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

Dramatic new design for state’s tallest building Page 3

OCTOBER 29 - NOVEMBER 4, 2018 | crainsdetroit.com EDUCATION

Big tax lien did in failed substitute teacher firm

ELECTION 2018

What we know — and don’t — about Ilitch sports network Page 3 PHILANTHROPY

Regional CEO group to look at Detroit’s public spaces

By Chad Livengood

By Sherri Welch

The Internal Revenue Service slapped Professional Educational Services Group LLC with a $3.27 million lien for unpaid payroll taxes two weeks before the substitute teacher staffing firm abruptly shut down and left more than 110 Michigan school districts scrambling to staff classrooms last week. Professional Educational Services Group, or PESG, owes the IRS $3.15 million in unpaid income, Social Security and Medicare taxes that were withheld in 2017 from the paychecks of nearly 2,000 regular substitute teachers and an additional $119,000 in unemployment insurance taxes, according to an IRS lien that was filed Oct. 8 with the Kent County Register of Deeds. PESG’s sudden demise was a perfect storm of worsening finances, a failed attempt to sell the “faltering company” to a competitor and a “skittish” secured creditor that pulled the firm’s line of credit after seeing the lien and a swelling backlog of accounts receivable, said Ian Northon, attorney with Rhoades McKee PC in Grand Rapids, which is representing the staffing agency. The school employee staffing agency’s cash-flow problems were exacerbated by nearly $1.5 million in unpaid bills from its school district customers, Northon said. “If the company’s got $3 million or $4 million in the bank, this is not an issue,” Northon told Crain’s. “But when a secured creditor comes in and soaks up that money, then it’s a crisis.” PESG is one of a handful of staffing agencies in Michigan that sprung up in the past 15 years in the movement to slash overhead expenses and privatize non-instructional jobs in school districts that have been wrestling with dwindling student populations and ballooning employee legacy costs.

The regional “no name CEO group” is taking a look at yet another issue, this one firmly rooted in Detroit. Conversations centered on Detroit’s parks, trails and other public spaces — what exists and what’s planned, the resources needed and available to maintain them and the best practices around the country for doing Cullen: Chairs so — began in public spaces late summer. “pillar.” Many of the informal group’s 23 members and the organizations they represent support public spaces in Detroit. They include:  Gerry Anderson, CEO, DTE Energy Co., which created Beacon Park at Grand River and Cass near its Detroit headquarters last year and programs it.  Mary Barra, CEO, General Motors Co.; David Egner, president and CEO, Ralph C. Wilson Jr. Foundation; and Kresge Foundation President Rip Rapson, with their support for development of public parks and spaces along the Detroit riverfront.  Dan Gilbert, founder and chairman of Quicken Loans Inc. and Rock Ventures LLC, with support of downtown parks like Campus Martius and the Detroit RiverWalk.  Cindy Pasky, president and CEO of Strategic Staffing Solutions, who chairs the Downtown Detroit Partnership, which operates Campus Martius and several other downtown parks. They’re being asked to do more as the private sector continues to play a bigger role in the development and maintenance of the city’s parks and trails.

clivengood@crain.com

swelch@crain.com

GETTING OUT THE VOTE Metro Detroit firms join trend of giving employees time off

By Chad Livengood clivengood@crain.com

Andy Weir has afforded his politically active employees at the Commonwealth Heritage Group Inc. flexible time in their schedules to vote during work hours in past election years. But this election year, Weir decided to take it a step further. The Dexter-based archaeological and historic preservation consulting firm is giving its 110 employees spread across 11 offices in nine states the entire day off Nov. 6 to carry out their civic duty. “This year, since the country’s so polarized, I wanted to send a message about how important it is to get out and vote, even though I know

how much my employees vote anyways,” said Weir, whose firm also has a regional office in Traverse City. Commonwealth Heritage Group is among a growing number of U.S. companies that are declaring Election Day a company holiday in an effort to boost abysmal voter participation rates. The Society for Human Resources Management’s survey of HR managers found a record 44 percent of U.S. companies will give workers paid time off to vote in the Nov. 6 midterm election. That’s up from 37 percent of U.S. firms offering paid time off in the 2016 presidential election, according to the HR managers’ organization. SEE VOTE, PAGE 18

SEE TEACHERS, PAGE 17

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SEE CEO GROUP, PAGE 21

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MICHIGAN BRIEFS

INSIDE

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

Contamination confirmed in more places at former Buick City site The sale of remaining portions of a massive former manufacturing site in Flint are on hold after another kind of chemical contamination was confirmed. The update comes after toxins known as per- and polyfluoroalkyl substances, or PFAS, were found at Buick City, where Detroit-based General Motors Co. once built cars, the Flint Journal reported. The Revitalizing Auto Communities Environmental Response Trust is continuing to market the property, but won’t close on a sale “until we have a deeper understanding of PFAS impacts at the site” and come up with a “comprehensive remedial strategy,” said Bruce Rasher, redevelopment manager for RACER Trust. Most of Buick City closed in 1999, creating one of Michigan’s largest brownfield sites. Portions have already been redeveloped: Lear in August opened a $29 million plant on a 33-acre section of the site. The U.S. Environmental Protection Agency has been overseeing cleanup. Crain’s recently reported that Buick City is not eligible for the new Oppor-

tunity Zone tax breaks for investments in economically distressed areas. The once-bustling site is “ideally situated” to benefit from them and it could help with redevelopment, U.S. Rep. Dan Kildee, D-Flint, told Crain’s. Previous proposals from parties interested in segments of the property have included a plan for an environmentally friendly industrial park and green space or “eco industrial park.”

Snyder signs bill blocking Hemlock from building power plant

Legislation allowing the Michigan Public Service Commission to create long-term industrial electric load rates for specific industrial customers, a move aimed at Hemlock Semi-Conductors in Saginaw County, was signed into law Wednesday by Gov. Rick Snyder. Hemlock, one of the largest electricity users in the state with its production of polysilicon — the key component of solar-cell panels and semiconductors — has been examining developing its own power generation plant. However, with 7 percent of all Consumers Energy Co. power sales to Hemlock, Consumers warned it would have to raise rates to customers by more than 1 percent or more than $60 million to make up for the loss of Hemlock’s business. House Bill 5902, sponsored by state Rep. Dan Lauwers, gives au-

GENE MEADOWS

Hemlock Semiconductor was founded in 1961 in mid-Michigan and is a joint venture of the Dow Chemical Co., Corning Inc. and Shin-Etsu Chemical of Japan.

thority to the PSC to allow customized electricity rates for companies meeting certain criteria. Current law requires electricity rates to be based on cost of service. Supporters of the legislation said the bill was necessary to block Hemlock from developing its own power generation plant. Snyder, in a prepared statement announcing his signing of the legislation, made no mention of the Hemlock situation.

Shoulder replacement technology firm closes $2.5M funding round

A Holland-based startup focused on developing shoulder replacement technology wrapped up its Series A round of outside investment with $2.5 million in equity funding. Shoulder Innovations LLC closed on the funding led by Ann Ar-

bor-based Michigan Angel Fund in addition to Grand Rapids-based Wakestream Ventures and Holland-based Genesis Innovation Group LLC, the company announced last week. The funds will be put toward new product development and to support its cornerstone inset glenoid (part of the shoulder) technology, which is used during shoulder replacement surgery. The company claims it reduces surgical exposure and improves glenoid stability by 87 percent. It marks the third time the Michigan Angel Fund has invested in the company, Skip Simms, the fund’s managing director, said in an email. He declined to say how much the fund invested. “It is impressive that the team at Shoulder Innovations has developed truly cutting-edge and disruptive

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products in the orthopedic space, and they have done so in a capital efficient manner, which we love to see,” Simms said in the news release. Shoulder Innovations, founded in 2009, is tapping into a growing market. About 53,000 people in the U.S. have shoulder replacement surgery each year, according to the Agency for Healthcare Research and Quality. That number has increased from around 18,000 in the early 2000s.

CORRECTION The story titled “The forever business: Region’s top arts groups push to raise endowment” on Page 1 of the Fall 2018 Crain’s Giving Guide gave an incorrect number for matching gifts leveraged by a $100,000 donation from the Detroit Symphony Orchestra’s music director laureate, Leonard Slatkin, and his wife, Cindy. The couple’s gift leveraged another $100,000 in matching gifts.

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SPORTS BUSINESS

DEVELOPMENT

MOBILITY

FAQ: About Hudson’s the proposed tower design Ilitch sports evolves network News that the Ilitch family is considering launching its own channel for Detroit Tigers and Red Wings games has raised more BILL questions for SHEA which there are not yet answers. Here’s a rundown of the major questions and what’s known and unknown so far:

Need to know

What’s happening?

The Ilitch family, owners of the Detroit Tigers and Red Wings, announced  Many questions Thursday that remain about how they’re thinking likely that might be of launching to happen their own regional sports  Deal with Fox network to air Sports Detroit said their teams’ to be up in 2021 games. Now, those games, and those of the Detroit Pistons, are aired live under long-term broadcast rights deals on Fox Sports Detroit. Ilitches explore idea of new TV network for Tigers, Red Wings 

When are the rights deals up?

I’ve been told that the current deals expire in 2021. The teams and the network all decline to talk about the start-end dates for the contracts, and won’t say why.

Willow Run center revises blueprint

again as it gets taller

By Pete Bigelow pbigelow@crain.com

By Kirk Pinho kpinho@crain.com

Need to know

The state’s tallest building is not only growing, but it has been dramatically redesigned.  Design for New renderings of the skyscraper Hudson’s site slated to go on the former J.L. Hudskyscraper has son’s department store site show a dramatically building up to 912 feet tall with a shifted stepping design, paying its respects  New renderings to buildings like the Penobscot and feature a stepping David Stott towers and also allowing design to allow for more light to penetrate to the more light, street level, said William Sharamenities ples, principal of Shop Architects PC, one of the project’s archi Final height to be determined but tects along with Detroit-based Hamilton Anderson Associates. currently planned “We are excited about the dito be between 800 rection and the design of the and 912 feet tall tower. We think it captures sort of a Detroit essence. It draws on history and looks forward,” said Jamie Witherspoon, director of architecture for billionaire real estate and mortgage mogul Dan Gilbert’s Bedrock LLC property development, management and leasing company that is building the project. In addition, the new design of Gilbert’s centerpiece development allows for added features, whereas the previous design did not. “Stepping allows for terraces for amenities and possible hospitality spaces,” Sharples said. SEE HUDSON’S, PAGE 20

When could a new network be launched?

After the current deals expire, the Ilitches said. So that’s in the early 2020s. How long have the teams been on Fox Sports Detroit?

FSD has aired Tigers, Red Wings and Pistons games since 1997-98, when it won the broadcast rights from the now-defunct Pro-Am Sports System, which had been owned by Domino’s Pizza founder Thomas Monaghan until he sold it to the Washington Post Co.’s Post-Newsweek Stations Inc. in 1992. That’s the same year he sold the Tigers to Mike Ilitch, who died last year at age 87. Son Christopher Ilitch has run the family’s day-today business operations for years, and that includes ultimate control of who gets to broadcast the games. SEE NETWORK, PAGE 22

New renderings of the skyscraper slated to go on the former J.L. Hudson’s department store site show a building up to 912 feet tall with a stepping design, paying its respects to buildings like the Penobscot and David Stott towers. SHOP ARCHITECTS PC

Six months ago, the American Center for Mobility opened with much fanfare, as government officials and industry executives hailed the arrival of a proving ground for self-driving vehicles as a technical marvel and economic anchor. Built on the grounds of a dilapidated factory in Ypsilanti that saw its heyday making airplanes during World War II, the facility was remade for an autonomous age. In April, the mobility center opened a 2.5-mile highway loop and Need sketched plans to to know add places for test  Leadership s c e n a r i o s changes at deemed too danAmerican Center gerous for public for Mobility add roads, a cyber-seuncertainty about curity center and future more in future  High-stakes phases of develproject lost federal opment. Those plans are designation, which now in flux as the could amp up center faces a competition for turnover in leadfederal dollars ership.  Mobility testing Since its grand ground formalizing opening, three relationship with top officials have Mcity departed. A search for a new CEO remains ongoing. In the meantime, Kirk Steudle, director of the Michigan Department of Transportation, has been serving as the organization’s interim Kirk Steudle: Serving as interim CEO and crafting plans that emCEO. phasize increasing revenue. “We’ve got the basics, and now we’re asking the industry what kind of environments they’re interested in using that we don’t have yet,” Steudle told Automotive News. “An off-road area? Interest in a coast-down facility? Everything going forward will be driven by an industry board that lets us know what they’re interested in using and renting. At the end of the day, we need to be building things that are rentable.” The stakes are high. Ford Motor Co., Toyota Motor Corp., Hyundai America Technical Center, Adient Ltd. and Visteon Corp. are among the automakers and suppliers that have invested up to $5 million each on the project. SEE MOBILITY, PAGE 18

MUST READS OF THE WEEK Business executives join fight against legal pot

Is the Palace nearing an acquisition by OU?

Pewabic Pottery shapes future with expansion

DTE, Business Leaders for Michigan and Michigan Chamber of Commerce oppose recreational marijuana legalization. Page 4

Oakland University said to be in “serious negotiations” for the Palace of Auburn Hills. Page 4

Detroit studio and school wants to ramp up participation in development projects. Page 7

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@CRAINSDETROIT

DTE, BLM, Michigan Chamber of Commerce oppose legal pot By Chad Livengood clivengood@crain.com

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Business executives at DTE Energy Co., Meijer Co., the Michigan Chamber of Commerce and Business Leaders for Michigan have waded into the debate over the legalization of marijuana for recreational purposes and are actively opposing Proposal 1 on the Nov. 6 ballot. The Detroit-based utility and the state’s largest business groups have joined a public opposition campaign against Proposal 1, which is making a late advertising push to urge voters to defeat the proposed law. DTE Energy Chairman and CEO Gerry Anderson and company President and COO Jerry Norcia donated $50,000 and $15,000, respectively, to the Healthy and Productive Michigan committee working to defeat the marijuana legalization initiative, according to a campaign finance report filed Friday. Meijer Vice Chairman Mark Murray also donated $50,000 and Grand Rapids businessman J.C. Huizenga donated $51,000 to the anti-marijuana ballot committee, according to the report. Murray declined comment when reached by phone Friday. On Monday, Novi-based power-transmission operator ITC Holdings Corp. made a $50,000 donation to the ballot committee, according to a report. BLM’s PAC donated $50,000 to the Healthy and Productive Michigan committee on Thursday, and Mark Stiers, president of DTE Gas, made a

Need to know

JJDTE, other businesses opposed to

recreational marijuana legalization

JJDTE executives, other business leaders donated money to anti-Proposal 1 campaign JJMarijuana legalization advocates dispute claims about edibles in new TV ad

$2,500 donation Wednesday, according to late contribution reports. An Alexandria, Va.-based nonprofit called Smart Approaches to Marijuana Action has poured more than $1 million into the push to defeat the campaign to allow the commercial sale of marijuana to Michigan residents age 21 or older. The late infusion of cash from the business interests helped the group get its television ad on cable TV starting Thursday night, said Scott Greenlee, president of the Healthy and Productive Michigan ballot committee. “The support recently has been overwhelming,” Greenlee said. “I’m very excited that a number of folks have gotten engaged.” The TV ad claims legalized marijuana would allow pot-infused edibles in candy, cookies and ice cream to contain “unlimited potency” that puts “the lives of our children and grandchildren at stake.” The ballot proposal specifically prohibits marijuana edibles “that are attractive to children or that are easily confused with commercially sold candy,” according to the proposed law. “This ad is typical of the hysteria,

fear-mongering and flat-out lies that have been perpetuated by the opposition this entire campaign,” said Josh Hovey, spokesman for the Coalition to Regulate Marijuana Like Alcohol. “Legalization shifts marijuana sales from the underground market to licensed and regulated businesses that check IDs and keeps in place the same harsh penalties in place today for selling to minors.” The biggest concern among leaders at DTE Energy and the state’s largest business groups centers around concerns of employees being stoned on the job. “At DTE, the safety of our employees — and our customers — is our top priority, which is why we strictly prohibit the use of unauthorized drugs of any kind, including marijuana, by our employees,” DTE spokesman Pete Ternes said. State and federal laws require DTE to subject its employees to drug testing. “We have no plans to change our company’s current drug-free policy even if recreational marijuana is legalized in Michigan,” Ternes said. The Michigan Chamber of Commerce has joined DTE, BLM and other groups in opposing the legalization of cannabis for recreational purposes. Local chambers of commerce in Alpena, Ferrysburg, Grand Haven, Grand Rapids, Hillman, Midland, Muskegon and Spring Lake also have come out in opposition to Proposal 1. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

Oakland University said to be in talks to buy Palace of Auburn Hills By Kirk Pinho kpinho@crain.com

FACEBOOK.COM/CRAINSDETROIT

Oakland University is said to be in discussions with Palace Sports & Entertainment to buy The Palace of Auburn Hills. Discussions have been ongoing for at least six months, according to a real estate source who requested anonymity. Citing “multiple sources with knowledge of the talks,” the Detroit Free Press reported first Friday that the university would purchase the former home of the Detroit Pistons as a new arena for its men’s and women’s basketball teams and as the university’s second concert venue. It also owns Meadow Brook Amphitheatre on its campus in Rochester Hills. The Detroit News also cited a source saying OU is negotiating with Pistons owner Tom Gores’ Platinum Equity to purchase The Palace. Detroit Pistons spokesman Kevin Grigg would not confirm the report and said Palace Sports would have no comment. Brian Bierley, director of media relations for OU, said “it is an interesting rumor, but I am not aware of any serious talks by Oakland University to purchase The Palace of Auburn Hills.” A deal has not been finalized, the Free Press said. The Golden Grizzlies basketball teams play at the O’rena on OU’s campus, which seats about 4,000. The Palace is about five miles from campus. The 22,076-seat Palace opened in

The 22,076-seat The Palace of Auburn Hills opened in 1988 and hosted its last Pistons game on April 10, 2017.

1988 and hosted its last Pistons game on April 10, 2017, five months after the team announced its pending move to the new Little Caesars Arena downtown. Real estate sources have long anticipated that the Palace would be demolished to make way for private redevelopment. Palace Sports asked several developers and other real estate companies this summer to pitch ideas and provide their assessments on the property’s value as well as how much it would cost to tear the arena down, a source familiar with the meetings said Friday. Last year, the city rezoned the 103acre arena property and another 6-acre property that houses the team’s practice facility as a tech and research district. It had been zoned as general industrial. Messages seeking comment were

left with Auburn Hills officials. Billionaire William Davidson, the Auburn Hills commercial and industrial glass industrialist who bought the Pistons for $8 million in 1974, spent $90 million to build the Palace with partners Robert Sosnick, the former president of Southfield-based developer Redico LLC who died in 2000, and dealmaker David Hermelin, who also died in 2000. Davidson died in 2009. Gores bought the Pistons and The Palace in 2011 for $325 million from Davidson’s widow and several minority owners. He has spent $40 million in upgrades on the arena. Pistons and Palace staff continue to use the arena as office space until a new $65 million team headquarters and practice facility opens in Detroit’s New Center area next summer. — Crain’s reporter Bill Shea contributed to this report.

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Hazel, Ravines and Downtown bets on market, diverse cuisine in Birmingham By Annalise Frank afrank@crain.com

“Highest Member Satisfaction among Commercial Health Plans in Michigan”

Hazel, Ravines and Downtown is a $1.5 million bet on an unusual restaurant concept in an expensive city, but its owners are confident they’re in for a win. Beth Hussey and chef Emmele Herrold are launching their “casual fine dining” spot at the eastern edge of downtown Birmingham, in the Greenleaf & Trust Building at Maple Road and Woodward Avenue. It opens Monday in a prominent location previously home to The Stand Gastro Bistro. Hazel, Ravines and Downtown is a 10,000-square-foot corner restaurant with an open layout, 120 seats and a long hallway that doubles as a convenience store. Those dining in will also see a raw oyster bar, a large U-shaped bar and the state’s only Jim Beam highball-making machine. Hussey and Herrold want their restaurant to be a neighborhood destination, Hussey said. They’re close to two parking structures, so they’ll serve the early morning working crowd, too. “So many people park right there,” Hussey said. “At 7 a.m. it looks like downtown New York City here.” So HRD has a “C Store” that opens at 7 a.m., aiming to sell what an office employee downtown needs during the workday: snacks, chips, sandwiches, coffee, pastries, salads — even aspirin and cigarettes. The restaurant and market designed by Birmingham-based Ron and Roman LLC comes from the minds of sole owners Hussey and Herrold, who worked together previously to create One-Eyed Betty’s and Pop’s for Italian in downtown Ferndale. Herrold was chef and Hussey was a partner in the ownership group, Kramer Restaurant Group. Hussey said that after she reached

kpinh

ANNALISE FRANK/CRAIN’S DETROIT BUSINESS

Hazel, Ravines and Downtown opens Monday in the Greenleaf & Trust Building at Woodward Avenue and Maple Road in Birmingham. The restaurant is flanked by a small convenience store that opens at 7 a.m. to serve office-goers in the city’s downtown.

Need to know

JJRestaurant at Maple Road and

Woodward Avenue opens Monday JJThreefold concept offers trendy, international and familiar foods JJOwners were creative minds on Pop's for Italian, One-Eyed Betty's in Ferndale

out to chef Herrold, they both knew they wanted a venture in Birmingham, though “we knew it would be extra hard to afford a restaurant” in the city known for its upscale dining options. The business partners pooled $500,000 of their own money and got a $1 million loan through Huntington National Bank. The investment’s a personal risk, Hussey said, but “the numbers just work for us. Assuming the (sales) are what we think they’re gonna be.” The mouthful of a name Hazel, Ravines and Downtown is drawn from

the eatery’s location at the junction of three old Birmingham neighborhoods. The three words also represent a trio of menu categories, respectively: familiar, internationally inspired and trendy. “To me every project has to start with a strong vision,” Hussey said. The owners also wanted accessible pricing. Dishes range from $6 for chicken noodle soup and $9 for Georgian cheese bread to $12 for seasonal panzanella, $20 for a fall oyster roast and $24 for Peruvian chicken. The menu spans ethnicities and cuisine styles, color-coded into the three namesake categories. With a staff of 120, HRD will serve dinner, brunch, lunch and hot sandwiches to go. It also has flexible private dining space that can seat up to 100 and a private meeting room targeted at businesses. Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

Antietam’s Gratiot Avenue space resurrected as seafood, burger restaurant By Annalise Frank afrank@crain.com

A new seafood and burger restaurant is coming to the distinctive Art Deco buildings on Gratiot Avenue that French-inspired Antietam vacated in March. Le Culture Cafe is leasing from Greg Holm, owner of the Detroit buildings and restaurant Antietam, Holm confirmed to Crain’s. He said in a message he is still looking to sell his property on Gratiot, but did not respond to a question on price. The incoming restaurant’s owner, Drew Matthews, said he’s aiming for a Nov. 9 opening. He deferred additional comment to a chef who wasn’t immediately available. Le Culture is taking up around 2,000 square feet across the ground floor of both storefronts. The fine-dining restaurant’s appetizers range in price from $9 for jerk veggie lettuce wraps to $22 for fried jumbo crab claws, according to a menu posted on its Facebook page. Sandwiches and burgers are around $10-$18. Mains include southern fried chicken for $18, stuffed salmon for $28 and $60 for jumbo king crab. From a peek through windows, major decorative and remodeling work has been completed for Le Cul-

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ANNALISE FRANK/CRAIN’S DETROIT BUSINESS

Le Culture Cafe aims to open Nov. 9 in the Gratiot Avenue spot vacated by Antietam in March.

Need to know

JJLe Culture Cafe is leasing from owner of

closed, French-inspired restaurant Antietam

JJAnticipates Nov. 9 opening date JJEastern Market area seeing new interest from landlords, investors

ture on the thoroughfare just northeast of downtown. The cafe is in Eastern Market, an area of Detroit that’s seeing increased attention from new landlords and investors. It’s tucked between retailers including Orleans + Winder, SMPLFD and Boro Resale, and on the same block as recently re-

opened cafe Trinosophes and shared-plates restaurant Gather. Antietam shut its doors after a four-year run because “our goal has been accomplished,” Holm said in a statement early this year. As of March, he was listing for sale the smaller of the two buildings, one story at 1420 Gratiot Ave., as a turnkey, 30-seat restaurant for $650,000. He was also considering selling the next-door, two-story building at 1428 Gratiot that could seat around 50 on its first floor. Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

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Adient takes $11M haircut in sale of planned HQ By Kirk Pinho kpinho@crain.com

Adient plc lost more than $11 million in the sale of its planned downtown Detroit headquarters property across from Cobo Center. A $25 million sale of the 164,000-square-foot Marquette Building at 243 W. Congress St., an approximately 400-space parking deck at 328 W. Congress and a surface parking lot at 225 W. Congress closed last Wednesday to an entity tied to Detroit-based real estate company Sterling Group, according to a source familiar with the matter. The source said Sterling Group plans to market the property for lease. An email seeking comment was sent to Adient on Thursday morning. The spinoff of Milwaukee-based Johnson Controls Inc. paid $36.13 million to acquire and improve the property over the course of a year between November 2016 and November 2017, according to city property records. It’s not known how much money the company sunk into what was to be its new headquarters in the Marquette Building, a $100 million plan for which was scrapped this summer. Adient will remain in its Plymouth Township headquarters, a spokeswoman said at the time. Detlef Juerss, the company’s vice president of engineering and chief technology officer, said in August that the downtown Detroit plan was a mistake. “Detroit was not the right timing,” Juerss said at the Center for Automotive Research’s Management Briefing Seminars in Traverse City. “We should have spent that money somewhere else.” It would have been home to about 500 employees, including more than 100 new hires in such departments as legal, accounting, audit and treasury. It received a $2 million state incentive. The city also offered a property tax incentive, according to the Michigan Economic Development Corp. Adient is tax-domiciled in Dublin, Ireland.

KIRK PINHO/CRAIN’S DETROIT BUSINESS

Adient plc paid $36.13 million for the Marquette Building, a parking deck and a surface parking lot in downtown Detroit less than two years ago.

Need to know

JJAdient properties sell to Detroit-based Sterling Group for $25 million JJSupplier paid more than $36 million for them less than two years ago JJSterling plans to market the property for lease

Its 2017 revenue was $16.21 billion. Since spinning off from JCI, Adient has struggled to maintain consistent profitability, reporting a $1.5 billion loss in 2016 before recovering to net income of $877 million last year. In 2018, its balance sheet has been dragged down by its money-losing seat structures and mechanisms division with its $3.3 billion in debt. In the second fiscal quarter of 2018, Adient reported a net loss of $168 million on revenue of $4.6 billion, but recovered in the third quarter with a $54 million profit. Mexican businessman Carlos Slim Helu bought the Marquette Building for $5.8 million in 2014 and sold it to Adient in November 2016 for $16.9 million. The company also paid about $19.23 million combined for a parking deck (November 2016) and surface parking lot (November 2017), according to city property records.

Pewabic shapes future with capacity-doubling expansion By Annalise Frank afrank@crain.com

Pottery nonprofit Pewabic has finished a $1.1 million expansion to its historic Detroit building that it expects to nearly double production capacity. The 115-year-old ceramics studio housed in a national historic landmark is most well-known for its decorative tiles. It sells ceramics for public projects, home renovations and retail. The studio expects the added production space will help it ramp up participation in the projects that are changing Detroit’s cityscape. Last year, Pewabic provided tile designs for a mural on Little Caesars Arena and QLine streetcar stations on Woodward Avenue; now its wall tiles will appear in the soon-to-open Shinola Hotel’s beer garden. The nonprofit started moving equipment into its new attached addition last week ahead of the high-volume holiday season. Its campus is at 10125 E. Jefferson Ave. between Hurlbut Street and Cadillac Boulevard, just east of the MacArthur Bridge to Belle Isle. Construction finished Wednesday, Executive Director Steve McBride said. Pewabic plans to announce a naming-rights sponsor during a ribbon-cutting ceremony Thursday, after which it will host a public open house noon-3 p.m. Saturday. Funding for expansion came from more than 250 donors. Inform Studio out of Northville designed the 2,500-square-foot studio space with a contemporary look that complements the main Tudor-style house, McBride said. It’s the first physical expansion of production space since 1912. Detroit-based Sachse Construction managed construction.

Need to know

JJDetroit pottery studio and school wants to ramp up participation in development projects JJMore production space, elbow room in $1.1 million expansion JJNonprofit housed in historic building made tiles for QLine, Little Caesars Arena

“We’ve been making all of our tile in this really cramped 700 square feet of space,” he said. Pewabic fires 1,000 square feet of tile in its kilns per month and expects to ramp up to 1,800 square feet with the addition, according to McBride. “What we’re hoping to accomplish with this is to look toward the future and meet the needs of architects and designers for some of these larger projects,” he added. “To be as much a part of the development of Detroit as we have been the last 115 years.” Last year, half of Pewabic’s production went to commercial projects and half to individuals. But a huge project like the QLine can greatly alter that ratio, so it varies year to year. In 2017, the nonprofit recorded $3.9 million in revenue. About two-thirds came from selling ceramic art, 25 percent from fundraising and grants and 10 percent from tuition for its classes. It expects to hire more onto its 60-employee team over the next several years. Other recent Detroit projects include commemorative tiles for the beatification of Father Solanus Casey last year and tiling the wine cellar floor in the Charles T. Fisher Mansion. “It’s an exciting time to be in Detroit doing the work we do,” McBride said.

When we say we'll take care of your employees, we mean it.

Discover more at bcbsm.com/employers

For J.D. Power 2018 award information, visit jdpower.com/awards. Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association.

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

OPINION EDITORIAL

LETTERS

Why candidates cozy to Snyder

Bill Schuette unfit for governor’s job

uddenly, everyone wants to be close to Rick Snyder. A few years after the governor became politically radioactive in the depths of the Flint water crisis, both candidates for governor are touting their ties to him. It makes strange bedfellows, for sure. In last week’s debate, Democrat Gretchen Whitmer made much of her record of working together with Snyder, especially on the Healthy Michigan Medicaid expansion. Republican Bill Schuette laid claim to Snyder’s economic legacy: “We are better off than we were eight years ago ... And I have the experience to build on the success of the last eight years and drive our state forward” despite bad blood between the two that apparently led Snyder to pointedly not endorse Schuette. It’s a tribute to the success of Snyder’s eight years in office. He will finish his term, which started with Michigan as an economic basket case, with a number of significant accomplishments: n The reworking of Michigan’s business tax system, making it more appealing to employers. n The Healthy Michigan expansion, which helped insure an additional 650,000 people and has been a boon for Michigan's important health care industry. n Helping to oversee the rescue of Detroit from its historic Chapter 9 bankruptcy, a saga that appears to have structurally fixed decades-old problems with the city’s finances for the long term. n The deal to construct the Gordie Howe International Bridge — with Canada paying for it. n An economy that’s now back to pre-recession levels and was the seventh fastest-growing in the nation since the recession’s nadir in 2009. Certainly, there are other issues that will also be part of Snyder’s legacy. There are still lingering questions about the Snyder administration’s handling of the Flint crisis, and it will always be seen as a defining aspect of his time in office. But his administration has also put enormous effort and resources behind the recovery effort. In a time notable for its political divisions, Snyder was the rare politician who mostly was able to rise above the rancor. His motto of “relentless positive action” is easy to mock, but it’s also an accurate description of his approach to governing. We understand why both Whitmer and Schuette would want to be associated with that, and we hope that whichever candidate wins, they do carry on Snyder’s legacy of data over discord and pragmatism over politics.

To the Editor: As former director of the Michigan Department of Community Health for both Govs. John Engler and Rick Snyder, I recognize what it takes for a person to successfully serve as governor of the great state of Michigan. It takes leadership, principles and integrity. That is why I am part of the group “Republicans and Independents for Gretchen Whitmer for Governor.” I have known Bill Schuette for many years and based on my personal experiences with him, I do not believe Bill Schuette is right for the job. When I came back to serve as director of the department in 2012 Bill Schuette called to welcome me. He said I should fire the department employees he called “the tobacco Nazis.” I was shocked. He was talking about committed professionals who were making Michigan restaurants and public places smoke free. Bill Schuette was more interested in appeasing big tobacco than protecting the health of its residents. After a federal judge ruled against Attorney General Schuette and held that Michigan’s ban on same-sex marriage was unconstitutional, Schuette immediately appealed. We sought the attorney general’s advice on how the Department of Community Health’s Division of Vital Records should handle pending marriage licenses, in light of his appeal. Despite the department’s need for clear legal advice, and in spite of the fact that this was needed as a direct result of his appeal, Schuette declined to do his job and provide us with legal advice. We had to seek our own legal advice elsewhere. By refusing to advise the Vital Record Division, Bill Schuette failed in his duty as the attorney general to represent our department in an unbiased manner. When Gov. Snyder supported the expansion of Medicaid through the Healthy Michigan Plan to provide insurance coverage to adults who didn’t have health care, Bill Schuette did everything he could legally and politically to kill it. Thankfully, he failed. A coalition led by Gov. Snyder and Senate Minority Leader Gretchen Whitmer got the bill passed. It now provides health care to over 680,000 Michiganders. Half of them are working families. Even today, Bill

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Schuette is trying to dismantle this program that would strip health care from hundreds of thousands of Michiganders. The way Bill Schuette has handled the Flint water crisis has cost the taxpayers more than $35 million. But after three years there hasn’t been one single trial. All that money could have been spent to help the citizens of Flint. But Schuette’s only goal was publicity for himself and his campaign for governor. I’m a Republican, and I encourage you to vote for Gretchen Whitmer for governor on Nov 7. She will represent us all with principled leadership and integrity. Jim Haveman Grand Rapids

Vote Schuette to continue comeback

To the Editor: Michigan’s future is on the line in November. It’s vital that we vote to continue our comeback. Keeping Michigan on the right track is why I am supporting Bill Schuette for governor. Memories tend to be short, but let’s not forget our state’s dire situation just a few short years ago. People refer to the “Lost Decade” for a reason. Unemployment soared near 15 percent, twice the national average. More than 500,000 jobs vanished. But with the election of Rick Sny-

der in 2010, he and the Republican Legislature implemented a series of bold reforms and put Michigan on sound financial footing. The results speak for themselves. Michigan’s unemployment rate is at a 17-year low. State debt was reduced by $20 billion. Michigan now has the sixth-fastest income growth in the U.S., and we’ve added 555,500 new jobs. So how do we build on all that progress? Bill Schuette has the experience to build on Gov. Snyder’s pro-growth polices. His opponent, Democrat Gretchen Whitmer, fought against Gov. Snyder’s dramatic reforms; she would take Michigan backward. I know what a difference strong, capable leadership in Lansing can make for our state. Bill Schuette is best positioned to build on that success. That is why he has earned my vote for governor of Michigan. Robert Kurnick Jr. Vice Chairman, Penske Corp. President, Penske Automotive Group Bloomfield Hills Send your letters: Crain’s Detroit Business will consider for publication all signed letters to the editor that do not defame individuals or organizations. Letters may be edited for length and clarity. Email: malee@crain.com

What about everyone else?

n a few days, our nation will go to the polls for our midterm elections, and the pundits have been busy predicting the outcome before the election. They all seem to forget what happened before the last big election. Our country will be electing everyone in the House of Representatives, some U.S. senators, a bunch of governors and lots of state representatives. Count them up and it’s certainly a lot of seats.

KEITH CRAIN Editor-in-chief

But their numbers are far dwarfed by those of other bodies within our

state and federal government. Those elected representatives are a mere drop in the bucket compared with the tens of thousands of people staffing the bureaucracy who are not elected by the people and all too often are not accountable to any elected officials. I am not sure how, if it is even possible, to change how we run our government and make it more accountable to the people. A good first step is for our elected leaders to keep close tabs on a bu-

reaucracy that too often takes on a life of its own. All too often, many of these employees seem to believe that they are independent and not necessarily accountable to anyone, certainly not anyone who might have been elected by you or me. It seems to demonstrate just how important voting has become. Not only is it important to vote, but we should also demand that our elected representatives fulfill the responsibility of keeping an eye on the unelected bureaucrats who work for us.

Sometimes the choice may seem difficult between two candidates, but one of them will win. So we have to make a choice, not always a simple one. But the real answer is to vote.

More on WJR Hear Crain’s Group Publisher Mary Kramer and Managing Editor Michael Lee talk about the week’s stories every Monday morning on WJR 760 AM’s Paul W. Smith Show.

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

Marijuana issue is bad business for Michigan

ue to innovation, resources, and of course, hard work with our drive to succeed, Michigan has always had a proud tradition of setting an example for the rest of the country. However, there is a threat to our continued success: commercialized marijuana. In a few short weeks, we will vote on legalizing and commercializing this drug, and it could hurt our state in profound ways. More marijuana use in the workplace signifies increased costs for employers. Workplace accidents, injuries, absenteeism and disciplinary problems are just the start of the challenges pot brings. Employees who test positive for marijuana have 55 percent more industrial accidents, 85 percent more injuries, and absenteeism rates that are 75 percent higher than those who test negative on a pre-employment exam. When it comes to absenteeism, one marijuana-using employee could cost an employer up to $3,260 a year per each full-time hourly employee, or $2,407 a year per each salaried employee. Not only does increased marijuana use potentially cost employers money due to the aforementioned issues, it also means a less desirable hiring pool. In Colorado, the poster child for legalization, the CEO of the state’s largest construction company stated that they are having to recruit workers from other states due to most of the applicants from Colorado being unable to pass a drug test. Legalization is great news for trial lawyers, though. The marijuana industry has not only pushed for legalization of the substance, it has vowed to make employee “rights” to pot use a priority. This has resulted in several anti-business court rulings as of late, and has racked up even more costs for employers. The preponderance of data shows that availability drives use. The more available marijuana becomes through legalization and commercialization, the more people will use it. If employers are worried about the current workforce being high on marijuana, how much more impact will increased marijuana use have on the future workforce?

TALK ON THE WEB

Re: JLA demolition cost rises to $12M I thought the state allocated $6 million for demolition as part of approving the LCA tax breaks. LCA was insisting Joe Louis be torn down so it wouldn’t be competition for them, yet the city incurs the costs. Par for the course. MikeInMI Bigger problem with this site is how to make it anything but the back end of Cobo. What ever goes in there needs to work with Cobo on longterm expansion plans and the Detroit River Front Conservancy. E M Parmelee Typical of business as usual in the “D .” Bill Only missed estimate by 100 percent. John

OTHER VOICES Scott Greenlee

Today’s pot is not your Woodstock Weed. It is highly potent — some products are 99 percent pure THC — and addiction is real. In fact, more young people are in treatment for marijuana abuse than for alcohol

and all other drugs combined. Adolescent marijuana use severely impacts the ability of our youth to learn, greatly increases the risk of serious mental illness, impairs memory and can even result in a loss of up to eight IQ points. Today’s youth are the workforce of tomorrow. If, as the data have shown, legalization leads to increased marijuana use among young people, the implications for future workforce readiness and productivity are indeed grim. While the Big Marijuana industry claims that legalizing recreational use will lead to an influx of state tax dollars, evidence shows that the costs of legalization outweigh any poten-

tial tax revenue. Based on research in states that have legalized recreational marijuana, the public health costs related to Big Marijuana are at least 25 percent greater than the increased tax revenues, due to workplace accidents, hospital admissions, traffic crashes and increased law-enforcement costs. And there are so many more costs we cannot even begin to quantify. They include increased use of other drugs, greater marijuana use, controlling an expanded black market, sales to minors, public intoxication, more drugged driving which results in higher auto insurance rates and other burdens.

SAVINGS

Savings and energy efficiency go hand-inhand. But folks like Jerad Rushlow, owner of Daybreak Salon in Woodhaven, prove managing energy usage goes beyond just saving. DTE helped him make a few changes like installing T-5 fluorescent fixtures, LED lights with dimmers, and ENERGY STAR® rated washers and dryers. Plus, not only did he save money, he made his space more inviting and enhanced the atmosphere for his clients.

To learn more about managing your energy use to save money, go to dteenergy.com/savenow.

We must push back against the might of Big Marijuana lobbyists and activists. Their deep pockets and continued drive to succeed at all cost are creating a stoned workforce that is draining our economy. It’s up to us to stand together Vote No on Proposal 18-1 on Nov. 6 — we cannot succumb to the manipulations and deceptions of an industry that will increase use among our youth, and bring with it the next social disease. Scott Greenlee is president of Lansing-based Greenlee Consulting and president of the Healthy and Productive Michigan campaign.

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

FOCUS LAW

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BEST IN CLASS: LAW

Awards honor work that brought outstanding results for clients

reat lawyers are tireless. Our inaugural Best in Class: Law awards honor the work of those who did not rest until they achieved an outstanding result for their clients. These awards represent the most impressive work of area lawyers and law firms in

2017 — work that made a difference in our region. We asked you, our readers, to submit nominations in categories including: Law Firm of the Year, Attorney of the Year, M&A and Real Estate Deals of the Year, Business Litigation of the Year

Law Firm of the Year Plunkett Cooney It was a high-profile case for a firm that tends to fly under the radar. In Jennings vs. Genesee County Deputies, an excessive use of force case, plaintiff William Jennings alleged he was mistreated while in police custody after his arrest for

drunken driving in 2010. In 2016, a jury verdict in U.S. District Court for the Eastern District of Michigan awarded Jennings nearly $37 million in damages — a huge sum comparatively for a police brutality case. Plunkett Cooney, one of the few Midwest law firms with a dedicated team of appellate attorneys, represented the defendant post-trial.

“Our attorneys are always involved in major litigation, appeals and business transactions.” Thomas P. Vincent, President and CEO

Plunkett Cooney attorneys were able to reduce damages from $37 million to $11 million. After the

and Nonpartner Associate of the Year. The winners were selected based on top scores from a panel of judges that included Crain's editorial staff; William Blasses, associate, Kerr Russell; and Tamira Chapman, attorney, Ford Motor Co. and Crain’s 2018 40 Under 40 honoree.

plaintiff declined the remittitur, the district court ordered a new trial, bringing the total verdict in the case to $0. Jennings later settled out of court. It was one among several significant cases for Plunkett Cooney in 2017. The firm also represented the buyer in the acquisition of Ciber Inc. North America and India operations for $130 million through a bankruptcy proceeding that involved 16 office locations, hundreds of contracts and thousands of employees. SEE FIRM, PAGE 11

In this package JJLaw Firm of the Year. This Page JJReal Estate Deal of the Year. Page 11 JJAttorney of the Year. Page 12 JJBusiness Litigation of the Year. Page 12 JJM&A Deal of the Year. Page 12 JJNonpartner Associate of the Year. Page 12

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

BEST IN CLASS: LAW

Real Estate Deal of the Year McLouth Steel Products Corp. sale Wayne County and Crown Enterprises Inc. By Kirk Pinho kpinho@crain.com

The future of more than 180 acres of Detroit riverfront property in Trenton were at stake when the former McLouth Steel Products Corp. went into foreclosure. In the end, the property along West Jefferson Avenue ended up in the hands of the Moroun family for redevelopment and the downriver Wayne County community gets at least $20 million in investment and hopefully a new life for the site in the years to come. Among the challenges attorneys for both the county and the Moroun family’s Warren-based Crown Enterprises Inc. were $4 million in back taxes that had to be paid; a looming property tax foreclosure auction the county wanted to avoid; a raft of environmental issues as a result of the property’s previous use; a right of first refusal process; and the overall effort to return the site to productive use, said Daniel Rosenbaum, the current executive director of the Wayne County Land Bank who was general counsel for the organization during the deal’s negotiations. Ever since McLouth closed in 1996 when the steelmaker went bankrupt, the property has been

FIRM

FROM PAGE 10

And it represented Singh Development in the purchase of four acres from the City of Royal Oak at the corner of I-696 and Woodward Avenue adjacent to the Detroit Zoo — one of the most visible parcels of land in Metro Detroit, soon to be home to a $65 million residential and retail development. Founded in Detroit in 1913, today the Bloomfield Hills-based firm considers itself a well-kept secret, winning the kinds of cases that don’t make headlines. Though it made its reputation as a top litigation firm, Vincent said Plunkett Cooney has been intentional about growing its business law department significantly over the years. Though they’re not always at liberty to discuss their successes, “our attorneys are always involved in major litigation, appeals and business transactions,” said President and CEO Thomas P. Vincent. “Plunkett Cooney clients say that we are their go-to law firm because from the courtroom to the boardroom, our attorneys are experienced, responsive, fearless, and obtain great results.” Among many recent national honors, Plunkett Cooney was named by National Law Journal among the top 100 law firms nationally for female attorney diversity in 2016 and 2017. In 2018, the firm hired Laurel McGiffert to be its first director of diversity and inclusion.

challenged, Rosenbaum said. “The previous ownership didn’t have the capacity or show any results in doing something productive on the site,” he said. “The county was trying to prevent this large, crazy property from going through the foreclosure auction,” said Cheryl Jordan, deputy corporation counsel for Wayne County who was the land bank executive director during the negotiations. “By letting Crown purchase it before it went to auction, we were able to get them to agree to a bunch of stuff.” That includes hiring of Wayne County companies and residents, and investments in Trenton philanthropic organizations and job fairs, Jordan said. The deal was struck in September 2017, with Crown paying $4 million for the site on the condition that they invest at least $20 million within six years cleaning it up and redeveloping it. If the company fails to meet that deadline, a $1 million fine will be imposed. Also working on the deal were Randal Brown, general counsel for the Great Lakes Water Authority who at the time was deputy corporation counsel for the county; and Dennis Schreibis, a director at Crown Enterprises.

KIRK PINHO/CRAIN’S DETROIT BUSINESS

In a deal struck in September 2017, Crown paid $4 million for the former McLouth Steel site.

Tax and Financial Controversy Experience

In Your Corner. ®

Former Senior Trial Attorney for the District Counsel of the IRS and Special Assistant U.S. Attorney for the U. S. Department of Justice

Tax and financial controversy (IRS and various States), civil and criminal tax litigation

First Tier Ranking in Tax Law and Tax Litigation

Contact Eric M. Nemeth at emnemeth@varnumlaw.com

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

BEST IN CLASS: LAW

Attorney of the Year

USM Holdings Inc. and Wynnchurch Capital v. Brian Simon Dickinson Wright PLLC

E. Powell Miller

By Dustin Walsh

The Miller Law Firm PC

dwalsh@crain.com

By Dustin Walsh dwalsh@crain.com

E. Powell Miller is ambitious. Leader of his debate team at the University of Detroit High School, winner of the Harvard University Varsity Debate Tournament while only a freshman at Georgetown University, he became partner at Detroit law firm Honigman Miller Schwartz and Cohn before his 30th birthday. In 1994, at 33 years old, he founded his own firm — Rochester-based The Miller Law Firm PC. Also ... he’s never lost a trial. In 2017, Miller took on two cases that could challenge his winning record. He was hired by Oakland and Wayne counties to represent them in a joint lawsuit against 12 pharmaceutical companies over the marketing of prescription drugs, particularly opioids. He is also co-lead attorney on a class action suit brought by investors against Fiat Chrysler Automobiles alleging the automaker inflated

Business Litigation of the Year

E. Powell Miller

sales numbers. Both cases are ongoing. Miller also represented Peter Karmanos in his lawsuit against his former company Compuware, who fired Karmanos in 2013 and stripped him of vested stock options after a public spat with the company and its new owners. Miller secured a $16.5 million verdict in favor of Karmanos, and the Michigan Supreme Court upheld the arbitration victory last year. Miller earned his law degree from Wayne State University in 1968.

Chicago-based private equity firm Wynnchurch Capital Ltd. acquired Warren-based U.S. Manufacturing Corp., a supplier of truck and trailer axle components, for $270 million in June 2014. The deal marked Wynnchurch’s re-entry into the Southeast Michigan automotive market, after selling off many of its holdings following the Great Recession. From the outside, the transition appeared smooth. USM revenues climbed; its backlog grew. But less than 18 months after acquiring the supplier, Wynnchurch sued its former owners and executives for fraud to the tune of $51 million. In a December 2015 suit, Wynnchurch alleged former CEO and equity holder Brian Simon and nearly two dozen shareholders in the Simon family misrepresented the state of its equipment at its plants in Silao, Mexico, and Warren and omitted breach of contracts with its second largest customer Dana Holding Corp. and a sour relationship with its

Thomas McNeill

Benjamin Sobczak

largest customer American Axle & Manufacturing Inc. Despite USM being a private company, Wynnchurch sued on the grounds that the former owners breached U.S. Securities and Exchange Commission rules, which are generally applied to publicly traded companies. The suit, filed in U.S. District Court in Detroit, alleged Simon and his partners “distorted USM’s capacity to successfully launch three Dana programs” which caused Wynnchurch to spend tens of millions of dollars on new equipment and upgrades to execute the contracts. Detroit-based Dickinson Wright PLLC attorneys Thomas McNeill and

Benjamin Sobczak represented Simon and another shareholder in the case, drafting up a 75-page motion to dismiss the case, asserting that Wynnchurch negotiated a poor contract with American Axle and made other poor business decisions that led to its financial troubles. Detroit-based Miller Canfield PLC represented several other members of the Simon family and Detroit-based Clark Hill PLC represented the company’s former CFO. By February 2017, USM was losing money and Wynnchurch sold the company’s operations to Dana for $100 million. Wynnchurch continued to pursue its lawsuit against the Simons and other owners and executives. But in June of that year, a judge dismissed the case and its claims. Wynnchurch did not appeal the federal case, but did file another lawsuit in Macomb County Circuit Court alleging breach of contract. The parties reached a settlement earlier this year, releasing $12 million held in escrow linked to the deal to Wynnchurch.

M&A Deal of the Year Sale of Art Van Furniture, Puresleep and Affiliates Bodman PLC

By Dustin Walsh dwalsh@crain.com

The sale of Warren’s iconic Art Van Furniture Inc. in early 2017 remains one of the most memorable acquisitions in recent years. The late Art Van Elslander, former chairman and founder, sold the 59-year-old furniture retail chain to Boston-based Thomas H. Lee Partners LP in January 2017 for an estimated $550 million. The deal brought new ownership and the prospect of further expansion to a chain that grew out of a one-man store on Gratiot Avenue in Detroit in 1959. Van Elslander died just over a year later at age 87. Bodman PLC in Detroit represented Van Elslander in the deal, which involved more than 100 stores in five

states, some leased, some owned, an affiliated manufacturing business, a franchising program, roughly 4,000 employees and nearly $1 billion in revenue. Bodman’s interdisciplinary team included attorneys: David Larsen, Carrie Leahy, Kenneth Powell, Michael Antovski, Timothy Bliss, Alexandra Dieck, John Cashen and David Walters. Despite the complex nature of the deal, the Bodman team was able to secure a close quickly and the transition appears to have been smooth. Since acquiring Art Van, Thomas H. Lee has extended the retailer’s sponsorship of the Detroit Thanksgiving parade and acquired several other retailers to expand the Art Van model including St. Louis-based Rothman Furniture & Mattress.

An Art Van Furniture storefront on Gratiot circa 1963.

Nonpartner Associate of the Year Ariana Pellegrino Dickinson Wright PLLC By Amy Elliott Bragg abragg@crain.com

Ariana Pellegrino arrived at the courthouse expecting just to observe. In January, the Michigan Court of Appeals was set to hear oral arguments in the case of Kimberly Rodriguez v. Board of Regents of the University of Michigan. Pellegrino, an associate at Dickinson Wright PLLC, had been back to work after maternity leave for less than a week. She had written the

brief on behalf of UM, but that was another lifetime ago, months before her daughter was born in September 2017. She didn’t have the brief with her. She Ariana Pellegrino: didn’t even have a Successful appeal pad of paper with her. But the court for UM. docket had moved quickly that morning, and the case was called early, before lead counsel had arrived. Pellegrino tried to stall,

but the chief judge said she had to argue the case or concede the appeal. “I think it’s fair to say this is a litigator’s worst nightmare,” Pellegrino said. “I was thinking ‘What is the defendant’s name? What is my name?’” The panelists were gracious while she composed her thoughts, she said. “The first minute — I would not like to read that transcript. But once opposing counsel went, it jogged the memory ... it ended up going really well, and the judges were complimentary.” More importantly, UM won the appeal in a 3-0 decision. Pellegrino turned a terrifying situation into a positive outcome

for the client and the firm. “I’ve worked with Ari on several significant employment cases, and she has been a tremendous help in terms of the quality of work she provides and assistance to our clients,” said Timothy Howlett, member and Labor & Employment Practice leader at Dickinson Wright. “Ariana doesn’t just check the boxes when it comes to her work, she embraces each project by looking at the whole picture to help achieve the best possible outcome for our clients.” Besides her moment of grace under pressure, Pellegrino is proud of an $81 million judgment she and a partner

won after a two-year-long case in Ann Arbor, as well as her recent pro bono work on a case in the Eastern District of Michigan on behalf of a man who was not allowed to celebrate the Muslim holiday Eid while he was incarcerated. The state is currently appealing the decision to the 6th Circuit Court, but Pellegrino is glad to have won some relief for her client for the time being. But her proudest accomplishment, she said, is that she has been able to do all of this as a new mom — “being able to keep acting on a high level as a professional while having an awesome kid.”

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UM Detroit Center, Carr Center on the move

By Sherri Welch swelch@crain.com

The tenants of a couple of prime Woodward Avenue locations in Downtown Detroit are set to turn over, displacing the Carr Center from a temporary location, and next year, relocating the University of Michigan Detroit Center to the north side of Orchestra Place. UM’s lease on the Woodward frontage in Orchestra Place where its Detroit Center is located now will end and not be renewed in 2019, said James Holloway, vice provost for global engagement and interdisciplinary academic affairs at UM, in an email. UM will take other space in Orchestra Place for Detroit Center at that point, but it’s smaller and doesn’t include gallery space. “We hope this lease will take us through the time until we can occupy the Rackham Building,” Holloway said. The university earlier this year purchased the 77-year-old Horace H. Rackham Education Memorial Building in Midtown, with an eye toward expanding UM’s footprint in the city. The relocation of Detroit Center to the north side of Orchestra Place in early 2019 is happening to reactivate the southern part of the building for retail, said Richard Broder, CEO of Detroit-based Broder & Sachse Real Estate, in an emailed statement. “They are a valued tenant we look forward to hosting for years to come.” Broder & Sachse bought Orchestra Place last year from the Detroit Symphony Orchestra. Separately, the Carr Center recently moved its gallery out of temporary space it’s occupied for the past year in a Bedrock-owned building at 1505 Woodward at Clifford, across from the John Varvatos store. The Carr Center, which hosts African and African-American and other diverse arts programs, provides arts education and provides space for local artists

The Carr Center moved into this building at 1505 Woodward in downtown Detroit in August 2017.

Need to know

JJUM Detroit Center lease for Woodward

frontage at Orchestra Place to end next year JJUniversity to move Detroit Center to smaller space in same building JJCarr Center has moved from Bedrock-owned space on Woodward, plans pop-up exhibits at UM Detroit Center gallery

and performers, is leasing office space in the Hannan House nonprofit office center in Midtown. After hosting its performance programs at various sites last year, it’s moved them to Detroit School of Arts this year. Bedrock provided the temporary

space to the Carr Center at cost just over a year ago, after the nonprofit moved from its leased space at Harmonie Club after falling two years behind on its rent and losing a bid to buy the building. The agreement between the two was that Carr Center could remain in the 4,600 square feet of space it was renting at cost indefinitely, until Bedrock signed a permanent tenant for the space. Both Bedrock and Quicken Loans have been longtime supporters of the Carr Center, said Jo Lynn Lewis, marketing and communications director for the center, in an email. “We were grateful for the ‘indefinite temporary’ solution that they provided.” Bedrock has been going “above

Company to invest $71.1M, create 500 jobs in Washtenaw County By Kurt Nagl

Need to know

High-tech semiconductor equipment manufacturer KLA-Tencor Corp. is planning to invest up to $71.1 million and create 500 jobs in Washtenaw County. The new research-and-development center would be the first Michigan location for the Milpitas, Calif.-based company, which supplies process control and yield management systems for the semiconductor industry and employs 6,000 people worldwide, according to a news release from the Michigan Economic Development Corp. The company intends to lease temporary space in Ann Arbor before choosing a site where it would construct a permanent facility in Ann Arbor Township or Pittsfield Township. The plant would support long-term growth projections for the company. A message left with a company spokeswoman last week for more information about the project was not returned. KLA-Tencor (NASDAQ: KLAC) reported just shy of $1.1 billion of reve-

Arbor area

knagl@crain.com

JJKLA-Tencor plans plant opening in Ann JJJobs would pay $48-$72 per hour

JJState supporting project with $16.2 million

nue for fiscal year 2018. Its stock was trading at $89.03 at Thursday’s closing. The state is supporting the project with about $16.2 million over eight years through a Good Jobs For Michigan Withholding Tax Capture for the 500 new jobs, which is awarded to job-producing projects, as well as a $1.5 million Michigan Business Development Program performance-based grant for 150 qualified new jobs. A local property tax abatement will also be offered to support the project. The company was considering opening the plant in Dallas or Toronto. “Among the decisive reasons for building a major R&D hub in Michigan are Ann Arbor and the Detroit metropolitan area’s attractive talent pool, relative low-cost of living (compared to the San Francisco region

where KLA-Tencor is headquartered), proximity to Detroit Metropolitan Airport and other logistical advantages that support KLA-Tencor’s leading international semiconductor and electronics customers,” Chief Strategic Officer Bobby Bell said in a news release. “Ann Arbor also stood out by giving us the opportunity to strengthen our partnership with the University of Michigan and its proximity to the automotive industry. Locating in Ann Arbor and the surrounding area allows the company to draw from one of the greatest concentrations of engineering talent in the U.S.” The newly created jobs will be filled mostly by recent graduates with master’s and Ph.D. degrees in technical disciplines, highly skilled engineers and managerial level talent and would pay between $48 and $72 per hour, according to the company. Automotive companies purchase $21.8 million of semiconductors from Michigan-based companies, the release stated. It’s expected that demand for semiconductors will increase rapidly with the development of mobility and autonomous vehicles.

BEDROCK LLC

and beyond” in assisting the Carr Center with finding a permanent home, Lewis said. “We look to announce a new permanent gallery space in the coming weeks.” Bedrock LLC did not specifically comment on plans for the 4,600 square feet the Carr Center had been renting on the building’s ground floor. “The Carr Center has been a great addition to 1505 Woodward, and from Day 1, we have worked alongside them in their search for a space that suits their long-term organizational goals of serving the Detroit community with thought-provoking arts programming,” said Bedrock senior communications manager Gabrielle Poshadlo.

“We are looking forward to their forthcoming announcements about some very exciting developments, including a brand new location.” For now, the Carr Center has entered a new agreement with UM to host a series of pop-up exhibitions over the next few months. The center will serve as the guest curator of exhibitions and programs at the University of Michigan Detroit Center, located a mile up Woodward from the Bedrock-owned building. The Carr Center has been working with UM for years, President Oliver Ragsdale Jr. said. “We’ve done a number of exhibitions, concerts, hosted events for them at all of our sites. We’re excited about being in their space and working with them and continuing that relationship,” he said. It’s too soon to say what UM’s longterm engagement with the Carr Center will be, Holloway said. “This was a great chance to try something out, so we will see how it works out and evaluate after that.” It could be “a number of years before we have space again that we could program in this way,” Holloway said. At UM Detroit Center, the Carr Center will develop, curate and mount three pop-ups over the next few months in the Lester P. Monts Gallery, beginning with one featuring Detroit bikes and bike makers that opens on Monday. It will be followed by the exhibition of an artist- and community-decorated Christmas tree in November, to be given away at the close of the event, and a third exhibition in January, in partnership with the UM Stamps School of Art and Design, according to a letter sent to UM Detroit Center director Feodies Shipp III in late September by Erin Falker, curator and senior creative director for the Carr Center. Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

Logistics firm mulls Detroit operations near Corktown By Kirk Pinho kpinho@crain.com

A growing Chicago-based third-party logistics company may open a new facility in Detroit employing up to 300 people. Coyote Logistics LLC is considering whether it will spend $3.6 million to create the new facility at 1700 W. Fort St. in a mixed-use building near the Corktown neighborhood owned by Dan Gilbert, the billionaire mortgage and real estate mogul, according to Otie McKinley, media and communications manager for the Michigan Economic Development Corp. The Michigan Strategic Fund board on Tuesday approved a $1.5 million Michigan Business Development Program grant for the possible project. The company, founded in 2006, is also considering locating the facility in Denver; if it chooses that city instead of Detroit, the grant would not be awarded. Its current operations in Ann Arbor in the 777 East Eisenhower building will close regardless of in which city Coyote chooses to locate, according to the MEDC. Build-out would take

Need to know

JJCoyote Logistics LLC may open facility with 300 employees JJMichigan Strategic Fund approved conditional $1.5 million grant for the possible project JJFacility would be located at 1700 W. Fort St.

place in 2019 and hiring would start in early 2020, McKinley said. The MEDC said Coyote received a similar $1 million grant in 2013 for its Ann Arbor location and the creation of 120 jobs and another $320,000 grant to create another 80 jobs. It has fulfilled the requirements of both grants to date, the MEDC said. United Parcel Service of America Inc. acquired Coyote Logistics in 2015. According to city property records, Gilbert paid $5.2 million for a real estate portfolio that included the building in January 2016 from The Display Group, which moved into the Packard Plant in May 2015, Crain’s reported. Bedrock spokeswoman Whitney Eichinger said the company does not comment “on rumors or speculation.”

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CRAIN'S LIST: OAKLAND COUNTY'S LARGEST EMPLOYERS Ranked by full-time employees July 2018

Company Address Rank Phone; website

Top local executive

Full-time employees in Oakland County July 2018

Full-time employees in Oakland County July 2017

Full-time employees in Michigan July 2018

Worldwide employees July 2018

Type of business

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

John Fox president and CEO

18,531

18,301

28,033

28,045

Health care system

FCA US LLC 1000 Chrysler Drive, Auburn Hills 48326-2766 (248) 576-5741; www.fcagroup.com

Michael Manley B CEO

12,866

13,099

36,923

90,000

Automobile manufacturer

General Motors Co. 300 Renaissance Center, Detroit 48265 (313) 556-5000; www.gm.com

Mary Barra chairman and CEO

9,773

9,687

52,025

172,533

Automobile manufacturer

Henry Ford Health System 1 Ford Place, Detroit 48202 (800) 436-7936; www.henryford.com

Wright Lassiter III president and CEO

6,024

4,085

25,514

25,554

Health care system

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

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

5,474

23,103

Health care system

U.S. Postal Service 1401 W. Fort St., Detroit 48233-9998 (313) 226-8678; www.usps.com

Karlett Gilbert district manager

5,100

4,195

18,204

503,103

Postal service

Oakland County 1200 N. Telegraph Road, Pontiac 48328 (248) 858-1000; www.oakgov.com

L. Brooks Patterson county executive

3,501

3,451

3,501

Magna International of America Inc. 750 Tower Drive, Troy 48098 (248) 631-1100; www.magna.com

Don Walker, CEO; Jim Tobin, CMO and president, Magna Asia

2,667

2,441

10,782

172,000

Automotive parts supplier

Trinity Health 20555 Victor Parkway, Livonia 48152 (734) 343-1000; www.trinity-health.org

Richard Gilfillan CEO

2,542

2,466

23,794

131,000

Health care system

Continental Automotive Systems U.S. Inc. 1 Continental Drive, Auburn Hills 48326 (248) 393-5300; www.continental-corporation.com

Samir Salman CEO, Continental, North America region

2,100

2,250

236,000

Automotive supplier

Flagstar Bancorp Inc. 5151 Corporate Drive, Troy 48098-2639 (248) 312-2000; www.flagstar.com

Alessandro DiNello president and CEO

2,013

1,979

2,519

3,692

Financial institution

Comerica Bank 411 W. Lafayette, Detroit 48226 (248) 371-5000; www.comerica.com

Michael Ritchie Michigan market president

1,991

2,003

4,828

7,867

Financial institution

Rochester Community Schools 501 W. University, Rochester 48307 (248) 726-3000; www.rochester.k12.mi.us

Robert Shaner superintendent

1,949 D

1,833 D

Public school district

Lear Corp. 21557 Telegraph Road, Southfield 48033 (248) 447-1500; lear.com

Raymond Scott E president and CEO

1,925

1,932

3,827

167,200

Automotive supplier

Oakland University 2200 Squirrel Road, Rochester Hills 48309 (248) 370-2100; www.oakland.edu

Ora Hirsch Pescovitz president

1,798

1,764

1,811

Public university

Blue Cross Blue Shield of Michigan/Blue Care Network 600 E. Lafayette Blvd., Detroit 48226 (313) 225-9000; www.bcbsm.com

Daniel Loepp president and CEO

1,741

1,496

9,008

10,236

Nonprofit mutual insurance company

McLaren Health Care Corp. One McLaren Parkway, Grand Blanc 48439 (810) 342-1100; www.mclaren.org

Philip Incarnati president and CEO

1,620

1,831

22,821

23,172

Health care system

Huron Valley Schools 2390 S. Milford Road, Highland 48357 (248) 684-8000; www.hvs.org

Nancy Coratti superintendent

1,507 D

1,362 D

Public school district

Walled Lake Consolidated Schools 850 Ladd Road, Walled Lake 48390 (248) 956-2000; www.wlcsd.org

Kenneth Gutman superintendent

1,401 D

1,410 D

Public school district

The Suburban Collection 1795 Maplelawn Drive, Troy 48084 (877) 471-7100; www.SuburbanCollection.com

David Fischer chairman and CEO

1,374

1,251

2,128

2,210

Automobile dealerships

U.S. Farathane 2700 High Meadow Circle, Auburn Hills 48326 (248) 754-7000; www.usfarathane.com

Andrew Greenlee president and CEO

1,334

1,269

2,318

4,860

Plastic injection molder, extruder, thermal compression molder

Kelly Services Inc. 999 W. Big Beaver Road, Troy 48084 (248) 362-4444; www.kellyservices.com

George Corona president and CEO

1,263

1,235

1,398

8,000

Staffing

Nissan North America Inc. 39001 Sunrise Drive, Farmington Hills 48331-3404 (248) 488-4123; www.nissanusa.com

Takeshi Yamaguchi senior vice president

1,215

1,213

1,215

Automobile manufacturer

Comau LLC 21000 Telegraph Road, Southfield 48033 (248) 353-8888; www.comau.com

Brendan Blennerhassett CEO (NAFTA)

1,200

1,300

1,200

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

Anthony Tedeschi group CEO

1,188

1,150

10,050

County government

Manufacturing

Health care system

This list of Oakland County employers encompasses companies with headquarters in Wayne, Oakland, Macomb, Washtenaw or Livingston counties. Number of full-time employees may include fulltime equivalents. It is not a complete listing but the most comprehensive available. Unless otherwise noted, information was provided by the companies. Companies with headquarters elsewhere are listed with the address and top executive of their main Detroit-area office. Actual figures may vary. NA = not available.

B Succeeded Sergio Marchionne as CEO on July 21. C Succeeded Gwen MacKenzie, who resigned on April 30. D Figure is FTE count from the Center for Educational Performance and Information. E Former executive VP and president, seating. Succeeded Matthew Simoncini as president and CEO in February. LIST RESEARCHED BY SONYA D. HILL

Battered, tattered, beat-up, dog-eared, ripped, clipped, folded, frayed, devoured, digested, tagged, taped,

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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 // O C T O B E R 2 9 , 2 0 1 8

DEALS & DETAILS

CALENDAR SPOTLIGHT Shinola Hotel hires DIA executive

ACQUISITIONS & MERGERS J Universal Logistics Holdings Inc., Warren, a trucking company, acquired Specialized Rail Service Inc., Las Vegas, Nev., a cargo and freight service. Websites: universallogistics. com, specializedrail.com J Skyway Precision Inc., Plymouth, manufacturer of machined components, acquired the assets of Bellwright Manufacturing LLC, Summerville, S.C., manufacturer of machined components. Websites: skywayprecision.com, ibellwrightmfg.com J Union Partners LLC, Chicago, a private equity firm, acquired the assets of the pickling operations of Xcel Steel, Dearborn. The division has joined Union Partners-owned Maksteel Inc., Mississauga, Ontario, a steel service center, and will now operate under the name Maksteel Processing. The Detroit location of Xcel Steel Processing Inc. will continue its existing slitting operations, under its current ownership. Websites: xcelsteel.com, unionpartnersllc.com, maksteel.com

CONTRACTS Home Point Financial Corp., Pittsfield Township, a mortgage lender, has an expanded partnership with Capsilon Corp., San Francisco, Calif., a mortgage software provider, to eliminate bottlenecks in the loan process, boost productivity and reduce risks. Websites: homepointfinancial.com, capsilon.com J The Community House, Birmingham, a nonprofit community center, has named PublicCity PR, Southfield, a public relations agency, and Social Motto, Detroit, a social media marketing and digital advertising agency, as its new public relations and social media agencies of record, respectiveJ

ly. Websites: communityhouse.com, publiccitypr.net, mysocialmotto.com J Qualitech, Bingham Farms, a technology integrator and software re-seller, is providing cloud and desktop services for Lockwood Companies, Southfield, a property management, construction and development company. Websites: qualitech.net, lockwoodcompanies.com J Michigan Health Information Network Shared Services, Lansing, a health information service provider, is using Direct Secure Messaging from openAirWare LLC, Farmington Hills, a software company, to secure transmission of health care communications. Websites: mihin.org, openairware.com J The Detroit Community Technology Project, a program to promote digital literacy, has partnered with 123Net, Southfield, an internet service provider, as part of The Equitable Internet Initiative, a collaboration between several community organizations and neighbors in Detroit to distribute Gigabit internet connections to homes. The partnership consists of six 1 Gbps connections from 123Net to three neighborhoods that are part of the Equitable Internet Initiative: Southwest Detroit through a partnership with Grace in Action, Islandview in Southeast Detroit through a partnership with Church of the Messiah, and the North End through a partnership with the North End Woodward Community Coalition. Websites: detroitcommunitytech.org, 123.net J Michigan Capital Advisors, Bloomfield Hills, a private equity firm focused on the automotive and transportation-related industries, has partnered with Material Impact, Boston, a venture capital firm, in a joint investment in Fusion Coolant Systems, Canton Township, a technology company that uses supercritical carbon dioxide as a cutting lubricant

to the metal machining industry. Terms of the transaction were not disclosed. Websites: michigancapitaladvisors.com, fusioncoolant.com J Fabric Genomics Inc., Oakland, Calif., genomic data analysis firm, and Genomenon Inc., Ann Arbor, genomic data search company, have a partnership to work on clinical genomic interpretation and variant classification. Websites: genomenon. com, fabricgenomics.com J AxleTech, Troy, specialty powertrain manufacturer, is developing an e-powertrain system with Thor Trucks Inc., Los Angeles, Calif., a transportation lab building electric commercial trucks. Websites: axletech.com, thortrucks.com J Auria Solutions, Southfield, supplier of automotive acoustical, thermal, aerodynamic and fiber-based products, and Stayhold, Dublin, Ireland, maker of products to secure cargo, have an agreement to design, manufacture, commercialize and sell cargo management products for consumer, automotive and other transportation companies. Websites: auriasolutions.com, stayhold.com

EXPANSIONS Spark Productivity, Chicago, provider of workplace productivity and time management training, is expanding to the Detroit area. Website: sparkproductivity.com

TRADE GROUPS Todd Hohauser, CEO, Harvey Hohauser & Associates, Troy, was elected chair of IIC Partners, an executive search organization, during the organization’s annual meeting in Stockholm. Websites: hohauser.com, iicpartners.com

Submit Deals & Details items to cdbdepartments@crain.com

Advertising Section

PEOPLE ON THE MOVE To place your listing, visit www.crainsdetroit.com/people-on-the-move or for more information, please call Debora Stein at (917) 226-5470 / email dstein@crain.com. INSURANCE

REAL ESTATE

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Jacqueline Trost has been promoted to Vice President of Marketing and Communications for REDICO, and its affiliated company, American House Senior Living Communities. She joined REDICO in 2014 as Director of Marketing and Communications, and has more than 17 years of experience in a variety of non-profit and for-profit industries. In this new role, Jacqueline oversees all branding, marketing and communications functions for both organizations.

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

Loepp

Poppe

THURSDAY, NOV. 1 2018 Michigan CEO Summit. 8 a.m.-2 p.m. Business Leaders for Michigan. Opening keynote One Michigan: Patti Poppe, president and CEO, CMS Energy and Consumers Energy. 21st Century Health Care: What’s on the Horizon: Daniel Loepp, president and CEO, Blue Cross Blue Shield of Michigan; Lara Latham, vice president, health care systems, Stryker; John Hendrickson, president, C&H Solutions LLC, former CEO, Perrigo. Next-Generation Family Businesses — Standing the Test of Time: Ron Hall Jr., president and CEO, Bridgewater Interiors LLC; Ben Maibach III, vice chairman and chief community officer, Barton Malow Co.; Brig Sorber, executive chairman, Two Men And A Truck/International Inc.; Robert Taubman, chairman, president and CEO, Taubman Centers Inc. Breaking Through Traditional Barriers — Growing Your Bottom Line Through UX: Chris Granger, group president, sports and entertainment, Ilitch Holdings Inc.; Julia Oswald, senior vice president, business insights, strategy and consumer insights, Domino’s; Brian Pugh, director, digital user experience, Meijer. Luncheon keynote: Are You Doing Everything Possible to Prepare for What’s Next: Richard Anderson, president and CEO, Amtrak. Cobo Center, Detroit. $150. Contact: Courtney Masiarczyk, phone: (313) 259-5400; email: courtneym@businessleadersformichigan.com ; website: businessleadersformichigan.com

UPCOMING EVENTS CEO Series: Nate Forbes. 8-9:30 a.m. Nov. 7. Troy Chamber of Commerce. Speaker: Nate Forbes, president and managing partner, The Forbes Company, the developer and owner of the Somerset Collection. Petruzzello’s, Troy. $28 members; $38 non-members. Website: troychamber.com/events; phone: (248) 641-8151; email: theteam@troychamber.com. Brexit and Cross Border Opportunities. 11:30 a.m.-1:30 p.m. Nov. 12. Clayton & McKervey. International accounting professionals Ulrich Britting, owner of Best Audit, Germany, and Robert Lissauer, director taxation and international advisory at Hall Chadwick, Australia, will discuss the changing environment for cross border trade. Global business topics planned for discussion include: Brexit — not just a UK issue, global market conditions, free trade agreements, China dynamic and impact of U.S. tax changes. Automation Alley, Troy. Free, but registration required. Contact: Denise Asker, email: dasker@claytonmckervey. com; website: claytonmckervey. com

Partners in the new Shinola Hotel in downtown Detroit have hired a Detroit Institute of Arts vice president to lead the upcoming shopping, sleeping and dining destination. The 129room hotel along WoodBroom ward Avenue with event space and extensive retail is prepping for a December opening. Elliott Broom, 53, started as the Shinola Hotel’s general manager Oct. 2 after 10 years as vice president of museum operations for the DIA, according to a news release. He’ll be “top executive” at the hotel, overseeing service, sales and performance, the release said. Broom left the DIA on Sept. 28. The museum hasn’t yet decided what will happen with the position. Before the DIA, Broom was manager of the Hotel Palomar in Dallas. The Shinola Hotel has also signed on a food and beverage director who is relocating from New York, Sol Andrews, 37, of NoHo Hospitality Group. NoHo is the hotel’s food and beverage partner.

United Way creates new officer role

United Way for Southeastern Michigan created a new chief impact officer position to oversee the development and execution of its community-impact strategy. President and CEO Darienne Driver Adair recruited a former colleague from the Milwaukee Public School District to serve in the new role. Tonya Adair, chief academic officer for the Milwaukee district, will join United Way on Thursday. Driver, who took the United Way helm in July, formerly was the Milwaukee schools superintendent.

Detroit Area Agency on Aging names CEO

The Detroit Area Agency on Aging named a U.S. Department of Health and Human Services executive from Atlanta as its next president and CEO. Ronald Taylor, who most recently served as aging services program Taylor specialist for two of the federal department's regions, joined the Detroit nonprofit last Monday. He succeeds longtime president and CEO Paul Bridgewater who has retired after leading the Detroit Area Agency on Aging for 38 years.

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TEACHERS FROM PAGE 1

The Caledonia-based company gave its customers — public school districts — no advance warning that its business was going under at a time when the supply of substitute teachers is reportedly just as short as other areas of the workforce. “The lack of communication on their part to us is what was really disconcerting and upsetting for us given the long relationship we’ve had with them,” said David Mustonen, communications director for Dearborn Public Schools. PESG’s internal financial crisis surfaced earlier this month after the lien notice arrived and, the company’s leaders began scrambling to maintain their “just in time” fee-forservice business model that relies upon billing school districts on the first and third Thursday of each month and getting paid the following Tuesday, Northon said. PESG President and CEO Henry Bledsoe decided to shut down the company on the afternoon of Monday, Oct. 22, after determining the firm couldn’t make payroll that coming Thursday, Northon said. “It’s unfortunate. But businesses fail,” Northon said. “It’s not a perfect world we live in, and it’s my clients’ fault.” Professional Educational Services Group was part of PESG Family of Companies, whose founders also own separate companies related to education staffing operating in Alabama, Florida, Indiana and Tennessee, according to Staffing Industry Analysts. The closure affected only operations in Michigan.

Billing disputes remain Northon told Crain’s that PESG had $1.2 million in unpaid bills to school districts for substitute teachers as well as $300,000 in past-due invoices for the salaries of athletic coaches that schools have farmed out to the firm to lower payroll exposure to state-mandated pension payments. As of last Friday, Dearborn Public Schools owed PESG about $119,000 for substitute teaching services, Northon said. “Our attorneys are working to resolve any issues that may rest with PESG,” Mustonen said. PESG is working to get past-due bills paid by school districts so its past employees can get paid for work during the first three weeks in October. Athletic coaches are supposed to get paid next week, and the company is trying to get school districts to pay those bills as well, Northon said. But given the company’s abrupt closure, some school districts are reluctant to send PESG another check for fear that the money could wind up in the hands of creditors should the company file for bankruptcy, said David Martell, executive director of the Michigan School Business Officials. “Schools don’t necessary want to pay if they can’t guarantee if the money isn’t going to go to the people working their schools,” Martell said. “You want it to go to the people working for you because you want them to come back.” PESG does not plan to file for bankruptcy protection from its creditors, Northon said. The more than 100 school districts that had contracts with PESG had to quickly sign temporary employment

contracts with the substitutes working for PESG in their buildings, going through all of the normal hiring procedures like background checks that were previously conducted by PESG, Martell said. By week’s end, the 18,000-student Dearborn school district had a pool of 200 substitute teachers, some of whom applied for the jobs after news broke of PESG going out of business, Mustonen said. “For us, it actually created a bigger pool for us to choose from,” he said. PESG’s past competitors also swooped in to get a piece of the failed staffing agency’s business within hours of its announcement. Clark Galloway, president of Edustaff LLC, said he was on the phone and communicating via email with school administrators around the clock for the first 24 hours after PESG shut down. Edustaff, a Grand Rapids-based staffing agency with 50,000 employees working in 400 school districts in eight states, was working on signing contracts last week with 58 of the school districts that were customers of PESG, Galloway said. “Any time an entity goes out of the business abruptly with people unpaid … it really creates a black eye for our industry in general,” Galloway said. Other companies such as Knoxville-based ESS and Troy-based Kelly Educational Staffing — a division of Kelly Services Inc. — also were working to secure contracts last week with school districts, according to company officials contacted by Crain’s. “If there is a need from some of those clients that PESG had who have an interest in joining Kelly, absolutely we’re interested in that,” said Nikki Soares, vice president and managing director for Kelly Educational Staffing. ESS is a national firm that merged with Portland, Mich.-based PCMI in December. The company was touting its technological advantages compared to smaller firms. “(PESG) got maybe caught up in pricing rather than quality, and it was just unsustainable,” Bernie Decker, senior vice president of human resources at ESS. The executives from Edustaff, ESS and Kelly each said their respective companies were not trying to purchase PESG. The company’s lawyer declined to identify the prospective buyer who pulled away after the IRS filed the tax lien against the firm.

Privatization debate reignites PESG’s closure is the first known major company built out of the privatization of public school operations to fail in Michigan. “This is another sort of industry that popped up to make money off of public education with public tax dollars,” said David Crim, spokesman for the Michigan Education Association teachers union. “We’ve talked to a number of teachers that have been part of PESG who said it was extremely chaotic working for them.” Schools have opted to contract out substitute teachers, custodians, bus drivers, cafeteria workers and information technology specialists to private firms such as PESG, Edustaff and ESS to lower the amount of payroll subject to contributions to the state pension system, which can add as much as 38 percent to the salaries of school employees, Martell said. “That number’s gotten so big that school districts say, ‘I can save a lot of

money by not having these people in the system,’” Martell said. In his first term, Gov. Rick Snyder’s administration and the Republican-controlled Legislature offered school districts “best practices” grants to incentivize privatization of any job outside of classroom teachers and superintendents, which legally must be employees of the district. “We’ve basically built this industry where there’s an incentive for schools to have their coaches go through (the private staffing agency), and bus drivers, custodians and some of the business office,” Martell said. The private companies charge anywhere between 12 percent and 25 percent for overhead to cover their costs associated with recruiting, background checks, hiring, onboarding and human resource management, according to Martell and company officials. “There’s enough money for districts to privatize while still giving a profit to those vendors,” Martell said. Privatization of substitute teachers was also “very attractive” for schools because it removed a laborious task of handling teacher absences, calling and scheduling substitutes, said Chris Wigent, executive director of the Michigan Association of Superintendents & Administrators. “When we started to have to cut back on people, there just wasn’t capacity to do that,” Wigent said. “We were looking at any way to keep as much money in the classroom as possible.” School districts also opted to privatize substitute teachers because if they remained on their payroll for more than 60 days, the district had to pay a salary, leave time and other fringe benefits, said Dandridge Floyd, assistant superintendent of human resources for Oakland Schools. Privatization also allowed school districts to get around labor rules that required gave a long-term substitute teacher first right of refusal to a vacant position after 150 days of being employed as a substitute, Floyd said. But an overall shortage of certified teachers has given rise to fewer and fewer qualified substitute teachers. “Every employee group you can think of is a challenge right now,” Galloway said. “The dynamics of our industry has changed because these graduates are coming straight out of college and straight into the classroom.” In August, Snyder signed into law a bill lowering the number of college credit hours required for substitute teaching from 90 credit hours to 60, the equivalent of an associate’s degree. “They’ve lowered the bar so far that if you’re breathing and can fill out a form … they will put in front of a class to fill that class,” said Crim, the MEA spokesman. Sarena Shivers, superintendent for Redford Union Schools, was one of the school administrators who scrambled last week to fill substitute teacher spots. Shivers said PESG’s sudden demise shouldn’t be taken as evidence that privatization of school support services is a failed management approach. “It could happen to anyone or any service provider that provides services,” Shivers said. “We could have a hiccup in any of the companies that provide services to us.” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

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MOBILITY FROM PAGE 3

As self-driving technology emerged from places such as Silicon Valley and Pittsburgh in recent years, state officials conceived of the center as a centerpiece in their strategy to ensure that Michigan remains a relevant home for the next-generation auto industry. They have steered tens of millions of dollars in public funding to get the organization up and running and do not want to see that investment languish. A blueprint is being revised in collaboration with the organization’s industry advisory board, and part of its plans will emphasize building more office and garage space for automakers and other companies to rent on site. Eight short-term and six long-term garages are already in use, the latter under 10-year leases. Steudle says there’s demand for more facilities, and he anticipates more will be built by the third quarter of 2019. “One thing that we have accelerated here is the economic development component,” he said.

Future jobs The American Center for Mobility is a public-private partnership run by a nonprofit in conjunction with the state’s Department of Transportation, the Michigan Economic Development Corp., the University of Michigan, Ann Arbor’s SPARK business accelerator and Ypsilanti Township. Leaders have touted it as a way to ensure high-paying auto-industry jobs remain entrenched in Southeast Michigan. The state approved $35 million for the nonprofit that controls the joint partnership for the first phase of construction. By the time future phases are complete, the organization expects to spend $135 million on the overall construction of the facility. Seven companies, including Toyota and Visteon, paid $5 million apiece to be considered founding members of the facility. “Supporting” member Subaru and five other companies paid $2 million for ongo-

VOTE FROM PAGE 1

For the first time, Detroit-based Ally Financial is offering one hour of paid time off on Nov. 6 so employees can cast ballots on Election Day, according to a company spokeswoman. Michigan’s midterm elections — when voters elect the governor and other statewide officers — have historically had lower voter participation than presidential elections, which still lags behind most other industrialized countries. In Michigan’s last 10 midterm elections dating back to 1978, voter turnout among eligible adults has topped the 50 percent mark just once in the electoral donnybrook of 2006 between then-Gov. Jennifer Granholm and billionaire businessman Dick DeVos. Michigan’s election law restricts absentee ballots to voters who are 60 or older or are going to be out of town on Election Day. Proposal 3 on this year’s ballot would enshrine in the state constitution the right to vote by absentee ballot before Election Day without any reason, potentially making it easier for working people to vote by mail.

AMERICAN CENTER FOR MOBILITY

Visteon and Toyota Research Institute were the first companies to use the first phase of the American Center for Mobility project.

ing use of the track. It’s not just for traditional OEMs and suppliers. AT&T and Microsoft have been using the facility to advance next-generation automotive connectivity. The facility is also leading an industry study on truck platooning and researching how autonomous driving technology may affect the nation’s workforce.

Search for a new leader

Months of departures Despite the growing roster of companies using the mobility center, three people with direct knowledge of operations there said relationships between the leadership team and some of its external partners had frayed. In April, Andrew Smart, chief technology officer, left the organization, and COO Laurel Champion exited in June, according to their LinkedIn profiles. CEO John Maddox departed in August, according to the organization, though he remains in an external consulting role. While he did not address the naMost of Michigan’s largest employers offer some form of flexible scheduling to allow time for employees to go the polls on Election Day when they’re open between 7 a.m. and 8 p.m. Companywide holidays on Election Day are less common outside of government and companies with large unionized workforces. Since at least 2000, Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles have made Election Day a companywide holiday for both members of the United Auto Workers union and salaried workers. Employees at Blue Cross Blue Shield of Michigan also have the day off after the UAW negotiated Election Day as a company holiday, spokeswoman Helen Stojic said. The UAW represents customer service and claims processing employees at Blue Cross, Stojic said. State of Michigan workers get the day off, allowing employees in the Legislature and partisan statewide offices to volunteer at the polls for candidates and their respective political parties. Consumers Energy Co.’s unionized employees have paid time off built into their contract to allow time to vote on Election Day, spokeswoman Katie Car-

University of Michigan, which articulates how the two organizations will work together. The two facilities are intended to be complementary, with Mcity focused on early stage testing and research and ACM dedicated to highway-speed testing and validation of technologies that are closer to reaching the marketplace. “In the middle is where they collaborate together,” Steudle said. “This helps continue that partnership and set some things in place going forward.” Beyond the internal changes, the U.S. Department of Transportation stripped the American Center for Mobility and nine other nationwide organizations of an Automated Vehicle Proving Ground designation last month when they rolled out the third version of their federal automated vehicle policy. The designations were conferred in the waning days of the Obama administration, and policy experts have expressed doubt that they made much difference. But their removal perhaps signals an increase in competition for federal funding related to advanced transportation studies and projects as more regions view autonomous vehicles as a potential economic catalyst.

AMERICAN CENTER FOR MOBILITY

The American Center for Mobility is a public-private partnership run by a nonprofit.

ture of the relationships between the mobility center and others, Steudle separately said the organization

would soon sign a memorandum of understanding with Mcity, the autonomous test track at the nearby

ey said. Executives, managers, supervisors, technicians and administrative support staff are afforded flexible time off to cast ballots on Election Day. “Consumers Energy encourages all employees to take part in our

tems, flexible time for voting can’t always be accommodated for hourly employees, Antishin said. “It becomes a little bit more challenging in those types of roles to say you can come in later or leave earlier,” Antishin said. At Dow Chemical Co., the Midland-based chemical conglomerate offers flexible scheduling for employees who need to vote during normal business hours, spokesman Guillaume Artois said. “While these are role-dependent and vary by location, Dow will put its variety of work-life effectiveness programs to good use, to make sure our employees can accomplish their civic duties,” Artois told Crain’s. Quicken Loans Inc., Detroit’s largest employer, also is flexible with employees’ time to allow for voting when polling precincts are open. “We encourage our team members to take an active role in the electoral process and have always accommodated their schedules to ensure they have the ability to cast their ballot — one of our greatest civic responsibilities,” Aaron Emerson, senior vice president of Quicken Loans, said in an email. United Way for Southeastern

Most of Michigan’s largest employers offer some form of flexible scheduling to allow time for employees to go the polls on Election Day when they’re open between 7 a.m. and 8 p.m. country’s political process,” Carey said in an email to Crain’s. At DTE Energy Co., salaried employees who work at the utility’s downtown Detroit headquarters can use flex time to vote and come into the office late and work late, said Diane Antishin, vice president of human resources operations at DTE. But given the critical nature of some of DTE’s jobs operating power plants and electric transmission sys-

Steudle will retire from his post as director of MDOT at the end of October, but he will remain as the mobility center’s interim CEO until a new one is named. A national executive search firm is leading the hunt for a new leader. That search remains in its early stages with January 2019 as a tentative target to have a new hire on board. The right candidate should have both a startup mentality as well as experience in the automotive and mobility industries, Steudle said. “I think it’s going to be a mix of those things, and I don’t think it can be heavy on one side,” he said. “The important thing is a good blend, and chief to all of those, someone who understands how all the pieces fit together and can forge relationships to move things forward.” Michigan and the University of Michigan also allow flexibility in work schedules to accommodate when employees vote. “This is not a new policy as employees are encouraged to exercise their voting privileges,” said Vickie Winn, director of public relations at United Way for Southeastern Michigan. “Contingent upon their role and manager’s approval, staff may come in later or leave early.” United Way employees also can use the nonprofit’s Volunteer Paid Time Off to volunteer at the polls on Election Day, Winn said. UM’s 49,800 employees across three campuses and the Michigan Medicine health system can use their personal paid time off or vacation time “to participate in Election Day activities,” UM spokesman Rick Fitzgerald said in an email. “Most of us probably just head to the polls before or after work,” he said. Bloomberg News and Crain's reporters Sherri Welch and Jay Greene contributed. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

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SHOP ARCHITECTS PC

Plans for the Hudson’s site project include retail, hotel, residential, office, exhibit and event space.

HUDSON’S FROM PAGE 3

“The addition of new programming in the latest iteration of the design allowed us as architects and designers to break down the scale of the tower even further, and to approach it even more holistically, something we have been conscious of since the beginning of the project.” Plus, the tower’s setbacks are a practical feature, preventing the need for more expensive features that limit the swaying that wind can cause with buildings that height, he said. Michael Cooper, managing principal and president of Southfield-based architecture firm Harley Ellis Devereaux Corp., said the new design speaks to Detroit’s past and its future. “I look at this in the context of the city of Detroit right now, which is in the middle of a revitalization. It’s a forward-looking city, and there’s a feel of innovation and technology and its future contribution on a global scale, and at the same time, the city maintains a bit of edginess with its creative people,” he said. “The Hudson’s site is a centerpiece of this. It’s an iconic location and gives you an opportunity to marry the old heritage of the city with the new, and this design does that.” The Hudson’s tower scale has been increased several times since it was first publicly unveiled in February 2017. At first, it was 734 feet tall, just seven feet taller than the city’s and state’s tallest building, the 727-foot Detroit Marriott at the Renaissance Center. Then in September 2017, another 66 feet and a skydeck were added, bringing it to 800 feet in height and a $909 million price tag, a $134 million increase from the $775 mil-

In addition to the Hudson’s tower, another building, slated to be 14 stories and 232 feet tall, is planned.

lion originally budgeted. The final height has not yet been determined, but Joe Guziewicz, vice president of construction for Bedrock, said in September that a final decision on the height should be made by January. Adding another 112 feet would make it one of the tallest buildings in the United States, according to the Council on Tall Buildings and Urban Habitat, which monitors skyscraper construction around the world. The council lists 80 buildings in the U.S. that are completed, under con-

struction or proposed that are at least 912 feet. If all of them are finished, the tower at its maximum height would be the same size as 125 Greenwich St. in New York City (912 feet) and a shade taller than Oceanwide Center Tower 1 in San Francisco (910 feet), which are the 80th and 81st tallest buildings proposed, under construction or built in the country, respectively. The 15 Hudson Yards tower in New York is 914 feet, and 79th on the list. The tallest completed building in the U.S. is One World Trade Center in

SHOP ARCHITECTS PC

New York City, which is 1,776 feet, while the tallest building in the world is Burj Khalifa, which stands 2,722 feet in Dubai. In addition to the Hudson’s tower, another building, slated to be 14 stories and 232 feet tall, is planned immediately to the north on the same Woodward Avenue site, where an underground parking garage has been demolished. The total project, to be built by Southfield-based Barton Malow Co., is anticipated to be about 1.424 million square feet spread across the two

buildings, a more than 40 percent increase from the previous total of about 1 million square feet, according to a copy of a site plan dated Sept. 10. Office space in the 14-story building has increased to about 363,000 square feet across the top six floors, up from 263,000 square feet. It also includes a skylight. Hotel space is penciled in at about 500,000 square feet, while residential space is expected to be about 251,000 square feet across approximately 250 units and 22 floors. Retail space has been scaled back from 103,000 square feet in a previous plan to about 73,000 square feet, and exhibit space has decreased from 93,000 square feet to 77,000 across floors two through five of the tower. Event space has grown to 185,000 square feet from 168,000 square feet and includes a 1,250-seat event hall, a 445-person capacity ballroom and various meeting rooms. That would be across most of the third, fourth and fifth floors of the podium. A 700-space underground parking deck and a public observation deck atop the tower are also planned. The Hudson’s project is one of four where Gilbert, the billionaire founder and chairman of Quicken Loans Inc. and Rock Ventures LLC, is receiving $618.1 million in so-called “transformational brownfield” financing. The four projects total $2.14 billion. Forbes pegs Gilbert’s net worth at $6.4 billion. Since moving Quicken Loans downtown, he has assembled a sweeping real estate portfolio of more than 100 properties — buildings and parking decks, plus plans for new buildings on dozens of acres of land. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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

CEO GROUP FROM PAGE 1

The group’s common interest in maintaining what’s been built and identifying where green space is still needed in the city spurred it to create a public spaces “pillar” chaired by Matthew Cullen, CEO of Jack Entertainment and a principal of Rock Ventures. Cullen is also on the board of the DDP, which earlier this year began assessing local appetite for a $17 million endowment campaign to support Campus Martius and the other parks it oversees as it evaluated sources of sustainable funding. About 40 percent of the DDP’s current funding comes from corporations; just under a third comes from Downtown Business Improvement Zone assessments. The other 30 percent is split between foundation support and earned income. And Cullen is chairman of the Detroit RiverFront Conservancy, which is developing 5.5 miles of the city’s riverfront from Belle Isle to the Ambassador Bridge into public spaces and stewarding the Dequindre Cut greenway connecting the east riverfront to Eastern Market. The conservancy is raising both development funds and an endowment to provide a permanent source of funding for maintenance of those spaces. The CEO group feels passionate about green spaces and what they can contribute to a community, Cullen said. “We want to get smarter about how they can all come together. How do we go about conceiving, designing, creating, connecting, maintaining and sustaining them?” he said.

Others to the table Formed quietly two years ago, the CEO group in April publicly announced its support of regional transit. Two months later, during this year’s Mackinac Policy Conference, the group made its plans to launch a regional economic development nonprofit public. The new nonprofit will focus on marketing and business attraction and provide something 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. The CEO group’s search for a CEO to head the new nonprofit is underway. Based on individual CEO and company interest, the volunteer group, which operates with no staff or budget, has also supported projects including renovations and updates to Randolph Technical High School and Breithaupt Career and Technical Center in Detroit and the city’s Grow Detroit’s Young Talent summer youth employment program. On public spaces, the CEO group invited other stakeholders to be a part of the conversation, including: the city of Detroit, Downtown Detroit Partnership, Community Foundation for Southeast Michigan which is supporting greenway development throughout the region, other foundations supporting public spaces in the city and the Detroit RiverFront Conservancy. Their collective efforts are focused on getting “robust and curated data” on existing public space, Cullen said. It will use the inventory it pulls together to create an interactive map that will lay out where that space is and make visible opportunities to connect those spaces and the people

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The private sector came in with funding for new public spaces like Campus Martius.

around them. “We’re doing the west riverfront, and Ford is doing the train depot: How can we connect them?” he said. In the same way, a pocket Brad Dick: City park by itself is a always looking to wonderful thing maintain parks. for the community around it, “but if you can connect it as part of a system ... it’s even more impactful,” Cullen said. The stakeholders plan to make the interactive map of Detroit’s public spaces available to the public when done, he said. As part of the scan, the CEO group and stakeholders will look at best practices around the country for developing and sustaining public spaces, Cullen said, tapping organizations like the Urban Land Institute and the Trust for Public Land. Cullen said the stakeholders will share any costs tied to the public space work, which is expected to be completed by the first quarter of next year. At that point, each of the stakeholders will have data they can use to make decisions, Cullen said. The CEO group, for example, might decide to pick one space to focus on. Or the city might want to look at green spaces and greenways in and around the neighborhoods it’s currently redeveloping. “We may decide to collaborate on something, or we may not,” Cullen said.

A network of support Private support of public spaces in Detroit isn’t new; it’s been picking up speed for the past 20 to 30 years. About 30 years ago, most municipalities, including Detroit, cared for public spaces, said Laura Trudeau, principal of Trudeau Consulting and retired managing director of the Kresge Foundation’s Detroit program. Before retiring from Kresge last year, Trudeau published a white paper on public space sustainability, at the request of the DDP. The tax base shrank as population declined and business moved out of cities, and city-run parks and public spaces saw decreased funding, nationally, she said. It happened in Detroit, Buffalo, Philadelphia and even in New York city where population was grow-

ing but park budgets were not. In the ’90s, groups like the Central Park Conservancy and Prospect Park Alliance in Brooklyn formed, providing models for public-private collaboration in caring for public spaces, she said. Late that decade and into the early 2000s, “friends groups” like the Clark Park Coalition began popping up to help maintain neighborhood parks and other public spaces in Detroit, Trudeau said. And in 2002, the private sector formed the Detroit RiverFront Conservancy to lead development of the riverfront with private support, deals with private property owners and operating agreements with the city for land it owns on the river’s banks. A number of friends groups formed to support Belle Isle the decade before merged to create the Belle Isle Conservancy in 2011. The private sector also came in with funding for new public spaces like Campus Martius and Beacon Park. And within the past few years, new friends groups have formed, including People for Palmer Park in 2011 and Chandler Park Conservancy in 2015. As Crain’s reported in September, another conservancy is forming to raise $5 million to fund large-scale improvements at Grand Circus Park in downtown Detroit. “Everyone is focused on public space right now and improving it in Detroit as the city comes back,” Trudeau said. Despite the disparate ownership, management and funding streams, it’s important to think holistically about Detroit’s public spaces, she said. “The value of the system is the sum of all the parts.” Many of the spaces are connected by trails and greenways; they serve people as a system, even if owned or managed separately, Trudeau said. Thinking about them holistically makes sense from the user perspective and also from an economies of scale perspective. The CEO group and stakeholders’ look at public space is about keeping the momentum going and building on the success in Detroit, Trudeau said. That’s hard to do, because you need to grow your resources to do that. Permanent endowment is one way to do that, Trudeau said. There’s also tax-incremental financing models where building owners around parks provide support and even park/public space taxes in the neighborhood of a tenth of a cent, something that’s used in Chicago.

LARRY PEPLIN FOR CRAIN’S

Business improvement districts and zones and civic authorities are the primary funding sources for a high percentage of downtown parks and public space operating budgets in cities like Philadelphia and Houston, according to the DDP. But downtown Detroit’s Business Improvement Zone, launched just four years ago to fund cleaning, safety, lighting, landscaping and hospitality downtown, is “in its infancy and may not be a more significant contributor for another five to 10 years,” the agency said earlier this year in a memo floating the idea of an endowment campaign to fund maintenance of the parks it oversees. “I think if we all get together and think creatively about this, we can come up with some solutions,” Trudeau said. “And I think the city absolutely has to be part of developing the solutions.” When Mayor Mike Duggan took office in 2014, there were only 25 city parks being maintained, said John Roach, a spokesman for the mayor. “Most had been completely cut off from maintenance, let alone improvements.” Today, nearly 300 parks across the city are being maintained to high standards, he said, pointing to a recent article in The (Toronto) Globe and Mail that compared Detroit’s parks to those in London and Paris and called out Toronto for poor upkeep of its public spaces. The city of Detroit also has made major capital improvements to dozens of parks and is in the midst of redeveloping Riverside Park in southwest Detroit just past the Ambassador Bridge, and other parks, Roach said. Cities work best when leaders are honest about what the city can do and can’t do, he said. Forging public-private partnerships for the improvement and operation of public spaces “has helped Detroit to create and maintain some spectacular recreational opportunities, such as the RiverWalk, Dequindre Cut and Campus Martius Park.” The city is always looking at the mechanisms for ongoing maintenance for all of its parks, Brad Dick, group executive of services and infrastructure for the city, said in an emailed statement. “Figuring out an endowment strategy for some of these spaces would be a wise direction,” he said. Sherri Welch: 313 (446-1694) Twitter: @SherriWelch

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NETWORK FROM PAGE 3

How much does Fox Sports Detroit pay each team?

The deals were announced in 2008 as a combined $1 billion over 10 years. Sources have broken that down for me as $50 million annually, on average, for the Tigers and $25 million a year each for the Red Wings and Pistons. The Tigers are expected to add tens of millions of dollars in annual revenue in their next local deal, perhaps even doubling their current amount, matching a trend across baseball. How is that money generated?

Some of it comes from all of the advertising you see during game broadcasts on TV, online and via streaming. A lot of it also comes from subscriber fees. Fox Sports Detroit charges an average of $5.80 per subscriber as the fee for cable and satellite providers to carry the network, according to Kagan. The fee is passed to consumers in their monthly bill, and FSD’s average is second-priciest after only the $6.40 a month charged by the YES Network, a regional sports network that carries New York Yankees and Brooklyn Nets games. How much does it cost to run an RSN?

Data from Kagan, a media research group within S&P Global Market Intelligence based in New York City, predicted before the 2018 baseball season that FSD would have $190 million in operating expenses while generating $240 million in overall revenue. Startup costs would be driven by many factors, from building physical infrastructure such as studios, buying equipment, and hiring talent. It would be in the millions. Is this a leverage play by the Ilitches?

Maybe. Maybe not. Industry insiders I’ve spoken with all agree that it’s normal for team owners to examine the cost-benefit of taking broadcast rights in-house, so it’s no surprise they’d kick the tires on such an operation. What is surprising that they’re opting to do so publicly. One effect of issuing a press release about it is that Fox’s corporate parent — the entity that would handle any broadcast rights extension — feels some financial pressure. FSD and its 21 sister regional sports networks are for sale as part of the Disney-21st Century Fox deal. The threat of losing most of the channel’s content could steeply devalue the station, meaning potential buyers for FSD alone could be turned off, or buyers for all 22 channels as a group would want a discount. Why would the Ilitches do this?

Money. Control. If they have their own channel, they have total control and keep all of the revenue. If they think they can leverage a new channel’s content better than what’s being done now, they’ll probably pull the trigger and do it. There’s a demand for content from a variety of businesses — traditional broadcasters, Amazon, Apple or even a content-thirsty brand. “We have two perennially highly rated and historic franchises, which provide compelling year-round content and programming. As such, we feel our organization is uniquely positioned to explore the launch of what we believe could be a highly successful regional sports network,” Ilitch Holding Inc.’s Chris Granger said in a statement.

CRAIN’S DETROIT BUSINESS

The Tigers’ strong local ratings would be the prize for whichever station they land on. Would they own a new channel outright or have partners?

Too soon to say. The RSN landscape is filled with a variety of ownership structures. Some teams own everything, others are like Detroit and have zero stake while getting an annual rights payment. Others have some level of equity but don’t operate the network. For example, the L.A. Dodgers are getting $8.35 billion over 25 years from Spectrum SportsNet LA in a deal that began in 2014. The team owns half the network and Connecticut-based Charter Communications owns the other half. It was reported in August that the Chicago Cubs are thinking about dropping their 20 percent ownership stake in Comcast SportsNet Chicago, which airs games from four teams, in favor of launching their own network in 2019. An interesting RSN example that could be an Ilitch template is Altitude Sports and Entertainment operated by Kroenke Sports & Entertainment that’s owned by billionaire Stan Kroenke. His network airs Kroenke family-owned Colorado Avalanche (NHL) and Denver Nuggets (NBA) games, and pays for games from the Colorado Rapids (MLS) and other teams. The Ilitches could own the new station entirely, or partner with a veteran broadcaster, even Fox Sports Detroit, for an equity stake that ups the payments to the teams. Could they renew with FSD?

Yes, and have said so. “Fox Sports Detroit is a great partner, and we look forward to discussing renewal and extension possibilities,” Granger said in a statement. The easiest path for both is to sign an extension or new deal, but if the Ilitches believe there is more money to be made by going it alone, they may do that. If Fox feels pressure to give the Ilitches more money, they could do that, too. There are large traditional deals between teams and network owned-and-operated RSNs: The Los Angeles Angels reportedly get $118 million a year

from Fox Sports West in an arrangement not unlike the current deal in Detroit. FS West also airs L.A. Clippers, Kings, Anaheim Ducks games and some college content. So why don’t they just do a new deal?

Uncertainty. They also have some time to make a decision. The Ilitches see teams like the Yankees and Red Sox and the Dodgers getting enormous sums. They also likely see the RSN market fracturing amid new ways to deliver content while younger consumers are cord-cutting. They appear to be interested in due diligence. And maybe putting the iron to Fox Sports along the way. Have the Ilitches begun formal talks with FSD to renew?

Unclear. No one will say.

What about the Detroit Pistons?

They’re not commenting, but logic suggests they’d likely join the Tigers and Wings at a new channel. Pistons owner Tom Gores already has a deep business relationship with the Ilitches: His team relocated to the Ilitch-managed Little Caesars Arena last year to play alongside the Red Wings. They have revenue-sharing agreements (terms never disclosed). And Gores’ entertainment properties are managed as part of a joint venture with the Ilitch properties under a business called 313 Presents. The cost and headache of the Pistons launching a standalone channel are probably too high. It’s possible they could move to another local channel in the market. For example, local broadcaster Kevin Adell has expressed interest in Pistons games, and he owns WADL TV-38. What’s the risk?

For everyone involved, the major problem would be if the new channel’s operator doesn’t secure all of the carriage rights that FSD currently has. They have to negotiate new deals with every cable and satellite provid-

er in the state, and if any resist — especially if the Ilitch channel wants to charge more — then viewers who get games now may not get them under the new channel. That’s what happened when the Minnesota Twins took their game broadcasts in-house through Victory Sports One in 2003, but failed to secure enough carriage rights deals and had to return to Fox Sports North a few months later. Cable and satellite providers will try to keep those subscriber fees as low as possible because they’re the ones that hear consumer complaints and have to do the work to retain subscribers. It’s impossible to know if subscriber fees would go up, down or remain the same under an Ilitch-owned sports network. Another risk is if a new network does a poor job. Fans and advertisers are used to the present level of professional quality from Fox Sports Detroit after 21 years, and broadcasting games isn’t among the Ilitch family’s core competencies. That’s why the scenario of them partnering with a broadcaster or company with experience at this seems less risky. What does this mean for Fox Sports Detroit?

For game broadcasts and other content, it doesn’t mean anything right now. Things will continue as normal. But there are several potential longterm effects. First, there’s the aforementioned effect on the station’s value in any sale. More locally, if the station loses the Tigers and Red Wings, that’s most of its primetime content, meaning there’s very little value proposition in keeping it on the air. That would mean job losses. If a new channel is launched, it’s likely some of the on-air and technical talent would be hired by the new station. FSD’s fate also could be decided by what happens with the Disney-21st Century Fox deal. Federal antitrust regulators blessed the $71 billion deal only if Disney sells the RSNs. A lot of potential buyers are

out there, and Fox Sports could opt to take them back. What would happen with the other FSD content?

Fox Sports Detroit also airs high school sports, University of Detroit and Oakland University men’s basketball, and some Detroit Lions nongame content. A new Ilitch channel would have airtime to fill with non-Tigers/Wings/Pistons content, so some or all current FSD programming probably would migrate to the successor station. Alternatively, someone else in the market could launch a channel for some of that content. That seems less likely. What about advertisers?

They want to go where the eyeballs are, and the three sports teams have big local audiences — and those grow to huge local audiences when the teams are winning. So expect those Sam Bernstein and Belle Tire ads to follow the Tigers and Red Wings wherever they go. As for ad rates, it’s much too soon to speculate. The Ilitches could end up hiring some of the Fox Sports sales staff, and rates could be set by the same management or an outside consultant or operator. If the Ilitches seek total control of the operation, they’ll discover quickly what the market will bear. Who will be in the booth for Tigers broadcasts next season?

We know it won’t be Mario and Rod, who were jettisoned earlier this month after their fight. Many names have been floated, but from what I’ve been told, a decision is awhile off. The Tigers have a say in the matter, but ultimately the play-by-play and color announcer are network employees. I expect a decision around the end of the year, since the duo will be working spring training games together. I wouldn’t be surprised to see veteran broadcaster Matt Shepard paired with an out-of-market hire.

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

THE WEEK ON THE WEB

RUMBLINGS

Kar’s Nuts acquires Sanders as Detroit-born brands combine

Record Mega Millions jackpot has ripple effect

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

egional chocolate and caramel icon Sanders is being acquired by another Detroit-born snack maker, Kar Nut Products Co. Kar’s Nuts, an 85-year-old trail mix manufacturer based in Madison Heights, last Wednesday acquired Sanders owner Morley Candy Makers LLC. They did not disclose a purchase price or other details of the deal. Together Kar’s and Clinton Township-based Morley create a snacks and candy maker with an expected $185 million in total sales this year. They employ 525 people, mostly in Michigan. The integration means a concerted national distribution push for Sanders’ candy and less focus on its ice cream-slinging Michigan storefronts. Both ship products across the country, but Kar’s distribution network is more vast: Shoppers can find their nuts and mixes in more than 70 different stores or chains, ranging from Ace Hardware to Piggly Wiggly, Sam’s Club, Dollar General and Circle K convenience stores. Sanders, bought by Morley in 2002, has made confections for 143 years. It’s best known for artisanal chocolates and caramels, dessert toppings and its locally ubiquitous Bumpy Cake. Kar’s also inherits eight Sanders Chocolate & Ice Cream Shoppes in metro Detroit, Mackinaw City and Mackinac Island. Morley wants to make Sanders “America’s confectioner,” CEO Brian Jefferson said, and this acquisition is the way to do it. To find Sanders products now in Denver, for example, you would need to visit Saks Fifth Avenue; in Dallas, Saks or internationally focused grocer Central Market. Sanders is widespread, however, in specialty grocers and department stores such as Marshalls, Home Goods and Kohl’s. It does sell nationally through grocery chains Meijer and Costco — and regionally and “growing” through Kroger. But it’s angling for a greater grocery and convenience store presence, especially as convenience stores become more “upscale,” Jefferson said. Kar’s will initially focus on candy distribution, Kar’s President Nick Nicolay said. It delivers direct to around 4,000 stores in Michigan alone and is looking specifically at Sanders’ caramel mini-bites — one of its most pervasive grab-and-go offerings. “We’re not going to let go of cakes and ice cream,” he said. “But the candy, for us, is where they have the greatest reach so far and where we feel we have the greatest immediate opportunity.” The new focus means continuing a yearslong holding pattern for Sanders’ physical stores. It could also mean eventual downsizing, though Nicolay said none is planned. The stores are profitable, Nicolay and Jefferson said, and offer brand recognition. But they’re not what stands out, in terms of growth potential. “I think retail is somewhat challenging, brick-and-mortar retail,” Nicolay said. “... We don’t see any

MORLEY CANDY MAKERS

Morley Candy Makers and its Sanders brand were acquired Wednesday by Kar’s Nuts.

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

$12M

JJThe new estimated cost to demolish Joe Louis Arena — double what was previously reported.

15.4%

JJThe vacancy rate for office space in metro Detroit, down from more than 25 percent in 2012.

$86.2M

JJThe amount in Mega Millions tickets Michigan residents purchased for 26 drawings that started in July.

changes to that right now, but we’ll evaluate those a little bit later.”

BUSINESS NEWS J A three-week-long strike at the Westin Book Cadillac hotel in downtown Detroit has pushed CityLab, a major urban affairs conference, and the Michigan CEO Summit to change venues to the Detroit Marriott at the Renaissance Center and Cobo Center, respectively. The ongoing strike for higher wages, a say in how technology changes jobs and more rights for temporary housekeepers is part of a multicity effort by national organization Unite Here involving more than 7,700 workers. J Given recent volatility in auto production schedules, trying to predict short-term production volumes is a slippery business right now, Lear Corp. CFO Jeff Vanneste said Thursday. “It’s a slippery pig right now; it’s hard to catch,” he said in a conference call to announce third-quarter earnings for the Southfield-based seating and electronics supplier. “Production declines come quick, and they can come deep.” Lear reported third-quarter revenue of $4.9 billion, down about 2 percent from a year ago. Net income was $253 million, down 15 percent. What the company considers core operating earnings were down 2 percent, to $399 million. J Sahara Restaurant & Grill will open its first location in the city next year in The District Detroit area of downtown. The 4,500-square-foot Mediterranean and Middle Eastern restaurant will set up in the retail space under

construction at the Little Caesars world headquarters campus expansion on Columbia Street. J Prominent Detroit architecture firm Rossetti Associates Inc. laid off nearly a fifth of its employees on Thursday. The layoffs affect 15 employees, including licensed architects, bringing its payroll from 81 to 66, the company confirmed Thursday. “The architecture industry requires a great deal of flexibility due to the immense scale of the projects we are staffing at any given time. Rossetti remains a strong business with a bright future integrating a typology of work based more on mixed-use developments in Detroit’s urban core,” Matt Rossetti, president of the company, said in a statement emailed to Crain’s.

esides a very lucky few, the real winners of last week’s record-setting lottery are the state of Michigan and about 11,000 licensed lottery ticket vendors. The winning ticket for Tuesday’s $1.537 billion Mega Millions jackpot was purchased in South Carolina, but there were also two $1 million winners in Michigan — one in Mt. Pleasant and the other in Grandville, said Jeff Holyfield, public relations director for the Michigan Lottery. In all, Michigan residents purchased $86.2 million in Mega Millions tickets for 26 drawings that started in July. Some of those sales helped cap off a record year for the Michigan Lottery. For fiscal year 2018, which ended last month, the Michigan Lottery brought in a record $3.6 billion from ticket sales, up $300 million from the previous year.

Retailers receive a 6 percent commission on lottery ticket sales and 2 percent commission on winning ticket redemptions, with exceptions for big winners, Holyfield said. Owners of the Ric’s Food Center and Bricks that sold the winning $1 million tickets, for example, will earn $5,000 each once the prizes are claimed. In total, licensed retailers in Michigan will earn $5.2 million in commission for the latest Mega Millions prize. They earned a record $264.9 million in fiscal 2018, up from $249.3 million. A commission isn’t the only upside. For many retailers, the payout comes in the form of increased foot traffic. Kenny Yaldo, 44, owner of Crown Drugs in Redford Township, saw a boost in business as the Mega Millions jackpot swelled. “Every time the jackpot goes up, more people come in. Everybody’s got a dream,” he said.

OTHER NEWS J JPMorgan Chase & Co. is providing another $1 million grant to Eastern Market in support of small business as part of its $150 million commitment to Detroit. The grant will provide food entrepreneurs cost-controlled space in the popular market and create or maintain 250 jobs. It aims to "reduce barriers for entrepreneurs of color and those with limited means," the New York City-based bank said. J Scooter companies can now each deploy a total of 400 scooters in the city of Detroit, but at least 100 of them must be in neighborhoods outside of downtown. The previous 300 scooter cap was increased effective immediately under new city guidelines. The city also created a Community Advisory Board to engage with residents and “provide guidance on the goals and outcomes for scooters in Detroit.” Bird and Lime are the main players in the scooter game, and their entry into Detroit and other Michigan cities has spurred debate over safety and usefulness. J The estimated cost to demolish Joe Louis Arena has doubled. The Detroit City Council is in the process of approving the issuance of a bond for up to $12 million that would back an up to $12 million Michigan Strategic Fund loan for the demolition of the former Detroit Red Wings home. Tyrone Clifton, director of the Detroit Building Authority, said in a statement it plans to have an environmental remediation contractor hired by next month and a demolition contractor by January. The process should take 10 to 12 months between demolition and site grading, he said.

CRAIN’S DETROIT BUSINESS

About 800 lucky Corktown community members and Ford employees will get to participate in a Halloween event at Michigan Central Station on Oct. 31.

Halloween at train station will be family friendly T

he Halloween event at Michigan Central Station won’t be as scary as an episode of “The Haunting of Hill House.” The Ford Motor Company Fund decided to hold what it is calling “a family friendly Halloween experience for the Corktown community” on Oct. 31, a departure from the “haunted house” description used a month ago during a community benefits ordinance meeting on the project. That’s if you’re one of the lucky ones able to get inside the depot to participate. There were only 800 tickets and they have already been allocated to members of the Corktown community and a select group of employees of Ford Motor Co. and its related business and nonprofit groups, according to Christina Twelftree, a Ford spokeswoman.

“The tickets to residents will be distributed through local community partners who will select families and children that they feel would benefit most from the experience,” she said. Ford employees are coming from The Factory building near the train station, as well as Ford Land Development Co. and the Ford Motor Company Fund. There will be two groups: 400 from 4-6 p.m. and another 400 from 6-8 p.m. Among the first-floor highlights for those participants: pumpkin painting, mask and slime making, trick-or-treating stations by Corktown businesses and live music. Fret not: No ticket is necessary to take part in the “trunk or treating” that’s set to be held in front of the depot, which will be specially lit for Halloween.

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