Crain's Detroit Business, June 4, 2018 issue by Crain's Detroit Business

The List: Largest Michigan hospital companies Page 14

Major League Soccer bid: What went wrong Page 3

JUNE 4 - 10, 2018 | crainsdetroit.com HEALTH CARE

Meridian sale: What’s next for firm, family, city

REAL ESTATE

Historic Albert Kahn building sold

By Jay Greene jgreene@crain.com

The pending sale of Meridian, the state’s largest Medicaid health plan, to Tampa-based WellCare Health Plans Inc. for $2.5 billion took many observers by surprise as the founding Cotton family has long expressed a strong commitment to being a major force in Detroit for many years. Founded by obstetrician David Cotton and his wife, Shery, in 1997, Meridian is one of the largest family-owned, for-profit managed-care companies in the nation. It’s also a powerful econom-

Need to know  Meridian sale to WellCare for $2.5 billion is biggest HMO deal in Michigan history  Deal covers health plans in Michigan and Illinois and pharmacy benefit management business  Meridian name, headquarters to remain in Detroit and could be turned into regional hub for WellCare multi-state operations

ic force in downtown Detroit with 1,200 employees and ranks fourth on Crain’s Private 200 list of largest privately held companies in metro Detroit with $3.8 billion in revenue in 2017. It’s projecting revenue of $4.3 billion this year with growing Medicaid, Medicare and pharmacy management business lines. Meridian President Jon Cotton told Crain’s in an exclusive interview last Wednesday that the family decided to sell the company last summer when it became clear it needed additional financing to continue to grow and manage an ever-expanding Medicare and financially risky Medicaid patient population. “When we made the decision to sell, less than a year ago, we looked at what we could do as a privately held company, and realized if we wanted to expand, we needed cash,” Cotton said. “In Illinois, we have grown an incredible amount. It takes a lot of resources. We are used to rapid growth, but to do everything, we needed a like-minded partner.”

Plans call for apartments on floors two through 11, with the first floor and lower level as retail and office space.

JHIMM WOODS

New owners plan conversion into 200 apartments By Kirk Pinho kpinho@crain.com

A joint venture purchased an historic building in the New Center area with plans to convert it into more than 200 apartments. The deal, which closed last week for an undisclosed price, makes Birmingham-based Lutz Real Estate Investments and Farmington Hillsbased Northern Equities Group the new owners of the Albert Kahn Building, which was owned by a joint venture between Detroit-based The Platform LLC, New York City-based HFZ Capital Partners and New York City-based Rheal Capital Management, which is owned by Detroit native John Rhea. The apartments are slated for floors two through 11, while the first floor and lower level would be about 60,000 square feet of retail and office space. “The building is in great condition and it lays out great (for apartments),” said Adam Lutz, principal of Lutz Real Estate Investments. “We love what The Platform is doing, the access to the freeways and the QLine going downtown. It’s going to be tremendous.” Lutz expects the renovations to start in about six months. Some of the units should be available about 10 months after construction begins, with the entire project taking about 18-20 months. The building, which is about 320,000 square feet, is almost entirely vacant, minus a health care company that takes up about 2,000 square feet and is expected to move out in July. SEE KAHN, PAGE 20

MACKINAC POLICY CONFERENCE

CEO group creating regional development nonprofit By Sherri Welch swelch@crain.com

SEE MERIDIAN, PAGE 22

The 23-member CEO group that called for regional transit in April plans to launch a regional economic development nonprofit this year. The new organization plans to focus primarily on marketing and business attraction and provide some-

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thing the region doesn’t have: a single point of entry and a coordinated, rapid response to requests for regional data on information such as real estate and infrastructure. “Even though you hear a lot of deals, and it sounds like things are going really well in economic development, we are underperforming as a region. Be-

cause of that, our regional unemployment number is higher than it should be; (our) poverty number is higher and median income is lower,” said Dave Meador, vice chairman and chief administrative officer at DTE Energy Co., during the Detroit Regional Chamber’s Mackinac Policy Conference last week. SEE CEO PLAN, PAGE 21

MORE MACKINAC NEWS, PAGES 4-6

Q-and-A: Bedrock’s brain trust. Page 4 New DEGC CEO: Windows of opportunity. Page 5 Mackinac briefing. Page 5

NEWSPAPER

Gubernatorial candidates debate at Mackinac, from left: Bill Schuette, Gretchen Whitmer, Patrick Colbeck, Shri Thanedar, Brian Calley and Abdul El-Sayed. See story, Page 21. JOHN L. RUSSELL/CRAIN’S DETROIT BUSINESS

C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 4 , 2 0 1 8

MICHIGAN BRIEFS

INSIDE

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

McLaren-Flint pinned as source of Legionnaires’

A Michigan Department of Health and Human Services review of the Genesee County Legionnaires’ disease outbreak in 2014 and 2015 determined McLaren-Flint Hospital to be the only common source for the surge in cases, the Associated Press reported. The announcement by the department is the latest salvo in an ongoing battle between it and McLaren-Flint on what caused the deadly outbreaks. It also comes as DHHS Director Nick Lyon fights an involuntary manslaughter criminal charge over one of the Legionnaires’ deaths linked to Flint’s use of Flint River water. In 2014 and 2015, 12 people died and 90 became ill with the disease, which is a severe form of pneumonia that can cause high fever, muscle pains and shortness of breath. Of 54 people who fell ill and had exposure to hospitals, 51 spent time at McLaren-Flint — with 46 of those people having no other hospital exposure besides McLaren-Flint, according to the department. The review also found no cases of Legionnaires’ on the Flint water system that occurred after the hospital superheated its water system and installed secondary treatment systems. McLaren said in a statement the re-

CALENDAR

CLASSIFIEDS

DEALS & DETAILS

port reveals no new information regarding the outbreak and merely continues a pattern of deflecting blame. “We find the timing of the state’s release today to be an interesting coincidence as the first phase of the criminal proceedings against MDHHS leadership winds down,” McLaren spokeswoman Laurie Prochazka said.

KEITH CRAIN

OPINION

OTHER VOICES

AAA surveys Michigan drivers

the House, which last month dinged Snyder's $100-million goal by 25 percent in its budget. Snyder, a term-limited Republican, unveiled the plan earlier this year and has said it is his top priority during his final year of leading a state that has seen a steadily deflating talent pool since the Great Recession.

Nearly 90 percent of drivers polled by AAA Michigan rated the condition of the state’s roads as less than good. The Dearborn-based auto club surveyed 967 AAA members in Michigan in mid-May after a lengthy winter reignited conversations and indignation surrounding the state’s pothole-pocked thoroughfares. While a majority of those questioned agreed existing government revenue isn’t enough to maintain roads and bridges, thoughts on how to pay for the fixes were mixed and 62 percent said they wouldn’t be willing to pay more in taxes or fees to finance transportation system improvements, according to AAA’s survey released Tuesday. Fifty-eight percent of respondents rated road and bridge conditions as “poor,” while 31 percent said “fair” and 9 percent said “good.” “Very good” and “excellent” received 1 percent each. “Our members’ concerns echo

Of 54 people who fell ill and had exposure to hospitals, 51 spent time at McLaren-Flint — with 46 of those people having no other hospital exposure besides McLaren-Flint, according to a report.

those of motorists across Michigan,” Heather Drake, vice president of government relations and public affairs for AAA-The Auto Club Group, said in a news release. “They are frustrated by crumbling roads and bridges and most believe today’s policy and spending framework isn’t getting the job done.” Gov. Rick Snyder’s administration and lawmakers did strike a budget deal last week that included using a surplus to spend $400 million more than expected on infrastructure, primarily on roads and bridges. AAA acknowledged the additional dollars but said in its news release that “sustainable funding solutions appear to remain elusive.”

Senate approves $100M for ‘Marshall Plan’

The Michigan Senate is granting Gov. Rick Snyder’s Marshall Plan for Talent $100 million in funding, the Associated Press reported. Lawmakers voted 30-2 last Wednesday to establish a talent investment fund within the state’s Higher Education Student Loan Authority for the upcoming fiscal year. The money would be funneled into initiatives to promote talent development in Michigan, mainly through support for technical and skillsbased learning and partnerships between businesses and schools. The two-bill package now heads to

PEOPLE

RUMBLINGS

WEEK ON THE WEB

CORRECTIONS J A story in the May 28 edition on the Detroit Belle Isle Grand Prix incorrectly identified the race’s title sponsor. It is Chevrolet. J The May 28 article “Wayne State, Henry Ford deep in affiliation talks” incorrectly reported that talks between Henry Ford Health System and Oakland-based Kaiser Permanente were continuing. Henry Ford officials told Crain’s after the article was published that the two health organizations had engaged in talks in 2015, but they ended in late 2016.

C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 4 , 2 0 1 8

SPORTS BUSINESS

Detroit and Major League Soccer: What went wrong By Bill Shea bshea@crain.com

Major League Soccer wasn’t buying what the Detroit billionaires were selling. Not this time around, at least. MLS last week opted to add Cincinnati as its next expansion market instead of approving Detroit’s bid, backed by business titans and veteran pro sports team owners Dan Gilbert, Tom Gores and Martha Firestone Ford (and a rival bid from a group in Sacramento, Calif.).

HEALTH CARE

$47.5M center expansion at Karmanos work in progress

Need to know

J Cincinnati beat Detroit, Sacramento for MLS expansion team J Detroit bid still interested in final expansion round J Switch to Ford Field plan doomed bid — this time

The Detroit rejection calls into question of how serious the billionaires are in landing an MLS club versus how much the league wants the

13th-largest U.S. media market as part of its strategy to grow to 28 teams nationwide by 2022. Other successful expansion MLS bids, including Cincinnati, have included grassroots public support for a team — something conspicuously absent from Detroit’s effort that begin in early 2016. It also lacks a vocal public champion in the style of businessman Roger Penske, who quarterbacked Detroit’s Super Bowl XL effort and also the return of the Belle Isle Grand Prix.

It’s unclear the level of public thirst for a fifth pro team in downtown Detroit, but the central issue continues to be the stadium and who will blink first in the standoff over it. MLS has long been explicit that it wants its new teams to play in soccer-specific stadiums — there have been exceptions — but the Detroit bid’s principals opted in November to abandon a $1 billion plan for a soccer stadium at the unfinished downtown county jail site in favor of instead using Ford Field. That decision

was met with a distinct lack of enthusiasm by MLS, but the league may be softening on the topic. After Cincinnati’s expansion announcement on Tuesday evening, MLS Commissioner Don Garber told reporters the decision to use Ford Field instead of a new soccer-specific stadium harmed Detroit’s chance for an expansion team. But he also left the door open to MLS acquiescing to a team sharing the Detroit Lions’ home stadium. SEE SOCCER, PAGE 17

REDEVELOPMENT

Train station buzz ignites among contractors

By Jay Greene jgreene@crain.com

Seven years after Barbara Ann Karmanos Cancer Institute began planning to expand its outpatient center in Farmington Hills, new owner Grand Blanc-based McLaren Health Care Corp. committed $47.5 million to expand the size of the center, add critical services and hire more medical professionals and support staff. “Patients love Need the facility, so do to know our physicians JJLawrence and and our nurses,” Idell Weisberg Karmanos CEO Cancer Treatment Gerold Bepler, Center in M.D., told Crain’s. Farmington Hills “It has conveopens in 2021 nient access, but the facility has JJOwner McLaren limited services.” pledges to spend In 1995, Kar$47.5 million on manos Cancer three-year Hospital was rerenovation project named after JJExpansion to businessman Pequadruple the size ter Karmanos Jr. of the center, donated $15 milexpand services lion to honor his and treat 70 late wife Barbara percent more Ann, who died of patients breast cancer in 1989 at age 46. Three years later, Karmanos began planning the $10 million Lawrence and Idell Weisberg Cancer Treatment Center that opened in Farmington Hills in 2001. But Bepler said the Weisberg center was at full capacity almost immediately after it opened. During the first seven months of 2018, there have been 28,971 visits to the Weisberg center for more than 50,000 annual visits, said Bepler, who became Karmanos CEO in 2010. SEE EXPANSION, PAGE 20

Last week, Crain’s first reported that an entity that has been linked to Ford acquired the vacant Michigan Central Station.

Project could easily be hundreds of millions of dollars across multiple properties in Corktown area Kirk Pinho

kpinho@crain.com

The expected redevelopment of the Michigan Central Station isn’t yet announced, but the feeding frenzy is well under way. Ford Motor Co. is likely besieged with queries from builders, architects, engineers and others in its pursuit of work on what could be an expansive campus in the Corktown neighborhood west of downtown Detroit. Last week, Crain’s first reported that an entity that has been linked to Ford acquired the vacant Michigan Central Station, for years emblematic of Detroit’s dramatic half-decade-

Need to know

JJAn entity that has been linked to Ford

acquired the vacant Michigan Central Station

JJSources say they have been jockeying for a piece of the construction work JJWould easily be in the hundreds of millions of dollars spread out across multiple properties

long decline, as well as a former Detroit Public Schools book depository where a Detroit News reporter in 2009 told the story of a man found frozen in water, his legs grotesquely protruding.

“The rumor has been going around for a long time about Ford. Anybody who has a relationship with Ford, I’m assuming they have been knocking on doors saying, ‘Hey, what about me?’” said Todd Sachse, CEO of Detroit-based Sachse Construction Inc. And there’s a lot of work to be had. Sources have told Crain’s in the months since news first emerged about the train station plans that they have been jockeying for a piece of the construction work, which would easily be in the hundreds of millions of dollars spread out across multiple properties, with the centerpiece being the 505,000-square-foot depot

LARRY PEPLIN FOR CRAIN’S

that has sat unused since 1988. “We would love to, and yes, we will be reaching out to see if we can be part of the game with our resources and experience in doing historic rehabs,” Sachse said. His company has not done building work for the automaker, although he said Sachse Construction has done project pricing for Ford. Sachse also said multiple companies have asked his company to determine a mixed-use redevelopment budget for the train station in the past. “To renovate that whole building, well over $100 million; it could be well over $200 million. It really depends on what you do with the first floor concourse,” he said, declining to identify which companies asked his to price out their projects. SEE CORKTOWN, PAGE 18

MUST READS OF THE WEEK Teeing up Detroit golf course improvements

Combination restaurant partially opens in Detroit

Targeting its audience with technology

Detroit to invest $2.5 million in golf courses despite uncertain future. Page 13

The combination Applebee’s-IHOP restaurant at the Millender Center in Detroit is open — at least the IHOP half. Page 23

Health care industry uses microtargeting online technology to reach patients, customers. Page 10

C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 4 , 2 0 1 8

MACKINAC POLICY CONFERENCE

Q&A with the Bedrock brain trust: Ford in Corktown, the jail site and other projects MACKINAC ISLAND — Less than 30 minutes after Crain’s first reported Wednesday that the Michigan Central Station in Corktown has a new owner, reporter Kirk Pinho caught up with two of Dan Gilbert’s top real estate deputies: Jim Ketai, CEO and co-founder of Bedrock LLC, and Dan Mullen, president and chief marketing officer for the Detroit-based company. During the chat, the three touched on Ford Motor Co.’s expected move to Corktown, the billionaire’s planned development spree in the downtown core and other Detroit-related real estate topics. Here is a partial transcript of the conversation: Kirk Pinho: We put out a story 20 minutes ago saying (Michigan Central Station) transferred ownership. Jim Ketai: I couldn’t be happier. Dan

and I spent a lot of time with Ford convincing them they should be downtown. Dan Mullen: I went and spoke to the CEO of Ford Land (Development Co.). We met Dave Dubensky (Ford Land’s chairman and CEO) and spoke with him about Detroit and all the great things downtown. About a year ago, we were helping them get their eyes focused on downtown. Ketai: I think they realized Detroit is the place they are going to attract the most talent. I think it’s great. It didn’t have to be in one of our buildings.

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Need to know

 Bedrock executives say they have met with Ford Motor Co. about Detroit over the last year  Hudson's site project could have a mixture of hotel and multifamily residential, not just residential in the tower

Jim Ketai: Spent time convincing for to move downtown.

Dan Mullen: Many retailers interested in downtown.

Does that change your strategy at all in terms of shifting westward along Michigan Avenue in terms of property acquisition? Ketai: I would only say for our needs.

If we have warehouse needs or something like that, we would absolutely look in Corktown.

What’s the latest on the jail site project? Obviously you got it a couple months ago. How has the planning process been going along? Ketai: We haven’t planned anything

yet, but yes we are moving full speed ahead with looking at what we want to do with it. Mullen: It’s going to be totally mixeduse — retail, office, residential, restaurant, etc. It’s such a great location and it bleeds into the entertainment district, butting up to Ford Field and Greektown, so how does it look from a master planning standpoint and how all of that fits together in the fabric of the city? Obviously we have a few other mega projects that we are getting out of the ground, and understanding how the reception is going to be and what’s working and what can we do better and how all that helps us figure out the Gratiot site. Ketai: I have a feeling we are going to get some major user at that Gratiot site. Some user is going to come by and say, “Hey, we want to come downtown.” What better than to have a blank slate? Is there anyone you’re trying to peel off specifically? Ketai: Not that I can think of. There

are big companies that are looking to be in Detroit right now. Mullen: The tech sector, the autonomous vehicles sector. We don’t have anyone we are talking with about it, but as the world is developing in those two sectors, why not try to find somebody who wants to do a build-to-suit and be part of a mixed-use? Is the operating theory at Bedrock still that the city needs 10 million new square feet of office? That had been the talking point. Ketai: I’m not going to put an actual

number on it, but there does need to be more. We are at the point where we are full. We have to go vertical right now. There is just too much demand building up. It’s the same thing with residential. There’s got to thousands (of new units) every year that we keep adding. It’s going to work if we continue to add thousands of residents. What’s the general thinking on retail strategy on Woodward these days?

 Mix of office, retail, residential, restaurant envisioned for Wayne County Consolidated Jail site on Gratiot

There are still some vacant spots there. Mullen: We just left ICSC (Interna-

tional Council of Shopping Centers conference) a week ago. We met with so many retailers and restaurateurs interested in coming downtown. With the Shinola Hotel opening up and a lot of the other retailers doing so well ... for us, it’s always been part of the same sort of philosophy, which is how do we blend the local entrepreneurs with the national and international tenants? For us, it’s not about ROI; it’s about creating timeless blocks. You might see some empty storefronts. That’s because we put so much thought into who goes where.

Is there any update on the GM site next to the RenCen or any progress on Uniroyal or the other ones? Ketai: No progress right now, but we

think the riverfront is going to be a really attractive place, and we are excited to be a part of it, but nothing we can report right now.

What does this conference do for you guys? Are you participating in panels? Networking? Mullen: Both. More relationships and

the more folks you can meet help with a united, shared vision, along with panels and interviews. Ketai: I think just being with all the city people and state people and all the other people in the business, it’s a great way of talking about what lies ahead and how we can work together collaboratively and build momentum. There have been quite a few different hotel projects kicked around. Andrew Lieber was saying at a conference that 1300 Beaubien, the old DPD building, is being considered for hotel. And then there was an article featuring (Hamilton Anderson Associates’) Rainy Hamilton in which he said Hudson’s was a mix of apartments and hotel. Could Hudson’s have a mixture of hotel in it? Ketai: It could. Has the decision been made? Ketai: Not definitively, but that’s defi-

nitely something we are looking at.

How have the residential rents been doing? Have you guys been pro forma’ing $3 per square foot? Ketai: We haven’t on anything we’ve

owned right now that’s up and existing. But anything new that comes out new that’s planned four years from now, I would say you got to have rents around there.

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MACKINAC POLICY CONFERENCE

Incoming DEGC chief: Detroit can land corporate big fish MACKINAC ISLAND — Kevin Johnson, the incoming president and CEO of the Detroit Economic Growth Corp., pretty much came full circle at the Mackinac Policy Conference last week. It was during the annual gathering of business, political and philanthropic leaders five years ago that homebuilder PulteGroup Inc. revealed it was moving its Bloomfield Hills headquarters to Atlanta. It was a deal that Johnson worked on as a top official at Invest Atlanta, where Thursday was his last full day; he becomes head of the DEGC on June 12. He talked with Crain’s reporter Kirk Pinho on Thursday about his priorities and focuses for the economic development organization and other topics on Mackinac Island.

Kevin Johnson, the incoming president and CEO of the Detroit Economic Growth Corp., at the Mackinac Policy Conference, JOHN RUSSELL FOR CRAIN’S

What follows is a partial transcript of that conversation. Kirk Pinho: It’s been a little over a month since you were selected for the job. Have you been able to informally get your bearings on the organization, chat with staff, that sort of thing? Kevin Johnson: One thing I've

learned about the team at the DEGC is that they are highly skilled, very talented and with a depth of the gravity of what they work on on a day-to-day basis that I find to be very comforting as the new guy coming in. But I also know there are other things we are going to try to accomplish. My presence is to unleash some of those things. I think organizationally, we are very sound. I am

Making Michigan smile since 1957. State launches talent ad campaign

state’s general fund and was included in the recently passed budget, Snyder said at the Mackinac conference. MDOT will release a request for proposals in the next two weeks. Organizations will then have a month to respond and must launch a pilot within 60 days of winning funding from the state.

The state of Michigan is launching a $2.5 million digital marketing campaign, Choose Michigan, to attract new talent, Gov. Rick Snyder announced last Thursday at the Mackinac Policy Conference on Mackinac Island. It drew together business and political leaders last Tuesday through Friday for panels, policy discussions, networking and announcements. Michigan has failed to educate and curb misconceptions out-of-state workers and students have about Michigan, said Roger Curtis, director of the state’s talent and economic development department. The campaign will also work with local communities, starting with Grand Rapids and Detroit, on methods to show their cities off to potential new residents.

Employers push for transit vote

Hundreds of businesses and nonprofits in Southeast Michigan joined forces to push political leaders to put a regional transit proposal on the ballot this fall, the Detroit Regional Chamber announced last Wednesday at the Mackinac conference. The 220 organizations in the Employers for Transit coalition want leaders to let the public decide on a plan at the midterm elections Nov. 6. The group is made up of the automotive supplier, education and health care industries, which employ more than 267,000 in the region.

$8 million mobility challenge

The state of Michigan is offering a purse of up to $8 million to organizations that can launch mobility services to support seniors, those with a disability or veterans. The Michigan Mobility Challenge is funded by the

Nonprofit to launch career-readiness program

SHERRI WELCH/CRAIN’S DETROIT BUSINESS

Employers signed petitions for a transit vote at the Mackinac conference.

Warren-based nonprofit Winning Futures announced plans at Mackinac to invest $150,000-$200,000

launching a four-year workforce preparedness program this fall for students in grades 10-13. The program will do job shadowing with the kids, enabling them to interact with professionals. They’ll learn entry-level skills and intern while they’re still part of the program. Business, nonprofit and government leaders last Wednesday called for such programs that not only fill gaps, but also instill in young people the need for lifelong learning for the ability to adapt to fast-changing technologies.

Michigan commits $50 million to building second Soo Lock

Gov. Rick Snyder and legislative leaders committed up to $50 million to upgrade the Soo Locks, a bid to persuade the federal government to fund the long-sought $1 billion proposal to build a second large lock that allows commercial ships to traverse the Great Lakes, the Associated Press reported. The money is part of an additional $400 million for infrastructure from a surplus that was included in a state budget deal last week. The Republican governor said at the Mackinac conference that he would ask other Great Lakes states to contribute

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C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 4 , 2 0 1 8

so impressed with our board leadership. You don’t have to suck up to the board here.

During my interview ... they were interviewing me, and I was interviewing them. I’m coming from a city that is doing great things. Atlanta is one of the leading cities in the world, quite frankly, for the types of jobs and investment that many communities seek. I didn’t want to lose having the leadership that I had in Atlanta by coming to Detroit. I wanted them to be as committed to the work that we need to do as what I’m leading in Atlanta. When we spoke last, I brought up PulteGroup. It was five years ago at this conference that the news came out.

I’m sorry (laughter).

What about in terms of other recruitment or development strategies that you think are pressing? Any sort of changes you feel will be necessary?

One thing I did say to our staff is, if they thought we were aggressive be-

We are going to talk about branding and rebranding Detroit. We are going to markets where there will be an attractive opportunity for us to share our message. fore me, we are going to be even more aggressive when I get here. What I mean by that is, we have a window in Detroit. Windows open and windows close. Because we have this window to really accelerate the connectedness of what we are trying to do from a political, business and private-sector perspective, it is imperative to go out into the market, targeting customers that we think will be most responsive to our message and share with them what’s going on in our city. We need to do that at a high rate of speed. These windows open, and they close.

We are going to talk about branding and rebranding Detroit. We are going to markets where there will be an attractive opportunity for us to share our message. To be very cluster-focused, in terms of industry clusters. Peter Chapman (executive vice president for business development at the DEGC) and his team are doing a great job at that now, but I want to add a higher rate of urgency. I think we are already doing that. The announcement with Tata Technologies is an example of that, but we are going to do it domestically and internationally. That’s what my sweet spot is as a practitioner. I’m gonna pull an unrealistic example off the top of my head: Going to downtown Chicago and talking to the head of real estate for McDonald’s (and lure them out of the Windy City for a Detroit headquarters).

Why is that unrealistic?

Well, they have been pretty well based (in one place) ever since their founding.

So was Pulte. Those things, that’s not unrealistic. When there is a sig-

nal that a corporation is seeking new markets. When a corporation thinks that this neighborhood is where the action is, this neighborhood is where opportunities are, and they signal that to us, legacy companies move all the time. Fortune 500s don’t, but some Fortune 500s do. So does that mean going to companies that you feel might like to have an outpost, North American headquarters, international headquarters in the city, big or small, and say, “Hey, here is what we can offer, not only in terms of real estate, but also in terms of incentives that trickle through the DEGC. What do you think?” Am I reading that right?

You are completely reading that right. It is our responsibility to seek opportunities where they are. We can be aspirational. I do this all the time. I say, “Give me a list of the top companies in health information technology or in food. Give me the top 50 list in the industry clusters that we target.” Then let’s do some analysis on them. How long have they been in

their existing locations? What are their revenue projections? Where do they have regional operation centers? Do they have any in the Midwest? If not, should that be us? It’s almost like you’re doing a cost-benefit analysis.

You’re literally doing that. You shrink that list down to targets, specific targets, and then you say, “Let’s figure out how we can get a meeting and talk about the benefits and competitive advantage of having operations in Detroit.” That’s the science behind what we do. But now I can launch our team to go out and make those calls. Those industry clusters you were talking about, can you say what they are?

Advanced manufacturing, autonomous, it’s food, it’s health and health IT, it’s logistics and transportation. Those are the identified clusters. And then there are subclusters. Mobility would be one of those. We want to play in that space. We are going to play in that space.

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tificates or other credentials beyond a high school diploma.

funds because if the U.S. government ultimately helps pay for the project, the Trump administration has indicated it wants 20 percent to come from nonfederal sources and that large-scale projects with such funding would be moved to the top of the priority list.

Education leaders push finance improvement

Michigan’s education leaders were seeking to sell the state’s business leaders on an education finance reform plan in hopes of forcing Lansing’s hand at the Mackinac Policy Conference last week. Superintendents promoted the School Finance Research Collaborative, a bipartisan group of business leaders and education experts from around the state that recently created a road map for a school funding system that serves the wide-ranging needs of all students. Talent and education were major themes at the policy conference.

GM, Detroit chamber launch $150,000 grant program

General Motors Co. is granting $150,000 to help the Detroit Regional Chamber fund the pilot NeighborhoodHub Community Grant program. It would give $30,000 to a community group in each of five Detroit neighborhoods. Proposals will need to include programming focused on needs in that community and improving an accessible physical space — whether a vacant storefront, a coffee shop where people gather, space in a local library or in a community church basement — to house the programming.

Back-to-school initiative earns national nod

The Detroit Regional Chamber, Wayne State University and Macomb Community College are

JOHN RUSSELL FOR CRAIN’S

Michigan Gov. Rick Snyder opens the 18th annual Detroit Regional Chamber of Commerce’s Mackinac Policy Conference on Mackinac Island last week.

re-engaging in efforts to get people in the region to complete degrees or post-secondary certifications. Their work has caught the attention of the Indianapolis-based Lumina Foundation, which has desig-

nated Detroit as one of 23 “talent hubs” across the country and awarded it $275,000 to continue its efforts, with support from the Kresge Foundation, the groups announced during the Mackinac conference last

Wednesday. The “talent hub” designation means cities have demonstrated they have capacity and ability to significantly increase the numbers of residents with college degrees, cer-

Goodwill Industries purchase could boost training

Goodwill Industries of Greater Detroit plans to acquire a skilledtrades company that would provide new training ground for in-demand jobs. The Detroit-based nonprofit narrowed the field to three companies and is on track to close on one of them by year’s end, CEO Dan Varner said during the conference.

C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 4 , 2 0 1 8

OPINION COMMENTARY

EDITORIAL

Perils of politicization Population growth should be at

ichigan has had a front-row seat to some egregious — and seemingly never-ending — examples of the politicization of the legal process. Exhibit A: The criminal case against Health and Human Services Director Nick Lyon and Chief Medical Executive Eden Wells. Attorney General and gubernatorial candidate Bill Schuette has made it a holy mission to convict someone high in the Snyder administration for the outbreak of Legionnaires’ disease in Flint. The problem is that evidence that Lyon and Wells committed involuntary manslaughter is shaky at best, especially since there are other responsible government actors — officials at the Genesee County Health Department — who Schuette has not charged criminally for failing to notify the public about the outbreak in 2014 and 2015. Last week, the department that Lyon runs came out with a scientific report that put the blame for the Legionnaires’ bacterial outbreak on pipes in McLaren-Flint hospital. The evidence appears strong, especially that cases slowed back down immediately after the hospital flushed its pipes. In a normal public health case, this would be the end of the story. But with this case, nothing is normal. The report’s timing was immediately called into question because it came as the (nine-month!) preliminary examination of Lyon is winding down. That made it easy to attack as motivated by a desire to exculpate the department’s boss. And that’s the problem. Facts matter, and trust in institutions that are supposed to protect the public health matters. The criminal case, seemingly prosecuted as a plank in Bill Schuette’s campaign for governor, undermines that trust. Exhibit B: The Larry Nassar case. Nassar’s crimes were horrible, and he’s rightly spending the rest of his life in prison. But the horror of his crimes has also made the case an irresistible political football — and seemingly every politician wants a piece of it, including Schuette. When that happens, it almost always leads to bad policy. The Legislature last week passed an extension of the statute of limitations for civil cases filed by childhood victims of sexual assault — 10 years, up from three. The bills that passed will have fewer unintended consequences than the much longer, 30-year limit that earlier versions had. But they still provide a huge opening for a flurry of lawsuits against businesses, nonprofits, governments and religious organizations based on old charges with no guarantee of any public benefit. State Rep. Tim Greimel, a Democrat running for Congress in the 11th District, used the scaling back of the statute of limitations as an opening to attack the legislator who re-wrote the legislation, Republican Klint Kesto, who also is running for Congress in the 11th District. Greimel called it “Kesto’s Pedophile Priest Loophole” in an attempt to score quick cheap political points in the congressional race. Outrage over the Flint water crisis and Nassar’s crimes was justified. But the political grandstanding it has engendered has not been good for Michigan.

top of next Mackinac agenda

his year’s Mackinac Policy Conference sought to tackle some of Michigan’s most pressing issues — workforce, collaboration and social issues. These are all fine discussions and certainly highlight problems in Michigan’s growth, but they are ancillary to the state’s biggest impediment to economic growth. Population growth, or the lack thereof, is the reaper lurking in the shadows of Michigan’s future and should be the sole focus of next year’s policy conference. Ask any economist about economic growth, and they’ll point to two factors: increased productivity and population growth. Since 2010, Michigan has witnessed the longest and most severe slowdown in productivity growth since before World War II, growing only roughly 1.3 percent or less per year, according to data from the U.S. Bureau of Economic Analysis. Some of the slowdown can be attributed to Michigan’s rapid hiring coming out of the recession — more workers in the labor force reduces productivity output if the other factors remain the same. And there’s no indication, despite technology expansion, that productivity will increase above that 1.3 percent high. Michigan fares even worse in net migration — the number of foreign and domestic people moving into the state minus the number of people leaving. The state has lost 87,519 more people than it gained 2010-2016, ranking among the worst in the country alongside New Mexico, Mississippi and West Virginia, according to the U.S. Census Bureau. The net migration in Florida and Texas was 325,986 and 217,542, respectively, in 2016 alone. Washington, North Carolina, Arizona and Colorado round out the top six in net migration. Michigan is getting older too. The median age for Michiganders was 39.7 years old in 2016, up from 36.9 years old in 2005. This comes down to massive declines in fertility rates, a national phenomenon. Women are birthing

DUSTIN WALSH dwalsh@crain.com

Population growth, or the lack thereof, is the reaper lurking in the shadows of Michigan’s future and should be the sole focus of next year’s policy conference. fewer children across the U.S. The latest data from the Centers for Disease Control and Prevention shows the fertility rates of U.S. women at 1.77 lifetime births per woman, down 16.4 percent since 2007. To put that into perspective, there were 537 fewer births in 2016 in Michigan versus 2011 and 4,463 more deaths between the same time frame. We’re quickly approaching the Rubicon where there will be more deaths than births, causing more rapid population decline. This may not seem inherently like a business problem. But it’s undeniable. Tens of thousands of jobs are currently unfilled with more coming online daily. Gov. Rick Snyder claims we’ll have a workforce shortage of more than 800,000 jobs by 2024, mostly in the fields of information technology, computer science, manufacturing, health care and professional skilled trades. Coupled with the rapidly retiring baby boomers — 10,000 a day in Michigan by some estimates — and we have an economic maelstrom.

Ask Japan. Japan’s population was estimated at approximately 126.7 million last year, down more than 230,000 from 2016, marking the seventh consecutive annual decline. By 2040, Japan’s population is estimated to fall by more than 900,000 a year and the number of older citizens, aged at least 65, is expected to peak at 40 million, according to Japan’s The Mainichi newspaper. Japan’s economic and government officials now worry the country may not be able to maintain critical governmental functions by 2038 due to increased costs and weak tax revenue thanks to diminished economic growth. Michigan is no different. While Detroit’s population decline is flattening out, and we’re all patting ourselves on the back for its comeback, Michigan’s rural communities continued to be routed by depopulation. Gone are the jobs, opportunities and people. And it’s spreading. Population loss will become an absolute critical issue for the U.S., — especially if immigration reforms reduce the number of those entering our country to work — but it presents an early opportunity for Michigan if its leaders are willing to focus on the problem. Because remember, when the U.S. economy trips, Michigan’s falls down a well. So, while political and business leaders should be commended for discussing critical, albeit obvious, issues facing this state, it’s time to look at look at the long game. Solving today’s talent crisis is a game of checkers. Solving the disastrous consequences of population decline is a multidimensional chess match. Blindfolded. The 2019 Mackinac Policy Conference should take on the big picture before other states organize around solving their population problems and reap the benefits of population gains, i.e. economic growth. Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

It is more than just plants

veryone makes the wrong assumption that economic development just means trying to get companies to hire more folks or move their factories here. Sure, that’s part of it. We spend millions in taxpayer money on all sorts of staff and incentives to attract new companies to our region. And we would have spent billions to lure Amazon. Mind you, there is nothing wrong with economic development departments. Both our city and our state have their own departments, with lots of high-priced executives.

KEITH CRAIN Editor-in-chief

But I happen to think that another job of economic development that is just as important is the one the Larry Alexander holds as head of the De-

troit Metro Convention & Visitors Bureau. Bringing people and events to town is economic development of the first order, because that’s all new money coming into our city, not just local dollars being moved around. I don’t know if the visitors bureau had anything to do with this, but we’ve got another example coming down the fairway. Soon we will have our very own PGA event at the Detroit Golf Club featuring the best golfers in the world. It will join the successful LPGA event that is held in Ann Arbor.

The golfers won’t bring in any new factories or plants. But we can be sure that they will bring into our community millions of dollars that we otherwise would never see, just like last weekend’s Detroit Grand Prix. It would appear that once again we have Dan Gilbert and his organization to thank for being the primary motivator and sponsor of this important event. When you add up all the dollars and cents that these annual events bring to Detroit’s economy, the numbers become quite huge and very im-

portant. Each and every one adds to the vitality of our community and new prosperity to our local businesses. Every year, the North American International Auto Show brings into our city more added revenue that the Super Bowl. When we have special events, we should nurture each and every one of them. Plants and permanent jobs are important, but we should not forget our annual events. Other cities would kill for them. So tee it up and enjoy our success, at least for a little while.

C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 4 , 2 0 1 8

Now’s no time to be humble in courting talent to Michigan

s the epicenter of mobility and innovation, Michigan is the vibrant, beautiful, affordable land of opportunity that can change your life and the world. But we, as a state, have a perception problem. People outside Michigan lack knowledge of our comeback and have misperceptions about our state, in almost equal measure. Michigan now finds itself in uncharted waters. A state no stranger to the economic downturn in 2000s now has an unprecedented need for talent caused by a record comeback. And not just any talent: STEAM talent, a small group of highly educated, highly sought-after individuals.

OTHER VOICES Roger Curtis

All these jobs require some sort of post-secondary education, be it a four-year degree, specialized training or credential or apprenticeship program. They’re a special breed … intrepid, adventurous, hard-working.

Thinkers, dreamers and doers who want to matter, who want their jobs to mean something other than just a paycheck. Michigan represents a unique opportunity for these young professionals. The work they do here makes a difference, and they can make that difference sooner, faster. What they do will change the world — starting right now. So now is not the time for us to sound humble. Not when you consider who we’re competing against. Silicon Valley? They’re not humble. Austin? It’s not humble — just weird. Chicago? Pittsburgh? Madison? This is our competition and humility is not

a word we associate with these places. If we want to garner our fair share of the most sought-after talent in the US to compete against places like Chicago and Silicon Valley, we need to put our confidence on display and have a little bit of swagger. Make no mistake, we’re not arrogant. Being Midwestern is part of our charm. But it’s time to put ourselves out there in some ways that are a bit unexpected and a little edgy. The work we're now doing is pushing in that direction. We address both the misperceptions and the career opportunities throughout. In some cases, the mix leans a bit more toward

overcoming barriers, in other cases it focuses more heavily on making a difference. But in all cases, we’re aiming to break through the noise, level the playing field and get Michigan on this target’s consideration set. So, whether you’re wearing a banana suit in an electrified forest all weekend or reimagining the country’s aging energy grid all week, Michigan is home to choices that change your day and the future. Learn more at ChooseMichigan. org. Roger Curtis is the director of the Michigan Talent and Economic Development Department.

TALK ON THE WEB

Re: Morouns transfer ownership of station to mystery company Everyone should take a deep breath and see what happens. Ford's involvement in the city is a good thing. But, while the movement of 200 employees into Corktown is significant, it doesn’t mean that Ford is going to make a major real estate/personnel move into the property and put another 2,000 or so people into the Michigan Central Building, although that would be great. It may turn out to be another speculative real estate deal dependent on the provision of huge public subsidies. And, there is simply not enough demand for heavy, light or anything in between rail to justify any public investment now or in the foreseeable future for new track or station facilities. Historical note: I read somewhere that Henry Ford looked at assembling land in this area in the late 1920s. Not that that matters; “History is bunk.” Robert Truman A hail marry pass by Ford in the hopes that moving into an urban environment will help to kick start its image in the minds of millennials. The Ford shareholders who questioned at the last meeting whether this project made financial sense were right to express some skepticism. Psychologically, this move would be more impactful in the minds of Detroiters than the reality in the industry right now. Marco Ramirez If this means the Morouns are out of it, it’s a great victory for the public. jungoni

Is your business prepared for drastic shifts in health care?

Enormous mergers that blur the lines among payers, middle men and providers are remaking the health care landscape. What should we expect, and what will the effects be once it’s all sorted out?

PANEL DISCUSSION: The Future of Mergers & Acquisitions

Wright Lassiter, CEO, Henry Ford Health System

Joan Budden, CEO, Priority Health

Ewa Matuszewski, CEO, Medical Network One

David Hefner, Vice President of Health Affairs, Wayne State University

Moderator: Jay Greene, Reporter, Crain’s Detroit Business

Thursday, June 21 9-11:30 a.m. Somerset Inn 2601 W. Big Beaver Individual ticket: $80 Reserved table of 10: $850 Young Professional: $56 Are you a Crain’s Detroit Member? Email us at cdbevents@crain.com to receive your individual ticket discount.

You might want to be grateful, that if not for the Morouns the building would have not been around for this renovation. It’s so easy to bash. JimJ1 Wild guess: Ford is waiting to announce deal until they have concrete plans in place as to what the train station and surrounding area will look like and be used for. I’m sure they want to make a huge splash. Can’t wait! Mike Orlandoni

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FOCUS

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HEALTH CARE

TARGET AUDIENCE

GETTY IMAGES/ISTOCKPHOTO

Health care industry uses microtargeting online technology to reach patients, customers By Jay Greene jgreene@crain.com

Hospitals, health insurers and other medical providers are moving millions of advertising and marketing dollars into getting more personal with patients. Though they are running behind other industries, they are now entering the new digital realm using the Internet-based marketing strategy best known from the successful Obama and Trump political campaigns: “microtargeting.” At core, microtargeting is based on classic marketing principles. First, know who your customers are: age, geography, education, income. Two, know what they need: information on disease or condition, procedure or product. Then invest in using social media and ad networks to identify that audience. Advertising networks such as Google and Facebook have famously amassed a repository of consumer data, demographics and browsing histories to present or send ads, videos, questionnaires, messages or other information or messages to influence customers’ thoughts, actions and most importantly, their purchases. The health care industry is catching up to other industries in using these platforms. They also are hiring digital consulting companies to redesign their websites, adding custom

“If you are a hospital and trying to reach specific patients, you absolutely can do that with digital.” Seth Myers, digital director of Standard Wonder group

Need to know

JJHealth care companies increasingly target customers using mobile technology JJAd networks like Facebook, Google come to dominate marketing JJPrivacy and tracking concerns causing

social networks to become more transparent in how they use member data

content like news organizations, identifying and targeting patients to garner appointments and new business. After only about three years of experimenting, companies based in Southeast Michigan such as Beaumont Health, St. Joseph Mercy Health System, McLaren Health Care and Blue Cross Blue Shield of Michigan are finding the Internet fertile for new and repeat customers. They also believe they are offering customers greater value and transparency by more effectively answering patient questions along with, in some cases, providing quality and pricing infor-

mation. This is despite concern recently expressed in Congress, talk shows and around water coolers that the privacy of millions of Americans is being exploited without permission and used for business profit. And those questions get even more touchy when you’re talking about people’s health. In March, news broke that 87 million Facebook users had data extracted from their accounts without their knowledge by England-based Cambridge Analytica. Cambridge has since filed for bankruptcy. Facebook has implemented new safeguards for members, and more people are double-checking their privacy and advertising settings. Google, the other major ad network, may actually be the preferred vehicle for paid digital advertising by health care organizations in Michigan. Most companies have free Facebook pages — exposing companies to Facebook’s 2.2 billion worldwide members— with customer content that links back to their websites. On the other hand, Google — with 3.5 billion daily worldwide searches — could allow health care advertisers an even greater ability than Facebook to track people and direct ads, several experts told Crain’s. Google’s search advertising system called “Adwords” picks and stores key phrases used by Internet searchers. Specific categories of Adwords can be

purchased in a bidding process by a health care organization or advertiser. For example, say someone types in “chest pain” as a search item. “Google can send a very targeted ad to that person” for a product or medical service based on a contract with a company, said Erik Gordon, a professor at the University of Michigan Ross School of Business. “Clicking on the ad can take the person to the (health care organization’s) website, directly to an ad, custom video or to an advertiser’s Facebook page. If it is chest pain, the ad can go straight to information on chest pain.” For example, Gordon said the click on chest pain can direct a person to a questionnaire of three or so questions. Depending on the answers, a patient could be asked to call 911, be directed to a hospital or given a phone number to talk with a nurse, he said. “If you are a hospital and trying to reach specific patients, you absolutely can do that with digital,” said Seth Myers, digital director of Standard Wonder group, an ad agency in Detroit. “Subject to (privacy laws), you can tell Facebook or Google that we have a patient population, male or female, and their age ranges, income level, create a look-alike audience, and Facebook and Google can match up that audience” with the company advertisements. For example, Myers said one of

Standard Wonder’s clients is Wallside Windows in Taylor. “They want to sell windows, and we help them reach the right people who are in the market for windows,” he said. “It is the same thing for hospitals. They want to go after a very specific patient. They could target them using Facebook, but maybe not the patient. It could be the family member for an elderly parent. You need a strategy to reach the right patients,” he said.

Beaumont moves to digital At Beaumont, Mark Bohen, senior vice president and chief marketing and communications officer, said the eight-hospital system also is turning to the Internet more. “Google says 5 percent of all searches are health-related. People are turning to different places to get their information, and we want to be where the consumers are looking,” he said. Customers are also more often looking on the Internet to see how hospitals and doctors are rated for quality. “More health systems are putting data on their websites. When patients come to see (doctors), they have done a search on the Internet,” Bohen said. Bohen said Beaumont began to shift advertising toward digital beginning in mid-2015. He declined to break down the percentage. “In 2016,

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C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 4 , 2 0 1 8

SPECIAL REPORT: HEALTH CARE I didn’t change much. We had learn about the business. In 2017, we started to shift a little bit more. It’s been even bigger in 2018.” But Bohen said Beaumont will never abandon traditional media. The goal of advertising and marketing is to “move people, to create awareness, engage people and get them to consider, try or come back to Beaumont.” One reason people are using online sources of information is because more consumers are viewing health care services as “shoppable,” Bohen said, mostly because high-deductible health plans are requiring higher outof-pocket payments and that means people are spending more. “Before, when people had first-dollar coverage, they didn’t think about it as much,” he said. “Now they have a lot of questions” on price, quality and choice of provider. Overall, hospitals, medical services companies and health insurers spent 27 percent fewer dollars on traditional advertising, from $40 million in 2015 to $31.4 million 2017, according to VoiceTrak Inc., an Arizona-based company that surveys media markets. Health insurers dropped the most from $17.6 million to $12.6 million; hospitals declined from $22.5 million to $18.8 million during that three-year period. An increasingly larger amount of advertising dollars is being diverted to digital with Facebook, Google and other ad networks. “Companies are spending more money in digital, but you still want to go where things are most effective. You need a mix,” Myers said.

Seth Myers: Hospitals can reach patients with digital.

Erik Gordon: Health care behind on targeted ads.

er is the episodic nature of health care. “People are not familiar with hospitals or health insurers, other than the names. Maybe they have sat in a waiting room for a friend. They have no reason to know unless something happens and they need care,” Gordon said. But health care organizations are finding that digital marketing works because of the mobile device boom and the rise of “Dr. Google.” “People are buying online and using the Internet more. (Health care organizations) are using Facebook and Google advertising in two ways. One is it can be used to remind people of their name. The second is they can do very targeted advertising,” Gordon said. Andy Hetzel, vice president of corporate communications with Blue Cross, said the state’s largest health insurer increased digital media advertising by 81 percent from 2015 to 2018. As a result, television advertising declined 53 percent, radio by 43 percent and print by 60 percent.

“Within the budget, digital is getting a significantly larger percentage and is the single largest category in the advertising budget,” Hetzel said. “I view digital media as traditional media now because people are spending a significant amount of time now on digital.” Hetzel said Blue Cross uses Facebook and LinkedIn for its brand campaign, “Confidence Comes with Every Card.” But Blue Cross doesn’t place ads on its own website. It has membership information, including coverage, where to find a doctor or hospital, health care price data and health and wellness. It places all ads and videos on TimeForMore.com. “We are connecting with our audience and business customers more by telling their stories from their perspective,” Hetzel said. “We use our own content with the paid content and targeting the audience across all channels.” Hetzel said Blue Cross buys Google search network ads occasionally for some insurance market segments of our business, including individual, small group, large group and Medicare. But Hetzel said Blue Cross doesn’t track people or use email addresses for targeting brand or segment advertising. The company tracks metrics such as time spent on websites, popular features and number of clicks, he said. “For our segment campaigns, we do retarget by using traditional digital methods — such as cookies and pixels — placed on digital properties such as BCBSM.com,” Hetzel said.

“People are not familiar with hospitals or health insurers, other than the names. Maybe they have sat in a waiting room for a friend. They have no reason to know unless something happens and they need care.” Erik Gordon, a professor at the University of Michigan Ross School of Business

“Ads are sometimes retargeted (followed up) to individuals who visit the site, especially if they arrived there after clicking a link in a digital ad.” But Hetzel said the retargeting isn’t based on health conditions, only for those who opt-in to receive health reminders through the member message center, WebMD health record portal or customer email communications.

Targeting by place Through the use of Internet “geofencing, geotargeting or geopoaching,” advertisers can track your IP address on Facebook mobile or through another GPS-enabled app, “to know where you are, unless you have restricted your privacy settings,” Gordon said.

For example, “If you are visiting Grand Rapids from Detroit and you post something, Facebook knows where you are. You may be some miles from a hospital client. Facebook can target you with an ad for that hospital,” he said. Retailers have done this for years using online technology, Gordon said. They know when you visit a city and get an advertisement for a store a block away. “If you are a woman who loves the color green, you can be pitched to go to a store with fabulous green dresses,” he said. Hetzel said Blue Cross only employs geofencing in the product side to reach consumers in specific geographies about products that are only available in select regions of Michigan. He said Blue Cross does not use geofencing to target specific venues. Szczypka said St. Joe’s has been using geofencing for the past year. For example, if a consumer is attending a sporting event in a venue that aligns to a service they offer, such as sports medicine, St. Joe’s would deliver them an ad about their sports medicine program, she said. “When you walk into a location and have a smart tablet or cell phone, an advertisement is sent to you,” she said. Myers said this is the magic of microtargeting customers online. Because of mobile apps, digital companies can track the online activities of the millions of smartphone and tablet users around the world. These online actions can then be stored into databases and analyzed to find out behavioral patterns and common influences. SEE TARGETING, PAGE 12

On digital bandwagon Kevin Tompkins, vice president of marketing with McLaren, said the 14-hospital nonprofit system works closely with consultants and ad agencies to increase direct consumer and physician advertising. Over the past three years, McLaren has spent a greater percentage of its advertising and marketing dollars on search engine optimization, website development and with digital ad agencies. It’s not just targeting patients. For example, if trend data shows primary care visits are down, McLaren will target employed doctors or those on hospital medical staffs to remind them of the system’s clinical services. Michele Szczypka, chief marketing and communications officer with St. Joseph Mercy Health System in Ann Arbor, said there is a major change going on in how marketers look to attract people. “Health care is more challenging than anywhere else,” she said. Szczypka said St. Joseph Mercy has spent about the same amount on marketing and advertising the past two years. But it has been using social media resources differently and this year is developing a digital strategy to buy directly from Google and other online advertisers, she said. “We are trying to (teach) people to learn more (about health care services) on our website,” Szczypka said. “Those ads and (information articles) are digital now.” However, St. Joseph’s still spends dollars on print ads for patients who are older and don’t constantly check their cell phone, she said. Gordon said health care organizations are behind other industries in using online advanced digital marketing and advertising. One reason may be privacy issues, he said, anoth-

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SPECIAL REPORT: HEALTH CARE TARGETING FROM PAGE 11

For example, say a patient clicks on an ad hosted by a hospital, health insurer or physician organization to seek information on a procedure, medical diagnosis or provider. The host then has specific information on that patient that can be used later to contact that patient and help them be seen about diabetes, schedule a hip or knee replacement surgery, schedule an appointment or fill out an online survey. “At that point, if it is well-designed, the advertiser will get the IP address of the person, possibly even a cookie could be left on the device,” Gordon said. “A day or two later, if the person comes back the machine will recognize them and give additional information.” But he said hospitals and other health care organizations only will be able to track specific people if they register and leave an email address. “They then can track you and send you information directly,” he said.

Digital ads growing A Facebook official who requested anonymity told Crain’s the company is selling a growing amount of advertising to the health care industry and is tightening up its privacy policies. Now, she said, health care advertisers primarily use Facebook to promote brand awareness and to com-

GETTY IMAGES/ISTOCKPHOTO

plement a specific campaign. Szczypka said St. Joe’s spends on ads to develop brand name recognition, to alert patients to specific service lines, heart, orthopedic and oncology, and teach the value of preventive medicine. “Matt Stafford (in a St. Joe’s video) talks about the way he and his wife lead a healthy lifestyle, so health and wellness is a big thing we do,” she said. Beaumont recently completed a women’s health ad campaign. It complemented last year’s “No Quit” major branding campaign that explained to people the new Beaumont Health, a 2015 merger of legacy Beaumont Health System, Oakwood Healthcare and Botsford Hospital. Susan Hanchett, Beaumont’s director of brand management, said Beaumont wants to make sure it communicates clearly with women.

“We use mostly consumers and patients, and some providers” in the voice over in commercials, she said. Over the last several years, Beaumont also has put a lot more video and infographic content on its hospital websites to further explain clinical care and treatments. Using mostly Google, but also Facebook to a smaller degree, Bohen said Beaumont’s strategy is to be high on the Google rankings for particular health care services. “We pay for clicks, then display ads on a particular content, all designed to drive people to our website,” Bohen said. “We want to make the content as engaging and helpful as we can.” For example, if a potential customer is trying to make a decision on a doctor and they have three choices, “we want to provide them the right

content,” he said. Or if someone wants to learn about cancer, they might go to Web MD and find out about proton therapy. “We will give you physicians who meet your criteria,” he said. Always at the end, Beaumont will offer an 800 phone number that patients can call to talk with a representative or enroll on a website to get a specific referral or appointment “Once they fill out a form, they opt in with a number, and we can track how many people get an appointment, in aggregate. We don’t know the names of patients,” Bohen said. “We are seeing an increase in people who fill out forms and make appointments.”

Changes in social media privacy policies? Gordon said the fallout from the Facebook privacy controversy is that the digital platforms will have to be more transparent and clearer in what they are doing and how they are using data. “I don’t believe it will result in less effective advertising because it is not a mass movement,” Gordon said. “People are irritated but won’t make the effort to make their privacy settings more restrictive. You will see some people opting out, but not a lot, maybe 20 percent.” In the future, digital marketers and advertisers are expected to use artificial intelligence technology to more effectively target people based on their

“We pay for clicks, then display ads on a particular content, all designed to drive people to our website. We want to make the content as engaging and helpful as we can.” Mark Bohen, senior vice president and chief marketing and communications officer, Beaumont

preferences and needs, leading to a better experience for consumers and greater revenue for sellers, said a report from Ubex, a global digital ad exchange firm. While 78 percent of consumers prefer personalized ads, only 28 percent believe that is effectively done, according to the Adobe Digital Insights Advertising Demand Report. “Hospitals are laggards in using digital marketing,” Gordon said. “Even after the Facebook uproar, hospitals could use digital tools to target informative ads to people who have searched particular symptoms and who can be identified as being in the hospital’s service area. That would be more effective and efficient for hospitals than putting up billboards on a freeway, and it would be more helpful to prospective patients.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

Notable Women in IT/Tech are on the front lines of cutting-edge technology development in Michigan. They protect network systems from ever-present cyber threats. They mentor and recruit other women in the technology field and put community service

above all else. Crain Content Studio, the marketing storytelling arm of Crain’s Detroit Business, will name the 2018 Notable Women in IT/Tech in a special section on August 12. In that report, we’ll profile women in the information technology industry who are considered leaders in their workplaces and in the community.

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C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 4 , 2 0 1 8

Destroyed fencing separating the freeway from Chandler Park Golf Course on Detroit’s east side is targeted for repair as part of the city’s $2.5 million improvement plan for its golf courses. Fencing around the course was recently repaired and cleared on the neighborhood side to increase its visibility to the community. KURT NAGL/CRAIN’S DETROIT BUSINESS

Detroit to invest $2.5M in golf courses as future uncertain By Kurt Nagl knagl@crain.com

The city of Detroit is planning to invest $2.5 million in its three golf courses over the next two years amid a legal battle with its previous contractor and uncertainty over the fate of the courses. Sorely needed capital improvements at Rouge Park, Chandler Park and Rackham golf courses would be the largest city course investment made in several years. It would include the basics: fixing the fencing, repairing drainage, patching up cart paths and sidewalks, getting the bathrooms functioning, etc., said Brad Dick, director of the city’s General Services department. As for Palmer Park, the city is throwing in the towel at the north end course, which opened in 1927, following years of neglect and revenue declines. It was open briefly as a ninehole course after overgrowth claimed the back side, and there were talks of turning it into a driving range. At this point, the city is planning to just maintain it as a recreation space. “It hasn’t made money in quite some time, and we didn’t think it was worth investing money into it,” Dick said. “We’re post-bankruptcy and looking to be fiscally responsible.” Rackham’s future is unclear. The popular course, sprawled across land in Huntington Woods and Royal Oak near the Detroit Zoo, is the prized asset and revenue driver among the courses. Mayor Mike Duggan wants it sold, but such a move faces much opposition from City Council and many residents. For now, “the city doesn’t have an offer on it, and it’s not for sale,” Dick said. In March, it was unclear if the courses would even open. The city eventually approved a new two-year contract with North Carolina-based Signet Golf Associates II, ending eight years of management by Oakland Township-based Vargo Golf Co. Vargo called the bid process a sham and expressed doubt over Signet’s ability to run the courses. Vargo and the city of Detroit are now engaged in a legal dispute stemming from the contract loss. The city

Improvements to the clubhouse at Rackham Golf Course are planned as part of the city’s $2.5 million investment plan for its golf courses.

Need to know

JJCity to make largest capital improvements in several years JJFree community outreach events planned for June JJPrevious manager Vargo and the city engaged in legal dispute after contract change

filed a complaint last month with 3rd Circuit Court in Wayne County, alleging that after Vargo’s contract ended, the company took city property from the courses, including tee signs, irrigation systems, ball washers, bag racks, range mats and balls and wooden doors. It also claims Vargo is on the hook for outstanding electricity and property maintenance bills and that it took proceeds from the city by selling season passes for the 2018-19 season and taking revenue for its personal use, according to the complaint. A judge earlier this month ordered Vargo to return tee signs and irrigation systems — including lines, keys, radios and as-builts — from the courses as well as wooden doors from Rackham.

If the city does not prove it owns the property, a judgment will be entered in favor of Vargo, according to the order. Robert Vargo, owner of Vargo Golf Co., said he turned over tee signs to the city two weeks ago but that he owns the items after buying them from the previous management company. “We’ll be back in court,” Vargo said. “I’m not gonna be bullied by the city.” Dick said any delay to the start of the golf season was due more to unseasonable weather than management complexities. With warmer weather attracting patrons, and league play in full swing, many golfers are feeling the absence of an important amenity at Rouge and Chandler: alcohol. Vargo took the liquor license when it left and Signet is in the process of getting approval to sell alcohol at the courses. Dick said it hopes to receive the license in early to mid-June. It’s another headache for cashstrapped courses struggling to keep a customer base that has been steadily shrinking. As a general indication, the

number of players nationwide dropped from 30 million in 2002 to just less than 21 million in 2016, according to golf business analysis firm Pellucid Corp. Under a deal cut with Vargo, Detroit saw just $46,000 in revenue from the courses in 2016 after the city settled a $442,000 water bill with the course manager. Revenue was $104,000 in 2015. Vargo had paid the city a rental fee to operate the courses, kept nearly all the revenue and was responsible for investing in and maintaining the courses under its contract. In its twoyear contract with Signet, the city pays the management company $90,000 a year and 20 percent of course revenue above a baseline budget amount, Dick said. The city is responsible for investing in the courses. While the city’s plan to funnel money into the courses — a move requiring City Council approval, which could come in the next couple weeks — is a promising sign for the courses’ future, it falls short of what is needed. A study conducted by the National Golf Association found they require

$15 million in improvements. As for this season, goals are centered on engaging the neighborhoods and making small improvements to enhance the playability of the courses, said John Wait, president of Georgia-based Sirius Golf Advisors, which is working with Signet to run the courses. Among improvements planned for this season are implementing a resident rate at courses, expanding the First Tee program, introducing programs for junior golfers and golfers with disabilities, offering free or lowcost club rentals and reducing the cost barriers to the game, Wait said in an open letter leading up to City Council’s vote on the course management contract. The group is also aiming to market the courses more uniformly under the brand Golf Detroit. Signet also won earlier this year the contract to manage Belle Isle’s golf complex for the state, which operates the park. The driving range and shortgame practice area are open, but the short course is still closed as crews work to get it up to snuff, Wait said, adding that it should be open for play in about three weeks. In partnership with the city and Chandler Park Conservancy, the city’s courses are hosting Putt, Chip & Drive kickoff events that will include food and entertainment. The first event takes place 11 a.m.-3 p.m. Saturday at Chandler Park Golf Course; the second is June 9 during the same time at Rouge Park Golf Course. It is free for golfers and nongolfers and will include a petting zoo, pony rides, entertainment, games and food trucks. There will also be a chance to win $10,000 in a golf simulator hole-inone competition and $28,000 worth of prizes in other games. “What we are trying to do is reach out to more demographics — women and minorities have long been ignored by the golf industry,” Wait said. “We feel that is part of the responsibility of a municipally-owned facility, is to look beyond yourself and reach out to the community.” Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl

C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 4 , 2 0 1 8

CRAIN'S LIST: LARGEST MICHIGAN HOSPITAL COMPANIES

Ranked by 2017 net patient revenue Company Address Rank Phone; website

2 3 4 5

Top executive(s)

Number Full-time Net patient Total net Uncompensated Licensedof equivalent Number of revenue revenue care bed employed Michigan hospitals/ $000,000) ($000,000) ($000,000) capacity/ physicians employees ambulatory 2017/2016 2017/2016 2017 occupancy Jan. 2018 Jan. 2017 facilities Major facilities

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

John Fox president and CEO

$4,173.9 $4,145.3

$4,438.6 $4,373.1

$92.9

3,429 67.6%

913

28,038

8 187

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

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

Joseph Cacchione, M.D. B interim ministry market executive

3,615.2 3,469.9

3,841.1 NA

236.0

3,678 55.9

5,719

26,222

15 NA

3,275.0 3,800.0

NA 5,703.3 C

443.0

NA NA

1,721

25,514

NA NA

St. John Hospital & Medical Center, Providence and Providence Park Hospital, St. John Macomb-Oakland Hospital, St. John River District Hospital, Brighton Center for Recovery, Borgess Medical Center, BorgessPipp Hospital, Borgess-Lee Memorial Hospital, Genesys Regional Medical Center, St. Mary’s of Michigan, St. Mary’s of Michigan Standish and St. Joseph Health System, Crittenton Hospital Medical Center Henry Ford Hospital and its campuses: Macomb, West Bloomfield Township, Wyandotte and Kingswood and Henry Ford Allegiance

3,250.7 D 17,627.8 E 3,102.0 D 16,339.0 F

46.8

2,361 G 61.0 G

23,063

8 10

Saint Joseph Mercy Health System and its campuses in Ann Arbor, Chelsea, Oakland and Livonia. Mercy Health Muskegon and its campuses: General, Hackley, Lakeshore, Lakes Village, Mercy.

Wright Lassiter III Henry Ford Health System president and 1 Ford Place, Detroit 48202 (800) 436-7936; www.henryford.com CEO Richard Gilfillan Trinity Health 20555 Victor Parkway, Livonia 48152 CEO (734) 343-1000; www.trinityhealth.org Marschall Runge Michigan Medicine (formerly EVP for medical University of Michigan Health affairs System) 1500 E. Medical Center Drive, Ann Arbor 48109; (734) 936-4000; www.med.umich.edu Philip Incarnati McLaren Health Care Corp. One McLaren Parkway, Grand Blanc president and CEO 48439 (810) 342-1100; www.mclaren.org

3,070.0 2,846.9

3,297.9 3,066.9

104.9

1,043 86.2

17,054

1 40

University Hospital, C.S. Mott Children's Hospital, Women's Hospital, UM Cancer Center, UM Cardiovascular Center, UM Depression Center, Kellogg Eye Center

2,777.3 H 2,696.4

3,828.7 H 3,710.5

NA NA

22,850

NA NA

2,291.5 2,323.4

5,681.2 5,220.5

333.4

1,630 56.9

885

21,480

12 180

1,850.0 I 1,832.1

NA 1,937.8

NA NA

10,153

NA NA

Bay Region, Bay Special Care, Central Michigan, Greater Lansing, Orthopedic Hospital, Lapeer Region, Clarkston, Flint, Macomb, Oakland, Northern Michigan, Northern Michigan Cheboygan, Proton Therapy Center, Port Huron, Karmanos Cancer Institute, McLaren Home Care, McLaren Medical Group Spectrum Health hospitals: Butterworth, Blodgett, Reed City, United, Kelsey, Special Care, Gerber Memorial, Zeeland Community, Helen DeVos Children's, Big Rapids, Ludington, Pennock, Lemmen-Holton Cancer Pavilion, Meijer Heart Center, Tamarac Medical Wellness and Fitness Center, Wheatlake Cancer Center Children's Hospital of Michigan, Detroit; Children's Hospital of Michigan, Troy; Detroit Receiving Hospital; Harper University Hospital; Hutzel Women's Hospital; Cardiovascular Institute; Rehabilitation Institute of Michigan; Sinai-Grace Hospital; Huron Valley Sinai Hospital. Sparrow Hospital, Sparrow Carson Hospital, Sparrow Ionia Hospital, Sparrow Clinton Hospital, Sparrow Specialty Hospital

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

Richard Breon president and CEO

Detroit Medical Center 3990 John R, Detroit 48201 (313) 745-5146; www.dmc.org

Anthony Tedeschi CEO

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

Dennis Swan president and CEO

988.2 1,027.2

1,259.2 1,286.3

7.7

820 66.5

365

6,942

5 83

Diane PostlerSlattery president and CEO

762.4 649.7

NA NA

39.2

630 40.0

308

5,954

MidMichigan Health 4005 Orchard Drive, Midland 48670 (989) 839-3000; www.midmichigan.org

5 30

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

Ed Bruff president and CEO

604.1 591.6

NA NA

193

3,796

1 NA

Covenant HealthCare

Covenant HealthCare 1447 N. Harrison, Saginaw 48602 (989) 583-0000; www.covenanthealthcare.com Lakeland Health 1234 Napier Ave., St. Joseph 49085 (269) 983-8300; www.lakelandhealth.org

Loren Hamel, M.D., president and CEO

463.1 490.4

NA 502.0

17.6

361 NA

491

4,160

3 NA

414.8 J 422.1

NA 422.1

NA NA

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

348.0 K 277.5 L

NA NA

4.5

178 NA

NA NA

233.0 228.5

NA 228.0

NA NA

1 45

8 9

12 13 14 15

Melany Gavulic Hurley Medical Center president and 1 Hurley Plaza, Flint 48503 (810) 262-9000; www.hurleymc.com CEO Michael Faas Metro Health president and 5900 Byron Center Ave. SW, CEO Wyoming 49519; (616) 252-7200; www.metrohealth.net Holland Hospital 602 Michigan Ave., Holland 49423 (616) 392-5141; www.hollandhospital.org

Dale Sowders president and CEO

Metro Health Southwest; Rockford; Cascade; Community Clinic; Sports Medicine; Internal Medicine; MidTowne Ambulatory Surgery Center; Metro Health Park East; and The Cancer Center at Metro Health Village Holland Hospital

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

B Succeeded Gwen MacKenzie, who resigned on April 30. C From 2016 audited financial statement. D Michigan only. E Revenue is for entire Trinity Health System with 93 hospitals and 104,000 FTEs. F Revenue is for entire Trinity Health System with 93 hospitals and 97,000 FTEs. G As of 2017. H From annual report year ending in September 2017. I Crain's estimate. J From financial report year ending in June 30, 2017. K From Medicare report ending in June 30, 2016. L From Medicare report ending in June 30, 2015.

C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 4 , 2 0 1 8

CALENDAR THURSDAY, JUNE 7 Why Business Value Matters. 8-10:00 a.m. RAM Financial Services. Learn about business valuation methods and techniques, the benefits of knowing the value of a business and the importance of a current and accurate buy-sell agreement. $40. Skyline Club. Southfield. Contact: Marcella Evans, phone: (248) 4254588; email: marcella@ramfinancialservices.com; website: ramfinancialservices.com The Patient is Waiting. . . For a Dose of Disruption. 11:30 a.m.-1:30 p.m. Detroit Economic Club. Dave Ricks, chairman and CEO, Eli Lilly and Company, talks about unleashing technology and the change it causes on health care. Westin Book CaDave Ricks dillac. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org Conversation with Leaders. 5:30-7 p.m. Walsh College. Alex Drost, Winston Goan and Matt Alessi from Cascade Partners discuss what it takes to be a competitive applicant for new

positions, how to grow within a company, starting a career and making drastic career changes. Free. Walsh College, Troy. Contact: Heather Swarthout, phone: (248) 823-1280; email: hswartho@walshcollege.edu; website: info.walshcollege.edu/conversation-with-leaders-cascade

FRIDAY, JUNE 8 Customer Journey Mapping. 9 a.m.-5 p.m. Lawrence Technological University. Marc Bolick, managing partner of Design Thinkers Group USA, and Terri Burch, DTG’s Detroit-based service designer, will facilitate the course. Bolick and Birch have prepared challenges and customer personas that they will use in their training in the customer journey – the interaction of the customer with the product or service offering. $495. LTU, Southfield. Contact: Matt Roush, phone: (248) 204-2210; email: mroush@ltu.edu; website: ltucollaboratory.com/events/1-day-customer-journey-mapping/

UPCOMING EVENTS Networking Roundtable: Connect, Network & Build. 6:30-8:30 p.m. June 12. Roundtable is designed to discuss business and business growth. Hosted by Angelita Thomas, connection coach. Free. Chase Great Enterprises, Eastpointe. Contact: An-

Are you a part of Grow Detroit’s Young Talent?

gdyt.org 313-300-5701 #GDYTGrind

gelita Thomas, phone: (248) 6314341; email: angelitathecoach@ gmail.com; website: networkingroundtable.eventbrite.com

security will change interactions with the world. Ford Field. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org

Meet the Buyers: A Procurement Matchmaking Event. 9 a.m.-2 p.m. June 13. Schoolcraft College. Meet with procurement professionals from federal, state and local governments. Designed to help small businesses begin or expand their business with government agencies. Meet buyers, understand buying requirements, learn how to get into the buying system. $65. VisTaTech Center, Schoolcraft College. Contact: Shannon Wilson, phone: (734) 462-4438; email: ptac@ schoolcraft.edu; website: www.schoolcraft.edu/college-events/2018/06/13/ college-events/meet-the-buyers-2018

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

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) Mike Rogers national security problems, and how technology and

2018 Women’s Business Enterprise National Council National Conference & Business Fair. June 19-21. Great Lakes Women’s Business Council. “Discover the Difference,” is an event for Michigan’s women business owners to meet with corporate purchasing representatives of national and international corporations. Cobo Center. Passes range from $200-$1,050. Contact: Robin Kinnie, phone: (734) 838-3862; email: rkinnie@greatlakeswbc.org; website: wbenc.org Is Overtime Overtaking Your Business. 8:30-10:30 a.m. June 20. Michigan Manufacturing Technology Center. Learn how manufacturing

companies can get back on track and on schedule, while still keeping up with demand in a strategic planning workshop. Free. Michigan Manufacturing Technology Center, Plymouth. Contact: Theresa Gaston, phone: (734) 451-4208; email: inquiry@the-center. org; website: the-center.org Five Steps to Networking Mastery. 9-11:30 a.m. June 20. Oakland County Department of Economic Development & Community Affairs. Learn why networking works, how to be ready to network anywhere, which online sites are worth it, how to identify the ideal referral partners, the components of a solid ask and how to grow a business. Speaker: Terry Bean, founder, Networked Inc. and Motor City Connect. $40. Oakland County Executive Office Building Conference Center, Waterford. Phone: (248) 858-0783. Email: smallbusiness@oakgov.com; website: eventbrite.com/e/five-steps-to-networking-mastery-june-20-registration-40886205742 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. More Calendar items can be found at crainsdetroit.com/events.

Since 2015, Metro Detroit companies large and small have provided summer jobs for thousands of Detroit youth through the ‘Grow Detroit’s Young Talent’ program. This year, GDYT will find summer employment opportunities for 8,000 Detroit Youth. If you want to help develop the next generation of Detroit talent, we want to hear from you. Call Mel Polk on 313-300-5701, email mpolk@detempsol.org or visit GDYT.org for more information.

We are looking forward to GDYT 2018, and so are many of the small businesses we work with.

GDYT has provided an amazing experience for Southwest Detroit Youth and has had a positive impact on our community.

– Camille Walker-Banks Goldman Sachs 10,000 Small Businesses

– Linzie Venegas Vice President, Ideal Group

C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 4 , 2 0 1 8

DEALS & DETAILS ACQUISITIONS & MERGERS

and manufacturer of components, modules and systems for the automotive, commercial vehicle, motorcycle, agricultural and off-highway vehicle markets, will be moving its Suzhou, China, location to a larger facility in Suzhou, to expand its operations. Website: Stoneridge. com

Faurecia, Auburn Hills, an automotive technology supplier, has invested in Promethient, Traverse City, maker of Thermavance, a climate control technology that is adaptable for multiple vehicle thermal use cases. Websites: faurecia. com, thermavance.com J

J Better Mortgage Corp., New York, N.Y., a digital mortgage company, has expanded its service to Michigan. Website: Better.com

CONTRACTS J Huntington Technology Inc., Southfield, provider of business and technology solutions for small/midsized companies, has a partnership with Datto Inc., Norwalk, Conn., provider of data protection for businesses. Websites: huntingtontechnology.com, datto.com

JOINT VENTURES J The University of Michigan, Ann Arbor, and Shanghai Jiao Tong University, Shanghai, China, have dedicated a new building, U-M-SJTU Joint Institute Long Bin Building, and signed another 10-year agreement to continue support of a joint institute in China. The new agreement will foster collaborations in international education and faculty development. Websites: umich.edu, en.sjtu.edu.cn

J Swift Biosciences Inc., Ann Arbor, developer of molecular biology technology for genome research, and Genomenon Inc., Ann Arbor, a genomic search engine company, have a partnership to design targeted gene sequencing panels. Websites: swiftbiosci.com, genomenon. com

NEW SERVICES J Domino’s Pizza Inc., Ann Arbor, a pizza company, is giving customers the chance to submit recommendations for Domino’s Hotspot delivery locations across the U.S. More than 150,000 Domino’s Hotspots were launched in April, such as dog parks, beaches and sports fields, for pizza delivery. Website: dominos.com

EXPANSIONS Lakehouse Studios, Brighton, a digital media and design agency, has expanded into larger quarters at its current location at 32751 Franklin Road, Franklin. The location now offers a video production space. Website: lhs-dmg.com J

Submit Deals & Details items to cdbdepartments@crain.com

Stoneridge Inc., Novi, designer

PEOPLE FINANCE J Dan Mirabella to financial adviser, managing director and branch manager, Robert W. Baird & Co. Inc., Ann Arbor, from financial adviser, Wells Fargo & Co., Ann Arbor. Also joining Baird from financial adviser positions at Wells Fargo, John Mathey to financial adviser, managing director; Karla Olson-Bellfi to financial adviser, managing director; Thai-Vi Pham to financial adviser, vice president; and Omer Bellfi to associate financial adviser, vice president. J Laura Kirchner to senior vice president of marketing strategy and innovation, TMS, Bingham Farms, from managing director of client services, Perficient Inc., Ann Arbor.

LAW J Erica Klein to shareholder, Brooks Kushman PC, Southfield, from shareholder, Kramer Levin Naftalis & Frankel LLP, New York City. J Julianne Cassin Sharp to principal, Miller Canfield PLC, Detroit, from partner, Jaffe Raitt Heuer & Weiss PC, Southfield.

RETAIL J Janet Ries to vice president of marketing, Carhartt Inc., Dearborn, from vice president of global marketing, Rockport Shoes, Newton, Mass.

To submit news of your new hires or promotions to People, go to crainsdetroit.com/peoplesubmit and fill out the online form.

ADVERTISING SECTION www.crainsdetroit.com/onthemove To place your listing or for more information, please call Debora Stein at (917) 226-5470 or email: dstein@crain.com

REAL ESTATE Craig P. Willian Vice President of Retail Development

The Platform The Platform LLC is proud to announce Craig Willian has joined its team as vice president of retail development. The Platform is a real estate development company specializing in residential and mixed-use properties in Detroit. He brings more than 20 years of retail acquisition and development experience and will help grow The Platform’s mixed-use portfolio. Craig says he joined The Platform team because of its focus on the city’s neighborhoods and dedication to helping Detroit thrive.

AUTOMOTIVE Patrick Paige Chief Executive Officer

HDT Automotive Solutions Patrick will lead HDT, the world’s leading supplier of fluidhandling systems and precision aluminum parts. The company employs more than 4,000 people at ten manufacturing facilities across the US, Canada, Mexico, Italy, UK, Poland, Hungary and China and serves the North American, European and Asian automotive markets. Headquartered in Michigan, it has a diverse array of products, new materials capabilities, a worldwide manufacturing footprint, and a wellbalanced customer base.

KNOW SOMEONE ON THE MOVE? For more information or questions regarding advertising in this section, please call Debora Stein at (917) 226-5470 or email: dstein@crain.com

SPOTLIGHT City of Detroit promotes Jemison

Detroit Mayor Mike Duggan has given the city’s housing and revitalization director a larger portfolio of municipal agencies to lead. Duggan has appointed Arthur Jemison to a group exArthur Jemison ecutive role as chief of services and infrastructure, a newly created position in which he’ll oversee the city’s health, fire, building safety, housing and public lighting departments as well as the general services department, which includes the parks and recreation division. The Detroit Land Bank Authority and Coleman A. Young International Airport also will fall under Jemison’s direction as part of a recent reorganization Duggan has made of the top management ranks. Jemison said the departments he will manage are interconnected in economic and housing redevelopment in the city.

McLaren Oakland gets new CFO

McLaren Oakland has found a new finance chief in former Detroit Medical Center executive Lynn Marcotte. The new CFO started in her role in May, the Pontiac hospital announced last week. Marcotte Lynn Marcotte was with the DMC for nearly a decade before departing as vice president of financial planning and budget. Marcotte has more than two dozen years of experience in the field. She will be tasked with improving the financial performance of McLaren Oakland.

Detroit Historical Society names CEO

Robert Bury, the outgoing head of the Detroit Historical Museum, introduced his successor last week during the opening reception of the 2018 Mackinac Policy Conference on Mackinac Island. Elana Sullivan, 49, who Elana Sullivan most recently served as chief advancement officer of Detroit Country Day School in Beverly Hills, will join the Detroit Historical Society and museum July 9 as executive director and CEO. She takes on oversight of the Detroit Historical Museum in Midtown, the Dossin Great Lakes Museum on Belle Isle and the Collections Resource Center, home to the city’s collection of more than 250,000 historic artifacts.

EPA, Morouns reach tentative deal to clean up McLouth site By Chad Livengood clivengood@crain.com

The U.S. Environmental Protection Agency has reached a tentative agreement with billionaire Manuel “Matty” Moroun’s real estate development company to clean up the polluted former McLouth steel plant site in Trenton along the Detroit River. The Wayne County Land Bank’s board has granted Moroun’s Warren-based Crown Enterprises Inc. a 120-day extension to continue negotiating a deal that could make the mammoth 180-acre former McLouth Steel Products Corp. facility a Superfund site. “This is a big win,” Crown Enterprises President Michael Samhat said. “This is going to be a Superfund site that’s not goNeed ing to sit and lanto know guish.” JJEPA, Morouns In September, have tentative deal Wayne County to clean up began the proMcLouth steel cess of selling the plant site McLouth site for $4 million to the JJSuperfund Moroun family to cleanup cost cover the cost of estimates range from $40 million to unpaid property taxes dating back $100 million to 2006. The forJJMoroun mer McLouth company granted Steel Products 120-day extension Corp. property to finish negotiahas sat vacant tions since 1996 and has become an eyesore in the Downriver community of Trenton. The 120-day extension is the third extension the county has granted Crown Enterprises to negotiate a deal with the EPA. Estimates for cleaning up the polluted site range from $40 million to $100 million. If the EPA grants the site Superfund status, Crown Enterprises has said it will begin abating the existing buildings of contaminants and demolishing the 1 million-square-foot main structure of the shuttered steel plant. Samhat has estimated the demolition alone could cost upwards of $6 million. Moroun’s Crown Enterprises owns a 76-acre site abutting the McLouth Steel site. The company has said the combined sites could be redeveloped into a multimodal logistics hub, a cluster of manufacturing plants, a finished car shipping center for multiple brands or even an auto assembly plant. The EPA informed Wayne County officials of the tentative agreement with Crown Enterprises in a May 23 letter. “Though we expect review of the settlement will be identified as a priority, securing approval from upper management is likely to take several weeks,” EPA Associate Regional Counsel Steven P. Kaiser wrote in the letter. “We are confident that, subject to public comment, we can finalize the settlement within the next 120 days.” The negotiations for cleaning up the site also involve the Michigan Department of Environmental Quality and the U.S. Department of Justice.

CRAIN’S DETRO I T ’SBDUETROIT S I NBEUSINESS S S // J U N E 4 , 2 0 1 8 CRAIN

Page 2

SOCCER

Detroit’s MLS bid and DCFC ownership say only polite things about each other, but Mann said its business strategy is to operate as if an expansion team will happen. Detroit City FC, which plays in U.S. Soccer’s fourth tier, intends to turn fully professional next year, possibly in a new league. It will be viewed as direct competition to a Detroit MLS team, Szymanski said. An acknowledged Detroit City fan, Szymanski said he believes DCFC could co-exist with an MLS team downtown only if Major League Soccer adopted Europe’s system of the best and worst teams being promoted or relegated to upper and lower

divisions of soccer. MLS opposes the pro-rel model, and Szymanski said he believes the league would want to put Detroit City out of business to monopolize the market. “If you look at the rest of the world, having two rival teams in the same city is a recipe for success,” Szymanski said. “That really works in the soccer world. But the (MLS) business model is so out of kilter with rest of world, it’s difficult to be sure (if co-existence could work here). A city the size of Detroit in Europe would have at least two teams, maybe three, four or five teams.” Unlike other U.S. pro sports leagues, MLS is a single-entity business, meaning the league owns all teams and all players are its employees rather than employed by the club. MLS pays the players. Team “owners” pay an investment fee to MLS for the right to operate a team in a geographic area. They become league shareholders rather than franchise owners in a league that has publicly acknowledged it remains unprofitable. Teams keep their own books and budgets. Spokesman Dan Courtemanche told Crain’s “all MLS clubs would likely be profitable if owners were not spending above the salary budget.” The league’s current salary cap is $4 million per club, but rules allow teams to exceed that ceiling to target marquee players in a bid to make the game more attractive to fans. Every team is above the cap, per salary tracking site Spotrac.com. Toronto FC leads at $25.2 million in payroll this season. Nashville's and Cincinnati’s own-

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“In many ways, they have come together to retrofit Ford Field, which could make it very MLS-ready; and they can talk about what those ideas might be, but they were really front runners when they were looking at the jail site,” Garber said in comments provided by MLS. The Gores-Gilbert bid on Nov. 2 announced it intended to use 64,500seat Ford Field rather than build a 24,000-seat soccer venue and provided conceptual illustrations of the NFL stadium reconfigured with blockedoff upper-deck seating to make a more intimate setting for soccer crowds. The bid insists Ford Field meets all of MLS’ needs and is in the best location for fans to enjoy the revitalized downtown; although, the jail site is only about a block away. The change also brought aboard the wealthy Ford family, owners of the Detroit Lions. MLS, despite its frosty reception to the venue switch, still made Detroit one of the expansion finalists on Nov. 29 along with Nashville, Cincinnati and Sacramento. That may be because MLS, which has yet to turn a profit since its 1996 launch, could use what three deep-pocket veteran pro-sports team owners bring, their expertise, wealth and business connections. Gilbert is chairman of Quicken Loans Inc. in Detroit and owns the Cleveland Cavaliers, which are now in the NBA Finals for the fourth straight year; Gores, a private equity investor, owns the Detroit Pistons; and Ford, who inherited the Lions when her husband died in 2014, is a major shareholder in Ford Motor Co. So, Detroit’s bid isn’t dead, but it is definitely on life support. MLS intends to add two more markets in the future but hasn’t announced a timeline or process. The Detroit bid remains in talks with MLS and appears interested in trying for one of those final two spots.

“A must-have market” One soccer insider believes Detroit will get a team because it’s in Major League Soccer’s best interest. “I think Detroit is more or less a must-have market for MLS. It’s such a big national market. Detroit is a much more lucrative market for MLS than Cincinnati will ever be,” said Stefan Szymanski, a University of Michigan sports professor who’s published several soccer economics books. Szymanski, a longtime critic of Major League Soccer’s business model, said the league could also cave on the stadium issue. Or MLS could agree to allow Detroit to use Ford Field for some years to test long-term fan and corporate interest before a soccer stadium is built downtown. “Committing to a soccer-specific stadium would push the bid over the line,” he said. Another question that Szymanski said looms over Detroit’s MLS bid is the presence of semi-pro soccer club Detroit City FC in Hamtramck, where it commands crowds of 5,000-plus for home matches. A cadre of its most zealous fans, known as the Northern Guard, actively and often profanely oppose MLS and any expansion to Detroit, which is perceived as a threat to their home-grown effort.

Expansion criteria MLS executives have said their pri-

Detroit’s bid insists Ford Field meets all of MLS’ needs and is in the best location for fans to enjoy the revitalized downtown.

Cities MLS added over the past three years JJOrlando City SC (2015) JJNew York City FC (2015) JJMinnesota United FC (2017) JJAtlanta United FC (2017) JJLos Angeles FC (2018) JJCincinnati (2019) JJMiami (2020) JJNashville (TBD)

mary criteria for expansion are wealthy and soccer-passionate ownership, the stadium plan and the market’s financial capacity — corporate ability and willingness — to support a team. A market’s historic support for soccer also is a factor. For MLS, Cincinnati and Nashville checked those boxes. Detroit did not. Detroit City FC CEO Sean Mann, who has been in conversations with the Detroit MLS effort since it began, said he noticed the disparity in the Cincinnati and Detroit bids. “(Cincinnati) had a public-facing component to it. Gilbert-Gores has been much more reserved and hasn’t been doing the rallies,” Mann said. “That being said, it’s been hard for them to get any kind of buy-in from the public without a public outreach component to it.” The Queen City had a built-in advantage over Motown because the expansion effort already-established and popular soccer team FC Cincinnati led the effort. The billionaire Linder family, whose fortune stems from insurance and a dairy store chain, owns the FC Cincinnati team and led the MLS expansion effort. Cincinnati’s formal announcement, held at a brewery in the Over-theRhine neighborhood near where the stadium will be built, was packed with zealous fans festooned in FC Cincinnati’s blue and white livery and holding aloft soccer scarves while belting the club’s songs and chants. Their club, launched in 2015 in the second division United Soccer League, averages 20,000-plus a match and has beaten MLS teams in tournament play. Detroit has none of that fan support. At least its MLS bid doesn’t. MLS has acknowledged it was impressed by the region attracting record-setting crowds to the International Champions Cup exhibition soccer tournament matches at Michigan Stadium in 2014 and 2016 and another crowd of 40,000-plus at Comerica Park last year. Proponents point to those crowds as potential evidence of a larger fan base for MLS to draw upon regionally.

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MLS announced its four-city expansion plans in 2015, and the Gores-Gilbert effort unveiled its intent to pursue a team in early 2016. Detroit was among four finalists from a pool of 12 cities that submitted bids in January 2017. Other cities that submitted bids in 2017: J St. Louis J Tampa Bay/St. Petersburg, Fla. J San Antonio J Raleigh, N.C. J Charlotte, N.C. J Indianapolis J Phoenix, Ariz. J San Diego MLS previously said the two finalist cities that failed to land a team in this round would automatically rejoin those eight markets. The 10 cities would then be the core markets for the next round of expansion to bring MLS to 28 teams by 2022. However, it’s unclear if new cities could be added or if markets will drop out. Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

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C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 4 , 2 0 1 8

CORKTOWN FROM PAGE 3

“The second floor up, there is not very much square footage; the floor plates are pretty small and they are actually in remarkably good shape. The perception that this building is a disaster really is not true. Other than that concourse, where there is a lot of historic decay, but the upper floors are really quite sound.” A Ford redevelopment of the train station, which opened in 1914, would likely trigger aftershocks in Detroit’s oldest neighborhood, with upward pressure put on real estate values and increased demand for restaurants and new housing.

2067 Rosa Parks in the Corktown neighborhood is among the possible properties for a Ford campus. LARRY PEPLIN FOR CRAIN’S

The area has already been a hotbed of real estate activity, with hundreds of residential units planned by Detroit businessman Anthony Soave and developer Eric Larson. Construction is underway on Soave’s Elton Park project and Larson’s development on the site of the former Tiger Stadium. “I think they realized Detroit is the place they are going to attract the most talent,” said Jim Ketai, CEO and co-founder of Dan Gilbert’s Bedrock LLC real estate development, management and leasing company that owns more than 90 properties in and around downtown. “I think it’s great.” Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

Corktown businesses fortify as expectations mount By Annalise Frank afrank@crain.com

PJ Ryder might just slap a “ridiculous price” on the building that houses his longtime Corktown watering hole, PJ’s Lager House. The 64-year-old with the white ponytail has been running the bar and music venue for more than a decade and has watched as the city’s oldest neighborhood slowly fills with restaurants and bars. Now, the air of expectation is growing thicker as assessed real estate prices are expected to rise based on the prospect of Ford Motor Co. purchasing the dilapidated Michigan Central Station, located west of downtown Detroit. Such an investment would have huge ramifications for the neighborhood’s residents, developers and, ultimately, commercial tenants, Crain’s has reported. Ryder didn’t just start considering selling his 4,800-square-foot building and retiring, and he isn't sure if or when it would happen. But recent buzz surrounding Ford’s reported pursuit of a deal to buy and redevelop the train depot ticked up the price in his head from around $1.3 million to $2 million. “I truly believe it’s going to be a boon to the area,” he said. “People are making moves because of the nature of the values.” Ryan Cooley, owner of Corktown-based O’Connor Real Estate, said the neighborhood is at least a year out from seeing a substantial influx of retail. Building owners are getting offers even when they’re not trying to sell. But it will take time before tenants follow en masse. Ryder and other Corktown business owners said they expect a surge in business if Ford grows its Detroit presence by moving what could potentially be thousands of employees to the train station and nearby properties. The Moroun family recently transferred ownership of 505,000-square-foot depot at 2001 15th St. to a mystery company, but Ford has declined to comment directly. An official announcement is expected in mid-June. The Dearborn-based automaker has been linked to nearly 50 properties across the neighborhood and is moving employees from its autonomous and electric vehicle teams — 220 total are expected — to The Factory building just northeast of the train depot. Restaurants, such as Gold Cash Gold and Brooklyn Street Local, are already considering ramping up operations in response to the influx. However, enthusiasm over new customers is also tempered by concerns over the changing character of the tightly knit business community. Com-

PJS LAGER HOUSE

PJ’s Lager House’s origins date back to 1914, when it opened as a restaurant. The Corktown neighborhood bar has been owned by PJ Ryder for more than a decade.

Need to know

Rumors of Ford buying Michigan Central Station and planned area developments to increase investment interest 

 Restaurants and retailers prepare for more foot traffic  Purchase discussion could spur rent increases in tight-knit business community

petition is likely to increase and turnover could hurt older businesses that have long watched the neighborhood rise. “If these (new employees) are even having one drink after work or having lunch out once a week, the economic impact on the four blocks surrounding (Michigan Central Station) is massive,” said Kees Janeway, a managing partner of Detroit-based Iconic Real Estate and a Detroit Restaurant Association board member. “As a result, you’ll see increased competition for food and beverage, the fortifying of existing businesses and a bit of a culling of the herd for people who aren’t operating with their best foot forward.”

Rising costs come at a price Not all Corktown storefronts could withstand substantial rent increases,

said Matt Buskard, owner of restaurant Bobcat Bonnie’s on Michigan Avenue. As developers and property owners respond to rising values, field purchase offers and buy up buildings, they’re more likely to rehab their properties quickly and increase rates for tenants, Janeway said. Consequently, businesses that haven’t guarded against rate hikes in their contracts will be vulnerable and could get forced out. Rental rates for ground-floor retail and restaurant space vary widely based on renovation needs, said Benji Rosenzweig, vice president of brokerage for Colliers International Inc. in Detroit. But Corktown is seeing deals from around the high teens and into the low $30s per square foot. If Ford announces a train station deal, Rosenzweig expects rental prices to move toward the high $20s and low $30s, compared with around $20s-$40s per square foot for groundfloor storefront spaces in downtown Detroit. “Everybody’s trying to swipe up as much land as they can,” Bobcat Bonnie’s Buskard said. “It gets nerve-racking for a business owner in that transition. I don’t want to see it become a situation where some of these little charming places are pushed out because they can’t afford rent.”

As rates climb, tenants with less cash tend to move to other neighborhoods, a natural cycle of growth, said Jim Bieri, principal of Stokas-Bieri Real Estate, which has offices in Detroit and Southfield. Diverse small businesses drove Corktown’s revival after the closing of Tiger Stadium nearly 20 years ago knocked it back, Ryder said, adding their efforts laid the foundation for Ford’s interest. “I’ve always joked that all the work I’ve put into this neighborhood will mean I’ll eventually price myself out of this neighborhood,” said Erin Gavle, owner of Eldorado General Store, which opened on Michigan Avenue five years ago. Still, she’s optimistic. She said a bigger spotlight on the area allows community organizations and incoming developers to work together to “build this bigger mission.” The Corner, a $30 million development on the former Tiger Stadium site at Michigan and Trumbull avenues, plans to offer 26,000 square feet of ground-floor commercial space when it’s complete in about a year. Some, including Gavle, are praising Bloomfield Hills-based developer Larson Realty Group LLC because the company says it will offer 60 percent of retail space at 50-percent of the market rental rate. Anthony Soave’s Elton Park project, around the northeast corner of Trumbull and Michigan avenues in Corktown, is expected to have 151 units in its first phase for a total of 420 units across multiple phases, as well as 30,000 square feet of retail space. Just west, Detroit PAL recently opened a new ballpark and headquarters on part of the old Tiger Stadium site.

Unanswered questions Though it’s too early to predict how a Corktown retail surge would take shape, owners of Gold Cash Gold, Brooklyn Street Local and Eldorado General Store already are considering growing their capacity and prepping for what they expect to be a substantial increase in traffic in coming years. “There's a lot of curiosity, because there’s a lot of stuff that’s not confirmed yet. A lot of questions,” said Deveri Gifford, president of the Corktown Business Association and co-owner of Brooklyn Street Local. Because her restaurant has reached capacity as a breakfast and lunch hub, she said they are planning to hire more staff and extend hours past 3 p.m.

Gavle expects to flexibly increase hours at her Eldorado retail space, too, alongside increased business at nearby eateries. Gold Cash Gold isn’t open daily for lunch. But the owners are considering doing so and expanding the currently small catering offerings to handle a potentially large swath of new workers, led by Ford. Cooley, of O’Connor Real Estate and a partner in Gold Cash Gold, said they’ve talked “a little bit” with some “people within the company” to let them know they can provide food services. But plans are still fluid. “If they come out and announce 1,000 jobs, wonderful,” he said. “(But) 10,000 jobs, that’d be a whole other thing.” The Southern-influenced restaurant is in a former pawn shop on the same block as Slows Bar BQ, the restaurant Cooley and his brother Phil Cooley opened in 2005 that’s often credited for kick-starting the neighborhood’s resurgence.

Shape of a neighborhood The milelong, partially redbricked section of Michigan Avenue west of downtown Detroit has a spirited food scene. But much of the commerce is still event- and destination-driven, Ryan Cooley said. A large body of working professionals could bring in daily foot traffic and new residents would drive a need for more services, grocery stores and retail. Some business owners said they want to see increased safety and infrastructure improvements as byproducts of new attention on the neighborhood. They’re also hoping visitors and locals will roam the streets longer to grab ice cream, peruse stores and venture off the main drag, instead of getting in their cars and driving home after a meal. Even without an official Ford announcement, the energy on Michigan Avenue is evident. Customers at Eldorado inquire about the hulking, long-vacant building, and Buskard has noticed an increase in foot traffic around Bobcat Bonnie’s. “All of a sudden a bunch of suits are getting chicken fingers at the Bobcat,” Buskard said. “Which is great, we want to welcome everybody. It feels exciting, and I think everybody feels that.” Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

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KAHN

Peter Cummings, executive chairman of The Platform, said in a statement. The Platform, HFZ and Rhea joint venture acquired the Albert Kahn Building and the 635,000-squarefoot Fisher Building in 2015 in an online auction, along with two parking decks, for $12.2 million. Last year, the Albert Kahn Building was listed for sale. Its main tenant, Albert Kahn Associates Inc., recently moved out. The Royal Oak office of JLL was the brokerage firm on the sale to Lutz and Sosin. Southfield-based Jaffe Raitt Heuer & Weiss PC completed the legal work. Birmingham-based Q10 | Lutz Financial Services secured the acquisition and construction financing from an unidentified West Coast lender. Detroit-based Kraemer Design Group is the architecture firm on the project, while the general contractor is Novi-based Cunningham-Limp Development Co.

FROM PAGE 1

Lutz and Matthew Sosin, principal of Northern Equities Group, mark their first Detroit venture together as the New Center area and immediately nearby region is brimming with new construction and leasing activity, including new condominiums and apartments by The Platform, the Detroit Pistons practice facility, Henry Ford Health System’s ongoing building nearby and anticipated projects by a handful of other out-ofstate developers from Philadelphia and Canada, among others. “We see this area as a major anchor in the city that is undoubtedly trending upward. New Center is one of Detroit’s most dynamic neighborhoods,” Sosin said in a statement. “We have substantial holdings in New Center, TechTown, Milwaukee Junction and North End. And we believe that by collaborating with other developers in this district, we will be able to fashion neighborhoods that are more dynamic and authentic,”

EXPANSION FROM PAGE 3

Most of the 19 physicians on staff at the center split their time at the main hospital located on the campus of Detroit Medical Center. The Weisberg Cancer Treatment Center also has 15 nurses, nurse practitioners, dietary and genetic counselors and social workers as well as other support staff. “We technically don’t turn away people. (But) we are at capacity and can’t place more physicians or providers there, and also can’t see more patients,” Bepler said. McLaren promised to spend at least $80 million on overall Karmanos improvements, including expansion of the Farmington Hills center, after Karmanos joined McLaren in 2013. McLaren has spent more than $49 million to expand the cancer center brand into greater Michigan at its other hospital and outpatient facilities. Now, the Cancer Institute has 14 sites in Michigan. Karmanos hired architectural firm Ghafari Associates and construction contractor Roncelli Inc., and McLaren approved the building plan for the Farmington Hills center two weeks ago, Bepler said. Plans call for the Weisberg center to quadruple from 17,700 square feet to 69,100 square feet, a 290 percent increase. The first phase of the project will focus on expanding imaging bays and space for research in the radiation oncology area and on adding procedure rooms and an interventional radiology suite. By April 2019, the second phase will renovate the infusion, laboratory and pharmacy areas, clinic care space and areas where support services and survivorship programming are held. Once complete, Karmanos plans to hire 10 additional doctors, 15

JHIMM WOODS

Last year, the Albert Kahn Building was listed for sale. Its main tenant, Albert Kahn Associates Inc., recently moved out.

nurses and other employees. It also will add services. Now, Bepler said, “people come for a clinic visit and get basic testing done and chemotherapy.” But, the center can’t provide blood transfusions, which requires patients to go to the Detroit center or a competitor, which isn’t ideal. “That will change,” he said. “We will have a full-service oncology program. The only thing missing will be inpatient care.” The Weisberg center will place catheters in patients, draw fluids, do biopsies and blood transfusions and provide complete imaging, including MRI, PET, CT and interventional radiology. However, bone marrow patients will continue to visit Karmanos in Detroit. Officials expect the renovated and expanded Weisberg Cancer Treatment Center to be complete in 2021. And Bepler expects the number of visits slowly to increase by about 70 percent. Expanding the hospital required Karmanos to acquire the adjacent the DMC-owned Rose Radiology Center. “Karmanos owned the left side and DMC owned the right side, until DMC decommissioned” Rose Radiology in 2012, Bepler said. DMC initially didn’t want to sell the building but agreed in 2016 to sell the facility to Karmanos for an undisclosed price. “We considered a new ambulatory site in Novi” in April 2015, Bepler said. However, shortly after the board approved the move to the Meadowbrook Medical Center, the Centers for Medicare and Medicaid Services announced it planned to reduce the amount of reimbursement hospitals could charge at outpatient facilities. “We scrapped the Novi center because the reimbursement was much less than we had planned,” Bepler said.

“We technically don’t turn away people. (But) we are at capacity and can’t place more physicians or providers there, and also can’t see more patients.” Gerold Bepler

Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

Nonprofit Winning Futures to launch career-readiness program By Sherri Welch swelch@crain.com

Business, nonprofit and government leaders on Wednesday called for workforce preparedness programs that not only fill skills gaps but also prepare the next generation for the careers of the future. With that, leaders said during the Mackinac Policy Conference, comes the need to instill in them the need for lifelong learning the ability to adapt to fast-changing technologies. Clearly, today’s workforce system is not working, given the skills gaps, said Dan Varner, CEO of Goodwill Industries of Greater Detroit during the conference. Much larger partnerships between employers and workforce development agencies are needed, he said. “We’ve got to give people the tools to navigate these changes. That begins with (youth) but has to carry into adulthood.”

Skills training It’s an issue that Winning Futures is preparing to do something about it. The Warren-based nonprofit plans this fall to launch a four-year workforce preparedness program for high school students. The program will do job shadowing with the kids, enabling them to interact with professionals. They’ll learn entry-level skills and intern while they’re still part of the program. Winning Futures plans to invest $150,000-$200,000 to launch the pilot programs, adding a staff person this year to develop the content and curriculum and run it by business focus groups. It’s seeking grant funding and increased funding from its 80 sponsors that contribute the majority of its $1.2 million cash budget, CEO Kris Marshall said. Funders “love the idea... they see it as an investment in their future workforce, not just as a charitable contribution to help us do good,” but a way to develop the employees they want to hire, Marshall said. “It is critical that the next step is

Dan Varner: Larger partnerships needed.

Kris Marshall: Need resources to make it happen.

Need to know

J Winning Futures to launch four-year, career-readiness program in fall to help prepare students for future jobs J Program will be based on its longtime mentoring model but include new curriculum with soft skills, internships and other support J Comes as business, government and nonprofit leaders voice concern about future workforce and needs for continuing education

pulling together companies, foundations, educational institutions (K-12 and continuing education) and nonprofits to do this work and not in silos, Marshall said. “Nonprofits have the potential to proactively prepare our youth, but we need the resources and connections to make it happen.” “Things are changing so rapidly in the workforce,” Marshall said, and a list of leaders is pointing to the need to fill gaps, including Business Leaders for Michigan, the Michigan Chamber of Commerce and Gov. Rick Snyder with his Marshall Plan for Talent. “If we’re in mindset that (the workforce) is going to be changing, that technology and automation are going to be a really big part of businesses, then we need to help our kids understand that things are going to change. And your education is going to need to change along the way, too.”

Lifelong learning Research points to the need for educational models to shift with

where the future workforce is headed, Marshall said. “There’s got to be pathing to get into these careers, and you may need to go after more education in your 30s and 40s as the jobs change.” By 2030, 45 percent of activities done by individuals could become automated, Marshall said, including data processing, collecting and manual labor that is set and structured. Today’s high school students will need a new level of flexibility and a mindset of lifelong learning, Marshall said. “If they move in one career path that eventually ends, what are they going to do when they’re 30, 35 years old and maybe have to reinvent what that next job looks like if their job is gone.” The program is geared to high schools students, but it will seek to help students understand the importance of training and lifelong learning today and the importance of the humanistic skills. Artificial intelligence, computers and robots will not be able to take over for what a human can do with relationships, sales, management and social skills, Marshall said. In 2016, Winning Futures started doing research on the U.S. Department of Labor workplace competency model and doing focus groups with CEOs from around Metro Detroit. It also sought input from companies on its board and sponsors, including Lear Corp. and sponsors of Winning Futures like McNaughton-McKay Electric Co. and Center Line Electric, to develop content that is relevant to Metro Detroit businesses and will tap business people to come in during students’ last high school year to mentor them so they can learn what’s needed right from the people who would actually hire them one day. “We kept hearing a common theme over and over- soft skills or critical skills, as we call them, are lacking in entry-level employees,” she said.

C R A I N ’ S D E T R O I T B U S I N E S S // J U N E 4 , 2 0 1 8

Governor candidates offer stark differences By Chad Livengood clivengood@crain.com

The major candidates vying to be Michigan’s next governor offered starkly different approaches to filling the gaping holes in the Great Lakes State’s roads and workforce while maintaining upward economic momentum during a debate Thursday before the state’s business and political leadership. The Detroit Regional Chamber’s bipartisan debate at the Mackinac Policy Conference featured the top three candidates in the Republican field — Attorney General Bill Schuette, Lt. Gov. Brian Calley and state Sen. Patrick Colbeck — and the three Democrats seeking their party’s nomination for governor — former state Sen. Gretchen Whitmer, Ann Arbor businessman Shri Thanedar and Abdul El-Sayed, the former Detroit health commissioner. Like the policy conference itself, the debate centered on the overarching question of Michigan’s preparation for the future at a time when the state’s education system is ranked near the bottom nationally, the roads are falling apart and household income growth remains stagnant. “If we want to have the edge in mobility, we can’t have gravel roads,” said Whitmer, who pushed her plan for taking on $20 billion in new infrastructure debt. Thanedar and El-Sayed, the two outsider candidates seeking to knock off Democratic Party establishment favorite Whitmer, railed against corporations and outgoing Gov. Rick Snyder’s tax policies in front of an elite crowd of leaders in business, government, philanthropic foundations and civic organizations gathered who paid up to $250 apiece to watch the debate in the opulent Grand Hotel’s theater. “You’ve got lobbyists from big corporations, they’re paying off politi-

CEO PLAN FROM PAGE 1

Benchmarking of comparable metropolitan areas with regional economic development groups shows they’ve attracted jobs and capital investments, he said.

Rapid response In addition to marketing, the economic development nonprofit would provide a single point of entry for regional analytics and the capability to respond to any question an interested employer might have. “You go to the best regions in the country like Atlanta, Ga., ...any question that comes in gets answered in 24 hours,” Meador said. “If you came to this region and had questions about land, or real estate or infrastructure, it might be six months for us to respond.” The CEO group looked at regional economic development approaches at Invest Atlanta — where the Detroit Economic Growth Corp.’s new president and CEO Kevin Johnson last worked — and Columbus 2020. The Ohio group said it was losing out on new business attraction to cities such as Indianapolis and Pittsburgh, Meador said. A decade later, its data shows the group is winning business from those cities. Meador added, “When we talk to those groups about our region, they

cians — almost everybody else on this stage — to make sure they keep getting their tax cuts, and then we don’t have the money to invest,” ElSayed said. Thanedar, a self-made multimillionaire, said the state’s future depends on creating an universal preschool and child-care system — funded by higher taxes on corporations and Michigan’s “rich and ultra rich” residents. “The corporations and people making over $200,000, which is everybody here, will pay a little more taxes,” Thanedar said. Schuette, the Republican frontrunner, said the Democrats were offering “a sequel to the failed governorship of Jennifer Granholm.” “Senator Whitmer’s plan for more taxes and more regulations is an economic collapse plan, which would send Michigan back to the time of Jennifer Granholm,” Schuette said. “We can’t afford that.” Whitmer shot back that her potential general election opponent was espousing “more positions, not plans,” for dealing with the state’s workforce shortage, crumbling infrastructure and development of next-generation auto mobility. “These are investments we have to make if Michigan’s going to be the place that our economy grows with our personal incomes,” she said. “We have to get these things right.” The Republican candidates took a hard line on road funding, arguing no new tax revenue is needed to improve pavement conditions. “There’s no need for a tax increase to fix our roads,” said Colbeck, a Canton Township Republican who trails Schuette and Calley in public opinion polls. “The focus needs to be on quality.” Schuette called for a review of the Michigan Department of Transportation to bring transparency in how many miles are paved with revenue from fuel taxes.

The six candidates for governor who shared a debate stage at the Detroit Regional Chamber’s Mackinac Policy Conference. From top left to right, the Democratic field: Ann Arbor businessman Shri Thanedar, former state Sen. Gretchen Whitmer of East Lansing and former Detroit health department director Abdul El-Sayed of Shelby Township. From bottom left to right, the Republican field: Attorney General Bill Schuette of Midland, Lt. Gov. Brian Calley of Portland and state Sen. Patrick Colbeck of Canton Township.

“We ought to be able to get money to the roads without raising taxes,” Schuette said. A citizen initiative to repeal the prevailing wage law is headed to the Republican-controlled Legislature, which is expected to adopt the measure. Calley said he also supports the repeal. Calley defended the $1.2 billion road-funding plan Snyder and the Legislature put into place in 2015 that won’t be fully funded until 2021. The lieutenant governor said the

say we don’t even show up on the radar as someone they should be worried about.”

Economic growth The Snyder administration’s disclosure last week that Michigan and “Everybody I’ve talked to — including the counties that might not agree on transit right now for whatever the reason — when we talk about this (economic development group), they all say ‘we’re all in.’”

Amazon revealed the need The need for a Southeast Michigan umbrella group became apparent during the recent Amazon bid when Quicken Loans Chairman Dan Gilbert pulled together about 70 of his employees to develop the proposal. Every time something would come up, transit for example, companies would scramble to get organized, calling on peers to fund a campaign and discuss whatever the issue was, Meador said. But the group was not sitting down on a regular basis and talking. That evolved into the CEO group, which is working with Gyro Creative Group to come up with a name for itself and the new regional economic development group. In addition, Meador said, the CEO group plans to search for a president or CEO that will lead the nonprofit and its eventual staff of 1520. “We have to go in this direction,” said Meador. “We are just not resourcing this right. We’re not competitive. We need a full-time person running a group like this, who wakes up every day and this is all (they) do.” Beyond the economic development benefit, he said, the new, independent group could also help ease some of the competitiveness in the region. It will represent the region as a whole, with

state will have more money to for roads once it pays off “the debt that the previous administrations saddled us with.” “We’re halfway done paying it off,” he said. “When we’re done paying it off, there will be an extra $200 million goes into our roads each and every year.”

Funding and partnerships

“You go to the best regions in the country ... any question that comes in gets answered in 24 hours. If you came to this region and had questions about land, or real estate or infrastructure, it might be six months for us to respond.” — Dave Meador, vice chairman and chief administrative officer at DTE Energy Co.

no alliances to any specific city or county. “One of the thoughts as we have been working on this is that if we do this right from the start and do it in an inclusive way, and it’s truly for the region, then we’ll get a platform where people will be working together for the region and not competing,” Meador said.

Members of the two-year-old CEO group committed to raising about $6 million annually to fund its marketing and attraction work. That’s the amount the region should be spending according to benchmarking against peer regions. However, Meador said, the region has only been spending $1 million to $1.5 million annually through the Detroit Regional Chamber. In other parts of the country, 80 percent of the umbrella group’s funding comes from the private sector and the rest from public sources. At the same time, Sandy Baruah, president and chief executive officer of the Detroit Regional Chamber, said “The chamber is proud of its award-winning business attraction program, which was recognized just last month as a ‘Top Economic Development Program’ by Site Selection magazine. The program, Destination Detroit, covers the 11-county Detroit region.” Meador, who is working on the effort with leader and DTE Chairman and CEO Gerry Anderson, was helped convene the CEO group.

Detroit offered Amazon.com Inc. up to $4 billion in tax incentives over 30 years in a failed bid to land the online retailer’s second North American headquarters also was a flashpoint in the debate over economic growth. “What happened with Amazon is a wake-up call that this system of giving hundreds of millions of dollars to corporations is not working,” Thanedar said. “This kind of a Band-Aid solution — trying to get a photo op for politicians — is not solving fundamental problems of Michigan.” Michigan should invest more money in infrastructure and education instead, Thanedar said. “Businesses will come to Michigan without having to bribe them,” he said. Schuette staked out a position that the way to grow the state’s population and create better-paying jobs is through a reduction in the 4.25 percent personal income tax to the early 2000s level of 3.9 percent. The hourlong debate served as the capstone of the Detroit chamber’s threeday conference on Mackinac Island. Ron Kitchens, senior partner and CEO of Southwest Michigan First and a Western Michigan University trustee, said Calley, Schuette and Whitmer were the only serious candidates on the stage. But for Kitchens, Calley had the best way forward for jobs and economic development because the tax climate in Michigan has improved under Snyder (who appointed Kitchens to the WMU board in 2016) and Calley. “He represents a continuation of the future,” Kitchens said of Calley. “Nobody that I’m talking to wants their taxes lowered. Everybody wants their roads fixed. Everybody wants better education. Everybody wants more and better-trained workers. Nobody is saying, ‘Please cut our taxes so life will get better.’” Kirk Pinho contributed to this report. The need for increased marketing and attraction efforts and a coordinated, regional response for companies looking at locating in the region is something DTE has been looking at for four years, he said. It was one of the reasons they quietly formed the “noname CEO council” during the 2016 Mackinac Policy Conference. “We have a good start with what’s at the chamber,” which will help launch the group more quickly, said Meador. The Detroit Regional Chamber, which already provides economic development. He said the new, regional economic development nonprofit will operate autonomously. It is discussing sharing space with the chamber and taking on much of its current marketing and attraction work. And the Detroit Regional Chamber will continue economic development activities, such as MICHauto, an initiative to help promote, retain and grow the automotive industry in the region. The chamber said details are still being worked out. “The Chamber’s Board of Directors agreed to examine new strategies to bolster this regional work, in partnership with the DTE-led CEO Group. No specific decisions have been made and discussions have not yet advanced beyond the conceptual phase,” Baruah said in a statement. Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

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MERIDIAN FROM PAGE 1 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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Cotton said the decision to sell came down to a solid belief that his family, which includes brothers and fellow executives Sean and Michael, always has held that “if you are not growing, you are done.” In a statement, CEO David Cotton explained the sale this way: “WellCare’s unwavering commitment to improving the lives of its members makes it an ideal partner. Our similar missions, values and goals combined with WellCare’s dedication to providing an unparalleled member experience, including access to high quality health care, were key factors in our decision.” But Jon Cotton said the family was not interested in pursuing the typical method to sell their business: hire an investment banker to get the highest price for the company’s assets. He said he and other family members and executives have known several of WellCare’s leaders over the past 10 years, vetted them, felt comfortable with them and sought them out as the company’s potential next owners over several other possible suitors. “We have always said the employees at (Meridian) mean the most to us, and we didn’t just want to sell (the company) as a commodity” to anybody, Cotton said. “We have similar missions and values (with WellCare), and they realize there is a more intangible value than just the assets.” Ken Burdick, WellCare’s CEO, told Crain’s he understood the Cottons’ dilemma. State Medicaid contracts, now worth hundreds of millions of dollars, have become much more financially risky. With medical and pharmacy costs rising, companies need more staff, infrastructure and financing to make the ventures profitable. Since the Affordable Care Act was approved in 2010 with Medicaid expansion, the population covered is less healthy on average, with more chronic diseases, thus needing more medical and case management, Burdick said. “Meridian is a well-run company with a reputation for quality,” he said. With Meridian’s nearly 1.1 million Medicaid members in Michigan and Illinois, the transaction will boost WellCare’s membership by 26 percent to 5.4 million, including 4.3 million Medicaid members. It operates in 11 Medicaid managed care states and 18 Medicare Advantage states. Jon Cotton said WellCare expects to continue Meridian’s commitment to Detroit and doesn’t expect the ownership change will affect operations or its workforce in Michigan. Overall, Meridian employs 2,000 with an office in Illinois, where it also operates the state’s largest Medicaid health plan with 565,000 members. Since 2015, Meridian has become a visible fixture in downtown Detroit when it purchased One Campus Martius with Dan Gilbert’s Bedrock LLC for an estimated $140 million to $150 million. It also sponsors the annual Meridian Winter Blast each January in downtown Detroit at Campus Martius Park, an event WellCare is expected to continue. Burdick said WellCare has committed to retain the Meridian name and the company headquarters in Detroit. “When the transaction closes, we intend to use Michigan as a regional hub for in-state business but (serve clients) in other states,” said Burdick. “It is a tribute to the talent assembled here. ... We hope to hire more people. Michigan still has more population to include in managed care.”

David Cotton: Pioneered paying for quality

Jon Cotton: ‘If you are not growing, you are done’

After the transaction closes WellCare will determine staffing needs in Illinois, where both companies have an office, Burdick said. “We are competitors until the closing, but both will be looking to hire more staff,” he said.

Deal reaction: Surprise Dom Pallone, executive director of the Michigan Association of Health Plans, said that shortly before the public announcement that Meridian would sell its business, Sean Kendall, president of Meridian Health Plan of Michigan, phoned him. Kendall is on the MAHP board. “It was very surprising. But it is not unusual” for an investor-owned HMO to keep news of the deal confidential until the last minute, Pallone said. “It still has some time to go, probably six to nine months to get formal regulatory approval.” The $2.5 billion deal appears to easily be the largest acquisition of a Michigan HMO. Previous big HMO deals include Blue Cross Blue Shield of Michigan buying M-Care and M-Caid, the University of Michigan’s health plans, for $240 million in 2006. In early 2007, Priority Health acquired 143,000-member CareChoices HMO from Trinity Health for $40 million. Grand Blanc-based McLaren Health Care acquired Indiana health plan MDWise for an undisclosed price earlier this year. But Pallone said he doesn’t expect much will change at Meridian. “That is what WellCare is purchasing in Michigan, the high quality,” he said. WellCare already covers about 40,000 people in Michigan under Medicare Part D, the federal drug prescription plan, Pallone said. “Medicare Advantage is a growing market in Michigan, and they will grow that business line as well,” he said. The health insurance industry is fast consolidating nationally because economies of scale are needed in a more competitive market, said Erik Gordon, a professor at the University of Michigan Ross School of Business. Pending deals include CVS acquiring Aetna; Centene and Fidelis Care; and Humana and Kindred Care. Nixed deals on antitrust grounds include Aetna and Humana, and Anthem and Cigna. “It would have been nicer for us if Meridian had been an acquirer,” he said.

Keys to the deal Meridian consists of Meridian Health Plan of Michigan Inc., Meridian Health Plan of Illinois Inc., and MeridianRx, a pharmacy benefit manager that has clients in 26 states and also services Meridian’s Medicaid and Medicare members. Wellcare (NYSE: WCG) plans to purchase Meridian by using a combination of cash on hand, $1 billion in revolving credit, new debt of $600 million to $1 billion and new equity of $800 million to $1.2 billion. WellCare also has secured $2.5 billion in committed bridge financing, company executives said last week.

Burdick said Meridian fit WellCare’s three objectives for an acquisition: Does it fit the company’s broader strategy? Does it add to core capabilities? And is it on a Shery Cotton: path to profitable Co-founded growth? “Meridicompany an satisfied all three objectives,” he said. One area of Meridian’s business that especially intrigued Burdick was its seven-year-old in-house pharmacy benefit management company, MeridianRx. Controlling pharmacy costs has become the key to profitability with health insurers, hospitals and other providers and WellCare saw MeridianRx as a critical solution. “Meridian’s PBM is part of what made it attractive,” Burdick said. “We expect to learn the PBM business ... and this transaction will provide us with additional insight into changing pharmacy costs and improving quality through the integration of pharmacy and medical care.” Susan Moore, a quality consultant and president of Ortonville-based Managed Healthcare Resources, said WellCare will greatly benefit from having MeridianRx PBM because of the rising costs of prescription drugs. “It is one way of keeping more dollars in the company and any assistance in developing it, even just for members, is beneficial with the volume of membership that WellCare has,” she said. WellCare currently contracts for PBM services with CVS Caremark through 2020. Burdick declined to address how MeridianRx would alter the company’s approach to pharmacy benefit services. Other health insurers are also looking to invest in PBMs with Cigna’s pending acquisition of Express Scripts. Another reason WellCare looked to Michigan is the effort underway in the state Legislature to integrate the state’s $9 billion Medicaid physical health system with the $3 billion behavioral health system. Meridian has been a major proponent of integration. “We are supportive of integration and physical health. More than onethird of our population has physical or behavioral issue issues,” Burdick said. “It certainly is attractive as a go-forward business in Michigan.” Another key to the deal is the Cotton’s comfort level with the current WellCare executive team. This was critical because WellCare and its top executives in 2007 were charged with Medicaid fraud. The company paid a $40 million fine in 2009 and in 2011 entered into a five-year corporate integrity agreement with the U.S. Department of Justice’s Office of Inspector General. It expired April 26, 2016. From 2003 to 2007, four top WellCare executives inflated expenditure information submitted to the Florida Medicaid program “in order to reduce the WellCare HMOs’ contractual payback obligations for behavioral health care services,” according to the Justice Department. Sean Cotton, president of Meridian Technologies, said Meridian completely vetted WellCare and knows the company’s current management team has great experience in the managed care and business world. “During the process we did as much due diligence on them as they did on us,” Sean Cotton said. “The company acted swiftly in October 2007 upon learning of the wrongdoing and separated the individuals involved. We

know that actions of those executives did not and do not reflect the hard work, dedication and ethics of WellCare’s associates and managers. “I cannot stress enough what a good fit WellCare is with Meridian and how happy my family is to leave our legacy in their hands,” he said. In a stock analyst call last week, Burdick was asked if he had concerns with Meridian’s profit margins. He said Meridian’s overall company margins “were in the high 2s, as a combined health plan and PBM with synergies.” Despite continued membership growth in Michigan the past decade, Meridian has struggled financially the past two years. Jon Cotton declined to talk about Meridian’s financial picture because of the pending sale. For 2017, Meridian’s total revenue declined 8.3 percent to $2.2 billion from $2.4 billion in 2016, according to the state Department of Insurance and Financial Services. The company suffered underwriting losses of $956,277 in 2017, compared with $24 million profit in 2016. After taxes, Meridian’s net income also declined 86 percent to $546,046 in 2017 from $3.9 million in 2016. In 2015, Meridian earned net income of $6.8 million. During the first quarter of 2018, Meridian’s total revenue dropped 6.2 percent to $542.7 million, compared with $578.3 million revenue for the same period in 2017. It increased net underwriting profit to $6.5 million, compared with a $10.1 million loss for the same period in 2017. But after paying federal taxes of $10.6 million, Meridian reported a net loss of $3.2 million compared with net loss of $6.3 million for the same period in 2017.

Cotton family future? Jon Cotton said it is too early to tell what his family will do after the sale, but they will retire from the company. He said they are focused on closing the deal during the fourth quarter. Burdick said all of Meridian’s top executives, including Sean Kendall, president of Meridian Health Plan of Michigan, and Karen Brach, president of Meridian Health Plan of Illinois, will be retained. “My Dad may finally retire, I hope,” said Jon Cotton, adding: “We obviously want to continue to do things as a family. I can tell you we won’t be starting another HMO.” Under Caidian Enterprises Inc., Meridian’s holding company, David Cotton owns 31.8 percent of Meridian stock; Shery Cotton owns 25.54 percent; Jon Cotton, 14.2 percent; Sean Cotton, 14.22 percent; Michael Cotton, 14.22 percent. “The Cotton family owns 100 percent of the company,” Jon Cotton said. Moore, a health plan accreditation consultant, said Meridian, which opened in 1997 as Health Plan of Michigan, was the second Medicaid HMO to gain accreditation with the National Committee for Quality Assurance in the state after McLaren Health Plan. Moore, who helped the Cottons gain their health plan license and audited many health plans for the state, said Meridian was always ahead of its time, especially when it came to information technology and offering the right incentives. “David Cotton did the smart thing for paying doctors for quality,” Moore said. “From the beginning, he said, ‘I won't mess with your performance, just do quality work.’” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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THE WEEK ON THE WEB

RUMBLINGS

Morouns transfer ownership of train station

Snyder becomes convert to Mackinac confab

MAY 25-31 | For more, visit crainsdetroit.com

ne of the Moroun family’s real estate companies quietly transferred ownership of the Michigan Central Station to a mystery company last week, and all signs point to Ford Motor Co. purchasing Detroit’s long-vacant train station in Corktown. The Wayne County Register of Deeds on May 23 recorded a May 22 warranty deed, transferring ownership from the Moroun-owned MCS Crown Land Development Co. LLC to New Investment Properties I LLC, property records obtained by Crain’s show. On the same day, the Moroun company also transferred ownership of the former Detroit Public Schools book depository building next to the depot to a separate entity called New Investment Properties II LLC. The deed records list the address for both New Investment Properties entities as the New York law firm Phillips Lytle LLP; there’s no record to suggest the entity receiving the property is another Moroun-owned real estate holding company. A spokesman for the law firm did not have immediate comment last Wednesday morning. Phillips Lytle has done legal work for Ford in the past, touting an award from Corporate Counsel magazine for its work on behalf of the company, among others. Both New Investment Properties I and II were incorporated within a week of each other in late February and early March, according to state corporation records. Because the identity of owners behind both entities can be shielded under state corporation law, it’s unclear whether there’s a link between New Investment Properties I and II and Ford or a related entity. Officials on both sides of the negotiations were tight-lipped about the deed transfers when Crain’s contacted them last Wednesday. Don Butler, executive director of connected vehicle and services for Ford Mobility, noted at the Mackinac Policy Conference last week that the automaker began moving 220 employees on its autonomous and electric vehicle teams into The Factory building at Michigan Avenue and Rosa Parks Boulevard. “We’re excited about that area and excited about what some of the possibilities are,” Butler said. “We look forward to growing our presence there and as we have things to talk about and announce officially, we will absolutely do that.” An official announcement from Ford is expected by mid-June, according to a source familiar with the company’s plans. Dawn Booker, communications manager for Ford Land Development Co., the automaker’s real estate division, declined to comment on the deeds last Wednesday morning but instead provided the following statement: “We are very excited about our return to Detroit this year beginning with our electric vehicle and autonomous vehicle teams relocating to the historic former factory in Corktown. We expect to grow our presence in

WAYNE STATE UNIVERSITY

Wayne State University launched Wednesday a debt-forgiveness program aimed at re-enrolling students who left the school without a degree. Warrior Way Back offers former students a chance to wipe out up to $2,200 in outstanding balances and fees to the university, said Dawn Medley, WSU’S associate vice president for enrollment management.

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

34 percent

The ratio of Detroiters who said in a Downtown Detroit Partnership Perceptions Report they have visited Little Caesars Arena, compared with 70 percent of suburban respondents.

$2.5 billion

The price for which Meridian Health of Detroit sold its multi-state operation to Tampa-based Wellcare Health Plans Inc.

$3.10

The average price per gallon gas hit on Memorial Day in Michigan — its highest for the holiday since 2014.

Detroit and will share more details in the future.” The warranty deed was signed by Michael Samhat, president of Crown Enterprises Inc., the Warren-based real estate development firm that’s part of billionaire trucking mogul and train station owner Manuel “Matty” Moroun’s business empire. Samhat declined comment last Wednesday on the deed transfers.

BUSINESS NEWS J Lyft is planning to consolidate its Detroit operations and open a new permanent location somewhere in the city as part of a $100 million nationwide investment by the San Francisco-based ride-sharing company. J Meijer Inc. will open a new store June 28 that anchors a $30 million development from Redico LLC at the corner of East 10 Mile Road and Schoenherr Road in Warren. It replaces the demolished Henry Ford Macomb Hospital campus. J The fate of Detroit’s private-sector bid for a Major League Soccer expansion team is unknown after Cincinnati was formally awarded a team last week. Detroit does remain in the running when the MLS awards two additional franchises to start play in 2022 — if concerns over the use of Ford Field as a venue are addressed. J The Oakland County Circuit Court

barred former chief executive officer Rob Chioini and former chief financial officer Thomas Klema from entering the offices of Wixom-based Rockwell Medical Inc. for 21 days while the parties undergo mediation over the executives’ firings. The Rockwell board voted 5-3 to fire the two executives, and they filed protest documents to the SEC.

OTHER NEWS J It’s official: The PGA Tour golf will return to Michigan with a new tournament in Detroit planned to start in 2019 at the Detroit Golf Club on the city’s north end. J Spectator turnout for the LPGA Volvik Championship in Ann Arbor May 24-27 rose for the third consecutive year to 30,000. J Officials at the Salvation Army Southeast Michigan Adult Rehabilitation Center plan to close its Pontiac store permanently and relocate its southwest Detroit location to the site of a closed supermarket in Mexicantown. J Entrepreneur Shri Thanedar reaped more than $16 million in capital gains from the sale of a majority interest in the Ann Arbor chemical testing company he sold in 2016 before launching a campaign for governor, according to his personal financial records released last Wednesday. J Thanedar also released a plan last Tuesday for addressing Michigan’s workforce gaps by funding universal child care and preschool programs through big tax hikes on corporations and individuals earning more than $200,000 a year. J Last week, Democratic gubernatorial candidate Gretchen Whitmer promoted a new jobs plan that would shift Michigan’s economic development policy from being business-friendly to friendlier for workers. J Michigan State University is hiring Teresa Sullivan, the outgoing president of University of Virginia and an MSU alumna, as an adviser to the school'’s board of trustees as it searches for a new president. J Legendary local athletes, a veteran sports writer and a Detroit Lions defensive lineman-turned entrepreneur are among eight members of the 62nd class to be inducted into the Michigan Sports Hall of Fame. The induction ceremony, sponsored by Walker-based Meijer Inc., is scheduled for Sept. 28 at the MotorCity Casino Hotel’s Sound Board theater.

s a businessman, Rick Snyder was turned off by the Detroit Regional Chamber’s Mackinac Policy Conference. The annual confab at the Grand Hotel on Mackinac Island was too much schmoozing, boozing and talking for the former Gateway Computers chairman’s strictly business tastes. “I came for a couple of years, and I stopped coming because I said, ‘All people did was talk. And I didn’t come here to go to a two-day cocktail party,’” Snyder said on stage at last week’s Mackinac Policy Conference. Snyder discussed his past feelings about the Mackinac conference during an on-stage interview with Sandy Baruah, president and CEO of the Detroit Regional Chamber. “I think it’s fair to say, you were not a fan of the Mackinac Policy Conference,” Baruah said. “That’s a correct statement,” the governor replied. “I think it’s fair to say your opinion of that has evolved over time,” Baruah said. In eight years as governor of Michigan, Snyder has become a Mackinac conference convert of sorts. But mostly because the Detroit Regional Chamber has let Snyder use the conference to set the agenda and use the gathering 1,600 of the state’s elites in business, politics,

civics, philanthropy and the media to drive public policy decisions. Snyder’s first Mackinac conference as governor in 2011 came as he was making the final push for major cuts to the state budget, eliminating numerous personal income tax breaks and repealing the Michigan Business Tax in favor of a 6 percent corporate income tax that relieved businesses of $1.8 billion in annual taxes. The 2013 conference centered on the future of Detroit — and its prized art collection — as the city was hurtling toward bankruptcy. The next year revolved around a campaign to get the Legislature approve a $195 million contribution to the “grand bargain” that lessened the blow for Detroit’s pensions in the bankruptcy. In 2016, Snyder used the conference to broker a deal to create the Great Lakes Water Authority, spinning off operations of the water supply for Southeast Michigan from Detroit’s direct control. Snyder said his attitude about the Mackinac conference has changed since he became governor “because things get done.” “Not always right at the conference, but you have a clear agenda, we have pillars, we have action happening, we have follow-up, we have metrics to measure things,” Snyder told Baruah.

ANNALISE FRANK/CRAIN’S DETROIT BUSINESS

The IHOP half of the IHOP-Applebees restaurant in downtown Detroit’s Millender Center is open daily for breakfast.

Combo Applebee’s-IHOP at least half-open

etroit may truly have it all now. The combination Applebee’s-IHOP restaurant at the Millender Center in downtown Detroit is open — at least the IHOP half. New sign for the restaurant at 333 E. Jefferson Ave., was spotted this week on the building’s exterior, with a foldout sign saying IHOP is open daily for breakfast (Monday-Friday 6:3011 a.m.; Saturday and Sunday 7-11 a.m.). It is unclear when the Applebee’s half will open. A message was left

with a spokesperson for the Livonia-based Team Schostak Family Restaurants, which operates the restaurant. Build-out of the 12,000-squarefoot, 300-seat restaurant began in 2016. Owners hope the first-of-its-kind, two-in-one concept will appeal to patrons as fast-casual dining goes cold in the market. The restaurants’ parent company DineEquity announced last year it would be closing up to 160 Applebee’s and IHOP locations.

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