Crain's Detroit Business, Sept. 25, 2017 issue by Crain's Detroit Business

SEPTEMBER 25 - OCTOBER 1, 2017

Housing chief Jemison to head DEGC.

The Athletic bets that sports fans’ passions will pay New site hires top journalistic talent. Page 3

Page 7

Economic Development

The quest for Amazon HQ2

Some possible Detroit sites for Amazon’s HQ2

Detroit-Windsor bid could be attractive

By Kirk Pinho

By Chad Livengood

Where in the Motor City could Amazon wind up for its initial ‘HQ2’ build-out? Detroit locations are on the front lines given that Gilbert and Duggan are publicly helming the process, but several suburban spots have been floated, including the former Northland Mall in Southfield, the Palace of Auburn Hills site and the Pontiac Silverdome site. All three are north of 100 acres and are expected to be redeveloped in the coming years. Multiple-site bids have also been pitched, which could include a combination of land in the city, the suburbs, or even in Canada. Here are some possibilities, should the Detroit-Windsor proposal get the thumbs up from Jeff Bezos & Co.:

Windsor’s foray into Detroit’s bid for Amazon’s second North American headquarters injects new variables into the Motor City’s case for winning the online retail giant’s multistate sweepstakes and promise of 50,000 new high-paying jobs. Government officials and independent observers on both sides of the Need Detroit River said to know a joint binational  Windsor has bid utilizing the joined Detroit in economic, talent crafting a bid for and infrastructure Amazon’s second strengths of both headquarters Michigan and  A key benefit Ontario could be attractive to Ama- touted is a talent zon, a Seat- pool that is more tle-based compa- educated than ny with a large Michigan’s market presence  Putting some in Canada. operations in While Detroit Canada could have Mayor Mike Dug- financial benefits gan said Wind- for Amazon. sor’s involvement in the Amazon bid is to gain access to a larger potential workforce, a local tax expert insists Amazon could net benefits from a physical location across the river. “The U.S. has one of the highest corporate tax rates in the world,” said Michael Patterson, principal and director of international tax at Rehmann in Ann Arbor. “If they put some of that workforce in Windsor, particularly the jobs that drive revenue, they can drive down their global tax rate.” The U.S. has the fourth-highest statutory corporate income tax rate in the world, levying a 38.91 percent tax on corporate earnings, behind the United Arab Emirates, Comoros and U.S. territory Puerto Rico. Canada, on the other hand, has a corporate tax rate of 15 percent minus the Canadian federal tax abatement and general tax reduction.

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Monroe Block/Hudson’s site developments The sites: These are obvious choices given that Gilbert is tasked with recruiting Amazon here. Just east of his headquarters in One Campus Martius, the planned redevelopment of two blocks is one of the largest the billionaire Quicken Loans Inc. and Rock Ventures LLC founder and chairman is planning. With 818,000 square feet of Class A office space on deck, the $830 million-plus development would meet Amazon’s initial buildout requirement of 500,000 to 1 million square feet. It could also be coupled with the nearby $900 million J.L. Hudson’s site project, which is slated to have at least 240,000 square feet. The pros: Its location in a thriving downtown core could be enticing to Bezos, the founder and CEO of Amazon. Brand new construction would also be a draw. The cons: The entire project isn’t expected to be completed until early 2022. The Hudson’s project had been expected to be complete at December 2020, but that timeframe has been pushed back due to a revision SEE SITES, PAGE 20

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The River East land and the Renaissance Center could pose possibilities for the big for Amazon’s second headquarters.

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INSIDE

Special Report: Wealth Management << Money managers see an age of uncertainty ahead for the market as global, domestic tensions rise. Page 10

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MICHIGAN BRIEFS

INSIDE

From staff and wire reports. Find the full stories at crainsdetroit.com

Snyder signs super PAC regulations Gov. Rick Snyder quickly signed into law contentious regulations for independent expenditure committees whose footprint in elections has grown since U.S. Supreme Court decisions seven years ago, the Associated Press reported. Democrats and campaign-finance watchdogs opposed the Republican-sponsored legislation, partly for letting candidates solicit unlimited donations for super PACs backing their campaigns. But the Republican governor says the bills signed last Wednesday — a day after lawmakers OK’d them — give the secretary of state “clear statutory authority” to regulate independent expenditure committees with reporting requirements and enforcement penalties. He cites confusion over the 2010 Citizens United ruling's effect on Michigan law. Snyder says the law now aligns with federal decisions protecting free-speech rights. Critics say the law improperly lets super PACs running ads use the same attorney that a candidate committee employs.

Michigan board limits bargaining

A Michigan panel last week pro-

hibited nearly 35,000 state employees from bargaining on seniority and other provisions related to the handling of layoffs, job transfers and overtime, sparking an outcry from unions that condemned it as another conservative-led political attack against organized labor, the Associated Press reported. The Michigan Civil Service Commission voted 3-1 in favor of the limits proposed by Gov. Rick Snyder’s administration, which said allowing negotiations on some contract topics had hampered agencies’ ability to operate efficiently and cost-effectively. Hundreds of workers protested outside and crowded the meeting room. Democratic lawmakers also spoke out, while conservative groups urged adoption of the rules. “Seniority is used in union contracts to promote fairness and efficiency. It is used as a way of avoiding individualized determinations that may say that they’re based on performance but may be based on other issues such as the kinds of nepotism, cronyism and political considerations that the Civil Service Commission was designed to protect against,” said Ava Rose Barbour, associate general counsel for the United Auto Workers, which represents 22,000 state workers. Republican Commissioner Jim Barrett, the former president and

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CEO of the Michigan Chamber of Commerce, said seniority hours have become “a proxy for fitness and efficiency when that number is unrelated to actual merit.” The other GOP commissioner, former House Speaker Jase Bolger, said the unwieldy process in which senior workers receiving layoff notices bump out less senior employees can require “several hundred hours of staff time just to figure out what will happen during one layoff.” He criticized the “disparate treatment.”

Most of the new rules will take effect in 2019 after existing labor contracts expire. They empower state management to treat unionized workers similarly to the state's approximately 15,000 nonunionized workers in areas such as employment preference, transfers, recalls and assignments for shifts and overtime.

ArtPrize Nine kicks off in Grand Rapids

ArtPrize Nine kicked off last week in

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Grand Rapids and runs through Oct. 8, the Associated Press reported. Organizers said the 19-day event in 2016 drew a half million visitors to downtown Grand Rapids, spending $28.6 million in what Anderson Economics calls “net new economic impact on the city.” In all, $500,000 in cash prizes will be awarded — including $200,000 for the public favorite and $200,000 for a winner picked by an expert jury. The voting structure has been updated in the ninth year of the international art competition. The first round narrows entries down to 20 chosen by the public and 20 by the jury. The second round’s rules will change, removing the distinction between the public and jury choices. Twenty from each group will compete with each other in one pool rather than two. The work of more than 1,300 artists will be displayed at more than 170 venues. The winners will be announced Oct. 6.

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Sports Business

The Athletic: Paywall sports journalism plants its flag Detroit By Bill Shea bshea@crain.com

In January 1990, Mexican media billionaire Emilio Azcárraga lavished salaries on the cream of American sports journalists and spent even more on technology to create The National Sports Daily. It was a Manhattan-based weekday tabloid-size newspaper covering sports as a hybrid of Sports Illustrated and The Sporting News — box scores to game coverage to long-form profiles. Eighteen months and $150 million later, unable to deliver the paper on time across the country and struggling to sell advertising, The National shuttered. Adam Hansmann, 29, and Alex Mather, 37, are too young to really remember that brief splash, but they’re

“Our brand, we think, will not be for everyone, but for the top 10-20 percent (of fans) in a given market.” Adam Hansmann

aware of the lessons it offers. They launched The Athletic last year. It’s a network of websites in a handful of American and Canadian cities, including Detroit since June. Its model is simple: Publish compelling and unique local sports journalism — text, not video — behind a hard paywall and zero advertising. No pop-up ads or auto-play videos. Just words and photos. The strategy of relying entirely on reader revenue — a subscription is less than $50 a year — immediately

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The Athletic Detroit launched in June

J The site focuses on sports news, and will make readers pay for the ad-free site J

Hiring spree of name-brand journalists

eliminates the biggest problem The National faced, which was getting printed and delivered. “We aren’t trying to get papers on doorsteps across the country. That was a big struggle they had that we don’t have,” said Hansmann, who worked for years at the athletics app Strava with Mather. Instead, The Athletic’s founders say they need just 10,000 to 12,000 subscribers per city to make their venture profitable. They don’t need the hundreds of thousands or millions of subscribers and page views that traditional newspapers and sites must have. But they do have to produce enough compelling journalism to get people to pay for it. “We could be sustainable with that number. That math holds up. You don’t need that many for the economics of it to work,” Hansmann said. “Our brand, we think, will not be for everyone, but for the top 10-20 percent (of fans) in a given market.” He said The Athletic Detroit, which launched in June, is three to four months ahead of schedule in its subscription growth. Hansmann declined to disclose the Detroit subscription numbers so far, but said they are well past 1,000. The site covers the city’s four pro teams along with Michigan and Michigan State football and basketball. Toronto, the second market to launch after Chicago in 2016, is profitable and has had the best growth. SEE ATHLETIC, PAGE 17

Podiatrists Anthony LaLama and Stefano Militello decided to branch out on their own, opening Premier Foot & Ankle.

FARA GALATI

Podiatrists buck trend, step out in their own practice By Jay Greene jgreene@crain.com

Anthony LaLama and Stefano Militello, two 34-year-old podiatrists, worked several years for an established podiatry practice before deciding last fall to branch out on their own. But opening a new physician practice isn’t the easiest for young physicians, and nowadays not that many venture out on their own early in their careers. LaLama and Militello were not discouraged. They have been accustomed to working 80-hour weeks, splitting time with surgeries in hospital operating rooms, outpatient surgery centers and seeing patients in their offices. But starting up a medical office brings with it many of the same challenges that

Need to know

JJYoung podiatrists break trend by opening own practice JJBank financing easier for physicians and medical professionals than lawyers, accountants and architects because of Medicare billing JJPartners expect to turn profit first year

face all small-business owners. On Nov. 1, Militello opened Premier Foot & Ankle, a 2,000-square-foot clinic located at the St. John Medical Center professional building at 17900 23 Mile Road in Macomb Township. He had previously sold his partnership share with Warren Podiatry. LaLama, who was an associate at the practice,

joined him in February. “To break out on your own, it takes a little bit of confidence in yourself,” said Militello, who is from Shelby Township and received his doctorate in podiatric medicine at the Ohio College of Podiatric Medicine in Cleveland. He completed his residency at St. John Macomb-Oakland hospitals. “We decided to open the practice because we wanted to be the new face of medicine,” said LaLama, who is from Sterling Heights and received his doctorate in podiatric medicine from Kent State College of Podiatric Medicine in Cleveland. He completed his surgical training at Providence Hospital in Southfield. SEE PRACTICE, PAGE 19

Medical Marijuana

Amid legal confusion, future uncertain for medical pot shops By Chastity Pratt Dawsey

Need to know

Bridge Magazine

Nine years after Michigan voters approved medical marijuana, government officials and patients don’t know which pot shops will be open or closed in coming months because the laws are so confusing. How confusing? On the same day last week when the state announced that existing medical marijuana businesses that want a new state license need to shut down by Dec. 15, a judge approved a ballot question to ask Detroiters if they want more marijuana shops in the state’s largest city. Michigan’s medical marijuana industry has been compared to the wild

MUST READS OF THE WEEK

JJImpending Dec. 15 dispensary shutdown could hurt industry. JJDetroit ballot initiative to ask if residents want more marijuana shops. JJVote would opt the city into a highly debated state licensing program.

CHASTITY PRATT DAWSEY/BRIDGE MAGAZINE

Last spring, Detroit Grass Station in a sparsely populated stretch of West Grand Boulevard in Detroit became one of 175 dispensaries that had to shut down last year due to its proximity to a park.

The doubting kind Fournier: It’s a tough sell, but also hard to bet against Gilbert, Duggan. Page 8

west, where lucrative pot shops run roughshod over unenforced rules and pay no special taxes to operate. Nowhere is the confusion more prevalent than Detroit, which shut down 175 marijuana shops over the past year. Last week, an advocacy group won a lawsuit to put a question on the city’s Nov. 8 ballot that will ask

residents if dispensaries can operate closer to churches, liquor stores and parks. On the same ballot, Detroit voters will also decide whether to opt into the state’s new law that allows medical marijuana shops to operate legally and pay an additional 3 percent tax atop the state’s 6 percent sales tax. Confused yet? “With the state law and these ballot initiatives, we’re talking about changing the entire game. There’s a lot that’s still in play, nothing is set in stone,” said Detroit City Councilman James Tate, who introduced the ordinance that closed most of the city’s dispensaries last year and opposes the new ballot measures. SEE MARIJUANA, PAGE 22

QLine ridership Some 40 percent of riders are paying for rides on Detroit’s QLine. Page 4

Google unveils its new offices in Ann Arbor The completely renovated 135,000-squarefoot complex at 2300 Traverwood Drive is an ode to Michigan. Page 21

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Average daily ridership on the QLine fell to 3,000 from the 5,000 people who were using it on a daily basis over the summer.

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40 percent of QLine riders paying as ridership falls By Chad Livengood

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Four in 10 QLine passengers paid to ride the streetcar up and down Woodward Avenue after Detroit’s newest vehicle for mass transit ended a summer of free rides after Labor Day. Average daily ridership on the QLine fell to 3,000 from the 5,000 people who were using it on a daily basis over the summer when private donors were paying for rides while the streetcar service worked out kinks in the payment system. The percentage of riders actually paying was 40 percent, which QLine spokesman Dan Lijana said is higher than 32.5 percent national average of similar downtown city rail

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systems. At a 40 percent pay rate, that means an average of 1,200 riders are paying fares on a daily basis through either daily, monthly or annual passes. The QLine’s operators have a goal of an average daily ridership of 5,000 from this month through next September. “We are very confident QLine will reach that goal,” Lijana said in an

email to Crain’s. “Early numbers suggest we are picking up more commuters in the early evening and attracting significant numbers of special event riders.” Since the payment service went into effect Sept. 5, QLine ambassadors have been directing riders to the payment kiosks at each stop along Woodward, Lijana said. M-1 Rail, the nonprofit organization that runs the QLine, plans to step up payment enforcement measures, Lijana said. “We are likely to increase enforcement of all ordinances including fare using transit police in the near future,” he said. “We’ve used the ambassador program as a way to help educate riders on payment.”

Ruling could let some Michigan nonprofits off the tax-bill hook By Sherri Welch swelch@crain.com

A property tax case in outstate Michigan could be good news for nonprofits challenging property tax assessments in other parts of the state. Municipalities around the state are dropping property tax assessments against Baruch Senior Ministries, following a recent Michigan Supreme Court case that validated its charitable nonprofit status. The case is expected to serve as a precedent for nonprofits that are typically exempt from property taxes but have been getting bills from Michigan cities and townships looking to fill revenue gaps. Following a six-and-a-half-year legal challenge, Tittabawassee Township late last month dropped its assessment against Baruch, a faith-based nonprofit that operates 23 assisted-living, independent-living and memory-care facilities for seniors across the state. The township conceded that Baruch is entitled to a property tax exemption as a qualified nonprofit, said Terry Zabel, an attorney with

Need to know

JJFirst property tax assessment against

Baruch Ministries dropped

JJWin could help other nonprofits challenge property tax assessments JJRuling offers new test for charitable nonprofits in tax cases

Rhoades McKee P.C. in Grand Rapids, representing Baruch in the property tax litigation. Several of the other 14 Tax Tribunal cases concerning Baruch’s properties have been resolved by local tax authorities as well, he said in an email. And other cases are in the process of being resolved. None of the other Baruch cases have been scheduled for a re-hearing with the tax tribunal and may not need to be, Zabel said. The settlements follow a Michigan Supreme Court opinion earlier this summer that clarified what defines a nonprofit as charitable and thus exempt from property taxes. Municipalities around the state have been relying on six factors laid out in an earlier Supreme Court case

to qualify a nonprofit as charitable. But on several occasions, they have interpreted the fees some nonprofits charge and qualifications they place on who can benefit from their charity as “discriminatory,” the high court said in a June 28 opinion. But none of the factors laid out in the original 2006 case, Wexford Medical Group v. City of Cadillac were designed to require a charity to offer services for free or to select recipients using arbitrary criteria such as firstcome, first-served, according to the court. Any reasonable restriction to further a charitable goal that meets the permissible charitable purposes laid out in the original Wexford decision is acceptable and qualifies a nonprofit as charitable, the court said. Nonprofits facing property tax assessments in Michigan should analyze whether their property may be entitled to tax exemption by utilizing the new test set forth in the Baruch case, Zabel said. Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

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A steady partner in a shifting world Netlink made a change and found help beyond refinancing Story by Marcia Lerner | Crain Content Studio In the world of IT, companies must be nimble, which helps explain the agility of Netlink, a Madison Heights-based IT services and solutions company. Netlink started out as a software developer in the early 2000s, then shifted to services, adopting new business models and expanding its reach both geographically and by industry. Netlink now has 2,000 employees worldwide, and while most of its customers are in the United States, the company’s services range across a variety of areas, primarily in the automotive industry, but dipping into media, entertainment and other areas as well. All this takes place in 17 locations around the globe. Netlink’s business model requires a high degree of financial flexibility, because it helps customers build their IT infrastructures in part by investing Netlink’s own money in those infrastructures. This helps Netlink show commitment to its multiyear contracts, makes IT solutions easier on the customer, and allows the customer to lay out less cash upfront. The model worked for Netlink, it worked for Netlink’s customers—the only one it didn’t really work for was Netlink’s previous bank. “Understanding of our business and our

business model was lacking on their part completely,” said Anurag Shrivastava, president of Netlink. Still, Netlink managed with its previous bank, coping with intermittent shortages of capital and an uneasy working relationship. “And then Huntington came along,” Shrivastava said. Huntington addressed Netlink’s challenges by looking closely at the company itself. “The main thing is starting to understand their business,” explained Adam Mastrangelo, relationship manager at Huntington. “We need to answer any questions, understand what they do, understand what the risks are, understand their objectives.” Huntington’s first steps were to tailor the loan side to help Netlink achieve the growth it wanted. Once financing was in place, Mastrangelo homed in on Netlink’s foreign exchange situation. “They do a lot of hiring in India, which requires them to move a lot of currency back and forth,” Mastrangelo said. He brought in John Bayer, a Huntington foreign exchange consultant, to see what they could do to ease the process and reduce Netlink’s exposure to currency exchange risks. “With any customer, what’s most important is getting in front of them and understanding, really, what the business model is,” Bayer said. This allows for an understanding of both SPONSORED BY:

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I-75 will be state’s largest public-private transportation project By Lindsay VanHulle

Crain’s Detroit Business/Bridge Magazine

LANSING — A plan to have the private sector pay for construction and maintenance of part of the busy I-75 corridor in Oakland County will be the largest public-private transportation project in state history, Michigan transportation administrators said. The plan to hire a contractor or a group of contractors to design, build, finance and maintain a stretch of the freeway from Eight Mile Road to 13 Mile Road would top a 2015 private-sector partnership to update 15,000 freeway and tunnel lights, according to the Michigan Department of Transportation. So-called “P3s,” while still relatively new in Michigan, are being viewed more favorably by transportation administrators as a way to stretch taxpayer dollars for transportation and maximize efficiency of construction projects. Rather than having to borrow for the entire project cost up front or build one section of road at a time over years as money becomes available — a process that likely would cost more when factoring in rising prices for materials and labor — a private company could finance

Need to know

I-75 project will be the largest public-private transportation project in Michigan history J

J Companies will be asked to bid on design, construction, financing and maintenance J Project will speed up construction by at least a decade

multiple sections at once and the state could repay the investment over 25 or 30 years. Public-private partnerships also are expected to play a large role in President Donald Trump’s proposal to infuse $1 trillion into rebuilding the nation’s infrastructure systems by using some federal funding to leverage even more private capital. “The message that we’re beginning to see coming out of Washington relative to infrastructure (is) looking at P3 delivery and private financing,” said Joe Pavona, a senior adviser for innovative contracting and P3s for MDOT. “The feeling is that it’s going to be looked at favorably.” MDOT administrators decided to speed up its original construction schedule for I-75 — an estimated $1.3 billion project in nine segments,

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to be completed by 2034 — in part because of feedback about the amount of time the heavily traveled corridor would be under construction. The first segment, a $91.8 million reconstruction of three miles of the freeway near the Square Lake Road exit, was mostly completed before Labor Day. The remaining work will be condensed into two segments. The first of those will span from 13 Mile to Coolidge Highway, with the state contracting with a company to design and build the project. That contract is expected to be awarded next summer and construction should finish in 2020, according to MDOT. This portion will use existing state dollars and the state will be responsible for long-term road repairs. The second leg to the south, however, will include a contract not just for design and construction, but also for long-term financing and preventive road maintenance, MDOT said. That contract should be awarded by the fall of 2018, with construction set to finish in 2022. The state will continue to be responsible for routine maintenance, such as snow removal, Pavona said. The type of long-term maintenance that will be handled under the new contract is expected to include such work as building sound and retaining walls, and surface patching. MDOT estimated construction costs for the two remaining stretches of freeway at $325 million to $350 million for the northern section, and up to $650 million for the privately financed section to the south. Until a contract is negotiated, state transportation leaders said they have not decided how many years Michigan will reimburse the contractors, nor the amount of long-term savings by speeding up construction, Pavona said. Companies bidding on a P3 contract could join a consortium, with a group of firms handling everything from design to construction to securing financing from a private lender,

A plan to have the private sector pay for construction and maintenance of part of the busy I-75 corridor in Oakland County will be the largest public-private transportation project in state history.

Pavona said. The private sector can benefit from having more control over multiple aspects of the project, giving them greater efficiency and economies of scale that could lead to lower materials costs for a large, bundled project. In addition, private firms can trust the government is not going to default on its payment obligations, Pavona said, adding that their involvement could lead to higher-quality work because the contractors have assumed more of the risk and will be required to maintain their work for decades. “It’s all calculated risk,” MDOT spokesman Jeff Cranson said. Public-private partnerships netted about $61 billion in contracts from 1989 to 2013 — a sliver of the $4 trillion spent on highway projects during those years at all levels of government, according to the Congressional Budget Office in 2014. Yet roughly half of that $61 billion was contracted in the five years before the report was issued, the budget office said, reflecting growing interest in P3s. There is some evidence that bundling more of the project could lead to faster, cheaper construction because a company will have more of a

reason to rein in costs and meet deadlines, according to the budget office. In 2015, MDOT joined a $123 million partnership with New Yorkbased firms BlackRock Infrastructure and Freeway Lighting Partners LLC to update 15,000 lights on Detroit-area freeways and tunnels. The private companies are responsible for operating and maintaining the lights for 15 years, while the state provides repayment over the life of the contract; MDOT has said the annual cost should be less than what the department would have to pay for the updates. So why not use the P3 approach from the start? “It’s like buying a house or buying a car. You know, what’s the perfect balance for you in terms of how much you privately finance and how much you pay for yourself?” Pavona said, adding that it was important to the state to begin the project with available funding that already had been set aside. “We continued to analyze and see what are other options that could be used that could improve delivery of the project. This is a huge project, and sometimes the right combination doesn’t always reveal itself immediately.”

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Wilson Foundation joins Accelerate Michigan competition as title sponsor By Annalise Frank afrank@crain.com

The Ralph C. Wilson Jr. Foundation is joining the Accelerate Michigan Innovation Competition this year as title sponsor, granting $250,000 of the $1 million offered yearly for the startup pitch contest and shoring up a financial picture that has at times seemed cloudy. On Nov. 16 at the Masonic Temple, 36 semifinalist startups will vie for a series of awards with a grand prize of $500,000. A panel of judges decides the winners. This is the Grosse Pointe-based foundation’s first time contributing. It joins returning sponsors such as the Michigan Economic Development Corp., the New Economy Initiative, Ann Arbor Spark, Invest Detroit and Invest Michigan. GM Ventures is also contributing for the first time this year; it pledged $15,000. Invest Detroit Ventures, the venture capital arm of Invest Detroit, is presenting and organizing the event. It took over as fiduciary after

Need to know

JJWilson Foundation giving Accelerate

Michigan $250,000

JJThis is the foundation’s first year participating JJThe competition has met its fundraising goal, is saving for next year

the 2013 event and began managing last year. Fundraising is always a challenge for Accelerate Michigan; rumors had circulated that 2015 would be its last year. Then 2016. But this year, the competition has met its fundraising goal of about $1 million and is starting to save up for next year. “We’re right on budget with what we budgeted for the year,” said Martin Dober, vice president of Invest Detroit and managing director of Invest Detroit Ventures. “From last year to this year, we are at about a 34 percent reduction in expenses, and we’ve done really well with sponsorships this year.

“The more we can continue to raise now just puts us in a better position for next year. This is probably the first time we’ve done that, with two months to go until the event.” Additional prizes at the event include a $25,000 Caregiver Award provided by the Wilson Foundation. It’ll go to a tech company that supports elderly populations. The MEDC also asked Accelerate Michigan to put together a $25,000 prize for a company in the mobility industry, Dober said. On the day of the competition, the 36 semifinalists — to be announced in early October — and about 27 student ventures will pitch throughout the day. Then 10 startup finalists and nine student finalists will pitch again in the evening, with winners announced the same night. The students are competing for a separate pot of $20,000. Mobility startup SPLT took home the top prize in last year’s competition at Cobo Center. Coming in second was Autobooks, which received $100,000. JOOL Health won $50,000.

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Detroit Economic Growth Corp. names Jemison as CEO By Dustin Walsh dwalsh@crain.com

The Detroit Economic Growth Corp. on Friday named Arthur Jemison as its new president and CEO. Jemison, the current director of housing and revitalization for the city of Detroit, replaces Rodrick Miller, who stepped down from the DEGC in March. Jemison begins his new role effective Dec. 15, the DEGC said in a news release. DEGC CFO Glen Long was serving in the role on an interim basis after Arthur Jemison: Miller’s departure. Jemison joined Joined city of the city of Detroit in Detroit in 2014. 2014, previously serving as the deputy director of the department of housing and community development in Massachusetts. Before that, he served in various governmental roles in Massachusetts and Washington, D.C., including special assistant to the deputy mayor for planning and development of the nation’s capital. There he worked on securing the site for the Washington Nationals, CityCenter DC and the Marriott Marquis Washington, D.C. Working for the city of Detroit, Jemison crafted a new ordinance to require developers to allocate at least 20 percent of new units to affordable housing units, the opening of more than 1,400

Need to know

 Arthur Jemison succeeds Rodrick Miller as DEGC president and CEO 

New role is effective Dec. 15

 Jemison joined the city of Detroit in 2014

units including 400 affordable units since 2015 and secured an $8.9 million grant from the U.S. Department Housing and Urban Development to drive public improvements for targeted neighborhoods. “Arthur has been critical to our efforts to make sure the city’s revitalization reaches all of our neighborhoods,” Detroit Mayor Mike Duggan said in a statement. “He is an outstanding choice to lead the DEGC as it continues to a larger role in attracting equitable growth and development to Detroit.” Jemison earned a bachelor’s degree from the University of Massachusetts and a master’s from the Massachusetts Institute of Technology. Before stepping down to form his own consulting practice Ascendant Global, Miller was involved in the launch of the Motor City Match grant program for small businesses, along with large real estate deals including the opening of a Microsoft Corp. office in Detroit and the Ally Financial Inc. move from the Renaissance Center to One Detroit Center, among others. He was also involved in the Little Caesars Arena construction process and the Detroit Pistons’ move from The Palace of Auburn Hills.

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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 // S E P T E M B E R 2 5 , 2 0 1 7

OPINION

COMMENTARY

We’ve already been The doubting kind to bankruptcy court I T here’s really no telling what Amazon CEO Jeff Bezos really wants in the city that will host his online retail company’s second North American headquarters. But if he’s looking for a city in the Rust Belt that has already confronted its unfunded 20th century promises to municipal workers, some Detroit leaders think they’ve got a distinct advantage over rival northern cities, especially debt-ridden Chicago and the state of Illinois. “One of the things Detroit needs to promote is unlike so many other communities, we’ve cleared our legacy costs,” said Eric Larson, CEO of the Downtown Detroit Partnership. “You think about Chicago, which is great competition, but the reality is they have a very significant pension liability that they’re going to have to deal with pretty soon. And that’s going to be all-consuming, just like it was for us.” Simply put: Detroit already went bankrupt! And in the process of that historic and tumultuous 17 months in 2013 and 2014, Detroit dumped $7 billion in liabilities in bankruptcy court, mostly through the elimination of an unfunded and generous retiree health care benefit. Most pensioners received modest haircuts, and a couple of bond insurance companies absorbed the rest of the losses on money Detroit borrowed to obscure its own pension-funding crisis. The $816 million “grand bargain,” an unprecedented infusion of cash from philanthropy, corporations and state government, spared most pensioners from double-digit reductions in their monthly checks. It also absolved Detroit of making full pension payments until 2024, giving the city a decade to get back on its feet financially as reinvestment into the center city started to pour in. The grand bargain also helped avert what could have very easily led to years of bankruptcy legal bills over the constitutionality of the pension cuts — litigation that would probably still be going on today at the steps of the U.S. Supreme Court. “As companies think about the overall health of the region, they are factoring those kind of things in — what is the health of the state, what is the health of local municipality,” Larson said. “And Michigan and Detroit have made huge strides over the last 10 years in getting ourselves in a better place.” To be clear, Detroit is not completely off the hook for pensions. And city retirees are still stewing about having their once-guaranteed health care benefits ripped away. Mayor Mike Duggan’s administration is already starting to squirrel away millions in surplus revenue to prepare the city for a $200 million annual balloon payment that comes

CHAD LIVENGOOD clivengood@crain.com

due in seven years — a move that has won plaudits from Wall Street credit rating agencies. But Larson clearly name-dropped Chicago because the Windy City’s day of reckoning seems to get closer with every new report showing its funded liabilities getting worse. At the end of 2015, Chicago’s bond debt and unfunded pension and retiree health care liabilities totaled $45 billion — nearly four times as much unsecured debt as Detroit had when Gov. Rick Snyder authorized the city’s bankruptcy filing in July 2013. The state of Illinois’ pension system has just $25.5 billion in assets to pay $235.9 billion in liabilities, according to financial data compiled by the taxpayer watchdog group Truth in Accounting. That debt load comes out to $210 billion or $50,400 for every man, woman and child residing in the Land of Lincoln. Economic developers in Detroit think Bezos can’t ignore the uncertainty of how Chicago and Illinois will dig itself out of its hole (Chicago can follow Detroit’s path through Chapter 11 bankruptcy, but the state of Illinois cannot, barring an act of Congress). “You’ve got to know what those long-term liabilities are. Because you gotta assume that at some point in time that could show up in your cost of doing business,” said Steve Arwood, the former CEO of the Michigan Economic Development Corp. As state and Detroit officials found out in the years running up to the bankruptcy, the city’s inability to borrow money at reasonable rates affected everything from fixing broken infrastructure and ambulances to cash flow for making payroll. Those are factors any business considering an investment in Detroit had to weigh at the time, Arwood said. “Detroit can present a completely different picture on the future,” said Arwood, CEO of Miller Canfield Consulting, a subsidiary of the Detroit-based law firm Miller Canfield Paddock and Stone PLC. In evaluating cities, Arwood said, Amazon’s brass should be asking, “Does your community have its fiscal house in order?” “If the answer is no, that could be translated into higher taxes for you,” Arwood said. “And you don’t know when or how much.”

’m a skeptic by nature. But when a can-do mayor shares power with a must-do mogul in a get-itdone city, nothing is impossible. It’s been a pleasant surprise to watch Mayor Mike Duggan set aside ego, steer wayward community leaders away from turf fights, and make a strategic decision serving nothing more than the people of metro Detroit: He put Dan Gilbert in charge of a long-shot bid to bring an online retail giant to the region. These Amazon sweepstakes may soften my hard heart. Raised by a cop in Detroit’s northeast corner, I was taught to trust nobody. Then I left college for Arkansas and Washington, nearly 30 years a political reporter, sifting lies and spin for tiny remnants of truth. But now I’m back home, slowly shedding my cynicism. The latest evolution began one day in the Crain’s newsroom when word arrived that Amazon.com Inc. owner Jeff Bezos was giving communities a few weeks to put together proposals (read: tax breaks and other incentives) for a second headquarters. Winner gets $5 billion in investment and 50,000 jobs. Our team jumped to action. Real estate reporter Kirk Pinho activated his vast network of sources to give a clear-eyed assessment of how Detroit stacked up against Amazon’s explicit list of requirements. “Courting an investment like that to Detroit will be an uphill battle,” Pinho concluded. “Perhaps the biggest obstacle: The area’s history of city vs. suburbs feuds on everything from regional taxes to water and sewers to mass transit.” Chad Livengood, who covers the city of Detroit and patrols the intersection of politics and policy like no other reporter in Michigan, filed a column titled, “3 Reasons Why De-

RON FOURNIER Publisher and Editor

For the first time in decades, if not ever, the region’s political, business, and philanthropic leadership is working together, for the most part. troit Won’t Get Amazon HQ2.” That headline came at my urging, and it was a bit overheated. Livengood’s piece was less absolute; it spelled out the many obstacles that “may hinder” Detroit’s bid. “Gov. Rick Snyder was quick to declare Thursday that Michigan is ‘perfectly positioned’ to become home to online retail giant Amazon.com Inc.’s second headquarters because of the state’s ‘wealth of talent and vastly improved business climate,’” Livengood wrote. “But the relentlessly positive governor’s platitudes don’t tell the whole story, papering over deep-seated shortcomings in Michigan’s talent pool, public education system, housing and mass transit.” I’m allergic to platitudes. I rolled my eyes while reading in the Free Press that Detroit Regional Chamber CEO Sandy Baruah thought Amazon might want multiple campuses across the region — exactly the opposite of Amazon’s written preference.

In challenging the story — and Livengood’s qualifications for writing it — Baruah said sometimes critical criteria are not outlined in an RFP. “Does the leadership have a ‘can do’ spirit to overcome inevitable obstacles?” First, nobody should question Livengood’s qualifications. He’s an experienced, unbiased, deeply-sourced and intensely thoughtful journalist. Second, as Baruah acknowledged, Detroit falls short of Amazon’s needs, particularly with public transit. Cando can’t fix that, right? But then again … Duggan is a stout white guy who lived in the suburbs, moved back to Detroit and won a write-in election in the majority-black city, led the city as it emerged from bankruptcy, and kept his promise to light streets, improve emergency services and encourage economic development. Gilbert is a stubborn self-made billionaire who moved his Quicken Loans headquarters and 1,700 of its employees to downtown Detroit in 2010, igniting a revival of the city’s core. These two guys — and so many other local leaders, including Baruah — get stuff done. For the first time in decades, if not ever, the region’s political, business, and philanthropic leadership is working together, for the most part, with incremental and limited success, toward a common goal: Make work and life better for everybody who lives in Metro Detroit. The next step is this Amazon bid. Can they do it? I doubt it, because I’m the doubting kind. But I won’t say they can’t. Ron Fournier is publisher and editor of Crain’s Detroit Business. Catch his take on business at 6:10 a.m. Mondays on the Paul W. Smith show on WJR AM 760.

COMMENTARY

Doesn’t anyone understand?

ast week, they had an opportunity for anyone who was interested in attending a hearing to voice their objections to having an economic event that brings tens of millions of dollars to the city of Detroit while at the same time showcasing Detroit in the best possible light to the world. Last week, citizens of Detroit could vent against the Detroit Grand Prix, probably the second-most-important event held in our community and the one that generates these millions of dollars. I will probably get lots of objections to supporting this event on Belle Isle, where Roger Penske has invested millions of his own dollars to improve the island and create a huge money-maker for our city. Is it a perfect world? No, but considering eliminating such an event seems inconceivable.

KEITH CRAIN Editor-in-chief

Last weekend, there was drag racing at City Airport. It had to create a lot of loud noise, which should be equated with the sound of money. No one objected that I know of. If we start to consider only the downside of every event, we might even decide that the North American International Auto Show creates too much of a traffic problem for downtown, and we should cancel it.

The Belle Isle Grand Prix had fewer than a hundred objectors. This same event not only generates tens of millions of dollars but also created thousands of jobs for the citizens of Detroit. We have to start to understand basic economics. There are a lot of manufacturing plants that may not suit every citizen but are creating jobs for Detroiters. We are doing events that do not harm our environment and generate millions for our community. It is long overdue that we realize their importance and celebrate their existence. If everyone had a chance to stop any activity they don’t like, before too long we would be back where we were 25 years ago, with too few jobs and too much decay. It would be a terrible trade if we listened to the dissenters.

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Business community needs to get serious about pipeline threat

t is time for Michigan’s business community to get serious about a threat to our economy, our tax base, and our quality of life. That threat emanates from the Line 5 pipeline, and in particular our current ignorance of both the economic risks of continuing operation of the pipeline, and the availability of alternatives. Unfortunately, even after two years of hearings and two failed efforts to identify alternatives, we know very little about the risks we face — including the risks to major Michigan industries and the many people they employ. As many Michigan residents know, the Line 5 pipeline operated under the Straits of Mackinac largely unnoticed for almost 60 years, until a major pipeline spill in the Kalamazoo River in 2010, and the work of the National Wildlife Federation in identifying aging oil pipelines as a threat to the Great Lakes in a report published in 2012. The state took action at that time, including creating a special task force. That group reported in 2015 that there was no comprehensive study of the relative risks of different modes of transporting oil. The governor reacted promptly, appointing an advisory board to address the risks. Progress since then has been achingly slow. There have been multiple incidents involving lapses in safety involving the pipeline, although no spills. Enbridge, the pipeline’s operator, agreed to fund two state-commissioned studies. One had to be canceled due to a conflict of interest. The other, with a company called Dynamic Risk, resulted in a draft report released in July. That document failed to include human error as a potential cause of accidents — an inexcusable error in a risk analysis. As the co-chair of the advisory board noted recently, it was human error that caused the Kalamazoo River spill. Moreover, the same document provides no credible analysis of alternatives. The state’s contractors dismissed one alternate route by noting the existence of rock formations in Canada. However, Enbridge pipelines already run from Manitoba to Montreal, and at least one pipeline is already operating along a potential alternative route in Canada. The state-commissioned report also included an estimate of the economic risk of the Line 5 pipeline: $41,500 per year. That is not a misprint; the state’s consultant wrote that our economic risk this year was equivalent to the cost of one well-optioned pickup truck. The failure of the state-commissioned consultants is not just an embarrassment; it is also a warning. We currently have no credible information on the risks to major industries. Let’s start with the tourism industry. Think of the devastating impact of an oil spill on Northern Michigan tourism. Now consider manufacturing and the transportation, logistics, services, and other industries that rely upon it. The state’s largest refinery receives some portion of its supplies indirectly from Line 5. The gasoline and other fuels from this refinery are critical to workers and businesses in the state. A pipeline break in the Colonial Pipeline last year caused prices to increase by 20 cents a gallon.

OTHER VOICES Patrick Anderson

That was a short-term disruption; what happens if we permanently abandon the Straits crossing, as has been proposed by a petition now being circulated? Unfortunately, we do not know the answer.

A well-informed assessment would probably reveal that at least 18 out of largest 20 Detroit-area corporations, and many other major employers, would be affected by a “minor” spill that shut down the pipeline for several months. It is time for a new approach. In particular, we need an approach that answers the following questions: J How important is the Straits crossing of Line 5 to the Michigan economy? In particular, what would be the supply disruption to users such as the Marathon refinery in Detroit, and propane users in Northern Michigan?

J If the citizens of the state are unwilling to shoulder the risks of the Straits crossing, what are the alternatives, and who would pay for them? J If the state was to force the closure of Line 5 by a change in law, how much would the taxpayers have to pay to compensate for taking their property? The current approach does not address these questions. It is time for the business community to start asking them.

Patrick Anderson is principal and CEO of East Lansing-based Anderson Economic Group LLC.

Unfortunately, even after two years of hearings and two failed efforts to identify alternatives, we know very little about the risks we face — including the risks to major Michigan industries and the many people they employ.

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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 // S E P T E M B E R 2 5 , 2 0 1 7

FOCUS

CON

SPECIAL REPORT: WEALTH MANAGEMENT

Increasing tensions with North Korea have added to uncertainties in the business world.

House Speaker Paul Ryan hasn’t been able to overcome fractiousness in Congress this year.

Will President Donald Trump pull the U.S. out of the North American Free Trade Agreement?

Senate Majority Leader Mitch McConnell has struggled to bring together even members of his own party.

Experts think this long bull market should persevere another year, but will turmoil cause a market pullback?

Experts worry uncertainty could hurt market

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Congressional inaction, North Korea, NAFTA, infrastructure on lengthening list of concerns By Tom Henderson thenderson@crain.com

“Trump without the good stuff, that’s weighing on the market.” So said David Sowerby, summing up the consensus of area wealth managers. They think the fundamentals of the economy are strong, with low unemployment, wage growth and good corporate balance sheets and that this long bull market should persevere another year. But amid turmoil in Washington and lack of legislative accomplishments since the inauguration, a market pullback is possible. Some local market managers are hedging their bets by holding more cash. Others are diversifying more than usual. The “good stuff” includes healthcare reform, tax reform and tax cuts and a big infrastructure program, said Sowerby, the managing director and portfolio manager in the recent-

Need to know

J Economy is strong, but a market pullback is possible J Lack of accomplishments on tax reform, health care has made market skeptical J Some wealth managers less concerned, think no action is better than bad action

ly opened Bloomfield Hills office of Cleveland-based Ancora Advisers LLC and before that the longtime portfolio manager at Loomis Sayles & Co. LP. “Late in 2016 and early this year, markets were given a big bump by anticipating what (President Donald) Trump would get done,” said Sowerby. Now, he says, investors worry about how soon things might start getting done in Washington. The result? Stock markets that have flattened out considerably and could start heading in the other direction. “Chaos is a nice word for what’s

going on in Washington,” said Melissa Spickler, managing director of Merrill Lynch’s Spickler Wealth Management Group in Bloomfield Hills. “Tax reform and infrastructure? All the things that were promised during the election? The market considered all of that and was quite happy,” she said. “But the reality is people see it’s probably not going to work out by the end of the year. At some point, stocks won’t be so patient.” Every year, portfolio managers and wealth managers discuss their worries in Crain’s annual fall wealth management section. In years past, big issues were: Would there be a double-dip recession? Would the BRIC countries — Brazil, Russia, India and China — rebound? When would the Federal Reserve finally start raising interest rates? Last year, the main worry was what would happen to the world and American economies after the Brexit

vote in the United Kingdom to leave the European Union — oh, and secondarily, what the consequences would be in the unlikely event Donald Trump won the presidential election. This year, say local advisers, the list of worries has gotten longer and the crystal ball more opaque, largely they say because of inaction and fractiousness in Washington, with some North Korea thrown in. Will there be an infrastructure bill that proves a boon for companies like Caterpillar? Will tax cuts help affluent clients and their businesses? Will sanctions against countries that do business with North Korea raise prices and depress sales at places that sell goods made in China? Will Congress raise the debt ceiling? Will it pass a budget? Will Trump try to shut down the government to get his wall built? Will he pull the U.S. out of the North American Free Trade Agreement?

“Will they kick tax reform into 2018? If it gets done, it can be very positive. But if it gets kicked forward and people still think there are low odds it will get done at all, it will be very bad for the market,” said Pete Gargasoulas, vice president and senior portfolio manager in the Detroit office of Fifth Third Bank. “At the beginning of the year, the market was very optimistic Trump would get tax reform through. Now, it’s very skeptical. There’s just a glimmer of hope,” said Leon LaBrecque, the CEO of Troy-based LJPR LLC. “The great pro-business president has turned out not to be so good.” Peter Sorrentino, the chief investment officer and senior vice president for Dallas-based Comerica Inc., has a counterintuitive take on the lack of tax or regulatory reform. He said private-equity companies that had recently raised large funds and had to invest them have been on SEE MARKET, PAGE 11

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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 // S E P T E M B E R 2 5 , 2 0 1 7

MARKET

SPECIAL REPORT: WEALTH MANAGEMENT in absolute performance, second only to the dot-com bubble of the 1990s, so we need to be cautious,” agreed Mike Dzialo, president and chief investment officer of Rochester-based Managed Asset Portfolios LLC. “No matter who won the election in November, we’d be in a slowgrowth economy for two structural reasons,” he said. “One, there’s an excess of debt in the system. Two, we’ve moved from a manufacturing driven economy to a service economy. General Motors used to be the largest employer in the U.S. Now, Walmart is No. 1 and Kelly Services is No. 2. We’re not going to bring back manufacturing.” So, while disarray and inaction in Washington don’t help, a government clicking on all cylinders would only have a modest impact. “Less regulation and fewer taxes will help, but no matter what, we’re not going to have 4 percent GDP growth,” he said.

CONTINUED FROM PAGE 10

a buying spree of small- and midsized companies. “Owners weren’t investing in companies, they were selling to buyers,” he said. Those that didn’t sell held off investing so they could see what happened this year in Washington. “But even if they don’t get tax or regulatory relief, businesses are at the point where they have to invest in their companies, and that bodes well for the economy.” Lyle Wolberg, a partner in the Southfield advisory firm of Telemus Capital LLC, says that while there is general concern over a lack of progress in Washington, “my biggest concern is we’re coming to the end of a long recovery. We’re eight years into this cycle.” “This is the second-best bull market in history, both in duration and

Year in and year out, Peter Schwartz, a principal in Gregory J. Schwartz & Co. of Bloomfield Hills, tries to keep his clients on an even keel — to temper both euphoria and despair as markets do their thing. “I’m a long-term optimist and a short-term skeptic, regardless of the party in power,” he said. “Given the turmoil in Washington, I’m a bit more of a skeptic. I wouldn’t be surprised to see a market correction of 10 to 15 percent. “It’d be nice to see things like tax reform getting done, but if things aren’t getting done, there’s at least a do-no-harm effect,” he said. In other words, he’d rather see nothing get done than decisive action that is misinformed. Here are what 12 area money managers like and dislike, where they are putting or not putting clients’ money, and what they have to say about it.

What 12 wealth managers, economists recommend now Mike Dzialo Founder, president and chief investment officer, Managed Asset Portfolios LLC, Rochester Likes: Consumer staples; tobacco companies, including Imperial Brands plc of the U.K. and Swedish Match of Stockholm, which makes smokeless tobacco products like moist snuff and chewing tobacco; U.S. agricultural companies like Bunge Ltd., a New York-based processor of grains, and The Mosaic Co., a Minnesota producer of fertilizers; pharmaceuticals; technology; dividend-paying Mike Dzialo stocks, particularly those in the U.S. and western Europe; the Central Fund of Canada Ltd., a gold and silver depository. Dislikes: Manufacturing and industrial, chemicals, financials, Asian markets. Insight: “Fifteen percent of job losses in the U.S. in the last decade have been from offshoring; 85 percent have been from technology and automation, and we’re not getting rid of technology and automation.” Jacob Taylor Senior vice president, managing director of wealth management for southeast Michigan, PNC Bank, Troy Likes: Developed international markets, dividend-paying stocks. Dislikes: Large-cap domestic stocks, long-term bonds, leveraged loans. Insight: “Tax reform will happen, but will it happen at a level Trump wants? No. It won’t have a major impact on equity markets.” Jacob Taylor Peter Schwartz Principal, Gregory J. Schwartz & Co., Bloomfield Hills Likes: Well-established European stocks, financials, dividend-paying stocks, oil, coal. Dislikes: Technology, China, emerging markets. Insight: “Foreign stocks had been out of favor for a decade, but they’ve been having their time in the sun for the last year and will continPeter Schwartz ue to outperform for the foreseeable future.”

Bob Palmer Wealth-management practice leader, Plante Moran Financial Advisors LLC, Auburn Hills Likes: Emerging markets, developed international markets, large-cap domestic stocks. Dislikes: Fixed-income investments, lower-credit bonds. Insight: “There is always uncertainty. We just have a different flavor this year. This year, it’s an uncertain political environment. Will we see tax reform? Will we see any significant legislation?” Bob Palmer Jim Robinson CEO, Robinson Capital LLC, Grosse Pointe Likes: Municipal bonds, small-cap European stocks, technology, digital retailers. Dislikes: Domestic largecap stocks, European large caps, real estate investment trusts that hold retail properties. Insight: “Although the market has ignored the noise coming out of Washington, I’m keeping a higher percentage of cash. I’m at 20 Jim Robinson percent; for the most part, in the past I’ve been closer to 2 percent. There are enough variables out there that can upset the apple cart.”

Leon LaBrecque CEO, LJPR LLC, Troy Likes: Heavy equipment manufacturers, including Caterpillar; U.S. financials; European stocks; emerging markets; the Mexican Fund Inc., a New York Stock Exchange closed-end fund; steel; copper. Dislikes: Long-term bonds, junk bonds, silver and gold, oil, Russia, Japan, China. Insight: “When I invested in the Mexican Fund, people Leon LaBrecque said, ‘Are you crazy?’ I didn’t think Trump was going to build a wall or pull the U.S. out of NAFTA, so I bet against him. It was a contrarian play.”

David Sowerby Managing director and portfolio manager, Ancora Advisers LLC, Bloomfield Hills Likes: Dividend-paying stocks, small-cap stocks, emerging markets, technology, healthcare service and equipment manufacturers. Dislikes: European and U.S. high-yield bonds; U.S. Treasuries. Insight: “Stock and highyield bonds are getting pricey. Not Tiffany pricey yet, but pricey; 2017 has been a respectable year for active, David Sowerby not passive, stock picking. Expect that to continue in 2018, in contrast to the financial headlines stating the demise of active stock investing.”

Melissa Spickler Managing director, Merrill Lynch’s Spickler Wealth Management Group, Bloomfield Hills Likes: Dividend-paying large-cap stocks, utilities, technologies, healthcare. Dislikes: Consumer staples, international stocks, commodities. Insight: “I like an all-cap portfolio of growth and value stocks. Large, mid- and small cap. I want to be more diversified than ever. I don’t want to be left holding the Melissa Spickler bag with just wrong sectors.” Anne MacIntyre President and CEO, Annie Mac Financial LLC, Sterling Heights Likes: Small-cap U.S. stocks; emerging markets. Dislikes: Energy, technology, bonds and other fixed-income investments. Insight: “With tax reform, something will get done. I don’t know if Trump will get the cuts he wants, but he has smart people working on it. The remarkable thing is, given all the chaos in WashingAnne MacIntyre ton, the market has been remarkably resilient. A pullback is possible, but it won’t be a Trump-driven pullback, it’ll be because that’s what mature bull markets do.”

Peter Sorrentino Chief investment officer and senior vice president, Comerica Inc., Dallas Likes: Medium- and small-cap U.S. stocks; emerging markets, including former Soviet bloc countries; utilities; industrial technologies; agricultural stocks. Dislikes: Consumer-related technologies, developed European markets, industrial metals. Insight: “Recoveries don’t die of old age, they die of exPeter Sorrentino cess, and we don’t see any pockets of excess out there.” Pete Gargasoulas Vice president and senior portfolio manager, Fifth Third Bank, Detroit Likes: Large-cap U.S. stocks, financial stocks, technology, emerging markets. Dislikes: TIPS (Treasury inflation protected securities), bonds, utilities, telecoms, commodities. Insight: “We think the Fed will keep rates lower for longer than people think. Janet Yellen is looking for an exPete Gargasoulas cuse to keep rates low, and instability in Washington gives her one.” Lyle Wolberg Partner, Telemus Capital LLC, Southfield Likes: Large-cap U.S. stocks; emerging markets; alternative investments with a low correlation to the stock market, such as reinsurance portfolios and catastrophe bonds issued by insurance companies to limit their exposure to catastrophic losses; companies that do consumer-direct lending. Dislikes: European stocks, long-term bonds, master Lyle Wolberg limited partnerships in oil and gas pipelines. Insight: “I’m optimistic short-term, based on earnings and corporate results, but there might be complacency and a false sense of security by investors overall, who are focusing on shortterm money when they should be thinking long term, now.”

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

UM marketing takes aim at low-income students By Ron French Bridge Magazine

There are a lot of numbers University of Michigan President Mark Schlissel can be proud of. The school consistently ranks in the top 25 in the world. It sweeps up the second-most research dollars in the nation — about $1.4 billion a year. The school runs the sixth-ranked health system in the nation, is the third-largest employer in the state, and has 100 graduate programs ranked in the top 10 nationally. But there’s one number the 59-yearold says keeps him up at night: The percentage of low-income students enrolled at the Ann Arbor campus. Despite being the cheapest public university for low-income students in the state, UM has the lowest percentage of poor students of any Michigan university. In the 2014-15 school year, just 15 percent of U-M undergraduates received federal Pell Grants, which are given to low-income students. The public univerMark Schlissel: sity with the UM seeking next-lowest share students in poor, of Pell recipients rural areas. was Michigan State University, at 21 percent. Those figures have remained stubbornly steady over years, despite UM aggressively increasing aid for low-income students. On the one hand, UM is different from other state schools. Its admissions are among the most selective in the nation. Since low-income students, for a variety of reasons, tend to have lower test scores than their more affluent peers, they are less likely to meet UM’s entrance standards. Still, other highly selective public universities around the nation have found ways to enroll a higher percentage of low-income students. (At the University of California-Berkeley, 31 percent of students are low-income, roughly twice UM’s rate). UM’s unsuccessful efforts to enroll more poor students does illustrate a larger issue faced by the state: the struggle to get more low-income students from high school graduation ceremonies to college campuses. Despite statewide efforts both inside and outside state government, the college enrollment gap between poor and non-poor students hasn’t budged — a fact that has economic implications for Michigan. Michigan has a lower percentage of adults with a bachelor’s degree or higher (27 percent) than the national average (30 percent). That’s critical because the average adult with a bachelor’s degree earns more than $800,000 more in their lifetimes than the average high school graduate. Increasing the percentage of Michigan adults with degrees increases money spent in the state economy and taxes collected for roads and schools. Roughly 70 percent of children from middle- and upper-income Michigan families attend college. For the state to catch up with other states, it needs to get more low-income students onto college campuses. Currently, only half of low-income students enroll in college within six months of graduating high school. U-M’s latest effort to get more poor students onto a campus, where the

Need to know

taged. And coming from a family of modest means, he didn’t think he could afford tuition there, so he wasn’t planning on applying. The letter made him decide to take a shot, and he was admitted. He’s now a sophomore in communications. “I didn’t have to take out any loans last year and only a small loan this year,” Raymond said. Raymond received the same amount of aid he would have received with or without the “free” letter, but he said he wouldn’t have applied without seeing that word. “Despite how expensive they (UM) are on paper, they have so much money, they can make it less expensive for those who need it,” Raymond said.

JJThe University of Michigan has the

lowest percentage of low-income students of any Michigan university .

JJIn 2014-15 just 15 percent of UM undergraduates received Pell Grants. JJ“Go Blue Guarantee” introduced this summer.

median student family income is north of $150,000, is a step forward in marketing, if not money. The “Go Blue Guarantee,” announced this summer to great fanfare, offers free tuition for four years for Michigan students from families with household incomes under $65,000. That’s slightly above the median household income in the state, so half of Michigan families can send their kids to UM tuition-free, if they gain admission. “The part I like the best is being able to tell a junior high school student and their parents, ‘Work hard, take your studies seriously, and if you get into Michigan, Mom and Dad can afford it, because they’re not going to have to pay,’” Schlissel said. “(We can) say that to half the students in the state, and to say to everybody else that we have very generous formulas that match the capacity of your family with the cost of education.”

Narrowing the gap

The power of ‘free’ High-achieving low-income students don’t apply to highly selective colleges at the same rate as their equally accomplished, wealthier classmates, according to the National Bureau of Economic Research. They are often unaware how affordable many “expensive” colleges can be to poor students; selective institutions often have larger endowments that can provide more financial aid. The Go Blue policy, which begins in January 2018, is meant to increase that awareness. The net cost of attending UM, which includes tuition, room and board and books, already was under $4,000 a year for students from families earning $30,000 a year or less. That will remain virtually the same under the new policy. Instead of more money, Go Blue banks on a different description of the school’s already generous financial aid, emphasizing the word “free.” Let Schlissel explain: “It puzzled me. We were quite confident that we weren’t getting applications from as many talented lower income students as we know exist in Michigan. Why is that? Why wouldn’t someone apply? We have this nice website and a financial aid calculator, and the messaging that says we give generous need-based aid. “So we did an experiment. And the experiment we did is called the HAIL scholarship program and it’s still underway. The basic idea is to take the lower-income graduating high school students and divide them up into two groups. One group gets a letter saying, ‘You’re a great student, please apply to the University of Michigan and we offer generous financial aid.’ The other group gets a letter saying, ‘Your school and principal have identified you as an outstanding scholar. If you apply and get accepted to Michigan we’ll guarantee you a free four-year tuition scholarship plus whatever other aid you qualify for.’ “That latter group, the application rate is 2½ times the former group. Two

Devin Raymond thought the University of Michigan would be too expensive for him to attend.

What’s the cheapest college for low-income students? The public universities with the most low-income students aren’t the schools that are the cheapest for poor students to attend.

School

Average net price

% undergrads receiving Pell Grants

Central Michigan

$11,507

Eastern Michigan

$10,794

Ferris State

$8,365

Grand Valley State

$11,149

Lake Superior State

$5,985

Michigan State

$6,639

Michigan Tech

$8,975

Northern Michigan

$8,000

Oakland

$8,445

Saginaw Valley State

$12,508

UM Ann Arbor

$3,414

UM Dearborn

$8,612

UM Flint

$10,526

Wayne State

$10,896

Western Michigan

$12,590

and a half times! These are changes you don’t see in the real world, right? So we went from 20-something percent of students applying with just a letter saying ‘You’re a great student, we give generous financial aid,’ to 68 or 70 percent of students applying when we say ‘If you get in, free tuition.’”

‘It was surreal’ Devin Raymond was one of the lucky high school seniors to get the

version of the letter that emphasized the word “free.” “My mom texted me when I was at cross-country practice. I told her she had to be wrong,” Raymond recalls. “I went home and Googled it. It was surreal.” Raymond was a great student, with a 3.9 GPA and leadership positions at tiny Mason High School in Monroe County near Toledo. But over five years, no one had gone to UM from his school district, where 47 percent of students are economically disadvan-

Among Michigan’s graduating high school seniors, there was a 21-point college enrollment gap between poor and non-poor families in 2011; five years later, the gap was 22 points. Sarah Anthony, deputy director of the Michigan College Access Network, an organization that works to improve college access in the state, said she’s convinced financial aid is only part of the problem. “One of the issues we’ve noticed with both Promise zones (such as the Kalamazoo Promise, guaranteeing college tuition to most graduating seniors) and free tuition programs is that we get so focused on the cost of a college education, we miss the other challenges,” Anthony said. “There are a lot of rural and urban students who don’t know the first thing about how to succeed in college. They’ll go on a field trip to the University of Michigan, and it’s like visiting a museum. They don’t picture themselves being part of it. There are too many communities where the assumption is that ‘I’m not college material.’” Without trying to build a college-going culture in the state, all the financial aid in the world won’t make a difference, Anthony said. “We need to de-mystify college … for families who think sending their children away to college might as well be sending them to Mars.” UM’s Schlissel disagrees. He is convinced that if he can get low-income students onto his campus, he can keep them there. The school has a 97 percent retention rate between freshmen and sophomore years and, within two years, students from low-income backgrounds and higher-income backgrounds are “indistinguishable” in classroom success. In recent years, UM has actively sought academically high-achieving students in poor and rural parts of the state rather than sitting back and hoping they apply. UM reps travel across Michigan hosting college information sessions. “We know there are talented students in all parts of our society,” Schlissel said. “The extent to which we can tap into the breadth of experiences and diversity of our state, we make our education better. Students learn from each other. And we want students of all different types of backgrounds to be sitting around a table like this, with a great professor, exploring hard questions and disagreeing with each other. “We know the talent’s out there,” Schlissel said. “We just have to find them.”

C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // S E P T E M B E R 2 5 , 2 0 1 7

CALENDAR MONDAY, SEPT. 25 Women of Influence Lecture Series: 6:30-8 p.m. The Community House. Carolyn Cassin, president and CEO, Michigan Womenâ&#x20AC;&#x2122;s Foundation; general partner, Belle Michigan LP. $15. The Community House, Birmingham. Contact: Program department, phone: (248) 644-5832; email: program@communityhouse. com.

TUESDAY, SEPT. 26 17th Annual Great Lakes Womenâ&#x20AC;&#x2122;s Business Conference: 9 a.m.-6 p.m. Great Lakes Womenâ&#x20AC;&#x2122;s Business Council. The conference addresses the needs of business owners while delivering strategies for succeeding in a highly competitive market. Suburban Collection Showplace. $200 members. Contact: Betty Aliko, phone: (734) 677-1400; email: baliko@greatlakeswbc.org; website: greatlakeswbc.org

WEDNESDAY, SEPT. 27 Reinventing...not Retiring: 5:307:30 p.m. Inforum. Many people spend years anticipating retirement. But as that time approaches, this question arises: What now? A panel of retired high-level executives who have charted very different paths includes: Patti Griswold, who retired in March from Comerica Bank, where she held several senior leadership roles; Nancy Hickey, who retired in 2014 as senior vice president and chief administrative officer of Steelcase Inc.; Maria Leonhauser, who was a journalist for several publications, including Time and People and later worked in public relations, retiring as an equity partner and president of Franco in Detroit; Lisa Payne, who retired vice chairman and CFO of Taubman Centers Inc. and now serves as a director of three NYSE companies. Moderator: Julie Green Topping, who had a 38-year career supervising and working with reporters, editors and production staff at the Detroit Free Press. $80. Townsend Hotel, Birmingham. Website: inforummichigan.org

THURSDAY, SEPT. 28 Top of Troy: Women of Influence: 8-9:30 a.m. Troy Chamber of Commerce. Panel discussion with Joan Budden, president and CEO, Priority Health; Kendra Corman, managing director, H2H Consulting; Ruthanne Largent, chief information officer, Horizon Global; Nancy Susick, president, Beaumont Hospital, Troy. Learn about the challenges they faced on their paths to success, the key tools they have used to remain focused along the way, the hard decisions they are faced with on a daily basis and how being a woman has affected the choices they made. MSU Management Education Center, Troy. $20 Troy chamber members, $35 nonmembers. Contact: Jessica Hruska, phone: (248) 641-1606; email: jessica@troychamber.com; website: troychamber.com/events/top-troy-2017/ Informational Meeting for Women Entrepreneurs: 5:30-7 p.m. Michigan Association of Female Entrepreneurs. Learn about the non-

profitâ&#x20AC;&#x2122;s current and future initiatives, entrepreneurship training and leadership development programs, business resources and support services. Free. Orion Township Public Library. Contact: Tonya McNeal-Weary, phone: (844) 490-6233; email: info@mafedetroit.org; website: mafedetroit.org ASE Talent Acquisition Symposium: 7:30 a.m.-4:30 p.m. American Society of Employers. ASEâ&#x20AC;&#x2122;s third annual symposium to discuss talent acquisition, management, and development practices. Participants will receive guidance on how to implement effective talent-related practices along with tools to use in the process. MSU Management Education Center, Troy. Price through Aug. 25: $179 ASE members; $219 nonmembers. After Aug. 25: $219 ASE members, $259 nonmembers. Contact: Dan VanSlambrook, phone: (248) 223-8008; email; dvan@aseonline.org; website: aseonline.org/Conferences-Events/ Talent-Symposium

UPCOMING EVENTS Western Wayne Business Leadership Banquet: 5-8 p.m. Oct. 3. Livonia Chamber of Commerce. Keynote speaker Matt Cullen of Rock Ventures, which serves as Dan Gilbertâ&#x20AC;&#x2122;s portfolio of more than 100 companies, discusses Gilbertâ&#x20AC;&#x2122;s vision of revamping properties and Matt Cullen attracting new business ventures in downtown Detroit. Crainâ&#x20AC;&#x2122;s publisher and editor Ron Fournier is the emcee. Ford Motor Company Conference and Event Center, Dearborn. $1,500 corporate table sponsorships; $100 individual. Contact: Dan West, phone: (734) 427-2122; email: dwest@livonia.org; website: livonia. org Women of Influence Lecture Series: 6:30-8 p.m. Oct. 3. The Community House. Jocelyn Benson, CEO, Ross Initiative in Sports for Equality. $15. The Community House, Birmingham. Contact: Program department, phone: (248) 6445832; email: proJocelyn Benson gram@communityhouse.com. Powering the Energy Future: 11:30 a.m.-1:30 p.m. Oct. 4. Detroit Economic Club. Barry Perry, president and CEO, Fortis, Inc., will talk about the importance of working together across borders to pursue business development opportunities that solve challenges and provide opportunities to create real value for communities, customers, employees and shareholders. Detroit Athletic Club. $45 members, $55 guest of members, $75 nonmembers. Website: econclub.org From Here to Security: How Work-

place Savings Can Keep Americaâ&#x20AC;&#x2122;s Promise. 11:30 a.m.-1:30 p.m. Oct. 11. Detroit Economic Club. Robert Reynolds, president and CEO, Putnam Investments & Great-West Financial, will speak on how to improve retirement systems â&#x20AC;&#x201D; public and private. Cobo Center. $45 members, $55 guest of members, $75 nonmembers. Website: econclub. org Women of Influence Lecture Series: 6:30-8 p.m. Oct. 11. The Community House. Denise Brooks-Williams, president and CEO, Henry Ford Hospital. $15. The Community House, Birmingham. Contact: Program department, phone: (248) 6445832; email: program@communityhouse.com. Crainâ&#x20AC;&#x2122;s 2017 Health Care Leadership Summit: 8 a.m.-1 p.m. Oct. 19. Crainâ&#x20AC;&#x2122;s Detroit Business. The summit will focus on managing health care in a time of uncertainty. Attendees will hear from industry experts on how their companies are managing today and making longterm decisions, despite uncertainty in the areas of policy and decision making, talent acquisition and retention, and technology. Keynote address from Rep. Joe Kennedy III, who will discuss the future of health care reform and an eye-opening panel discussion on Michiganâ&#x20AC;&#x2122;s opioid crisis, moderated by Lt. Governor Brian Calley. Marriott Renaissance Center. Individual ticket: $185; reserved table of 10: $1,900; young professional ticket for ages 21-35: $140. Contact: Kacey Anderson, phone: (313) 446-0300; email: cdbevents@crain.com.

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Transforming Healthcare: 11:30 a.m.-1:30 p.m. Oct. 27. Detroit Economic Club. Toby Cosgrove, president and CEO of Cleveland Clinic, will explore national healthcare trends and industry disruptors. MotorCity Casino Hotel. $45 members, $55 guest of members, $75 nonmembers. Website: econclub.org State of the Region: 11 a.m.-1:15 p.m. Nov. 1. Detroit Regional Chamber. The Detroit Regional Chamberâ&#x20AC;&#x2122;s fourth annual release of the State of the Region report, providing an economic overview of the 11-county region. Cobo Center. $50 members; $100 nonmembers. Contact: Jordan Yagiela, phone: (313) 596-0384; email: jyagiela@detroitchamber. com; website: detroitchamber.com Women of Influence Lecture Series: 6:30-8 p.m. Nov. 1. The Community House. Barbara McQuade, professor of law, University of Michigan Law School; former U.S. Attorney, Eastern District of Michigan. $15. The Community House, Birmingham. Contact: Program department, phone: (248) 644-5832; email: program@communityhouse. com. To submit calendar items visit crainsdetroit.com and click â&#x20AC;&#x153;Eventsâ&#x20AC;? near the top of the home page. Then, click â&#x20AC;&#x153;Submit Your Eventsâ&#x20AC;? from the drop-down menu that will appear. Fill out the submission form, then click â&#x20AC;&#x153;Submit eventâ&#x20AC;? at the bottom of the page. More Calendar items can be found at crainsdetroit.com/events

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On September 11, Crain’s Detroit Business published a special dual cover keepsake edition to celebration the opening of the Little Caesars Arena and the week of Detroit Homecoming.

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Notable Women Lawyers in Michigan set legal precedent and manage high-profile cases. They win awards and earn promotions. They serve on boards in the community and mentor co-workers. In a special section Dec. 11, Crain Content Studio, the custom publishing division of Crain’s Detroit

Business, will name the 2017 Notable Women Lawyers in Michigan. In that section, we’ll profile the female lawyers who are considered leaders in their workplaces and in the community, as nominated by a client or

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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 // S E P T E M B E R 2 5 , 2 0 1 7

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The Park Avenue Building, at 2001 Park Ave. , was constructed in 1922 and has been empty for years.

Park Avenue Building downtown hits market By Kirk Pinho kpinho@crain.com

The Park Avenue Building in downtown Detroit at 2001 Park Ave. is for sale following the January death of longtime owner Ralph Sachs at the age of 76. Sachs had owned the building for decades, said David Cohen, the broker with Farmington Hills-based Friedman Integrated Real Estate Solutions LLC listing the building and 0.34-acre parking lot immediately north of the Need building for sale. to know The parking JJThe Albert lot used to be the Kahn-designed Sachs-owned Park Avenue Hotel CharlevBuilding was oix, which was constructed in built in 1905 and 1922 demolished in 2013, according JJThere is no to Historic Delisting price for troit, which either the building tracks Detroit or a parking lot and immediately north, buildings architecture. the site of the He bought former Hotel both properties Charlevoix in 1981. JJOwner Ralph The Albert Sachs died in Kahn-designed January at age 76 Park Avenue Building is 102,000 square feet and has been vacant for years. There is no listing price for either the building or parking lot, which are being sold by Sachs’ estate along with the rest of his portfolio of mostly residential houses, Cohen said. It was built in 1922 and had in recent years faced demolition, according to a 2014 Curbed Detroit article. Sachs’ online funeral details from the Ira Kaufman Chapel described him as a doctor and attorney.

The parking lot used to be the Sachsowned Hotel Charlevoix, which was built in 1905 and demolished in 2013.

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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 // S E P T E M B E R 2 5 , 2 0 1 7

PEOPLE ADVERTISING/ MARKETING/PR J Adam Wilson to executive vice president, marketing, Duffey Petrosky, from managing director, new business development, Search Optics. J Sean McCaffrey to president and CEO, Gas Station TV, from executive vice president, national client strategy and partnerships, Clear Channel Outdoor.

ENERGY J Keith Polson to senior vice president and chief nuclear officer, DTE Energy Co., from vice president, nuclear generation.

HEALTH CARE J Elain Taverna to vice president of risk adjustment, Health Alliance Plan, from director of government programs, Henry Ford Health System.

SPOTLIGHT

J Mark Smith, M.D., to senior vice president, medical affairs, and chief medical officer, Henry Ford Allegiance Health, and CEO, Henry Ford Allegiance Medical Group, from medical director, Henry Ford Allegiance emergency services, hospitalist and observation services. J Josh Stopek to vice president of research and development, HistoSonics Inc., from senior director of R&D, Medtronic Lung Health, Medtronic Inc. Also, Histosonics co-founder Jim Bertolina to chief scientific officer from chief technology officer.

NONPROFITS/ BUSINESS GROUPS J Jennifer Nelson to vice president for public policy and economic development, Business Leaders for Michigan, from executive vice president and chief business development officer, Michigan Economic Development Corp. J Donna Satterfield to vice presi-

dent, community impact, United Way of Southeastern Michigan, from vice president, automotive, aerospace and defense industry leader, IBM Global Business Services. Also, Clarinda Barnett-Harrison to director of economic prosperity and director, Detroit Regional Workforce Fund, from director, business engagement center, University of Michigan-Dearborn, and Shawn Hill to director of college and career pathways from deputy chief of school, Education Achievement Authority.

REAL ESTATE J Mike Secord to corporate vice president of sales, Arterra Realty, from outside sales manager and outside sales agent.

SPORTS J Erik Carlson to general manager, Novi Ice Arena, from assistant manager, Novi Ice Arena.

DEALS & DETAILS EXPANSIONS J At Home Group Inc., Plano, Texas, a home décor franchise, has opened a 100,000-square-foot store at 10800 As-

sembly Park Drive, Wixom. Phone: (248) 675-0335. Website: athome.com. J Varroc Lighting Systems, Plymouth, a supplier of exterior vehicle

lighting systems, has opened a photometric laboratory at its manufacturing and technical facility in Changzhou, China. Website: varroclighting.com.

Former DEGC chief to head consulting firm

Little Caesars Arena construction process.

The former head of the Detroit Economic Growth Corp. has started a new economic development consulting firm, taking the roles of president and CEO. Rodrick Miller, the former president and CEO of the DEGC who stepped down Rodrick Miller from that position in March, said in a press release that there is “a gap in the market” for consulting firms that offer “the full breadth of economic development services with a keen focus on urban centers.” Among the focal points will be economic competitiveness, inclusion and resilience; corporate growth; disaster recovery; organizational development; real estate; and placemaking. The company started in April and has more than 10 employees, according to its website. Miller was involved in the launch of the Motor City Match grant program for small businesses, along with large real estate deals including the opening of a Microsoft Corp. office in Detroit and the Ally Financial Inc. move from the Renaissance Center to One Detroit Center, among others. He has also been involved in the

Business association names president The Southwest Detroit Business Association has appointed Robert Dewaelsche its new president. Dewaelsche, 61, took up his new role last week at the Detroit-based nonprofit. He replaces its longtime president, Kathy Wendler, who served in the position for 35 years and is retiring. Robert Dewaelsche Dewaelsche was previously president of Sustainability Knocks LLC, a communications firm he founded to empower community-based organizations. Before that,he served as deputy director of Detroit LISC, executive director of Habitat for Humanity Detroit and assistant vice president for Comerica Bank in Detroit. A resident of the city’s Palmer Woods neighborhood, Dewaelsche has a bachelor’s degree in political science and philosophy from the University of Michigan. The Southwest Detroit Business Association was established in 1957 to build public and private investment to facilitate economic growth in the city.

ADVERTISING SECTION To place your listing or for more information, please call Lynn Calcaterra at (313) 446-6086 or email lcalcaterra@crain.com

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Joe Lazar joins Siegfried’s Detroit Market as a Senior Associate. Lazar, who is always up for a challenge, has more than six years of accounting experience. He earned a Bachelor of Science in economics from Valparaiso University, a Master of Accounting from Oakland University, and a Juris Doctor from the University of Detroit’s Mercy School of Law.

Kelly Steward, CPA, joins Siegfried’s Detroit Market as a Senior Associate. She has a tireless desire to exceed expectations and tackles any challenge with grace. Most recently she was at BDO, where she gained three years of audit experience in the technology, manufacturing, staffing, and retail industries. She earned her Bachelor of Accountancy from Walsh College.

Reba Ravi, CPA, CA, joins Siegfried’s Detroit Market as a Senior Associate. With a positive attitude and analytical approach to any given task, she is committed to bringing out the best in herself and her team. After earning her Bachelor of Commerce at Osmania University, Ravi worked as an auditor at PwC and EY, and as an Oracle Functional Consultant.

Clear Rate Communications Brandon Shamoun joins Clear Rate as their General Counsel. Filling this critical role, he executes all contract negotiations, regulatory and compliance, and litigation to support the company’s growth objectives. He has spent much of his legal career dedicated to business transactions and litigation in both State and Federal Court. He serves on the Chaldean American Chamber of Commerce Board of Directors. Brandon holds his Juris Doctor degree from the University of Detroit Mercy School of Law.

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Village Green Powered by nearly a decade in multifamily housing, Minna Sharrak helps apartment communities nationwide achieve their business and revenue goals by delivering award-winning property management service and unparalleled hospitality. As the Senior Director of Business Development for Village Green, Minna fosters relationships with diverse client groups in an effort to enhance community performance, increase sales conversions, and promote resident satisfaction.

Direct Recruiters, Inc. Direct Recruiters, Inc., Executive Search, has named Laurie Bradley as their Director of Vehicle Technology. Laurie is based in Detroit, Michigan and is responsible for expanding DRI’s Vehicle Technology practice area to additional cities across North America through her expertise in designing customized talent management solutions. She brings over 20 years experience in talent management and technology outsourcing. Prior to joining DRI, Laurie was the President of ASG Renaissance Staffing.

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September 25, 2017

ATHLETIC FROM PAGE 3

It is expected to hit 15,000 subscribers later this year. Hansmann said Detroit is on a faster growth pace than Toronto so far. “The growth tends to be fairly steady and predictable,” he said. “Even when teams aren’t playing a lot of games, we see very strong performance.”

Paying journalists The Athletic isn’t offering the enormous wages that The National spent to hire prestige journalists such as Frank Deford and Mike Lupica, but it isn’t being cheap. They’re paying salaries and benefits luring talent away from old-line media, while also picking up jobless sports reporters laid off in the waves of local and national cutbacks. The site’s owners say they’re keenly cognizant of burning through cash. They’ve raised $7.7 million in three equity funding rounds, including $500,000 from Courtside Ventures that’s partly backed by Detroit billionaire Dan Gilbert. The rest of the money is from subscribers. “If we weren’t paying competitive salaries, we would not have been able to make some of the hires we are making,” Hansmann said. “We’re not being foolish with the capital on hand. We’re extremely focused on that.” The Athletic landed Paul Fichtenbaum, who was Sports Illustrated Group’s editor-in-chief from 2012 to 2016, in July as chief content officer. Another notable hire was baseball reporter Ken Rosenthal, who lost his platform when Fox Sports pivoted entirely to video. He’ll write baseball sto-

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C R A I N ’ S D E T R O I T CBRAIN U S’SIDNETROIT E S SBUSINESS // S E P T E M B E R 2 5 , 2 0 1 7 ries for The Athletic, but still do on-air work for Fox Sports and MLB Network. The Athletic has about 60 full-time journalists across its sites, and about a dozen people working in functions such as marketing, product and engineering, Hansmann said. In Detroit, former ESPN hockey writer Craig Custance was hired as the site’s top editor. He’s also covering the Red Wings. Custance, 40, explained The Athletic’s journalism strategy in an age when other media are cutting staff and pivoting to video: “It’s a pivot to text. Our focus is on the written word. This is going to be our niche. We don’t want anything in the way of great storytelling and reporting,” he said. Don’t expect much, if any, video content on the site, but it will offer podcasts. Those still are in the works, Custance said. Reporters for The Athletic sites are not asked to provide a recap or hot take immediately after a game. Instead, they’re given the time and latitude to develop unique angles. They’re not doing the three or four stories in the hours after the game ends that daily beat writers must churn out. “What we think our advantage is, to fans, is that we’re allowing our writers on staff at these events to spend as much as time as they need for a story,” Custance said. For example, when Tigers pitcher Michael Fulmer — the 2016 A.L. Rookie of the Year — had surgery to repair a nerve in his pitching elbow, The Athletic didn’t rush out a story. Instead, site managing editor and Tigers beat writer Katie Strang spent a couple of days crafting a detailed story about the nature of the injury, the surgery itself, and the process and

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Custance said he sought journalists who stood out for their work, and came with a built-in social media audience. “We tried to identify writers who could approach the beat in a non-traditional manner. We want people to have a breakout skill,” he said. “Like Katie Strang. She’s a dogged reporter, a news breaker. A great story teller.” The Athletic Detroit also wants rising young talent, Custance said. His most recent hire is James Edwards, who left the Michigan State basketball beat at the Lansing State Journal to cover the Pistons for The Athletic. “We want to have The Athletic be a place great young journalists have an opportunity to take the next step,” he said. “I asked people around the state, and James came up as a future star we identified in the market.” Edwards, 25, is also African American. The Athletic as a whole has come under criticism for its predominantly white male hires, and Custance said it is important to assemble a staff that reflects both the sports they cover and the people who read the stories. “That’s been a big part of our conversation. We have made strong efforts to make sure we’re casting a wide net. We’re very aware and sensitive to the criticism that has come The Athletic’s way,” Custance said. Finding talented reporters that “maybe weren’t getting a shot” because they’re not white males was part of the hiring strategy, he added. “It’s been a major part of our consideration.” The company’s owners have publicly acknowledged they must improve diversity. Edwards is optimistic that will happen. “Craig has done a great job of grabbing a bunch of different people. As we

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Strang knew Custance from their days covering the NHL together at ESPN. She returned to Michigan three years ago to cover hockey, and took over Tigers coverage in 2015. After having a baby, she moved to a baseball editor role at the network since she couldn’t travel for road games anymore. When Custance called her about The Athletic, she was ready to make the move. “It was a really easy choice. He’s one of the best teammates I’ve ever had,” she said. Also fueling her decision to leave ESPN was the network’s rounds of layoffs. “It didn’t seem to be based on the quality of your work, and that scared me,” Strang said. The Athletic’s owners impressed her, and restored her enthusiasm for the industry. They wanted to hire people to produce quality written content at a time of what she termed “bloodletting” at ESPN. “They saw opportunity. It was a reSEE ATHLETIC, PAGE 18

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move forward, I think we’ll see more diversity,” he said. Gender diversity is important, too. The Athletic Detroit has three women as full or part-timers: Strang covering the Tigers; Emily Waldon as a contributor writing about Tigers prospects, and Alison Cotsonika, formerly of the Detroit Free Press, Yahoo and Washington Post, as a contributing editor. “We think that having a diversity of viewpoints makes our coverage better, more sophisticated, and more appealing,” Strang said.

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timeline of recovery. It’s process stories that Custance wants, narratives that explain how and why things happen. Those require time and space. Strang had that luxury. “She had the time to talk to doctors that have performed that surgery,” Custance said. Athletic stories also dig deep into analytics, game film breakdown and business aspects such as salary arbitration. Do fans want to pay for that sort of filigree journalism? “We find readers are excited to get that level of detail,” Custance said. The site also uses a stable of freelancers to augment coverage from its full-time writers. Custance declined to discuss freelance pay rates. He said it’s Athletic policy to pay for journalism, which isn’t true of other major sports sites. “We pay our writers,” he said. The Detroit site has five full-time team reporters and a number of paid freelancers and contributors. That doesn’t include the open full-time jobs covering Michigan and Michigan State football. At $47.99 a year, which is $3.99 a month at a 20 percent discounted rate, selling 12,000 subscriptions in the Detroit market would theoretically generate nearly $576,000 annually. The currently nondiscounted monthly price is $7.99, and a full year at that rate translates into $1.1 million in annual revenue for 12,000 subscriptions.

Page17 17

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ATHLETIC

CONTINUED FROM PAGE 17

ally refreshing perspective,” she said. Strang said she’s produced more stories she’s proud of with The Athletic, but she’s still adjusting to being a nontraditional beat writer. “I don’t have to write every day. It’s allowed me to tackle bigger picture ideas, more topical angles. I’ve liked that. It’s challenged me. (But) it’s difficult to get out of the rhythm. You feel guilty if you leave the ballpark without filing a story,” she said. The most recent hire is Chris Burke, 35, to write about the Detroit Lions and the NFL draft. He spent the past six years as a national NFL writer for Sports Illustrated. The Grand RapChris Burke: Most ids native’s decision to leave a recent hire. venerable media brand like SI for a startup was fueled by the desire to do something new, near his Ann Arbor home. “I was looking for something that gave me a little bit more freedom, not chasing eyeballs the same way,” Burke said.

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With the roster mostly assembled, The Athletic Detroit now faces the ultimate test: Will enough people subscribe? Media sites have struggled with paywalls for years, but Custance said it’s not a major obstacle. “There’s been a little pushback on the paywall, but fans have gone to bat for us. You don’t always have to fight that fight. You’ve got subscribers that say it’s worth it,” Custance said. To boost value, subscribers get access to all of The Athletic’s sites. It’s currently in Detroit, Chicago, Cleveland, the San Francisco Bay Area, Minnesota, Philadelphia and St. Louis. In Canada, it has hockey-heavy sites for Toronto, Calgary, Edmonton, Montreal, Ottawa, Vancouver and Winnipeg. One national journalism expert thinks The Athletic has a real shot. “They’re entering the market at a crucial time, when there is a recognition across the board that digital advertising is harder to come by,” said Ken Doctor, who analyzes the newspaper industry for the Nieman Journalism Lab at Harvard University. “The No. 1 thing that higher quality publications are turning to is reader revenue,” Doctor said. “Launching this in the middle of 2017 (in Detroit) as a reader revenue dominated business makes a lot of sense.” The site’s primary challenge is simple: “Can they produce, profitably, enough content to get people to open their wallets and stay with them,” Doctor said. “You’ve got to able to hook people after they’ve bought it, so that they’re making it a habit.” Doctor said The Athletic very much reminds him of the The National Sports Daily. “It’s a digital echo of The National, in terms of the spirit and philosophy of it,” he said. Hansmann, the co-founder, had one other thought on comparisons to The National. “We’re already been around two years. We’ve outlasted them,” he said. Bill Shea: 313 (446-1626) Twitter: @Bill_Shea19

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

PRACTICE FROM PAGE 3

“Medicine has changed a lot over the years and we want to treat patients how they should be treated,” said LaLama, adding that he and Militello try and spend more office time with their patients to go over options and answer questions. Ewa Matuszewski, CEO of Medical Network One, a Rochester-based physician organization, said young physicians face many challenges in financing and opening their own practices. But it is less difficult than other nonhealth care professionals, including lawyers, architects or accountants. “Banks will finance physicians and health care professionals, especially if they come in with more than one year of billing from payers,” Matuszewski said. “Financial institutions still view health care professional risk as less than other professionals.” Matuszewski said a recent trend is for young employed physicians to break away from hospital employment, especially after the first year or two. She said it is still uncommon for young physicians to break away from established medical practices as partners, as LaLama and Militello did. “Many millennials are breaking away from health systems because they want to be accountable for their own activity and patients,” she said. “Transparency is so important to younger people.”

“We were pleasantly surprised how much we could accomplish in so short a time. We opened without any hiccups.” Stefano Militello

One factor is young physician partners or associates in a practice don’t have full access to a group’s balance sheet, she said. “Sometimes you see the expenses of the practice site. You know your own patient volume, but you don’t know the bigger picture,” she said. “If you really want to buck the trend and innovate, you set up shop on your own and determine your own destiny.”

How they organized the business side First, Militello said he and LaLama sat down with a financial planner to discuss all the financial and legal aspects of opening a new practice. They put together a cost estimate of office furniture and equipment, looked into staffing needs and found an open office at the medical center. “We were told to contact a loan director at a bank, get an accounting firm and talk with a lawyer,” Militello said. “We took out a loan from Huntington Bank, maybe used half of it, and took out a line of credit. We haven’t used it yet.” Militello said the partners were challenged early on to generate sufficient cash flow. “We expect to do better than break even first year,” he said. Besides monthly office rent and staffing expenses, the podiatrists have medical malpractice insurance premiums and annual hospital medical staff membership dues to pay — not to mention student loans, which for doctors average more than $200,000. They use a cloud-based electronic medical record system, which is free only be-

cause there are small advertisements on the side of the screen. But the practice management system they also use for billing, which also is cloud-based and connected to the EMR, costs about $350 per month. “We have small staff to keep our costs down,” Militello said. Besides the two podiatrists, the clinic has a physician liaison for marketing, a medical assistant and a business manager, who also does insurance and patient billing. “We were pleasantly surprised how much we could accomplish in so short a time,” Militello said. “We opened without any hiccups.” But as for all physicians, billing insurance companies can be a headache with the number of claim rejections, resubmissions and just the general 30 to 45 day wait period to be paid. If the claim is rejected, add on another 30 to 90 days for an appeal. “We were lucky enough to hire an office manager who knows how to do that,” said LaLama. Medicare accounts for about 50 percent of insurance claims with private insurance covering the rest. “Our clientele is mostly the older generation,” Militello said. “They have Medicare and secondary coverage.”

Setting up the practice During the first several months, Premier had a patient volume of about five patients per day. Lately, the two podiatrists see 10 to 20 patients per day and hope to eventually reach 20 to 40 patients per day by working closely with primary care doctors and getting good reviews from other patients on social media. “We have three rooms for patients and room for another podiatrist in two or three years once we are at capacity in our current office,” said Militello, adding that he and LaLama are hope to eventually expand to another clinic location in another five to seven years and add resident trainees. “We can expand here, but we probably would work in split shifts,” he said. “We both spend a lot of time in surgeries.” Both doctors work four-hour shifts each week at a St. John wound care center, mostly debriding non-healing wounds. Debridement removes dead, contaminated tissue or other foreign material from a wound. The process helps to reduce the number of germs, toxins or other substances that inhibit healing. LaLama works at the St. John Providence center and Militello works at the St. John Macomb center. “We both do surgeries, anywhere between two to 10 per week, anything below the knees,” Militello said. Surgeries range from foot or ankle fractures, Achilles tendon repair, bunion surgery, flat foot reconstruction or ankle fractures. LaLama specializes in foot and ankle reconstruction, diabetic limb salvage, sports medicine injuries and wound care. He is on the medical staff of St. John Providence Hospital in Southfield and St. John Macomb Oakland Hospital, Warren Campus. Militello specializes in diabetic limb salvage and reconstruction, foot and ankle trauma and wound care. He is on the medical staff of St. John Macomb-Oakland Hospital, Henry Ford Hospital and Beaumont Hospital Troy. “At the hospital, we see them for infections or fractures or diabetic wounds,” Militello said. “We try to see patients right away to help out primary care doctors. Hospitals want lower length of stays, so we come in earlier. The sooner we do surgery, the sooner they get out of hospital.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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

SITES

ments, it would make a big statement to bring new life to this iconic Corktown property off Michigan Avenue. The pros: It meets the size threshold and wouldn’t require booting any existing tenants. Plus, Michigan Avenue could be a natural “second leg” of the QLine with the right funding, and Anthony Soave is already developing more than 400 residences in the neighborhood. There are also large tracts of land near the property. The cons: Making the numbers work on Michigan Central Station is no small feat and the building’s layout is considered to be a challenge, although Amazon has been known to take on tricky projects in Seattle.

FROM PAGE 1

to the project’s design. In addition, the rents are expected to be substantially higher than what the average market rate is downtown.

Renaissance Center/River East site/Uniroyal site The sites: Yes, it’s the headquarters of General Motors Co., but hear us out. There is about 440,000 square feet of vacant office space across three of the riverfront complex’s towers, according to a recent report from the Royal Oak office of JLL, and at least in theory, a deal could be carved out to have Amazon’s initial wave of employees occupy that space while other space is sought or built. The RenCen, owned by GM, has 2.63 million square feet of office space (plus a 1.16 million-squarefoot hotel) and plenty of GM-owned land to the east for new construction. A few miles farther east also lies the former Uniroyal Tire Co. site, long abandoned and awaiting new life for its 43 acres, which is owned by the city. The pros: A riverfront location could be enticing and an on-site hotel is a nice plus. Seventy or so acres of developable land is a good start for Amazon’s 100-acre target. The cons: First and foremost, there has been no indication that GM is looking to move from the complex and it’s difficult to envision the multinational corporations sharing a headquarters. Any deal would be extremely complex with a lot of moving pieces. This is definitely a thinkingoutside-the-box idea and probably a long shot — but worth considering.

Cadillac Place The site: The 1.4 million-square-foot former GM headquarters on West Grand Boulevard could be attractive because of the state-owned building’s sheer size, which could easily handle

AMAZON FROM PAGE 1

Ontario, the province in which Windsor is located, also levies a 4.5 percent to 11.5 percent corporate income tax rate, compared to Michigan’s 6 percent tax on corporate revenue. But all in all, Canada is more tax advantageous, Patterson said. It would be in the Detroit bid’s interest to highlight potential tax benefits of locating revenue-drivers in Windsor, particularly engineers generating intellectual property, such as patents, trademarks or processes, Patterson said. “Obviously we don’t know what Amazon wants and what it plans to do with its second headquarters, but if it’s capable of moving employees across the border, it could carve off a big chunk of its tax rate and get similar talent in and around Detroit, it’s a big return on investment,” Patterson said. Detroit real estate developer and mortgage mogul Dan Gilbert has assembled a committee to make a bid for Amazon’s second headquarters and was meeting with Windsor government and business leaders to discuss a possible joint bid. Gilbert said Wednesday that Detroit’s shared international border is an advantage that “nobody can compete with” in the race among big American cities to woo Amazon’s planned $5 billion investment.

Joe Louis Arena

Michigan Central Station/Corktown

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Executive Office Plaza/ Joe Louis Arena The site: Long vacant, the 615,000-square-foot complex owned by Danou Enterprises has at least 20 acres of vacant land immediately to the west. The pros: The buildings meet the 500,000-square-foot minimum threshold and offer lots of land to build upon nearby. In addition to good freeway access to the Lodge (M10), the soon-to-be-demolished Joe Louis Arena isn’t far away sitting on 9 acres. Holdout creditor Financial Guaranty Insurance Corp. received development rights to the JLA site during Detroit’s bankruptcy. The cons: Putting together the 100 or so acres of land Amazon wants could prove difficult near these properties.

State fairgrounds site

Amazon’s initial wave of employees. The pros: Proximity to the QLine streetcar is a big advantage, as is its location in an up-and-coming area with new housing and other developments in the works by The Platform LLC, Midtown Detroit Inc. and others. It’s also close to a research hub in Wayne State University and the College for Creative Studies. The cons: A new location for state employees who work in the building could be a challenge, but it’s not insurmountable. There’s land nearby

upon which Amazon could build, but likely not enough to meet their 100acre requirement.

The sites: At 500,000 square feet and deeply rooted in Detroit’s history, the Moroun family-owned abandoned train station has been perplexing development experts for decades. But even though it’s on the smaller side of Amazon’s initial square footage require-

The site: With 157 acres at Eight Mile Road and Woodward Avenue, the site is easily the largest single property that could make sense. The pros: It’s difficult to assemble as much land as the fairgrounds could offer contiguously. It’s a location with quick access to the suburbs along the city’s spine, and could help pave the way for an extension of the QLine. The cons: It’s well outside of the greater downtown area and has been the

“We are going to win this thing or die trying,” Gilbert said Wednesday after announcing $2.1 billion in downtown building development projects his companies are pursuing. The new, expanded and renovated office buildings Gilbert’s Bedrock LLC is developing could play a role in fulfilling Amazon’s need for 8 million square feet of new office space over the next 17 years. As Gilbert and his investment and real estate companies work on the Amazon bid package due Oct. 19, local officials have been evaluating potential solutions to Detroit’s shortcomings in transit and the educated pool of tech workers Amazon desires in software development and engineering. The most stark is the talent shortage that Michigan companies have already been grappling with in recent years. About 63 percent of adults age 25 to 64 in Ontario have some level of higher education, according to Canada’s national statistics agency. In metro Detroit, 38.4 percent of adults over age 25 have an associate’s degree or higher, according to data compiled by the Detroit Regional Chamber. “I think having the ability to have both Canadian and Detroit employees, which would happen here, relatively easy to get across the border from Windsor to go to work, I think has got some potential here,” Duggan said last week. Moving across the border for daily

commuters is supposed to get easier when — and if — two new six-lane bridges are built over the Detroit River. But construction of the new Gordie Howe International Bridge and a replacement span for the Ambassador Bridge isn’t expected to begin until next year sometime, depending on the outcome of a litany of legal battles and permitting hurdles for the competing public and privately-owned bridge projects. Another potential advantage to Amazon constructing a physical office on the Canadian side of the Detroit River is access to foreign talent. As U.S. continues to seek new restrictions and caps on immigrants to the U.S., Amazon could seek and use a new pool of foreign talent via Canada’s immigration pool. However, Canada’s immigration system is also becoming tighter, said Aimee Guthat, senior attorney at immigration law firm Fragomen, Del Rey, Bernsen & Loewy PLLC in Troy. “Like the U.S., Canada has a very robust set of immigration rules governing availability and eligibility for work visas,” Guthat said. “The Canadian immigration program at one time was perceived to be more liberal than U.S. immigration rules, but this is definitely changing. Canada has taken significant steps in recent years to enhance its immigration regulations and procedures and tighten security and admission procedures.” Amazon’s request for proposals said it wants a second headquarters

in a metropolitan region of at least 1 million people. With more than 4.3 million residents, metro Detroit easily meets that mark. But Windsor by itself falls well short with a metropolitan population of 329,000, according to Canada’s national statistics agency. “I’m sure our respective strengths would make the bid stronger than either one city going it alone,” said Douglas George, the Canadian consul general in Detroit. With Toronto and Ottawa also pursuing Amazon, George said he couldn’t pick sides among Canadian cities. “But whether it’s Windsor or some other Canadian city, we can bring a lot of what Amazon will need to make its new headquarters a success,” George said. Basing part of the headquarters in Windsor could attract tech workers from Toronto and more populous cities in southern Ontario, said Kristen Thomasen, assistant professor of law in robotics and society at the University of Windsor. “The thing you’re going to get with Detroit-Windsor that you’re not going to get with Toronto is a lot of relatively inexpensive real estate,” said Thomasen, who is studying Amazon’s development of artificial intelligence technology and package-delivering drones. Thomasen, a native of Hamilton, Ontario, said the tremendous growth in

Michigan Central Station/Corktown

target of a long in-the-works redevelopment planned by Magic Plus LLC, which consists of Joel Ferguson, a developer and member of the Michigan State University board of trustees; Marvin Beatty, chief community officer for Greektown Casino-Hotel; and NBA legend Earvin “Magic” Johnson.

Fort Street post office The site: On Fort Street just east of Trumbull, the U.S. Post Office building is around 1 million square feet across from West Riverfront Park. The pros: It’s large enough to accommodate Amazon’s initial space requirements, is near the Detroit River and nearby sites like the Joe Louis Arena, immediately west of the Riverfront Towers residential buildings and others provide attractive building possibilities. The cons: It’s slightly off the beaten path and getting 100 acres around that site could prove challenging.

Campus Martius The site: Multiple Gilbert-owned buildings, including One Campus Martius, First National Building, Chase Tower, One Detroit Center to the south and others. These could also be coupled with office space at Gilbert’s Monroe Block and Hudson’s site developments. The pros: A central core encircling the popular downtown park and peppered with dozens of restaurants and coffee shops nearby, Campus Martius would be an ideal location, with more than 2.5 million square feet of prime office space already built touching the park. The QLine streetcar runs right through it. Gilbert already owns most of the buildings nearby and could offer a package deal. The cons: It’s occupied by the some of the city’s most prestigious tenants, including Gilbert’s Quicken Loans, and there isn’t a lot of land surrounding it on which to build new buildings that haven't already been proposed. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB Toronto in recent years has gentrified one-time bedroom communities like her hometown and pushed workers further away from Canada’s largest city. “Toronto’s a fantastic city,” Thomasen said. “But there are elements of living and working there that’s becoming increasingly difficult.” Windsor partnering with Detroit also presents Amazon with a potential logistics advantage, said Alex Calderone, managing director of Birmingham-based corporate advisory firm Calderone Advisory Group. “Amazon seeks to disrupt just about every step of the supply chain,” Calderone said. “The Detroit, Windsor region offers both a workforce and physical infrastructure that is capable of moving products efficiently and effectively across North America." On the online retail end of its business, Amazon already is building three regional distribution centers in Livonia, Romulus and Shelby Township. “If logistics services are in its cross hairs, what better place to be headquartered than along one of both countries’ busiest international borders; particularly given the new bridge capacity that may come on line in the near future?” Calderone said. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

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

Google celebrated the opening of its completely renovated 135,000-squarefoot complex at 2300 Traverwood Dr. Thursday in Ann Arbor. The office includes a three-story staircase. PHOTOS BY DUSTIN WALSH/CRAIN’S DETROIT BUSINESS

Google unveils its new offices in Ann Arbor By Dustin Walsh dwalsh@crain.com

The cafeteria in Google’s new office in Ann Arbor features family-style seating meant to spur collaboration.

A meeting and conference space outside Google’s office in Ann Arbor is among the complex’s high-end amenities typical of the Bay Area tech scene.

Google began consolidating its Ann Arbor employees under one roof more than a year ago. On Friday, it celebrates the grand opening of its new office, welcoming media and public officials into its new digs. The completely renovated 135,000-square-foot complex at 2300 Traverwood Drive is an ode to Michigan, yet with the high-end amenities typical of the Bay Area tech scene. Executives declined to discuss the investment into the space or the specific work being done in the office, though it revolves around support and engineering for its AdWords and DoubleClick advertising programs, as well as one of two global internal IT offices for the California tech giant. The other is in Sydney, Australia. The office supported 31,000 businesses and $3.5 billion in economic impact, the company said. Google moved out of its original Ann Arbor space at the McKinley Towne Centre in 2015, which it opened in 2006, moving some employees to an office near the Briarwood Mall and others into the Traverwood site while it underwent renovations. Now about 450 of its 600

About 450 of its 600 Michigan employees operate out of the one Ann Arbor location. Michigan employees operate out of the one Ann Arbor location. Up the grand staircase in the atrium and down the halls of the three-storied building are low-slung chairs, Michigan-themed conference rooms, traditional office space and several unique nooks and caverns — including the “Skull Cave,” which is reminiscent of a ’70s Los Angeles lounge with padded walls and fluffy seating. Entertainment and collaboration are critical to the “Googlers,” said Eric Yuhasz, facilities manager for Google’s Michigan offices. The building is equipped with several “micro-kitchens” and a Faygo-themed cafe, complete with several Michigan craft brews on tap. The space also includes a large cafeteria with organic and locally-sourced food options — free of charge to employees — and a 24hour gym.

The motto for the state of Michigan is displayed on the three-story wall in the atrium of Google’s Ann Arbor office.

Michigan touches inside Google’s new Ann Arbor office include a poster for Detroit-based Faygo Beverages Inc.

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

MARIJUANA FROM PAGE 3

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“It’s not unexpected to have hiccups with an industry that has the ability to produce an immense amount of dollars for businesses, for municipalities, but also the potential for being a nuisance for residents.” The Detroit vote likely will pit morality versus medical marijuana. The city’s churches were critical in arguing for the 2015 ordinance that prohibited pot shops from locating within 1,000 feet of churches, schools, libraries, parks, liquor stores and other pot shops in Detroit, leading to the mass closures. Detroit World Outreach Church, an influential megachurch, is launching an effort against the ballot measure. A representative for the church declined comment, but other pastors say Detroit doesn’t need more drugs. “I’m opposed,” said the Rev. Darren Penson, pastor of Greater Quinn African Methodist Episcopal Church on the city’s west side. “We already have enough issues as it is. This will further oppress our people, lead to more drug addiction.”

Hazy state rules Amid the debate in Detroit, the Michigan Department of Licensing and Regulatory Affairs on Sept. 12 dropped a bomb on medical marijuana businesses, announcing that any dispensary that wants to apply for one of five new types of licenses to be issued next year should shut down by Dec. 15 or face a “potential impediment” to getting a license. Approved last year, the Michigan Medical Marihuana Facilities Licensing Act will grant licenses to dispensaries, testing facilities, secured transporters, growers who can cultivate up to 1,500 marijuana plants and processors who make products such as edible marijuana-infused foods. The state licenses will only be available in cities that have opted into the state law. So far, nine municipalities have done so, according to Cannabis Legal Group, a law firm based in Royal Oak. The Detroit ballot question would opt the city into the new state licensing program. The law will allow participating cities to get 25 percent of the revenues from a new 3 percent tax on the gross receipts from dispensaries. A House Fiscal Agency analysis report last year estimates the new tax could bring in $24 million statewide, plus another $50 million from sales taxes. In comparison, Colorado has made $500 million in taxes and fees since retail marijuana sales began in 2014. The new laws are expected to bring order to an industry that has been loosely regulated since Michigan voters approved medical marijuana in 2008. That 2008 law allowed state-approved caregivers to grow up to 12 marijuana plants for each of six medical marijuana cardholders including themselves. Michigan has more than 244,000 medical marijuana cardholders and 40,000 caregivers, according to LARA. The businesses that sell medical marijuana in Michigan are, by law, called caregiver centers. But in reality, most if not all operate as dispensaries that sell to anyone with a medical marijuana card. That’s one reason dispensaries are still considered illegal. Rolling out the new regulations could deepen confusion, predicted

CHASTITY PRATT DAWSEY/BRIDGE MAGAZINE

Michigan voters approved medical marijuana in 2008, but the state is still wrestling with how to regulate the industry.

Andre Godwin, spokesman for Sons of Hemp, a group of marijuana business operators who advocate for diversity in the industry. He said the application period for the new law will take months, and medical marijuana could flood the black market from dispensaries that shut down as they await a license. Godwin said he uses medical marijuana to treat the pain from a condition he acquired after he said he was exposed to contaminated water 30 years ago when he was in the U.S. Marines. The condition causes eggsized boils to grow all over his body. According to Godwin, Michigan’s new state law does not address several important unanswered questions: When a business gets a state license, where will it legally obtain seeds or clones? The state wants growers to track seeds through the growth process to sale — how is that possible? How will cardholders get their medicine if all dispensaries shut down Dec. 15 through early 2018? “It’s all confusing, like it’s set up to fail,” Godwin said. LARA is to submit emergency rules related to the licensing process by November and expects to start issuing licenses by the end of March. In the meantime, patients should have plenty of time to find a legal caregiver while dispensaries go through the licensing process, said David Harns, a spokesman for LARA. “With the three-month notice (until Dec. 15), patients have time to

“Churches should have the ability to hold dispensaries accountable. They don’t want the lime green buildings with 1,000 signs saying, ‘Weed! Come and get it!.’” Charles Williams III, pastor at the Historic King Solomon Missionary Baptist Church

connect or reconnect with a caregiver to ensure continuity,” of access to medical marijuana, Harns said.

Questions for Detroit Back in Detroit, city officials are trying to balance what voters have said they want — legalized medical marijuana — and vice-free neighborhoods, said Melvin “Butch” Hollowell, the city’s corporation counsel. “We don’t think it should be anything unusual about not wanting oversaturation, which is what we’re

trying to avoid,” Hollowell said. Over the past five years, the city had 283 medical marijuana facilities. Many were within smelling distance of the city’s 4,000 church properties and along busy streets. The pot shops were so common that, in some churches, parishioners could look out beyond their statues of the Virgin Mary to see dispensaries decorated with green lights and names like “Mary Jane’s.” Since the city’s crackdown and zoning changes, only eight medical marijuana businesses have been approved to operate. Eighty-one applications are in the approval process, and another 69 shops are operating while waiting approval from the city. One of the reasons there are so few dispensaries now is because there are so many churches. A Bridge Magazine analysis of city zoning and assessing records shows there are limited areas of the city where shops could open because of the 1,000-foot prohibition near churches. Hollowell said there are about 40 remaining legal sites in the city for marijuana businesses. That number would grow significantly if voters pass the referendum that lowers the limit to within 500 feet of a church. Charles Williams III, pastor at the Historic King Solomon Missionary Baptist Church, said churches can be an important part of the discussion about marijuana dispensaries. “Churches should have the ability to hold dispensaries accountable. They don’t want the lime green buildings with 1,000 signs saying, ‘Weed! Come and get it!,’” he said. “We’ve got way too many churches, way too many liquor and lotto stores in Detroit, the last thing we need is way too many dispensaries. Too much of anything is not good.” Detroit officials also need to ensure there are opportunities for minorities to own medical marijuana facilities, said Williams, who is also president of the Detroit chapter of National Action Network, a civil rights group. “I do believe there is a way forward for co-existence of any legal businesses in communities in the city of Detroit,” Williams said. “These businesses must be held accountable to certain standards to not upset the communities.” Godwin said Detroit has a moral obligation to help marijuana patients like him and not stymie the industry because of moral judgments from churches. “Some people in Detroit started a witch hunt against dispensaries and got the churches and pastors to join in to say weed is the devil,” he said. “Detroit is being sloppy, Michigan is being sloppy. It doesn’t have to be

this way.” An advocacy group, Citizens for Sensible Cannabis Reform, sued to put both measures on the ballot. Its spokesman, Jonathan Barlow, said the group wants to ensure that African-American and Hispanic entrepreneurs get a chance to operate dispensaries. He said many dispensaries owned by blacks and Detroiters were shut down in the crackdown. “The city’s not seeing the big picture here,” Barlow said. “Somebody is

“It’s all confusing, like it’s set up to fail.” Andre Godwin, spokesman for Sons of Hemp

going to make money off of this and we need to decide if we’re going to participate or five years from now or complain because we got left behind.”

‘The wild west’ In the middle of the debate are entrepreneurs such as Philip Doherty, a 32-year-old who served as a consultant to a dispensary known as the Detroit Grass Station. It was painted green and white and operated out of a former gas station — and sort of looked like one — on a sparsely populated stretch of West Grand Boulevard in Detroit. At its peak, it raked in as much as $9,000 per day. Then last spring, the Grass Station became one of 175 such facilities that had to shut down last year due to its proximity to a park. Medical marijuana centers are not allowed within 1,000 feet of outdoor recreation facilities. Grass Station was 892 feet away from one. Doherty is in the final stages of being approved to open a new medical marijuana facility in the city. If Doherty gets approval from the city’s board of zoning appeals as he expects this fall, he said he probably won’t open a dispensary right away because he wants to wait and get a state license, too, to make sure he’s operating within all laws. “We’re going through the process with the city, and I’m waiting for clarification from the state. There are gigantic questions out there that make it hard for me to develop a business plan,” he said. “I know I’m going into a risky business, and I’m definitely trying to be as above board as I can. That’s truly most important. “Literally nobody knows how things are going to shake out,” Doherty said. “It’s like the wild, wild west.”

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

THE WEEK ON THE WEB

RUMBLINGS

Ross donates another $50 million to UM

Forbes: Lions now worth $1.7B, second-lowest in NFL

SEPTEMBER 15-21 | For more, visit crainsdetroit.com

ew York real estate developer Stephen Ross has given $50 million to his alma mater, the University of Michigan. The new donation from Ross, chairman and founder of Related Cos. and owner of the Miami Dolphins, brings his total donations to the university to $378 million. Ross, UM’s largest single donor, is chair of the Victors for Michigan Campaign, a $4 billion campaign launched four years ago this fall. The university surpassed its goal in April, more than a year and a half ahead of its target to do so. His most recent gift brings the amount raised for student support during the campaign to more than $1 billion. The contribution will support the Stephen M. Ross School of Business in several ways, including creating a $16 million Student Success initiative that will help students develop career and professional skills, build a network of advisers and career advocates, personalize their learning journey and access internships and career opportunities with companies around the world. The gift also supports the creation of a $16 million Stephen M. Ross Faculty Support Fund for faculty who develop academic innovations that advance the school’s commitment to action-based learning, interdisciplinary education and leadership development. UM’s business school “has become a world-class center of innovation and a magnet for attracting the best and the brightest students and faculty, and these new initiatives will even further enhance those efforts,” Ross said in a written statement. One of the developer’s more modest gifts to UM, a 2003 holding valued, ultimately, at a reported $3.4 million, drew the scrutiny of the U.S. Tax court. Ross and business partners who owned the holding took a $33 million tax writeoff when it was donated to UM to help fulfill a pledge Ross had made. After almost 10 years of litigation, the tax court last month disallowed the deduction due to an improperly filled out form, according to Forbes.

BUSINESS NEWS J Como’s Restaurant in Ferndale was ordered to close last week after a board upheld its license revocation for food safety violations. J Federal prosecutors seized $292,000 in funds they allege were laundered through a fake hospice center in connection to the corruption scandal by United Auto Workers and FCA US LLC executives. J Work is underway on the first Applebee’s-IHOP co-branded restaurant, which is set to open inside the Millender Center in downtown Detroit in the spring. J Somerset Collection plans to open 11 new stores in the next year, including the first Michigan showroom for luxury electric carmaker Tesla Motors. J Greektown Casino-Hotel’s transi-

AARON ECKELS FOR CRAIN’S

Stephen Ross brought his total for major donations to the University of Michigan to $378 million with his latest pledge.

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

J Roasting Plant coffee shop is branching out from downtown Detroit with new franchise locations in Dearborn Heights and Ann Arbor.

$85

OTHER NEWS

How much vials of melted Joe Louis Arena ice cost — they're being sold to benefit the Detroit Red Wings Foundation.

J Mary Treder Lang, a certified public account who has spent three decades in finance, sales and computer security in the private sector, launched a campaign last week for the Republican nomination for Secretary of State. J The I-75 modernization plan for Oakland County is set to get an overhaul that could cut a decade or more off the length of the project. J University Prep Academy Middle School has completed a $6 million renovation, including expanding classrooms and updating the cafeteria. J The Detroit-Windsor Tunnel will close regularly for eight months of renovation work starting Oct. 20. J A coalition of local and state environmental groups asked the Michigan Department of Natural Resources at a public forum last week to conduct an environmental impact study on the Detroit Grand Prix’s effects on Belle Isle Park. J Eminem teamed with StockX LLC in an effort to draw donations to help hurricane victims in Florida and Texas. J Longtime Detroit Institute of Arts board member and supporter Bonnie Ann Larson made a $5 million gift to support the museum’s operating endowment. J The Great Lakes region needs to drastically improve public water systems, state leaders have said. The Great Lakes Commission this week called for upgrading wastewater treatment plants, storm water pipes and drinking water filtration systems. The commission, which represents the region’s eight states, said a conservative cost estimate is $271 billion. J The Fred A. and Barbara M. Erb Family Foundation made a $1 million grant to Motown Museum in support of its expansion plan.

3.1 percent The average projected pay raise in Detroit in 2017, compared with 3 percent nationally.

122.2 The number of young veterans in Michigan per 100,000 who committed suicide in 2014, compared with the lower national rate of 70.4 per 100,000.

tion to Jack Detroit Casino-Hotel is underway and will finish by May 1, along with millions of dollars in interior renovation work. J Lipari Foods LLC has purchased assets of Dairy Fresh Foods Inc., adding its products to its portfolio. J Kroger Co. opened its new $19 million store in Southgate. J Meritor Inc. has agreed to sell WABCO Holdings Inc. its interest in the companies’ joint venture for $250 million. Meritor plans to use part of its earnings from the deal to pay off debt. J Burns & Wilcox signed a deal with Olympia Entertainment and the Detroit Red Wings that gets the wholesale insurance broker’s logo a spot on Little Caesars Arena’s center ice. In addition, Detroit Pistons owner Tom Gores’ private investment firm, Platinum Equity, is now a multiyear corporate sponsor for the Pistons in the arena. J A vacant Catholic school in Detroit’s Banglatown neighborhood is being redeveloped into affordable housing under a new $6.4 million project announced by the city Thursday. The Archdiocese of Detroit is selling the Transfiguration School building, vacated in 2005, to Ethos Development Partners and Building Blocks Nonprofit Housing Corp., which will lead the project.

OBITUARY J Steven Silk, principal of the Velmeir Companies based in West Bloomfield Township, died last week at age 59.

he Detroit Lions, coming off a playoff season and a $100 million renovation of Ford Field, continue to rank as one of the NFL’s least-valuable franchises. Least-valuable is relative, of course. Forbes’ annual NFL team valuations, published Monday, estimate the Lions are worth $1.7 billion, which ranks 31st in the 32-team league and ahead of only the Buffalo Bills at $1.6 billion. The financial news site estimated the Lions had $48 million in operating incomes on $341 million in revenue, both second-to-last in the league. Because the values are for 2016, they don’t reflect Detroit’s stadium renovation project, including several corporate naming rights deals, that wrapped up last month. That should goose the Lions’ value next season, and additional increases will come from relocation fees that will be paid in coming years by the St. Louis Rams, San Diego Chargers and Oakland Raiders. Detroit was valued at $1.65 billion a year ago. The average team value in this year’s list is $2.5 billion. That’s up 8 percent from a year ago, Forbes reported.

The Forbes estimates were made before the Lions completed $100 million in stadium renovations.

Much of the team values derive from the NFL’s enormous TV broadcast rights deals. NFL teams generated $7.5 billion from media deals last season, or 57 percent of the league’s $13.2 billion in total revenue, Forbes said. Topping the valuation list again are the Dallas Cowboys at $4.8 billion, with $350 million in operating income on $450 million in revenue, both tops in the NFL

KURT NAGL/CRAIN’S DETROIT BUSINESS

The mural on Russell Street in Eastern Market was created by Detroit graffiti artist Fel3000Ft for Murals in the Market.

Murals in the Market kicks off in Eastern Market

astern Market got a fresh coat of paint as the weeklong Murals in the Market officially kicked off Thursday. Produced by local art gallery 1xRUN, Eastern Market Corp. and several sponsoring businesses, the event welcomes more than 50 local and international artists to the district to create more than 100 public murals. Most of the prep work is happening this week, with 1xRUN crews priming surfaces for murals and taking artists on a tour of their new neighborhood for the week, said Jesse Cory, co-founder and CEO of 1xRUN. A couple of artists started their work early, Cory said. For example,

there’s blue-eyed fox next to Germack Coffee that now peers across Russell Street. While most work has been behindthe-scenes so far, the artistic hum is not going unnoticed. Patricia Lay-Dorsey, more widely known as “Grandma Techno,” braved the late summer heat on her electric scooter to take pictures. “I’ve been doing techno for 13 years and taking pictures of (Murals in the Market) since it started” (in 2015), she said. The full schedule and roster of artists can be found at muralsinthemarket.com. The event runs through Thursday — but the murals remain far beyond that.

A G E N D A AT A G L A N C E

MANAGING HEALTH CARE IN A TIME OF UNCERTAINTY KEYNOTE PRESENTATION

Joe Kennedy, III

Congressman, 4th District of Massachusetts

PANEL DISCUSSIONS

MANAGING UNCERTAINTY: REVENUE RISKS, GROWTH & COST

OCT. 19

MANAGING UNCERTAINTY: WHAT DOES IT MEAN FOR INNOVATION IN HEALTH CARE

MODERATOR Ron Fournier Editor and Publisher, Crain’s Detroit Business

8 A.M. – 1 P.M.

MODERATOR Marianne Udow-Phillips Executive Director, Center for Healthcare Research & Transformation

Ghada Abdallah, R.Ph. Pharmacist, Business Owner, Board Member of DWMHA, Substance Use Disorder, The Family Center of Grosse Pointe and Harper Woods, Michigan Pharmacists Association

Marriott Renaissance Center, Detroit

Eishi Asano, M.D. Medical Director of Neurodiagnostics, Children’s Hospital of Michigan Maya Hammoud, M.D. Associate Chair for E-Learning and Enabling Technologies; Clerkship Director for Obstetrics and Gynecology University of Michigan Medical School

Roger Jansen Senior Vice President And Chief Strategy Officer, Spectrum Health System

at crainsdetroit.com/events or call (313) 446-0300

Brent Nowak, Ph.D. Executive Director, Applied Medical Device Institute

Terri Kline President and CEO, Health Alliance Plan

Jaideep Rajput Director of Commercialization, Beaumont Health

Matthew O’Bryan CEO, KLA Laboratories Inc.

BREAKOUT SESSIONS

ATTRACTING AND RETAINING TALENT DURING TROUBLED TIMES Patrick Irwin Vice President of Human Resources, Henry Ford Health System Valerie Myers Organizational Psychologist and Consultant: Faculty, University of Michigan’s Ross School of Business Jodi Schafer Owner, Human Resource Management Services LLC Steve Tobocman Executive Director, Global Detroit Gracie Xavier Director, Corporate and Economic Development Strategy, Global Detroit

BREAKOUT SESSION SPONSOR

HEALTHY MEAL SPONSORS

NOTEBOOK SPONSOR

UNCERTAINTY OF CYBERSECURITY: PROTECTING FROM BEING HACKED MODERATOR Dan Cook Detective Sergeant, Michigan Cyber Command Center, Michigan State Police

MANAGING UNCERTAINTY: HOW TO FIGHT THE OPIOID CRISIS MODERATOR Lt. Governor Brian Calley State of Michigan Ghada Abdallah, R.Ph. Pharmacist, Business Owner, Board Member of DWMHA, Substance Use Disorder, The Family Center of Grosse Pointe and Harper Woods, Michigan Pharmacists Association

MODERATOR Richard Cruz Detective Sergeant, Michigan Cyber Command Center Michigan State Police Linda Bower Information Security Officer, Munson Healthcare; Member, Michigan HealthCare Cybersecurity Council John Fowler Deputy Information Security Officer, Henry Ford Health System

Scott Larsen Senior Manager of Cybersecurity Operations, Beaumont Health; Vice Chaiman, Michigan HealthCare Cybersecurity Council

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Honorable Linda Davis Judge, 41-B District Court Macomb County; President, Families Against Narcotics; Chair, Prescription Drug and Opioid Abuse Task Force for the State of Michigan Carmen McIntyre, M.D. Former Chief Medical Officer, Detroit Wayne Mental Health Authority Brian Spitsbergen Ph.D Director of Community Relations, Growth Works, Inc.

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