Crain's Detroit Business, May 21, 2018 issue by Crain's Detroit Business

Raft of events competes for sports ad dollars Page 3

Orthopedic urgent care centers to expand Page 3

MAY 21 - 27, 2018 | crainsdetroit.com

CRAIN’S MICHIGAN BUSINESS

A BARREL OF OPPORTUNITIES

A barrel of spirits at Holland-based Coppercraft Distillery. LARRY A. PEPLIN FOR CRAIN’S

Greater Grand Rapids has entrepreneurs on tap

urniture City. River City. Beer City. Art City. How about the Entrepreneurial City? This month, we look at grand growth stories from Grand Rapids and its environs, including Coppercraft Distillery in Holland, pictured above.

Stories begin on Page 8

Development: Grand Ventures nurtures startups. Page 9 Real estate: Urbaneer provides downtown living. Page 10 Government: Lakeshore Advantage spurs growth. Page 11

LAW

NONPROFITS

Legislature holds the key to MSU’s Nassar settlement

Charities look to buy their way out of pension squeeze

By Chad Livengood and Dustin Walsh

By Sherri Welch

clivengood@crain.com dwalsh@crain.com

Michigan State University’s proposed $500 million settlement with the abuse survivors of convicted sexual predator Larry Nassar hinges on the Legislature dropping an effort to pare back protections for government entities from being held financially liable for emcrainsdetroit.com

ployees’ actions. MSU has stipulated it won’t pay out $425 million to the 332 Nassar survivors and set aside $75 million for future claims if the plaintiffs continue to pursue legislative reforms that curtail civil immunity for government agencies and allow childhood sexual assault victims more time to file lawsuits through the state’s “notice of intent” law.

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SEE MSU, PAGE 17

swelch@crain.com

Southeast Michigan human service and mentoring agencies strapped with pension liabilities are moving to terminate their plans in the face of uncertain and rising liability and fees. Some are considering taking on millions of dollars of new debt or eyeing their endowments to buy their way out of the liability.

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As things stand, agency officials say they cannot project costs from year to year because of:  Market swings affecting the value of plan assets  Rising liabilities due to pensioners living longer  Increases in premiums to the Pension Benefit Guaranty Corp., a federal agency charged with providing pension benefits in private-sector-defined benefit plans that end without sufficient money to pay all benefits. SEE PENSIONS, PAGE 21

E S S // M A Y 2 1 , 2 0 1 8 CRAIN’S DETROIT BUSIN

FOCUS

CRAIN’S MICHIGAN BUSINESS:

GRAND RAPIDS

A GRAND CULMINATION

The Grand Rapids Downtown Market

surrounding area back to life Market in downtown Grand Rapids brings collapsing inward, most windows foot market is owned by Downtown By Tom Henderson thenderson@crain.com

The Grand Rapids Downtown Market, one of the last economic development projects undertaken by

Need to know

Grand Rapids Downtown Market remakes a neighborhood  One of the last projects by coalition of community leaders who changed the



Market Holdings LLC, a nonprofit corporation formed by Grand Action. It was built in 2012 on the site of five old abandoned warehouses and factories south of Wealthy Street, which

had long ago been shattered, floors were warped and rotting. Scrappers stole interior pipes and exterior gutters. The vision Grand Action had was u-

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

MICHIGAN BRIEFS

INSIDE

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

Ford resumes F-150 production after supplier fire

Ford Motor Co. was set to resume production of its F-150 pickup following a fire at a plant near Lansing where parts for the vehicle are made. The automaker said last week that work was scheduled to restart Friday at the Dearborn Truck Plant. The suspended production in Dearborn affected about 4,000 workers. Production of Ford’s Super Duty at its Louisville, Ky., truck plant and the F-150 at its Kansas City, Mo., assembly plant are targeted to resume by Monday. A May 2 fire severely damaged the main plant at the Meridian Magnesium Products of America factory in Eaton Rapids. The plant makes structural parts with about one-third going to Ford.

Consumers Energy files rate request Consumers Energy Co. filed a proposal with the Michigan Public Service Commission for a three-year, $7.5 million pilot infrastructure program to support the fast-growing plug-in electric vehicle market in the Jackson-based utility’s electric service territory. Jackson-based Consumers Energy

FORD MOTOR CO.

Production of Ford’s F-150 halted in the wake of the May 2 fire that interrupted output at the Meridian Magnesium Products of America plant in Eaton Rapids.

filed its EV plan last Monday as part of a $58 million overall rate increase request. The MPSC last year began to look at potential impacts to the state's electric grid as growth of electric vehicles begin to ramp up. There are now about 12,500-15,000 EVs in Michigan, which is ranked 10th in national EV sales as of 2017. By 2030, industry estimates are that EV sales will grow 150,000 to 800,000 EVs in Michigan. EVs include all electric vehicles, including plug-in hybrid electric vehicles and battery electric vehicles. A preliminary hearing is planned by the commission June 1 to consider the average 1.4 percent residential rate increase that would cover a 12-month period ending Dec. 31, 2019. The rate increase request could

have been more than $160 million if Consumers hadn’t received this year a decrease in its federal income tax rates. DTE Energy Co. in Detroit is also expected to file a rate increase case and EV plan early this summer. Like most rate cases, the MPSC generally takes up to 10 months to decide and usually approves a fraction of the request.

Michigan symposium expands focus

The Michigan Growth Capital Symposium is expanding its scope to the entire Midwest, which it is reflecting in a name change. The investment fair, which showcases companies in need of funding to investors across the U.S., will be called the Midwest Growth Capital

Symposium, the organization announced last Tuesday at its annual event in at Eagle Crest Resort in Ypsilanti. Next year’s program will include technology transfer success stories and potential investment opportunities from several Big 10 research universities, expanding from its start at the University of Michigan, it said in a news release. “As the cost of living and operating a startup continues to skyrocket on the coasts, investors and entrepreneurs alike have stepped up their search for alternatives, bringing the Midwest ecosystem the attention it deserves,” David Brophy, professor of finance at UM and founding director of the symposium, said in a release. “For the last four decades, (the symposium) has worked to bring national recognition to the region’s best and brightest — but over the years, we’ve begun attracting an audience that goes beyond Michigan’s borders. By changing our name to the Midwest Growth Capital Symposium, we’ll reflect the full complement of startup talent in America’s Heartland.” Next year’s event will include University of Illinois, University of Iowa, UM, University of Minnesota and University of Wisconsin, Michigan State University, Ohio State University, Indiana University, Purdue University, Northwestern University and regional research universities.

CALENDAR

CLASSIFIEDS

DEALS & DETAILS

KEITH CRAIN

OPINION

OTHER VOICES

PEOPLE

RUMBLINGS

WEEK ON THE WEB

Michigan plans $35M contract with Trinity

The state of Michigan will continue paying a company for prison food and to use its software while transitioning back to having state workers run prison kitchens. A state subcommittee on Tuesday approved a new $35 million one-year contract for Trinity Services Group. The full State Administrative Board is expected to vote next week. Department of Corrections spokesman Chris Gautz said companies were interested in bidding to supply the food but could not do so on an expedited timeline. He said the agency plans to issue a request for proposals so other vendors can begin providing food in June 2019. In February, Gov. Rick Snyder announced that an existing larger contract with Trinity would expire at the end of July and not be extended, largely due to problems with inadequate staffing levels.

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HEALTH CARE

Orthopedic urgent care centers to expand

SPORTS BUSINESS

Sports marketing dollars in demand

By Jay Greene jgreene@crain.com

A new orthopedic urgent care center operator is expected to start opening centers in Michigan later this year under the Miami-based OrthoNOW franchise as demand for convenience and lower prices sweeps the health care industry. Kelly Olin and her husband, Mark, co-owners and regional developers of the OrthoNOW Michigan franchise, plan to open 32 orthopedic urgent care centers in five years. The couple, who live in Rochester, will finance some centers, partner with orthopedic doctors and private investors and also sell territories within Michigan to other investors, she said. Kelly Olin: Over the past Co-owner of decade, the numMichigan ber of urgent care franchise. centers has exNeed ploded in Michito know gan and nationalJ New orthopedic ly as patients seek urgent care center to avoid a steep operator is emergency room expected to start bill or visit more opening centers in convenient health Michigan care settings. Data show there are J Plan to open 32 more than 350 urorthopedic urgent care centers in five gent care or walkin clinics in Michyears igan, including J Number of more than 45 urgent care within 20 miles of centers has Detroit, according exploded in to Urgent Care Michigan Locations LLC. Besides hospital-based systems and physicians that operate dozens of urgent clinics or patient-centered medical homes, a number of corporate-owned clinics like Concentra and the more retail-oriented CVS Minute Clinics also provide primary care services to patients. Most health insurers in Southeast Michigan contract with urgent centers because of their lower cost relative to emergency departments. That steady and reliable reimbursement has helped push the expansion of urgent care. Now, a new breed of urgent cares hopes to convince patients with bumps, bruises, sprains, and even simple broken bones to go to the urgent care rather than the emergency room. SEE CENTERS, PAGE 18

Events such as Detroit Tigers games, the Detroit Grand Prix on Belle Isle, the Gold Cup hydroplane races on the Detroit River and the Volvik Championship in Ann Arbor seek corporate sponsorships dollars in Michigan.

New PGA, LPGA Tour tournaments ramp up competition in Michigan By Bill Shea bshea@crain.com

Michigan is landing two new professional golf tournaments, increasing what sports marketing insiders say is already significant demand for corporate advertising dollars in Michigan. The PGA Tour intends to launch a new tournament, sponsored by Quicken Loans Inc., at the venerable Detroit Golf Club next summer, and the LPGA Tour on Thursday an-

Need to know

JJNew PGA, LPGA events in Michigan will

seek corporate sponsorships

JJSpring, summer are filled with sports events competing for ad budgets JJBrands seek better ROI using digital metrics

nounced the inaugural Dow Great Lakes Bay Invitational at Midland Country Club from July 17-20, 2019. Both events will seek millions of

dollars in corporate sponsorship investment in a calender already crowded with everything from the Detroit Tigers to the Detroit Grand Prix, the Gold Cup hydroplane races on the Detroit River and NASCAR races at Michigan International Speedway. Lower-tier leagues, such as the semi-pro Detroit City FC soccer club and the United Shore Professional Baseball League, also have sophisticated sponsorship deals that tie up ad dollars.

In golf alone, there already are two LPGA events in Michigan that command sponsorship money: the Volvik Championship in Ann Arbor at Travis Point Country Club from May 2127, and the Meijer Classic in Grand Rapids running June 11-17. Post-recession, there seems to be plenty of money to go around, even if competition is increasingly stiffer among professional, collegiate and amateur events. SEE DOLLARS, PAGE 22

Analyst: Burns & Wilcox gets $720K in brand exposure value with PGA champs By Bill Shea bshea@crain.com

Burns & Wilcox two years ago launched a brand marketing campaign to elevate its profile via sports marketing investments, and its bet on a pair of PGA Tour golfers paid off handsomely when they finished 1-2 at The Players Championship on May 13. The Farmington Hills-based wholesale insurance broker and underwriting

manager hasn’t disclosed what it paid to put its logo on Webb Simpson, the tournament’s winner, and runner-up Jimmy Walker, but the payoff in terms of media exposure value over a few hours that Sunday was significant, by one brand value analysis firm’s estimate. “Overall, we put the in-broadcast value for Burns & Wilcox during the final round Sunday at $720,630 of exposure value, based on more than 16 min-

utes of air time,” said Eric Wright, president and executive director of research at Ann Arbor-based Joyce Julius & Associates Inc., via email. That total is what Burns & Wilcox would have paid via TV commercials or other marketing to get the same exposure its logo did during the golf tournament, one of the premier events on The PGA Tour. SEE BRAND, PAGE 22

Webb Simpson in 2017.

BURNS & WILCOX

MUST READS OF THE WEEK Wayne State ends leases at Mackenzie House

The 2020 census and Mike Duggan’s legacy

Change in law could bring changes in New Center

Preservation Detroit and Urban Consulate have lost their leases as WSU gets ready to move historic home. Page 23

Chad Livengood: Detroit Mayor Mike Duggan hunts for new taxpayers as the census clock ticks. Page 6

State seeks retail tenants for Detroit’s Cadillac Place while awaiting legislative change. Page 4

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Legislation passed last week and expected to be signed by Gov. Rick Snyder allows the state more flexibility in what types of tenants can occupy the Cadillac Place building in Detroit’s New Center area.

State seeks retail tenants for New Center’s Cadillac Place By Kirk Pinho

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kpinho@crain.com

The state is lining up new retail tenants for the Cadillac Place building in the New Center area. Legislation passed last week and expected to be signed by Gov. Rick Snyder allows the state more flexibility in what types of tenants can occupy the state-owned building in the burgeoning neighborhood north of downtown along West Grand Boulevard and north of it. Robert Burns, the director of real estate for the Department of Technology, Management and Budget, which oversees the state’s real estate assets and leasing, said about two dozen businesses, mostly local, have walked through the first-floor retail space in the 1.4 million-square-foot Cadillac Place, the former General Motors Co. headquarters, since the legislation was introduced in the spring. “We probably have eight who have expressed interest, three or four strongly so,” he said. Burns declined to provide the names of the businesses but said they range from fine-dining restaurants to insurance companies, spas and clothiers to fitness clubs and entertainment uses. In the New Center area, a bevy of development and leasing activity has largely bypassed Cadillac Place, which sits across from the Fisher Building and has about 80,000 square feet available. Among those spearheading those efforts are Detroit-based The Platform LLC, Midtown Detroit Inc.

Need to know

State is looking to fill about 80,000 square feet of space 

 New legislation would expand opportunities for dining and concession operators  Rates expected at $17 per square foot-$20 per square foot

“We probably have eight (businesses) who have expressed interest, three or four strongly so.” Robert Burns, director of real estate, Department of Technology, Management and Budget

Part of that has been attributed to a state requirement enacted in 1978 known as Public Act 260, which requires that blind people own dining and concession options in stateowned buildings. Senate bills 803 and 804 would lift that requirement for Cadillac Place alone and also allow liquor licenses for concessions in a state-owned office building of more than 1 million square feet. Cadillac Place is the only stateowned building that meets that requirement. The restrictions have caused difficulty getting the retail space leased to tenants because retailers generally like the foot traffic restaurants bring, and the state has had difficulty filling space with blind restaurant

owners. There is currently a diner and a Subway restaurant in the building. Burns said rents will be market rate, ranging from about $17 per square foot to $20 per square foot. A portion of the 80,000 square feet on the first floor is “unnecessarily” occupied by state government agencies, and 30,000 square feet is completely vacant, Burns said. He also said Midtown Detroit has “shown and promoted the space,” although the state has not hired a brokerage firm to market it to tenants. Michigan’s law, enacted four decades ago, is far from unique; the federal Randolph-Sheppard Act giving preference to vendors owned by the blind has been on the books for more than eight decades. It followed World War I, when many returning veterans came home blinded by chemical weapons following their service in Europe, said William Robinson, director of the state’s Bureau of Services for Blind Persons, in an August interview with Crain’s. This year’s legislation, sponsored by Sen. David Hildenbrand, R-Lowell, takes effect 90 days after being enacted. Anna Heaton, Snyder’s spokeswoman, said the governor is “supportive in concept” of the bills, but they have not been sent to his office for final review. He has 14 days to sign them once they are received. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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5/15/18 11:41 AM

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OPINION COMMENTARY

Duggan hunts for new Detroit taxpayers as census clock ticks

SEE CENSUS, PAGE 7

to market then, and it still is today. Summer gives businesses many great opportunities to tie in with all the exciting events. All you have to do is take a look, figure out what your customers and prospects would enjoy, and put some money into sponsorships. Maybe your customers would enjoy the civic activity of the fireworks, or they might like the speed and excitement of the Grand Prix races on

Belle Isle. Maybe they are boaters and you think of the opportunities for the Unlimited hydroplane races on the river. Or the classic Concours d’Elegance out at the Inn at St. John’s. The LPGA tournament may have to share the spotlight with a men’s professional golf tournament next year, I understand. When you start to realize just how many sponsorships are available over the entire summer, it’s clear op-

Detroit is in a proverbial race against time to grow its population and show the world that this nascent comeback goes beyond shiny new buildings downtown.

CHAD LIVENGOOD clivengood@crain.com

his Quicken Loans family of companies, privacy is everything in their line of work. “Our flagship business, Quicken Loans, America’s largest mortgage lender, has consistently protected our clients’ privacy, especially as it relates to their most personal and private information,” Gilbert said in a written statement that included a plug for his company surpassing Wells Fargo in mortgage origination for two consecutive quarters. The irony of the Duggan administration’s crackdown on tax scofflaws and the implication that Gilbert is harboring them is this all can mostly be traced back to Detroit’s highest-in-the-nation auto insurance rates. Duggan has said it’s the No. 1 issue holding back Detroit from gaining residents and rebuilding the middle class that was basically invented here. When suburbanites move into the city for work — especially millennials working for, you guessed it, Gilbert’s Quicken Loans — an unknown number of them maintain suburban ad-

ob creation, revitalized neighborhoods and higher property values are all essential aspects of a thriving community. Here in Michigan, we can make progress in these areas and more through restoration of the Historic Preservation Tax Credit, which is currently under review in the Legislature. It’s no surprise that restoring and revitalizing historic properties requires significant investment, but we all stand to benefit from this work. Detroit is a prime example, with no shortage of beautiful historic buildings, many of which are more than 100 years old. Today, development in Detroit is transformational in part through the reuse of historic spaces — for instance, when former office spaces become multifamily housing or retail destinations. What’s old is new again, and the ability to breathe life back into these buildings has been a big part of the city’s comeback. The federal Historic Tax Credit program makes restoration work in Detroit — and across the state — possible. According to the National Park Service report on the federal program’s fiscal year 2017, the qualified rehabilitation costs for projects completed in Michigan totaled an estimated $158.7 million. Our own work within the state accounted for 43 percent of that total, so we are seeing firsthand the benefit this type of tax credit can have on projects here at home. However, without a tax credit at the state level, Michigan falls behind the rest of the nation. After the state tax credit was eliminated in 2011, Michigan became one of only 15 states without this type of incentive. As a result, historic buildings and homes are at increased risk of falling into disrepair, which can be irreversible. Unlike the federal credit, the Michigan Historic Preservation Tax Credit isn’t limited to developers and commercial projects. At the state level, this credit offers a direct benefit to homeowners and serves as an easy tool to apply toward stabilizing neighborhoods and increasing residential property values. If this tax credit is restored, homeowners can immediately put it to work, receiving a 25 percent credit for every qualified dollar spent. For example, a historic home — or home in a historic neighborhood recognized on the National Register of Historic Places — with a $200,000 rehabilitation project would return $50,000 in

ith less than two years until the 2020 census, Detroit is in a proverbial race against time to grow its population and show the world that this nascent comeback goes beyond shiny new buildings downtown. Mayor Mike Duggan has effectively staked his legacy on reversing Detroit’s 60-year population decline, once calling it “the single standard a mayor should be defined” by. Since 1960, Duggan’s six predecessors have all been, in part, defined by a census showing a shrinking, increasingly deserted and less influential Detroit. Like everything Duggan does, the mayor’s conscious efforts to increase the population are driven by data and improving the metrics. He demands better numbers from his staff all the time — whether it’s life-saving EMT response times, paying off post-bankruptcy debt faster than expected or beating tax revenue projections to guard against the next financial calamity. That’s one explanation for the Duggan administration’s aggressive hunt for new residents who haven’t been paying the 2.4 percent tax on earnings for residents. After sending downtown landlords a series of letters demanding personal information about tenants, the mayor’s tax collectors amped up the pressure by suing one of his closest allies — billionaire businessman Dan Gilbert’s Bedrock LLC real estate management company. The Duggan administration is demanding Bedrock turn over the Social Security numbers and employers of the residents in its 350 residential units in the greater downtown area. The city has sued eight other downtown property owners where a team of city auditors have determined fewer than one-fourth of the occupants in such buildings as Broderick Tower, the Cadillac Square Apartments and the Penobscot Building aren’t paying their share of the tax burden. Gilbert has balked — and not because Bedrock doesn’t want to help the city continue to grow its tax collections just weeks after Detroit got out from underneath state financial control. It’s largely because, for Gilbert and

Restore tax credit

dresses for cheaper auto insurance rates. It also saves them half on city income taxes by claiming the 1.2 percent nonresident tax rate, though few people will save as much money on taxes as they do on insurance. At 28 W. Grand River Avenue downtown, Gilbert’s Bedrock owns an apartment building that has 218 fully furbished apartments. It stands to reason that many of Gilbert’s own employees live there. To keep a car at this address would be pricey. A 24-year-old single female who has a college degree and worked in the banking and financial business as an analyst would pay upwards of $330 per month to insure a 2014 Chevrolet Malibu garaged at 28 W. Grand River Ave., according to an online quote from AAA of Michigan. The same female driver would pay about $180 per month — 45 percent less — for full coverage on the same vehicle garaged 25 miles northwest at a condo on the 25000 block of Grand River in Novi, according to another online quote from AAA. That’s $1,800 a year. If she makes $60,000 a year in salary, she saves $720 on taxes. The mayor has made competing with the suburbs for people part of his strategy to stop the bleeding population. Crain’s and Bridge Magazine found last year that AAA’s base auto insurance

OTHER VOICES Bob Kraemer

credits back to the homeowner. There’s also an immediate impact on the job market. There would be a need to fill high-quality, professional jobs to complete this work. When the tax credit was available in our state, a study from Clarion Associates indicated that spending $1 million on the rehabilitation of buildings would create 11 more jobs than manufacturing chemicals and eight more jobs than manufacturing vehicle parts and accessories. The economic return is proven. When Michigan offered this type of tax credit from 1999 to 2011, incentivized direct rehab expenses totaled $1.46 billion. In that period, 36,000 jobs were created to do the work. From 2001 to 2005, the economic impact across the state was valued at more than $1.93 billion. The overall economic impact was $11 for every dollar spent on historic rehabilitation. Think of what that could do for our neighborhoods. To continue the tremendous growth that’s happened in downtown Detroit and expand the reach of that movement to the surrounding neighborhoods, restoring the Michigan Historic Tax Credit is a simple solution. Michigan has phenomenal communities with historic elements that should be preserved, and this credit can be utilized by all, from small towns and villages to our biggest cities. Senate Bill 469 and House Bill 5178 have been introduced into our Legislature, and now, as members of the MI Impact Coalition, we are asking our friends and neighbors across Michigan to contact their representatives and senators to show support for this legislation. Reestablishing the Michigan Historic Preservation Tax Credit and preserving our great history is a worthy endeavor for generations to come. Bob Kraemer is principal and co-founder of Detroit-based Kraemer Design Group.

A good chance for business

hese days, everybody is questioning how to spend their marketing dollars. As department store pioneer John Wanamaker, whose stores are now part of Macy’s, is said to have said: “Half my advertising is wasted, I just don’t know which half.” With all the new ways to spend marketing dollars now, it is even tougher to figure out. But few can argue that one-on-one marketing was a pretty effective way

KEITH CRAIN Editor-in-chief

portunities abound to tie in an event that is perfect for your company and your customers. Advertising is a very powerful tool, but adding to your efforts with a sponsorship is bound to enhance your sales. It is exciting to make your business a part of something many people enjoy. You know your bottom line will appreciate it, and so will your customers and prospects.

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The new tax law and charity: a reality check

hange is never easy. That is especially true when the change involves emotional subjects, like taxes and charitable giving. When the new federal tax law was passed late last year, many in the nonprofit sector feared the worst. Would charitable giving dry up? Would nonprofits have to close their doors? Even a small bump in the nonprofit sector can be felt painfully. For a reality check, volunteer members of the Planned Giving Roundtable of Southeast Michigan, comprised of charitable development professionals, legal experts and financial advisers, have studied the new law and tried to assess the potential impact on the nonprofit organizations so vital to our community. The actual impact might not be known until the end of this year when charities can accurately measure their donations, but for now, it is important to assess the situation by talking to clients and donors from both a legal perspective and the views of those emotionally connected to charitable work across the region. Regardless of tax benefits, donors have always wanted to give to organizations they care about because the nonprofit organizations make a difference in ways donors cannot on their own. Nonprofits must continue to communicate closely with donors so their mission and needs are clearly understood.

OTHER VOICES

Rita Tinetti and Dennis Mitzel

Major gifts, the largest in our community, should not be affected by changes in the tax law. The most generous philanthropists will continue their charitable giving and will still be able to obtain a deduction for their gifts. Also,

the relatively small annual gifts that are the lifeblood of many smaller organizations will also continue because they tend to come from the heart and come from individuals who often did not itemize. But, there may be some impact on giving from middle income donors. Those who earn between $75,000 and $300,000 per year, and who are very charitable are likely the most affected by tax law changes to the standard deduction. In the past they often received a tax deduction for their gifts. With the higher standard deduction they could lose all or a portion of that benefit. Those are the donors who could give charitable contributions a different

look this year. These are also very generous people. Hopefully their generosity will not be impacted by the change in the tax law. The recent increase in value of stocks could also have a positive impact on giving and potentially offset some of the loss of benefits in the new tax act. The new law affects each individual differently. Financial advice should be more important than it has been before, to help donors navigate the new laws. For example, gifts from IRAs have the potential to be more powerful than ever for those older than 70½. Donors can take advantage of a 100 percent reduction of income for charitable gifts paid from their IRA, while gifts made by

a traditional donation might not be deductible at all. In addition, capital gains taxes can still be eliminated if an individual donates appreciated assets directly to the charity. Legal and financial advisers must be prepared to work directly with their clients’ favorite nonprofit organizations to ensure donors of all sizes retain the opportunity to follow their passions. That type of collaboration is philanthropy in its best sense. Dennis Mitzel is an attorney with the Mitzel Law Group in Ann Arbor. Rita Tinetti is development director of Manresa Jesuit Retreat House.

CENSUS FROM PAGE 6

rates in downtown Detroit are generally among the least expensive in the city. Longtime Detroiters who live in the city’s poorer neighborhoods often are charged three or four times what they would get charged in the suburbs — for the same vehicle and factors that have nothing to do with their driving records. Duggan has been trying incessantly to get the Legislature to reform the auto insurance system — and has been aided by Gilbert’s personal lobbying of lawmakers. The city’s income tax revenue is baked into the budget-balancing plan that got Detroit out of bankruptcy in 2014 and was part of a deal that helped fix the city’s long-broken streetlights. Auto insurance rates can be reined in; the income tax rates are likely here to stay. So why are these two allies going to court over something neither side can control? Is this spat for public show? So we’ll think Duggan won’t roll over for the big business interests that aided his elections and rise? Maybe. Or perhaps it’s just as simple as math. There were 713,777 residents counted in 2010 census. The Census Bureau’s most recent estimate from July 2016 pegged the city’s population at 672,795, down about 3,500 residents from the previous year. If Duggan can’t produce at least 672,796 residents on Census Day — April 1, 2020 — the numbers guy will have failed to meet his own benchmark by which he told us to judge him.

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FOCUS

CRAIN’S MICHIGAN BUSINESS: GRAND RAPIDS

A GRAND CULMINATION

The Grand Rapids Downtown Market

Market in downtown Grand Rapids brings surrounding area back to life By Tom Henderson thenderson@crain.com

The Grand Rapids Downtown Market, one of the last economic development projects undertaken by the Grand Action Foundation, has lived up to the name “grand.” Grand Action was a nonprofit coalition of community leaders founded in 1993 to spur economic development in downtown Grand Rapids. Over the years, it was also responsible for the construction of the Van Andel Arena, DeVos Place convention center, renovation and expansion of the Civic Theatre and the Michigan State University College of Human Medicine-Secchia Center.

Need to know

Grand Rapids Downtown Market remakes a neighborhood 

 One of the last projects by coalition of community leaders who changed the city’s face  Neighborhood springs back to life around it

Founded by John Canepa, Dick DeVos and David Frey, Grand Action raised $420 million in direct funding for $3.5 billion worth of projects. The organization declared mission accomplished last September and shut its doors in March. The three-story, 138,000-square-

foot market is owned by Downtown Market Holdings LLC, a nonprofit corporation formed by Grand Action. It was built in 2012 on the site of five old abandoned warehouses and factories south of Wealthy Street, which runs east-west through Grand Rapids and has become the epicenter for the city’s gentrification. While things were already perking up on Wealthy Street when the Downtown Market opened, the area around the market, just south of downtown, had cratered and there wasn’t a whiff of gentrification in the air. It was a furniture warehouse and factory district where everything stood empty and forlorn. Roofs were

collapsing inward, most windows had long ago been shattered, floors were warped and rotting. Scrappers stole interior pipes and exterior gutters. The vision Grand Action had was of a market that would feature restaurants, cooking classes, hot food stalls and fresh meat, seafood and produce. But the vision wasn’t just a market unto itself, it was of a market sparking commercial development in the surrounding blocks, putting cars back into parking spots and people on sidewalks and in buildings. It has all come to pass. The market — the building is LEED certified gold, one rating down from the high-

est level of platinum, and all tenants are required to recycle — is thriving, and the surrounding area has come back to life. Across Ionia Avenue from the market are the Baker Lofts, a five-story complex that is fully rented, a renovation project begun after the market opened at the site of the historic, long-shuttered Baker Furniture factory. A block north of the Baker Lofts are the Klingman Lofts, in a $22 million renovation of the nearly 100-year-old Klingman’s Furniture factory. Within easy walking distance is the University Prep Academy, a Moosejaw store and the Craft Beer Cellar. SEE MARKET, PAGE 14 LARRY PEPLIN FOR CRAIN’S

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

CRAIN’S MICHIGAN BUSINESS: GRAND RAPIDS

Nascent Grand Ventures fills startup funding gap By Tom Henderson

thenderson@crain.com

Grand Ventures LLC, a Grand Rapids-based venture-capital firm planning to help fill a funding void for startup and very early stage companies, has had no shortage of deals to review since it announced its birth in 2017 with a filing with the U.S. Securities and Exchange Commission. The filing said its fund, Grand Ventures I LP, was targeting $50 million. The first closing in August was $10 million. While co-founder and general partner Tim Streit said he is continuing to raise money toward the goal, SEC rules prohibit him from disclosing further details. He can disclose, though, the heavy workload of due diligence needed to choose which startups and early-stage companies to fund. “In the last year, we looked at 700 companies and invested in four,” Streit said. Grand Ventures looks for companies with business-to-business software in automotive, agriculture and energy. “We like the intersection of technology and old industries,” he said. The plan is to target Michigan companies and invest in five or six a year until they reach about 25. “We want to find young entrepreneurs and keep them here instead of seeing them head to the coast,” Streit said.

Need to know

JJGrand Ventures raised $10 million of

$50 million goal

JJConnects portfolio companies to advisory resources JJSeeks to retain and attract startups and early-stage companies

Though Grand Ventures focuses on companies in Michigan and the Midwest, Engage Talent is based in Charleston, S.C. Engage Talent uses artificial intelligence to help companies recruit passive job candidates, people who aren’t actually looking for a job change but might be receptive to an offer. The company analyzes data predicting people’s job security and likelihood to change jobs based on their professional background, career progression and events impacting their companies and industries. In December, AOL founder Steve Case and his co-investors launched the $150 million Rise of the Rest Seed Fund. In February, Grand Ventures co-led a $3 million seed round in Engage, an investment co-led by Case. Engage was the first cohort of nine investments the Rise of the Rest Fund announced on Feb. 14. Strenghthening its business, Grand Ventures resides in a shared work space and incubator center called the Grand Rapids Collaborative in downtown Grand Rapids.

Not so coincidentally, collaboration is at the heart of Streit’s business model, he said. “Our secret weapon is our extended team of advisors, each of whom has committed their time, energy and capital to helping GV companies succeed,” says the Grand Ventures’ website. “From Hagerty Insurance and Founders Brewing to US Robotics and Lean Logistics, GV’s founders and advisers have built world-class Midwest companies. Want to turbo charge your growth? We do too.” Added Streit, “Good things happen when I take 20- or 30-year-old CEOs and connect them with a 30or 40-year veteran of business. We try to bring more to companies than just capital.” Streit is especially referring to CEOs of startup and early-stage companies who have had more trouble getting funding in recent years as venture capital funds seek out later-stage companies that already are producing revenue and don’t have long timelines to market. “Over the past few years, we’ve seen a national trend of venture capital funds moving to later-stage investing, creating a shortage of seed and early-stage funding. Angel investors and some community funds have helped, but there is still more capital needed in Michigan at the earliest stages of company development,” said Chris Rizik, CEO

McKeel Hagerty: Co-founded Grand Ventures.

Inc., a spinoff from the University of Michigan, that makes ultra-low power integrated circuits; Plymouth Township-based Algal Scientific Corp., an algae-based food maker for farm animals that was sold last year; and Ann Arbor-based FarmLogs, a provider of cloud-based data and services to farmers. A native of west Michigan, Streit wanted to launch his new VC firm there, where he had been running Huron River’s other office. He co-founded Grand Ventures with McKeel Hagerty, CEO of Traverse City-based Hagerty Group LLC, which bills itself as the largest insurer of classic cars and boats in the world. If one of Grand Ventures' themes is keeping entrepreneurs in Michigan, another is recruiting former Michigan talent back to portfolio companies and his own firm. When Maitlan Cramer, who had been in the Technology Investment Banking Division of Wedbush Securities in San Francisco, was visiting for the holidays, Streit said they met for a beer and he asked if Cramer was interested in coming back. "My fiancee and I were both from here and we both wanted to come back," said Cramer who returned in 2016 and is a founding team member and principal at Grand Ventures.

Tim Streit: Looked at 700 firms in past year.

and fund manager of Ann Arbor-based Renaissance Venture Capital Fund. “It is really encouraging that Grand Ventures is looking to invest in that much-needed area. I think that they’ll find lots of opportunities all around the state, and they’ll also be helping to fill a gap that is important to growth of high-potential companies here. To attract major venture capital funds from around the country to invest large amounts in our state’s more-developed technology companies, we need strong local investors like Grand Ventures who are investing smaller amounts in those companies at a much earlier stage and are helping them develop.” Streit is still a partner in Ann Arbor-based Huron River Ventures and continues to serve on the board of some of its portfolio companies. Its portfolio companies include Austin, Texas-based Ambiq Micro

Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

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LARRY PEPLIN FOR CRAIN’S JJGrand Rapids Downtown Market brings surrounding area back to life. Page 8 JJGrand Ventures fills startup funding gap. Page 9 JJFarm-to-table fare and cocktails raise the bar at Coppercraft Distillery. Page 10 JJUrbaneer provides downtown living space solutions. Page 10 JJAgency spurs timely West Michigan growth. Page 11 JJSalesPad makes a business by making pads evaporate. Page 14

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JJOnline: Genesis Innovation takes medical device makers further. crainsdetroit.com

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CRAIN’S MICHIGAN BUSINESS: GRAND RAPIDS

Farm-to-table fare, cocktails raise bar at Coppercraft By Tom Henderson thenderson@crain.com

Coppercraft Distillery, which was at the breaking edge of the craft distillery wave when it opened in 2012, in what was a former showroom east of downtown Holland, keeps upping its game. Last year, Coppercraft opened an on-site restaurant featuring new American cuisine, often farm-to-table pairing of local foods with spirits made in copper stills and fermenters visible behind a high glass wall. Chef Kelsey Winter-Troutwine, who the restaurant recruited from Chicago in 2015, pickles and preserves fruits and vegetables that are served with the various dishes. Coppercraft seats 56 inside and 26 on the outdoor patio and has a menu that thanks local farmers and vendors, listing 18 by name. The fare, which regularly changes, includes items such as bacon-wrapped chorizo-stuffed dates, Bangs Island mussels, mac and cheese with bacon and English peas and fish tacos.

Mixing it up In addition to traditional shots of alcohol, the beverage menu includes signature cocktails with names like Cucumber Cooler, Ruby Mule, Peaches and Diesel, Juniper Sunrise, Hibiscus and Berry, the Bison and the Nutty Dutchman. Coppercraft is making a few additional changes. Those include:  Selling cocktails in copper-colored, 12-ounce aluminum cans, the first Michigan distillery to put distilled spirits into ready-to-drink containers;  Opening a tasting room in the tourist town of Saugatuck, over Memorial

Need to know

 Coppercraft is first state distillery to package cocktails  Opens a Saugatuck tasting room Memorial weekend 

Wants to know your flavor faves

weekend;  Launching a digital-media crowdsourcing campaign this month for flavor ideas; and  Expanding distribution to California and Illinois, over the next month. The Saugatuck tasting room will be open seven days a week and have 12 seats at high-top tables, with the goal to push retail sales, and the Mermaid Restaurant in Saugatuck will serve appetizers. As an official sponsor of May’s Tulip Time festival in Holland, Coppercraft created the Tulip Julep, featuring its Applejack, which was available at restaurants throughout Holland during May’s festival. “Canned cocktails are the cutting-edge of the craft-distiller business. It’s the hot new thing in Chicago, New York and Los Angeles,” said Coppercraft’s general manager Brandon Joldersma. The first canned cocktail, a gin and tonic, became available in mid-April. “We’ve sold everything we’ve made thus far. It’s been a hot item,” he said. Coming on the market in May is the Michigan Moscow Mule — created with vodka, lime and a ginger hard cider made with Michigan apples — the second in a line of cocktails.

Bourbon’s still king Despite the additional revenue

Brandon Joldersma, general manager, Coppercraft Distillery. LARRY PEPLIN FOR CRAIN’S

flows from the restaurant, the premixed cocktails and an expanded list of bottled spirits, Coppercraft’s chief focus since distiller Walter Catton and his wife, Kim, founded it is its two bourbons. In April, Coppercraft earned the title of Michigan bourbon distillery of the year at the New York International Spirits Competition. Prior, in 2016, it won the gold and best-in-category awards for its cask-strength bourbon from the American Distilling Institute. The focus on bourbon has paid off as consumer interest in high-end bourbons has intensified. “Bourbon has just exploded. We’ve been reactive. We see that trend con-

tinuing for a long time,” said Joldersma, who added that an increase in bourbon distillation will be at the heart of plans to increase total production of spirits from 150 barrels a year last year to 500 barrels this year and 1,000 barrels in five years. There are 53 gallons in a barrel. By tradition and law, bourbon is distilled from a mixture of at least 51 percent corn and aged in charred, new white oak barrels. After using the barrels once, Coppercraft sells or donates them to local craft breweries that like the way they impart a hint of bourbon to beer. Bourbon requires a four-to-12-year aging process, which is where produc-

tion of clear spirits that require much less aging and can get to store shelves quicker, comes in. Clear spirits generate cash flow and pay the bills while the bourbon slowly absorbs the smell and taste of oak. The vodka, citrus vodka, gin and rum retail for $29.99 for a fifth. Coppercraft’s bourbons are $42.99 and $49.99.

Noteworthy history Joldersma joined Coppercraft a year ago after Dick and Betsy DeVos purchased the distillery in 2016. Previously, Joldersma was sales director for Fennville-based Virtue Cider, a

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Urbaneer provides downtown living space solutions By Tom Henderson

thenderson@crain.com

Millennials, tired of sprawl and lengthy drive times, want to live in downtowns and are willing to downsize into smaller housing to do so. Grand Rapids-based Urbaneer LLC wants to help them. The company, a tenant at the Start Garden incubator downtown, has closed on more than $1 million of a planned funding round of $1.5 million. Raul Fernandez, vice chairman and owner of Washington, D.C.,based Monumental Sports & Entertainment, and Wakestream Ventures LLC, the DeVos family office in Grand Rapids, led the funding. Previously, Urbaneer was a proofof-concept unit at Grand Rapids-based Rockford Construction testing the theory that it makes commercial sense to design smaller, smarter living spaces for urbanites. Through subcontractors, Urbaneer designs and builds movable walls, wall beds, wall tables and kitchen islands that go from coffee-table height

Need to know 

Former Start Garden cohort



Raised $1 million of goal

 Constructs movable walls and counters for small spaces 

Developed innovative wireless kitchen

to counter height to provide functionality to smaller living spaces. The company received two patents on its movable walls in 2015. For example, a couple renting a 900-square-foot apartment in a downtown doesn’t need as much square footage in their bedroom during the day as at night. So, Urbaneer designed a wall that moves back at night to make a full-size bedroom and moves the other way by day to make the bedroom tiny and turn a cramped space on the other side of the wall into a comfortable dining area. In January, Forbes featured Urbaneer in an article on intriguing gadgets for home use that were on

display at the Consumer Electronics Show in Las Vegas. Urbaneer’s $8,000-plus wireless kitchen featured counters with built-in wireless power for mobile devices, laptops and other smart kitchen appliances. “We want to design the right housing for a changing population that wants smaller, more efficient spaces,” said Bruce Thompson, Urbaneer’s co-founder and president. “People moving into cities won’t need as much space or have as much stuff. We want to be that company that builds the next generation of building spaces.” Thompson said Urbaneer employs four full-time employees and four contractors and will use the current funding round to ramp up sales and marketing and on product development. “Where we live and how we live is changing. Our cities are changing. As a result, developers and builders are seeking new solutions that create more livable spaces. Urbaneer is a new breed of company, with a pow-

Urbaneer designs and builds movable walls, wall beds, wall tables and kitchen islands for smaller living spaces. URBANEER

erful vision, and its products are creating the next generation of living spaces,” said Wakestream Investment Director Kim Pasquino.

Experienced innovator “Urbaneer’s sweet spot is how we create a smarter space that works more efficiently in urban spaces as real-estate costs go up with demand and as people want to return to cities,” said Paul Moore, a director at Start Garden. “Bruce is one of those

seasoned and smart guys who blows up the mythology of startups being incubated out of dorm rooms. The ones that grow really smart and really fast are grown by people who have been successful in other areas.” Indeed, Thompson’s CV goes well beyond the dorm room. In 1988, he founded Online Management Services in Colorado, which he acknowledges was too far ahead of the Internet curve and went out of business two years later. He has also worked with Grand Rapids-based

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

Agency spurs timely West Michigan growth By Tom Henderson thenderson@crain.com

hard-cider maker owned by Anheuser-Busch. Betsy DeVos stepped away from the business and resigned as chairperson of the couple’s holding company, Windquest, when she became U.S. Secretary of Education. Dick DeVos retains ownership through CC Investors, which includes his sons, Rick and Ryan, and his sons-in-law, Nathan Lowery and Michael Abraham. The same group, under the entity RC Investors, bought a 51 percent stake in Ridge Cider Company, a craft hard-cider maker in Grant. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

The 122-year-old Colonial Clock Tower building in Zeeland is a fitting symbol of the economic rebirth going on in the region. The industrial building might have seemed destined for the wrecker’s ball, like so many old industrial buildings whose former tenants were left behind by technology and markets. What were once called clock towers now are more commonly known as grandfather clocks. And there hasn’t been much demand for grandfather clocks for many decades or, it seemed, for the aging, deteriorating building that once housed their manufacture. Worthy of note is the clock company’s first employee, in 1886, was Herman Miller. That Herman Miller, the one for which the iconic furniture maker is named. After the building sat vacant for 15 years, Innotec Group, an LED lighting and technology manufacturer, came to the rescue. In 2006, Innotec completed a $7 million renovation of the three-story yellow brick building, thanks in part to a $700,000 tax credit from the Michigan Economic Development Corp. It is fitting, too, that the building is now home to Lakeshore Advantage, a nonprofit, economic development agency founded in 2003 by local business leaders who thought economic development should be led by the private sector with government as a strong junior partner. Lakeshore Advantage, one of the building’s first tenants, connects businesses to resources needed to grow in Ottawa, Allegan and Kent counties. Other tenants include TwistHDM LLC, which makes wireless lighting-control systems for parking garages, warehouses and manufacturing facilities; and Disher, a consulting and engineering services company focused on new product development.

The road ahead

Computer Design Inc., an early developer of computer-aided design systems; joined MCI Telecommunications’ new business development team in Washington, D.C.; was vice president of corporate development for Washington-based Proxicom, a systems integrator Fernandez founded; and was VP of corporate development at Virginia-based Objectvideo, which provides video software for security, public safety and business intelligence.

Lakeshore Advantage coordinated a $7.7 million project interchange improvement project at I-196 and the congested I-196 business loop into Zeeland. In February, the Michigan Department of Transportation awarded a $2.7 million economic development grant for the project that is expected to spawn 262 permanent new jobs in Ottawa County. More than 20 private-sector companies — including Gentex Corp. and Zeeland Farm Services Inc., the two most high-profile beneficiaries — have pledged support to the project. Gentex is a global electronics company supplying the automotive, aerospace and fire-protection industries. Zeeland Farm Services is a leader in farm, freight and food services. Each company planned to expand but was leery because of the traffic congestion near their campuses.

SEE URBANEER, PAGE 14

SEE AGENCY, PAGE 15

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

CRAIN’S MICHIGAN BUSINESS: GRAND RAPIDS

SalesPad makes a business by making pads disappear By Tom Henderson

Need to know

The last thing Pete Eardley had in mind in 2002 was creating a software company He already had a business, a Kentwood-based distribution company called Charter Industries. What he wanted was a fix to the software he was using to manage workflow at his company. The software was ERP, for enterprise resource planning, and it was a Microsoft product called Great Plains, and it was cumbersome and nonintuitive. Eardley could get what he wanted done with it only by also using clipboards and legal pads to keep track of things. So, Eardley turned to Matt Williams, a consulting software developer, to create an add-on application that would make Great Plains easy to use, fast and efficient. He may not have had a second business in mind, but from the start, Eardley knew what Williams created was so powerful, other companies would want it, too. Thus SalesPad LLC was born in 2003 in Grand Rapids to help other distribution and manufacturing companies keep their inventory under control and manage their supply chain. Now Eardley does have a software company — one that expects more than $10 million in revenue this year, employs 115 and has 13,000 users at 1,200 customers. SalesPad’s software products work with other leading software applications, including Intuit QuickBooks and an updated Great Plains software

Grand Rapids

thenderson@crain.com

JJSalesPad LLC was born in 2003 in

JJWas desktop-based at the beginning and has expanded to the cloud JJHelps other distribution and manufacturing companies keep their inventory under control and manage supply chain

now known as Microsoft Dynamics GP. The software was desktop-based at the beginning and has expanded to the cloud. Sales were fairly slow to begin with. Revenue hit $400,000 in 2007 and $1 million in 2009 but has grown dynamically since to $7.5 million in 2015 and a projected $10.4 million this year. Williams ran the business as CEO and president until last year, when Jennifer Jurgens replaced him as president.

Atypical career path Jurgens is a veteran of supply-chain management, though her career path was hardly typical. Most of her fellow supply-chain-management majors at Michigan State University in 1993 took jobs in the auto industry. She had a better idea, heading to Hawaii to become general manager of a joint called Hernando’s Hideaway in Honolulu, where she developed custom inventory tracking systems for nightclubs, drastically cutting down on employee pilfering. A native of western Michigan, Jurgens returned to Grand Rapids in 1996 to become vice president of mar-

keting at Weller Auto Parts Inc., then had management positions at a series of tech companies, including being a manager at Pandesic, a joint venture in Silicon Valley between SAP and Intel from 1999-2000. “The bubble went up, and the bubble exploded,” she said. It was back to western Michigan. Jurgens, who had been diagnosed with breast cancer in 2009, was executive director of the Susan G. Komen Foundation’s operations in western Michigan from 2012-2017. “I wanted an opportunity to give back to one of the organizations that helped me find my breast cancer early and beat it,” she said. She joined SalesPad as VP of marketing in February 2017. A friend interviewed for the position and decided not to take it, but thought Jurgens and SalesPad might be a good fit. Jurgens interviewed with Williams, who was impressed. “He said, ‘I see you as president in a year.’” He was wrong. It only took nine months. She was elevated to the presidency last November. Jurgens said SalesPad’s sweet spot is serving distribution and manufacturing companies with revenue between $5 million and $200 million a year. “Being in a tech company in western Michigan is really exciting,” she said. “We have a young, energetic team. I think I’m the third-oldest employee, and I’m 46.” Bob Milanowski is an operating partner at Grand Rapids-based Dempsey Ventures LLC, a private-equity firm. He said he has used SalesPad

Jen Sal

to improve software operations at various companies for more than 10 years. “I’ve leaned on them for their development talent for quite a few projects,” he said. Recently, SalesPad helped integrate software at three medical devices companies Dempsey Ventures bought for one of its portfolio companies, Grand Rapids-based SunMed Holdings LLC, a supplier of medical devices to more than 5,000 health care facilities around the world. “SalesPad was instrumental in

URBANEER

MARKET

Thompson later returned to his hometown of Grand Rapids as a partner in RC Logistics before becoming chief strategy officer at Rockford Construction. He and Rockford CEO Mike VanGessel co-founded Urbaneer in 2013.

“The market was meant to be a catalyst, and it has been,” said Mimi Fritz. “This area was bad. Bad.” Fritz has been president and CEO of the market since it opened. Previously, she was marketing director for downtown Holland for nine years. She joined the market while it was being built. “I literally worked out of a closet in the Grand Action office. They cleared it out for me,” said Fritz, who oversees 45 employees, 22 of them fulltime. She said the market is self-sustaining, with excess revenue going to the Downtown Development Authority, which owns the land. Last year, sales at the market hit a record of almost $14 million, up 14 percent from the year before. That includes vendor and catering sales, with 961,000 people visiting the market to shop or for special events, such as wedding receptions, or to attend classes at its cooking schools. The ground floor of the building has more than 20 tenants, including food-stall vendors and two restaurants — one of Phil Cooley’s Slows Bar BQ barbecue restaurants and an operation of Birmingham-based Social Kitchen and Bar. It also houses three commercial office tenants. Vendors and food stalls include Vietnamese food, gourmet popcorn, an eye-popping fresh seafood mar-

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Manufacturing community “Western Michigan is a really good place to do this. The office-furniture industry means there is an established supply chain for us,” said Thompson. West Michigan is home to Grand Rapids-based Steelcase Inc., Zeeland-based Herman Miller and Holland-based Haworth among other furniture manufacturers. Jennifer Boezwinkle, Rockford’s vice president of communications and strategy, said the construction, real-estate development and property-management company wanted to get ahead of trends in the market place. Engineering News-Record ranks Rockford as one of the top 150 contractors in the nation. Founded in 1987, the company claims projects totaling nearly $4 billion in more than 800 cities across the U.S. “Millennials prefer to live in cities,” Boezwinkle said. “But with an influx to cities like Grand Rapids, the supply gets very expensive, which is why

helping us institute an ERP system. We had three weeks to get it done, and they were able to do it. The danger of failure is quite great when you’re trying to integrate the IT systems of three health care companies, but SalesPad pulled it off.” Tyler Hartman is operations manager at Grand Rapids-based Angstrom Supply, a supplier of chemicals, garments and equipment to clean rooms around the U.S. “It’s been about a year and a half since we started using SalesPad,” he

Rendering shows 800-square-foot model house in Grand Rapids built with Urbaneer designs.

the small-space movement is growing.” Rockford has incorporated some Urbaneer designs in two of its recent redevelopment projects. Two Urbaneer apartments were built at the 18-unit 600 Douglas project as models. Some Urbaneer design was included in all 99 apartment units at The Morton, a rehabbed building built in the late 1800s in downtown Grand Rapids. The Morton apartments range from 500 square feet to 1,200 square feet. Rockford and Urbaneer also built a small demonstration house in Grand Rapids. So far, Thompson said, 400 living units in projects in Traverse City, De-

URBANEER

troit, Washington, D.C., Chicago, New York City and Austin, Texas, have incorporated Urbaneer design. “We are extremely jazzed about this. We showed we could do it in a renovation as well as in new construction,” said Boezwinkle. “Affordable housing is a challenge in Grand Rapids, and this is certainly a piece of the solution. And there are opportunities moving forward in student housing, in senior housing and in creating a better work environment. It’s all about creating spaces that can transform.” Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

ket, a juice bar, a pasta stand, a bakery run by a Zingerman’s Deli alum, a cheese and wine shop, a butcher and a taco stand. The market also accepts applications for daily pop-up food stands as part of what it says is its commitment to Michigan entrepreneurship. It also hosts a pop-up marketplace on the fourth Saturdays of May through September at which artisans sell their wares. On the second floor, there is an incubator kitchen, where 500 would-be entrepreneurs have tested their ideas and recipes for food-related businesses; a large industrial kitchen filled daily with 300 area high school students taking classes in two shifts; and a smaller teaching kitchen where classes are offered to the public. The incubator has launched more

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

CRAIN’S MICHIGAN BUSINESS: GRAND RAPIDS

IT firm Worksighted brightened by growth By Tom Henderson thenderson@crain.com

Jennifer Jurgens, president of SalesPad in Grand Rapids. LARRY PEPLIN FOR CRAIN’S

said. “We were on a system that wasn't handling order management and inventory very well. SalesPad had the solution for us. When they came in, what they had wasn’t really what we wanted, but they took our feedback and came back six weeks later and implemented everything we needed. They’ve proven time and time again that they put our needs at the top of their list.” Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

LARRY PEPLIN FOR CRAIN’S

The ground floor of the building has more than 20 tenants, including food-stall vendors and one of Phil Cooley’s Slows Bar BQ barbecue restaurants.

than 85 businesses and created about 500 jobs. While that might seem like a small number of businesses to result from 500 would-be entrepreneurs, Fritz said it reflects the lessons learned about how difficult it is to turn a food idea into a business reality. “A lot of them come in here and find out how tough it is and how hard they are going to have to work for a long time, and they decide it isn’t for them,” Fritz said. “Which is fine, that’s why we’re here.” In the summer, the teaching kitchen hosts three-day cooking camps for

Worksighted Inc.’s headquarters on the outskirts of Holland is bright, airy, with murals throughout and a color scheme dominated by orange. “Everyone asks us, ‘Where does the orange come from?’” said Michael Harris, co-founder and vice president. The color is a perpetual reminder to Harris and Mat Nguyen, co-founder and president, of their humble beginnings. When they launched their IT services company more than 17 years ago while seniors working on their computer science degrees at Hope College, it was in the basement of Nguyen’s parents’ house. Their office was in a cubbyhole and had orange shag carpet, the same shade of orange now a theme in their headquarters. However, the openness and brightness of their current office, with hardwood floors and plenty of windows, is the opposite of their first space. The cubbyhole wasn’t just small. It was micro. Their desks abutted each other, one facing the other. If Harris or Nguyen needed to get to the working side of the other’s desk, he had to get down on his hands and knees and crawl under both desks because there was no room to squeeze around. “We were dropping cables through dropped ceilings to our computers. I was like, ‘Man, this is not going to work.’” But, it did. Their basement now includes a large kitchen, a pingpong table and large-screen TVs, no crawling required. “It took us a year to get our first customer,” said Harris. That was Driesenga & Associates Inc., an architectural kids aged 7-11, where they can learn how to make the cuisines of Japan, Italy, Australia, Thailand, South Africa, England, South Korea, Jamaica and Canada. On the second floor, there are also meeting rooms for rent and two greenhouses, one where table tops are rented by restaurants that grow their own greens and vegetables and nonprofits that grow plants for sale; and one lined with plants, open in the middle and available for special events, including 70 weddings last year. “We have a whole events team,” said Fritz. “We do 400 events a year.” On the top floor, there is a 9,000-square-foot room available for events with an outdoor patio overlooking downtown and the Grand River. In warmer months, in the spacious adjacent parking lot, there are car shows, cornhole tournaments and monthly antique markets. Last year, the Michigan Strategic Fund, which helped fund the market’s launch, approved a new 30-year mortgage, that retired $3 million in debt for a state loan first restructured to delay principal payments in 2014 after the Downtown Market failed to land federal tax credits. In addition to the state loan, the market was built with $15 million in public funding and $12 million in private funds. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

LARRY PEPLIN FOR CRAIN’S

Mat Nguyen (left) and partner Mike Harris of Worksighted Inc. near Holland.

firm in Holland that needed someone to connect its office computers. Johnson Controls hired Nguyen and Harris after graduation, and they stayed there a year while trying to generate customers and revenue. It wasn’t until they had five full-time employees that either of them took a Worksighted paycheck. Now, they have 75 employees, eight of them in the Wixom office they opened last year to support their growing client base of tier-two defense suppliers and companies in the autonomous vehicle space. The company added 20 employees last year and expects to add at least 12 this year. Worksighted offers a range of cloud-based services, networking and cybersecurity. Until the recent foray into defense and auto, it focused on

customers in healthcare, food processing and manufacturing. Worksighted’s sweet spot is working with companies with 250 to 500 employees. “We help customers decide what technology they need,” said Harris. “It doesn’t make sense for a company that size to do their IT in-house. We can bring them a lot of value.” The Great Recession was a boon for Worksighted. It was able to buy two struggling competitors, one of which got it into healthcare IT. “We knew how to run a team. When the recession hit, it was like, ‘Yeah, bring it,’” said Nguyen. Harris added, “We had customers having a tough time paying us. They were taking way longer than they were supposed to pay us, but we worked

AGENCY

Need to know

FROM PAGE 11

The new intersection, however, will widen the business loop from four to six lanes with a raised concrete median. It also will reconfigure nearby intersections to allow direct left turns, speeding up the flow of the heavy truck traffic in the area. As a result, Gentex committed to investing $100 million to expand its production facilities, resulting in 250 new jobs. ZFS plans to invest $5 million to expand its Jennifer Owens: headquarters Something operations, respecial about sulting in 12 new area. jobs. The development is a relief to Jennifer Owens, president and CEO of Lakeshore Advantage, which employs 10. “That’s No. 1 for keeping me up at night,” said Owens, who helped coordinate the MDOT grant. A native of Benton Harbor, she is familiar with economic development projects. She was vice president of marketing and communications at the MEDC from 2000-2009, vice president of business development at Ann Arbor Spark from

JJLakeshore Advantage coordinated $7.7

million I-196 project, leading to local business expansion

JJAided more than $100 million in tax abatements and private funding for regional companies JJHelped secure $2.4 million in skilledtrades-training grants

2009-2011 and then a vice president at Kalamazoo-based Southwest Michigan First from 20112014. She took the Zeeland post in 2014. “There’s something very special about being back here,” she said of western Michigan. “That project is an example of the barriers to growth we can overcome by getting the different local units of government to cooperate. Here, people like to say, ‘What can we do?’ I’ve worked in other areas, where it is, ‘How can we get to “no”?’”

Key resource connection In addition to breaking barriers to growth, Lakeshore Advantage connects entrepreneurs and early-stage companies to a range of services through its Surge programs, including the Holland Smart Zone, Business Accelerator Fund, Entrepreneurial Support Network and mentors, events and monthly meetings. Surge showcase companies include:

with them and we got through it. Now, they’re loyal customers. They’ll never leave us.” One longtime customer is Zeeland-based Disher, an engineering services, product-development and consulting firm with about 130 employees. “We’ve been in business 18 years, and Worksighted has been with us for a dozen years, if not more,” said Brent Heeres, the business lead for engineering at Disher. “We don’t have any full-time IT people on staff. The best word I would use to describe the relationship is ‘partnership.’ They operate as an extension of Disher. They know what makes us tick. They provide people and services that fit into our culture,” he said. Worksighted has reported strong and consistent growth. The company made the Inc. 5000 list of fastest growing companies for six consecutive years. The annual list uses rolling three-year revenue-growth figures, and the firm had three-year increases of more than 100 percent in each of the last six listings, from a high of 134 percent in 2012 to 103 percent in 2015. They hope last year’s growth to $12.7 million along with the two previous years will get them on the list, again, when it comes out in July. “We got to the high 90s this time,” said Harris, who added that revenue this year should increase to about $15 million. “Not many companies make it seven years in a row,” said Nguyen. After outgrowing an artsy loft space in downtown Holland, Worksighted moved in 2014 into its current space. The company bought the building last year. J Grand Rapids-based Fathom, which makes a smartphone-operated underwater drone. J Zeeland-based G3 Acoustics LLC, which improves the audio quality of broadcasts on TVs in sports bars and restaurants, giving customers at tables their own audio controls. J Grand Rapids-based MaxOne, which created a training app that allows coaches to tailor individual training programs for their athletes. J Holland-based Spera Foods, which sells products made from the tiger nut, a small root vegetable high in iron, fiber, magnesium and potassium. According to its annual report, Lakeshore Advantage had a big year in 2017. Its business accelerator fund invested $61,000 in five startups and its entrepreneurial support network provided $29,000 in in-kind services. In addition, Lakeshore coordinated $17.1 million in tax abatements for local companies, helped 57 companies get $2.4 million in skilled-trades-training grants, helped 18 companies get more than $90 million in private funding for expansion projects that created more than 650 jobs, and, as part of its Michigan Smart Coast project, helped 210 summer interns attend educational and networking events.

Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

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

CALENDAR TUESDAY, MAY 22 Mayor Dennis Archer Luncheon. 11:30 a.m.-1:00 p.m. Livonia Chamber of Commerce. Former Detroit Mayor Dennis W. Archer recently wrote a book “Let The Future Begin” about his life story. Archer will speak about the book and decisions he made to guide Detroit into its current renaissance. Archer Schoolcraft College, Livonia. $45. Contact: Laura Tahmouch, phone: (734) 427-2122; email: tahmouch@livonia.org; website: www.livonia.org/events/details/mayor-dennis-archer-luncheon Building a Brand That People Will Love (Or Possibly Hate). 6:30-8:30 p.m. American Marketing Association Detroit. Eoin Comerford, CEO of Moosejaw, will lead a discussion of successful branding tactics. Comerford will also give additional insight behind Walmart’s acquisition of Moosejaw, and what this means for the future of the Moosejaw brand. Topics include: Aligning brand identity with overall mission, strategies for building a brand’s desired reputation and instances in which sacrificing a sale is necessary. Lawrence Technological University. $45 nonmembers, $35 members, $20 students. Contact: Whitney Swistock, phone: (248) 797-

SPOTLIGHT 1976; email: ama.detroit7@gmail. com; website: amadetroit.org

WEDNESDAY, MAY 23 Women in Blue Celebration. 8-9:30 a.m. Detroit Public Safety Foundation. A celebration of the women within the Detroit Police Department, Detroit Fire and EMS and the programs and initiatives taking place to protect women and children in the community. A portion of all individual ticket sales will support the inAquilina vestigation and prosecution of rapists identified by backlogged rape test kits. Judge Rosemarie Aquilina, who presided over the Larry Nassar abuse trial, will be the keynote speaker. A Women in Blue Officer of the Year and Women in Blue Firefighter of the Year will also be recognized at the event. MGM Grand Detroit Grand Ballroom. $125. Contact: Carter Drewry, phone: (313) 628-2169; email: cdrewry@detroitpublicsafety.org; website: detroitpublicsafety.org Virtual Employment Revisited. 9:00 a.m.-noon. Nemeth Law PC. Nemeth Law attorneys will discuss the challenges of managing virtual employment and a variety of related labor and employment law topics, in-

cluding: when working from home works and when it doesn’t; data security, confidentiality and privacy issues when working remotely; is telecommuting required as a reasonable accommodation for a disability?; wage and hour issues of offsite work and best practices for implementing (and rescinding) work-from-home practices. MSU Management Education Center, Troy. $75. Contact: Pamela Perkowski, phone: (313) 567-5921; email: pperkowski@nemethlawpc. com; website: nemethlawpc.com

THURSDAY, MAY 24 A Conversation on the U.S. Economy and the Retirement Challenge. 11:30 a.m.-1:30 p.m. Detroit Economic Club. Tony James, executive vice chairman, Blackstone, discusses trade war fears, employment rates, the deficit and tax cuts. Westin Book Cadillac. $45 members; $55 guests of memJames bers; $75 nonmembers. Website: econclub.org

UPCOMING EVENTS The Patient is Waiting. . . For a Dose of Disruption. 11:30 a.m.-1:30 p.m. June 7. Detroit Economic Club. Dave Ricks, chairman and CEO, Eli

DEALS & DETAILS CONTRACTS J Macomb County businesses, the SME Education Foundation, Dearborn, and the Michigan Manufacturers Association, Lansing, are launching an advanced manufacturing education program for students of Fraser High School, Fraser, beginning in the 2018-19 academic year. Dominion Technologies Group, I.F. Metalworks, Fori Automation, General Motors, Oakley Industries and Superior Heat Treat LLC will collaborate through SME’s Partnership Response in Manufacturing Education initiative. Websites: smeeducationfoundation.org, mimfg.org J Central Michigan University has an agreement with Quicken Loans Inc., Detroit, a mortgage company, and the city of Detroit to provide discounted educational opportunities for employees and their families. The agreements provide employees at both the city of Detroit and Quicken Loans discounted tuition for classes taken online, in CMU’s Detroit office or five satellite locations in metro Detroit. The discount extends to employees’ spouses and dependents as well. Websites: cmich.edu, quickenloans.com, detroitmi.gov J Fathead LLC, Detroit, a vinyl wall graphic maker, has an agreement with FlyQuest Sports, New York, N.Y., an esports organization, to launch a FlyQuest product line of wall graphics. Websites: Fathead.

com, FlyQuest.gg J Meritor Inc., Troy, a commercial truck supplier, has an agreement with TransPower, Escondido, Calif., provider of electrification technology for large commercial vehicles, to supply all-electric drivetrain systems for two Peterbilt vehicle platforms. These include 12 Peterbilt all-electric Class 8 Model 579 day cab tractors and three Model 520 refuse trucks. Websites: meritor.com, transpowerusa.com J WinterPark Engineering LLC, Auburn Hills, provider of automotive industry engineering services, has an agreement with Burke Porter Group, Ada, manufacturer of intelligent machines and instrumentation, to provide cost-effective emission and diagnostic services to their common automotive customers. Websites: burkeportergroup.com, winterpark.us J Autobooks LLC, Detroit, a secure receivables and payables product for small businesses to manage their finances, is being offered by Jack Henry & Associates Inc., Monett, Mo., provider of technology solutions and payment processing services primarily for the financial services industry, as part of JHA Payment Solutions. Websites: autobooks.co, jackhenry.com

EXPANSIONS J Ziebart International Corp., Troy, an aftermarket automotive franchise, has new franchise agreements in

Lilly and Company, talks about unleashing technology and the change it causes on health care. Westin Book Cadillac. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org Global Security Means Local Problems: Security, Intelligence, Space, Cyber & Politics. 11:30 a.m.-1:30 p.m. June 13. Detroit Economic Club. Former Congressman Mike Rogers discusses the rapid changes of technology, the emergence of new (and old) national security problems, and how technology and security will change interactions. Ford Field. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org Tech Talk and Tech Trek 2018. 9 a.m.-6 p.m. June 15. Ann Arbor Spark. Tech Talk: Speakers will each have six minutes to talk about their innovations, what they see happening in the world of tech and what they foresee for the future. Tech Trek: Technology companies will open their doors to the public and showcase their latest innovations. Michigan Theater and downtown Ann Arbor. Free. Website: techtrek.annarborusa.org 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.

PEOPLE Quakertown, Pa. and Dallas, Texas. Website: ziebart.com

NAME CHANGES J Fraza Forklifts, Canton Township, a provider of material handling equipment, will now operate under the name Fraza. Website: frazagroup. com

NEW PRODUCTS J Swift Biosciences Inc., Ann Arbor, developer of molecular biology technology for genome research, has released Accel-Amplicon Plus Cancer NGS Panels, a suite of nine tumor-specific and focused gene panels to facilitate targeted cancer sequencing. Website: swiftbiosci. com J StockX, Detroit, an online “stock market of things,” has added products from Bape, Tokyo, Japan, a clothing brand, and Palace Skateboards, London, England, a skateboard brand, to its streetwear catalog on the platform. The catalog will include both men’s and women’s offerings. Website: stockx.com J Akervall Technologies Inc., Saline, a mouthguard manufacturer, has introduced the SISU GO, a shorter mouthguard for sports that don’t mandate mouthguards but can still benefit from dental protection. Website: sisuguard.com

Submit Deals & Details items to cdbdepartments@crain.com

EDUCATION J Damian Hermann to interim head of school, Academy of the Sacred Heart, Bloomfield Hills, from regional superintendent — Manhattan region, Archdiocese of New York City, New York, N.Y.

FINANCE Jeff Tischler to senior vice president/credit risk executive, Fifth Third Bank, Detroit, from senior managing director, Conway Mackenzie Inc., Birmingham. J Brian Ackroyd to sales supervisor, Concorde Holdings Inc., Livonia, from supervisory principal, LPL Financial, Portland, Ore. Also, Brian Ragen to sales supervisor from home office, Office of Supervisory Jurisdiction manager, Triad Advisors Inc., Norcross, Ga., and Shannon Arndt to compliance principal from senior compliance administrator, Munder Capital Management, Birmingham. J

LEGAL J Gregory DeGrazia to principal, Miller Canfield PLC, Detroit, from partner, Warner Norcross & Judd LLP, Southfield.

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.

Diplomat Pharmacy appoints new CEO

Flint-based Diplomat Pharmacy Inc. appointed a new CEO to replace Phil Hagerman, the co-founder of the company who retired in January. Brian Griffin will begin the new role and assume a position on the c o m p a n y ’s board of direcBrian Griffin tors June 4, according to a news release from Diplomat. The company’s chief financial officer, Atul Kavthekar, is taking on the role of interim CEO until the leadership change is official. Griffin comes from Indianapolis-based insurance company Anthem Inc., where he assumed in March the role of vice president and CEO of IngenioRx, a pharmacy benefits subsidiary of the company.

Mosaic Youth names executive director

A year after launching the new position of executive director, Mosaic Youth Theatre of Detroit has named Stefanie Worth as the second person to fill the post. The Detroit native replaces Tara Tomcsi-Husak, who stepped down at the end of Stefanie Worth April to join Brighton-based Senior Village Management LLC as vice president of life enrichment. Founder and Artistic Director Rick Sperling said she is still with the organization in other capacities. “She got an offer she could not refuse of a really favorable position that was beyond what Mosaic could compete with,” Sperling said of Tomcsi-Husak, who became the group’s first executive director in August. “But she is still on our Patron Council and being nominated to our board of directors. She is on our development committee of the board.”

Detroit Parent Network names CEO

Social services agency Detroit Parent Network has hired Jametta Lilly as its new CEO. Lilly, 62, comes to the New Center-based nonprofit with more than 20 years’ experience in local agencies, foundations and social work. She Jametta Lilly started her role last month. She replaces Sharlonda Buckman, who vacated the role last summer for a position as senior executive director of family and community engagement with the Detroit Public Schools Community District.

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MSU

FROM PAGE 1

The bills have also drawn pushback from other government entities, other universities, nonprofits and the Michigan Chamber of Commerce over concerns about the legislation being retroactive to Jan. 1, 1997, potentially creating an opening for a flood of lawsuits over a period of 21 years. “The agreement is contingent upon the university having its defense of governmental immunity and the notice-of-intent requirements intact,” said Robert Young Jr., special counsel for MSU and a former Michigan Supreme Court chief justice. The main sponsor of the Nassar-inspired reforms said the Legislature was not a party to MSU's settlement and that the agreement itself is “a key example of why we need to change governmental immunity.” “Michigan State negotiating this in a settlement should trouble us all,” said state Sen. Margaret O’Brien, R-Portage. “They believe the current law protects government even when they’re doing wrong and they know they’re doing wrong.” The House Law & Justice Committee will likely scale back the government immunity provisions that have already passed the Senate when the panel votes this week, said Rep. Klint Kesto, chairman of the committee. But Kesto emphasized the committee will act in response to widespread concerns about the impact of the legislation, not at the behest of MSU. “We’re not beholden to any contract,” Kesto said of MSU’s landmark settlement in principle. “Regardless of their agreement, I think there are concerns there. ... I don’t think that there’s enough support on the government immunity side.” Reacting to the crimes Nassar carried out on children and young women, state lawmakers have moved swiftly this year on a series of reforms inspired, in part, by MSU’s initially defensive posture to Nassar’s two decades of victims who were sexually assaulted under the guise of medical treatment. Until Nassar’s sentencing hearing spurred hundreds of public testimonies from victims, Michigan State’s lawyers had tried to quash a litany of lawsuits under the argument that the public university couldn’t be held legally liable for their employee’s actions on and off campus and that the complaints were older than the statute of limitations. “Any sexual misconduct is inexcusable. The business community doesn’t condone that,” said Rich Studley, CEO of the Michigan Chamber of Commerce. “But retroactive changes in the law are almost inherently unfair. What is the burden of proof?” The “high likelihood of an increased number of claims” could lead to higher liability insurance premiums and costly legal bills for the state’s universities, said Daniel Hurley, CEO of the Michigan Association of State Universities. “Had organizations knew about a 21-year lead, they would have upped their coverage over 21 years,” Hurley said. “We think it’s certainly prudent that the Legislature has an understanding of what the potential cost is to the state, as well as taxpayers, who ultimately will have to pay, whether it’s through products or services they purchase. Ultimately, the cost will be borne through society by these bills.” Studley and others believe private attorneys will create a cottage industry out of seeking out clients possibly

LUCAS VALONE FOR CRAIN’S DETROIT BUSINESS

The $500 million settlement in the Larry Nassar sexual abuse case announced Wednesday marks a major development in a scandal that has rocked Michigan State University.

A specialized firm

Pushback on liability bills

The California firm that led the civil suit against Michigan State University and stands to take in tens of millions of dollars from the settlement is known nationally for its high-profile sexual abuse casework.

At the Capitol, the Michigan Chamber is warning of major financial risks for the state’s businesses and large institutions should the Legislature allow retroactive lawsuits to be filed. Wendy Block, vice president of business advocacy for the Michigan Chamber, testified May 16 on the Nassar bills before the House Law & Justice Committee. “Employment law attorneys have suggested to us that an entity trying to defend itself from a vicarious liability claim under (Senate Bill 872) should expect to spend anywhere from $75,000 to $100,000 to argue the claim through summary disposition and $200,000 to $250,000 to defend a case through trial,” Block told the committee. The Senate bills, as passed and written, would create headaches for human resource managers and corporate attorneys if decade-old claims of sexual misconduct are made against a company, nonprofit organization or government entity, Studley said. Studley noted employers don’t usually keep records of employees beyond seven years after they leave. “Some lawmakers have assumed

Most notably, Manly, Stewart and Finaldi spearheaded a civil onslaught against the Roman Catholic Archdiocese in California on behalf of several victims sexually abused by priests. To date, the firm has reached settlements with the Archdiocese to the tune of more than $1 billion, including a $660 million settlement with the Roman Catholic Bishop of Los Angeles centered on 508 sexual abuse claims. The firm has also successfully sued the Los Angeles Unified School District on behalf of students who were sexually assaulted.

abused by employees of public institutions in search of big paydays. It’s an argument that appears to be resonating with some legislators. “That wouldn’t be fair to the taxpayers,” said Kesto, R-Commerce Township.

The law firms’ cut The potential payouts to law firms in the MSU case represent big money. Irvine, Calif.-based Manly, Stewart and Finaldi along with local partner on the case, Grand Rapids-based Drew Cooper & Anding, are expected to split a substantial sum as part of the MSU settlement. The two firms represented 177 survivors in the cases against MSU and could divvy up a sum greater than $34 million if the settlement funds are distributed equally to each client. The total compensation for law firms that represented survivors will be determined in negotiations between firms and clients. A judge may intervene on those costs as well. The typical representation fees for suits of this size and scope can range from 10 percent up to one-third of the total purse, several experts told Crain’s. Those same experts, however, expect the total payout to land near 15 percent. Okemos-based Grewal Law PLLC and Lansing-based ChurchWyble PLLC represented 111 survivors and those firms could see a payday of $21.3 million. Grewal and ChurchWyble recently merged but remain separate entities currently. Mick Grewal, founder and managing partner of Grewal Law, said the firm is not focused currently on its take of the settlement and that those figures will be determined via contractual agreements and negotiations over several months, noting he had no way of knowing the total at this time.

JOB FRONT POSITIONS SOUGHT

that they can retroactively change the law and that insurance coverages that were in effect 10, 12 or 15 years ago will still apply,” Studley said. “In fact, that’s not the case. “Our focus has been on the real-world, practical implications of legislation that goes far, far beyond trying to understandably prevent what happened at MSU ever again,” Studley added. The House committee could vote this week on whether to move the legislation to the floor. Opponents are hoping MSU’s settlement with Nassar victims will change the dynamics of the legislation, which lawmakers have been rushing to pass this spring before their summer adjournment. “Conceptually, the MSU settlement would seem to relieve some pressure for the needs for these bills,” Hurley said.

The insurance question MSU administrators plan to rely heavily on an insurance policy through United Educators Insurance that covers up to $39 million in annual claims for sexual harassment and assault, Young said. Bethesda, Md.-based United Educators “specializes” in insuring institutions for claims of sexual assault by employees, Young said. “(United Educators) have been actively involved in the litigation and we expect all of our insurers to honor their policies,” Young told Crain’s. MSU’s insurance policy with United Educators is one of seven insurance policies spanning 20 years of Nassar’s tenure at the university that the East Lansing school will file claims to cover a portion of the $500 million settlement with survivors of Nassar’s serial sexual abuse. “This is a long-tailed set of claims,” Young said. A spokesperson for United Educators did not return a call seeking comment. Young said MSU officials have an idea of how much of the settlement the insurance policies should cover,

but he did not want to publicly disclose the number as the university is still negotiating with insurers. Other options for paying for the settlement include raising tuition, tapping into budget reserves or issuing infrastructure bonds that could include extra money for settling Nassar-related claims, MSU spokeswoman Emily Guerrant said. “We’re evaluating the full picture of how we’ll pay for the settlement, and the insurance policies are a big chunk of that,” Guerrant told Crain’s. Donated money is off limits, though. Guerrant said MSU will not use its endowment, worth $2.7 billion as of last June 30, to pay the settlement. Using the endowment to pay a sexual abuse settlement could turn off the future donors not interested in seeing their cash go toward criminal costs. University officials have not yet commented on whether the $500 million payout will affect tuition for students in the coming years. The school has about 39,000 undergraduate students. About 20 percent, or $281 million, of MSU’s $1.36 billion general fund operating budget comes from state tax dollars, with $989 million in tuition and fees making up the lion’s share of the university’s revenue, according to fiscal year 2017-18 budget projections. MSU’s reputation and its financial fallout from the Nassar scandal is also a taxpayer issue, Peter Henning, professor of law at Wayne State University’s law school specializing in white collar crime, constitutional criminal procedure and attorney ethics, told Crain’s in January. “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.” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

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CENTERS FROM PAGE 3

A franchised approach OrthoNOW was co-founded in 2010 by Miami surgeon Alejandro Badia. It now has 54 centers in Florida and Georgia, said Nick Mendez, OrthoNOW president. Michigan is the first of several states in the Midwest the company is planning to expand into, including Ohio, Illinois and Wisconsin. Olin said the Michigan centers will assess and treat an array of musculoskeletal orthopedic and sports injuries and chronic conditions without appointments. Injuries could affect the foot, ankle, knee, hip, wrist, hand, elbow, shoulder and spine. OrthoNOW also will offer radiology, physical therapy and sports medicine and wellness care. Each OrthoNOW center will be staffed initially with four or five employees, including a physician assistant who specializes in orthopedics, a front desk employee, an administrator, a medical technician who also doubles as an X-ray technician and a physical therapist, Olin said. If all 32 centers are developed, OrthoNOW could employ more than 1,200 health care workers. Ali Hassan, M.D., president of the Urgent Care Association of Michigan, said specialty centers that focus on orthopedics are relatively new in Michigan and could fit specific market niches for nonemergency musculoskeletal injuries, especially as more health care services are being delivered in outpatient settings. He said a few sports medicine doctors have opened up urgent care clinics and they also treat injuries that have orthopedic aspect.

MATT SARDELLI, M.D.

OrthoMichigan Now, an orthopedic specialty clinic in Flint, averages about 20 visits per day and those numbers have been growing.

“I am hearing folks are exploring orthopedics. It is one of those things that every one of us in the urgent care industry have looked into,” said Hassan. “Some centers are looking into having an orthopod in the center. But even if a patient is seen, they can be referred to an orthopedist.” For example, athletes in contact sports occasionally suffer sprains or bruises when playing. Most are minor and heal quickly. But severe contusions can cause tissue damage and should be assessed by experts, Hassan said. “It is not always easy to know when to come into an ER, see your primary doctor or come into urgent care,” Hassan said. “When it has to do with bone and joints and the injury isn’t severe enough to go to the ER, many people are finding it convenient to go to urgent care.” Hassan, who also is owner and operator of 1st Choice Urgent Care, said

his three centers have direct referral relationships with 10 orthopedic surgeons for more serious cases. He said most general urgent care centers have similar relationships. Matt Sardelli, an orthopedic surgeon in a nine-physician group based in Flint Township, opened an orthopedic urgent care center in Matt Sardelli: 2016 to give paOpened a center tients greater in 2016. convenience and prepare for contracting with health insurers under bundled payment arrangements. Medicare and private payers are moving to pay hospitals and doctors a flat, or bundled fee, to cover hip and knee joint replacement surgeries.

“For us orthopedic surgeons, it is a business move but with the pressures of health care, could be beneficial for patients with other injuries,” said Sardelli, who practices with OrthoMichigan with offices in Flint, Lapeer and Fenton. “There is demand by the public to get seen quickly and by specialists.” Sardelli said OrthoMichigan’s urgent care center averages about 20 visits per day and those numbers have been growing. Hours are Monday through Friday, noon until 9 p.m.; Saturdays, 8-12 p.m. At least one orthopedic surgeon covers during the week, with a physician assistant working the weekend with a doctor on call. Olin said one need for specialty orthopedic centers is that they can cut the wait time patients sometimes have for nonemergency orthopedic problems. “We are a walk-in clinic, and people can come in without an appointment,” she said. Hassan said orthopedic doctors have busy schedules and it is not uncommon for patients to wait three or four weeks for appointments. “We can get patients in to see our referral partners much more quickly than” if they called on their own, he said. 1st Choice operates centers in Dearborn and Garden City and recently opened an occupational health center catering to employers in Taylor. Hassan said his centers treat about 10 percent of patients for an orthopedic-related injury. “Most have a sprain. If someone comes in with a little fracture in the ankle or wrist, we can send them out,” he said. “No more than half will require an orthopedic follow-up.” Mendez said the center will take any medical issue short of surgery. “If a patient needs X-ray or casting, we can do it on the premises. If a surgical intervention is needed, we can refer that out to our surgical team,” he said. David Markel, M.D., former president of the Michigan Orthopedic Society, said the orthopedic urgent care model is one that hospitals and orthopedic doctors are considering because of the patient convenience and a way to offer after-hours follow-up after an initial urgent visit. “Having access for people with musculoskeletal things make sense, if they are set up right,” said Markel, who also is market president of The Core Institute at Porretta, a nine-physician orthopedic group in Southfield and Novi that mainly practices at Ascension hospitals. “It is clearly a model being looked at by Ascension and other health systems,” Markel said. “We are definitely looking at it and the best way to work with hospital partners.” But Markel said his orthopedic practice regularly gets patients who have been seen at an urgent care clinic who were not managed correctly. “I have concerns with the model of urgent cares out there because it is not regulated,” he said. “Who is staffing these clinics? If it is a well-trained physician assistant with a backup provider and the patient has rapid access to an orthopedist, it is way faster than going to an ER.”

Partnering with physicians, investors Olin said the plan is to partner with orthopedic doctors, who will oversee the medical side of the business. She said investors or other business partners would purchase territories for the centers from them. “One of the options is to fund it

ourselves or get a group of investors. Other options include partnering with orthopedic physicians interested in financing this,” Olin said. “It is a profitable business venture. They are attracted for the downstream referrals and the continuity of care it can offer.” Olin said she has “multiple deals in the works” and is negotiating with a group of orthopedic doctors who practice at hospitals in Southeast Michigan. “In the next couple weeks we will announce our first location in Michigan in northern Oakland County,” she said. “Our goal right now is to get the first center open. Once you get a couple doors open, the buzz is out.” Olin said the physicians would be funding the project and would enter into a license and service agreement with OrthoNOW. “We would hire the manager and handle the office side, billing and collections.” But Hassan said urgent care clinics owned by nonphysicians can run into problems with the state’s corporate practice of medicine law unless they structure the clinic properly. “I’ve had a conversation with my wife,” Hassan said. “If something happens to me, I told her, you cannot own the clinics.” Mendez said OrthoNOW has consulted with lawyers and they have been advised how to correctly structure the deals with physicians to comply with Michigan’s corporate practice of medicine law. Richard Chesbrough, M.D., said the state’s law on corporate medicine is clear: nonphysicians are not allowed to own covered medical services, including radiology, urgent care centers or abortion clinics. There is an exemption for nonprofit hospitals. A radiologist, Chesbrough is involved in a lawsuit filed against Oakland MRI and lay business owner Susan Swider by the Michigan Radiological Society, which claims Swider is violating the state’s corporate practice of medicine law. However, MRS has lost in Oakland County Circuit Court and the Michigan Court of Appeals, which recently ruled that MRS does not have standing to bring the lawsuit. MRS is considering whether to appeal the case to the Michigan Supreme Court. Christine Dura, OrthoNow’s chief development officer, said a nonphysician can own an OrthoNOW center, but it needs to be structured as a management service organization. MSOs provide practice management and administrative support services to individual physicians and group practices. “The PC (professional corporate) owns the entity and the practice. What I own is the management services for that practice. (Doctors) are contracting out for the services and the brand,” Dura said. Olin was born in Michigan and went to Michigan State University where she earned a master’s degree in human resources. She has worked in the corporate world in sales and marketing. “I look at (health care) more from a consumer standpoint. I am mother of three young boys and my perspective is (the retail clinic) model is such a no-brainer,” Olin said. “Health care is becoming more outpatient and having convenience for people is a natural progression.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

Gig-speed to more businesses in more places

Yes.

Nope.

ƺƺǉɰɰ ɽɁ Ɂʤǉɨ іѝ ȴȈȢȢȈɁȶ ŤˎȶȈɽʰ WiFi hotspots nationwide

Yes.

Not so much.

:ɁȴɥȢǉɽǉ ɨǉȢȈƃƹȈȢȈɽʰ ʥȈɽȃ ʍɥ ɽɁ 8 hrs of 4G LTE backup available with internet service

Yes.

Doesn’t.

35 Voice features and solutions ɽȃƃɽ ǼɨɁʥ ʥȈɽȃ ʰɁʍɨ ƹʍɰȈȶǉɰɰ

Yes.

No.

2-hour appointment windows

Yes.

Nah.

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

Starfish Family Services looks to formalize, spread child care plan

GET A HEALTHIER OUTLOOK ON CHILDHOOD

By Sherri Welch swelch@crain.com

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Starfish Family Services is working on a “playbook” to enable other childcare providers to replicate its service model, which combines early childhood education with behavioral health, parent support and an approach that takes into account traumatic experiences and their effects on behavior. To do that, the nonprofit first is working to define and standardize the model within its own operations. Traumas, such as the loss of a parent, an unsafe living environment or family member addicted to drugs or alcohol often get in the way of children’s learning, healthy development and Ann Kalass: growth, said StarTrying to reframe fish CEO Ann Kawork with kids. lass. “We’re trying to reframe our work with children from ‘why is this child bad?’...throwing a temper tantrum or acting out, to (asking) what happened to this child that makes him or her act that way and bringing that lens to how we work with kids,” she said. Starfish provides early childhood education to low-income children in Wayne County, behavioral health services and programs to support parents and families. The Ralph C. Wilson Jr. Foundation provided a $250,000 grant to fund Starfish’s yearlong standardization effort. With the Starfish service model,

Need to know

Starfish Family Services is defining, standardizing its early childcare service model 

 Model integrates behavioral health, trauma-informed approach to more holistically serve children  Effort could set the stage for other early child-care providers to replicate model

therapists visit families at home to assess what’s going on there and what the families’ needs are. Then they work to connect them to services that can help meet those needs. Starfish also focuses on the parents’ mental health, their relationship with their child — from prenatal to age 8 — and the child’s development. The group also embedded behavioral health consultants at all of its early childhood centers and is training its staff and consulting with parents to help them understand how to support children who have been traumatized. The model is showing promising outcomes, Kalass said. She added that about 79 percent of the 4-year-old children in Starfish’s seven early education centers in western Wayne County were ready to enter kindergarten in the fall of 2017. “We have been unable to find a contrasting number for the state or Southeast Michigan,” she said. “(But) that’s all the more impressive because ... we are serving some of the children facing higher risk, (such as) poverty, developmental disabilities and homelessness.” Replicating the model is a goal in

Starfish’s three-year strategic plan. The agency is always exploring alternative business models to ensure its programs are sustainable and well-funded, but it hasn’t yet decided about whether it will license its program to others, Kalass said. Inkster-based Starfish has linked behavioral health to early childhood programs for more than a decade. Two years ago, it committed to universal trauma screening, as well. While the Inkster-based nonprofit employs the integrated and trauma-focused approach at its early childhood centers, it’s looking to standardize and strengthen it at those locations, Kalass said. It’s also working toward bringing the trauma-centered approach to the Thrive By Five collaborative’s 16 centers across the city, something that interests other member agencies, including Focus: Hope, Order of the Fisherman Head Start Ministries, American Indian Health and Family Services and Development Centers, she said. Starfish, which is operating on a $40 million budget, has taken on direct service at four of the Detroit early childhood centers in the collaborative. Southwest Solutions, which ceased offering early childhood services last fall over funding issues, previously operated those sites. Other centers Southwest operated are now under the management of the other collaborative partners as part of the closure of some centers and opening of others, Kalass said. Sherri Welch: 313 (446-1694) Twitter: @SherriWelch

DMC sells outpatient pharmacy business to Walgreens By Jay Greene jgreene@crain.com

The Detroit Medical Center has sold its retail and outpatient pharmacies to Walgreens Co. as part of a pharmacy reorganization. The deal encompasses seven specialty pharmacy sites and one mail-order service business, Crain's has learned. Terms were not announced. Over the past two years, DMC has been reorganizing its outpatient pharmacy operations, laying off and reassigning at least two dozen employees. “I am pleased to share with you some important news that will enhance the services and convenience we provide to our patients and allow us to focus more resources on DMC’s core mission of care delivery,” DMC CEO Tony Tedeschi, M.D., said in a Wednesday email to employees. “DMC has entered into an agreement with Walgreens, the world-class pharmacy operator, to transition DMC’s retail, outpatient pharmacies into Walgreens-branded locations,” Tedeschi said in the email. “This transition, which we expect to have in place and fully operational by August, is yet another example of DMC’s transformation as we strengthen our focus on patient care and align our resources to support our care objectives.” In a statement, Walgreens confirmed it has purchased seven specialty pharmacies and one mail-service

Need to know

Walgreens to begin retail and outpatient pharmacy services at DMC hospitals by August 

 Part of effort by DMC to reduce costs and improve efficiency  DMC has been reorganizing various departments the past two years

specialty pharmacy from DMC and its parent, Dallas-based Tenet Healthcare Corp. Scott Goldberg, Walgreen’s senior manager for media relations, said the transaction is scheduled to close sometime this summer. “We look forward to continuing to work with DMC’s medical team as we focus on improved health outcomes through personalized support, patient engagement and expert care,” he said. Goldberg said Walgreens has approximately 300 community-based specialty pharmacy locations in the U.S., with about two-thirds located inside a hospital or medical office building. Walgreens is a unit of Deerfield, Ill.-based Walgreens Boots Alliance Inc. DMC officials have told previously told Crain’s that the outpatient pharmacy lost money and was not a core business for DMC. “As you are aware, faced with broader industry challenges, hospitals nationwide must discover new, creative

ways to improve patient care,” Tedeschi said in the email. “Walgreens has successfully partnered with dozens of medical care providers to operate outpatient, retail pharmacies within hospital facilities. Walgreens is well known for its pharmacy expertise, high customer service standards and respected global reputation, and I am very confident that this transition will be successful and better serve our patients.” Walgreens will operate branded specialty pharmacies at several of DMC’s six hospitals. It also will coordinate with DMC’s discharge planners to have prescriptions filled by DMC’s in-house Walgreens. DMC began this year with a goal of reducing its 11,000-employee headcount by 3 percent, or about 330. Officials have said those layoffs are nearly over, but three sources familiar with the matter who requested anonymity have told Crain’s that owner Tenet Healthcare Corp. is seeking further cost savings. Few hospitals still operate outpatient pharmacy departments, although pharmacy experts said it is common for urban teaching hospitals like DMC to maintain an outpatient pharmacy staff. Compliance with medications is easier when patients can fill their prescriptions when they leave the hospital, rather than going to an outside pharmacy.

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

PENSIONS FROM PAGE 1

Most private-sector pension plans, including those offered by nonprofits, are covered by the PBGC and are required to pay annual premiums, said Carol Meyers, senior pension analyst at Watkins Ross in Grand Rapids. An additional risk premium is due if the plan is considered underfunded. For-profit businesses have wrestled with similar issues for years. However, for nonprofits trying to fulfill a mission, pension liability issues result in them helping fewer people. Big Brothers Big Sisters of Metropolitan Detroit has posted pension liability-related losses in recent years. While many large employers have been relieved of their pension liability, “the PBGC won’t take a look at us because they think BBBS can continue to pay the obligation,” said Jeannine Gant, president and CEO of Big Brothers Big Sisters of Metropolitan Detroit. There are several options for plan sponsors to reduce their risk. Meyers said they can buy annuities to cover current plan beneficiaries without terminating the plan. They can allow retiring participants to choose to receive a lump sum to buy out the future liability, or employers can borrow money to terminate their plan. “Though the cost of terminating a plan may be expensive, the plan sponsor may want to consider financing the cost of the plan termination if interest costs are favorable,” Meyers said.

The United Way plan Big Brothers Big Sisters, one of the state’s oldest and largest mentoring agencies, was among the nonprofits that pulled out of the pension plan United Way for Southeastern Michigan operated between 2005 and 2009. Established in 1945 by United Community Services, which merged with United Way in 1995, the United Way pension plan was intended to reduce administrative costs and improve benefit coverage for smaller nonprofits. The plan was adequately funded until 2004, but poor market returns, declines in interest rates and alleged mismanagement increased agency liabilities. United Way froze the plan in March 2005, preventing nonprofits from adding new employees to it. Seven years later, the PBGC agreed to take control of the plan, with 18 of the original 55 nonprofit employers and their employees still participating. BBBS left the United Way pension plan before then, in 2007. But increasing pension contributions coupled with reduced federal funding began to take their toll. Despite reducing the number of children the organization serves by a third, to 850 in 2017 from 1,279 in 2012, and cutting a handful of staff members, BBBS operated at a loss for three of the past four years. Gant said the pension liability is to blame. “We have worked hard over the years to increase our unrestricted fundraising while reducing our dependency on the fluidity of federal funds, but the pension obligation remains as the primary looming presence to our bottom line,” she said.

Sheilah Clay: Expects to terminate plan.

Jeannine Gant: PBGC won’t take a look.

“When we have to make pension contributions that total more than 10 percent of our operating budget, it limits our ability to hire the staff needed to build sustainability and serve more youth.” According to a draft of its audited financial report, last year BBBS had total revenue of $1.12 million and a net loss of $16,228. It was technically insolvent with negative $215,065 in net assets/fund balances at year’s end. The agency also paid $160,000 in pension contributions and just less than $25,000 in premiums and fees. BBBS, which is operating on a $1.4 million budget this year, had a pension liability of just less than $427,000 as of Feb. 22. This year’s audit isn’t complete, but according to BBBS’s 2016 federal 990 tax form, grants and contributions fell to about $685,000 that year from slightly more than $1 million the year before. While some grantmakers are still willing to take a chance, others are not, Gant said. “I’ve had funders say, ‘We’d love to fund you, but we’re really concerned about this.’” The pension liability also stood in the way of BBBS’s March proposal to its Washtenaw affiliate that they merge not only to save money but also to expand programming to areas such as St. Clair and Monroe counties where lack of funding caused other affiliates to close. “Jeannine and I had an informal conversation because our national (organization) is always having that conversation,” said Jennifer Spitler, executive director, Big Brothers Big Sisters of Washtenaw County. “I took it to our executive committee and threw it out there informally,” she said. “The pension liability, in general, was a non-starter from a financial standpoint.”

Widespread issues Lutheran Child and Family Services of Michigan, part of Wellspring Lutheran Services, operates on a much larger budget of $19 million, but it’s facing the same issues. “Frankly, when we start seeing $250,000-a-year premiums, we start thinking, ‘Should we just go get debt and get out of this thing?’” said President and CEO Dave Gehm. “At least debt service is a decreasing number over time, whereas premiums are just going to go up. And we don’t control the liability either way.” The Flint-based provider of foster

Dave Gehm: Trying to solve pension problem.

Lenora Hardy-Foster: Impacts services.

care, adoption and home-based crisis services merged with Boys and Girls Republic, another agency that disaffiliated from the United Way plan, in 2008. With 444 total pensioners in its two frozen plans, it’s now considering taking on an estimated $6 million to $6.5 million in debt. The debt would allow the nonprofit to buy out pensioners where it can and to put remaining pensioners into annuities so they receive their full retirement benefits and so it can terminate the plan. The liability prevented Lutheran Child and Family from entering a full merger with Lutheran Homes of Michigan in 2011, Gehm said. Instead, they formed a joint-operating agreement. “Frankly, the merger was waved off largely because of the pension liabilities and the challenge they presented to the balance sheet, not to mention cash flow in the long run,” he said. By combining central offices, the two were able to carve out a fair amount of overhead. But “we’re trying to figure out how to solve the (pension) problem so (we) can do a full merger,” Gehm said. Lutheran Child and Family has trimmed programs, cut about 20 employees over five years and sold buildings to get as lean as it can, he said. Thanks to the cuts, it ended 2017 in the black. But the cuts that have kept it afloat also prevented it from being distressed enough for the PBGC to take on its plans in 2012-13, he said. “We’ve employed a strategy of trying to continue to fund the plan as best we can. That makes the plan healthier and more accessible to pensioners and helps us move liability off the books when people retire and take lump sums,” Gehm said. But with the age of pensioners and projections on their life expectancy increasing, Lutheran Child and Family is seeing a significant run-up in recommended payments over the next several years. This year alone, the nonprofit is looking at potentially $1 million or more in contributions to keep it at the 80 percent funding level that enables it to buy employees out of the plan as they retire and to reduce the premiums it must pay to the PBGC. Those premiums have gone up. In 2012, Lutheran Child and Family’s premium was less than $30,000, Gehm said. In 2015, it rose to $99,000. In 2017, it was $183,000. For 2018-19, he projected the premium

“We couldn’t project before. We got a surprise hit one year (and) ended up having to pay $600,000 ... to keep our balance up to 80 percent because of market fluctuations. The next year we had to pay nothing…. It was really worth our while to get rid of that uncertainty.” Denise Dalrymple

alone will be somewhere around $220,000. Because of the pressure on the PBGC, premiums are going through the roof, Gehm said. “When you start seeing premiums skyrocket the way they are, it really does force the conversation about taking on debt. “But when’s the right moment to pull that trigger, and can we get a bank to help us with that under the circumstances?” he said. “We don’t have a lot of collateral.”

Ditching uncertainty Other agencies that disaffiliated from the United Way plan are in slightly better shape. Girls Scouts of Southeastern Michigan, created from the 2009 merger of four councils — including two that disaffiliated from the United Way pension plan — terminated its plan four years ago and not a moment too soon, said CEO Denise Dalrymple. The nonprofit sold one of its camps to do it but was able to exit before experiencing the increases the PBGC passed on to employers with underfunded plans in recent years. Girls Scouts terminated one pension plan just after the merger and paid $2 million to terminate the other, Dalrymple said. “We couldn’t project before. We got a surprise hit one year (and) ended up having to pay $600,000 ... to keep our balance up to 80 percent because of market fluctuations. The next year we had to pay nothing…. It was really worth our while to get rid of that uncertainty,” she said. Neighborhood Services Organization and Goodwill Industries of Greater Detroit have paid down their pension liabilities in recent years but can’t move fast enough to terminate their plans. NSO, which reported pension liabilities of $2.58 million in 2016, needs $1.1 million more to fund its pension at 110 percent. At that level, the agency would be able to completely terminate its plan, said President and CEO Sheilah Clay. The organization expects to be able to terminate the plan in 2019 or 2020. “As we get closer, if we determine we need to take out debt, we will … but it won’t be a large amount,” she said. Goodwill, which is operating on a $39 million budget, reported $1.3 million in pension liability on its 2016 federal tax form. It contributed $1 million to its pension fund last year, CEO Dan Varner said, adding they expect to be able to pay the remaining money needed from its current reserves. “We’ve tentatively circled December 2019 as our date by which we’d like to liquidate the plan,” he said. The Judson Center has unfunded liability of roughly $3 million, President and CEO Lenora Hardy-Foster said. It established a board-designated endowment that today is about $10 million to help weather swings in liability. The agency’s board hasn’t yet discussed terminating the plan, but the endowment would cover any costs if it chose to do so, she said. “We’re always struggling from year to year (to see) what that unfunded liability is going to be,” Hardy-Foster said. “That liability impacts our ability to provide more services.” Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

www.crainsdetroit.com Editor-in-Chief Keith E. Crain President KC Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@crain.com Product Director Kim Waatti, (313) 446-6764 or kwaatti@crain.com Digital Product Manager Carlos Portocarrero, (313) 446-6056 or cportocarrero@crain.com Creative Director David Kordalski, (216) 771-5169 or dkordalski@crain.com News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Special Projects Editor Amy Elliott Bragg, (313) 446-1646 or abragg@crain.com Design and Copy Editor Beth Jachman, (313) 446-0356 or bjachman@crain.com Research and Data Editor Sonya Hill, (313) 446-0402 or shill@crain.com Newsroom (313) 446-0329, FAX (313) 446-1687, TIP LINE (313) 446-6766

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

DOLLARS FROM PAGE 3

“Competition for corporate sponsorship is good,” said Keith Karbo, the Volvik Championship’s tournament director for its three years of existence. “Each event is unique and has its own set of compelling attributes. It’s our job to tell our story, develop creative ideas that drive results for our sponsors and build the right long-term partnerships. If we continue to deliver a fantastic spectator experience, then we’ll be relevant and attractive to our corporate partners, too.” As sports sponsorships have grown more complex, opening them up to smaller companies with digital and social media opportunities atop traditional signage and hospitality and naming rights, advertisers expect more bang for their buck. That’s been Andy Appleby’s business strategy with his development USPBL league in Utica, which began its third season May 11. He’s sold more than $4 million in corporate deals to put his startup league in the black from Day 1. “There is increased competition (for ad dollars). Companies have to be very judicious in who they choose to partner with. From that perspective, I believe we as properties have to be better than ever in terms of our service. I spend 365 days a year servicing our partners, not just during the season,” he said. “You have to show companies value and service.”

Cost of sponsorship Depending on the sport and event audience, sponsorships can range from a few hundred dollars to the millions for event title deals. Increased sophistication in what teams, venues and events offer potential sponsors has lowered the barrier to entry while increasing the overall cash intake. Mike Dietz, whose job it is to preach the gospel of sports marketing effectiveness as president and director of Farmington Hills-based Dietz Sports & Entertainment, laid out the democratization of the industry.

BRAND FROM PAGE 3

Simpson, 32, now a five-time PGA Tour winner, began wearing the Burns & Wilcox logo on his shirt in January 2017 at the Sony Open in Hawaii, and the firm extended his deal a few months later. The caddies for both golfers also wear the logo, and it’s on Simpson’s golf bag and towel. That media value estimate for the brand’s exposure breaks down as more than $570,000 for the Burns & Wilcox logo on Simpson’s shirt, another $147,000 for the logo on the caddy’s hat, and about $2,400 from the marque showing up on his golf bag. Joyce Julius measures how many times and for how long the logo was seen, frame by frame, from the broadcast. “Exposure value is calculated by measuring the on-screen time for the brand, and comparing the time to the cost of a commercial during the broadcast,” Wright said “We then also discount the exposure by taking into consideration the size of the identity in relation to the screen, positioning on the screen, brand clutter, and any integration of the brand into the ac-

LARRY PEPLIN FOR CRAIN’S

The opening of Little Caesars Arena garnered significant investments, putting additional pressure on the other franchises and events.

“Even if companies start small, they will find success with sports marketing and can grow their budgets and partnership assets,” he said. “Some companies invest in large assets with naming rights, entitlement jersey patches, entrance naming rights and category exclusivity. Other companies maximize smaller assets: digital signage, social media, community events, youth sports venues. No matter what your budget, there is room in the Detroit sports landscape to invest in a program that will bring measurable results. Community partnerships can run from $1,000 to $10,000 and are the perfect entrance vehicle into sports for small businesses.” Pro-golf sponsorship isn’t cheap. Dave Richards, owner of Bloomfield Hills-based Resort & Golf Marketing, told Crain’s in 2015 that an LPGA event costs its main sponsor about $500,000 to $750,000; while a mid-level event on the PGA Tour,

such as the now-defunct Buick Open in Grand Blanc, is $5 million to $6 million. Hospitality packages for the 2008 PGA Championship at Oakland Hills Country Club began at $37,500 for a 10-person table and increased to $500,000 for larger, more sophisticated offerings.

The financial details, including sponsorship costs, for the new PGA Tour tournament in Michigan are still being worked out, according to title sponsor Quicken Loans. The online mortgage giant owned by Dan Gilbert, a heavy sports marketing spender, has been title sponsor of the PGA Tour’s The National near Washington, D.C., since 2014. It dropped involvement with that event after the 2017 tournament for the new Detroit event. “We are currently focusing on fi-

nalizing the contract,” said Aaron Emerson, senior vice president of communications at Quicken Loans, via email. “As we move toward execution of the contract we will have much more information on the business aspects, including corporate sales and hospitality, of the Detroit event.” One academic that monitors sports investment predicts that the new Detroit PGA Tour event will have competitive ripple effects in the market. “Its impact will be felt by other major events in the area as they reach out to additional sponsors,” said Victor Chiasson, an assistant professor of sport management at Eastern Michigan University. “The competition is fierce at every level and every new event that comes to town adds to that competition.” Dietz, whose firm creates sports sponsorship deals for companies, agreed.

tion taking place. These factors are digitally measured during each frame of the telecast.” Walker, who wears the logo on his shirt, accounted for 15 seconds and $6,240 of the overall total. While the details of how much Burns & Wilcox is spending to sponsor the golfers weren’t disclosed, it likely got a big chunk of that back in just one tournament. PGA Tour player sponsorship deals vary wildly because of their terms, industry insiders say. “I can say that to be on a hat and a shirt for a player in the top 20, it would cost at least $250,000. Keep in mind that each of these sponsorships includes things like player appearances as well as commercial opportunities,” said Mike Dietz, president and director of Farmington Hillsbased Dietz Sports & Entertainment. His firm has helped Burns & Wilcox with managing hospitality events, but he said he has no knowledge of the company’s deals with Simpson and Walker. Raising the Burns & Wilcox profile is the chief objective of its sports marketing strategy, and sponsoring winning pro golfers is a primary tactic. The firm’s clients watch golf. “It’s brand awareness for the right

audience, which pays attention to golf. It’s the audience that makes decisions for insurance. That’s very important to us. People always like doing business with a winner, a champion,” said Alan Jay Kaufman, chairman, president and CEO of H.W. Kaufman Group and Burns & Wilcox. “The high visibility, you can’t put a price tag on that. It’s been very exciting. It heightens the brand. It’s one of our goals. It puts us in a forefront in our business.” Burns & Wilcox gets more than brand awareness out of its sports deals, which also include its logo at Little Caesars Arena’s center ice and a sponsorship contract with Red Wings player Justin Abdelkader. Job applications spike when its sponsored golfers perform well, Kaufman said. The company has more than 60 offices in the U.S., Canada, and United Kingdom with more than 2,000 employees. The company’s staffers also enjoy watching “their” golfers play well, Kaufman added, meaning the sponsorship deals offer an additional measure of value. “It brings people together,” he said. “It’s exciting for us.” Burns & Wilcox office TVs were tuned into the tournament, and texts,

emails and calls flowed in when Simpson won, Kaufman said. “Something like this can be very powerful,” he said. The employees had a lot to cheer for during The Players Championship. Thanks to a first-round 66 and a second-round 63, Simpson’s 73 during the final round was enough to give him a four-stroke victory at the TPC at Sawgrass course in Ponte Vedra Beach near Jacksonville, Fla. Walker, 39, shot a final-round 67 to tie for second with South Africa’s Charl Schwartzel and last year’s PGA Tour Rookie of the Year, American Xander Schauffele. The sports marketing payoff with Simpson took some time for Burns & Wilcox: He had last won at the Shriners Hospitals for Children Open in Las Vegas in October 2013. His only victory in a major was the 2012 U.S. Open, and his struggles with putting have been noted since the tour banned his preferred type of putter in 2016. He’s since remastered that portion of the game, and it has paid off for both himself and Burns & Wilcox. The company also uses its golf sponsorships as a perk for clients and staff. It had a corporate hospitality tent at the TPC at Sawgrass last week and the firm staged a meet-and-greet

Rippling effects

“Competition is fierce for sponsorship dollars, and we encourage companies to have a strategic plan in order to maximize the return on their investment,” Dietz said. “The new PGA Tour event will mostly target hospitality budgets for tickets and chalets, so the competition for the hospitality budgets will get more competitive, with suites at Comerica Park, Ford Field, Little Caesars Arena, as well as chalets at the Grand Prix and season tickets with the teams. Adding a premiere event to the calendar will give sponsors more options but also open opportunities for new companies to get started in sports.” There are long-term sponsorships, such as venue naming rights, presenting rights, signage and suites but also deals for fixed-time events where the deal is for a temporary tent, social media, etc. And companies can get immediate ROI data from digital ad campaigns, which has made online and social media ad spending an integral part of sponsorship deals for some time. That said, traditional sports branding investments have still an enormous effect on ad dollar competition. “The opening of Little Caesars Arena garnered significant investments, putting additional pressure on the other franchises and events,” Dietz said. Within the golf industry itself, broader troubles led to companies re-thinking how they spend ad dollars, said one of Michigan’s top golf minds. “‘Green grass’ golf participation (at real golf courses) has been stagnant-to-declining over the past decade with an accompanying drop in television viewers. Corporate sponsors responded by allocating sponsorship dollars more carefully and strategically,” said Jan Brintnall, who owns DeWitt-based Jan Brintnall Golf School LLC and who teaches a business golf program for Michigan State University’s Eli Broad College of Business. “It remains to be seen how corporate sponsors react to the influx of professional tournament activity in the state of Michigan.” Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19 with Simpson and Walker for clients and employees on Thursday, Kaufman said. It will have even larger tent at the Colonial Country Club for the Fort Worth Invitational from May 24–27, he added. Kaufman said last Sunday’s results cement the decision to get involved in sports marketing. “It proved what we anticipated, that we would get great results, which we did, which is why we signed Webb,” he said. The company plans to expand its sports marketing investments, but isn’t yet prepared to discuss details, Kaufman said. “We’re looking at a number of opportunities,” he said. Burns & Wilcox is the North American flagship for Farmington Hillsbased H.W. Kaufman Group. It provides insurance services to brokers, agents and carriers, including underwriting, inspections, risk management and third-party claims administration. H.W. Kaufman Group had $2.1 billion in revenue last year, and it topped Crain’s most recent list of largest Michigan business insurance agencies and companies by revenue. Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

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

THE WEEK ON THE WEB

RUMBLINGS

Ford Wixom plant site’s remaining acres sold

MoGo bike share tests accessible rentals

MAY 11-17 | For more, visit crainsdetroit.com

Cleveland-based company purchased the remaining 182 acres of the Ford Motor Co. Wixom assembly plant site with plans for new development. Industrial Commercial Properties LLC closed on the purchase from Boston-based investor Trident Barrow, which for more than a year was locked in a federal legal battle with Ford over the property. Chris Salata, COO of Industrial Commercial Properties, said in a statement that the site “lends itself to many uses, including manufacturing, distribution and tech office,” and that it “can be ready for new construction in short order.” Christopher Semarjian, owner of Industrial Commercial Properties, said in an interview last Wednesday that the sale closed last Tuesday. Semarjian did not disclose the purchase price. The Southfield office of Los Angeles-based CBRE Inc. worked on the deal. Trident Barrow and Ford also reached a settlement in their lawsuit, according to federal court records. Terms of the settlement were not revealed. "We are open for business, whether there is a build-to-suit, a joint venture or straight out land sale," Semarjian said last Wednesday. "We are working with others and we are already talking to a couple other users and three other developers who have in-tow prospects." He said the prospects include a 500,000-square-foot build-to-suit project; a 600,000- to 800,000-squarefoot manufacturing facility; and a 150,000-square-foot steel fabrication project. He declined to reveal the users. Among the work to be done is clean up “some of the debris left on the site” and removing the site pad, Semarjian said. The Wixom property is generally considered prime west Oakland County land in a growing area that once housed a 4.7 million-square-foot factory that employed as many as 5,500 people at its peak 45 years ago.

BUSINESS NEWS J Caesars Windsor and Unifor Local 444 reached a tentative agreement last week after more than a month of a labor strike. But workers rejected the deal, leaving the casino-hotel closed as of Friday. J Troy-based Altair Engineering Inc. reported $91.7 million for first-quarter revenue, a 19 percent rise from last year facilitated by strong software product sales after an initial public offering last fall. J Chicago-based tax and consulting services firm RSM US LLP invested $1.2 million to open an office in downtown Detroit. J The Jamaican Pot, a 4-year-old Caribbean-influenced restaurant in northwest Detroit, plans to open a second location in the city’s New Center neighborhood. J A Dunkin’ Donuts franchisee plans to open a fast-casual restaurant called Loaded Links, focusing on nontraditional hot dogs, in Troy. J Ford Motor Co. officials told share-

KURT NAGL/CRAIN’S DETROIT BUSINESS

A spate of water main breaks and an unexpected closure of Maple Road in downtown Birmingham caused headaches for some merchants last week as crews continue to overhaul the city’s main four-block stretch of Old Woodward Avenue. The city is on pace to complete the $7 million project by late July/early August. Also, many business owners have found the construction less crippling than feared.

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

11,000

The number of jobs for which McDonald’s is hiring in Michigan to handle the summertime fast-food rush

The figure Michigan gas prices topped last week for the first time since 2015, according to the Associated Press

48%

The percentage of millennials who believe businesses behave ethically, according to Deloitte’s seventh annual survey of the generation

holders earlier in May the Dearborn automaker will “grow our presence in Detroit” and did not deny the company is pursuing purchase of the long-vacant Michigan Central Station in the city’s historic Corktown neighborhood. J Noble Sushi, owned by New Jersey-based True World Group LLC, plans to expand in Clawson to take up two additional storefronts in its strip mall building. J After more than three years of negotiations, a legal challenge and a partner bowing out, the Royal Oak City Center project broke ground last week. J After decades of serving its signature Blue Moon ice cream, Miller Bros. Creamery in Mt. Clemens plans to close due to 93-year-old owner Irene Szlachtowicz’s declining health. J Seraph Biosciences Inc., a Detroit-based biomedical device company, signed a development and exclusive distribution agreement for its Seraspec pathogen identification device with Zomedica Pharmaceuticals Corp., a veterinary diagnostic and pharmaceutical firm with its U.S. office in Ann Arbor. J A Baltimore-based grocery delivery service is coming to metro De-

troit in June to sell imperfect produce from farmers and wholesalers at discounted prices. J The Rock Family of Companies plans to fill downtown Detroit this spring and summer with more than 30 local vendors, a chef incubator, a farmers market and a beer garden, after the reported success of its winter Downtown Detroit Markets program. J Cooper-Standard Holdings Inc. acquired a majority stake in the automotive parts business of South Korean industrial machinery conglomerate LS Mtron Ltd. J At least one of Detroit’s three casinos may be interested in adding a betting operation now that the U.S. Supreme Court struck down the 1992 federal ban on sports wagering.

t nearly 1 year old, Detroit’s MoGo bike share service is launching a trial program to introduce hand tricycles, two-wheel tandem bikes and others that provide wider accessibility. MoGo launched May 23 as a bicycle rental service, aiming to connect Detroiters and visitors with destinations across 10 neighborhoods. The nonprofit said Tuesday it will make Detroit one of the first big U.S. cities to test adaptive bicycles in a bike share program. The 13 vehicles added to the fleet cater to those in need of more back support, those with physical disabilities and children. The 430 basic-model MoGo bicycles can be picked up and dropped off at any of its 43 docking stations. But the upright cargo tricycles, recumbent tricycles, two-wheeled tandem cycles and other new models will be available May 15-Oct. 31 only at Wheelhouse Detroit, a cycle shop on Atwater Street at the riverfront, according to a news release. Wheelhouse will service the adaptive bicycles through a partnership with

MOGO

MoGo’s front-loading trailer is a tadpole tricycle with an attached front trailer.

MoGo. MoGo bought the new bikes with funding from the Ralph C. Wilson Jr. Foundation’s Design & Access Fund at the Community Foundation for Southeast Michigan and the Dick Allen Lansing to MACkinaw Fund.

OTHER NEWS J A Michigan House committee heard testimony last week on bills that backers said would increase the number of people who can invest in renewable energy, expand the amount of solar energy generated and direct state regulators to set rates the utilities would be required to pay customers who generate more electricity than they use. J The Detroit Economic Growth Corp. aims to help would-be small business owners learn about funding through a new financial summit program. J Nonprofit manufacturing association SME moved its headquarters from Dearborn to a more modern and open space in Southfield Town Center. J The city of Detroit last week kicked off a $1 million redesign of East Jefferson Avenue that will cut two lanes of the thoroughfare to make way for bike lanes. J For the first time in more than two decades, Oakland Community College has decided to freshen its brand and add a new motto: “Excellence Empowered.” J OCC and Oakland University announced a $20,000 co-branded marketing campaign to encourage county residents pursuing a degree to “Start Here ...” at the former and “Finish Here” at the latter.

PRESERVATION DETROIT

Wayne State University plans to move the historic David Mackenzie House around the corner to make room for an expansion of the Hilberry Theatre.

Wayne State ends Mackenzie House leases

reservation Detroit and Urban Consulate, the nonprofit and exchange network groups that rent space out of Wayne State University’s David Mackenzie House, will have to find a new home by July 31. Jolene Kijorski, a Preservation Detroit board member, said both organizations were notified May 4 that the university would terminate their leases in the historic house that is to be moved as part of the $65 million Hilberry Gateway Performance Complex project. The project proposal, which has been in the works for eight years, outlines that the Mackenzie House would be moved from its current spot on Cass Avenue to replace a parking lot on the same block. “I can tell you that space is a premium” in Midtown, said Wayne State Fine & Performing Arts Dean Matthew Seeger, who is involved in the planning of the performance com-

plex project. “We have had lots of conversations. Our needs are a little different than [the tenants’] at the moment.” Wayne State leased space to Preservation Detroit and Urban Consulate through December and February, respectively, but the organizations agreed to a 90-day notice clause that allowed the university to end the lease early. “We hope the university will consider our proposal to continue activating the house as it was originally used by David Mackenzie and remains vital today — as a bridge between campus and community, and a home for urban ideas and exchange,” Urban Consulate founder Claire Nelson said in an email. She declined to comment further. Preservation Detroit is looking for a location, ideally in Midtown, with two to three offices, conference space and potential storage for its archives.

T:10.875” S:10.25”

PROMISES KEPT RECORDS BROKEN S:14”

T:14.5”

Webb Simpson said, “My dad always told me to never give up.” Now we know, he never did. Congratulations to Webb Simpson for his history-making win at the 2018 PLAYERS Championship.