a common-sense economic incentives proposal that will make Michigan a winner in the race for jobs, income and prosperity. The future of our state and its ability to thrive for current and future generations are counting on it.

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

The riot didn't cause Detroit's decline

The 1967 Detroit riot exposed insufferable living conditions for poorer, largely African-American residents, caused a tragic loss of lives and was a major blow to businesses in 5 percent of the city. The riot did not, however, as some believe, cause the city’s slide into today’s abandonment and severe economic decline. Toxic decisions involving the exodus of industry, federal programs, blockbusting and school busing occurring before and after the riot were the overriding factors. In the 1950s, auto manufacturers and suppliers began to close World War I-vintage plants and export production and jobs to the suburbs. At the same time, the federal highway and urban renewal programs began tearing up vibrant Detroit neighborhoods. I-75 struck a fatal blow to the African-American community on the lower east side, wiping out Hastings Street and Paradise Valley, its centers of culture and commerce, and the adjacent Black Bottom neighborhood. Destructive actions accelerated after the riot. In 1968, in response to President Lyndon Johnson’s Kerner Commission citing unemployment, housing and education as major grievances causing the riot, the U.S. Department of Housing and Urban Development launched a subprime lending program for low-income tenants in riot-torn areas to buy homes in better neighborhoods. As tens of thousands of fully insured, no-down-payment subprime mortgages were issued to tenants and the need for more homes to buy rose, real estate agents turned to heavy-handed, illegal blockbusting to spread racial fear among white homeowners and to spur white sales and flight. City government appeared helpless. Soon, just like the subprime mortgage crisis that sank the banking industry 10 years ago, mortgages were defaulted and housing abandonment became rampant in the affected neighborhoods. Market values dropped and blight set in. HUD abandoned housing in Detroit swelled to 20 percent of the national foreclosure inventory. Many affected neighborhoods never recovered. Then, in August 1970, the busing desegregation case of Milliken v. Bradley began. The plaintiff's goal was a regional busing plan, but no suburbs were included as defendants. By that time, only one-third of Detroit school children were white. The lower federal courts found that Detroit Public Schools had discriminated against African-American children, but that a Detroit-only desegregation plan was not sustainable and would result in a totally segregated school system within a few of years and, accordingly, ordered a regional desegregation plan. The U.S. Supreme Court, however, reversed the order on the basis that no discrimination was proved against the suburbs. Detroit-only busing was ordered, resulting in a

OTHER VOICES John Mogk

Mogk is a Wayne State law professor. major exodus of the remaining white middle class from Detroit and

the predicted near-total segregation of Detroit Public Schools. During this period, industry and jobs continued to leave the city not because of the riot, but because neither the city nor manufacturers planned for replacement plants in the city. As a result, no significant industrial plants remain in the city today, with the exception of the GM Hamtramck and Chrysler Jefferson Avenue North Assembly Plants, both belatedly built on land assembled with eminent domain to promote economic development now prohibited by the Michigan Consti-

tution. The formula for returning Detroit neighborhoods to their 1950s quality with a strong middle class that will support housing, local shops and the city’s tax base is the same now as then — good jobs, quality schools, increased home ownership and safe neighborhoods. The extraordinary rebound of downtown and Midtown, built upon a diversified nonmanufacturing base, needs to be extended to the neighborhoods, along with urban agriculture and the beneficial use of open space.

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

Young professionals and empty-nesters repopulating downtown and Midtown do not require quality schools, but the families needed to rebuild Detroit's neighborhood population will. The city has assembled an impressive coalition of private corporations, civic groups, community organizations and foundations, all working more actively than ever to improve the quality of Detroit's neighborhoods. It will take time, but the path forward is clear, and the goal can be reached.

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

SPECIAL REPORT: CRAIN’S MICHIGAN BUSINESS

UP NORTH

ichigan's farm businesses — some of them owned by the same family for generations — are finding fresh ways to thrive year-round. In this special Crain's Michigan Business section, we profile three farms that are breaking new ground: a maple syrup farm that broadly expanded its product line and opened a café, a cottage fiber processing mill that also sells innovative milling equipment and an organic farm focusing on retail and running on geothermal heat.

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COURTESY COVEYOU SCENIC FARM MARKET

David Coveyou converted an old barn on his family’s centennial farm into a retail market, which sells the farm’s own organic produce as well as specialty food items from other makers in Northern Michigan.

A farm with a view

The scenery is part of the strategy at this organic farm in Petoskey By Tom Henderson thenderson@crain.com

Once upon a time, Dave Coveyou was an electrical engineer managing a hardware design group in Massachusetts for North Carolina-based RF Micro Devices, a company that made high-performance radio frequency systems and applications that operated wireless and broadband satellite communications. Now, he’s an organic farmer, owner of Coveyou Scenic Farm Market and the adjacent fifth-generation centennial farm in Petoskey. The farm was founded in 1874, one year after railroads were laid into that corner of northwest Michigan to haul out hundreds of thousands of acres of white pine. Today, business at the farm is growing, as Coveyou works to diversify the farm’s offerings and develop a year-round business model. The market sits on a ridge just off US-131, overlooking miles of forest and farm fields, with a spectacular view of Lake Walloon to the south. The view, and the wonderful old barn that has been converted to a market, is a draw to locals all year round, and to tourists

during the busy summer and color seasons as they head into or out of downtown Petoskey, which is two miles to the north. At its founding, the farm provided lumber to the then-burgeoning lumber industry, which by the end of the century supplied pine for millions of houses across America. As the lumber was cut, the farm evolved into raising livestock, potatoes for the state’s many potato-chip makers and a variety of grains to sell to nearby farmers for their livestock. “My parents said, ‘Go to college. Whatever you do, don’t go into farming,’” said Coveyou, who heeded their advice. He got a degree in electrical engineering from Michigan Tech University in Houghton in the Upper Peninsula in 1986, then was an engineer with Hughes Aircraft in California before joining RF Micro Devices. “The family farm was always in the back of my mind,” said Coveyou. He wanted it to stay in the family, but he was making a good living with a good deal less work than it took to run a farm. And there were his three siblings; one of them could keep the

“I wasn’t going to let it go out on my watch,” said Coveyou. “My parents thought I was crazy. ‘You’re going to give up engineering?’” Luckily, his wife, Kathy, a native New Englander, was game to leave Massachusetts and become a farmer, and now runs the market’s nursery operations, selling potted vegetable plants and flowers. Dave’s decision wasn’t a complete surprise to her. She knew how much he loved the area, and how much he had treasured working on the farm with his dad as a kid. She’d suspected one day he’d want to make the move.

Diversifying COURTESY COVEYOU SCENIC FARMS

Kathy and David Coveyou took over the farm in 2007.

farm in the family when it came time for his parents, Lorenzo and Hedy, to retire. But in 1999, when his parents start ed seriously thinking of retirement, none of the siblings were interested. So he began a long transistion and took control of the farm in 2007.

The Coveyous began spending weeks at the farm each year for the next eight years, building out infrastructure and expanding the range of what they grew. For example, the Coveyous would come in the spring and plant mums, then come back in the fall to sell them along the highway. They sold out a crop of 300 the first year, then 1,200 the next. Coveyou cultivates just 30 of the farm’s 330 acres, a reflection of the

time and effort it takes to run what he was determined would be an organic operation. The farm has been certified organic by the U.S. Department of Agriculture. “It was the challenge that interested me. Engineering is problem solving, and this farm was the ultimate challenge,” said Coveyou. “How do you create a viable business based on agriculture in Petoskey? You’re so far from major markets, there’s a short growing season. It’s a difficult business model.” The key, he said, was finding more ways to sell product. “It’s not just how to grow a crop but how to create enough sales channels to support a 30-acre farm.” One of his first decisions was to convert the old barn into a retail market, which sells the farm’s own produce as well as specialty food items from other makers in northern Michigan, such as Yaya’s Organic Bakery in Charlevoix. Other new sales channels? Selling produce and other products online; a program called Community Supported Agriculture, where area residents pay in advance for a share of crops as SEE COVEYOU, PAGE 13

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SPECIAL REPORT: CRAIN’S MICHIGAN BUSINESS

Gold in the trees

A fifth-generation family maple syrup farm expands products, adds café By Tom Henderson thenderson@crain.com

There may not be gold in themthar hills, but there’s plenty of it in them-thar sugar maples on the Parsons centennial farm south of Charlevoix — and at the new Harwood Gold Café, a new eatery in downtown Charlevoix. “Gold” is what five generations of the Parsons family have been calling the maple syrup they’ve been making on the family farm since 1898, tapping into two huge stands of maples on their 180-acre farm along Harwood Lake. But the family’s fifth generation — Amber Munday and her sister, Katie Untalan — has intensified the focus on syrup, introduced a newer business model and a vastly increased the product line. Until recently, farming was more of a family pastime. Their father, David, raised hay and made syrup but had a full-time job as a machinist at Michigan Scientific Corp. in Charlevoix. His wife, Terri, was a schoolteacher who sold syrup at farmers markets each summer. Amber, her husband, Phillip, and Katie have launched the cafe and a 50-item product line far beyond simple maple syrup, and Katie has begun growing a variety of organic vegetables to be used at the café and as another source of revenue. But that’s getting ahead of the tale, a major chapter of which begins in the summer of 2010, when Australian-born chef Phillip Munday arrived on a yacht out of Fort Lauderdale. He thought the Charlevoix harbor looked like a movie set. Soon, he was enamored with both the view and a local woman he met, Amber Parsons. Munday stayed in northern Michigan for three months, then he and Amber moved to Tasmania, Australia, where she did odd jobs and he was a chef. In August, 2012, they returned to Charlevoix to be married on the family farm. That’s when Amber’s dad dropped a bomb on her. As Amber recounts it, her father came up to her and said: “We want to retire. I’m tired. This is a huge undertaking. If you’re interested, we’ll show you the ropes. If not, we’re going to sell it.” “I told him, ‘That’s not going to happen.’ We weren’t going to let them sell the farm. Phillip was really excited about it. We’d already decided we wanted to own our own business in some capacity, and this gave us the opportunity.” In 2014, the Mundays moved back to Charlevoix for good and began working with her parents as part of a transition process. In June 2015, they and Katie formally took over ownership of the farm. They continued selling maple syrup at farmer’s markets, “but we

LONNIE ALLEN, CHARLEVOIX COURIER

Amber and Phillip Munday’s products range widely from pancake mix to meat rubs.

COURTESY HARWOOD GOLD MAPLE SYRUP

Infused maple syrups are a mainstay of Harwood Gold’s expansion.

wanted to have a bigger businesses. We came up with a list of 100 products and narrowed to 50. My parents thought we were crazy,” said Amber with a laugh. The product list is wide-ranging, from pancake and cornbread mixes to buckwheat and granola to jams and jellies to maple catsup and maple mustard to meat rubs to sauces. They make everthing themselves in a large kitchen on the farm, adjacent to their combination warehouse and syrup processing barn. Everything they make is sweetened only with maple syrup — no fructose, corn syrup or cane sugar. Since maple syrup is so sweet, they can use far fewer grams per serving than would be needed with other sweeteners. Taking advantage of Phillip’s culinary background, they also make and sell Australian-style meat pies. They come in such choices as chicken, leeks and portobello mushrooms; braised lamb shank and vegetable; and beef brisket and portobello mushroom. All include maple syrup-infused barbecue sauce. Amber said Phillip began making his pies for friends and family after moving to Michigan. “They were telling him, ‘Man, you need to be selling these.’” They expanded their range of maple syrups as well, and now sell syrups infused with mango, vanilla bean, lavender and coffee, and a ghost pepper-infused maple syrup that can be used both as a glaze for

ribs and a pick-me-up in cocktails. They also sell a bourbon-infused syrup, using small wooden barrels they borrow from the Grand Traverse Distillery. After they make the syrup, they return the barrels to the distillery, which then uses them to make a maple syrup-infused bourbon. Phillip says he gets a particular kick out of using maple syrup so extensively. Australia doesn’t have maple trees and imports what ends up being high-priced syrup from Canada, which makes its use there somewhat rare. In the summer of 2015, farmers markets in Charlevoix, Petoskey and Boyne City provided the major source of revenue, though the three partners knew that if they wanted this to be the successful business they imagined, they needed it to be more than seasonal. One rainy day in June 2016, sitting at the farmers market in downtown Charlevoix, Amber saw a for-rent sign in front of the former Murdick’s Famous Fudge shop, which had moved to another building downtown after having been in that spot since 1953. Suddenly, it seemed clear. “We were at a point where we needed to make a decision,” she said. They took the plunge and signed a three-year lease three weeks later. After a lot of time and money spent on a total renovation, they opened a café on Aug. 5. The revonation was a family affair, involving the Mundays, Katie and her husband, David, and David and Terri Parsons. They removed the dropped ceiling to reveal, to their surprise, a gorgeous stamped tin ceiling, replaced windows, put in a new wood floor and found cool old barn wood to lend atmosphere. “We were happy we were doing it, but there were moments where you wondered, ‘What did we do?’ “ The café is open year-round, seven days a week during the busy summer and fall color seasons, from 8 a.m. to 9 p.m. The pies are a staple at both the

café and their market at the farm, selling about 1,000 a week during the busy season. They retail for $6 each. They employ two at the farm, which operates as Parsons Farm LLC, and 16 at the café, whose legal name is Harwood Gold Cafe LLC. Eventually, they’d like to start doing occasional farm-to-table dinners at the farm. Back when they were starting to transition from a fourth-generation to a fifth-generation farm, Amber met Annie Olson, the director of the northwest Michigan region for the state’s Small Business Development Center, at a seminar on succession planning for family farms. Olson has been advising them since. “The entire family could serve as an example for demonstrating a willingness to learn togther, try new

ideas, and be inventive with developing their business approach for the future,” said Olson. “As it relates to Harwood Gold Cafe, Amber and Phil are knocking it out the park from the design and interior of the cafe, atmosphere, and both products and services that they are offering. “They and Katie are extremely coachable and the epitome of what a fun client looks like from my perspective. They have a lot of learning curves to work their way through, and that will all come with time and persistence. I’m looking forward to being a continued member of their team in helping them along the way.” In 2015, the farm was named as the best small business for Olson’s region. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

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

SPECIAL REPORT: CRAIN’S MICHIGAN BUSINESS

Spinning a business opportunity Daughter’s 4H project turned into a second act in fiber processing By Tom Henderson thenderson@crain.com

Deb McDermott blames her daughter for ruining a perfectly good retirement — and credits her for sparking an idea that turned into a multimillion-dollar business making and selling a range of machines for small cottage fiber-mill operations. She also ended up creating the yarn that Yves St. Laurent used to make the U.S. Olympic team’s sweaters in 2014. McDermott’s husband, Chuck, had grown up in Charlevoix and spent 30 years with General Motors, first in Bay City and then in Adrian. After he retired, he wanted to move back up north. “We moved here 30 years ago,” said McDermott, of what has been a working farm since 1853, a few miles south of East Jordan. “This was going to be our retirement. It was just what we wanted. I wanted some horses and we were going to do some crafts and putz around,” she said. When they pulled into what had been the Pesek family farm on Pesek Road, Deb knew it was the place. It wasn’t the rolling terrain or the beautiful old farmhouse with its wide wooden planks that sealed the deal. It was a massive, very old sugar maple that reminded her of a tree from her childhood in Hillsdale that she used to climb into to read and find some peace from her nine siblings. Her daughter Jamie was 10 and wanted to raise lambs for 4H. “When we sheared them, my husband decided we had to have a spinning wheel,” said Deb. One thing led to another. For years, they used the yarn to make crafts and keep busy, while most of their time was spent running the place as a petting farm for locals and tourists. They eventually decided a small fiber mill would be something they could do together. “We’d do it four hours a day, four days a week,” said Deb. “Our goal was to spin 400 pounds a month.” They bought some machinery and began operating the Stonehedge Fiber Mill in 1998 with a small carding machine.

Internet sensation Deb had heard about something called the Spin List, a group of yarn making and weaving enthusiasts around the world who communicated on this new thing called the Internet, so she and Chuck bought a computer and got online. “We put out a note that said we were going to open up a fiber mill, what do you think? And orders started coming in. People started sending us their fiber,” said Deb. A month later, they had more machines and were working 12 hours a

PHOTO BY KATHLEEN HENDERSON

The McDermotts’ 20 sheep help supply the fiber for their yarnmaking operation that started as a 4-H project.

for a while what the yarn was for. “We worked with them for months before they let on what they were going to be doing,” said Deb. In 2010 and 2012, the U.S. Olympic committee had taken a lot of heat for having team uniforms made in China. For the Winter Games in Sochi, Russia, the uniforms were designed by Yves St. Laurent and made in New York, using McDermott’s yarn.

Machine business

PHOTO BY KATHLEEN HENDERSON

Deb McDermott’s note to neighbors floating the idea of a fiber mill led to a landslide of orders and more work than she and her husband could handle. day, seven days a week. “It took much longer to do anything than the machine sellers said,” said Deb. So Chuck decided to design his own, more efficient machines. And Deb decided she needed more of her own fiber to spin. So she started raising sheep. “I didn’t have a clue, but we learned by doing.” Soon, they were processing 1,500 pounds a month. They have made yarn from goats, sheep, alpaca, llama, angora rabbit and musk ox. They have shipped yarn to 38 states. In a large corral, acting more like pets than farm animals, are 20 sheep eager for a pet, a llama who gets jealous if he isn’t being petted, an alpaca

and four goats. In addition to several small buildings that house machines on the farm, and a retail farm market on the grounds, the mill rents 1,500 square feet of storage space in a former plastics factory in East Jordan. A chance visit from a tourist, who saw a small sign on the highway announcing a nearby fiber mill, led to the mill’s most high-profile commission. “A woman pulled in and we gave her a tour. I sold her a skein of yarn. She liked the wool and said she worked for a designer in New York,” Deb said. Later, the woman called and asked that some samples be shipped to New York, then put in a large order. The McDermotts didn’t find out

Fiber processing involves several steps to go from a hunk of fur just sheared off an animal’s back to a ball of yarn. The fiber has to be fluffed out, cleaned, spun and gathered. And all of those steps require special equipment. The McDermotts sell 10 different machines — a carding machine, a picker and tumbler, a spin and ply machine, a pin drafter, a needle felter, skein and conewinders, a dehairer, a rug-yarn maker and a skein twister. Not every cottage fiber mill needs every machine. A typical order might involve six machines for a total of about $250,000. The machines are custom made by Brian Stanek at his Northwest Fabricating Co. in East Jordan, with one of Deb’s employees, electrician Mark Hooker, assembling component parts, including wiring, bearings and motors. On the wall in one of the small buildings that house Deb’s machines is a map of the United States with a black dot for every place they’ve shipped machines. There are dots in

about 40 states so far. Machines have been shipped throughout the Midwest and to Arizona, Oregon, Washington, Colorado, Montana, South Dakota and the East Coast. And machines have been shipped to Canada, Estonia and Chile. Chuck died in January 2016, but Deb continues to run the milling equipment business. Between the milling and the machining, she employs 11. This month, she’s visiting a farm outside Melbourne, Australia to oversee an installation of machines and training of workers. She said combined revenue for the two operations was $1.2 million last year. “I lost Chuck in January last year, so there’s a chance it would have been better than that if I hadn’t,” she said. McDermott recently installed a seven-machine milling operation for Hoof-to-Hanger Inc., a new fiber mill in Bridgman in southwestern Michigan. The mill is in a new 750-square-foot building behind the courtyard of a retail store called The Sandpiper, which sells, among other things, candles, jewelry and yarn. Suzy Barnes, a yarn spinner for 20 years, is a co-owner of Hoof-toHanger and as owner of the The Sandpiper had been a customer of the McDermott’s for six years. “It started as a hobby, but people would come into the store and ask if I was selling what I was making. About the 10th time, I realized I was missing a business opportunity,” said Barnes. She found out about the McDermotts and started taking them wool to spin into yarn. “When I first met Chuck six years ago, he tried to talk me into buying my own machines,” said Barnes. A few months ago, with the help of partners who could put up the $250,000 it took for machinery, Rick Fuller and his wife, Anna Kozak, Barnes finally decided to open her own mill. The mill began operations in midJune with five employees and a second shift about to be added. Hoof-to-Hanger will spin yarn for others and sell a full line of yarn and clothing made from sheep, alpaca and llamas in The Sandpiper. “We have a backlog of five months of work from people around here dropping off their wool. There’s so much demand,” she said. “Farmers need every dime they can get from their animals, and being able to turn their wool into yarn provides a much needed service. “Deb has been great. She’s been a mentor. I’m on the phone with her every other day. I’m more than just a customer, now. I’m a friend. She’s been so supportive. She’s like that with everyone she sells equipment to.” Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

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

SPECIAL REPORT: CRAIN’S MICHIGAN BUSINESS COVEYOU CONTINUED FROM PAGE 10

they are harvested; selling produce to area restaurants; selling to institutions such as senior centers and schools; selling to retail grocery stores in the area; selling at weekly farmers’ markets in Petoskey, Harbor Springs and Boyne City; and selling large volumes of things like tomatoes, tomatillos and Fresno chili peppers to American Spoon, a popular Petoskey-based retailer that makes and sells specialty foods in Petoskey, Charlevoix, Harbor Springs, Traverse City and Saugatuck. All of that requires 11 employees during the busy tourist seasons, but the greenhouses grow year-round and he employs three in the winter months. He said the farm has had double-digit revenue growth annually, including 24 percent growth last year. One weekend late in June was the farm market’s best weekend ever, “and we don’t even have any produce to sell, yet. The crops are just coming in,” he said. “Both of my parents are dead, now. But I think they’d be pleased.” Another future revenue channel? The farm’s terrain and gorgeous views of forest, farm and Walloon Lake would make a perfect setting for the Farm Stay model of agritourism. Coveyou said he is starting to explore building some cabins on the hillside to rent out to tourists who wouldn’t mind trading a short drive to the beach for a dramatic view.

Organic trend One of Coveyou’s main concerns in starting an organic farm was how sustainable the organic movement would be. Was it going to be a fad? A buzzword for a few years then ... who cares? “It seems to have staying power,” he said. “You see the whole spectrum of people wanting organic — old, young and in between. People want good food and they are willing to pay a little more for it.” Petoskey has become a center of organic farming in Michigan. “You go to the farmers’ market around here and most of the vendors are going organic. And while not every chef necessarily wants to buy organic, they all want to buy quality.” John Biernbaum is professor of horticulture at Michigan State University and faculty coordinator for the MSU Student Organic Farm. He has been working with small farmers for 20 years. He met the Coveyous four or five years ago through an MSU student who was interning on their farm. Biernbaum said he has been impressed with the engineering approach Dave Coveyou has brought to farming, particularly the installation of geothermic heating, which is used to heat the farm’s greenhouses and cool the refrigerators that keep the produce fresh in the farm stand. “His background as an engineer brings a lot of new things to farming and has helped him develop good, quality production. I’ve liked seeing all the interesting things he’s doing.

He’s taken a small generational farm and evolved it from primarily a grower of potatoes to a diversified crop mix,” he said. Before Coveyou took over farm operations, he studied farms in California and New England and was struck by how much electricity they used. He wanted to open a retail market, and that was going to require several large, electricity-eating coolers. So he did what engineers do: he tinkered and tinkered some more and designed his own geothermal system. Six feet under ground, the earth is about 50 degrees all year round. His system is complex, in-

volving antifreeze and insulated storage tanks, but the basic physics are simple: A heat pump uses that 50 degrees to heat otherwise frigid greenhouses in winter and cool them in the summer. The heat pump also chills a large tank of water to give a shocking icecold bath to produce as it is harvested, which sharply slows the wilting process, allowing him to deliver fresher, longer-lasting produce to restaurant customers. Coveyou’s geothermal system is augmented by solar panels that generate enough electricity so that he almost breaks even on his electric

bill year-round. In sunnier months he actually gets a credit from the utility, thanks to excess electricity being fed back into the grid. Biernbaum said for a small organic farmer to be successful, he or she has to have diversified crops and diversified markets to sell them to, and the Coveyous excel at both. They’ve also managed to extend the growing season — particularly crucial in northern Michigan — through their geothermic system and are building strong nutrient-dense organic soil matter. Last, but not least, “Dave has done a great job with his on-farm stand,”

said Biernbaum. The Coveyou farm has 170 acres certified to grow organic crops, which leaves them plenty of growth potential. “But I’ll need to find other markets first. I can’t sell that much to local buyers,” said Dave. Record revenue and record sales weekends don’t mean farming has gotten easy. “After doing this a lot of years, the thing Kathy and I both struggle with is how all-time consuming it is,” Coveyou said. “I tell my kids they better go to college.” Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

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

SPECIAL REPORT: UP NORTH

Northern Michigan firm armors 1 in 5 police officers By Tom Henderson thenderson@crain.com

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Lt. Brian Murphy was shot 15 times by a terrorist at a Sikh temple in Oak Creek, Wis., in 2012. He survived because he was wearing a bullet-proof vest made by Armor Express Inc., by far the largest employer in the little town of Central Lake on the Chain of Lakes river and lake system in northwest Michigan. Murphy retired from the police force and now runs the Saves Program for Armor Express, which honors police officers who survive being shot on duty and offers them support and counseling. When Boston police hunted down the two marathon bombers in 2013, they were wearing Armor Express body armor. When Capital Police killed the shooter after coming to the defense of members of Congress in Washington, D.C. in June, they were wearing Armor Express equipment, too. Police departments around the state â&#x20AC;&#x201D; including Grand Rapids, Traverse City, Troy, Sterling Heights and Southfield â&#x20AC;&#x201D; and around the country wear bulletproof vests made by Armor Express. Police dogs wear their vests, too, as do international police forces and military units. It seems improbable that a town tucked along a back road, miles away from the regionâ&#x20AC;&#x2122;s tourist spots, would

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COURTESY ARMOR EXPRESS

Today, Armor Express employs 157 and revenue is approaching $30 million. be a major supplier to police and all branches of the U.S. military. It would have seemed highly unlikely, too, to company President and CEO Matt Davis when he founded the company in May 2005, bucking the odds, advice, common sense and even his own doubts. The year before, his father Richard Davis, who had founded another maker of bullet-proof vests, Second Chance Body Armor, in 1970 and saw it grow to become the largest maker of armor in the U.S., had gone out of business amid scandal. Matt Davis: If YouTube Restoring the and the Internet family name in had existed in body armor. 1971, Richard Davis would have achieved worldwide viral fame. He founded the company in Romulus, and in a pitch for business the next year to the Detroit Police Officers Association, he shot himself in the chest with a .38-caliber bullet, leaving only a bruise. Cops lined up cash-in-hand to buy his vests. In 1974, Davis moved the company to Central Lake, his grandmother's hometown. He had spent many happy summers there. In 2004, Davis was forced to recall 120,000 vests and file for bankruptcy after the death during a traffic stop in 2003 of Tony Zeppetella in Oceanside, Calif., who had been wearing a Second Chance vest made from a new material called Zylon. Zylon was made by Toyoba Co., a Japanese company. â&#x20AC;&#x153;The data Toyoba provided showed Zylon was fine, but it was a faulty product. The fiber proved to be prone to early degradation,â&#x20AC;? Matt Davis said. Davis was a national sales manager during the recall. He took a company with nearly $100 million in revenue through bankruptcy.

â&#x20AC;&#x153;It was baptism by fire,â&#x20AC;? Davis said. "It would have been easy to walk away. I was considering other options, but my dad encouraged me to start a new company. He absolutely was the driving force.â&#x20AC;? Davis's dad stayed retired and had no role in the new company. Davis said he had three objectives in starting another body-armor company, though the move seemed destined to fail to many. He wanted to restore the family name in the industry. â&#x20AC;&#x153;We had been the dominant brand in the world,â&#x20AC;? Davis said. He wanted to bring jobs back to Central Lake â&#x20AC;&#x201D; Second Chance had employed 200 â&#x20AC;&#x201D; and he wanted to make a living. He started it up just a week after Second Chance sold its assets.

Lucky break Davis had been a finance major at Michigan State University in 2000. After a stint working in finance in Arizona, he joined his father's company in 2002. â&#x20AC;&#x153;He had me do every job in the company. I swept floors. I answered the phone. I cut material. I did customer service,â&#x20AC;? said Davis. In February 2003, he got in a pickup truck and toured the country, calling on sales reps and customers and appearing at trade shows. He also called on customers in the United Kingdom, Germany and India. Around the time Zeppetella was killed, he was named national sales manager. â&#x20AC;&#x153;By the time we began building Armor Express in 2005, I had a lot of contacts in the industry,â&#x20AC;? he said. Davis knew servicing cops was a relationship business, and relationships had been his forte. He was just 29 when he founded the company with a small group of colleagues. They worked for months in a three-bedroom cottage before making their first sale at a trade show. They were unable to find investors and were desperately short on cash. SEE ARMOR, PAGE 15

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

ARMOR FROM PAGE 14

Davis said he hit a lottery of sorts in 2006 while on a plane leaving Detroit's Metro Airport. The guy next to him asked him what he did for a living. He told him the story of death and rebirth. The guy was intrigued, and two weeks later, Davis flew out to California to pitch the guy and some of his former law partners for money. They ended up writing checks totaling $2 million. Davis was happy to give them 35 percent of the company in exchange. (In 2015, Armor Express raised another round of financing to fund growth, what he described as a significant round of money he is prohibited from disclosing terms of, through a private placement from a family office and private-equity firm.) Just after raising that first venture capital came the next big break, a $4 million contract with the Pennsylvania Department of Corrections. And in 2007 came an $11 million contract with the Iraqi security forces that ensured the company's survival. Today, Armor Express employs 157 and revenue is approaching $30 million. It occupies four buildings in town, a 50,000-square-foot factory, an admininstration building, an R&D center and a warehouse. In addition to employees, Armor Express uses what it calls the Sew at Home Network, farmer's wives or hobbyists who have sewing machines and are eager to do piecework, sewing component materials for the outer shell of the vests. Davis says his armor is worn by 800,000 police officers at 18,000 departments. "One in every five officers in the country wears Armor Express," said Davis. Each vest is custom-made for each officer to ensure proper fit, at a cost that ranges, depending on style and features, from $600 to $1,000. The outside can come with pockets and designs vary greatly depending on user needs. Inside are the ballistic panels that do the heavy work. The are generally made up 10-12 layers of thin sheets of polymer. Armor Express uses Kevlar, the most famous brand for what is generically called a para-aramid fiber, with five times the strength of steel and created by accident by a DuPont chemist in 1965. The company also uses another para-aramid called Twaron, made in the Netherlands, and a lightweight fiber made by a variety of providers called ultra-high-molecular-weight polyethelene. The powerful straight-ahead force of the bullet, which would puncture the body and lead to injury or death, is turned into lateral forces by the fibers in the layers of material in the vest. In 2010 and 2016, Armor Express was named government contractor of the year by the state of Michigan. In 2016, the company won a seven-year, $93.8 million contract from the Department of Homeland Security to provide vests to more than 90,000 officers with U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement, Transportation Security Administration and other federal agencies. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

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

CALENDAR WEDNESDAY, JULY 12

How the Industrial IoT Can Transform Business.

8:30-10:30 a.m. LHP Engineering Solutions. More and more companies are looking to leverage the Industrial Internet of Things as a means of competing globally. The speaker is Michael King, president, Data Analytics & IoT at LHP Engineering Solutions. Automation Alley, Troy. Free for members. $20 nonmembers. Phone: (800) 427-5100; website: automationalley.com Social Media for Business Growth Workshop. 9

a.m.-11:30 a.m. An overview for using LinkedIn, YouTube, Facebook, Instagram and Twitter to grow any business. Terry Bean from Motor City Connect will take participants through the tools and rules of social media. Registration required. Oakland County Executive Office Building Conference Center, Waterford Township. $40. Registration: www.advantageoakland.com/businessworkshops

THURSDAY, JULY 13

Pandora CEO Tim Westergren. 11:30 a.m.-1:30

p.m. Adcraft Detroit. Westergren shares his vision for Pandora and point of view on the platform’s future. The Reserve, Birmingham. $50 member; $75 nonmember. Website: adcraftdetroit.com

UPCOMING EVENTS

Detroit ’67: Looking Back to Move Forward. 11:30 a.m.-1:30 p.m. July 17. Detroit Economic Club. Business leaders will discuss diversity, economic inclusion, and engaging the next generation of leaders. Panel includes: Tim Ryan, U.S.

SPOTLIGHT chairman and senior partner of PwC and chairman of The CEO Action For Diversity & Inclusion; La June Montgomery Tabron, president and CEO of W. K. Kellogg Foundation; Wright Lassiter III, president and CEO of Henry Ford Health System. Moderator: Ron Fournier, publisher and editor, Crain’s Detroit Business. MotorCity Casino Hotel. $45 members; $55 guests of members; $75 nonmembers. Phone: (313) 963-8547; email: info@econclub.org; website: econclub.org Designing Smart Products for the Internet of Things. 8:30-10:30 a.m. July 19. Automation Al-

ley. The Internet of Things (IoT) is changing how manufacturers design and develop products. Product development experts Peter Bilello, president of CIMdata, and David Hofer, electrical technical specialist and certified interconnect designer at Fisher Unitech, discuss creating smarter products with seamless collaboration between the engineers and design teams. Automation Alley, Troy. Free for members; $20 nonmembers. Phone: (800) 4275100; Email: events@automationalley.com

Is Artificial Intelligence Redefining Marketing (and Market Research)? 11:30 a.m.-1:30 p.m.

July 19. What is marketing artificial intelligence? Is AI redefining marketing research? Session will feature guest panelists; a Google “Digi” search of the AI topic; and a discussion. Discussion Leader: Jan Leon Woznick, known as “Dr J-“ in the marketing/marketing research community. Lawrence Technological University. Free. Contact: Dave Pagnucco, (248) 3737451; email: Connect@amadetroit.com.

Automotive Hall of Fame Inductions & Awards Gala Ceremony. July 20. Cocktail reception, 6

p.m., dinner and ceremony 7 p.m. This year’s inductees are Alberto Bombassei, president of Brembo; August Fruehauf, founder of the Fruehauf Trailer Co. and the inventor of the semi-trailer; Jack Roush, an icon of American motorsports and co-founder of Roush-Fenway Racing as well as Roush Enterprises and its subsidiaries; Ed Welburn, recently retired head of Global Design for General Motors. Cobo Center. $600. Contact: www.automotivehalloffame.org Capital Raise Meetup. 9:30 a.m.-11 a.m. Aug. 1.

Capital expert Mike Brennan will detail the various capital sources in Michigan and talk about how to properly position your company to be qualified for private funding including: private equity, the angel network and venture capital, and/or public funding including: grants, preseed, micro-loans and venture match. Macomb-OU Incubator at Velocity Center, 6633 18 Mile Road, Sterling Heights. Free. Contact: macinc@oakland.edu.

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

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NON-PROFIT Marc Berke

Chief Development Officer Girl Scouts of Southeastern Michigan

LAW

The Girl Scouts of Southeastern Michigan is pleased to welcome Marc Berke as their Chief Development Officer. Berke brings over 20 years of fund development experience to GSSEM and has previously served as Senior of Major Gifts and Campaigns for Forgotten Harvest and Director of Development for Alzheimer’s Association - Greater Michigan Chapter.

PUBLIC RELATIONS Greg Colombo

General Manager and Chief Operating Officer Pine Lake Country Club Pine Lake Country Club is pleased to welcome Greg Colombo as General Manager and Chief Operating Officer. Columbo will manage all aspects of the club’s activities and relationships with the Board of Directors, members, guests, employees and the community. His previous experience includes executive positions at private clubs and luxury hotels including Cattail Creek Country Club in Glenwood, Maryland, Planfield Country Club in Edison, New Jersey and Ritz Carlton in Philadelphia.

Yavonkia Q. Jenkins Casey Koppelman Attorney Varnum LLP Varnum is pleased to announce that Casey Koppelman has joined the firm. An experienced real estate attorney who focuses on complex commercial real estate transactions, Koppelman has a national practice with a concentration on acquisitions and dispositions and leasing of multi-tenant retail, office and industrial properties. He joins the firm from the Bloomfield Hills office of Dykema where he was a partner in the real estate group. He is based in Varnum’s Novi office.

Chief Marketing and Communications Officer Girl Scouts of Southeastern Michigan Yavonkia Jenkins has been promoted to Chief Marketing and Communications Officer at Girl Scouts of Southeastern Michigan (GSSEM). Jenkins will develop and manage communications strategies for regional and national Girl Scouts program initiatives, including local implementation of Girl Scouts of the USA’s new brand platform. Jenkins was previously the Director of Public Relations and has more than 15 years of experience in agency, non-profit and government communications and marketing.

PEOPLE ON THE MOVE provides an opportunity to announce the selection, promotion, appointment, leadership or role responsibility expansion of an employee, colleague or team member across industries and sectors. For more information or questions regarding advertising in this section, please call Lynn Calcaterra at (313) 446-6086 or email: lcalcaterra@crain.com

Burant named new chief at Taubman institute The A. Alfred Taubman Medical Research Institute at the University of Michigan has named a new director. Charles Burant, M.D., a diabetes and obesity researcher, is taking up the position after Eva Feldman, M.D., 65, announced she would be stepping down from it after 10 years. The leadership changes officially took effect July 1. Burant, 60, is an endowed professor of metabolism and professor of internal medicine in UM’s department of Metabolism, Endocrinology and Diabetes. He is also a professor of Burant: Takes over Molecular and Intethe reins from Eva grative Physiology in Feldman. the university’s medical school and its schools of Public Health and Kinesiology. He is director of the Michigan Metabolomics and Obesity Center at the university, which provides infrastructure for researchers conducting clinical research metabolism, obesity and diabetes. Burant has an M.D. and Ph.D. in molecular and cellular biology from the Medical University of South Carolina in Charleston. After obtaining those degrees, he completed a residency at the University of California in San Francisco and a fellowship in endocrinology at the University of Chicago. He joined the UM faculty in 1999. Feldman was founding director of the institute, which was created with tens of millions of dollars from mall mogul A. Alfred Taubman to fund research into intractable diseases like Alzheimer’s, ALS and diabetes.

Shinola marketing chief leaves watch-maker Shinola/Detroit LLC Chief Marketing Officer Bridget Russo is leaving the Detroit-based luxury goods maker after a “whirlwind” five years taking the company from start-up status to a global brand. Russo, 44, said Thursday that she's leaving Shinola to take a break and possibly launch a new company in Detroit, which she had made her home since moving to town from New Russo: May start York City. new company Russo joined Shiin Detroit. nola in 2012 when the watchmaker was preparing to debut its men’s timepieces. Shinola founder Tom Kartsotis hired Russo full time after she consulted for the company through a firm she established called Passion Projects. Before that, Russo worked on the launch of the Edun clothing brand founded by U2 lead singer Bono and his wife, Alie Hewson. Russo has overseen marketing of the company as it grew from a boutique watchmaker in Detroit to a producer of upscale bicycles, bags, turntables, jewelry and office accessories with 26 stores.

July 10, 2017

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Page 17

SENTINL FROM PAGE 3

Belinda Padilla, president of U.S. subsidiary Armatix USA Inc., had her personal information, including phone number and address posted online by opponents of owner-recognition software on firearms. Those who oppose this type of software argue that the software will enable the government to track individual firearm owners and how that weapon is being used and potentially compromise a firearm’s reliability, The New York Times reported. Gun owners are also suspicious of government mandates for this technology, as states like New Jersey have considered in recent years. Kiyani said IdentiLock is equipped with software that doesn’t connect to the internet and doesn’t have the capability to send the fingerprints to any government entity. “The only time gun owners get uncomfortable is when this sort of technology is forced upon them,” said Bill Brassard Jr., senior director of Newtown, Conn.-based National Shooting Sports Foundation. “The industry is not against this technology, but it is against mandating it. As long as it’s always optional, gun owners will be interested.”

Potential improvements Owner-recognition software, like IdentiLock’s, could prevent suicides, accidental shootings and the deaths of police officers who lose control of their gun to assailants, according to a 2013 study by the National Institute of Justice, which studied several manufacturers’ capabilities, includ-

Sentin’s IdentiLock biometric trigger lock, protecting a Smith & Wesson M&P Shield handgun from unwanted users. ing Armatix’s. IdentiLock has the potential to reduce the rate of accidental shootings, Kiyani said. Accidental shootings are an issue in the U.S., particularly among children. A review of shootings nationwide by The Associated Press and USA Today uncovered at least 141 deaths of minors from unintentional or accidental shootings in 2015 alone. In June, a 3-year-old boy in Clinton Township died after accidentally shooting himself after pick-

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ing up a handgun he found on the ground outside the apartment complex where he lived. “Everyone notices the quick release on my product, but it’s not the real innovation; it’s the locking speed,” Kiyani said of the system that clicks onto the trigger with ease and quickness. “I want these accidents to start going down. I believe in gun ownership. In fact, I think everyone should own a gun, but I want to enable responsible gun ownership and prevent deaths.”

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A rapid ramp-up Since going on sale in June, Sentinl — which has 10 employees — has sold 2,000 units on its website with no advertising or marketing. With the IdentiLock product available online and in Cabela’s stores, Kiyani has already ordered 10,000 more units from his contract manufacturer in Shelby Township. Orders are fulfilled out of a warehouse in Warren. But Kiyani expects to sell out of

Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

REAL ESTATE

JOB FRONT

BUSINESS OPPORTUNITIES

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SENTINL

that by September. “My fear is that because I’m new to the market, I can’t really predict volumes,” he said. “If this catches on like I think it’s going to, I could hit 100,000 units by Christmas. My goal is to keep up with demand.” Brassard said the Identilock competes in a crowded field of safety accessories, but it’s unique. “I wouldn’t consider this the main security device a gun owner should have — that’d be a gun safe — but it has a role to play,” Brassard said. “As always, the market will decide.” In preparation, Sentinl just opened its second round of venture capital funding with the goal of raising $2 million. It previously received $500,000 in investment in a first round last year. Sentinl, which operates out of Wayne State University’s business incubator TechTown, is also supported by a $100,000 grant from the Smart Tech Challenges Foundation Firearms Challenge. The company plans to issue Identilock units for an additional three to five more families of guns by the end of the year — a quick turnaround for such a small company, thanks to its connections in Detroit, Kiyani said. Kiyani declined to name the suppliers for the company’s product, but said they are all local. “I couldn’t be successful anywhere but Detroit; nowhere else could I find the designers, engineers and materials scientists to get this device made so well,” he said. “I learned about safety and reliability in autos and those same suppliers are making my product. That’s something I value.”

MISCELLANEOUS

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SURVEY ANALYZE MATCH

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FOURNIER FROM PAGE 3

Kudos from supervisors can be converted into charitable donations. A company concierge will help employees buy a card for a spouse’s birthday or flowers for a sick friend. Which explains how Ishbia answered my first question (the interview was edited for clarity and length): What keeps you awake at night? Our people and their families. Let me call a little BS. What CEO thinks about his people first? You must think about the bottom line and making money. Yeah, that is why we are different (than other companies). So, I am not a public company. It’s owned by me and my dad. You want to make money and your dad wants to make money. We make money. We make money. So (focusing on employees) differentiates us. If you can see this new building: If you had asked me, what is the business reason for putting a $2 million gym in there, there is no business reason; it’s a people reason. It’s for our people. It’s a lifestyle. It’s a part of our life, so I would say … people don’t live to work, they work to live. So we make our company a part of people’s lives and we believe if you treat and take care of your people in (the) way that we do here, they take

care of our clients in the same way. But, still, at the end of the night, you’ve got to be worrying about the bottom line. No, never. It never crosses my mind. Specifically, what are you thinking about? What kind of thing keeps you awake when you are worried about people? Certain leaders in our company. Why did two people from (an internal) team resign last month? What’s going on? Is that a leader problem? That team is a reflection of them, and that (employee) just left and I’m going to talk to them personally … because my job is to lead the company with vision and values, and then my job is to get the right leaders in place, and if I have the wrong leader in place, it creates that misalignment all the way down, and so I see that and track it. That is some of the things I think about at night. When your idol and former coach, Michigan State basketball coach Tom Izzo, lays awake at night, he is worrying about his win-loss record. No, he’s not. I played for him for four years and coached with him for a year …. Izzo is worried about why did (a player) not have his hand up when (an opponent) was going right. Did I not do a good enough job telling him that (the opponent) goes right every time? He thinks about ev-

ery nuance. He knows if he takes care of every inch or nuance, we are going to win the game. Never is he worried about how many games (MSU will) win in a season. We talked about every inch. We talked about being in the weeds. There is not a thing that is too big or too small, ev-

“We are not just doing mortgages — mortgages are boring — but we are helping people make dreams come true. They understand that there is a purpose to what we do; this is not like selling water bottles. We are making an impact on people’s lives, and you can change a person’s trajectory in a positive way by helping them get the house.” ery detail matters. Every inch counts. Two weeks ago, I called on … our facilities team (and asked), ‘What time do the people clean the bathroom up here? It looks like the garbage is overflowing.’ If it’s every two hours, maybe we need to move it to every 90 minutes with all the people we have.

WE’VE GOT SOMETHING SPECIAL TO BRING TO THE TABLE

A lot of people would say that’s way too far down in the weeds for a CEO. It’s crazy to think you are worrying about the trash. Everything matters, there is not a thing that doesn’t. Why? Why does it matter that the garbage is picked up on time? Because it matters to our people. So what about your culture can help other businesses succeed? The lesson is, take care of your people first. Your people are what differentiate you. Compared to other generations, millennials are highly purposedriven. They want to know they’re making a difference in their lives and through work. You are right on. We call it dream makers. I talked about it at the rally the other day: We are dream makers, so that resonates with our millennials and other people here. We are not just doing mortgages — mortgages are boring — but we are helping people make dreams come true. They understand that there is a purpose to what we do; this is not like selling water bottles. We are making an impact on people’s lives, and you can change a person’s trajectory in a positive way by helping them get the house. We are also helping business owners and mortgage brokers around America so the millennials definitely care

about purpose. [T]hey care about other things than just work. They are big on worklife balance. They are big on ‘I want my weekends to myself.’ The older generations are, like, ‘You go and get the biggest paycheck you can’ — and that is not how millennials think. Most employers fight that. Yeah, we embrace it here. At what point did you think of implementing a strict 40-hour work week? The point that I realized it was what mattered to our people. Do you remember the last time you were lying in bed or had to get out of bed because you had something on your mind that involved this place? I started about six to eight months ago worrying about (the office space). I take it you weren’t just worried about how a too-small headquarters would affect your bottom line. You were worried about staff morale: They need a bigger headquarters to be happy, and you need a happy workforce to make clients happy, and you need happy clients to make money. Yeah. If our people aren’t happy, they will tell their friends, and we can’t grow (the workforce). If we can’t grow, then we can’t get more business.

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BLM to study best K-12 practices By Lindsay VanHulle

Crain’s Detroit Business/Bridge Magazine

Business Leaders for Michigan has kicked off a study of best practices in K-12 education, in hopes of raising Michigan students’ academic performance. The state’s business roundtable says it will examine data of Michigan students’ school performance and how they measure up against students in comparable grades, academic subjects, ethnic backgrounds and locations. The study also will include research and interviews with

“Too many kids aren’t getting the preparation they need in their elementary and secondary education to thrive in this environment.” Doug Rothwell, Business Leaders for Michigan

education and government leaders from other states and feedback from Michigan educators, and will take into account the recommendations of a Gov. Rick Snyder-appointed 21st Century Education Commission. The study is expected to include a series of recommended priorities to improve academic performance in Michigan schools, BLM said. “Today, most good jobs require an education or training beyond high school and successful careers will demand it in the future,” Doug Rothwell, BLM’s president and CEO, said in a statement. “Unfortunately, too many kids aren’t getting the preparation they need in their elementary and secondary education to thrive in this environment.” PricewaterhouseCoopers will lead the study, with findings expected in early 2018. Business groups have taken an interest in addressing Michigan’s sliding K-12 school performance in part because they recognize Michigan has a shortage of skilled talent. Oakland Schools, educators from around the state and business executives from companies such as Southfield-based Barton Malow Co. are part of a coalition called the School Finance Research Collaborative, which aims to build on a state-funded school adequacy study to determine the true costs of educating students in Michigan.

Leaders in Complex Business Lawsuits and Class Action Litigation www.millerlawpc.com (248) 841-2200/ www.millerlawpc.com 950 West University Drive / Suite 300 / Rochester / Michigan / 48307 / (248) 841-2200

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BLIGHT

percent of the 5,471 commercial structures were privately owned. Through June 12, Detroit had paid 13 demolition companies about $16 million for commercial demolitions since January 2014 at an average cost of $54,946 per building, according to a Crain's analysis of city records. The cost of the demolitions have ranged from $2,620 to tear down a small car wash on 3rd Avenue in the Piety Hill neighborhood to $1.27 million razing an old school building on Rosa Parks Boulevard in the Dexter-Linwood area, according to city records.

FROM PAGE 1

A Crain's analysis of city data shows demolitions of commercial property in Detroit have slowed over the past 18 months. In 2014 and 2015, during Mayor Mike Duggan’s first two years in office, Detroit demolished 209 commercial structures. In 2016 and the first six months of this year, just 83 commercial properties have been torn down, according to the city’s data. That puts Detroit on pace to raze half as many commercial buildings in 2016 and 2017 as were torn down during Duggan’s first two years in office. Records on the city’s website last week showed 36 commercial buildings have been razed this year, with just three in the last two months. City officials said Friday there was a glitch in data and that 59 commercial buildings have been razed this year. The former Samuel B. Dixon Elementary School on Tireman Avenue on the city’s far west side was the most recent demolition completed by Adamo Group Inc. on June 12 for $418,275, city records show. Duggan, who is up for re-election this year, recently told Crain's the city plans to accelerate commercial demolitions by knocking down more buildings over the next 12 months than his administration did in the 42 months he's been in office. “We’ve been taking out 150 a year, and we’re going to double that to 300 a year,” Duggan said in May 31 interview.

The pile on Mt. Elliott COURTESY OF LOVELAND TECHNOLOGIES AND MOTOR CITY MAPPING

The former Motor City Party Store at 5471 Mt. Elliott St. on Detroit’s east side is shown here on Jan. 9, 2014 before it burned down.

COURTESY OF LOVELAND TECHNOLOGIES AND MOTOR CITY MAPPING

The burned-down Motor City Party Store at 5471 Mt. Elliott St. on Detroit’s east side is shown here on Sept. 12, 2016.

Changing processes Rebecca Christensen, executive director of city operations for Duggan, oversaw the commercial demolition program in 2015 when the city first topped 150 demolitions in a year. Christensen said the process was slowed in 2016 by changes in the procurement process that now require approval for commercial demolition contracts by both City Council and the Financial Review Commission. “That slowed things down significantly in 2016,” she said. Environmental reviews for tearing down commercial properties such as old gas stations can add months to the process, Christensen said. “Commercial demo is a completely different animal than residential demo,” she said. To meet the goal of 300 commercial demolitions over the next 12 months, there are contracts for tearing down 13 buildings in the hands of demolition companies and 90 in the purchasing phase, Christensen said. Demolitions also have been slowed by the way Detroit has prioritized the most problematic properties. The pile of rubble at 5471 Mt. Elliott St. is not scheduled to be cleaned up until sometime next year. The building is in the city’s 2018 commercial demolition plans, said John Roach, a spokesman for Duggan. After Crain's inquired about the site Wednesday, the city’s building authority began exploring whether an emergency demolition could be ordered to “move more quickly, given its current condition,” Roach said. The burned-down party store’s re-

CHAD LIVINGOOD/CRAIN’S DETROIT BUSINESS

There’s an opening for the basement of the former Motor City Party Store amid a pile of debris from the burned down store at 5471 Mt. Elliott St. on Detroit’s east side. The opening is within feet of a sidewalk on East Ferry Street and not secured or roped off. mains sit along a stretch of Mt. Elliott between Gratiot Avenue and I-94 that’s a four-lane street. Duggan said the highest priority for commercial demolitions is publicly owned properties along seven-lane corridors such as Gratiot. Streets with fewer lanes, like Mt. Elliott, are less of a priority. “We are literally taking every commercial building in the city and we’re scoring it based on the effect on the community and the risk to people going by,” Duggan told Crain's.

Most demos residential Since he took office more than three years ago, Duggan’s administration has knocked down 11,787 residential houses at a cost of $173.4 million, most of which has come

from federal funds. The mayor's residential demolitions have gotten most of the attention because of the sheer volume of houses coming down and controversial cost-overruns that sparked a federal probe of the program and recent settlement with the state housing agency. But commercial blight removed pales in comparison to the debilitated housing stock that’s been cleared. Since January 2014, the city’s contractors have demolished 272 commercial buildings — putting a small dent in the 5,471 commercial properties in Detroit that were identified as blighted by the city’s May 2014 blight removal task force report. Motor City Mapping’s survey of 17,962 commercial properties in Detroit for the blight task force found 30 percent were considered blighted. More than 83

When the blight task force report came out in the spring of 2014, Detroit was in the midst of a historic municipal bankruptcy. Detroit’s bankruptcy attorneys used the city’s widespread blight to justify shedding $7 billion in debt and long-term liabilities to free up more money for demolitions. Around the same time, Nagi was just taking possession of the former Motor City Party Store at 5471 Mt. Elliott through a land contract his company, Alqublani LLC, had secured with the previous owner, city property records show. “I was putting money into it, fixing all of the stuff in it,” said Nagi, who owns and operates the Hoover Pharmacy on Holbrook St. in Hamtramck. By late last summer, Nagi said he owed more than $4,000 in back taxes and his rehabilitation project couldn’t keep up with the vandals. “They broke in, took every thing inside and they burned it down," he said. “I gave up.” That’s when he let the Wayne County Treasurer’s Office take the property in a tax foreclosure. It’s unclear why the burned-down building has been allowed to sit untouched since the fire last September. City officials didn’t respond to additional questions about how such properties are prioritized. Motor City Mapping photos dated Sept. 12, 2016, show the front wall of the building still standing. At some point since last fall, the walls were torn down and left on the heap of rubble, with an opening to the basement left exposed just a few feet from the sidewalk. A city official reported the property as an illegal dump site in late May and a blight violation was issued. Last week, a rain-damaged blight violation ticket was wrapped in a plastic bag and taped to a post that Google Street View images show once served as a barrier around a pay phone. For one longtime business owner on Mt. Elliott, the charred remains of the former party store are a way of life in a near east side neighborhood where just a few blocks to the east the former Packard plant has been an urban eyesore for decades. “We’ve just kind of gotten used to this over the years. It’s not the first one that’s been sitting like that,” said Jacob Lueck, manager and co-owner of the Eastern Michigan Distributors Co., which has operated a building supplies warehouse on Mt. Elliott for 63 years. “Every customer who comes in drives by it. Most of them are used to it.” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

GRAYLING FROM PAGE 1

Arauco’s arrival is expected to help salve a number of the county’s ills, from above-average unemployment (5.9 percent) and sluggish income (less than $23,000, per capita), to a persistent housing shortage in and around Grayling. The project is being hailed as a model for how struggling regions can benefit when state, business, education and civic leaders join forces to make their community inviting to commercial investment. In the years B.A. — Before Arauco — businesses and government groups may have shared common goals, but they admit they didn’t truly collaborate. That began to change when Arauco began poking around Crawford County. Rick Harland, supervisor of Grayling Township, where the factory is being built, said he received critical help and strategic support from the Michigan Department of Natural Resources, down to county and Grayling city administrators. “It was just seamless,” Harland said. “Look at what we did because we worked together.”

A rejuvenated Grayling The city of Grayling is a familiar pit stop to anyone traveling I-75 amid the forests and streams of northern Michigan. And that’s been part of the challenge for this city of 1,800. “We never have problems getting people to Grayling,” said Jeff Gardner, co-owner of the Old Au Sable Fly Shop just off M-72 toward downtown. “We have problems getting them out of their car.” In a bid to revive a moribund downtown and create a place where younger people want to live, Grayling has produced an influx of craft breweries and a wine bar, and plans are in the works for expanding its farmers’ market into a food business incubator modeled after Detroit’s Eastern Market. “We’ve created some interesting little oases,” Gardner said, “so people could stop and drink and eat and have some fun.” Yet, like many struggling Michigan towns, there aren’t enough job opportunities or market-rate housing to lure the young talent Grayling needs to thrive. Enter Arauco. The company’s North American division broke ground on its factory in April. Already, Kirtland Community College is planning to expand a barely-year-old campus down the road from the factory to add coursework that teaches skills for the forestry industry. Some local leaders believe Arauco could recruit from a radius of 50 to 60 miles or so for the production operators, millwrights, electricians and other workers it will need to staff the plant. Downtown boosters say Arauco creates the necessary market demand to help them tackle other pressing challenges, including convincing developers to build new, middle-income housing to ease the city’s housing shortage. South of town, local and county

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

government administrators are feeling the promise of more industrial and commercial development — which may include, for better or worse, big-box stores. “You’re going to have some growing pains,” said Harland, the township supervisor. “I’m not a proponent of big-box stores. But small business does survive around big-box.” Businesses, he said, “are starting to recognize this as a hub.”

Roots in forestry In 2015, Gov. Rick Snyder’s administration included Grayling in its inaugural Rising Tide program, which targeted 10 economically struggling communities — from River Rouge to Newberry — for help in learning to tackle problems on their own. In Grayling’s case, that has meant bringing government, business and workforce leaders to the same table to identify the region’s biggest needs and find ways to meet them. Some of these groups say the program marks the first time they can remember that decisions about Grayling’s future have been made as a community. “In their own focused way, they were accomplishing the objectives of their organization solely, as opposed to looking at the bigger picture,” Dan Leonard, of the Michigan Economic Development Corp., said of Grayling’s old way of doing business. Local leaders are now leveraging the Arauco plant to coordinate ways to boost other parts of its economy. “The jobs are coming. Now we have to create the housing,” said Rae Gosling, director of Grayling’s Main Street program, which works on reshaping downtown. “It doesn’t matter which one you create first, in all honesty. It doesn’t. Just create one of them.” The rest, she says, will follow. Grayling’s location, amid forests and near two major rivers, helped it prosper as a lumber town in the 19th and early 20th centuries. It’s named for a once-native species of fish, the grayling, that disappeared from local waters more than 50 years ago. Turns out, the timber barons’ practice of filling rivers with cut logs was not conducive to the lifestyle of the fish. The region nonetheless remains a popular spot for canoers and anglers, who fish for trout in the Au Sable and Manistee. The forest products industry remains a significant part of the local economy, though at a much smaller scale. Some in town say the arrival of Arauco is like coming full circle, with lumber once again creating economic opportunity. Jeremy Hendges, chief deputy director in the state Department of Talent and Economic Development, said Grayling’s participation in Rising Tide laid the foundation for hooking Arauco. The state helps communities participating in the program develop an economic plan. The reality is that in many of these towns, overworked city employees serve multiple roles, attributed both to shrinking payrolls and poor succession planning when staffers retire. The state provides lo-

LINDSAY VANHULLE/CRAIN’S DETROIT BUSINESS

Arauco North America, a Chilean forest products company, is building a $400 million particle board factory south of Grayling, near I-75 in Crawford County. The factory is expected to employ upwards of 200 workers when it opens in the third quarter of 2018. cal leaders with technical help while encouraging towns to identify “champions” in and outside of City Hall to develop and sustain momentum once the state leaves the room. In addition to housing, leaders in Grayling say residents need more child-care options. So employers, downtown business leaders and others are working together to explore daycare possibilities, according to Leonard, of the MEDC, a perk businesses can use to attract and keep young, talented workers. These community-wide discussions also revealed other needs. For example, the DNR noted that there are 12 companies in the forest products industry in Crawford County alone, with as many as 850 employees combined among them. Arauco would be the 13th. That was news to the local community college. “You start to add all that up and say, ‘Wait a second, I’ve got pretty close to 1,000 people here,’” said Tom Quinn, president of Kirtland Community College in Roscommon, which opened a Grayling campus last year. “You get looking at it,” Quinn said, “and you say realistically, Grayling is — well, right now at this moment, anyway — kind of the epicenter of growth in the wood products industries.”

Courting Arauco Globally, Santiago, Chile-based Arauco does $5 billion in annual sales, with about $1.3 billion of that in North America, said Jake Elston, vice president of operations for Arauco North America, which has its headquarters in Atlanta. The company employs about 14,000 people globally and 1,500 in North America. Grayling’s facility could hire as many as 250 workers when it’s operating at full capacity, Elston said. Today, Arauco has nine plants in North America, Elston said. Gray-

More online

JJDowntown Grayling works on a

resurgence of its own. Go to crainsdetroit.com/Grayling

ling will make 10. “It’s clearly the most modern technological platform that we have in our family,” Elston said, “and it’ll be the most modern technological platform in North America, for sure.” Arauco first scouted for property on the West Coast and Southeast regions of the U.S., where it already has plants. Grayling won it over because of the region’s proximity to producers of ready-to-assemble furniture in neighboring Great Lakes states and Canada. Its customers include IKEA, Rubbermaid, Archbold, Ohio-based Sauder Woodworking Co. and office furniture manufacturers like Grand Rapids-based Steelcase Inc. Grayling also had other factors working for it. It’s close to lumber sources, particularly sustainably managed forests, and resin, an adhesive used in manufacturing, which Atlanta-based Georgia-Pacific LLC makes at a chemicals plant down the road from Arauco’s new factory. And Arauco said it found a receptive government audience in Michigan, from economic development to natural resources. The state DNR sold 600 acres of state forest land to Arauco for $840,000, said Bill O’Neill, forest resource division chief and state forester. The money was invested into a fund the DNR can use to buy property or spend on building improvements. The MEDC awarded Arauco North America an $11.8 million property tax incentive, known as a forest products processing renaissance zone. The incentive is designed for companies that use wood or residual lumber, such as sawdust, to make products that can be sold to manufacturers or customers, or to make biomass or other alternative fuels.

Arauco’s incentive will last for 13 years. Under the deal, Arauco will begin to pay taxes in the 11th year, in 25 percent increments until it reaches 100 percent payment in year 14. The MEDC said Arauco also will benefit from $1.8 million in tax savings because its manufacturing equipment won’t be subject to a statewide assessment that replaced Michigan’s phased-out personal property tax. Arauco will be a registered C-corporation, according to the MEDC, meaning it will pay Michigan’s new 6 percent corporate income tax.

Hiring regionally Joe Wakeley, Crawford County’s treasurer, said he doesn’t anticipate Arauco will hire only from within the county. Even when it goes outside, those workers will still spend money on gasoline and other items in the area. Arauco’s goal is to hire locally as much as possible, said Lloyd Hotchkiss, who will be the Grayling plant manager. Most of the hiring will be done early next year. Arauco has not disclosed the number of hourly and salaried positions it will hire for, nor how much it will pay. The average manufacturing job in Grayling starts out at about $11 per hour, said Alayne Hansen, a business services professional for the Michigan Works Northeast Consortium, which serves Crawford County. The company has advertised for a number of supervisory roles, including electrical and mechanical maintenance leaders, a production manager and a purchasing agent. It says the Grayling facility also will need plant production operators and people with skilled trades experience, including millwrights and electricians. “These machines are run by computer now,” Hotchkiss said. “In today’s manufacturing, it’s much more technical than it was 30 years ago.”

21 To that end, the jobs will require some education or prior training — either three years of related job experience for candidates who only have a high school diploma, or postsecondary training, according to Arauco’s website. “They made it perfectly clear that it’s not a job that people are going to come in with no experience. They’re not going to step out of high school and get a job,” Hansen said. “Get some skills and be ready when the doors open,” she said, “and you’ll be first in line to get a job.” Quinn, the Kirtland Community College president, said he has board authorization to spend up to $9 million to expand its Grayling campus to teach students about the science of wood and how to operate the type of automated machines and sensors used in the forest products industry.The planned expansion would add at least two new labs and more capacity for tutoring services. Quinn hopes construction can start “as soon as the frost comes out of the ground” in 2018, with the first classes ready for the winter semester in 2019. The MEDC’s incentive is estimated to waive just over $909,000 in Arauco’s property taxes each year for more than a decade. Yet, according to Wakeley, landing a company its size outweighs the financial hit. “It was a big — a huge — boost to our economy, and it will be once the plant is up and running and the jobs are there,” Wakeley said. “Hopefully, the tradeoff will be beneficial down the road.” It better. Crawford County already operates with a smaller tax basewith roughly 70 percent of its property owned by the state or federal governments, including protected forests and the Michigan National Guard’s Camp Grayling training center. Government-owned land generally produces less revenue than land in private hands and is not available for housing or commercial development unless state or federal agencies release it for that purpose. That leaves the county with a limited pool of property to market to developers. That’s partly why Wakeley and other local government administrators, including Harland of Grayling Township, are excited about prospects for future development along Four Mile Road. Several leaders told Bridge that multiple trucking companies are considering locating along the Four Mile Road corridor near the plant. Townships that straddle Four Mile also created a joint authority with plans to run municipal water and sewer service through the area. The $7 million project is expected to be backed by federal grants and loans, and financed by special assessments billed to companies that tie into the system, including Arauco, Wakeley said. If all goes well, the system could be up and running by the spring of 2018. “Once that happens,” Wakeley said, “I think your whole Four Mile thing will go nuts.”

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

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FROM PAGE 1

at $20 a pop. Projections are up to $150 million this year. The not-so-secret engine of SunFrog's runaway growth? Social media and search engine optimization (SEO), which SunFrog has used to harness the creative power of the crowd and tailor products to people’s pet interests. Created by Kent to be “the Etsy of shirts” (referring to the peer-to-peer e-commerce website for vintage and handmade goods), SunFrog is now the largest maker of printed T-shirts in the U.S., and according to Alexa, an Amazon.com company that ranks companies by Web traffic, SunFrog regularly ranks in the top 500 in the U.S., ahead of such brands as Mashable, Reuters and Nordstrom. The business has disrupted an industry with thousands of players. T-shirt designers can upload their own designs, or they can choose from SunFrog’s online library of 20 million design elements. Designers then market their shirts on their favorite social media platforms. Facebook users have probably seen some of SunFrog’s highly personalized shirts for sale, like “Director of Operations: Because Freakin’ Miracle Worker Is Not An Official Job Title” and a whole line of name shirts with slogans like “It’s a [YOUR NAME HERE] Thing, You Wouldn’t Understand.” SunFrog does order processing, payment collection and distribution to artists. SunFrog pays T-shirt sellers between 45 percent and 65 percent of gross sales, depending on volume, which Kent says is much higher than commissions paid by other T-shirt makers. “Our goal is that some day, everyone in America will think of SunFrog when they think of T-shirts,” said Kent.

Expanding SunFrog employs about 350, is hiring four a week and its army of printing machines fills 100,000 square feet of space in a sprawling

HARBOR FROM PAGE 3

Tremonti allegedly told Mighion in a recorded Sept. 23 phone call, the certified transcript of which was provided to Crain’s by Mighion’s attorney, Reese Serra. Mighion, who also owns the flagship Harbor House in Clinton Township, said he wants to invest $100,000 to remodel the restaurant but uncertainty with his landlord is making it difficult. “How do I invest in it when I have a landlord (who) doesn't respect a lease any longer? I’m in limbo,” Mighion said. Small and nondescript, the building at 440 Clinton St. is regardless a prime chunk of downtown real estate given its proximity to where Gilbert and Gores want to build a Major League Soccer stadium and three high-rises for residential, office and hotel uses. The planned $1 billion-plus development has caused the property's val-

building in an industrial park near the Gaylord airport, south of downtown. Construction is underway on a 10,000-square-foot expansion. “There are problems that come with growth like that,” said Kent, the company’s 37-year-old president and CEO. “You don’t have enough people. You don’t have enough equipment.” Early on, Kent and his wife would rent a truck and travel the country buying used machines wherever they could find them. Half of SunFrog’s factory space is filled with those older screen-printing machines. The other half is filled with newer machines known as DTG printers, also known as digital direct to garment printers, which are descendants of desktop inkjet printers. The blank shirts come from suppliers around the world. “Literally every continent,” said Kent. SunFrog also makes shirts for other retailers, including up to $5 million of shirts a year for M22, the Glen Arbor-based company that sells items branded after the scenic state road that runs around the Leelanau Peninsula. SunFrog also supplies The Mitten State, a seller of Michigan-themed apparel in Grand Rapids. Beyond shirts, SunFrog sells 2,000 coffee cups a day and a variety of caps, with plans to broaden the product mix to include custom-designed dog tags, necklaces and cell phone covers. The company marketed a line of coffee cups for Father’s Day, designed for people whose fathers live in different states. The cups showed outlines of the two states where father and offspring lived — Texas and Kentucky, for example — with the outline of a heart in each state connected by a line. The caption read: “The love between father and daughter knows no distance.” Kent said that as an experienced web-site developer, he was confident in 2013 that he could build a compelling retail web site for his next business venture. But why T-shirts? “There was a fun factor to it. For some reason T-shirts excited a passion.

Today, SunFrog is debt-free, Kent said. He is able to fund growth out of cash flow and hasn’t had to seek out angel and venture-capital funding. Josh and his wife, Kristy, also run a crowdfunding web site, showyourlove. com, which is patterned after GoFundMe and helps people raise money for such things as medical emergencies, funerals and their favorite charities. For now, the Kents handle all the costs, with 100 percent of proceeds going directly to the fundraiser. Josh said they run the site for free, for now, covering credit card and processing fees. They want people to become familiar with the platform and get to trust it. Eventually they plan to start charging a modest fee, but not until after at least $2 million or $3 million are raised through the site for free. Melvin Turbyfill, 68, a retired banker in Newland, N.C., has been selling shirts online since February 2014 and is one of SunFrog’s earliest

ue to rise, at least anecdotally, even though Wayne County has not decided whether it will allow Gilbert, the founder and chairman of Quicken Loans Inc. and Rock Ventures LLC, and Gores, the owner of the Detroit Pistons, to develop the 15-acre property it owns. “Clearly the day that franchise is approved and the county signs off on the transfer and construction begins, every property owner in a fiveblock radius is going to get an immediate bump in value,” said AJ Weiner, managing director in the Royal Oak office of commercial real estate brokerage firm JLL. “It’s a major swinging element to any transfer of property over there.” Mighion says he has an option to buy the building for $950,000; the Tremontis say that while such an option existed in an original 2008 lease, it has long since expired under new lease agreements. In court documents, the Tremontis say the lease is not valid because family matriach Melanie Tremonti, who was 88 years old when she was

deposed in May, signed a blank sheet of paper rather than an actual lease, and that the lease was with Harbor House’s previous operating company Mighion Detroit LLC, not John Mighion LLC, its current one. A Toledo-based attorney for the Tremontis, Matthew Weisenburger of Cline, Cook & Weisenburger Co. LPA, did not return emails and voicemails seeking comment last week. At $950,000, the purchase price would amount to about $70.90 per square foot. Reese Serra, the Rochester-based Serra Donovan Law Group attorney representing Mighion, said representatives from MHT Family Property have told him the owners have received offers “three times” that amount. According to a lis pendens document — which provides written notice of an upcoming lawsuit — filed with Wayne County in February, Mighion and MHT Family Property entered into a lease around Jan. 1, 2014 that included a five-year option to purchase the building. Until 2015,

They float my boat,” he said. And floated others’ boats, as well. Kent said about 25,000 people — SunFrog calls them “affiliates” — have designed and sold shirts through SunFrog. And why the name SunFrog? He said he held brainstorming sessions with friends early on. Everyone agreed they liked the Geico Insurance gecko and a cool frog seemed like the next best thing. Recognition and accolades came almost as quickly as new orders. In 2015, SunFrog was named as one of 50 companies to watch in the state by the Michigan Small Business Development Center. In August 2016, Kent was one of three entrepreneurs featured in an article in Inc. on how to disrupt an industry. In September 2016, Kent was named by Entrepreneur magazine as one of 25 entrepreneurs under 40 who are creating the next big thing. And in October 2016, Kent delivered the keynote address at the e-commerce Shopify Summit in San Diego.

Lid-busting

affiliates. His other online business, launched in 2008, is distributing funny or interesting videos he finds online daily to 32,000 subscribers. “I’m always looking for different things to do. I read a lot of forums, and I saw people talking about selling T-shirts. I thought, ‘Selling T-shirts? There can’t be any money in that,’” said Turbyfill. But with nothing to lose, he thought he’d give it a try. So he reached out to SunFrog. Turbyfill sells both shirts he designs and shirts he likes by other SunFrog affiliates. He guesses he has sold more than 5,000 shirts since he started, about 1,000 this year. His first was a black T-shirt that read: “You can't buy love, but you can rescue it,” with a dog’s paw instead of the “o” in love. His two most recent designs are a Fourth of July T-shirt with a cartoon of an eagle in an American-flag-motif top hat and a black shirt that says across the front: “I’d rather be driving my tractor.” “I retired in 2006, and the income from the shirts helps tremendously. SunFrog helps me not have to worry about getting a day job,” he said. “SunFrog has been tremendous to work with. Josh is just remarkable. Even as they’ve grown, Josh will answer an email or text me almost immediately if I need something. And they do all the heavy lifting.” “I heard Josh Kent speak several months ago at a Leadership Lunch Club meeting in Traverse City about ‘lids,’ which was his term for ceilings that prohibit growth or obstacles to succeeding in business,” said Deanna Cannon, executive director of the Northern Michigan Angels LLC. “He shared how lids can be perceived obstacles given our past experiences rather than actual obstacles and how teamwork helped to solve many of SunFrog’s lids along their journey. “It was a very inspiring presentation and points to why Josh and his team at SunFrog have become a lid-busting, high-growth successful startup business in a short period of time.” Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

the entity had been registered to Melanie Tremonti. Her son, Gregory, said in a deposition that ownership of the building nets her only between $10,000 and $12,000 per year, after taxes and insurance. The document says the notice of intent to purchase had to be delivered to MHT Family Property 90 days prior to the five-year period’s expiration. The lis pendens says the notice was sent Dec. 30, and that on Jan. 18, Tremonti sent a letter saying that the lease was invalid and Mighion was not entitled to the option and he had 30 days to vacate the building. The restaurant continues operating under a month-to-month lease agreement as Mighion awaits resolution in the case. “Any seller should be in a very patient mode pending that announcement, and any buyer should be impatient and try to get control of real estate as fast as possible,” Weiner said. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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

THE WEEK ON THE WEB

JUNE 30 - JULY 6 | For more, visit crainsdetroit.com

Henry the Hatter owner gets new rental leads

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

ince Paul Wasserman announced that he would close Henry the Hatter, the historic downtown hat retailer, the 70-year-old businessman said he has received "an unbelievable outpouring of support." Several real estate brokers have reached out to offer space to lease for the 124-year-old retailer, which claims to be the oldest hat retailer in the country. Some prospective locations he is looking into include Corktown and a "very promising" location in Eastern Market. Before news of the looming closure, Wasserman said he had found few leads since he began his new location search in April. He said he received a letter from his landlord, the Detroit-based Sterling Group, that his lease at 1307 Broadway would be terminated this August after Wasserman requested to discuss extending his lease. "I haven't been able to breathe the last few days, which is not necessarily a bad thing right now. I've had contacts about spaces far east and the Avenue of Fashion," Wasserman said. "But my goal is to be as close physically to this location as possible and something that is a good fit for both the landlord and myself." Southfield-based Farbman Group is one firm that has offered space to Henry the Hatter in its New Center One building in Midtown. President Andy Gutman said he called Wasserman immediately after hearing the Broadway Street store was closing. Some have said the institution's closing downtown is an example of a tale of two cities where existing businesses that rent space are seeing prices rise with Detroit's resurgence downtown.

$20

Price per square foot that owner Paul Wasserman would like to pay to lease a new Henry The Hatter location downtown.

$40,000

The cost per location for the City of Detroit to operate 16 free recreation centers this summer, in partnership with Detroit Public Schools Community District.

155 megawatts

The amount of renewable energy that a new Conusmers Energy wind farm will be capable of producing. Consumers broke ground on the project in Tuscola County last week.

Lt. Gov. Brian Calley has started a new effort to make Michigan's Legislature part-time. Calley's Clean Michigan Committee announced last week it submitted a new petition with revised language to the Secretary of State. J Detroit's unemployment rate continues to decline, dropping to 7.5 percent in May — the lowest percentage of jobless Detroiters in 17 years. J More than 50 local and international artists will be making their way to Eastern Market in Detroit later this summer for the third annual Murals in the Market, which runs Sept. 21-28 and showcases more than 100 public murals. J Detroit youth will have more than a dozen additional recreation cenJ

ters to visit this summer. The City of Detroit and Detroit Public Schools Community District have teamed up to open 16 new Detroit Summer Fun Centers at schools across the city in an effort to establish recreation centers in neighborhoods that have lacked one for more than a decade. J Gary Lewis has rejoined Southfield-based Cascade Partners LLC as managing director, after leaving the company for Amherst Partners LLC in Birmingham over a year ago. J Consumers Energy Co. broke ground on its third wind energy project last week. The Jackson-based energy group is working with Detroit-based White Construction to build Cross Winds Energy Park II in Tuscola County. J Robert Bosch said it expects revenue at its automotive division to increase by 7 percent this year to about $53.3 billion. J The Royal Oak Golf Center is showing off its newly renovated 27acre complex Friday following a $1.4 million investment in the 70-year-old business. J The Arab American National Museum has launched an artists' residency that provides space for work and living across the street in the Detroit suburb of Dearborn's former City Hall. J Months after hearing arguments, the Michigan Supreme Court has decided to stay out of a personal-injury case at a big-box store that could have consequences for retailers statewide. The court said it will let an appeals court decision stand against Menards, which was sued after a shopper was struck by a pickup truck while pushing a cart outside a Bay City store in 2011. J The Grow Detroit's Young Talent program has enrolled 8,127 young adults for summer work at local employers. More than 12,000 applied for positions, according to a city news release.

OTHER NEWS The 600,000-square-foot Gibraltar Trade Center in Macomb County’s Mt. Clemens is closing later this summer after 37 years in business, stung by online sales, The Associated Press reported. J Robert Huschka has resigned as executive editor of the Detroit Free Press after less than two years in the job, the newspaper reported Friday morning. No specific reason for his departure was given. Former Freep senior editor Jeff Taylor, who left to become top editor at the Indianapolis Star in 2012, announced Huschka’s departure Friday to the newsroom. Taylor, who also is Midwest regional editor for the USA Today Network that is owned by Freep corporate parent Gannett Co. Inc., will act as interim editor while a replacement search is underway, he said in a memo to the staff obtained by Crain’s. J

TYLER CLIFFORD/CRAIN’S DETROIT BUSINESS

Henry the Hatter owner Paul Wasserman says he has received offers of space from several potential landlords for his downtown shop, now set to close in August.

RUMBLINGS

AP PHOTO/CARLOS OSORIO

Detroit Tigers manager Brad Ausmus is on the hot seat as the team’s fortunes — and attendance and TV ratings — have fallen.

Mediocre Tigers see attendance, ratings fall

fter a decade of dominance — but no World Series titles — the Detroit Tigers are not very good, and fan disappointment has manifested itself both at the turnstiles and in local TV ratings. Detroit is averaging 28,500 per game after 43 games at 41,299-seat Comerica Park. That ranks 16th among Major League Baseball’s 30 clubs, and is below the league-wide attendance average of 29,731 per game. These are the worst attendance numbers since 2005. Since 2013, when the Tigers reached the American League Championship Series, home attendance has fallen by an average of 9,566 per game. Detroit’s only sellout so far this season was 45,013 for Opening Day, and they haven’t come near that mark since. Detroit sold out two of 81

home games last season, four in 2015, and 27 in 2014. Fans also are abandoning the team on TV: After 70 games — the total aired by Fox Sports Detroit through June 25 — the Tigers averaged a 5.57 household rating, down from a 7.08 rating at the same point last season, according to Nielsen Co. viewership data for the Detroit market. That’s a 21.3 percent ratings decline year over year. Five years ago, Detroit led all of baseball in local TV ratings with a 9.59 rating. They’re now down 42 percent from that number. Still, despite the tumble, the Tigers’ local TV ratings still rank fifth in Major League Baseball, according to FSD. The numbers don’t account for games watched online and via mobile devices (which have seen viewer growth), or at bars and restaurants.

Is a ‘Detroit City Soccer Club’ in the offing? I f Detroit is granted a Major League Soccer expansion team, it could be called Detroit City Soccer Club. Tom Gores' Palace Sports & Entertainment has registered more than a dozen website domains using variations of that name in an apparent effort to secure online real estate for the MLS team he and Dan Gilbert jointly want for a proposed $1 billion downtown stadium development. Palace Sports spokesman Kevin Grigg confirmed that the domain names were secured but cautioned that the soccer effort remains early in the process and nothing has been decided on a team name. He declined to discuss any details of the domains or other names. Gilbert’s Detroit-based Bedrock LLC real estate firm deferred comment to Palace Sports. The domain names, all registered Sept. 28 through a Palace email address, are variations of "Detroit City Soccer Club." The domains, which expire Sept. 28, 2018, currently redirect to palacenet.com. Additionally, the Twitter account

@DetroitCitySC, created in January, is a locked account with no information available. The name registrations don't necessarily mean the MLS team would be called Detroit City Soccer Club. It’s a common practice in sports and business to register potential names early at a relatively low cost before someone else buys them with the intent of selling them at an inflated price — which happened with the www.littlecaesarsarena.com domain website. The Detroit City Soccer Club name is strikingly similar to Detroit City Football Club, the popular semipro soccer team that plays to 5,000 fans a game at Keyworth Stadium in Hamtramck. The owners of Detroit City FC are seeking to become a professional club and have acknowledged they’ve talked to the Gores-Gilbert team about possible investment or purchase. A message was left for Detroit City FC co-owner Todd Kropp, who acts as spokesman for the ownership group.

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