Crain's Detroit Business, Jan. 29, 2018 issue by Crain's Detroit Business

Comerica Bank extends stadium naming-rights deal Page 6

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HEALTH CARE

Beaumont seeks west Oakland County site

MSU: THE NASSAR CASE

Long, complex road ahead for MSU

By Kirk Pinho kpinho@crain.com

and Jay Greene jgreene@crain.com

LLC, maker of the of the 5-Hour Energy drink, each announced sponsorship deals this month with elite video game teams that will include branded content, jersey logos and mentions in the gamers’ social media channels. The Detroit Pistons are also investing in the rapidly growing field, often called “esports,” by launching a team

Beaumont Health is looking to build a new large outpatient building in west Oakland County, although where precisely it goes if it is built, and how large it would be, are both key factors that are up in the air. Last month, broadcast entrepreneur Kevin Adell shot down the health system’s $19.82 million offer for nearly 20 acres of land he owns in Novi at 43700 Expo Center Drive, near I-96 and Novi Road. A letter of Need intent he provid- to know ed to Crain’s in-  Beaumont cluded a site plan seeks land for showing a 200,000-square200,000-square- foot outpatient foot building that building a Beaumont  Health system s p o k e s w o m a n offered $20 million later said was en- for prime Novi site visioned for out- owned by Kevin patient services. Adell A 200,000square-foot cen-  Adell turned ter would be ex- down the offer; tremely large for Beaumont traditional out- continues to scout patient services, for locations health care experts told Crain’s. Carolyn Wilson, Beaumont Health’s COO, confirmed that the health system has been looking at western Oakland County for expansion of outpatient services. She signed the letter of intent on Dec. 21. “Population growth there is driving an increased need for health care services. We also believe that residents there are interested in having a close, convenient Beaumont facility.” She said in the statement that the size and services provided at a new center “will be determined by multiple factors, including market needs and available real estate. We will communicate more as decisions are made.”

SEE ESPORTS, PAGE 21

SEE BEAUMONT, PAGE 17

Former MSU sports doctor Larry Nassar was sentenced Wednesday. SCOTT OLSON/GETTY IMAGES

By Dustin Walsh dwalsh@crain.com

Need to know

University is working to reduce huge liabilities from civil court lawsuits 

Michigan State University is facing a heavy toll for its role in the sexual abuse of gymnasts by former MSU doctor Larry Nassar. In the aftermath of the Nassar criminal verdict, the university is working to reduce huge liabilities from civil court lawsuits and scrapping with insurers, who may be on the hook for hundreds of millions of dollars, as the wounds of losing in

 Insurers may be on the hook for hundreds of millions of dollars  The East Lansing university is mounting a defense

the court of public opinion mount. It won’t be simple, or cheap. It may be years before it’s all resolved. And anything MSU does to reduce

its ultimate costs — vigorously fighting victims’ claims in court, for example — risks a backlash that could further hammer its reputation. MSU President Lou Anna Simon resigned late last Wednesday, only hours after Ingham County Circuit Judge Rosemarie Aquilina sentenced Nassar to 40-175 years in state prison and now famously told the convicted sexual predator, “I’ve just signed your death warrant.” Nassar pleaded guilty of molesting

girls, some as young as 6 and many Olympic gymnasts, under the guise of medical treatment. He was already sentenced to 60 years in federal prison for possessing child pornography. The criminal cases against Nassar followed reports in 2016 in The Indianapolis Star about how USA Gymnastics ignored complaints about sexual misconduct involving the doctor and other coaches. SEE MSU, PAGE 20

SPORTS BUSINESS

Quicken, 5-Hour Energy among brands in ‘esports’ By Bill Shea bshea@crain.com

100 THIEVES

The 100 Thieves team inside the Rocket Mortgage Team House in Venice, Calif. crainsdetroit.com

Bagger Dave’s shrinks again to stem losses Page 3

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A pair of high-profile metro Detroit companies are joining the rush of brands pouring money into professional video gaming in a bid to capture the attention of cord-cutting millennials and Gen Z. Detroit-based Quicken Loans Inc.’s Rocket Mortgage unit and Farmington Hills-based Living Essentials

INSIDE

, 2018 // J A N U A R Y 2 9 OIT BUSINESS CRAIN’S DETR

FOCUS

Special Report: Finance

FINANCE

NEWSPAPER

<< How tax reform could affect your small or mid-sized company. Page 10

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affect your small or How tax reform could By Rachelle Damico Business Special to Crain’s Detroit

plan, The Republican tax reform Donald signed into law by President encourto Trump in December, aims by adjusting age economic growth businesses how small and mid-sized and corporations are taxed. will Many American companies othas well as see significant tax cuts, drive growth. er benefits that can help of compa“I think we’ll see a lot salaries and nies investing in higher a tight labenefits, because in such with bor market they’re all strugglingthat’s when and how to attract talent, on salary happening it’s big pressure Fowler, presiand benefits,” said Rob Business dent and CEO of the Small n.

Need to know

businesses new law will see a tax cut under the can deduct J Pass-through companies 20 percent of income about if you’re J Some things to think business considering changing your structure

J Most small and mid-sized

their compalot of people organized of the ny the way they did because federal tax law.” accounting Kurt Piwko, partner at firm Plante and business advisory of his busiMoran PLLC, said many law favorably, ness clients view the how it will afbut are confused as to fect their company. is one of the “The reality is, this law ime

es Pass-through business

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rules surAmsden said there are deduction, rounding the 20 percent employbut generally, most qualify. ee-based companies will manu“If you’re a small business distribufacturer, a small business establishretail a or tor of products to get a ment, (you’re) likely going regard to with deduction 20 percent your effective that income to reduce said. tax rate,” she

in The vast majority of businesses in of them the U.S. — 95 percent Treasury De2014, according to the “passpartment — are so-called profits whose through companies” the owner’s are taxed according to orgaKurt Piwko: Law personal rate. Companies LLCs Rob Fowler: ips, is one of most nized as sole proprietorsh all pass- Expects higher complex. and partnerships are salaries, benefits. Personal service through companies. those companies resulting in a taxable Under the new tax plan, 20 percent of x 20 percent) such businesses can deduct of $60,000. Personal service companies, acThat means income somebody who have pass-through income. you agents, attorneys, “If percent of a of income as real estate the IRS will only tax 80 brokers and doctors, makes the exact amount income. in 2017, and countants, made they rules. business owner’s personal as 2018 at in have a different set of is only Margaret Amsden, shareholderthe all of their deductions are identical, The 20 percent deduction with PC, leads tax because in less pay Clayton & McKervey would available for single taxpayers and specializ- they or married structure,” she said. firm’s tax department income up to $157,500 said the ef- of the rate es in business tax. She jointly with incomes

C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 9 , 2 0 1 8

MICHIGAN BRIEFS

INSIDE

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

DTE, Consumers Energy plan 3-4 percent rate cuts from tax reform Michigan businesses and residents are set to see a reduction in energy costs this year resulting from the new U.S tax code approved late last year. Jackson-based Consumers Energy Co. and Detroit-based DTE Energy Co. are expecting the reformed tax law to net a savings of $200 million and $190 million to its customers, respectively, which equates to a 3 percent-4 percent savings for customers. The energy companies are legally obligated to pass along the savings to customers, Consumers spokesman Brian Wheeler said. The Michigan Public Service Commission in December ordered 13 utilities to study the impact of the new federal tax law and devise a plan for routing savings to customers. DTE customers will see a rate reduction of about 3 percent, according to a Tuesday news release from the company. Consumers customers will see a 3 percent-4 percent reduction, Wheeler said. A typical home serviced by Consumers has an average electricity and gas bill totaling $175 per month, Wheeler said. Average monthly sav-

ings per house at a 3 percent reduction would amount to $5.25. The new energy rates will go into effect following approval from the Michigan Public Service Commission. Consumers is seeking approval by the second quarter of 2018. DTE customers will begin seeing reduced costs as soon as May, depending on MPSC approval, company spokeswoman Carly Getz said. She said the reductions are retroactive so customers will ultimately receive savings dating to Jan. 1. DTE serves 2.2 million electric utility customers and 1.3 million natural gas customers in Michigan. Consumers serves 1.8 million electric utility customers and 1.8 million natural gas customers.

Snyder: Don’t cut taxes at future’s expense

Gov. Rick Snyder staked a legacy claim in his final State of the State address last Tuesday: Turning around a once debt-ridden state government beset by financial crises with a businesslike approach to reducing liabilities and focused on long-term economic growth. In doing so, the outgoing governor used an analogy of parents sacrificing for their children in an attempt to warn fellow Republicans against rushing to slash taxes ahead of the November election. “We have a broken culture in our

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Michigan Gov. Rick Snyder delivers his State of the State address to a joint session of the House and Senate last week. Goals for his last year in office include proposing a “Marshall Plan” to develop talent — which he plans to detail in coming weeks.

political world where it’s OK to say we can spend money or we can cut taxes and do that now for short-term benefit, and leave the bill for the kids,” Snyder said during the televised address. “Fiscal responsibility” was a major theme of Snyder’s last speech before a joint session of the Michigan House and Senate as he highlighted accomplishments during his seven years as governor and laid out a general game plan for his final 11 months in office.

Snyder touted reducing the state’s long-term liabilities for government employee retirement benefits by $20 billion through a series of sometimes controversial reforms. The governor also highlighted a turnaround in the state’s “rainy day” savings account — from a mere $2 million to nearly $900 million today. Snyder used the speech to issue a warning of fiscal restraint on tax cuts amid a brewing political fight with fellow Republicans, including the

RUMBLINGS

WEEK ON THE WEB

man who wants to succeed Snyder in the governor’s office. Snyder and the Republican-controlled Legislature have been increasingly at odds in recent weeks over tax policy, as some lawmakers want to create new $100 tax credits for seniors and children to offset perceptions that only businesses have benefited from Snyder’s tax plans. The governor is also planning a big push next month to get the Legislature to fund his “Marshall Plan for talent” and the largest increase in K-12 school operations funding “in the last 15 years.” Snyder said the “Marshall plan” will “break down the walls” between educational institutions and businesses. He called for more “teamwork” in the training of skilled workers. “This is going to lay the groundwork for a new way of producing talent in the state of Michigan,” he said. “It will lead the world in this thought process.”

Know someone that has what it takes to join this elite group? Submit a nomination today at crainsdetroit.com/nominate Nomination deadline extended to February 9!

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NONPROFITS

As leadership shifts, Focus: Hope looks to get leaner

HOSPITALITY

NONPROFITS

Funding of programs for homeless investigated By Sherri Welch swelch@crain.com

By Sherri Welch swelch@crain.com

Focus: Hope is finalizing a deal to sell its former headquarters building on its northwest Detroit campus as part of a plan to retool the 50-year-old nonprofit. Interim CEO Vernice Davis Anthony declined to identify the buyer on Friday but said the deal, which is set to close by the end of the first quarter, is good news on Need several fronts. to know “It’s a way to JJFocus: Hope reduce some of finalizing deal to the overhead that sell headquarters is not supported building financially, and it will generate revJJDeal will bring enue,” she said. new revenue while “The other adlowering overhead vantage is we will JJComes as have a thriving nonprofit is community partretooling its costs ner right here on and refocusing Oakman (Bouleprograms vard).” Anthony, a Focus: Hope board member for the past nine years and the former president and CEO of the Greater Detroit Area Health Council, was named interim CEO Friday. She steps in for Jason Lee, who is leaving in February after a year and a half to join Detroit Employment Solutions Corp. as the first executive director of the city’s summer jobs program, Grow Detroit’s Young Talent. Lee’s announced departure comes on the heels of former CFO Ollette Boyd leaving last Friday, after more than six and a half years with the nonprofit. The management shifts follow Focus: Hope’s struggles to right its financial house and put in place sustainable programs that are relevant to its mission. Many nonprofits with a rich history like Focus: Hope tend to get mission creep at some point, said Jay Craig, president and CEO of Meritor Inc., who served on its board for four years before being named chairman last May. “We have made some changes, and there are more to come that we believe will put Focus: Hope not only on stable financial footing, but make … (us) more focused on the direct mission,” Craig said. “We believe ... the mission of social and racial justice ... is just as important today as it ever was.”

Financial stability In order to be true to that mission, SEE LEANER, PAGE 17

quest for an interview, deferring to the Jan. 15 statement. High costs have plagued the chain in the past. In its most recent quarterly report, among the cost-cutting moves the company cited were reducing marketing spending, cutting labor costs and keeping capital expenditures at a “maintenance” level. Losses have been steep. For the first nine months of its fiscal 2017, Bagger Dave’s reported a net loss from continuing operations of $5.54 million on revenue of $13.69 million. After its most recent slew of closings, the restaurant chain is down to just seven locations in Michigan: Novi, Chesterfield Township, Berkley, Bloomfield Township, Cascade, Birch Run and Grand Blanc, the release said. It will also continue to operate two locations in Ohio and one in Indiana.

The city of Detroit is looking into the process used to allocate about $25 million in annual federal dollars to the homeless providers that make up the Detroit Continuum of Care, in the wake of allegations of self-interest and a lack of transparency. Arthur Jemison, director of housing and revitalization for the city, is leading the review to ensure the awards process is transparent and aligns with the letter of the law and the CoC’s own charter. He’s also looking at the effectiveness of the Arthur Jemison: Homeless Action Leading review of Network of De- awards process. troit as the lead agency for the De- Need troit CoC, the systo know tem of nonprofit JJCity of Detroit homeless providreviewing ers for Detroit, Hamtramck and allocation process Highland Park; for $25 million in the Coordinated annual federal Assessment Mod- homeless funds el, which is used JJThe city invests by the continuum about $5 million to refer each each year to fund homeless person homeless outreach to an agency for JJReview follows assistance; and whether there is a public call for an long-term strate- investigation gic plan to guide services and allocations. As he completes the review, Jemison said he’s asked Meghan Takashima, homelessness solutions director for the city, to resign as chair of the CoC board in order to ensure an objective assessment. Takashima and another representative from her team will remain on the CoC board, however, filling two city seats provided for in the organization’s charter. Jemison expects to wrap up his investigation in February and to provide Detroit Mayor Mike Duggan with his findings and any recommendations by March. While acknowledging the work homeless providers are doing in Detroit, Jemison said he’s definitely seeing some issues as he learns more about the current system and process. The city invests about $5 million each year to fund homeless outreach on Detroit’s streets and other programs such as permanent housing and prevention.

SEE LOSSES, PAGE 19

SEE HOMELESS, PAGE 18

CRAIN’S DETROIT BUSINESS

The Bagger Dave’s restaurant chain is down to just seven locations in Michigan. The location in Woodhaven closed in 2017.

Bagger Dave’s shutters 5 more stores as it works to stem losses By Annalise Frank afrank@crain.com

Bagger Dave’s Burger Tavern Inc. has closed five more locations as it works to stem losses amid what it calls a decline in casual dining. The burger-and-beer restaurants in Canton and Shelby townships, East Lansing, Grand Rapids and Traverse City closed Jan. 15. The closings are another sign of trouble for the company, which spun off from Southfield-based Diversified Restaurant Holdings in late 2016 as a separate company and has gone through a series of restaurant closings as it tries to stem steep financial losses. Launched in 2008 as part of Diversified, Bagger Dave’s expanded rapidly from its first restaurant in Berkley, despite launching into the teeth of the Great Recession. Three years ago, the company had 26 Bagger Dave’s restaurants. Now, it’s

Need to know

JJBagger Dave’s closed five more

locations

JJCanton and Shelby townships restaurants have shuttered JJTraverse City-based company cites decline in casual dining industry

down to just 10. The continued downsizing comes after Bagger Dave’s, now based in Traverse City, closed three of its locations in Michigan in July and at least eight others — including in downtown Detroit — before the end of 2015. “We have worked diligently over our 10 years in business to operate efficiently and aim to continue to strengthen our brand, despite the challenges of a recession impacting the casual dining industry,” CEO Michael Ansley said in a news release. The company declined Crain’s re-

MUST READS OF THE WEEK ‘Detroit Rising’ podcast Bamboo Detroit co-founder sees changes in the downtown Detroit office space landscape. Page 7

Fournier: Are we slipping back into old ways?

Gilbert writes of the ‘elephant in the room’

‘Big 4’ trotted out a painfully familiar playbook in their chat last week. Page 8

Quicken Loans chief blames Amazon HQ2 loss partly on Detroit’s long-suffering reputation. Page 12

Changes at the Leland Building to get $120 million renovation, be converted to 339 apartments. Page 4

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The former Leland Hotel in Detroit, which opened in 1927, is expected to get a $120 million-plus renovation and 650-space parking deck for 339 residential units.

The Leland to get $120M renovation, be converted to 339 apartments By Kirk Pinho kpinho@crain.com

Cool Places to Work in Michigan returns in 2018. This prestigious program recognizes employers that go the extra mile to make their employees feel appreciated – as judged, in part, by the employees themselves.

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The former Leland Hotel in downtown Detroit is expected to undergo a $120 million-plus renovation that will convert the building into a mix of 339 affordable and market-rate apartments and add a 650-space parking deck. Some details of the planned project, long discussed privately, are spelled out in a request for proposals obtained by Crain’s last week. The Leland, which now has about 300 apartments and extended-stay hotel rooms at 400 Bagley Ave. at Cass Avenue, is 22 stories with 372,000 square feet, about 91,300 of which are commercial, according to the RFP. It was built in 1927 and is on the National Register of Historic Places, according to Historic Detroit, which chronicles Detroit building history and architecture. Construction is expected to begin in September and wrap up by March 2020, the RFP says. Shane Napper, president of construction for Grand Rapids-based Rockford Construction, the development manager on the project, said there are about 150 residential ten-

Need to know

RFP says hotel will be turned into 339 apartments J

J Construction to begin in September, finish in 2020, RFP says J Building was built in 1927 and is on National Register of Historic Places

ants in the building, which was designed by C.W. and George L. Rapp. Financing is planned from federal Low Income Housing Tax Credits; New Market Tax Credits; federal historic tax credits and other sources, Napper said. The RFP also says that commercial and retail tenants — City Club and a diner — will remain in the building during construction. Currently vacant residential units will be renovated, existing tenants will be moved into those renovated units, and then their vacated units will be renovated. “We will not be moving out any existing tenants. We will be keeping this building in a great occupied shape,” Napper said. Approximately 20 percent of the 339 units are expected to be for affordable housing, with some of those

devoted to residents making 50 percent or less of the area median income. Responses to the RFP are due by Feb. 2 to Rockford Construction. The GC contract is expected to be awarded between Feb. 28 and March 9, according to the RFP. If completed, the redevelopment would be one of several large-scale projects planned for the area. The Ilitch family has fielded responses to an RFP for the Fine Arts Building facade on Adams Street and plans another six residential developments and redevelopments with nearly 700 units, and construction on a new 288-unit building has begun on the site of the former Statler Hotel at Washington Boulevard and Park Avenue. Michael Higgins has owned the Leland Hotel building for years through the Leland House Limited Partnership Co., which was registered in 1980. Detroit-based Kraemer Design Group is the project architect and engineer, according to the RFP. Kirk Pinho: (313) 446-0412 Twitter:@kirkpinhoCDB

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Comerica Bank extends stadium naming-rights deal By Bill Shea

bshea@crain.com

Dallas-based Comerica Bank said Friday that it will exercise an option to extend its Comerica Park naming rights deal an additional five years, taking it through 2034. The original deal, signed between the Detroit Tigers and the bank when it was still based in Detroit in 1998, is a 30-year contract valued at $66 million that began in 2000. It’s unclear if the Tigers will get additional annual money out of the extension. The current Need deal is estimated to know at $2.2 million anJ Comerica Bank nually, and was extends naming set to expire Dec. rights deal with 31, 2029. Detroit Tigers The naming rights extension J Deal now was announced extends through Friday afternoon 2034 by Comerica J Financial terms Bank-Michigan not disclosed President Michael Ritchie during the Detroit Tigers Winter Caravan stop at Comerica Bank’s Auburn Hills Operations Center. The extension option was available under the terms of the initial agreement, the bank said. A company spokeswoman said the bank opted to trigger the option now as a pro-Detroit business decision. “We decided to exercise it now as a showing of support for Detroit and the Detroit Tigers,” Kathy Pitton, a vice

Comerica Park, publicly owned by the Detroit-Wayne County Stadium Authority, opened in 2000 at a cost of $326 million.

president of communications for Comerica, said via email. “Our Comerica Park sponsorship has increased our name recognition in our primary markets as well as across the country. It’s also given us an opportunity to deepen our relationships with customers and to support the revitalization of the city in which we were founded almost 170 years ago.” The Tigers’ naming rights deal is modest compared to what companies have been willing to pay to put their names on sports venue in the past 20 years. Most recently, Toronto-based Scotiabank agreed to pay $639 million over 20 years for the right to change the name of Toronto’s Air Canada Centre to Scotiabank Arena, home of the Toronto Maple Leafs and Toronto Raptors, according to Sports Business Daily. That gives the parent company

of the two teams, Maple Leaf Sports & Entertainment, nearly $32 million in annual average value under the deal. Air Canada’s naming rights deal was valued at $1.5 million annually over 20 years. Hockey and basketball arenas tend to have more costly naming rights deals because the venues also are used regularly for concerts and nonsports events, while baseball stadiums are mainly used for 81 regular-season home games. Comerica Park over the years has hosted the occasional concert — Journey, Def Leppard and the Zac Brown Band will play at the stadium this July — and rare non-Tigers sports events such as soccer and ice hockey games. The most lucrative stadium naming rights deal for an MLB club is the $400 million over 20 years the New York

Mets are getting from New York Citybased Citigroup Inc. for 2008-28. The most recent baseball naming rights deal is the 2017 contract between the Atlanta Braves and Atlanta-based SunTrust that has the bank paying the team $250 million from 2017-42. Little Caesars Arena, which opened in September as home of the Ilitch-owned Detroit Red Wings and the independently-owned Detroit Pistons, has a 20-year, $120 million naming rights deal with the pizza chain founded by Mike and Marian Ilitch in 1959. The venue functionally serves as a marketing tool for another part of the same family’s business empire at a cost of $6 million a year. The money is paid by the pizza chain to the Ilitch-owned entity that runs the arena on behalf of the Detroit Downtown Development Authority that owns the building. Under Olympia’s concession agreement to run Little Caesars Arena, it keeps all revenue from the building’s 200-300 events a year, including naming rights. Comerica Bank in 2016 signed on as the sponsor of one of the arena’s premium clubs for an undisclosed sum. Comerica Park, publicly owned by the Detroit-Wayne County Stadium Authority, opened in 2000 at a cost of $326 million. It was financed via $86 million in stadium authority bonds, paid off by rental car and hotel room taxes approved by Wayne County voters in 1996, along with $40 million from the Downtown Development

DISCOVER THE BLUE WATER BRAND

PANEL: THE SKILLED TRADES GAP A focus by the state of Michigan on four-year degrees has left an enormous shortage in the skilled trades. What’s the right mix and how do we get there?

Crain’s NEXT is a new series of thought-leadership events aimed at discovering “What’s NEXT?” within key areas of the state.

Feb. 15, 2018 9:30 A.M. – 12 P.M.

Blue Water Convention Center, 800 Harker Street, Port Huron

PANELISTS:

Julie Armstrong, Chief Academic Officer, St. Clair County Community College Jennifer Montgomery, President, McLaren Port Huron Hospital Donna Russell-Kuhr, President/CEO/Co-Owner, PTM Corp.; President, Economic Development Alliance

Tickets: $40

Authority, $55 million from the Michigan Strategic Fund and $145 million in private financing by the Ilitch family (that didn’t include Comerica Bank at the time). The Tigers pay the stadium authority $1 a year under a 35-year lease, then $1 million annually for each of six 10year lease extension options exercised. Comerica Bank has been a longtime financier for the Ilitch family’s business interests. Most recently, Ilitch-owned Olympia Development said on Nov. 1 they had paid off the $200 million worth of 30-year non-taxexempt bonds, bought by Comerica Bank when issued in 2014, that financed some of Little Caesars Arena’s $863 million construction cost. Olympia ended up drawing only $188.5 million of the Series B bonds, according to information provided by the DDA. Comerica, which has $71.6 billion in assets, has 437 U.S. banking centers, including 194 in Michigan. It was founded as the Detroit Savings Fund Institute in 1849, and relocated to Dallas in 2007. Comerica has sports naming rights deals with the Detroit Lions for the Comerica Gridiron Club and Suites that were created in 2017 as part of the football team’s $100 million stadium renovation. Financing wasn’t disclosed for that deal, which includes separate VIP entrance lane for Comerica customers using the club and suites. The bank also has a sports marketing sponsorship with the Belle Isle Grand Prix.

PANEL: THE BLUE WATER BRAND Branding is important, and the Blue Water region of St. Clair County has a strong one. But what’s the best way to leverage strengths when cities, regions and the state as a whole each have their own branding strategies? How can we all work together? PANELISTS:

Jeff Bohm, Commissioner and Board Chairman, St. Clair County Kathy Vertin, Co-owner, Riverbank and Snug Theatres and Inn on Water Street Mark Walker, Organizer, House Committee for the National Antique and Classic Boat Show; Chairman, Michigan Mutual, Inc. Kelly Wolgamott, Director of Travel Marketing, Pure Michigan

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OVER 150 YEARS.

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Jennifer Foster (left), owner of Catalyst Media Factory, and Bamboo Detroit co-founder Mike Ferlito talk to Crainâ&#x20AC;&#x2122;s Detroit Business Senior Reporter Chad Livengood about how Bambooâ&#x20AC;&#x2122;s co-working shared office space model works during a Jan. 4 taping of the Crainâ&#x20AC;&#x2122;s â&#x20AC;&#x153;Detroit Risingâ&#x20AC;? podcast at Bamboo Detroit at 1420 Washington Blvd.

Bamboo Detroit co-founder sees changing office space landscape When Jennifer Foster needs assistance serving a clientâ&#x20AC;&#x2122;s needs for her small public relations and social media business, help is usually right outside her one-room office door at Bamboo Detroit, a co-working space in downtown Detroit. â&#x20AC;&#x153;If you needed anything, you just had to stand up and ask and say, â&#x20AC;&#x2DC;Hey, Iâ&#x20AC;&#x2122;m looking for somebody that knows about such and such.â&#x20AC;&#x2122; And you built an instant network,â&#x20AC;? said Foster, owner of Catalyst Media Factory. Catalyst Media Factory is one of 200 businesses ranging from oneman bands to 10-person companies that use Bamboo Detroitâ&#x20AC;&#x2122;s two floors of open and private office space in the historic Julian C. Madison Building at 1420 Washington Blvd. Foster and Bamboo co-founder Mike Ferlito talked about how the shared office space model works in an interview for the Crainâ&#x20AC;&#x2122;s â&#x20AC;&#x153;Detroit Risingâ&#x20AC;? podcast at Bamboo. For Foster, being in Bamboo has given her a coveted downtown Detroit mailing address and access to a stream of potential clients â&#x20AC;&#x201D; small startup businesses and nonprofit organizations that also are members of Bamboo. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re very casual â&#x20AC;&#x201D; we wear jeans and T-shirts. We donâ&#x20AC;&#x2122;t spend money on expensive suits,â&#x20AC;? Foster said. â&#x20AC;&#x153;We donâ&#x20AC;&#x2122;t spend it on expensive office space, but we have good space. And it certainly suits our needs.â&#x20AC;? Companies using Bamboo include businesses working in the fields of construction, real estate, investing, lending, information technology, public relations, nonprofits

alize that their employees want different atmospheres.â&#x20AC;?

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â&#x20AC;&#x2DC;Detroit Risingâ&#x20AC;&#x2122; â&#x20AC;&#x153;Detroit Risingâ&#x20AC;? is a weekly Crainâ&#x20AC;&#x2122;s podcast on businesses, entrepreneurship and economic and workforce development in Detroit that is broadcast each Monday at about 12:42 p.m. on â&#x20AC;&#x153;Business Rapâ&#x20AC;? on WQTX 92.1 FM in Lansing and is published on crainsdetroit.com/DetroitRising on Tuesdays. You can also listen to all our podcasts by subscribing on iTunes, Apple Podcasts or anywhere else you get your podcasts.

and various business support services. Ferlito, a partner in a family real estate firm called The Ferlito Group, believes co-working spaces like Bamboo and WeWork will become more prevalent in downtown Detroit as office space becomes scarce and rents rise. The ability to work remotely in a collaborative environment also is appealing to younger workers, he said. â&#x20AC;&#x153;I think the whole office space in the real estate sector is going to change in the next 10 years,â&#x20AC;? Ferlito said. â&#x20AC;&#x153;Companies are starting to re-

â&#x20AC;&#x153;If you needed anything, you just had to stand up and ask and say, â&#x20AC;&#x2DC;Hey, Iâ&#x20AC;&#x2122;m looking for somebody that knows about such and such.â&#x20AC;&#x2122; And you built an instant network.â&#x20AC;? Jennifer Foster

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C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 9 , 2 0 1 8

OPINION COMMENTARY

After failed Amazon bid, are we back to our old ways?

hen L. Brooks Patterson stood on wobbly, injury-wracked legs for the Pledge of Allegiance last week, Detroit Mayor Mike Duggan pressed his hand on the Oakland County executive’s back, supporting a fellow pol who isn’t always supportive. Patterson and Duggan stood together, hands over hearts, alongside Macomb County Executive Mark Hackel and Wayne County Executive Warren Evans — the “Big Four” of metro Detroit politics. The picture of comity. Then things went to hell. After Hackel helped Patterson back into his seat onstage at their annual Detroit Economic Club appearance at Cobo Center, moderator Carol Cain opened with a broad question about the future of mass transit in metro Detroit — an issue tinged with racial and regional animus that is stifling economic growth. “Brooks,” she said, “let me start with you.” Patterson chucked, “Whoa.” The audience laughed, knowing Cain had put the suburban instigator on the spot. Patterson continued, “We’re still in the middle of that debate.” The Oakland County executive, who withheld his support of the failed 2016 regional transit plan, said the “Big Four” planned to take a month or two to survey their residents “almost door-to-door” and then come together to decide next steps. “But right now,” he said, “we don’t have a plan.” Duggan smiled. Or was it a grimace? It was the Detroit mayor and billionaire Dan Gilbert who led the charge to bring Amazon’s $5 billion second headquarters to the region. The Seattle-based retail giant cited a lack of talent and transit in rejecting metro Detroit’s bid last week. Hackel spoke next. After com-

RON FOURNIER Publisher and Editor

plaining about the region’s roads, he suggested that technology would be the mass transit elixir — autonomous vehicles shuffling people to all points across the three counties. Hackel said, “We need to figure out whether we want to lag behind other regions” by focusing on “buses and rails.” Duggan grimaced. Or was it a scowl? The mayor wants a mass transit system now. He doesn’t want to wait on Patterson’s polling or Hackel’s hopes. Privately, he’s been badgering both men to lead — to persuade their suburban constituents that Detroit isn’t a dangerous threat, but is a vital part of their livelihoods and lives. “I just think as a region we’re taking a much too casual attitude for something that’s critical” for competitiveness for jobs, he said. Calmly and politely, Duggan made the case: Amazon, Foxconn and other companies that jilted Detroit say the region needs more engineers, technologists and skilledtrade workers — and those employees need more ways to get to and from their jobs. Young workers, the backbone of any city’s future, don’t want to be tied to their cars, and millennials want to live downtown, or at least be able to visit the urban core. When he pitched Foxconn to come to Detroit, “they probably spent an hour with me on the bus

JEFF A. KOWALSKY/DETROIT ECONOMIC CLUB

Macomb County Executive Mark Hackel; Oakland County Executive L. Brooks Patterson; Detroit Mayor Mike Duggan; and Wayne County Executive Warren Evans address regional issues Tuesday at the packed Detroit Economic Club meeting at Cobo Center in Detroit.

routes,” Duggan revealed. The region’s lack of mobility “is being used against us by other cities in the Midwest every single day.” He rejected Hackel’s fears that Macomb County would be a “donor county” if a regional plan makes the November ballot. “Nobody is talking about taking the lion’s share of money out of Oakland and Macomb or western Wayne and putting it somewhere else,” he said. Attacking another suburban red herring, Duggan said there will be no expensive light rail system. “We’re not talking about running rail lines out to Oakland and Macomb,” he said. “That’s not in this conversation.” Evans took a jab at Hackel. “If we sit here waiting for the ultimate tech-

It is a different world L

ast week, I was in Washington, our nation’s capital, and could not help but think that I had gone to another country. I will be the first to admit that in some areas, the federal government is needed to take care of the things that our cities and states can’t do. But I can’t help but feel a real disconnect between Washington and the rest of the country. I often muse as to whether we would be better off if we did not disperse our federal government all across the country. Maybe have our Defense Department headquartered in South Dakota and our State Department based in Nashville. Everyone who lives and works in Washington has the distinct feeling that the sun rises and sets in D.C. I get the feeling that those thousands of government employees have no idea that there is a Detroit or Mid-

KEITH CRAIN Editor-in-chief

west or anywhere outside the Beltway. It is eye-opening to realize that this industry, the federal government, takes up everyone’s thoughts all day, every day. These same folks make decisions that impact all of our lives, all the time. Unlike Congress, whose members are supposed to return home to their districts every so often to keep some idea of what is going on in the

nology,” the Wayne County executive said, “I guess we’ll be waiting to fly like the Jetsons.” He noted that the region’s leaders have been promising a mass transit system since the 1960s — when the futuristic cartoon first aired. So what happened to our hopes for a new future? What happened to our hopes that the courtship of Amazon had created a new model for cooperation? While the region came up short, the Detroit-Windsor campaign was creative and inspired, the work of dozens of leaders from throughout metro Detroit, including the “Big Four,” who largely set aside egos and old fights. Watching the “Big Four” play small ball, you couldn’t help wonder whether that magic was just for the

moment. Are we back, already, to our old ways? Duggan recalled working with Patterson on a 1995 SMART millage. “I’m hoping the Brooks Patterson I knew in 1995 is going to sit in the room with us over the next 45-60 days.” Will a joint mass transit plan be ready for the November ballot? “Personally, I’m optimistic,” Duggan replied, “but maybe my buddy will shoot it down.” He smiled and nodded at Patterson. 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.

LETTERS real world, many federal employees never leave Washington. Our founding fathers had no idea what sort of monster they created. Tens of thousand of unelected government employees working away, with little or no input from anyone outside Washington. It smacks a bit of 1984, all these buildings filled with thousands of humans. The federal payroll must be mind-boggling. Those of us out in the country often suggest that it is time to “drain the swamp.” Probably not a bad idea, but essentially impossible. Sure, it is important for us to visit Washington to try and grasp what is or is not going on. But maybe it would be more important for our federal employees to leave Washington and visit the rest of the nation. Who knows, they might actually learn something.

Time’s up for Joel Ferguson To the editor: Last week’s editorial, “MSU board fails in its most vital duties”, I suspect, was met with mixed reviews. Some readers will agree wholeheartedly, while others will take exception to the inference that two trustees being over 80 are not capable of providing sound judgment. Well, to add some credence to that comment, we recently heard from oldster Trustee Joel Ferguson who implied that there are also other things going on at MSU other than the Larry Nassar debacle. Attribute it to Ferguson being out of touch with all the impact statements that have gone on for weeks or for his being totally tone deaf to the seriousness of the statements from the abused and assaulted

young girls. Hearing his comments reminds me of a Hall & Oates song where one of the verses is “You’re out of touch — and I’m out of time.” Yes, Ferguson is out of touch with reality, and we as a concerned community are out of time listening to his insensitive ramblings. A recent apology from Ferguson fell on our deaf ears! Joel, as long as you are making utterances, can you say “resignation” for yourself, because your time is up! Bill Kalmar Lake Orion

Send your letters: Crain’s Detroit Business will consider for publication all signed letters to the editor that do not defame individuals or organizations. Letters may be edited for length and clarity. Email: rfournier@crain.com

C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 9 , 2 0 1 8

No-fault needs reform, but current package doesn’t deliver it

n 1973, the Michigan Legislature adopted no-fault auto insurance with the promise it would lead to lower auto insurance rates for everyone by taking attorneys and expensive litigation out of the system. No-fault has not delivered on its promises. Over the past 44 years, health providers, trial attorneys and special interest groups have caused the system to crumble. For decades, Lansing has failed to fix it, and unless a fix comes soon, a collapse of the system is inevitable. Last fall, the Michigan House of Representatives failed to pass House Bill 5013. While it was not a perfect bill, it was a plan that really began to address the real issues plaguing our no-fault system. Since that bill’s failure, residents across the state have been hearing about an alternative 11-bill package, which has been labeled “The Fair and Affordable NoFault Reform Package” (FANRP). Unfortunately, some individuals and special interest groups have been spreading misinformation and untruths about this package of bills and it is time to set the record straight. The FANRP was written and promoted by a special interest group whose members are comprised of health providers, trial attorneys, and other groups which profit directly from Michigan’s current system. For decades, this organization has intentionally misrepresented information about proposed auto no-fault reform legislation to scare drivers and accident victims into opposing changes to our no-fault system, in order to protect their profits. Now, as they see the tide of public opinion supporting changes to the system, these special interests have decided to promote what amounts to sleight of hand at best. Much of the package will actually further enshrine into law the very things making Michigan’s insurance the most expensive in the nation while protecting and fattening the golden goose that has made hospitals, health providers and trial attorneys wealthy. Multiple sources have reported that hospitals and other medical providers demand auto accident victims pay medical fees three or more times higher than their other patients for the exact same services. Auto insurers are paying an average of $3,259 for an MRI when Medicare patients pay $484 for the same MRI. The FANRP would put these outrageous medical bills into state law. In some cases, the proposal would require auto insurers to pay more than they are paying now for medical services. The plan also seeks to encourage abuse and waste by requiring insurers to pay for claims even when the consumer knowingly and willingly committed fraud when purchasing the insurance policy. The package also triples the time an individual would have to file a claim and drastically expands the services insurers must pay for. These bills would also socialize the cost of providing auto insurance in Detroit by prohibiting insurers from using common-sense rating factors to base policies upon risk. These factors, which are used in almost every other state across the nation, would cause every driver outside of the city of Detroit to instantly pay more for auto insurance. Under the current system, trial attorneys receive one of every three dollars awarded in an auto no-fault

OTHER VOICES Lana Theis

lawsuit. Auto no-fault lawsuits now comprise over 45 percent of all circuit court cases statewide and that percentage is increasing. The special interests’ plan would encourage even more lawsuits by increasing the

amount trial attorneys could receive from their clients. As chair of the House Committee on Insurance, I adamantly oppose this package of bills as I do anything that would increase our insurance rates. The plan would cause auto insurance premiums to skyrocket even more and fatten the profit margins for trial attorneys and health providers. Passing legislation which encourages insurance fraud, mandates additional coverages and payments and requires insurers to pay three to four times more for medical procedures will not fix our no-fault system. These bills do not address the real issues with our current no-fault sys-

The plan would cause auto insurance premiums to skyrocket even more and fatten the profit margins for trial attorneys and health providers. tem, which are a lack of choice for drivers, insurance fraud and over-billing by medical providers. I have made it clear that my No. 1 priority in Lansing is to reform Michigan’s auto no-fault system. Wealthy

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special interest groups are angry that I will not support their disingenuous package of bills helping them fatten their golden goose. As I have said from day one, the reforms I support must address the true costs behind the system and they must result in lower premiums for all drivers across Michigan. I will continue to work with my colleagues in both the Michigan House and Michigan Senate on no-fault reforms over the coming months. State Rep. Lana Theis represents Brighton and the townships of Brighton, Genoa, Green Oak, Hamburg and Putnam.

C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 9 , 2 0 1 8

FOCUS FINANCE

GETTY IMAGES/ISTOCKPHOTOS

How tax reform could affect your small or mid-sized firm By Rachelle Damico

Special to Crain’s Detroit Business

The Republican tax reform plan, signed into law by President Donald Trump in December, aims to encourage economic growth by adjusting how small and mid-sized businesses and corporations are taxed. Many American companies will see significant tax cuts, as well as other benefits that can help drive growth. “I think we’ll see a lot of companies investing in higher salaries and benefits, because in such a tight labor market they’re all struggling with how to attract talent, and when that’s happening it’s big pressure on salary and benefits,” said Rob Fowler, president and CEO of the Small Business Association of Michigan. However, the benefits for small and mid-sized businesses are complex. Rather than lowering the tax rate on all pass-through companies, the final bill allows pass-throughs to deduct up to 20 percent of their income based on what type of company they are. “I could see some companies examining whether or not they are organized the best way,” Fowler said. “A

Need to know

Most small and mid-sized businesses will see a tax cut under the new law

Pass-through businesses

J Pass-through companies can deduct 20 percent of income J Some things to think about if you’re considering changing your business structure

lot of people organized their company the way they did because of the federal tax law.” Kurt Piwko, partner at accounting and business advisory firm Plante Moran PLLC, said many of his business clients view the law favorably, but are confused as to how it will affect their company. “The reality is, this law is one of the most complex in quite a long time given the variety of areas it touches,” Piwko said. “Business owners should be reaching out to their tax professionals, accountants, attorneys and whomever their source of tax knowledge typically is.” Here’s what business owners should know about how the tax reform law will affect their small or mid-sized company.

The vast majority of businesses in the U.S. — 95 percent of them in 2014, according to the Treasury Department — are so-called “passthrough companies” whose profits are taxed according to the owner’s personal rate. Companies organized as sole proprietorships, LLCs and partnerships are all passthrough companies. Under the new tax plan, those businesses can deduct 20 percent of pass-through income. That means the IRS will only tax 80 percent of a business owner’s personal income. Margaret Amsden, shareholder at Clayton & McKervey PC, leads the firm’s tax department and specializes in business tax. She said the effective tax rate on individuals has also decreased, and rate brackets have become broader. Income for individuals are taxed on a graduated scale. For example, Amsden said, if an individual makes about $75,000 a year of passthrough income, ignoring any other income or deductions, they would get a deduction for $15,000 ($75,000

Rob Fowler: Expects higher salaries, benefits.

Kurt Piwko: Law is one of most complex.

x 20 percent) resulting in a taxable income of $60,000. “If you have somebody who makes the exact amount of income in 2018 as they made in 2017, and all of their deductions are identical, they would pay less in tax because of the rate structure,” she said.

Employee-based companies For employee-driven companies, such as restaurants, manufacturers and distributors, the deduction depends on your payroll, and the 20 percent deduction is limited to 50 percent of your payroll.

Amsden said there are rules surrounding the 20 percent deduction, but generally, most employee-based companies will qualify. “If you’re a small business manufacturer, a small business distributor of products or a retail establishment, (you’re) likely going to get a 20 percent deduction with regard to that income to reduce your effective tax rate,” she said.

Personal service companies Personal service companies, such as real estate agents, attorneys, accountants, brokers and doctors, have a different set of rules. The 20 percent deduction is only available for single taxpayers with income up to $157,500 or married couples filing jointly with incomes up to $315,000. Sole proprietorships, for instance, would not qualify once the income threshold is exceeded. Once the income exceeds the threshold, Piwko said, companies need W-2 wages or assets. SEE TAXES, PAGE 11

C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 9 , 2 0 1 8

TAXES FROM PAGE 10

“Congress made the decision to tie taxes to W-2 wages paid to incentivize businesses to make investments in people or capital,” Piwko said. “If a business makes a lot of money but has no employees and no depreciable assets, in the view of Congress, they do not deserve a tax benefit because they are not viewed as driving economic growth.” Piwko said companies should note that the definition of professional services doesn’t necessary include all personal service-type activities. “A law firm or accounting firm would clearly be disqualified, but a sole proprietor running a delivery business would still be OK,” he said. If you’re not sure whether your business is considered a personal services business, ask your accountant or financial adviser.

New deductions The new tax reform law allows companies to take an immediate first-year deduction on property new to the taxpayer. For instance, a business owner who purchases a used piece of manufacturing equipment for the first time Margaret would qualify for Amsden: a deduction. Companies may Companies automate, invest. can also expense 100 percent of what it costs to invest in new equipment, allowing them to defer any taxes they have to pay. “I think a lot of small and mid-

sized companies may use that as an opportunity to automate and invest in their business,” Amsden said.

Foreign taxation Mid-sized companies that have foreign operations may also see a tax break. C Corporations that own 10 percent or more of a foreign subsidiary will no longer be taxed on dividends received. Also, a new deduction for C corporations is available for income related to the sale and provision of goods and services to foreign entities or for a foreign use, resulting in a preferential tax rate of 13.125 percent. “The calculations and definitions surrounding this deduction are complex and will require some attention before tax payers understand the tax benefit,” Amsden said. Also under the new tax law, untaxed profits of U.S. companies being sheltered in operations overseas — profits that were to be taxed at a 35 percent rate when brought back stateside — will be taxed at a onetime lower tax rate. The new rules call for an 8 percent tax on profits invested in real estate and other hard assets abroad, and 15.5 percent for profits in cash and stock and other liquid assets. After this one-time payment, companies will no longer have to pay U.S. taxes on foreign income, moving to what’s called a territorial tax system. This may not bode well for a lot of smaller companies operating overseas that have been sheltering cash for years — they now must pay up. “Repatriation rules could have a big impact on any small or mid-sized companies that have foreign subsidiaries set up as corporations,” Amsden said. “There’s a lot of $40 million or $50 million manufacturers here

that have opened plants or operations in China or Mexico, and they’re all going to have to address these deemed repatriation rules in the coming months.”

No more entertainment deduction Companies have been able to deduct 50 percent of meals and entertainment in the past. But Amsden said those companies that are accustomed to taking clients golfing will have to take them out for a meal instead, as entertainment can no longer be deducted. “The rule has always been, to deduct there has to be a substantial business conversation,” Amsden said. “In some way that’s kind of the closing of a loophole, because it’s been abused before, but it’s recognizing people are going to do business over lunch.”

Implications The way the law is organized may tempt many businesses to change their entity structure. Since the new tax reform law lowered the corporate tax rate from 35 percent to 21 percent, a common misconception for pass-through entity owners is that they should become a C corporation. Although the change in taxation may sound favorable to many business owners, Amsden said it may not make sense for many companies to change their business structure. “There’s a whole laundry list of things you have to think about today, as well as what you’re going to do in the next five to 10 years, to really be able to say whether or not it makes sense to change your entity structure,” she said. Although C corporations are taxed at a 21 percent rate, Amsden said

PBS President and CEO Paula Kerger to keynote Mackinac conference By Tyler Clifford tclifford@crain.com

Public Broadcasting Service President and CEO Paula Kerger will deliver a keynote address at the 2018 Mackinac Policy Conference, the Detroit Regional Chamber announced last week. Kerger’s speech will focus on how media can foster trust and the need to restore confidence in government, media and business, the announcement said. Her speech will be

Paula Kerger: Will focus on media role

streamed online from the conference, which is set for May 29-June 1 on Mackinac Island. Detroit Public Television President and CEO Rich Homberg praised Kerger as one of the best people to discuss

the topic, which is one of the pillars of this year’s conference. “For 14 consecutive years, PBS and its member stations — including Detroit — have been ranked as the most trusted national institution by independent research,” he said in an email. “Most of those years have been under the wise and progressive leadership of Paula Kerger.” Other speakers scheduled so far include Wall Street Journal columnist and author Peggy Noonan.

Grow Michigan Fund gets two-year extension By Tyler Clifford tclifford@crain.com

State officials and stakeholders have decided to give the Grow Michigan Fund a two-year extension through 2019, the Bloomfield Hillsbased group announced. The fund, which is registered with the state as Grow Michigan LLC, was launched in 2013 as a group of Michigan banks collaborating to help small businesses grow. Since then the MSF and 19 banks have pooled $51.1 million to support $353.2 million worth of expansion projects that have yielded more than 3,000 jobs in the state, the news release said. Grow Michigan has helped entrepreneurs in manufacturing, distribu-

“We have been able to help numerous businesses statewide grow and thrive but there is much more work to be done.” Patrick O’Keefe

tion, transportation, life sciences and enabling technologies to date. “This innovative fund has been a win-win for all involved,” Grow Michigan CEO Patrick O’Keefe said in a statement. He has led the organization since October. “We have been

able to help numerous businesses statewide grow and thrive but there is much more work to be done. This extension will allow us to continue our vital work.” Grow Michigan looks to invest in businesses with the following characteristics: J Profitable with strong management teams J Established relationships with senior leaders J Typical loan size between $500,000 and $3 million J Revenue between $3 million and $50 million with a positive earnings before interest, taxes, depreciation and amortization, or EBITDA J Expanding workforce

many business owners forget C corporations are taxed twice. When C corporations generate income, they are required to file their tax return with the Internal Revenue Service, and profits are taxed at both the corporation’s tax rate and if those earning are paid out to shareholders. “C corporations aren’t necessarily going to give you a lower tax rate,” Amsden said. However, Amsden said companies looking to re-invest profits inside the business will have the second layer of taxation deferred, so it may make sense for them to be a C corporation depending on what a company wants to do with their earnings. “If I can expense 100 percent of what it costs me to invest in new equipment, then I’m going to be able to defer any taxes I have to pay,” Amsden said. “Which means I have more cash flow today to invest in my business.” Many members of SBAM, which has more than 25,000 members countywide, have also expressed confusion given the new tax structure, Fowler said. Before the law had passed, Fowler said SBAM was advocating for parity, in hopes that C corporations and S corporations would have the same rate. “The simplest way would have

been parity so you wouldn’t have companies trying to decide whether they’re organized properly or not,” Fowler said. “There would be no disadvantage one way or the other.” Regardless, Fowler said the majority of SBAM’s members are excited about the tax reform law, and he believes it will help stimulate the economy. “I think it will be very positive for everyone,” Fowler said. “If you’re planning on growing your business, you can’t put (profits) in your pocket and just take a bigger cut — you really have to invest it in your company and in your workforce in particular, because everybody else is going to.” Business owners looking to make sense of the law and questioning whether or not they want to restructure their business should make an appointment with their CPA or other financial advisers. Amsden said financial statement disclosures may be different, so small and mid-sized businesses that have reviewed or audited financial statements should look at how it impacts their balance sheet. There are provisions in the law that can impact what needs to be recorded on the balance sheet. “Slow down, talk to your accountant, consider how it’s going to impact you, and then make decisions on how to go forward,” Amsden said.

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C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 9 , 2 0 1 8

COSTAR GROUP INC.

The Cash City Pawn shop at 1300 Randolph St. downtown Detroit opened in 1992.

Sheldon Stone sold his buildings at 1237 and 1231 Broadway St. in Detroit to Bedrock LLC.

KURT NAGL/CRAIN’S DETROIT BUSINESS

Gilbert adds retail properties to downtown Detroit portfolio By Kirk Pinho kpinho@crain.com

Dan Gilbert’s Bedrock LLC has added two new downtown properties to its ever-growing real estate portfolio: The Cash City pawn shop at 1300 Randolph St. and the J.L. Stone men’s clothing store across the street at 1231 and 1237 Broadway. In a statement, owner Sheldon Stone, 78, said he is retiring and approached Bedrock about purchasing the properties.

Need to know

J Buildings’ owner retiring, approached Bedrock about purchase J Bedrock plans retail, dining in properties J Liquidation sales expected before Sheldon Stone’s businesses close

The sale closed Tuesday for an undisclosed price. “This is not a sad day, it’s exciting to see the rebirth of the city and ev-

erything going on downtown and I look forward to seeing the continued development,” he said. Liquidation sales at both businesses are expected before they close. A time frame for that is expected to be released soon. “We are excited Sheldon approached us about acquiring his properties,” Bedrock CEO Jim Ketai said in an email to Crain’s. “The intersection at Broadway and Randolph is an important one as it relates to the bulk of our footprint as

well as downtown Detroit itself. We are developing plans to bring in several retail, dining and entertainment destinations for the properties to add another few elements to the positive momentum Detroit continues to experience.” The buildings are near Gilbert’s planned redevelopment of the Monroe Block site, which is 3.5 acres. A groundbreaking is expected on the $830 million Monroe Block development this year. The Cash City building is about

4,700 square feet, according to CoStar Group Inc., a Washington, D.C.based real estate information service. The J.L. Stone property is 1,200 square feet, according to CoStar. The building at 1231 Broadway is about 2,000 square feet and 1237 Broadway about 1,400 square feet, a Gilbert spokesperson said. Stone opened Cash City in 1992, and his family owned J.L. Stone; he bought the business in the early 1970s, according to the news release.

Gilbert: Region’s ‘radioactive-like’ reputation factor in Amazon HQ2 “It is clear that we don’t do ourselves any favors by feeding the pessimistic narrative about Detroit and our region, when this view is not anywhere near the balanced, full story. I believe this is the single largest obstacle that we face.”

By Kirk Pinho kpinho@crain.com

Dan Gilbert pushed back last week on assertions about the reasons Detroit and Windsor didn't make a list of finalists for Amazon’s second headquarters, claiming that the city’s “unique Need radioactive-like to know reputational fallJ Gilbert pens 4 out” over the de1/2-page letter cades was “the pushing back on elephant in the one publicly stated room.” reason for In a 4 1/2Amazon’s decision page missive posted to his J Calls for action Twitter account, “now” on mass the billionaire transportation who helmed Desolution in troit’s proposal Southeast to the Internet Michigan retail giant for a J Detroit-Windsor $5 billion investrevealed to not be ment said “it's among HQ2 simply untrue finalists last week that there is a talent crisis or shortage of talent in our region.” Earlier this month, Detroit Regional Chamber president and CEO Sandy Baruah told Crain’s that an Amazon official explained its decision not to include Detroit and Windsor among its finalists for the 50,000-worker HQ2 was because of the region’s transportation system and what Baruah described as Amazon's perception that the region was currently unable to attract and retain the talent it needed to sup-

Dan Gilbert

port HQ2. In the letter, which Gilbert said also was sent to the 60-person Amazon bid committee, the founder and chairman of Quicken Loans Inc. and Rock Ventures LLC said the city’s image likely played a role in Amazon’s decision after “50-60 years of economic decline, disinvestment, municipal bankruptcy, and all of the other associated negative consequences of that extraordinarily long period of time.” “This lingering, negative perception has unfortunately survived our impressive progress over the last several years,” Detroit’s most powerful landlord and developer wrote. “It is clear that we don’t do ourselves any favors by feeding the pessimistic narrative about Detroit and our region, when this view is not anywhere near the balanced, full story. I believe this is the single largest obstacle that we face.” Gilbert also wrote that the region’s mass transportation system needs addressing “once and for all.”

“We need to take investment in transit infrastructure seriously. Companies like Amazon and their employee base require dynamic and reliable transit. If we are determined to attract exciting opportunities to metropolitan Detroit, then it’s time to get in a room and figure it out. Now.” The Detroit-Windsor bid was one of 238 Jeff Bezos’ Seattle-based company received after it issued a request for proposals from cities and regions to woo it for the HQ2 project. The HQ2’s destination is expected to be announced later this year. Over a six-week period beginning Sept. 7, officials from Gilbert’s Bedrock LLC and Rock Ventures, plus the city, Detroit Economic Growth Corp., the city of Windsor, state and private-sector consulting firms put together a 242-page bid book to Amazon. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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CaringForKidsJANUARY.indd 1

There are still a lot of people in Detroit who really don’t know where to go for checkups, dental cleanings or any type of wellness. We were able to give the program around $100,000; I knew it meant an awful lot to them, and that’s when I knew we had something very special. Burns: What are your thoughts about community service? James: How children are shaped is important to them being contributing members of society. We want to make sure they have all the advantages possible. A lot of us on the Leaders for Kids board grew up in positions of privilege; we always had food on the table and had great role models and influences. We can’t assume everyone was brought up the way we were. This is a way for us to be involved in these children’s lives and make sure they are around other positive influences. If you can’t give monetarily you can spend time with these kids who just need someone to care about them. I believe time is just as valuable.

Burns: Tell us about the organization you started, Families Against Narcotics. Davis: About 11 years ago I had a family member facing a serious addiction, and I realized how little help there was for families navigating the system. That was a concern to me because if I was a judge and could not find help, then the average person was going to have no chance finding viable help for someone they loved. That was the beginning of my passion for this. In addition to that, we were seeing in court young people coming in daily with theft crimes. They were good kids. Surprisingly they were honest and said they had drug problems, either prescription or heroin. We decided to do a town hall meeting and bring together people that had been affected to try to talk about the problem. There was a lot of pointing of fingers—at the parents, the schools, the police officers, the judges. And one of our young people said, “We are not getting anywhere by pointing our fingers at everybody; what are we going to do about this?” He suggested that we let young, recovering addicts go into the schools and start talking. The organization grew, and

we now have more than 20 chapters in Michigan and 29 support groups where parents and their kids in recovery or who are still struggling can come and get information and support on addiction and what to do about it and where to go and what to expect. We also started a program called Hope Not Handcuffs where we partnered with 33 police departments. People with addictions can walk into a police department, not get arrested and receive help. Since last February we have placed over 770 people into treatment. (To learn more, visit hopenothandcuffs.com.) Burns: What’s happening in Lansing with these efforts? Davis: I chair the Governor’s Commission on Opioid Addiction and Prevention. We had a number of bills that were being submitted that regulate doctors, making it mandatory that they map every patient. Often people come into my courtroom that are on three different prescriptions but the combination is deadly. We were there to sign those bills with the Lieutenant Governor.

Burns: In reflecting on the many patients, cases and families you’ve seen, what are some of the common threads within children’s health? Forbes: It’s the amazing resilience of children who are innocent and didn’t ask for the difficulties they have, of them being able to overcome the issues they are trying to deal with and still have a smile on their faces. I’ve been to many hospitals but at Children’s Hospital of Michigan, you see children who are very sick, chronically, and just being part of it and seeing how they respond to it and the positive outlook they have on life regardless of the circumstances that have been dealt to them has been an inspiration to me.

Burns: Our Foundation created our first-ever focused areas of support so we can become more proactive seeking out things to support, and one area is cardiology research. What can our foundation do to better support you and your programs as we move forward? Forbes: Through the Foundation, we’ve been able to start the largest interventional pediatric cardiology registry in the world. It’s taken off in such a way that the FDA has come to us because of the registry, saying we want to use you to be the registry for developing pediatric devices in the country and getting approval for devices. Of the procedures we do in the cath lab, 90 percent are covered by 7 procedures. They want us to make modules of each of those procedures and ultimately get those made into devices. It’s the first time the FDA ever approached an institution to do something like this. I ask the Foundation for continued support. We hope to shorten the FDA approval time for devices from five years to one-and-a-half to two years.

1/24/18 2:51 PM

C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 9 , 2 0 1 8

Venture capital investing up in Michigan in 2017 John Egnatios, By Tom Henderson thenderson@crain.com

Venture capital firms invested a total of $339 million in 80 Michigan companies in 2017, ranking the state 20th nationally for total investment. The figure is a substantial rise from the $222 million invested in 2016, according to the Washington, D.C.based National Venture Capital Association and PitchBook Data Inc. As usual, California topped the list with $42.8 billion invested in 2,750 deals. New York ranked second with $12.1 billion invested in 922 deals. Others included Massachusetts, third with $8.8 billion invested in 551 deals; Illinois, No. 4 with $1.9 billion

Need to know

 Venture capital firms invested $339 million in Michigan companies in 2017 

State ranked 20th nationally

California topped list with $42.8 billion invested 

invested in 224 deals; and Washington, fifth with $1.8 billion invested in 377 deals. In the Midwest, Ohio came in at No. 17 with $526.2 million in 141 deals. Minnesota was No. 18 with $493.41 in 87 deals; Indiana, No. 25 with $166.6 million in 84 deals; and Wisconsin, No. 29 with $102.4 mil-

lion in 57 deals. For the fourth quarter alone, Michigan ranked 17th nationally, with $99.7 million invested in 11 deals. That was up from the third quarter, when the state ranked No. 25 with $46.6 million invested in 22 deals. It also marked growth from last year’s fourth quarter, when the state came in at No. 26 with $41.8 million invested in 14 deals. California was No. 1 in the fourth quarter with $12.6 billion invested in 615 deals. Other rankings included New York, No. 2 with $3.3 billion in 219 deals; Massachusetts, No. 3 with $2.8 billion in 132 deals; Florida, No. 4 with $758.8 million in 48 deals; and

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Venture capital firms invested a total of $339 million in 80 Michigan companies in 2017. Pennsylvania, No. 5 with $500.1 million in 43 deals. Other Midwest states were Illinois, No. 6 with $446.9 million in 46 deals; Minnesota, No. 19 with $79.3 million in 14 deals; Ohio, No. 22 with $42.7 million in 29 deals; Wisconsin, No. 23 with $42 million invested in 16 deals; and Indiana, No. 26 with $31.9 million in 16 deals.

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co-founder of Dobbs Furniture, dies at 90 By Annalise Frank afrank@crain.com

John Egnatios, a longtime metro Detroit resident and co-founder of Dobbs Furniture, died Jan. 5 at 90. Egnatios died due to complications from Parkinson’s disease in hospice care in Florida, his son Mark Egnatios said. Egnatios founded Dobbs Furniture with his brother, Eddie, in 1950 and they ran the company for decades, according to his death notice. Egnatios fo- John Egnatios: cused on market- Ran company for ing, sales and decades. legal — he oversaw radio, print and TV ads and even voiced commercials himself, his son said. In 1991, the Troy-based company filed for Chapter 11 bankruptcy. The brothers sold the headquarters and showroom to Art Van Elslander for a Scott Shuptrine Furniture store, Crain’s reported at the time. John Egnatios was born in Venezuela and grew up in Detroit. He lived in metro Detroit until about five years ago, when he moved to Florida full time, Mark Egnatios said. Egnatios dealt in metro Detroit and Michigan commercial and residential real estate development for years. “He never really retired,” his son said. Egnatios is survived by his children John, Diane, Martin, Mike, Roger, Mark and Rick; 10 grandchildren; one great-grandchild; and his longtime companion, Jean. He was preceded in death by his sister, Ellen. Memorial donations can be made to the Boys & Girls Clubs of Southeastern Michigan Detroit chapter.

Nominees sought for Twenty in their 20s Do you know a 20-something to watch? Crain’s Twenty in their 20s recognition program seeks young professionals who are making their marks in the region. This awards program recognizes the hard work of local rising stars and further propels their careers. We’re looking for up-and-comers who are making waves as young professionals within companies, have shown success as entrepreneurs, or have made a local impact in some other demonstrable way. Candidates are not limited to any particular field or activity – besides the corporate world, we consider applicants from creative industries, nonprofits, government and social entrepreneurship. Winners will be profiled in the May 7 edition and honored at an awards event. The nominee must be 29 or younger on May 7, 2018. The deadline for nominations has been extended to Feb. 9. To nominate, go to crainsdetroit.com/nominate.

C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 9 , 2 0 1 8

CALENDAR MONDAY, JAN. 29 Positive Links Speaker Series: Raj Sisodia — The Healing Organization. 4-5 p.m. Center for Positive Organizations. Speaker Raj Sisodia, FW Olin Distinguished Professor of Global Business at Babson College, and the Co-Founder and Chairman Emeritus of Conscious Capitalism Inc., discusses how business can become the primary agent for healing society. University of Michigan Ross Campus. Free. Contact: Jacob Feinberg, phone: (734) 764-0544; email: jafeinb@umich.edu; website: positi-

DEALS & DETAILS ACQUISITIONS & MERGERS J Faurecia North America Inc., Auburn Hills, an automotive supplier, has entered into an agreement for the acquisition of 100 percent of the Swiss company Hug Engineering AG, Elsau, Switzerland, a manufacturer of exhaust gas purification systems that is currently owned by ElringKlinger AG, Dettingen an der Erms, Germany. Hug Engineering will complement Faurecia’s clean mobility business unit with their exhaust gas after-treatment products for high horsepower diesel engines. Websites: faurecia.com, hug-engineering.com, elringklinger.de/en. J David Kramer and Theodore Nittis, insurance professionals and attorneys, have purchased Gemini Risk Partners, which was a division of the Oswald Companies, Cleveland, Ohio, and launched it as an independent professional liability insurance brokerage in Bloomfield Hills, focusing on legal malpractice insurance. Kramer and Nittis were formerly employee-owners at Oswald and will continue their affiliation with the firm for certain insurance business. Websites: geminiriskpartners.com, oswaldcompanies.com. J Geometric Results Inc., Detroit, a portfolio company of Bain Capital Private Equity and wholly owned subsidiary of MSX International Inc., has agreed to acquire the de Poel group of companies, Knutsford, England, U.K. By combining with de Poel, a vendor-neutral managed service provider with its own technology platform, GRI is positioned to provide MSP services to an even broader array of industries. Websites: geometricresultsinc.com, baincapitalprivateequity.com, msxi. com, depoel.co.uk. J Valassis Communications Inc., Livonia, a media and marketing services company, has acquired Maryland Pennysaver, Hanover, Md., which is distributed via direct mail throughout Maryland to over 247,000 households weekly. Websites: valassis.com, mdpennysaver. com.

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Michigan Should Lead the Next Frontier of Innovation. 11:30 a.m.1:30 p.m. Feb. 5. Detroit Economic Club. U.S. Senator Gary Peters will discuss Michigan’s opportunity to become a hub for transformative technologies, including self-driving vehicles, artificial intelligence, and robotics, and the implications these technologies will have on Michigan’s economic future. The Masonic. $45

Kara or Shannon, phone: (734) 4624438; email: ptac@schoolcraft.edu; website: schoolcraft.edu/bdc/about/ ptac The Economy & Workforce: The Reentry Opportunity. 11:30 a.m.1:30 p.m. Feb. 13. Detroit Economic Club. Jeff Korzenik, chief investment strategist/senior vice president, Fifth Third Investment Management Group, on the opioid epidemic as a workforce challenge. Townsend Hotel. $45 members, $55 guest of members, $75 nonmembers. Website: econclub.org

2018 Detroit Policy Conference. 7:30 a.m.-4 p.m. March 1. Detroit Regional Chamber. Conference will focus on creating a culture of civility in Detroit. MotorCity Casino Hotel. $159 members; $235 nonmembers. Website: detroitchamber.com/dpc To submit calendar items visit crainsdetroit.com and click “Events” near the top of the home page. Then, click “Submit Your Events” from the drop-down menu that will appear. Fill out the submission form, then click “Submit event” at the bottom of the page.

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C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 9 , 2 0 1 8

PEOPLE

SPOTLIGHT

BANKING/FINANCE

LAW

Monique DeGrandis to Canadian practice leader, Cole, Newton & Duran CPAs, Livonia, from accountant/ tax analyst, Collins Barrow Leamington LLP, Leamington, Ontario. J Laurie Marshall to principal and senior financial adviser, LJPR Financial Advisors, Troy, from senior financial adviser.

Steven O. Ashton to shareholder, Garan Lucow Miller PC, Detroit and Troy, from partner, Draugelis & Ashton LLP, Clawson. Also, Joseph R. Conte to shareholder from partner, Draugelis & Ashton LLP.

HEALTH CARE

J Tatiana Hernandez to senior program officer, Arts & Culture, The Kresge Foundation, Troy, from arts director, Hemera Foundation, Boulder, Colo. J Dana Nyquist to program manager and grant writer, One Earth Writing, Huntington Woods, from PR associate, Your People LLC,

J Paul Browne to senior vice president and chief information officer, Henry Ford Health System, Detroit, from chief information officer and senior vice president of applied informatics, Tenet Healthcare Corp., Dallas, Texas.

NONPROFITS/ ORGANIZATIONS

Huntington Woods. J Mark Noble to business sales manager, Tamarack Adventure & Retreat Center, part of Tamarack Camps, Bloomfield Hills, from client partner, connected solutions, Verizon, Southfield.

REAL ESTATE J Toni Thwaites to branch manager, Ross Mortgage Corp., Birmingham, from loan officer, John Adams Mortgage Co., Birmingham.

To submit news of your new hires or promotions to People, go to crainsdetroit.com/peoplesubmit and fill out the online form. Please limit submissions to management- or partner-level positions.

New Center Stamping selects new president

New Center Stamping Inc. named Ray Fernandez as its new president. He replaces founder Greg Smith, who will become chairman and CEO of the Detroit-based metal stamping components supplier. Fernandez joins the company after serving as Ray Fernandez president of Tranor Industries LLC in Royal Oak. He brings executive and management experience from roles at Findlay Industries Inc. in Ohio and Delphi Automotive PLC, now Aptiv PLC, where

he oversaw a portfolio of more than $2 billion in business developments. New Center Stamping also announced that Ron Hall Jr. will become vice chairman and retain his role as a member of the board of directors.

CMU president to step down

Central Michigan University President George Ross will step down after eight years at the helm of the Mount Pleasant-based school. Ross, 66, is leaving the role effective July 31, according to an announcement. He was appointed CMU’s 14th president in 2010. Ross, who led the charge to open a medical school at CMU, does not plan to leave the university, though. He said he intends to return to the classroom in 2019 as a full-time tenured professor in educational leadership and accounting.

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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Dean & Fulkerson, P.C. Karen Libertiny Ludden has joined Dean & Fulkerson as a Shareholder, along with her team of 3 senior associates, and will chair the newly-formed Insurance Coverage & Defense Practice Group. Ms. Ludden brings 25 years of handling insurance coverage and defense matters for national insurers and private clients. She litigates and advises clients regarding complex insurance coverage issues arising under commercial general liability, commercial and personal auto, property damage and cyber policies. Sarah J. Brutman has joined Dean & Fulkerson’s Insurance Coverage & Defense Practice Group as a Senior Associate. She concentrates her practice on commercial insurance coverage and liability defense. She handles complex litigation matters in state and federal courts across the country, with an emphasis on property damage, construction and premises liability claims. She routinely conducts examinations under oath for insurance carriers and is an astute analyst of coverage and strategic issues. Lindsey R. Johnson has joined Dean & Fulkerson as a Senior Associate. She focuses her practice on commercial general liability defense, premises liability and third party auto negligence claims. She handles federal and state cases involving the Fair Debt Collection Practices Act and Truth In Lending Act on behalf of lenders and servicers, quiet title claims involving commercial and personal property, condemnation claims, and construction cases involving liens, breach of contract and bond issues. Eric M. Wagman has joined Dean & Fulkerson as a Senior Associate. He concentrates his practice in commercial general liability defense focusing primarily on civil defense litigation, premises liability, trucking accidents, and general negligence. He has experience in commercial litigation including contract disputes and consumer fraud, claims of institutional abuse, professional negligence, work-site accidents and products liability. He also handles complex trust and estate litigation matters.

REAL ESTATE

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Therese P. Agboh

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KIRCO Therese joins KIRCO with over 25 years of experience. She has successfully run her own consulting firm, T. M. Peace & Associates, Inc., for the last 10 years. Her previous roles include Vice President/Chief Learning Officer at the Auto Club Group and First Vice President/Corporate Learning Director at Comerica Bank. Therese is responsible for overseeing KIRCO’s HR functions including recruiting, training and development, benefits, compensation and overall administration and company culture.

Curtis Kaye joined the Miedema Asset Management Group team in October 2017 as a machinery and equipment appraiser. He is a candidate for ASA designation. He brings 25 years of auction experience and a wide range of appraisal experience with him. As a part of the Miedema team, he will focus on machinery, equipment, and other personal prop appraisals . Miedema welcomes Curtis, and looks forward to helping our clients meet their needs with dependable valuations. Located in Clinton Twp, MI

As Chief Legal Officer, Dono leads the internal legal function of Stoneridge, Inc. His experience includes Executive VP, General Counsel and Corporate Secretary at Metaldyne Performance Group and Senior VP, Legal Affairs, General Counsel and Corporate Secretary at Key Safety Systems. Prior to that, Dono served in legal leadership roles at Delphi Corp.; and Wilson, Sonsini Goodrich & Rosati.

KNOW SOMEONE ON THE MOVE? For more information or questions regarding advertising in this section, please call Lynn Calcaterra at (313) 446-6086 or email: lcalcaterra@crain.com

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C R A I N ’ S D E T R O I TCRAIN B U’SSDIETROIT N E SBSUSINESS // J A N U A R Y 2 9 , 2 0 1 8

BEAUMONT FROM PAGE 1

They said a health care building that size sounds more like Beaumont might be considering a shortstay hospital with 24-hour observation beds, a type of facility many health care systems are considering. Beaumont officials, however, said that is not part of their current plans. Adell, owner of The Word Network, said Beaumont’s offer was “not serious” because of its timing just before the holidays and because of a small nonrefundable down payment of $50,000 that was offered. “Eight months ago they were interested in the property, and they were going to give me an LOI then,” he said. “I knew when I looked at it that the LOI was done a long time ago. Then they gave me a day to get back with them.” “If (the down payment offer) was $1.9 million, or 10 percent, I would have given it a harder look ... When I saw that ($50,000), I realized they weren’t serious. That’s a bungalow in Royal Oak.” His real estate brokers in the Southfield office of Los Angeles-based CBRE Inc. countered with a $30 million purchase price, with $25 million for the land and $5 million for the property’s water tower, which bears Adell’s last name. The LOI was sent by Randy Thomas, the president and CEO of Commerce Township-based Insite Commercial who does some brokerage work for the hospital system. The back-and-forth between Beaumont and Adell has been going on for months. In August, Adell said Beaumont wanted to build a new corporate headquarters on his property. The hospital system’s corporate campus ended up at the 686,000-squarefoot First Center Office Plaza in Southfield, a move first reported by Crain’s which Beaumont confirmed in October. The health system plans to consolidate 3,000 employees

CRAIN’S DETROIT BUSINESS

The back-and-forth between Beaumont Health and Kevin Adell has been going on for months.

there by the end of the year from multiple locations. At the time, its employees occupied 16 leased or owned buildings in three metro Detroit counties. Beaumont has 38,000 employees plus 5,000 physicians. The first group of employees scheduled to move into Southfield is Beaumont’s financial services team. Other departments moving could include compliance, legal affairs, information technology, human resources and others, the hospital system said at the time.

Hotbed of medical building activity Beaumont Hospital has long wanted to build a hospital either in West Bloomfield Township or Novi, two fast-growing population and health care services markets in western Oakland. Even before 2008 when St. John Providence Park Hospital opened in Novi and Henry Ford West Bloomfield opened, health care systems have targeted business growth potential in western Oakland and into eastern Livingston County. But building a hospital is costly

and difficult, especially in Michigan with its certificate-of-need laws, and Beaumont was stymied on its plans. Then came the economic downturn of 2008-2009, and all major construction plans came to a halt. Several years ago, McLaren Health Care Corp. proposed to build a $300 million hospital at its 80-acre McLaren Health Care Village at Clarkston. State certificate-of-need officials turned down its request. Instead, McLaren has announced it would like to build a $30 million to $50 million, 30-bed short-stay hospital with high-tech diagnostics and a 24-hour emergency department at the site. Meanwhile, McLaren has been spending money on building out its Clarkston Medical Center, adding outpatient, or 24-hour observation beds. Over the past several years, Beaumont has opened several outpatient physician and clinic offices in Novi, including medical centers that range from family medicine, heart and obstetrics/gynecology. In 2015, Beaumont also opened a 2,200-square-foot urgent care center in West Bloomfield. Short of a hospital, the Southfield-based system has long wanted to build a major outpatient center in the Novi market that could compete with St. John and Henry Ford. Beaumont still owns more than 200 acres in two separate parcels in western Oakland, one of which is a parcel in Novi that is currently up for sale. In eastern Livingston County, Ascension Health Michigan last year opened a 13.5 million, 60,000-square-foot ambulatory care center, in Howell. The center is 24 miles west of Ascension’s Providence-Providence Park Hospital. St. Joseph Mercy Health System also last year opened an 18-bed short-stay unit at its Brighton Health Center. The project is part of a $41 million investment St. Joe’s has been making in Livingston County. The University of Michigan Health System also has built several outpatient centers in eastern Livingston County.

January 29, 2018 17

LEANER FROM PAGE 3

“we know first and foremost (we) have to be financially stable,” Anthony said. Throughout the years, the nonprofit has had ups and downs while maintaining a very strong and positive presence in the community, she said. “We are financially stable at this time, and we’re pleased with that.” But the nonprofit must remain flexible in its operations and lower overhead to remain stable, she said. The sale of the resources center that served as Focus: Hope’s headquarters for many years is one step toward lowering overhead and creating new revenue, Anthony said. The nonprofit is also looking at options for other real estate as well, with an eye on selling. “But we are continuing to work through optional strategies, all good that would result in alleviating excess cost,” she said. As it looks to trim overhead, Focus: Hope is also reevaluating the Hope Village Initiative programs and others, Craig said, to decide if it’s the most effective provider for those programs. “We’re going through the organization with a fine-tooth comb to focus on education and empowerment and financial stability,” Anthony said. Mainstay programs such as its early childhood education and senior food program will continue, new supportive, wrap-around services will be offered and workforce training programs will take on an even greater employer-driven focus, looking to train people for living-wage jobs. “One thing we are discovering: we need to train our workers how to learn and continue to grow,” not always just in a specific skill but with the capacity to learn new skills and problem-solve, Anthony said. Focus: Hope will look to replicate workforce training partnerships like a truck driver training program it operates with assistance from Meritor to get candidates places in truck fleets throughout the industry and the pact with Flex-N-Gate announced

“We’re going through the organization with a fine-tooth comb to focus on education and empowerment and financial stability.” Vernice Davis Anthony

last week. The automotive supplier has committed to hiring Detroiters first for the 400 jobs that will be created by its new Detroit stamping plant set to come online in April. And Focus: Hope will train the new hires through the city’s Detroit at Work workforce development program. Though the nonprofit has worked closely with area employers on training programs for years, “the newness is to have positions identified up front for the participants,” Craig said. Early last year, the city tapped Focus: Hope to play a role in getting Detroiters of all skill levels workforce-ready for information technology jobs. And in December, the Michigan Economic Development Corp. awarded it a $2 million grant to provide medical, book, equipment and automotive warehousing space and related training in logistics, robotics and work readiness. In 2016, the year of its most recent 990 filing, Focus: Hope reported $38.4 million in revenue, up from $24.3 million the year before. It ended the year with a $1.6 million overage, even as expenses rose $9.6 million. Government grants accounted for nearly three-quarters of its budget. Focus: Hope is operating on a $31 million budget this year, with about 200 employees. “We’re poised to be a much stronger, much leaner, more focused organization,” Anthony said. “We really feel that ... we’re on the right path.” Sherri Welch: 313 (446-1694) Twitter: @SherriWelch

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Work with cros-func Cust & dev team in anal requi & desi Android Apps/Serv for Autom Infot proj with on-time & high qual deli to mult cust Work with global SW dev team to dev new feat, debug issues & wri test case for unit test. Lead & or parti in meet bw the cust & inter team (onsite & offsite res) for des rev & clarif in the specs doc. investi the issue, identify priorities, updat track & root cause doc etc. Dev & track KPIs for each SW rel to insure it meet the accep criteria. Inter with Test team & peer team to share k’ledge in order to per dev & debug acti Sup & mentor less exp peer by shar k’ledge in Android, Linux, Perf analy & related tools to carry-out the activ. Cond code & des rev, appr chan. Keep abreast of new tech & meth for the pur of reco chan that will bene curr & fut cust progr. Appl intens & diver k’ledge of engi princi & prac in broad areas of assig & related fields. Work with prog mngr to dev proj plan to manage proj risk & to sec dom deliver. Lead activ of Sys domain to ramp up new proj with prog mngr & other teams. Req: Bach’s deg or for Equi in Comp Sci Eng/Electr, Elec, Comm or Tele Eng or related & 8 yrs of progr work exp in SW desi & dev on Mob Smartphone p’form and/or In-Vehicle Infot plat in lang of C/C++ and Java as SW Eng/ Sr SW Eng, Lead or Arch, spec to Android Apps Framework & apps dev. Alt: Mast deg or for Equi in Comp Sci Eng/Electonics, Electrical, Comm or Telecom Eng or related & 4 yrs prog work exp in SW design & dev on Mob Smartphone plat & or In-Vehicle Infot plat in lang of C/C++ & Java as SW Eng / Sr SW Eng Lead or Arch spec to Android Apps Framework & apps dev. 8 yrs of extensive exp in SW des & dev on Mob Smartphone and/or In-Vehicle Infot plat in lang of C/C++ & Java. Excel skil in Obj Orien Program & Obj Orien Des. Min 8 yrs of exp of UI Frameworks dev from In-Vehicle Infot or smart phone. Min 5 yrs of exp in Android Framework dev. Expert in Android compa test & issu anal , Android Proj prot test, GIT & GERRIT Exp in UML Exp in des & build large complex SW in a real-time, embed, multi-inter env Shld be well ver with OS con, OOP, Des Pattern & o’view of the sys compo of Linux, Android. Excel prob sol ski with exp of using sys anal & profi tool for debug & perf opti. Work loc: Novi, MI May have long term assi in other loc in U.S. incl Livonia, MI area.

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To Apply: Please send resumes to: Harman Connected Services Inc. Attn: Gokul /Job Code SSE-M03 2002 156th Ave NE #200, Bellevue, WA 98007. Work location: Livonia, MI may have long term assign other locations in U.S. including Novi, MI

C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 9 , 2 0 1 8

HOMELESS FROM PAGE 3

That’s a fraction of the roughly $25 million the CoC gets from the U.S. Department of Housing & Urban Development each year. “We try to use our bully pulpit very selectively,” Jemison said. “The influence we have, we’ve been using ... to make sure that things that are essential to the city don’t change,” as different homeless programs have seen cuts through the CoC process. Between its seats on the CoC board, which makes funding recommendations to HUD, and just making the city’s voice heard, “I feel confident we can get change that we think is appropriate,” Jemison said.

Provider concerns The city’s review follows Detroit Rescue Mission Ministries CEO Chad Audi’s public call for an investigation in late November. Among his concerns are what he sees as a lack of transparency in how the funding is allocated and the apparent lack of a long-term strategy to guide services and funding allocation. He also believes only select providers are named to the CoC board and sees issues with the CAM’s performance and a perpetual administration contract for it that hasn’t been rebid since it was put in place four years ago. “We need either HUD or the city to get involved in CoC allocations, to oversee the transparency of the process,” Audi said. “We still believe that they’re fixing their papers to

“We try to use our bully pulpit very selectively. The influence we have, we’ve been using ... to make sure that things that are essential to the city don’t change.” Arthur Jemison

look good but the process is not fair. People who’ve gotten on the (CoC) board have gotten more money, and I can prove this.” Jemison said he has heard from other homeless service providers about their concerns, as well. Roslyn Baughman, CEO of Travelers Aid Society of Detroit, shares Audi’s concerns and believes there’s a conflict in the way CAM operates. Its lead administrator, Southwest Solutions, is responsible for assessing each homeless person who seeks shelter or assistance and then referring them to a specific provider for assistance. Baughman said referrals to Travelers are always people with no income at all who are difficult to get into and keep in permanent housing. The success ratio Travelers and other providers have in getting the people referred to them into permanent housing then affects their score for future CoC funding. Both Detroit Rescue Mission and Travelers have lost CoC funding for transitional housing programs in recent years, and both are under

pressure financially, having operated at a financial loss for the past couple of years. “The CoC, from my point of view, is corrupt to the core,” Baughman said. “The very people who are judging our grants for renewals are the very same people who are receiving the funds I’m applying for.” Even though there is a recusal process in place during funding conversations and votes, she fears friends vote for friends on the board. “I feel if you are going to be voting on who gets the money, you should not have a dog in that race, (and) your best friend should not have a dog in that race,” she said. She also questions the model of each CoC agency being required to make annual payments to HAND — a total of $18,000 annually for Travelers — when the administrative agency is applying for and getting its own grants. “I just want a fair shot. Keep it fair and above board and transparent,” Baughman said. The Homeless Action Network, which administers the grant submission process for the Detroit CoC and the collection of local homeless data for inclusion in a federally required Homeless Management Information System, believes it’s operating within the terms of its charter, which establishes the process for nominating providers to CoC board seats, said Executive Director Tasha Gray. A link to the charter it adopted in 2015 is posted on its website. There is also information posted related to a permanent supportive housing plan finalized in 2016. Gray said there is a point system

used in ranking projects applying for funding. The CAM governance committee of the CoC board is also looking at establishing a review process for CAM and its lead agency administrator, she said.

Shift in strategy Underlying the tension between some homeless service providers and the CoC board that makes the recommendations for local allocations to HUD is the shift to the housing first strategy HUD views as a best practice. The approach puts the primary focus on getting people into permanent housing and helping them maintain it and does not put stipulations on that housing such as mandatory sobriety, Gray said. The Detroit CoC has adopted the approach, which has led to the defunding of programs providing services rather than housing to the homeless and cuts in funding for many transitional housing programs that help people get independent or give them a place to go as they await a permanent housing placement. Housing first has been a HUD push for over 20 years, Gray said. “What you will find with HUD is sometimes they are very soft with their implementation,” saying it’s a best practice, Gray said. “It’s not until years later they’ll put the hammer down.” The city sees permanent supportive housing as a proven approach, as well. Takashima credits the approach and a strategy of focusing on get-

ting the chronically homeless off the streets with the 20-percent drop the city has seen since 2015 in the annual point-in-time counts of the homeless on a designated day each January in Detroit, Highland Park and Hamtramck. Last year during the one-day count, there were 2,078 homeless people in those areas compared to 2,597 in 2015. Between 2015 and 2017, 514 units of transitional housing were cut, Takashima said. During that same time, 444 total permanent housing units came online.

Other changes underway As the city’s review continues, changes are already being made to address issues and gaps in the system to get the homeless into permanent housing in Detroit, Highland Park and Hamtramck. Last week, HAND announced a shift in the Coordinated Assessment Model’s intake operations, from a call center that proved hard to reach to an in-person model of initial assessment that will require homeless people in the three cities to get to one of five Detroit locations for housing assistance. The in-person assessment is expected to be a more personal way to engage the homeless and hopefully, get them on a path to permanent housing rather than just into a shelter for a night, Gray said. To fill the after-hours gap in assistance for homeless people who live on the streets, the city asked the nonprofits it contracts to do outreach with that population to begin working the late shift from 4 p.m.-midnight, seven nights a week.

Revenue opportunities A cohesive, unified approach to ending homelessness in Detroit could attract new dollars to support that work. A pay-for-success model that Jemison helped put in place in Massachusetts has proven successful in helping get people into permanent housing, he said. It’s based on the idea that homeless individuals generate costs in areas such as state-funded healthcare. The program combined housing vouchers from HUD with private investment aimed at getting about 400 people into permanent housing. “It would be great to do a project like that in Detroit,” Jemison said, noting he’s talked with the state about the approach. “But I don’t feel like we have strong enough systems” in place to build on, he said. “We have to strengthen what we’ve got now so that we can be in a position to do things like that with the state of Michigan.”

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BANKRUPTCIES

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The following business filed for bankruptcy protection in U.S. Bankruptcy Court in Detroit Jan. 19-25. Under Chapter 11, a company files for reorganization. J Michigan Commercial Door Group LLC, 23010 Industrial Drive East, St. Clair Shores, voluntary Chapter 11. Assets and liabilities are not available.

C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 9 , 2 0 1 8

LOSSES FROM PAGE 3

Bagger Dave’s is a relatively small player in a wide, chain-filled casual dining landscape that has gone through difficult times because of competition from fast-casual chains like Chipotle and a generational shift in dining preferences. “Casual dining” refers to restaurants that don’t approach fine dining but do offer table service — like Chili’s Grill & Bar and The Olive Garden. They have higher overhead costs than the trendy fast-casual dining sector, which generally serves up meals more quickly and requires less staff. Casual dining has struggled over the past two years or so, but did turn around and see sales growth in the fourth quarter of 2017, according to Dallas-based TDn2K’s Restaurant Industry Snapshot data series. Fast-casual and family dining hadn’t seen positive quarterly growth since 2016’s first quarter, but also improved in the last quarter of 2017, the report found; upscale and fine dining have fared the best. Mark Cory, a franchise placement specialist, said he hasn’t heard the casual dining industry’s current predicament referred to as a full-on “recession,” as Bagger Dave’s CEO Ansley terms it. Cory, principle of Grosse Pointebased FranNet of Michigan, helps potential franchisees match with businesses, including in the restaurant industry.

O ET C N E HA AT C N ST MI LA NO

Bagger Dave’s says that it is keeping its “10 strong locations” open.

PHOTOS BY CRAIN’S DETROIT BUSINESS

“We aim to provide the best possible service to our guests. By moving in this direction, we can continue to do so, and will retain many of our team members.” Michael Ansley

Bagger Dave’s CEO Michael Ansley, shown in a file photo, says a recession in casual dining has affected business.

ATTRACT. RETAIN. DEVELOP.

He said he’d be “hesitant” to use the word “recession” to describe the casual-dining business today. The sector is quite crowded, but that isn’t new, he added. “(In casual dining), there is kind of a tougher nut to crack, because of the overhead, the large footprint,

high operating costs,” Cory said. “High volume is paramount, and with so many choices in that sector, if you’re not totally on your game, you’re just not going to get the volume you need to cover the overhead and return a fair profit.” When it comes to downsizing, casual dining establishments must decide whether the volume of sales they’re producing for a specific location warrants keeping it open, he said. “So I’m sure what (Bagger Dave’s) has done is pared it down to the best-performing locations and are focusing their efforts on driving volume in those locations, as opposed to spreading themselves thin,” Cory said. Bagger Dave’s did say in its news release on the closings that it is keeping its “10 strong locations” open. It aims to retain as many employees as possible, but will offer severance packages at the remaining storefronts to those who aren’t kept on. “We aim to provide the best possible service to our guests,” Ansley said in the release. “By moving in this direction, we can continue to do so, and will retain many of our team members.” The company spun off from Southfield-based Diversified Restaurant Holdings Inc. in December 2016. Diversified remains a standalone company and is the largest franchisee of Buffalo Wild Wings restaurants. Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

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C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 9 , 2 0 1 8

Murray, Engler, Blanchard, Wilbur names floated to lead MSU By Chad Livengood clivengood@crain.com

Michigan State University’s Board of Trustees set into motion Friday a leadership succession plan in the wake of the resignation of the school’s longtime president over former doctor Larry Nassar’s years of sexually abusing female patients in a campus clinic and elsewhere. The elected governing board on Friday appointed MSU Vice President Bill Beekman as acting president while it begins what’s expected to be an expedited search for an interim leader who will face a campus upheaval, costly litigation and political scrutiny from the state Legislature to Congress. MSU trustees issued emotional apologies at a public meeting Friday, striking a different tone after spending months focused on thwarting lawsuits from dozens of Nassar’s past patients. “This board has come across as tone deaf ... and lacking empathy,” MSU Trustee Brian Mosallam said, fighting back tears while reading a statement to Nassar’s survivors. “I’m truly sorry. We failed you.” MSU Trustee Dan Kelly, who was elected to the board in 2016 after Nassar’s patients started filing lawsuits against the university, said the board was more focused on the litigation than Nassar’s crimes committed in a campus sports medicine clinic. Seven days of victims making public statements during Nassar’s sentencing turned into a weeklong trial of MSU’s vigorous attempts to beat back the lawsuits in federal court.

MSU

FROM PAGE 1

MSU, along with its board of trustees, USA Gymnastics, Twistars USA Inc. and current and former MSU employees, are being sued by more than 140 women for alleged negligence related to inaction that allowed Nassar to abuse girls for 20 years. While Nassar will spend the rest of his life in prison, it remains to be seen how long his name will plague MSU.

On the defense The East Lansing university is mounting its defense in U.S. District Court in Grand Rapids and elsewhere that it is a government agency and is therefore immune from tort liability under the state’s governmental immunity statute — the general rule of which is the state can’t be held liable for the actions of a single employee. MSU’s other defenses include eliminating plaintiffs who were not students, because they can’t sue under Title IX, which states that no person can be “subjected to discrimination under any education program or activity receiving Federal financial assistance,” as well as arguing that the statute of limitations for filing suits has expired. The institution is also expected to argue that Nassar during his examinations of gymnasts was acting on behalf of the USA Gymnastics, not MSU. “They want to limit their liability by knocking out as many claims as possible,” said Peter Henning, professor

Need to know

JJHuge management challenge as univer-

sity deals with Nassar fallout

JJBoard met Friday to start process JJFormer President Simon resigned Wednesday

“I watched that and it changed me — and ultimately it’s going to change this university,” said Kelly, an attorney in the Troy firm of Giarmarco, Mullins and Horton PC. “And those girls are going to have the credit for that.” The apologies followed one of the most tumultuous weeks in the university’s history as an Ingham County judge sentenced Nassar to 40-175 years in prison for molesting at least 150 girls over 20 years and President Lou Anna Simon and Athletic Director Mark Hollis resigned. MSU Trustee Dianne Byrum said Beekman will serve as acting president while the trustees search for an interim leader in the “very near short term.” “This can’t go on for weeks — this needs to be a very compressed time frame,” Byrum told Crain’s before Friday’s board meeting. Fallout from the Nassar scandal is seen as far from being over. MSU’s next leader will face a tempestuous management challenge as politicians, donors, students and the victims ask how the doctor’s crimes went undetected for years. Attorney General Bill Schuette, who is running for governor this year, announced Friday that his office has

“MSU can’t risk a trial, so it’s doing what it can to delay proceedings from entering discovery while it determines with its insurers what it can pay out in a settlement.” Peter Henning

of law at Wayne State University’s law school specializing in white collar crime, constitutional criminal procedure and attorney ethics. “MSU can’t risk a trial, so it’s doing what it can to delay proceedings from entering discovery while it determines with its insurers what it can pay out in a settlement.”

The insurers Simon indicated in a letter to the university’s community on Jan. 19 that its insurers were playing an active role in the university’s defense. “MSU is entitled to, and its insurers require, that we will mount an appropriate defense of these cases,” she wrote. But William Passannante, a partner at New York-based Anderson Kill PC law firm specializing in policyholder insurance recovery, said it’s unlikely that the university’s insurers are rushing to its defense. “It’s likely (the insurers) are no longer in the ‘How do we help you?’ phase, instead are acting in ‘How do we avoid our insurance liability?’ position,” Passannante said. “From my experience, in cases with potential

Jim Blanchard: Served as governor 1983-91

John Engler: Was governor from 1991 to 2003

Kathy Wilbur: Was CMU’s interim president

Mark Murray: Meijer Inc. vice chairman

an “ongoing investigation” of MSU. Brian Breslin, chair of the MSU board, publicly called on Schuette to appoint a third-party “neutral” investigator to remove any hint of politics from the investigation. U.S. Education Secretary Betsy DeVos said her department is investigating the university’s handling of the Nassar case “and will hold MSU accountable for any violations of federal law.” “What happened at Michigan State is abhorrent,” said DeVos, a billionaire philanthropist from West Michigan. “It cannot ever happen again — there or anywhere.” The U.S. House Energy and Commerce Committee launched its own investigation Friday of MSU and USA Gymnastics, where Nassar worked as doctor and also molested female athletes over a period of 20 years. Several members of Michigan’s congressional delegation called for hearings on how MSU, USA Gymnastics and the U.S. Olympic Committee handled complaints about Nassar’s sexual abuse, which he committed on young girls by claiming he was per-

forming medical procedures. The MSU board will be looking for an interim president who can navigate both the legal and political scrutiny the university will face, while also trying to start a healing process, Byrum said. “I’m looking for somebody who can be a compassionate leader, with strong communication skills, (who can) be more transparent, bring the community together and start a path forward,” said Byrum, a former state legislator and owner of a Lansing communications firm. Meijer Inc. Vice Chairman Mark Murray and former Michigan Govs. John Engler and Jim Blanchard are among the top names being floated to be MSU’s interim president, according to Byrum and Mosallam. Kathy Wilbur, a former MSU trustee and Central Michigan University’s vice president of development and external affairs, is also being mentioned as a potential pick for the MSU board to consider because she was CMU’s interim president in 2009 and 2010. “All of the names that have been

dollar sums this big, there’s usually an unfair attempt by insurers to try to dodge their insurance obligations. MSU is likely receiving reservation of rights letters explaining why the insurers have the right to deny coverage. I’d even expect them to have already been denied coverage at this stage.” MSU declined a request for Crain’s to review its insurance policies.

ments) now. MSU doesn’t want to let this get into the discovery phase of a trial. The legals bills will pile up and the case will drag on. MSU is asking itself whether it still wants to be in the news in 2019 or 2020 alongside a picture of Larry Nassar.” And the case is precarious for MSU in the public eye, Henning said. “How do you let this go to court? How do you try to cross examine survivors?” Henning asked. “Just imagine that scene of an attorney examining a survivor to the benefit of the university in front of a court room full of reporters. That’s not a legal problem, but in the court of public opinion, it’s probably more important.” The university has already damaged its reputation in handling the Nassar scandal. Besides arguments that Simon and the university were complicit in allowing Nassar to continue practicing after several complaints, university officials have been accused of being tone deaf about the situation. Following a Jan. 19 board of trustees meeting, Trustee Joel Ferguson in a radio interview on Lansing’s 730 AM WVFN said, “There’s so many more things going on at the university than just this Nassar thing.” Simon, who has denied any prior knowledge of Nassar’s abuse other than that a Title IX investigation was underway against one of its doctors that remained unnamed, said in resignation letter, “Throughout my career, I have worked very hard to put Team MSU first. Throughout my career, I have consistently and persistently spoken and worked on behalf of Team MSU.” Putting the university first is what Nassar’s victims claim MSU has always done.

The Penn State example If the sexual abuse scandal by former assistant football coach Jerry Sandusky that rocked Penn State University is a barometer, the costs could be bank-busting — and the insurers know it. Six years after Sandusky’s conviction of sexually assaulting young boys during football camps held on campus, the university is still paying out. The university disclosed in November it paid an additional $16 million to victims, settling with a total of 33 victims to the tune of $109 million. The Nassar scandal involves upwards of 200 girls and could be far costlier than Penn State’s settlements. Assuming the same settlement value per case as Penn State, MSU’s liability could be greater than $500 million.

The legal tangle Currently the civil cases await judges’ rulings on MSU’s motion to dismiss the cases — which is unlikely, Henning said. “The motion to dismiss could be six months away,” Henning said. “The question is now whether MSU waits for the motions to dismiss or starts trying to resolve (through settle-

out in the press are people we’re interested in talking to,” Byrum told Crain’s. Murray is seen in Lansing circles as the top prospect as he was previously president of Grand Valley State University, was a state treasurer under Engler and ran the Meijer grocery store chain as president from 2006-13 before being elevated by the Meijer brothers to a boardroom leadership role. “He would be a stabilizing, transitional figure,” said Greg McNeilly, a Republican political strategist from Grand Rapids. “He’s always been seen as an honest broker, not partisan, even though he is a partisan. His integrity is unassailable.” Murray, Blanchard and Wilbur did not return messages seeking comment. “I want a person that is committed to principles such as transparency, empowering sexual abuse victims and to restoring the trust, respect and pride of the public once had in our university,” Mosallam told Crain’s. John Truscott, who was Engler’s press secretary, said his former boss has the leadership skills needed to lead MSU while a permanent leader is identified. “In terms of what the university needs right now of someone who could come in for a short period and fix things, there isn’t anybody who would be better (than Engler),” said Truscott, president and principal of Truscott Rossman, a Lansing public relations firm. “I think they need a fixer because the next permanent president would be a healer.” “You play word games saying you didn’t know because no one believed,” Rachael Denhollander, the first of Nassar’s victims to publicly accuse the doctor of abuse, said at Nassar’s sentencing last week. “And the reason everyone who heard about Larry’s abuse did not believe it is because they did not listen.” John Mozena, a marketing and communications consultant, said in a recent blog posting that MSU’s handling of the Nassar situation is posing a threat to its bottom line. “You can survive losing a lawsuit,” he wrote. “You can survive losing leadership. But it’s much harder to survive losing your organization’s reputation, and that’s where Michigan State should be a cautionary tale for any organization facing a crisis of public confidence.” MSU’s reputation and its financial fallout from the Nassar scandal is more than just an issue for the institution and its leadership. The issue may become a taxpayer issue, Henning said. “Where is the settlement money going to come from?,” Henning asked. “Sure, they can claim they paid the funds out of this or that fund, but ultimately if MSU takes money out of one pot, they will replace it from another. This will impact taxpayers.” MSU receives more than $275 million from the state of Michigan. “MSU will try to put this behind them, but the scars are always going to be there,” Henning said. “Which is of little consequence to you and I, except are we paying for their behavior?” 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 // J A N U A R Y 2 9 , 2 0 1 8

ESPORTS FROM PAGE 1

this year as part of the NBA’s 2K league that begins in May. Even the University of Michigan is getting into the game. The companies say they’re trying to get themselves in front of the rapidly growing audience of young, diverse video game fans that number in the hundreds of millions, who may not be exposed to the brands’ traditional marketing messages. It’s too soon to say if video game streams will provide much return on investment, but brands are excited about the opportunity to court a tough-to-reach audience. The Rocket Mortgage sponsorship, whose financial terms were not disclosed, includes branding of a 6,000-square-foot house in Venice, Calif., as the training headquarters for the “100 Thieves” gaming team. “From an asset standpoint, the jersey and the house, it’s an opportunity for us as a brand, to find new ways to reach an audience we cannot reach in traditional media channels,” said Casey Hurbis, chief marketing officer at Quicken Loans. “It’s something that’s intriguing, and a perfect way for us to step into that space.” Quicken said its investment will help pay for sports psychologists, analysts, nutritionists and personal trainers for the five-player 100 Thieves team playing in the 2018 North American “League of Legends” Championship Series. 5-Hour Energy signed a sponsorship deal on Jan. 15 with FlyQuest Sports, a multi-team esports company owned by Milwaukee Bucks co-owner Wes Edens. The deal, for an undisclosed investment amount, includes jersey branding, involvement in the team’s social media and streaming channels, and creation of a pair of streaming content series, 5-Hour said in a statement. The deal helps 5-Hour reach more of its target audience. “The demographics for esports, men 18-34, aligns well with the energy product category. The sponsored content that these organizations create is engaging, authentic, and interactive for their fans. It is a great compliment to our current marketing strategy,” said Melissa Skabich, 5-Hour’s outside media relations spokeswoman, via email.

The numbers About 300 million people watched live video game competitions online globally last year, mostly streaming on Twitch and YouTube, said Joost van Dreunen, CEO and co-founder of New York City-based gaming industry analyst firm SuperData Research. SuperData estimated that esports generated $1.5 billion in 2017 revenue, half of which came from investments and 35 percent from sponsorships and advertising. Esports revenue is predicted by SuperData to hit $2.3 billion by 2020, and its viewership to grow 12 percent annually. By contrast, the NFL had about $14 billion in revenue in 2017, but it’s been losing its audience, which skews older, after decades of growth. Companies understand that they have to look elsewhere for new eyeballs for marketing, and the rise of mobile devices, social media, and gaming has provided fertile new ground. “How we access content is dra-

“How we access content is dramatically shifting in a very different direction. We don’t just play video games. We watch others play them. (Esports) connects a hard-to-reach audience with advertisers desperate to get in front of that audience.” Joost van Dreunen

Need to know

JJBrands are seeking elusive younger

audiences

JJVideo game streaming audiences top 300 million JJPistons are launching their own esports team

matically shifting in a very different direction,” van Dreunen said. “We don’t just play video games. We watch others play them. (Esports) connects a hard-to-reach audience with advertisers desperate to get in front of that audience.” The past couple of years in the esports space for brands has been exploration and initial investment, said van Dreunen, but now the space is entering a period when the marketing department is going to have to justify the spending to the bean-counters. “Now how do you justify (the esports investment) with the VP of finance, the people who see the world through spreadsheets,” van Dreunen said. “How do we demonstrably pull benefits from it? That’s a bit trickier.” That said, while brands are making splashy announcements about their esports deals, companies are really just dipping a toe financially rather than pouring money into the space like they do traditional advertising channels, van Dreunen said. “What everyone is risking right now is a small percentage of their overall budget,” he said. “It’s a safe bet for a lot of these companies, and it’s an exciting thing to do.” Among the major brands that have put money into esports in varying ways are State Farm, Audi, Coca-Cola, Comcast Xfinity, Gamestop, Microsoft, Sony, Google, Doritos and Red Bull. More than 600 esports sponsorship agreements have been made since the beginning of 2016, according to a Nielsen Inc. report from October, and the major brand categories include energy drinks, fast food, headsets, PC tech, PC hardware, gaming PCs, gaming software, esports news and gaming chairs.

The games With the big audiences, there’s been a proliferation of games and leagues, and brands are still sorting out what will capture consumer interest. At the moment, the “League of Legends” battleground-style game from Los Angeles-based Riot Games and the “Overwatch” first-person shooter game from Santa Monica, Calif.-based Activision Blizzard Inc. NASDAQ: ATVI) have emerged as the marquee names. The new Overwatch League that launched on Jan. 10 has 12 citybased teams that cost owners $20 million each as a franchise fee. Among Overwatch team owners are Stan Kroenke, who owns the L.A. Rams and three other major pro sports franchises, and Robert Kraft, owner of the New England Patriots. Players earn a minimum of $50,000

as a salary, plus more for winning. The Overwatch League’s first week of matches drew 10 million viewers, said Activision Blizzard Inc., which launched the team-based multiplayer online first-person shooter video game in 2016. The peak online audience came on the league’s first day for a game between the Dallas Fuel and Seoul Dynasty that attracted 437,000 hits on the Twitch and MLG, Activision Blizzard said. Twitch is the live streaming video platform that Amazon.com bought for $970 million in 2014, and it’s paying Activision Blizzard $90 million over two years to stream the Overwatch matches online in English, Korean and French, according to Sports Business Daily. Activision Blizzard’s in-house platform MLG.tv also is streaming the Overwatch games. Another popular game with a big streaming audience is Bellevue, Wash.-based Valve Corp.’s “Dota 2,” and the game’s annual tournament was won last year by Team Liquid, a Dutch team (co-owned by Lansing native Magic Johnson) that took home a $10.8 million jackpot. The finals took place in front of more than 15,000 fans inside of Seattle’s KeyArena, and was watched by 400,000 streaming, according to Valve. Other major games with sponsored teams include “Counter-Strike: Global Offensive,” “Call of Duty” and “Super Smash Bros.”

NBA 2K Also prepared to carve out a niche is the NBA’s 2K League, being created in conjunction with Novato, Calif.-based game publisher 2K Games Inc. The Pistons are in the process of assembling their Pistons Gaming Team that will begin “NBA 2K” matches in May. Seventeen of the NBA’s 30 clubs will have teams, and the league is being run by former Palace Sports & Entertainment sales executive Brendan Donohue, who’s now a league executive. Potential “NBA 2K” players are participating in an online qualifying tournament this month on the PlayStation 4 or Xbox One game consoles, and those who advance to the next step have to fill out an online application and eventually participate in a draft combine that includes IQ testing — not unlike what college players undergo before the annual NFL draft, said Mike Donnay, the Pistons’ vice president of brand networks who is in charge of the esports effort. Donnay said he has a draft board of 100 potential players already set up in his office. Eventually, the Pistons will draft five main players and a sixth as an alternate, and the players will be NBA employees under sixmonth contracts. The team will provide them local housing beginning in April, and the players will fly to a to-be-determined central studio for weekly matches and tournaments leading to a playoff system. Like traditional brands, the Pis-

tons see the NBA 2K league as an avenue to reach fans they might not through traditional channels. “We have a huge opportunity to make those activations and create those inroads with the gaming community. There’s a big opportunity to tap into that audience,” Donnay said. “We see this as a platform to bring esports, NBA 2K fans, into the Pistons umbrella.” The esports league also gives the Pistons a chance at other new revenue sources: It can sell corporate sponsorships for the player jerseys and inside the virtual Little Caesars Arena within the video game — just as it does inside the real arena. “We have a whole playbook of virtual assets,” Donnay said. In-game ads in esports often are less expensive, allowing smaller companies to get into the competitive video game space, too. The Pistons also will create content to stream on the team’s social media and other channels, such as behind-the-scenes video looks at egaming life. “We’re telling the story of what it’s like to be a professional 2K player,” Donnay said. Such content also is ripe for paid sponsorships.

Other teams Detroit’s other pro sports teams aren’t yet in the esports game, but told Crain’s via email that they’re looking at it. “Our sports and entertainment group is actively and thoroughly researching esports, and we continue to evaluate potential opportunities and partners,” said Chris Granger, group president of sports and entertainment at Ilitch Holdings Inc., the corporate parent of the Detroit Tigers and Red Wings. The Detroit Lions said something similar: “We’ve had some internal conversations about opportunities around esports, but nothing material enough to comment on at this time.” It’s not just pro sports teams getting into esports. The University of Michigan has a team in the College League of Legends tournament run by the Big Ten Network and the online battle arena video game’s maker, Los Angeles-based Riot Games. The college tournament began in 2017 and the current season began Jan. 15. Major League Soccer, which is considering Detroit as an expansion market, announced on Jan. 12 plans for a EA Sports “FIFA 18” league played by single-person teams from each of the soccer league’s clubs. The NFL has staged game tournaments, and it signaled this month it may venture more deeply into the space by advertising for a league headquarters-level head of gaming and esports. Individual athletes are investing in esports, too. For example, pro basketball player Jonas Jerebko, who played for the Detroit Pistons from 2009-15 and is now with the Utah Jazz, in 2016 spent an undisclosed sum to buy the Rochester-based Detroit Renegades’ esports team, which was previously sponsored by 5-Hour. Video game competition has matured to the point that discussions are under way to have esports as an official event at the Summer Olympics in Paris in 2024. They will be a demonstration sports at the 2018 Asian Games in Jakarta, Indonesia. Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

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C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 9 , 2 0 1 8

THE WEEK ON THE WEB

RUMBLINGS

MSU President Simon resigns

Detroit’s MLS bid still awaits its fate

JANUARY 19-25 | For more, visit crainsdetroit.com

ichigan State University President Lou Anna Simon submitted her resignation in the wake of the Larry Nassar sexual abuse scandal. The university posted a copy of her resignation letter last Wednesday night. (For more, see story, Page 1.) Calls for her resignation had risen to a deafening crescendo over days of painful and emotional testimony from Nassar’s victims, most of whom were gymnasts who the former MSU physician pleaded guilty to abusing under the guise of medical treatment. Nassar was sentenced last Wednesday to 40-175 years in prison after pleading guilty in Ingham County Circuit Court on charges related to the case. Many of the victims accused the university of mishandling past complaints about Nassar. Brian Breslin, chairman of the MSU board of trustees, said in a statement that the university would work through details of the transition to new leadership this week and announce plans as soon as they were set. “Throughout my career, I have consistently and persistently spoken and worked on behalf of Team MSU,” Simon said in her resignation letter. “I have tried to make it not about me. I urge those who have supported my work to understand that I cannot make it about me now. Therefore, I am tendering my resignation as president...” Simon’s announcement came on the day Nassar was sentenced, and the same day the Michigan House of Representatives voted overwhelmingly to call for Simon’s resignation. Calls for change at MSU had increased after days of testimony from the victims during sentencing proceedings for Nassar, a sports medicine doctor who worked for MSU and the U.S. gymnastics team. Former Michigan Gov. Jennifer Granholm’s name has been mentioned as a possible interim replacement for Simon, but she has brushed that aside. Others considered in the running are former Michigan governors Jim Blanchard and John Engler.

BUSINESS NEWS J Re:purpose, a job recruitment website that was the first tenant of the WeWork shared workspace in Merchant’s Row in Detroit last March, has raised a seed funding round of $125,000 from a group of local angel investors. J Novi-based Orotex Corp. and San Diego-based Achates Power Inc. are planning $11 million worth of capital investment in Novi and Farmington Hills. They were awarded $500,000 in performance-based grants from the Michigan Economic Development Corp. J Longtime Detroit radio personality Doug “The Doc” Podell has landed a new gig with 93.1 Nash FM. His radio career in the Motor City dates back to 1976, with his most recent stint being at WCSX 94.7 FM. J Washington, D.C.-based storage company Zippy Shell has entered the metro Detroit market.

SCOTT R LEPAGE/LAT IMAGES

Last year’s Chevrolet Detroit Grand Prix presented by Lear generated a record $58 million in spending in metro Detroit, according to a study released Thursday. The total represents an increase of nearly $11 million from the last Detroit Grand Prix economic study, conducted in 2014, the study by St. Louis marketing research firm Sportsimpacts found. Total spending accounts for all local and nonlocal expenditures related to the event. About 100,000 people attended the three-day motorsports races on Belle Isle in June.

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

400

The number of jobs auto part supplier Flex-N-Gate is creating at its parts plant to be built in Detroit's I-94 Industrial Park. The company committed to hiring Detroiters first

3-4 percent

The rate cuts Consumers Energy Co. and DTE Energy Co. expects its customers to see due to the effects of the reformed U.S. tax law

300

The approximate number of workers the Detroit Medical Center plans to lay off over the next several weeks

J Detroit Tigers Opening Day and individual game tickets for the 2018 season went on sale on Saturday. The baseball team is also hoping to draw fans to Comerica Park in the season ahead with a variety of special events, giveaways and ticket packages. For one, it’ll mark the 50th anniversary of winning the 1968 World Series on Sept. 7-9 when the team faces classic foe St. Louis Cardinals. J Toys “R” Us Inc. plans to close about 180 U.S. stores, including six in Michigan — two in Ann Arbor. Former Domino’s Pizza CEO and University of Michigan athletics director Dave Brandon leads the toy retailer. J Pure Detroit opened a new store in Cobo Center in downtown Detroit just before the North American International Auto Show kicked off. J Nearly 10 months after it opened in Detroit’s New Center neighborhood north of bustling Midtown, Atomic Chicken is adding a second concept to its space to mix things up and reinvigorate after “disappointing” sales showings. J After more than three years on

Gratiot Avenue in Detroit’s Eastern Market area, French-inspired restaurant Antietam plans to close at the end of March.

OTHER NEWS J Beginning last Monday, nonprofits contracted by the city of Detroit to do outreach with the city’s homeless began working until midnight, seven days a week, to fill an after-hours gap in assistance for the vulnerable population. J Metro Detroit’s “Big Four” political leaders appeared at odds at the annual Detroit Economic Club meeting last Tuesday over how to address mass transit shortcomings. Macomb County Executive Mark Hackel and Oakland County Executive L. Brooks Patterson were noncommittal on whether they could strike a deal in the coming months with Detroit Mayor Mike Duggan and Wayne County Executive Warren Evans to put another regional mass transit tax on the ballot this November. J The Detroit City FC semi-pro soccer club, keen to expand its brand and bolster the local talent pipeline, plans to launch “an enhanced youth soccer initiative” this spring in cooperation with the YMCA of Metropolitan Detroit. J The city of Detroit is set to begin a sweeping plan to bring tens of thousands of rental properties in the city up to code starting Feb. 1, following the city council’s November approval of a stricter ordinance. J Wayne County Executive Warren Evans announced he is running for a second term in 2018. The county has been working through a financial crisis over the past several years and left state oversight in 2016. J Travel time between Detroit and Chicago via train is being reduced by as much as 20 minutes through Amtrak after a $384 million, government-driven investment to improve infrastructure and a push to boost rail speeds up to 110 mph. J Metro Detroit’s millennial population ranks average overall among urban cores in the country when it comes to growth, well-being and educational attainment, according to a Brookings Institute study.

iami will reportedly get its Major League Soccer expansion team in a formal announcement this week, ending a four-year odyssey while Detroit and two other cities still await the fate of their bids for a team. Retired soccer superstar David Beckham’s ownership group is expected to be officially awarded a team in an event on Monday, or possibly Tuesday, the Miami Herald reported. The Miami expansion effort, underway since 2014, is separate from the four-team expansion process that includes Detroit as a finalist and has been under way since 2016. The league still has no timeline for when it will make a decision on its remaining expansion slots. Nashville was awarded one of the four slots in December. MLS originally expected to award two expansion teams in December, and two more later in 2018. After the Nashville announcement, the league said it would wait until January to make a decision on the next city. Detroit’s expansion group, led by billionaire businessmen Dan Gilbert and Tom Gores, submitted a bid in

ROSETTI

Detroit’s bid for an MLS team looks to the 64,500-seat Ford Field as the team’s permanent home.

December that would have a team playing at Ford Field, reconfigured to a smaller soccer capacity instead of the 64,500 seats it uses for Detroit Lions games 10 times a year. MLS, which has a few teams in NFL stadiums, has stated it prefers its teams play in open-air soccer-specific stadiums — which means the league may have cooled on Detroit’s bid.

THE PLATFORM LLC

The lobby of the new condominium development at Cass Avenue and York Street in Detroit’s TechTown.

New downtown condos hit pricing highs

on’t get sticker shock when you see the asking prices for new high-end condominium construction in TechTown. Detroit-based The Platform LLC is marketing the 53 new condos at Cass Avenue and York Street for $430 to $501 per square foot. At the low end for a 763-square-foot studio, that puts a new unit at $328,000. The low end for the largest unit, a 2,462-square-foot two-bedroom, 2 1/2-bath, is $1.06 million. The high end puts those units at $1.23 million for the largest two-bedroom. Austin Black II, founder of residential real estate brokerage City Living Detroit, says the high-end new construction fills a void that has

existed in the for-sale market. Although existing condo units average around $375 per square foot, the new Platform units are being marketed and sold at a fair price, he said. “Based on what I’ve read and heard, if they go as high-end as I’ve heard, they are on the mark,” he said. “I think it’ll be great to have a product like that so we can begin balancing out the market where properties are truly selling based on location, amenities and finishes, because I’ve seen a lot of properties selling at a higher price per square foot, and even then you have to gut those units in some cases.”