Crain's Detroit Business, Sept. 16, 2019 issue by Crain's Detroit Business

SmileDirect’s IPO features founders with deep metro Detroit roots Page 3

SEPTEMBER 16 - 22, 2019 | crainsdetroit.com

Xenith: Football helmets hit by tariffs, too Page 3

REAL ESTATE

Real estate executive vanishes; lawsuits allege investors were bilked Imperium Group CEO goes dark as real estate firm implodes, employees stop getting paid By Kirk Pinho kpinho@crain.com

The contractor on Viktor Gjonaj’s Washington Township mansion has sued, claiming $197,000 in unpaid work. KIRK PINHO/CRAIN’S DETROIT BUSINESS

Viktor Gjonaj is 6-foot-6 but no one can find him. The metro Detroit commercial real estate executive hasn’t been heard from in weeks and lawsuits have started to mount, including one in Oakland County Circuit Court alleging he stole from investors in what it called a “multi-million dollar Ponzi-type scheme” that also included his wife, Rose, and a Gjonaj business partner, Gregory Vitto. The most detailed complaint so far, filed Aug. 26 by investors Kris Krstovski and Jerome (Jerry) Masakowski, says the two men were swindled of “millions of dollars” in a scam that allowed the Gjonajs “to buy extravagant homes and expensive cars and to support Viktor’s gambling and believed drug habit.” The complaint alleges Gjonaj doctored purchase agreements to make it appear to investors as if they were buying ownership interests in properties around Southeast Michigan, when in fact they were already owned by the plaintiffs. SEE GJONAJ, PAGE 32

DETROIT HOMECOMING

Detroit Homecoming: From 9-1-1 call to real opportunity

ttendees at the sixth annual Detroit Homecoming will see a different hometown than what greeted those at the inaugural Homecoming in 2014. The event, produced by Crain’s Detroit Business, aims to re-engage local natives who found success in other places with their hometown, with the aim of promoting connections and investment. When Homecoming was being forcrainsdetroit.com

MICHAEL LEE malee@crain.com

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mulated by retired Fortune publisher Jim Hayes in 2013, unemployment in the city hovered above 15 percent, Dan Gilbert’s plans for downtown Detroit had only just started to take shape, and the city had filed for the largest municipal bankruptcy in the history of the United States. Now, the backdrop has changed. Expats are returning to a city that has seen enormous redevelopment in downtown and Midtown, nascent success stories in neighborhoods scattered across the city and a national profile that has made it a tourist destination. When Homecoming began, “the original narrative was ‘Your poor home is in bankruptcy. This is a 9-1-1 to come home and help,’” said Homecoming Director and Crain’s Group Publisher Mary Kramer, who has spearheaded the event since the beginning. SEE HOMECOMING, PAGE 30

HOMECOMING SPECIAL REPORT

Black entrepreneurs who rose to challenges in building businesses Meet 10 of the city’s rising business stars Pages 10-27

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MICHIGAN BRIEFS

INSIDE

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

Budget negotiations break down after roads taken out of discussion At the start of last week, Democratic Gov. Gretchen Whitmer set aside her monthslong campaign for $2.5 billion in higher taxes for roads and asked the Republican-controlled Legislature to approve a “status quo” transportation-funding budget for the fiscal year that begins Oct. 1. Crain’s first reported the Whitmer administration wanted lawmakers to approve a budget for the Michigan Department of Transportation that only increased road funding as required by a 2015 law. “It’s safe to say transportation funding will stay status quo and follow the previously passed plan as discussions on new road funding will continue once the budget is done,” said Kurt Weiss, spokesman for State Budget Director Chris Kolb. But the governor’s effort to suspend all increased spending on roads did not sit well with Republicans who control the Legislature, causing a breakdown in budget negotiations by mid-week. “We could not have predicted that our talks would break down over my

CALENDAR

CLASSIFIEDS

OPINION

governor wanting less money to fix the roads, but in the end, we could not accommodate her position,” Senate Majority Leader Mike Shirkey, R-Clarklake, said Wednesday in a statement. Shirkey said Republicans plan to pass a budget plan that includes $500 million in more year-over-year funding for roads “without raising taxes.” Under an amended 2015 law, the earmarked use of income tax revenue for transportation purposes is scheduled to increase from $264 million to $468 million in the 2020 fiscal year that begins next month. The current fiscal year includes a one-time boost to roads of $300 million in surplus tax revenue from the General Fund.

OTHER VOICES

Michigan OKs country’s first LGBT credit union

Michigan has approved a charter for a new financial institution, called Superbia Credit Union, aimed at LGBT customers, clearing the way for online service to begin early in 2020. Superbia Credit Union will offer products which are often outside the scope of a more traditional lender, such as loans for transgender people in the process of transitioning, said Myles Meyers, founder of New Yorkbased Superbia Services Inc., which created the credit union. “I can walk into a bank or credit union and apply for a loan or credit

A disagreement over road funding led to a breakdown in state budget negotiations in Lansing last week.

card or savings accounts and frankly, no problem,” Meyers said. “If I walked in to the same institution with my husband, we can come across different responses and welcome. And this is where it all starts to change for the community.” Large swaths of corporate America now advertise their support for LGBT rights, and hundreds of companies

have signed on to support federal and state laws to give equal protection to the community. A majority of Americans say they support gay marriage.

State gets $7.5 million federal mobility grant

The U.S. Department of Transportation has awarded a $7.5 million

8 9

PEOPLE

RUMBLINGS

WEEK ON THE WEB

federal grant to help strengthen research and development of self-driving technologies in Michigan. The grant will go toward a partnership between the state, city of Detroit, University of Michigan and Ypsilanti-based American Center for Mobility, according to a news release. Self-driving vehicles will be tested on the streets of Detroit and at UM’s Mcity and the ACM, the release said. “This investment will help keep Michigan at the forefront of mobility, and ensure our state remains the global leader in developing self-driving innovations and building the vehicles of the future,” U.S. Sen. Gary Peters, a Democratic member of the Senate Commerce, Science and Transportation Committee, said in the release. Congress is disbursing a total of $60 million for self-driving research and development projects. Peters and fellow Michigan Democrats U.S. Sen. Debbie Stabenow and U.S. Rep. Debbie Dingell and other state lawmakers backed the Michigan Mobility Collaborative’s grant application.

THE KEY TO YOUR CITY General Motors is proud to support innovation at the Detroit Homecoming. Thank you for showcasing the beauty and promise of Detroit.

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SPORTS BUSINESS

Xenith hit by ‘dizzying’ tariffs

FINANCE

Exponential ETFs eyes growth with savvy By Kurt Nagl knagl@crain.com

Detroit-based Exponential ETFs — the only exchange-traded fund issuer in the state — is out to prove it can compete with the heavy hitters of Wall Street. After moving from Ann Arbor to downtown Detroit in April, the firm is growing its staff and looking to expand from $470 million in assets under management to $1 billion in the next year, said CEO Phil Bak. Its flagship fund, based on the American Customer Satisfaction Index, is also picking up steam, although it has yet to prove it can outperform the market. Businessman and ACSI mastermind Claes Fornell, who is bankrolling the enterprise, has $50 million that says it will. Founded in 2016, Exponential ETFs issues and sub-advises ETF funds — a mutual fund-like investment vehicle

Need to know

JJFounded in 2016, ETF manager aims for $1 billion in assets over the next year JJFirm's flagship fund is based off American Consumer Satisfaction Index JJHired last week, Tyrone Ross will lead finance awareness initiative in Detroit

grown to nearly 10 percent of the market share of helmets for youth football, the high school and college gridiron and professional players across multiple continents, Sullivan said. At peak production, the company has 80 employees working out of its 66,000-squarefoot production, research and development facility located inside James Group International’s sprawling warehouse on Fort Street in southwest Detroit. Another 50 employees work in Xenith’s corporate offices and design studio in the Gilbert-owned Kresge Building at 1201 Woodward Avenue, above the Under Armour store.

that’s exploded in popularity and is considered by many experts to be a game changer in finance. With East Coast behemoths such as BlackRock and The Vanguard Group owning most of the market share, and hundreds of smaller companies cropping up regularly, Bak said he sees his small but strong firm in a David vs. Goliath type light, with Detroit a fitting stage. “It is a little bit out of the way — we’re off Wall Street,” he said. “This is certainly off the beaten path, but that makes the company more interesting, more colorful.” Bak and his seven-member team — including finance ace Tyrone Ross Jr., hired earlier this month by the firm — are tapping into one of the country’s fastest-growing investment tools.

SEE XENITH, PAGE 29

SEE ETFS, PAGE 4

LARRY PEPLIN FOR CRAIN’S

Maria Barraza works on a helmet at Xenith in Detroit.

Despite headaches, made-in-Detroit helmet brand grows to nearly 10 percent of market By Chad Livengood clivengood@crain.com

A football helmet company in Detroit that’s part of Quicken Loans founder Dan Gilbert’s family of companies has not been immune from President Donald Trump’s trade war with China. Ryan Sullivan, CEO of Xenith LLC, said the president’s tariffs on Chinese-made goods and components has “definitely impacted” the football gear maker as it sources numerous parts from Chinese manufacturing plants, including its inner helmet padding system that mitigates the impact of blows to the head on the playing field. “To be candid, keeping track of what cate-

gory classifications are part of the tariffs that are going out this week or that week and the next week can be dizzying at times,” Sullivan said in an interview for the Crain’s “Detroit Rising” podcast. “As Crain’s and other outlets have covered, it seems each and every other week there are different products that are subject to new tariffs.” While the tariffs have been a logistical headache, they have not slowed annual helmet production as Xenith has come within reach of the 100,000 unit mark and doubled its reconditioning business after 10 years of retail helmet sales, Sullivan said. Xenith, which Gilbert moved from Lowell, Mass., to Detroit four years ago, has quietly

ENTREPRENEURSHIP

SmileDirectClub’s $1 billion+ IPO starts with a thud By Annalise Frank afrank@crain.com

A startup with deep metro Detroit roots went public Thursday in one of the biggest initial public offerings of the year, but not without some bumps. SmileDirectClub Inc., a Nashville-based at-home teeth aligner startup,raised more than $1.3 billion from the IPO, which set a $23-pershare price Wednesday evening. That made it the sixth-biggest IPO of the year. However, the stock opened with a thud. Shares tumbled nearly 29 percent to close at $16.44 in their Nasdaq debut after the company’s IPO was priced above its initial target range of $19-$22. That made it the first U.S.

Need to know

JJNashville-based company has one of

the biggest initial public offerings of the year JJDavid Katzman, cousin and former partner of Dan Gilbert, retains control after IPO

JJCo-founders are childhood friends who met at northern Michigan summer camp

company since at least 2008 to raise more than $1 billion and price its IPO above range, yet sink in its opening trades, Bloomberg reported. SmileDirectClub launched in 2014 with financial backer Camelot Venture Group, a Farmington Hills-based

investment firm founded and coowned by David Katzman, father of one of the SmileDirectClub founders and a former Dan Gilbert business partner. Katzman is also CEO of SmileDirectClub. Co-founders Alex Fenkell and Jordan Katzman, both 30, are childhood friends who met at a northern Michigan summer camps. Fenkell is from Bloomfield Hills and attended Cranbrook, while Katzman of Franklin attended Birmingham Groves High School. They partnered with Jordan’s father, David, and his Camelot firm that has invested in Quicken Loans Inc. and 1-800 CONTACTS, among others. SEE SMILE, PAGE 32

SMILEDIRECTCLUB

SmileDirectClub co-founders and metro Detroit natives Jordan Katzman (left) and Alex Fenkell met at summer camp in their teens.

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Birmingham, we’re

In Your Corner.

Phil Bak

ETFS 260 East Brown Street Suite 150 Birmingham, MI 48009 Main 248/567-7800 | Fax 248/567-7423

www.varnumlaw.com

August 2019

FROM PAGE 3

In total, ETFs hold more than $4 trillion in assets in U.S. markets and are growing, according to a report from the New York Stock Exchange. ETFs are essentially mutual funds that can be traded like a stock on the stock market. They are more tax efficient and typically cheaper for investors because fund managers take a smaller cut. Exponential ETFs is both a creator and manager of these funds. Its proprietary American Customer Satisfaction ETF (BATS: ACSI), was launched in 2016. Its other fund, Reverse Cap Weighted (BATS: RVRS), debuted a year later. Combined, they have drawn around $70 million in assets. Around $50 million of that is Fornell’s money. In 1980, Fornell, a native of Sweden, began teaching at the University of Michigan, where he is the Donald C. Cook Distinguished Emeritus Professor at the Ross School of Business. In 1994, he founded the American Customer Satisfaction Index, which measures U.S. consumer satisfaction based on a yearly survey of about 300,000 customers. The index rates and ranks companies in different sectors based on how satisfied customers are with them. Fornell also started Detroit Vineyards, as well as Ann Arbor-based firms ForeSee Results and CFI Group.

Bringing research to market Around the late 1980s, Fornell began considering the application of his research to the stock market. “It’s not a big jump in intellectual ideas to say, you’re probably better off as a company with satisfied customers, but nobody had measured this on a big scale,” Fornell said. “I thought, ‘OK, that’s pretty obvious.’ Then I thought, ‘OK, are investors looking at this?’ And the answer was no.” Fornell tested his theory in 2009 by launching a hedge fund based on the ACSI. It provided good returns for a while, he said, but fizzled out with the high fees and popularity decline of hedge funds. In 2016, he received a call out of the blue from Bak, a managing director at the NYSE who had followed Fornell’s research from afar and had been itching to apply his ETF expertise elsewhere. “He said he was in Kmart one day, and it was just awful, and he asked me, ‘Has anyone tried investing in companies that treat people well?’ and I said, ‘Well, you probably called the right person,’” Fornell recalled. “I was not familiar with the ETF market. He was one of the world’s experts, so I thought, ‘Gee, this is a great combination.’”

Tyrone Ross

Claes Fornell

With Fornell the primary funder (he’s invested about $4 million into operations of the company), Bak assembled a team and created a fund that tracks stocks based on the consumer satisfaction ratings of companies. “We wanted to deliver Dr. Fornell’s thesis about customer satisfaction and stock pricing, and we wanted to do it with the most cutting-edge investment fund,” Bak said. Since ETFs were first made available in the early 1990s, more than 5,000 have been developed. The largest ETF manager is BlackRock, which has more than $1.3 trillion in assets under management across several funds. ETF funds are composed of dozens of different securities, including stocks, bonds and commodities, that track underlying indexes. The ACSI is designed to favor companies that get good reviews from customers. “Basically, let’s take all the companies that are getting a five-star rating on Amazon and overweight those companies,” explained Sam Huszczo, owner of Southfield-based SGH Wealth Management, which handles $160 million in assets that are mostly invested in ETFs.

it’s impressive that he’s done it through Detroit.” Chris Fragner, principal of Ann Arbor-based Sage Hill Capital, said around one-third of the firm’s $135 million in assets are in ETFs. He said he invested in the ACSI shortly after it was launched. “We were believers in the research. It was the reason we were an early adopter,” Fragner said. “Customer satisfaction is important because when a recession comes, people tend to go where they found value. (There is) potential for outperformance in the next recession with this ETF.”

“We wanted to deliver Dr. Fornell’s thesis about customer satisfaction and stock pricing, and we wanted to do it with the most cutting-edge investment fund.” Phil Bak

Huszczo, an eager but cautious adopter of ETFs, said he is not an investor in Exponential’s products. He said as a rule he sticks to funds that have been around for many years — long enough to prove they track an index as designed. Thematic ETFs are grabbing the attention of investors, but many are little more than flavors of the month, he said. For example, esports and marijuana ETFs are exploding in popularity. Exponential charges 0.66 percent in management fees for the ACSI fund. For comparison, the Vanguard S&P 500 ETF charges only 0.04 percent in fees, while a typical mutual fund manager charges an average of 2 percent. The ACSI fund has produced a year-todate return of 16.47 percent, compared with the S&P 500’s return of 18.54 percent, according to its website. “I think their core products are interesting,” Huszczo said of Exponential ETFs. “(Bak) has certainly made a name for himself in this world. I think

Growing in Detroit Bak said the company could issue additional ETFs based on consumer demand, but its priority is the ACSI and sub-adviser business, where it sees most growth potential. The company manages $400 million in nine sub-advised funds, which license third-party tracking strategies. An example of these funds is the BlackSwan ETF, which uses tracking strategies from New York City-based S-Network Global Indexes Inc. and focuses on investing in U.S. Treasury securities. “It’s been a tough time for asset managers, but we’ve been able to carve a niche that is growing,” Bak said. “We’re still in the early stage — not a big rush to just grab a bunch of assets. We want to build for growth.” Revenue for 2019 is around $700,000. With $1 billion in assets, annual revenue would be near $2 million. The company’s funds are used by financial advisers across the country. Bak said he can’t quantify how many of them are from Southeast Michigan, but he’s eyeing local advisers to help fuel growth. Another growth strategy for the firm is attaching itself to Detroit as the city enjoys a boost in its public image. A key part of the strategy is hiring Ross, whose job is to promote financial education in Detroit. Based in New York City along with a couple other employees from the firm, he is expected to relocate to Detroit in the coming months. He will lead the firm’s Detroit Invests in You initiative, which aims to increase awareness of the benefits of investing, saving, entrepreneurship, avoiding debt and owning a home. As for the ACSI ETF, Fornell said it’s just a matter of time before the fund bears fruit. “To me, it’s extraordinarily simple. Companies with high levels of customer satisfaction will, on average, outperform the market,” he said. “I’d be willing to bet almost anything on it — much more than $50 million.” Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl

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REAL ESTATE INSIDER

West Elm hotel no longer planned for Woodward site What happens with the West Elm hotel in Detroit isn’t precisely known, but we do know that the second site where it was supposed to go is KIRK no longer in the PINHO cards. The deal was scrapped by Detroit-based The Roxbury Group late this spring, David Di Rita, the company’s principal, said last, confirming a detail in a lengthy Detroit Free Press story by JC Reindl. He declined to provide specifics on why the business relationship didn’t work out, although he did say that Roxbury started talks with other hotel flags for the project after West Elm was no longer in the picture. But the hiccup in the Detroit project comes around the same time that a West Elm hotel in Indianapolis was canceled, as well. In June, Indianapolis Monthly reported that the West Elm hotel in that city was DOA. A lawsuit by DDK Hotels, the former hotel operator that West Elm had tapped for a joint venture on the projects, has been filed in the matter, threatening delays to the ultimate rollout in the other pilot cities. It alleges breach of contract. The lawsuit says that a new West Elm president, Alex Bellos,

owned by Wayne State University. It was revealed a year and a half ago that it had moved to the Roxbury site, which is at Woodward Avenue and Eliot Street as part of a planned 7-acre development known as SoMA, which is shorthand for South of Mack Avenue, planned by the Nyman family. Some of the first West Elm hotels were to be in Detroit, Indianapolis, Minneapolis, Oakland and Portland. There’s no indication on the West Elm hotels website of Detroit’s being scrapped; the city’s location is still listed. But then again, so is Indianapolis.

Remember the Vernor? HAMILTON ANDERSON ASSOCIATES

Detroit-based developer The Roxbury Group has pulled the plug on a West Elm hotel at the site it is working on at Woodward Avenue and Eliot Street straddling the Midtown and Brush Park neighborhoods.

“blind-sided” DDK, “informing them that he wanted to move the West Elm Hotel brand in a materially different direction than was initially contemplated by the joint venture partners and wanted to develop a more scale-able, cookie-cutter model,” the complaint says. “In fact, however, what (West Elm parent company Williams-Sonoma Inc.), West Elm and Bellos had already decided upon was to eliminate DDK from the joint venture, to replace it, obtain a more favorable fi-

nancial arrangement, and to accomplish that result by engaging in conduct that violated DDK’s legal rights and the terms of the JV Agreement.” I sent an email Monday night to West Elm seeking additional details on whether the luxury furniture brand still plans a Detroit hotel. I have not yet heard back. When it was announced in September 2016, it was to go on a roughly 1.5-acre site at Cass Avenue and Canfield Street in Midtown on land

You’ve read about it in Crain’s in varying stages for almost six years (!!!), ranging from its initial announcement in November 2013 to when there were indications that Wayne State University might pull the plug. You’ve read that the West Elm hotel (yes, the one above) was supposed to go on the site but got cold feet. Now, one of the lead executives in charge of the planned Vernor project targeted for Cass Avenue and Canfield Street said there is fresh momentum behind the long-delayed project. Todd Sachse, CEO of Detroit-based Sachse Construction LLC, an affiliate of Detroit-based developer Broder &

Sachse Real Estate Services Inc., told a group of real estate professionals during the RE Journals Detroit Commercial Real Estate Summit event in Southfield on Friday that he anticipates an approval for the project by the Wayne State University Board of Governors later this month. He didn’t elaborate on the type of approval needed, but a spokeswoman later said that it’s a pending property purchase vote. She declined to release more information. Sachse described the project as having a “residential tower” and a “hotel tower” but didn’t reveal more details. Shawn Wright, a spokesman for Wayne State, said this month’s board agenda for Sept. 20 hadn’t been released and it’s not known yet what will be on it. The Vernor site had been planned for 248 apartments, a 120-room hotel, 19,000 square feet of retail and a 300-person conference center after awarding an April 2013 request for proposals to Broder & Sachse and entering into a memorandum of understanding for the $60 million project with the developer in November 2013. A March 2018 appraisal by Detroit-based The Harbin Group puts its value at $5.468 million. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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The Kresge Foundation is proud to support the 2019 Detroit Homecoming.

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OPINION EDITORIAL

COMMENTARY

Take the $500M, governor, and start building bridges

Scar tissue: Steel tariffs moved money, created uncertainty for suppliers

hatever you think of her politics, Democratic Gov. Gretchen Whitmer is the only state leader this year who has offered a plan commensurate to the real challenges Michigan faces on infrastructure and education. But due to the short-term vision of legislative term limits and voter distaste for higher taxes, Whitmer’s $2.5 billion tax hike earned bipartisan rejection and was never likely to happen. After a two-month summer vacation, the Republican-controlled Legislature has successfully run down the clock on Whitmer, forcing the first-year governor to erase her tax hike line in the sand. And now there are just two short weeks left to avert a state government shutdown that would be an embarrassing setback to the strides Michigan political and business leaders have made in recent years to change the image of a state in chronic decline, beset by dysfunction at the bargaining tables of labor and management and in the halls of political power. GOP legislators have insisted for months they can cut their way to $2 billion more for roads. So far, they have not produced a viable plan that doesn’t involve siphoning away education funding, saddling future generations with more debt or selling off the Blue Water Bridge. But lawmakers have scraped together $500 million in surplus, one-time funds they want to spend on road construction next summer. Whitmer should take them up on it and spare Michigan’s 10 million residents of another year or more of political dysfunction in Lansing. The governor has said this one-time money isn’t a long-term solution and could lead to short-term spikes in construction costs. But she can pick up the long-term road-funding fight in the 2020 elections. We’d like to propose a solution: Fix the damn bridges. Nearly 1-in-5 Michigan bridges are rated in poor condition. The Michigan Department of Transportation has a $1 billion plan on the drawing board to bundle together 1,100 locally owned bridge replacement projects over five years. This $500 million would get MDOT halfway there. While some Republican legislators have scoffed at the governor’s media tours of bad bridges, some of these aging spans are actually “a catastrophe in the making,” as Whitmer framed it back in May when she stood under the 88-year-old Miller Road bridge in Dearborn — an antiquated span being held by 524 temporary supports. That Depression-era bridge was constructed to carry trucks and daily foot traffic of workers headed to Henry Ford’s massive Rouge plant. This bridge literally supported Michigan’s early 20th century rise. Now it’s a sign of Michigan’s 21st century decline as we struggle to muster the political will to rebuild infrastructure. In her inaugural address, Gov. Whitmer invoked the image of Michiganians coming together under a common cause in the 1950s to construct the Mackinac Bridge. It was a bridge-building metaphor for cooperation in Michigan’s newly divided government. Whitmer should take the $500 million — and get to work building bridges.

MORE ON WJR J Listen to Crain’s Group Publisher Mary Kramer and Managing Editor Michael Lee talk about the week’s stories every Monday morning at 6:15 a.m. Mondays on WJR 760 AM’s Paul W. Smith Show.

.S. steelmakers are planning to add up to eight million tons of annual domestic steel production by 2024. Thanks to the Trump administration’s sweeping tariffs on imported steel and aluminum that took place in 2018, steel company executives touted “record years” in 2018. High steel prices have led to new promises of investment. But at what cost? While those high-dollar capital expenditures are a clear win for the White House, for Livonia-based metal stamper and engineering firm AlphaUSA, those investments represent a price tag for the tariffs — a redistribution of wealth. The tariffs caused domestic steel prices to skyrocket through most of 2018 and early 2019, causing AlphaUSA to pay upward of $7 million more for the 12,000 tons of steel it buys annually and 12,000 tons of bolts it uses to make fasteners than if the tariffs never occurred. “What we experienced in 2018 and early 2019 was a permanent and unnecessary transfer of resources from our business to the domestic steel producers,” said David Lawrence, senior vice president and chief administrative officer for the automotive fastener supplier. Now auto sales are slowing down, with most experts predicting sliding sales over the next three years, and Lawrence said the high steel prices AlphaUSA paid is impacting its ability to adjust. “It’s put a strain on our financials and made it harder to invest in new equipment,” Lawrence said. “Our resources are now limited and we’re just not sure for what end.” The U.S. Department of Commerce approved a 25 percent tariff on imported steel in March 2018 under President Donald Trump’s “America First” policy platform after a ninemonth investigation into affects of imported steel on national security. Three months later, those tariffs were extended to the European Union, Canada and Mexico. The goal was to prevent excess supply from flooding the domestic market and aid the struggling U.S. steel industry. Prices for domestically made hotrolled coil steel increased 42 percent by the third quarter of that year to $1,002 per metric ton, costing the automotive industry billions of dollars. Steelmakers enjoyed the fruits of protectionist trade policy. Profits for Charlotte, N.C.-based NuCor increased by $1 billion, or 79 percent, in 2018, $455 million for Fort Wayne, Ind.-based Steel Dynamics, $83 million for West Chester Township, Ohio-based AK Steel and $728 million for U.S. Steel. “Increased demand levels and lower imports generated approximately six million tons of added volume for the U.S. steel industry last year,” NuCor CEO John Ferriola told investors during its 2018 fourth quarter earnings call. “The best way for me to sum

DUSTIN WALSH | CRAIN’S DETROIT BUSINESS

Driveshaft boot retainers stamped by Livonia-based AlphaUSA

DUSTIN WALSH dwalsh@crain.com

up 2018 is this: It was a record year for Nucor.” In contrast, Ford Motor Co. said in October 2018 that the tariffs cost the automaker more than $1 billion. General Motors calculated a similar loss. “It is definite that U.S. Steel prices are higher than any other market (because of the tariffs). It’s definite that someone has to pay for that steel prices,” said John Anton, associate director and the lead steel expert for Southfield-based market research firm IHS Markit. “It’s definite that steel prices increased more than car prices. Parts prices also increased less than steel prices, that would be a fair statement. Therefore steelmakers made more money than parts makers.” But the tariffs aren’t bad for every auto supplier. Wixom-based Grand Steel Products Inc. benefited from the sharp rise in steel prices last year. The steel service center, which provides supplies flat-rolled steel to buyers who may not have direct contracts with steelmakers or who need to spot buy, was able to capitalize on steel it bought at low prices and resell it for much higher prices post-tariffs. “What the price of steel did last year was bonkers,” said Michael Barnett, president and COO. “We rode the high in 2018” But the tariffs didn’t provide sustainable profits for steelmakers or Grand Steel. The Trump administration rolled back the steel tariffs on Mexico and Canada in May. Soon after, domestic steel prices began to slide. Steel prices dropped to pre-tariff levels by late summer this year and it’s

shown in steelmaker stock prices. Shares of ArcelorMittal, for instance, are down nearly 30 percent year-todate. Investors saw it as a one-time windfall via the tariffs. That windfall has led to planned increases in domestic steelmaking capacity. Steel Dynamics Inc. plans to invest as much as $1.8 billion to build a mill at an undecided U.S. site. ArcelorMittal has said it will spend $3.1 billion on U.S. factories. And U.S. Steel Corp. is eyeing plant investments of $2.5 billion. This capacity is going to lead steelmakers to flood the market, depressing prices further, said Barnett. “I’ve made a lot of money, but I’ve also lost a lot of money, and these wide swings in costs aren’t helping,” Barnett said. “Steel prices have always been variable, but they shouldn’t vary this much.” The tariffs, however, have done little to create jobs in the steel industry. Anton said domestic steelmakers are investing in technologies that make them more efficient, not more labor intensive. The Alliance for American Manufacturing, a tariff-supporting industry organization, estimated earlier this year the tariffs created or saved more than 12,700 jobs at steel and aluminum factories. The Peterson Institute for International Economics, a nonpartisan Washington, D.C., think tank, estimates consumers and businesses like AlphaUSA paid $900,000 annually for each job saved. For Lawrence and Barnett, the point of the tariffs remains unclear. “We’ve created a stronger domestic steel producing industry, but on the backs of the manufacturing base.” Barnett said. “I don’t have a side here, but is that a win? I guess allowing domestic steel producers to be profitable for a while is a win for the administration. We’re right back to reality on steel prices in 2019 and I don’t see how anything has changed.” Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

C R A I N ’ S D E T R O I T B U S I N E S S // S E P T E M B E R 1 6 , 2 0 1 9

Don’t kick teacher pension can ahead to fund roads

s lawmakers in Lansing haggle over how to pay for fixing Michigan’s roads, bridges and other infrastructure, they should consider the experiences of other municipalities in Michigan and other states before embarking on funding plans that involve the public school employee retirement system. Current proposals under consideration could undermine efforts of the past decade that put the state-administered pension fund for school employees on firmer financial ground. By extending and creating debt using the pension system, they hope to free up other tax dollars for road repairs, essentially gambling that financial markets won’t have to weather an economic downturn. Under a current, fiscally responsible plan, debt for the Michigan Public School Employees Retirement System pension fund is on track to be paid off by 2038. The debt is called “unfunded liabilities,” which is the difference between what the pension fund holds in assets and what it owes to retirees. The larger the unfunded liability, the more vulnerable a pension system is to fiscal collapse. We should

Health Care Summit features author, former Aetna CEO

OTHER VOICES Royce Humm

stay on course to close the liability gap in the state system, rather than jeopardize it with a road funding plan that is risky or inefficient. Borrowing $10 billion by selling “pension obligation bonds” or POBs

and investing the bond proceeds, so as to use the interest earnings to repay the bond debt and make payments into the pension system is the proposal. Come again? POBs are complex and risky, based on a rosy assumption that the investment will produce a robust, steady income. POBs have been used by some state and local governments as a strategy to shore up employee pension funds that are badly underfunded. According to the Government Finance Officers Association, “POBs involve considerable investment risk, making this goal very speculative.” The association notes that some

municipalities across the U.S. have endured increased financial stress because of POBs, which demonstrates their risks. Another Lansing road-funding proposal is analogous to refinancing a home mortgage with 20 years remaining to a new one with a 30-year term. It would simply extend the schedule for repaying MPSERS’ unfunded liabilities by five or 10 years. In the short term, it frees up some cash, but in the long run it leads to higher costs. Delaying the MPSERS repayment schedule merely kicks the proverbial can down the road, which is one reason the existing pension

fund debt accumulated in the first place. To be sure, providing much-needed upgrades to Michigan’s roads and bridges is a serious and pressing matter. But it also requires serious funding solutions. We urge lawmakers to resist relying on risky funding gimmicks that will take us off the current fiscally prudent course and potentially cost taxpayers more in the long run. Royce Humm is executive director of the Michigan Association of Retired School Personnel, which represents nearly 40,000 retired public school employees

Coverage and resources you and your employees can count on.

Our health care system is beset by gaps — gaps among patients, providers and payers. There are gaps in information: understanding on all sides about health coverage, communication among providers, gaps among people in the social determinants of health. Crain’s 2019 Health Care Leadership Summit will focus on bridging these gaps in the effort to create a system that works for all. The keynote speaker will be Henry Ford Health emergency room physician Rana Awdish, M.D. Her book “In

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Shock” recounts the story of her own experience as a patient with a life-threatening condition who then returned to medicine. Another featured speaker at the summit helped put together a multibillion-dollar deal that promises to disrupt some of the gaps in our multilevel health care system: former Aetna Inc. CEO Mark Bertolini, who oversaw the insurer’s sale to pharmacy company CVS Health Corp. The summit will also feature presentation of Crain’s Health Care Heroes awards along with breakout sessions on specialty topics. The summit runs 8:30 a.m.-1:30 p.m. Oct. 28 at The Henry hotel in Dearborn. Tickets are $185 or $2,000 for a table of 10 and are available at CrainsDetroit. com; click on the “Events” tab.

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FOCUS

DETROIT HOMECOMING: ENTREPRENEURSHIP

As efforts focus on rebuilding Detroit’s black middle class, these business owners find growth as entrepreneurs

BUILDING A NEW SPIRIT OF DETROIT By Chad Livengood

clivengood@crain.com

ne woman left a career in marketing in Washington, D.C., to move back to Detroit and run a family restaurant and banquet hall in a resurging Midtown. Another woman patented a hair care product she developed from imported Moroccan clay in her kitchen and sold bottles with admittedly “horrible” packaging on a folding table at Eastern Market. One man sold his software company in Houston when he saw an opportunity to get back to Detroit through data-driven bids on housing demolition contracts. And others have toiled for years as aspiring entrepreneurs before leaving their day jobs and charting new careers as business owners in Detroit, a city that lost thousands of businesses over five decades of decline. Under the surface of Detroit’s nascent comeback, there’s a movement of new black-owned businesses popping up across the city, breathing new life into the city’s black-middle class that nearly disappeared in the 1990s and early 2000s.

This week, Crain’s profiles 10 blackowned small businesses that have grown since the Great Recession in Detroit ahead of the annual Detroit Homecoming gathering of expats, major themes of which are entrepreneurship and rebuilding Detroit’s black middle class. These businesses have not risen without struggles and obstacles. They have faced challenges in securing capital, suitable building space and finding the right mixture of skilled employees. And some of these entrepreneurs trying to get in on Detroit’s building boom are feeling left out of the comeback because of their smaller size, even amid a shortage of construction capacity. SEE BUSINESSES, PAGE 26

Tarolyn Buckles President and CEO, Onyx Enterprises Inc. Page 12

Stephanie Byrd Co-Owner, The Block Page 12

Asia Denson Owner, Denson Construction Services Page 14

Cherri Harris Owner, Swint Logistics Group Page 14

Gwen Jimmere Owner, Naturalicious LLC Page 16

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ROIT BUSINESS Kenji Lemon Owner, One Stop Property Maintenance LLC Page 16

IN THE

The Marshall Matthers Foundation, Carhartt and Michigan Sta ate University collaborate in Detroit to create Verses, a program to teach kids literacy thro ough music education. The next generation of leaaders are sitting in Detroit’s classroo oms right now. And chances are, Verrses is the opportunity they’ve been waiting for. Now, they can learn ho ow to harness the power of word ds, and use them to pave their ow wn path. Learn more at: go.msu.edu/mathers

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DETROIT HOMECOMING: ENTREPRENEURSHIP

Tarolyn Buckles

President and CEO, Onyx Enterprises Inc.

“I have relationships with clients that are just like family.”

Stephanie Byrd Co-Owner, The Block

What her business does: The Block is a casual, gastropub-style dining restaurant on Woodward Avenue between Selden and West Alexandrine streets. She also manages the adjacent Garden Theater, an events space for wedding receptions and banquets. How she got started: Byrd left Detroit to get a college education at Howard University in Washington, D.C., where she studied marketing and communications. She lived and worked in D.C. for most of her 20s in marketing at H&R Block and XM Radio. In 2013, she moved back to Detroit to join her family’s restaurant business. Her father, Michael Byrd, is the longtime owner of Flood’s Bar & Grille on St. Antoine Street, adjacent to the headquarters of Blue Cross Blue Shield of Michigan. Michael Byrd and his business partner, George Stewart, own all of the buildings on Woodward between Selden and Alexandrine, known as the Woodward Garden Block Development. In building out an 88-seat restaurant at 3919 Woodward Ave., a group of consultants convinced the Byrds to open an upscale restaurant in November 2013, during construction of the QLine streetcar track on Woodward Avenue. “That was definitely our valley, that time during QLine construction,” Stephanie Byrd said. After less than two years, the Byrds pulled the plug on Grille Midtown. “We found the concept didn’t work, so we rebranded to something much more casual,” Byrd said. In rebranding the restaurant, the father and daughter were initially at an impasse over the new

“He didn’t think I would take [the name The Block] and run with it. But I did run with it.”

t n a t

name. “We were considering calling it Byrd House or Byrd something,” Stephanie Byrd said. “Me and my dad had a little argument about it and he said, ‘Just call it The Block.’ He didn’t think I would take it and run with it. But I did run with it.”

A b w c S s

Keys to growth: In her years of going to college and working in Washington, D.C., Byrd saw restaurants come and go in multiple cycles as a “fickle” base of patrons never became loyal to any one establishment. In DePORTRAITS BY SYLVIA JARRUS FOR CRAIN’S

What her business does: Civil, electrical, mechanical, structural and architectural engineering, construction project management and permitting and underground municipal utility inspections. How she got started: In 2011, Buckles, a civil engineer by trade, left an engineering firm to venture out on her own. The next year, she became the technical adviser for the Detroit Water and Sewerage Department’s board of directors. Her firm began to grow when she partnered with the global infrastructure firm HNTB on construction of the QLine street car project. Onyx Enterprises did the underground municipal utility inspections for that massive reconstruction of Woodward Avenue from downtown to New Center. Buckles’ firm has done engineering, general contracting or project management work at Detroit Metro Airport, Walker-Miller Energy’s new headquarters in New Center and the Michigan Department of Transportation’s multi-year I-94 reconstruction project, as well as out-of-state projects. Onyx Enterprises has offices in Cleveland, Atlanta and is opening a new office in Tampa. Keys to growth: Partnering with bigger firms to win a share of prime contracts, particularly when the client has specific goals or mandates to hire a certain percentage of minority or women-owned businesses. Advice to other entrepreneurs: “It’s a business where you have to be resilient and patient. There will be some frustration,” she said. And client relationships are everything, Buckles said. “I have relationships with clients that are just like family,” she said. “I treat them like family.” — Chad Livengood

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troit, she’s found that loyalty is everything after four years of running The Block with a neighborhood bar and grill vibe. “Folks really want that Cheers environment — they want their bartender to recognize them by name,” she said.

dad with

Advice to other restaurateurs: Understand your clientele and be ready to make changes. Byrd acknowledges she and her dad were too “hands off” with the Grille Midtown restaurant in 2013 competing with other nearby upscale establishments like Selden Standard and Grey Ghost. “That was a learning experience for us,” she said. — Chad Livengood

ome De-

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How she got started: In 2011, Denson got laid off from her job as a highway engineer at BF&S Engineering. While out of work, she went to carpentry school in 2012 at the Detroit Training Institute of Technology and earned a builder’s license. From there, she started doing renovation work for home-

“People will definitely try to get one over on you. I’m sweet as pie. But sometimes I have to put my big girl pants on.” owners and houses she bought as investment rental properties. Denson has renovated rental homes for owners in Canada, China, Israel, Taiwan, California, Florida, New York and Texas. She has marketed her services through a YouTube channel and uses Facebook Live and the mobile phone video chat app Marco Polo to communicate with overseas or out-ofstate clients. Last October, Denson held a seminar for a group of 50 investors in New York’s Bronx borough on how to buy and manage Detroit rental properties. The seminar resulted in new clients. She has since held additional seminars in Orlando and Brooklyn, N.Y. Keys to growth: Denson credits her use of social media and sending clients photos and videos of her finished projects with generating referrals and repeat business. Also, her time is money. In 2014, Denson stopped doing free estimates and started charging $50 for an estimate. “When I did that, that cut all of the BS by 50 percent,” she said. “I don’t stress, I get the better clients.” She has since raised her estimates fee three times to $75, $100 and then $150 in August.

Cherri Harris Owner, Swint Logistics Group

What her business does: Swint Logistics Group started in 2015 as a traditional motor carrier trucking company and has diversified into a training and consulting company for gravel dump truck haulers and operators. Harris runs one over-the-road tractor-trailer, a box truck and one gravel dump truck. The company also does dispatch work for other trucking companies from its office.

“We started too big, we had to come back to the table, regroup, come up with a new plan, start from scratch and start back growing.” How she got started: Harris spent 15 years as a commercial truck driver. When she ventured out on her own, she was initially running five tractor-trailers for fixed-route deliveries. In November 2018, she won a $10,000 grant from the New Economy Initiative’s NEI Ideas program to start a training program for operating gravel dump trucks. “That was born just from the NEI Ideas grant,” she said. “It opened up new opportunities and a new stream of revenue for us.” Harris has done training programs for long-established road-building companies, including AJax Paving Industries Inc., Cadillac Asphalt and Asphalt Specialists Inc. AJax has hired her to create a pre-apprenticeship program for heavy construction trucking for its unionized employees. Keys to growth: Harris has found a niche in teaching gravel truck driving and operating courses in a market that’s got high demand and a shortage of drivers within the fields of commercial, industrial and infrastructure construction. But she scaled back from being another small trucking company after learning some hard lessons on the near-debilitating cost and scope of insuring tractor-trailers. “We started too big, we had to come PORTRAITS BY SYLVIA JARRUS FOR CRAIN’S

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Advice to other entrepreneurs: Don’t be afraid to turn away problematic customers. “People lie. People will definitely try to get one over on you,” she said. “I’m sweet as pie. But sometimes I have to put my big girl pants on.” — Chad Livengood

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NEW HIRE? PROMOTION? BOARD APPOINTMENT?

DETROIT HOMECOMING: ENTREPRENEURSHIP

Gwen Jimmere Owner, Naturalicious LLC

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What her business does: Jimmere holds a patent on a hair-care product made from Moroccan lava rhassoul clay that is a five-in-one conditioner, shampoo, detangler, deep conditioner and leave-in conditioner. Jimmere started the company in 2013 from home and selling bottles of Naturalicious in Eastern Market before moving into coworking production space at the former PonyRide building in Detroit’s Corktown. She moved production of her line of hair care products to a facility in Livonia last year after being unable to find adequate production space in Detroit. The company sells about 3,000 units per month and is on track to do $2 million in sales this year. How she got started: Jimmere was laid off from her job as head of global digital communications at Ford Motor Co. in 2013 at a moment in her life when she had a toddler son and was finalizing a divorce. She had been experimenting with lava rhassoul clay from Morocco, in search of a solution to cutting the amount of time involved in maintaining her curly hair. With no money to pay for a table at Eastern Market, Jimmere took her son to open market days with a fold-up table. “I would go down there and park it and pretend I was supposed to be there,” she said. “I had to do what I had to do, right?” Her big break came later in 2013 when she convinced a curly haired Latina woman who was a regional representative for Whole Foods to let her sell her hair care system for tight curls and coils inside the chain’s Midtown grocery store.

“Start where you are and work with what you have.”

Keys to growth: In 2015, Jimmere listened to the advice of her mother and got her Naturalicious formula patented, becoming the first African American woman in U.S. history to get a beauty care product patented. She has since gotten distribution contracts with Sally Beauty and Ulta stores, as well as Whole Foods. Advice to other entrepreneurs: Jimmere, a Crain’s 40 Under 40 winner for 2019, makes no apologies for sneaking into Eastern Market. At the time, it was a matter of survival, she said. “Start where you are

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and work with what you have,” she said. “I didn’t have a backer or funder or investors or anything. Sometimes you just have to use what you have and be really creative with that.” To initially get into Whole Foods, Jimmere had to hunt down a local representative for the new Detroit store. “Who was I to approach Whole Foods?” she said. “My packaging was horrible. It looked like I had produced it in my bedroom, because I had. But the opportunity presented itself from this woman who just understood my pain point.” — Chad Livengood

.”

What his business does: Lawn mowing, landscaping, fertilizing, power washing, snow plowing and general exterior maintenance.

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How he got started: In 2008, Kenji Lemon was working in underground maintenance for AT&T and saw a business opportunity for facilities upkeep in commercial and industrial properties. He started out mowing lawns for commercial clients on the side, before landing a landscaping contract for CVS pharmacy stores in Wayne County. In 2012, he left his job at AT&T and went full time into the property maintenance business. One Stop Property Maintenance now has the complete turf maintenance contracts for 48 CVS stores in metro Detroit and snow-removal contracts for 26 of them. Keys to growth: Lemon started out as a lawn-mowing company and eventually expanded into snow removal, general landscaping and power-washing exteriors. When officials at CVS asked whether his company could replace all of the plants in the flower beds of its stores, Lemon jumped at a new opportunity to grow his business. “I’d explain to them, ‘I don’t know a lot about planting, but if you tell me what you’re looking for, I’ll find the people to do it,’” he said. “Each time our major customers have said ‘We’ve got a need, and we’re going to give you a chance,’ I tell my guys ‘Let’s put a little more shine on it.’” Advice to other entrepreneurs: In the service industry, cutting corners to wring out a larger profit can show up in the end product. “I don’t compete on price. I compete on value,” Lemon said. — Chad Livengood

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DETROIT HOMECOMING: ENTREPRENEURSHIP

Felicia Maxwell Owner, Fit 4 Life Health and Fitness

What her business does: Neighborhood gym and fitness club on West McNichols Road on Detroit’s northwest side. How she got started: Felicia Maxwell worked in banking and finance before leaving the workforce to raise her children. As a stay-at-home mom, she later became very involved in daily fitness and exercise. In August 2013, she started teaching workout classes in her 900-square-foot basement on Detroit’s west side with one weight machine, a treadmill and an elliptical and free hand weights. In 2017, a friend encouraged her to apply for a Motor City Match grant from the city of Detroit to open her own gym. After researching the market and submitting a business plan, she won a $40,000 grant and qualified for a $40,000 loan from the Entrepreneurs of Color Fund, a flexible capital loan fund started by JPMorgan Chase & Co. and the W.K. Kellogg Foundation. She opened the gym in August 2017 and paid off the loan nine months early. Keys to growth: Maxwell’s gym has grown from 28 members in her basement three years ago to nearly 250 regular and senior citizen members. The neighborhood she serves in Detroit’s far northwest corner

“They come during the peak hours, which is after work.”

lacked a neighborhood gym, forcing residents to drive into the suburbs. She believes she’s tapped into a need. Maxwell is exploring opening a second gym in another gym desert in the city. Advice to other entrepreneurs: Maxwell isn’t trying to replicate a 24-hour-chain gym franchise — and has modeled her business around customers looking for a more personal experience. She opens at 8 a.m. each week day morning and closes in the early afternoon before reopening at 5:30 p.m. for the evening rush and closing at 8 p.m. “I learned this during the first year of business that nobody would show up during that time,” she said. “But they come during the peak hours, which is after work.” — Chad Livengood

PORTRAIT BY SYLVIA JARRUS FOR CRAIN’S

Detroit is Open for Business Don’t just visit Detroit, make it home. Join us in our mission to support a more inclusive, thriving, and resilient community.

THRIVING CHILDREN. WORKING FAMILIES. EQUITABLE COMMUNITIES.

With founding roots in Michigan, the W.K. Kellogg Foundation is proud to support Detroit Homecoming VI and partner with all Detroiters — past, present and future — to build the city all of our children deserve. New oﬃce location opening this fall Detroit Oﬃce Fisher Building 3011 West Grand Blvd. Suite 321 48202

wkkf.org

@KelloggFoundation

Twitter: @WK_Kellogg_Fdn

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DETROIT HOMECOMING: ENTREPRENEURSHIP

Brian McKinney CEO and Founder, Gayanga Co.

alumni

forever maroon and gold CMICH.EDU

Welcome home, CMU Alumni! You’re in good company. More than 46,000 fellow Chippewas call Detroit home, and over 6,000 current students from the metro Detroit area are preparing to lead the future. Fire up forever!

Proud Sponsor of Detroit Homecoming VI What his business does: Structural and underground demolition, excavating and earthwork. How he got started: In 2017, Brian McKinney sold his Houston finance software company Benjii and moved back to his hometown of Detroit to get into the demolition business. He had studied the demolition industry from afar and seen gaps in the business. He built software that uses publicly available data about past contracts for Detroit’s housing demolition program to help Gayanga Co. data-mine its way into millions of dollars in demolition contracts. “That intuitive data has allowed us to build robust tools around estimating to figure out where the market should fall,” he said. Keys to growth: Since launching in September 2017, Gayanga Co. has razed more than 300 structures in the city, giving the Detroit company a foothold in the demolition business that has opened doors for other opportunities, including contract work at the site of the future Gordie Howe International Bridge. McKinney prides himself in hiring Detroiters, with 84 percent of his 45-employee workforce residing in the city. He says a workforce of Detroiters earning an average of $50,000 in wages has been a selling point for new business and recruiting labor. “That’s

“Don’t get high on the applause and too low on the boos.” one of our talking points in showing the impact of local residents getting jobs and the impact to the city’s coffers,” he said. McKinney also said efforts by Mayor Mike Duggan’s administration to hire more Detroit-based firms and minority contractors has helped his business win contracts and build a track record. Advice to other entrepreneurs: “My advice would be not to settle for what someone thinks you can do,” he said. “Be open about your challenges — and engage. Remember who you are and why you want to start a business. Don’t get high on the applause and too low on the boos.” — Chad Livengood

PORTRAIT BY SYLVIA JARRUS FOR CRAIN’S

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THE FUTURE IS IN DETROIT

It’s no secret: Our city is quickly growing. And when it comes to this resurgence, we’re making sure it benefits everyone. Beautifying our neighborhoods is important, but building sustainable communities also means providing educational opportunities to create paths to success. Because, only by bettering lives can we truly create lasting change in Detroit.

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DETROIT HOMECOMING: ENTREPRENEURSHIP

Ken Porter CEO, Porter Media Group

What his business does: Corporate print communications, event marketing, public relations campaigns, print and digital graphic design and printing. How he got started: Porter started his company in March 2010 and spent nearly seven years as a oneman band, handling print communications for corporate clients, but farming out the actual printing of marketing documents, event brochures and programs. He struggled to scrape by and get traditional financing to buy his own printing equipment. Keys to growth: In late 2017, Porter secured an $85,000 loan from the Entrepreneurs of Color Fund administered by the Detroit Development Fund to purchase his own printers for glossy brochures and conference materials his firm produces for business meetings at TCF Center and the Detroit Marriott at the Renaissance Center. “From that point, things really picked up,” Porter said. “It just put us in a position to be more competitive on pricing, and we could really control the quality and turnaround at that point which put us in a really good position to grow.” Porter Media Group’s corporate clients include Walbridge Aldinger Co., JPMorgan Chase & Co., First Robotics competitions in Detroit and Bridging North America, the consortium of companies constructing the Gordie Howe International Bridge. Advice to other entrepreneurs: Porter credits mentorship from seasoned businesspeople for helping him grow from a one-man band to a small agency with three full-time employees and four contractors. “Those relationships and referrals are much more credible than me trying to go out and promote myself,” Porter said. “You can’t do this on your own. You need some kind of guidance from someone who’s been down that road before, regardless of the industry.” — Chad Livengood PORTRAIT BY SYLVIA JARRUS FOR CRAIN’S

“Relationships and referrals are much more credible than me trying to go out and promote myself.”

HOW TO PLAY SOCCER IN 2019: Have a kid.

Buy the kid a soccer ball.

Write a check.

Practice.

Write a big check.

Ignore other sports.

Focus on soccer.

Write a check.

Drop town’s rec league.

Write another check.

Write a check.

Write another check because you think it’s good for your kid.

Travel.

Write a check.

Give up weekend obligations.

Write a check.

Travel.

Or retire. Just like the 65% of kids from low-income families that don’t play sports at all.

What is the cost of youth sports costing us? Visit ProjectPlaySEMI.org to help give sports back to kids.

We are proud to lift up the people and places that help to shape our regionâ&#x20AC;&#x2122;s culture and economy. Our past is just a prologue to an even brighter future.

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DETROIT HOMECOMING: ENTREPRENEURSHIP

Ashley Williams

Founder & CEO, Rizzarr What her business does: Rizzarr is a content-creating platform for consumer brands seeking to market their products to millennial customers. The platform has a network of 5,200 freelancers who produce articles, videos, podcasts and photos that companies use on their social media, websites or marketing materials. The company also does market research on millennial customers for corporate brands. Rizzarr’s clients have included JPMorgan Chase & Co., Glassdoor, DTE Energy Co., Bridgewater Interiors, First Independence Bank and Warby Parker eyeglasses. How she got started: A former multimedia journalist at USA Today, Williams founded Rizzarr in 2015 in her mid-20s with a focus on marketing consumer products to fellow millennials digitally and cutting out traditional advertising and marketing agencies. Now at age 30, her firm has built out an automated tech platform to link companies with freelance content producers in their 20s and 30s. “It’s really a place where people see content that’s produced by millennials for millennials,” Williams said. Rizzarr gets 50 percent of what’s charged to the customer seeking millennial-focused marketing content, she said. Keys to growth: “Most of this I’ve bootstrapped myself or my parents have invested in the company,” Williams said. Now she’s looking for new investors through a $2.5 million investment round to redevelop PORTRAIT BY SYLVIA JARRUS FOR CRAIN’S

“[Rizzarr]’s really a place where people see content that’s produced by millennials for millennials.”

the platform, create an app and a sales-and-client-management infrastructure within the seven-employee company. In 2018, the company did $75,000 in sales. Williams projects sales this year between $200,0000 and $250,000. Advice to other entrepreneurs: Get a mentor. Williams credits longtime Detroit businessman Donald Snider with guiding her through building the business. “He’s helped me with understanding how to get more clients, building my self-esteem and my team,” she said. — Chad Livengood

BUILDING INFORMED AND ENGAGED COMMUNITIES KF.org | @knightfdn

Creating future leaders

SPONSORED CONTENT

Yeshiva Beth Yehudah’s commitment to education, community a focus of annual dinner Yeshiva Beth Yehudah, or, “The Yeshiva,” as it is called by those in the know, has become “the cause” for some of the biggest movers and shakers in Detroit. The Detroit-area school, known as a vibrant and celebrated educational institution cultivating the future leaders of our community, has announced that Jim Nicholson will be the Honoree for the 2019 Yeshiva Annual Dinner. The Yeshiva’s Annual Dinner, a gala event held in late fall at the Detroit Marriott at the Renaissance Center, has become Detroit’s not-to-be-missed event, challenging the laws of physics as it bursts with nearly 3,000 guests. The dinner’s dais will feature the A-list of dignitaries, including Michigan’s governor, U.S. Senators, local mayors, Michigan Supreme Court justices, a host of members of Michigan’s Congressional delegation and state legislative leaders, along with numerous business and philanthropic leaders. Past guest speakers have included President George W. Bush, Prime Minister Tony Blair, Vice President Joe Biden, General Colin Powell and Secretary of State Condoleezza Rice. This year’s guest speaker will be Ambassador Nikki Haley. Gerry Anderson, CEO of DTE Energy, will serve as Honorary Chairperson of the event, while 2018 Honoree Mark Davidoff, Michigan managing partner of Deloitte, serves as the General Chairperson. Yeshiva Beth Yehudah proudly provides a top quality Jewish and secular education to all who seek one, regardless of their ability to pay tuition. In doing so, the Yeshiva lives and breathes the traditional concepts of Knowledge, Service, Compassion. These values will make it a fitting and appropriate tribute to Nicholson, co-chairman of PVS Chemicals, when he is presented with the Yeshiva’s highest citation, the Outstanding Leadership Award, at its November 10 gala. Nicholson’s philanthropy and community involvement are legendary in Detroit. He currently serves as chairman of the board of the Community Foundation for Southeastern Michigan and the Futures Foundation. He is a past chairman of the boards of Business Leaders for Michigan, the Michigan Nature Conservancy and the YMCA of Metropolitan Detroit. He is a current member and past chairman of the boards of the Detroit Symphony Orchestra and Detroit Public Television. He also serves on the boards of the Michigan Colleges Foundation and the Detroit Economic Club. Nicholson’s commitment to community, good values and education led him to admire the Yeshiva Beth Yehudah and the legions of alumni that have become community, civic and philanthropic leaders. The Yeshiva is the oldest and largest Jewish day school in Michigan and the values it promotes are universal. The 1,100 students of the Yeshiva include over 200 children with varying degrees of special educational needs, which are met with

Jim Nicholson, 2019 Yeshiva Annual Dinner Honoree, interacts with students at Yeshiva Beth Yehudah as Mark Davidoff, the 2018 honoree, looks on.

a variety of special services, therapies and educational modalities. In addition to K-12 classrooms, the Yeshiva houses a post-graduate scholars’ program and the well-known Partners adult educational program, which provides programming to thousands of metro-area adults. Knowledge. Service. Compassion. These are the Yeshiva’s core values, and they are embodied in practice by Nicholson. As his son Jim M. Nicholson explains: “Everything our father does for the community is driven by our mother’s assertion: ‘To what purpose.” For that, the Yeshiva is honored to bestow upon Nicholson its 2019 Outstanding Leadership Award. He is an authentic leader who lives and breathes these principles; he will be celebrated by hundreds of communal leaders and thousands of community members for a lifetime of service. It is an honor well deserved, yet Nicholson will tell you he has benefited as much from his relationship with those at the Yeshiva.

Dinner details

Nikki Haley, former U.S. Ambassador to the U.N., is the guest speaker for Yeshiva Beth Yehudah’s annual dinner. When: November 10, 2019 Where: Detroit Marriott Renaissance Center Tickets: $360; more info at ybydinner.org

The metro Detroit community is blessed to have many outstanding leaders who, in their own right, have made significant contributions to education, social justice, and the arts. We can only imagine which gifted leader will emerge as the Outstanding Leadership Awardee at next year’s Yeshiva Annual Dinner.

DIGNITARIES: YESHIVA A ‘BEACON’ FOR COMMUNITY

First Lady Laura Bush 2012 Guest Speaker

General Colin Powell 2016 Guest Speaker

There are two educations: one should teach us how to make a living, and the other should teach us how to live. For nearly a century, the Yeshiva has taught students both.

Education is the path to a successful future. I only wish that every person in this country had the kind of deep transformational experience that these Yeshiva students receive.

Matt Simoncini 2017 Outstanding Leadership Awardee

Mark Davidoff 2018 Outstanding Leadership Awardee

The unique combination of an uplifted Torah and secular education, along with a critical focus on love for learning and high ethical teachings, is a remarkable recipe for producing high achievers for our next generations.

Although its primary mission is to serve students of the Jewish community, the Yeshiva has evolved as a beacon for the general community. Thorughout the year, and at this dinner, we can lean on the Yeshiva to refresh our understanding that we are grounded in common values that unite us.

Prime Minister Tony Blair 2018 Guest Speaker When I saw those young people, I was gripped by a sense of their passion and commitment, that comes from a spirit deep within them, the people that look after them, and the community of Detroit.

Yeshiva2019.indd 32

9/10/19 8:53 AM

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DETROIT HOMECOMING: ENTREPRENEURSHIP

Invi

rating

It’s time to look at Detroit with fresh eyes, because your city has refreshed, reimagined and reinvented itself. New housing, innovative restaurants, dynamic retail and inspired entrepreneurs are transforming the city into an amazing place to work and live. Detroit. It’s GO time.

Gwen Jimmere was the one-time head of global digital communications at Ford who started selling her solution for maintaining curly hair at Eastern Market in 2013.

BUSINESSES FROM PAGE 10

“We’re getting work, but it’s not significant,” said Tarolyn Buckles, president and CEO of Onyx Enterprises Inc., an engineering firm that has branched out to Cleveland, Atlanta and Tampa in search of growth opportunities in commercial construction and transportation infrastructure. “There’s a lot of barriers in Detroit.” The biggest barrier, Buckles said, has been competing with national construction contracting and engineering firms that have close ties to the developers building Detroit’s next skyscrapers and manufacturing facilities. Buckles built her book of business in the early years of this decade as an adviser for the Detroit Water and Sewerage Department’s board of directors. But public works contracting changed when the DWSD’s regional operations were spun off into the Great Lakes Water Authority as part of Detroit’s post-bankruptcy reorganization. The new water authority for Southeast Michigan didn’t maintain the same contracting rules DWSD has requiring a certain percentage of contracts go to minority or women-owned contractors, Buckles said. “Here we are, I’m Detroit based, Detroit-headquartered, and it’s very difficult to get work here,” said Buckles, president of the National Association of Minority Consulting Engineers. Buckles’ company is part of a newly formed Detroit Coalition for Economic Inclusion, a group of blackowned businesses that are trying to raise the profile of their companies — and get the attention of developers like Dan Gilbert’s Bedrock Detroit and TCF Bank as it begins building a new downtown headquarters. Onyx Enterprises has made some inroads with demolition and construction projects at Detroit Metro Airport, or through partnering with bigger firms to compete for a share of a prime contract, she said. Buckles said small minority and women-owned firms would have a chance at winning contracts if gener-

Kenji Lemon started his business in 2008 as a side hustle to his day job.

al contractors would unbundle large prime contracts that smaller companies can’t compete for because of bonding requirements and other stipulations that shut them out. “If you don’t partner and procurement policies aren’t in place where they have to use a certain percentage of Detroit firms … these large customer-based firms are coming from out of state and they’re setting up shop here,” Buckles said.

‘On the ground’ While Detroit’s downtown and Midtown building boom has attracted out-of-town companies and investors alike, the use of suburban contractors by long-established businesses and institutions is what motivated Kenji Lemon to get into the property maintenance and landscaping business. Lemon started his One Stop Property Maintenance LLC lawn-mowing business in 2008 as a side hustle to his day job doing underground air pressure maintenance for AT&T. By 2012, he quit his day job and went full time into the business. He now has 12 employees and is in the middle of renovating two blighted buildings on Hamilton Avenue

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bridge to Canada. That was the case for Gwen Jimmere’s Naturalicious, a producer of natural beauty products sold in Sally Beauty and Ulta stores, as well as Whole Foods. Jimmere was the one-time head of global digital communications at Ford who started selling bottles of her homemade solution for maintaining curly hair at Eastern Market in 2013. In 2016, Jimmere moved production from her basement in Detroit to 150 square feet at the Ponyride shared workspace and business incubator building on Vermont Street

in Corktown for $75 per month. As sales of her patented shampoo, conditioner and detangler climbed, Jimmere moved into a 500-squarefoot space at Ponyride, followed by a 1,000-square-foot spot. And then in February, Ponyride founder Phil Cooley sold the building for $3.3 million to developer Marc Nassif — and Jimmere was scrambling to find a new home for Naturalicious, which is now selling 3,000 units per month. She searched the city in vain for a suitable production space of 3,000 to 4,000 square feet. In Corktown, one property owner

quoted her $150,000 to lease 7,000 square feet (a staggering $21 per square foot, comparable to office rents), citing the real estate boom in Detroit’s oldest neighborhood triggered by her former employer Ford Motor Co.’s purchase of the Michigan Central Station train depot and other nearby properties for development of an autonomous vehicle campus. “It was insane,” Jimmere said. “(The building owner) was like, ‘Well, this is the going rate now. This is prime real estate.’ And I was like, ‘Well, I don’t know who’s going to be moving in here now except Ford.’” Every available option in Detroit,

she said, “either required a ton of build-out that was cost prohibitive or the rent was just so ridiculous, it was so gentrified.” In June, Naturalicious moved into a 4,000-square-foot building in Livonia — a suburban space for the company’s production, warehousing and front-office marketing and sales operations. “I’d love to be back in the city of Detroit,” Jimmere said. “I really want Naturalicious to become a billion-dollar brand.” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

013.

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PHOTOGRAPHS BY SYLVIA JARRUS FOR CRAIN’S

north of the historic Boston Edison neighborhood that will be One Stop Property Maintenance’s new headquarters. Among its clients, One Stop Property Maintenance does full-service landscaping, snowplowing and power-washing for CVS pharmacy stores in Wayne County, power-washing in parking garages owned by Gilbert’s Bedrock Detroit and mowing grass at Milliken State Park for the Michigan Department of Natural Resources. But he chafes at the sight of suburban landscaping companies working on the grounds of large Detroit-based businesses whose executives tout their efforts to hire Detroiters. He didn’t name names. “If they’re going to talk the talk as far as helping out Detroit, then you’ve got Detroit-based companies that can do the work that you’re forking over to larger landscaping companies that aren’t here,” Lemon said. “We’re the boots on the ground trying to make it happen. The only way I’m going to go from five trucks to seven trucks to 10 trucks, is if I get more business.”

Leaving Detroit Detroit’s historic decline of nearly 1.2 million residents between 1960 and 2010 was driven by a host of economic and social factors, not the least of which were racial tensions. But at the heart of the city’s decline from its early 20th century status as an industrial and manufacturing giant was the lure of vast swaths of farmland for new factories and homes that became Detroit’s suburbs. The legacy of that abandonment has left a dwindling stock of suitable real estate for manufacturing. For large auto parts suppliers like Flex-N-Gate or Dakkota Integrated Systems, the solution has been to build new factories on mostly vacant land assembled by city government for redevelopment. But smaller manufacturers without the access to capital for new construction have found industrial property in short supply in recent years, as evidenced by the loss of a handful of longtime businesses in the Delray neighborhood that have uprooted for the suburbs to make way for a new

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So get more tips at dteenergy.com/savenow.

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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 or email dstein@crain.com. FINANCE

FINANCE

REAL ESTATE

Wells Fargo Advisors

Ford Land

R. Glen Hall has joined the Birmingham, Michigan branch of Wells Fargo Advisors as Managing Director - Investments. Mr. Hall is a Senior PIM Portfolio Manager, one of a limited group of advisors within the firm who meet the criteria for discretionary portfolio management. He has more than 35 years of experience in the financial services industry. He received his Finance degree from the University of Mount Union and an MBA from Ohio University.

Wells Fargo Advisors is pleased to announce that Eric Neubecker, CFP®, First Vice President Investments, has been named the branch manager of the firm’s Troy, Michigan branch. Mr. Neubecker has more than 25 years of experience in the financial services industry and is a CERTIFIED FINANCIAL PLANNER™ professional. He earned a bachelor’s degree in Economics from the University of Michigan – Dearborn.

Ford Land is excited to announce new additions to our Sales & Leasing team, Jeff Lynch and John Davis. Lynch leads the team as Director - Sales, Leasing & Development, overseeing the acquisition, development, leasing and disposition of Ford Land’s Southeast Lynch Michigan commercial portfolio. In his prior role, Lynch played an instrumental part in Ford Detroit Development and the acquisition of iconic Michigan Central Station. Toting an extensive background in real estate services, Davis rejoins the team overseeing the portfolio as Sr. Sales & Leasing Manager. Including Marie Adducci, the now complete Ford Land Davis Sales & Leasing team is a robust group with widespread knowledge and expertise, here to assist with all commercial real estate needs.

Wells Fargo Advisors Ralph T. Albers, CRPC®, AWMA®, has joined the Farmington Hills, Michigan branch of Wells Fargo Advisors as Associate Vice President Investments. Mr. Albers has more than 33 years of experience in the financial services industry and has earned the Chartered Retirement Planning Counselor SM and Accredited Wealth Management Advisor SM, designations which are issued by the College for Financial Planning. He earned a bachelor of science degree in Finance from the Ferris State University.

HEALTHCARE

Plante Moran Tanja Fessell has joined Plante Moran’s healthcare consulting practice. In this role, she’ll help payers, providers, and new market entrants navigate a changing healthcare landscape. Her personal goal is to improve the lives of patients by introducing and applying best practices from high reliability organizations. With expertise in cultural transformation and Lean methodology, Tanja will help improve quality and lower costs for the healthcare systems that impact countless lives.

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Crain’s People on the Move showcases industry achievers and their companies to the Detroit business community. Guarantee placement in print, online and our e-newsletter today.

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CALENDAR

SPOTLIGHT

TUESDAY, SEPT. 17

Art Van hires new CEO

Masterful Networking: A Workbook. 8-9:30 a.m. Troy Chamber of Commerce. Barry Demp of Barry Demp Coaching LLC will discuss techniques to achieve successful networking connections. Topics include: Behavior and attitude, relationships and communication, building powerful networking habits, networking as part of a solid business plan and mapping out networking. Marsh & McLennan Agency, Troy. $15 members, $25 nonmembers. Website: troychamber. com/events

WEDNESDAY, SEPT. 18 September Economic Development Forum. 8-9:30 a.m. Troy Chamber of Commerce. Topic: The Aerotropolis Advantage. The Detroit Region Aerotropolis is a four-community, two-county public-private economic development partnership focused on driving corporate expansion and new investments. Rehmann, Troy. Free members, $15 nonmembers. Website: troychamber.com/events

UPCOMING EVENTS Great Lakes Women’s Business Conference. 9 a.m.-4:30 p.m. Sept. 23-24. Great Lakes Women’s Business Council. Speakers include Ford Motor Company futurist Sheryl Connelly, Dr. Phil’s “branding brain” Libby Gill and The Repositioning Expert Chala Dincoy. Event will also include workshops, pitch contest, awards, buyers and networking. Suburban Collection Showplace. $200 members; $225 nonmembers. Email: events@greatlakeswbc.org; phone: (734) 677-1400. Website: greatlakeswbc.org/2019events-events/signature-events/conference Automotive Dealers, Construction Industry & Controllership Conference. 8:30 a.m.-5 p.m. Sept. 24. Michigan Association of CPAS. Crain’s Detroit Business senior editor Chad Livengood, Royal Oak Mayor Michael Fournier and the Michigan Association of CPAs will discuss what’s driving the state’s economy forward. Information will include what factors, on a state and national level, continue to help Michigan industry thrive as sectors come together to see the big financial picture. Other topics include: Michigan’s automotive industry condition and updates on the latest financial and legal concerns; the secrets of commercial lending for construction projects including the range of interest rates, fees and down payments that borrowers should expect to see; the organizational benefits of adopting a servant leadership philosophy, insights and attributes of impactful servant leaders. Laurel Manor, Livonia. $229 members; $379 nonmembers. Contact: Jessica Bills, email: jbills@micpa.org; phone: (248) 267-3749. To submit calendar items visit crainsdetroit.com and click “Events” near the top of the home page. Then, click “Submit Your Events” from the drop-down menu that will appear. Fill out the submission form, then click “Submit event” at the bottom of the page. More Calendar items can be found at crainsdetroit.com/events.

Art Van Furniture LLC has a new CEO: Gary Fazio, who retired from the helm of bedding manufacturing giant Serta-Simmons Bedding in 2015. The former Mattress Firm CEO started his new job Wednesday with the Warren-based furniture retailer, Art Van announced Fazio in a news release. Fazio replaces Ronald Boire, a former Barnes & Noble Inc. CEO whose exit from Art Van was announced Aug. 1 alongside the departure of its chief merchandising officer. Boire was the second CEO to leave Art Van after its founder, Art Van Elslander, died in February 2018 at 87. Boire succeeded Kim Yost, who announced his retirement as CEO later that month. Van Elslander’s death came the year after he sold Art Van to Boston-based private equity firm Thomas H. Lee Partners LP in 2017 for an estimated $550 million.

Knight Foundation names Detroit leader

The Miami-based John S. and James L. Knight Foundation has named business leader and entrepreneur Nathaniel Wallace as its new Detroit program director. He succeeds Katy Locker, who stepped down in April after overseeing Knight’s grants in the region for six years. Wallace Wallace joins Knight with nearly two decades of entrepreneurial and business management experience. For the past 16 years, he’s served as vice president of operations and co-owner of his international family firm, Troy-based Communications Professionals Inc.

DMC’s Mallett promoted to familiar role

Conrad Mallett Jr. has been appointed to a familiar role as chief administrative officer of six-hospital Detroit Medical Center, a for-profit hospital owned by Tenet Healthcare Corp. of Dallas, a role he has held at least three times since joining DMC in 1999. Mallett, who Mallett has been CEO of DMC Sinai-Grace Hospital since 2017, will focus on strategic relationships with key external stakeholders, functioning as a liaison between the hospital and community, said Tony Tedeschi, M.D., DMC’s CEO. “Conrad has had a tremendous impact on the DMC through his leadership and commitment to our organization,” Tedeschi said in a statement.

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CLASSIFIEDS To place your listing, contact Suzanne Janik at 313-446-0455 or email sjanik@crain.com www.crainsdetroit.com/classifieds EMPLOYEE SERVICES

Harman Connected Services: Principal Software Engineer

A selection of Xenith helmets.

XENITH FROM PAGE 3

In a podcast interview, Sullivan discussed Xenith’s adaptive fit helmet technology and the company’s evolution from a football helmet company to a maker of head-to-ankle protective gear for the gridiron. This partial transcript of the interview has been edited for clarity: Livengood: It is kind of surprising that Dan Gilbert would have a helmet company in his portfolio. What is the history of how Xenith became part of the Quicken Loans family of companies? Sullivan: Dan has been an investor in

Xenith for quite some time and really led the push to relocate the company from Boston to Detroit in 2015. And since that time the business has gone through quite a transformation from our origins as a football helmet company that’s always been known for outstanding technology, differentiated technology in the marketplace that’s really designed for the athlete. And since we moved here to Detroit, our team has expanded, our business has expanded tremendously. And we’ve also expanded the horizons of who were and what we are as a company. Not only do we continue to design and build some of the most outstanding football helmets in the world, but also we design for the football athlete from head to ankle.

So you’ve got clothing apparel now, you’ve got shoulder pads. What other types of products are you making here in Detroit?

Helmets, shoulder pads, other accessories like visors, backplates or tails as the athletes would call them. We launched training apparel last December of 2018 and we have steadily increased and added to our apparel portfolio within the last nine months, with a lot more on the horizon. There are other playing accessories which sort of blur the lines between apparel and other goods, such as gloves. At the end of the day, people are worried about concussions and head injuries to athletes. What is it in your technology that is lowering the chances that a football player is not going to suffer a concussion?

What’s special about Shadow ... is the adaptive fit system ... a custom fit to the athlete every time they’re putting the helmet on. That ensures the helmet stays in its place and is able to do its job properly on the field of play. Because ultimately, what good is a helmet if it doesn’t fit right? Number two, our unique shock matrix system. Think of it as a web of shock absorbers that are filled with air, which allows for a dynamic response to impacts that an athlete may experience on the field of play. And three, that shock matrix system is

LARRY PEPLIN FOR CRAIN’S

attached only in a couple of places to the exterior shell ... that allows for a decoupling of the shell and the interior shock matrix, which helmets remove the athlete’s head from the hit so to speak or the impact. When I walked in here, one thing that struck me is you have an assembly line system with a conveyor belt for assembling the helmets. But there’s not a bunch of machines assembling these helmets, there’s a lot of people. There’s a lot of hand craftsmanship that goes into that. Tell me a little about the supply chain and the assembly work that’s involved in making a helmet.

A helmet is a very complex and unique product, not only from a science and engineering and design standpoint, but how do you actually commercialize and make this at scale, which is one of the challenges we face as a business because you have to carry and serve a highly customized product. Think about the number of colors and color combinations for not only the shell but also different facemask styles, different colors, chin cups, straps, etc. So it’s a highly customized product. And we have a global supply chain in order to fulfill that demand and the requirements of the marketplace at a price point that is very accessible. Something I didn’t know until you introduced me to your head engineer that Wayne State University has long had for almost half a century a robust biomechanical program that was spun out of the auto industry ... that has given rise to the football helmet-testing industry as well, which is a big part of what you do here.

01 position: Duties: Develop specific & common SW feat for IVI tech for customers per tech req. Dev Harman solu architect utilizing p’forms/lang like QNX, Embedded LINUX, C/C++, Qt/Qml, C/C++ based HMI using object-orien program tech & Solid design program pat. Analy existing embedded SW add feat, make modification &/or port to diff p’form. Analy customer & internal req & specifications to translate to SW des, unit test spec’s& other doc. Work with customers to refine req & spec’s for exis & new feat. Create tech doc’sfor spec IVI feature. Docu review ensure all req met. Implementation efforts estimations. Impl new & exist feat using C/C++, Qt/Qml. Interact with customers & peers for execution of assigned tasks rel to implement new feat & modify existing feat. Tech builds support. Test prod on unit, system & vehicle lev. Fix bugs during test phases. Supp & mentor less exp peers by sharing k’ledge in QNX, Embed Linux, C/C++, Qt/Qml to carry-out their acti. Create doc & examples that help educate other engineers. Other Req: Bachelor’s deg (or foreign equival) in CompSci; Eng, SW Eng; Electro/Telecom or equival or rel with 5 yrs of exp in SW dev on Mobile Smartphone p’form &/or IVI p’form in languages of C/C++, Q T/QML is accepted. Alternate: Master’s (or foreign equival) in CompSci; Eng, SW Eng; Electro/Telecom or equival or rel with 3 yrs of exp in SW dev on Mobile Smartphone p’form &/or IVI p’form in languages of C/C++, QT/QML is accepted. Other Req: Min 3 yrs exp of HMI dev from IVI or smart phone. skills in object-oriented program & SOLID design patterns u’standing of embedded p’forms & system components of QNX or ELINA (Embedded LINUX). Exp in dev solutions on ELINA, QNX or other RTOS is must. Work with vehicle networking (CAN, MOST). AUTOSAR standards. Exp in SW dev tools (MS Visual Studio C++, Qt Creator, QNX Momentics). YOCTO or similar build sys. Version control sys GIT/GERRIT, SVN, Rational ClearCase. JIRA. Apply: Send your CV’s to Harman Connected Services C/O Mahesh G M; (Job Code PSE-HCS-M-07); to 2002 156th Ave NE Ste 200 Bellevue, WA 98007. Work Loc: Novi, MI. May have long term assignments in other loc in U.S. including Farmington Hills, MI area.

The Global Polymer Group is looking for a Business Development/Sales Associate who will be expected to work with inactive accounts and new prospects to presell the brand with the objective to set up a meeting with the Regional Manager. They will work with the sales team to help establish relations to ensure an smooth transition of the account. The Business Development Associate will need to be able to effectively research and uncover new opportunities both endemic and non-endemic clients.

Visit crain.com/careers/ for more information and available positions.

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You say you’ve got about 10 percent of the helmet market share. Where do you see the growth for Xenith in helmets? Is there a lot of room there in sports apparel and equipment?

Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

Business Development / Sales Associate

It’s very cool history and heritage right here in this town, coming out of Wayne State, which is a pioneer in biomechanical research that started for the auto industry naturally. But then as that team of researchers and engineers started to look at other applications such as sports and football.

Absolutely. ... We’re on track to have our best year ever here at Xenith. And that’s directly as a result of a lot of the innovation and new products that we have launched just in the last 12 months. All of those have been designed and developed here in Detroit and we’re really excited about what the next 12, 24 and 36 months look like. ... We have a number of significant developments that we’ve been working on for two years-plus in some cases that will be coming to market just in the next six months that we’re tremendously excited about.

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C R A I N ’ S D E T R O I T B U S I N E S S // S E P T E M B E R 1 6 , 2 0 1 9

MICHIGAN THROUGH

INNOVATION & COLLABORATION

HOMECOMING FROM PAGE 1

“As Americans we have a natural tendency to root for the underdog,” said Eric Larson, CEO of the Downtown Detroit Partnership, the nonprofit that serves as fiduciary for Homecoming. “What has changed is that we’ve gone to a place where there’s real opportunity.”

Big challenges

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Detroit still has enormous challenges. The neighborhoods are getting more attention, but the city still suffers from dire poverty and a lack of jobs; a hollowed-out black middle class; and an educational system that is disjointed and ranks near the bottom of the country. This year’s Homecoming, which runs Wednesday through Friday, aims to engage expats in helping to solve those problems — and to spotlight progress, such as the strides in the Detroit Public School Community District under Superintendent Nikolai Vitti. The themes include rebuilding Detroit’s black middle class, encouraging entrepreneurship and improving education. Highlights of this year’s program include a chat with Steve Case, the AOL co-founder who now runs Revolution Capital. His message and investment philosophy in recent years is that the heartland is where the opportunity is, away from the coasts. His company has backed that up with investments in Detroit companies including the floral company Bloomscape. The opening night festivities will include a discussion with Mayor Mike Duggan and FCA North American operations chief Mark Stewart, as well as a chat on entrepreneurship between Duo Security co-founder Dug Song and Delane Parnell, the CEO and co-founder of PlayVS, and a Detroit expat. (See the box for more of the programming, which will be livestreamed on CrainsDetroit.com.) The second day of the event will delve into research by the nonprofit Detroit Future City on Detroit’s African-American middle class, and by Endeavour Detroit on Detroit’s prospects for growing high-growth companies.

Making connections Homecoming organizers point to more than $400 million in investments from expats who have attended. (A selection of some of those investments appears on this page.) But that doesn’t account for some fascinating stories of connections made at Detroit Homecoming that have led to other moves. An example: The opening dinner for Detroit Homecoming was held at the long-empty Michigan Central Station. Matthew Moroun said his family’s sale of the station to Ford Motor Co. last year was catalyzed by the experience. Another: Detroit Pistons President Arn Tellem and Henry Ford Health System President and CEO Wright Lassiter III met at the 2015 Detroit Homecoming, a connection that was key to the basketball team’s decision to move downtown into the new Little Caesars Arena. About 60 percent of expats as this year’s Homecoming will be new to the event, according Colleen Robar, production manager for Homecoming. To come back, they must prove they’ve done something to help the city, whether that is an investment, hosting an event or mentoring a local business. If they do, the newcomers will come back to a city that is again different than today.

AARON ECKELS FOR CRAIN’S DETROIT BUSINESS

A panel discussion at 2015’s Detroit Homecoming.

Homecoming’s impact Detroit Homecoming’s intent was to lure expat metro Detroiters back to their hometown to re-engage them and encourage them to invest. An array of investments and commitments totaling at least $400 million have sprung out of the annual event, produced by Crain’s Detroit Business. A sampling of some of the major investments: J RecoveryPark Farms founder Gary Wozniak raised $1.4 million through expat Walter Tripp Howell, retired international director of real estate brokerage Jones Lang LaSalle, who learned of the project during last year’s Detroit Homecoming. J Expat Peter Cummings, who had left Detroit during the recession and first attended Homecoming in 2014, returned to create The Platform real estate company with Dietrich Knoer. The Platform has major construction and redevelopment programs in the works in Midtown and the Baltimore Station, Livernois/Six Mile and Island View neighborhoods. J Matt Temkin, partner in Greatwater Opportunity Capital LLC,

launched the Detroit Opportunity Fund to invest in apartment and commercial development projects tied to Detroit’s Opportunity Zones at last year’s Homecoming. Four expats have invested in Greatwater deals. Former Detroit development official Jed Howbert recently left his city job to become a partner with the group. J Former Microsoft CEO and Homecoming III expat participant Steve Ballmer and his wife, Connie, created an office for their Ballmer Group foundation in 2017 that has committed $16 million and counting toward local nonprofits. J “Hamilton” producer Jeffrey Seller, who attended Homecoming in 2016, donated $1 million to Detroit’s Mosaic Youth Theatre, the Detroit nonprofit’s largest one-time grant. Seller also supported a fundraiser put on by expat Amy Nederlander benefiting L!Fe Leaders that featured a performance of “Hamilton.” J Michigan Women Forward has netted a $100,000 investment and four $50,000 investments into its Belle Michigan Impact Fund from Homecoming attendees.

Watch Homecoming events The presentations at the invitation-only Detroit Homecoming VI will be viewable online at crainsdetroit.com. Among the highlights of the program:

Wednesday

Fireside chat among Detroit Mayor Mike Duggan and Fiat Chrysler North American COO Mark Stewart, moderated by Crain’s Detroit Business Publisher KC Crain. J

J Duo Security co-founder Dug Song and PlayVS founder/CEO and expat Delane Parnell.

Thursday

J Building entrepreneurship in Detroit featuring Altimetrik founder Raj Vattikuti, Tony Tomczak of DTE Energy and James Chapman of Rock Ventures, moderated by Darin McKeever of the Davidson Foundation. J Discussion of building scalable companies in the heartland away from the coasts, featuring Revolution Capital’s Steve Case, the co-founder of AOL; and Chris Rizik, CEO of Renaissance Venture Capital. J The Power of Play, featuring the Detroit Pistons’ Blake Griffin; Tom Farrey of the Aspen Institute; Diane Dietz, the Big Ten’s vice commissioner; and Dave Beachnau of the Detroit Sports Commission. J Reflections on Detroit’s bankruptcy five years later, featuring Detroit expat

Ken Buckfire of Miller, Buckfire & Co.; expat Ty Fahner of Mayer Brown LLP; moderated by Chad Livengood, senior editor of Crain’s Detroit Business.

Friday

J Building Digital Arts/State Film Incentives: Discussion between Detroit Free Press columnist Mitch Albom; Nancy Tellem, executive director in the office of the CEO, Metro-Goldwyn-Mayer; and Tim Flattery of the College for Creative Studies. J State of K-12 education: Featuring educational philanthropist Robert Thompson of the Thompson Foundation; former NBA and University of Michigan player Jalen Rose, who founded the Jalen Rose Leadership Academy charter high school; and Tonya Allen, CEO of the Skillman Foundation. J Motown at 60 retrospective: Martha Reeves of Martha and the Vandellas, Norma Barbee Fairhurst of the Velvelettes, Funk Brother Dennis Coffey, arranger Paul Reiser Sr. and engineer Edward Wolfrum, moderated by WDET-FM’s Ann DeLisi.

Concert open to public

J A Detroit Homecoming concert by the soul duo War & Treaty, made up of Michigan natives Michael and Tanya Trotter, is open to the public at 8:30 p.m. Thursday at Orchestra Hall. Tickets are $29 and available through dso.org.

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GJONAJ FROM PAGE 1

If proved true, making investors whole would be a Herculean, if not impossible, task, said Peter Henning, a professor of law at Wayne State University. “If they can get more than 15 or 20 cents on the dollar, they are lucky and often it is much less than that.” Wherever Gjonaj is today — a request for a temporary restraining order filed last month says it’s “a near certainty” he fled the country — the 42-year-old hasn’t been shy in the past. His company, Troy-based Imperium Group LLC, sponsored the Crain’s Detroit Business Real Estate Next event in April, and he delivered remarks during the gathering. The father of four has been quoted on retail real estate matters and advertised Imperium in Crain’s, given interviews in legal blogs and even been quoted about his pricey Lincoln Navigator in the Detroit Free Press/USA Today. His firm that formed less than two years ago also has the contract to market space in the Brewery Park office building that houses the Crain Communications Inc. Detroit headquarters for lease. While things may have seemed rosy from the outside, internally the company was in disarray. In the last several weeks, the small team of commercial real estate professionals Gjonaj assembled for Imperium disbanded after not hearing from him for weeks and not getting paid; and the company building his new $2.25 million mansion began seeking nearly $200,000 for unpaid work after he abruptly went dark. That lien is separate from three Oakland County lawsuits alleging that he stole millions of dollars. Gjonaj has not returned emails and text messages from Crain’s. Neither he nor his wife have an attorney listed in court filings, and emails sent to her through an address on one of the complaints were not returned. Attorneys for the plaintiffs in three of the lawsuits declined to comment for this story; a message was left with another one. Attorneys who have represented Gjonaj in past matters either declined comment or did not respond to emails. Gina Balaya, a spokeswoman for the U.S. Department of Justice office

C R A I N ’ S D E T R O I T B U S I N E S S // S E P T E M B E R 1 6 , 2 0 1 9 in Detroit, said she “wasn’t able to find any cases, either civil or criminal, that our office was involved in relating to Mr. Gjonaj. I’m not aware of him or his whereabouts.” Kelly Rossman-McKinney, communications director for Attorney General Dana Nessel, said she could not confirm a state-level investigation into his alleged business dealings. But Gjonaj, according to text messages allegedly from him revealed in the lawsuit by Krstovski and Masakowski, seemed to know there were choppy waters ahead. “I’m in the process of fixing my behavior,” he wrote to Krstovski July 5, after Masakowski had confronted Gjonaj about the alleged scheme. “I beg of you to not disclose of any of these to anyone plz. My little girls need me and this was a wake up call on how much I need them. As long as I made money for everyone I didn’t think it would affect anyone. I was so damn wrong. I will have ur $ Monday/ Tuesday. I just want to go back to the old Viktor. I miss him so damn much.”

Joining forces The whole story is not yet known, but court documents suggest more revelations are to come. There was an “elaborate network of more than 30 companies (with the possibility of many more) all designed for the sole purpose of defrauding investors and keeping the money hidden,” one reads. And for one of those investors, his involvement all started with his accountant. After Krstovski, a general contractor by trade, learned of a former Kmart Corp. property for sale in Fenton off U.S.-23 on Silver Parkway, he needed money to buy and redevelop it, installing retail tenants like T.J. Maxx, Skechers and Five Below in there instead. That’s according to the lawsuit against the Gjonajs, Vitto, 10 John Does and 14 different Gjonaj-affiliated companies. (Unraveling the business web Gjonaj has allegedly woven has been complex and not without hiccups. The plaintiffs originally named in their lawsuit a series of limited liability companies registered to another Viktor Gjonaj in Macomb County; they have since filed to have them dismissed from the proceedings.) The accountant, unnamed in legal

documents, put Krstovski in touch with Gjonaj, who also didn’t have the money, according to the lawsuit. But Gjonaj did know Masakowski, owner of Sterling Heights-based staffing company CER Group LLC, from previous real estate deals, and the three men ultimately formed K2 Fenton Development LLC to buy the property, according to the complaint filed by Southfield-based law firm Jaffe Raitt Heuer & Weiss PC. Under the agreement, Masakowski was to pay for the property purchase; Krstovski was to build out the building; and, the complaint says, Gjonaj “apparently (provided) nothing other than putting the two together (while simultaneously keeping them apart).” The three men owned equal shares of the company, however. City of Fenton staff said the purchase was recorded in July 2018 for $3 million for the roughly 75,000-square-foot building that sits on about 14.4 acres. There was a similar deal for another former Kmart property in Greenville that was purchased in January. The purchase price is not revealed in public records for the Montcalm County city, but its value is about $1.5 million. Then there was the nondescript medical office plaza in Eastpointe, at 21811 Kelly Road. In the summer of 2018, a year after first approaching Masakowski about purchasing the property, Gjonaj asked him to wire money to Richfield Funding LLC, without disclosing that it was registered to Vitto, Gjonaj’s business partner at Imperium, according to the lawsuit. It was wired on July 11, 2018, and, court documents allege, the same day Gjonaj bought a “mansion” on Lockwood Street in Washington Township. And yet according to Eastpointe property records, Richfield Funding had owned the property since November 2017, when it paid $215,000 for its 16,500 square feet. In addition, in June, Gjonaj took out a $1.5 million mortgage on it without asking or telling Masakowski, according to court documents. There was also another roughly 200 acres of Macomb Township land on 23 Mile Road for development purchased using 23 Mile Acquisitions LLC, at least about 105 of which was from the Archdiocese of Detroit.

Unkept promises The complaint alleges that begin-

SMILE

SmileDirectClub sells clear teeth aligners and it says its treatments take an average of six months. Customers take impressions of their teeth from home or at a SmileDirectClub store and then get mailed their aligners all in one box.

FROM PAGE 3

SmileDirectClub, which dubs itself as disrupting the orthodontics industry, sold 58.5 million shares of Class A common stock, according to a Securities and Exchange Commission filing. It’s listed on the NASDAQ Global Select Market in New York under the symbol SDC. The company was valued at $3.2 billion as part of a funding round last fall. The IPO price valued it as a public company at around $8.9 billion, Crunchbase.com reported. David Katzman retains control of the company through a separate class of stock with special voting powers, according to federal filings. “We’re still a young company, but our IPO is a key milestone to help us continue to grow and keep our rocket ship soaring,” Fenkell said in an emailed statement. Though SmileDirectClub moved its headquarters to Nashville in 2016, Katzman remains in metro Detroit

ning last year, Krstovski and Masakowski were lending Gjonaj money, “thinking they had a good relationship” with him. “Viktor would often give them a story about this ‘investment’ or that investment and that he needed short term financing which he would repay quickly and/or made promises of interests in these deals,” the lawsuit says. “Sometimes Viktor would pay them back, most often however, he would allow large debts to accumulate.” In a Jan. 18 email, Gjonaj made an extensive list of promises to Masakowski “to give the biggest loan yet,” the lawsuit says. “But not a single promise Viktor made in that email was kept.” As that was going on, according to the lawsuit, Krstovski and Gjonaj met at the International Council of Shopping Centers conference in Las Vegas in May, during which Gjonaj allegedly told Krstovski to not discuss their business with an unnamed “Person A” during the annual retail real estate gathering, according to the lawsuit. During a subsequent meeting at a Royal Oak coffee shop after the ICSC conference, Person A told Krstovski that he was the owner of the Fenton, Greenville and Macomb Township properties, having given Gjonaj the same amounts of money to buy those properties that Krstovski and Masakowski did, according to the complaint. Person A then showed Krstovski a list of other properties he had apparently purchased with Gjonaj, and some of those were properties that Krstovski was negotiating to purchase himself with Gjonaj. Gjonaj, according to the complaint, “altered” purchase agreements for the Fenton, Greenville and Macomb Township properties “to make it appear as if Viktor and Person A were purchasing those properties, and used those phony documents to get Person A to transfer him millions of dollars.” Krstovski has been approached by “several more people” who claim that Gjonaj “had sold them the Fenton property, the Greenville property, 23 Mile Road properties and the Kelly Road property — real property Masakowski and/or Krstovski paid for and own.” Henning, the Wayne State law professor, said Ponzi schemes are typically operated using securities investments but real estate has been the

SMILEDIRECTCLUB

while Fenkell spends most of his time at the company headquarters with frequent visits back home. Why Nashville? Fenkell notes the city is a hub for the health care indus-

try and calls the vibrant and growing city an attraction for talent. “Known as the health care capital of the southeast, we felt the synergies between Nashville’s rich history and

our innovative business model worked well,” he said in a statement. David Katzman is a former Quicken Loans vice chairman and Gilbert’s cousin. Gilbert, the billionaire Quick-

vehicle for them in the past. “You can run a Ponzi scheme built around giving the appearance that you have a large portfolio of property,” he said. “That can entice investors because people trust property. Dirt is one thing you can’t fake. Except you can.”

More lawsuits It isn’t just Krstovski and Masakowski alleging they have lost money to Gjonaj. Jerome Morgan, owner of Detroit-based Jermor Plumbing & Heating Inc., alleges in a lawsuit filed in Oakland County last month that he loaned Gjonaj $1.5 million to buy the Monroe Center retail strip mall housing a Staples office supply store, a Dunham’s sporting goods store and a Hobby Lobby. In exchange for the loan, Gjonaj offered Morgan membership interests in Imperium; Gratiot Eastpointe Acquisitions LLC; and Richfield Funding, according to Morgan’s lawsuit. The lawsuit says that “representations regarding the acquisition of the property, the assets owned by them and the financial condition of Imperium and Gjonaj were false.” As of last week, the property remained listed on the Imperium website. In another complaint, Gjonaj is alleged to have secured a $2.475 million loan from Ded Dedvukaj in exchange for membership interests in five limited liability companies, including two — Manchester Wilshire LLC and JVD I LLC — in which neither Gjonaj or his companies had a membership interest, according to court documents. The loan agreement says Gjonaj had 33 percent membership interests in those two entities; 33 percent membership interest in K2 Retail Fenton LLC; 70 percent membership interests in Imperium Investments Grand Rapids LLC; and 100 percent ownership of Davison Owners LLC. A source familiar with the lawsuits said Dedvukaj, Krstovski and Masakowski may consolidate their cases.

Mounting bills Everything was running smoothly for Dan Ivanovic as he was building Gjonaj’s new house, which is being erected on Lockwood Drive off of Mound Road north of 26 Mile Road in Washington Township. Last week, en Loans founder and Detroit real estate mogul, is a former partner in Camelot with Katzman — they invested together in graphics company Fathead LLC, among others. Katzman was also part of Gilbert’s investment group that bought the Cleveland Cavaliers for $375 million in 2005. Katzman reportedly had a falling out with Gilbert and sold his stake in the team, Crain’s reported. In 2008, partners in the investment firm transitioned from Camelot Ventures to a new entity called Camelot Venture Group that kept investments made as part of the previous company.

Smile-makers SmileDirectClub is expanding, while its losses are growing: It reports a 190 percent increase in revenue from $146 million 2017 to last year’s $423.2 million; it saw net losses of $74.8 million last year, rising from $32.8 million in 2017, according to the SEC filing. The company says it has had more than 700,000 customers. It employs

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workers were on the 3.66-acre site; siding had not yet been installed, but the bones of a palatial estate were in place. From the street, nothing seemed amiss. But in reality, Ivanonic says in court documents, he is owed $197,000 for work that Gjonaj hasn’t paid for on the $2.25 million mansion. Ivanovic, owner of Sterling Heights-based Ivanovic Construction Inc., said he hasn’t heard from Gjonaj in three or four weeks. “We were communicating every other day, if not daily, sometimes 3-4 times a day, sometimes 10 times a day,” Ivanovic said. “At the end, I heard a lot of excuses. Before that, money was no object. Everything was ‘Go ahead’ and ‘Let’s get this thing done.’” The old Gjonaj was apparently replaced with someone scrambling to free up money to build the house, a hulking 6,418-square-foot mansion abutting Stony Creek Metropark. It replaces a 1950s home less than onethird that size. Gjonaj bought the property a year ago, allegedly using Masakowski’s money from the Eastpointe scam, and immediately tore down the old house to make way for his two-story estate

set back off the tree-lined street. Ivanovic said he isn’t the only one who may have lost money. Mutual friends have loaned Gjonaj north of $250,000, he said. “Viktor is nowhere to be found. I have no clue where the hell he’s at,” Ivanovic said.

5,000 total, with more than 100 in Michigan. It operates 300 brick-andmortar SmileShops, including 11 in Michigan. And more are coming: SmileDirectClub launched in the U.K. and Australia this year. Plus, CVS Health announced in April it had partnered with SmileDirectClub and plans to open SmileShops in “hundreds” of its pharmacies this year, more than doubling the SmileShop footprint. How does the smile-straightening work? After customers make impressions of their teeth from their home or at a SmileDirectClub shop, they are mailed a box with a series of custom, clear aligners that shift teeth in five to 10 months. It’s billed as a lower-cost, remote way to get strai ght teeth. SmileDirectClub says its at-home plan costs up to 60 percent less than traditional methods. It says traditional fixes cost $5,000-$8,000 or more, while it charges $1,895. It also has an $85-permonth option for a total of $2,290. The company says it works with 225 dentists and orthodontists who build

customers’ alignment plans based on photos and medical history. But the traditional orthodontic industry is opposed to customers going through the medical procedure without in-person supervision from a dental professional. The main orthodontists’ trade association has filed complaints against SmileDirectClub with 36 state dental boards and attorneys general alleging regulatory and statutory violations, Bloomberg reported in October. Since its debut, SmileDirectClub has expanded into new products including teeth whitening, overnight retainers and lip balm.

Business abandoned The walls were closing in on Gjonaj, and he appears to have known it. In the Morgan lawsuit, lawyers say that “shortly after the execution of the (June 5, 2019) loan, Imperium ceased conducting business and abandoned its office” in Troy at 50 W. Big Beaver Road in the Liberty Center property. Last week, a pair of FedEx notifications of failed package deliveries from Aug. 28 and Sept. 4 sat affixed to the glass doors: “Please call,” both said. One former employee, who said he is contractually bound from speaking with the media, said last week he and the rest of the Imperium team was “laid off.” “Everybody left at the same time” around mid-August, he said. Another former employee speaking on the condition of anonymity said

New funding SmileDirectClub raised $380 million in a funding round last fall that valued the company at $3.2 billion, Bloomberg reported. Private equity investor Clayton, Dubilier & Rice, with main offices in New York and London, led the financing round. It was joined by Kleiner Perkins and Spark Capital. Clayton partner Rick Schnall joined

KIRK PINHO/CRAIN’S DETROIT BUSINESS

that one by one, starting in mid-August, the staff stopped coming in. Gjonaj, the former employee said, hadn’t been seen or heard from for at least three weeks before that. “(One employee) said, ‘Enough of that, I’m not coming in and working for nothing,’” the second former employee said. “And then (another employee) was next and he kind of said he didn’t know what was going on and he’s out. He left and we were kind of holding down the fort, thinking we would hear something. There is still business going on and business to be done, but after three or four weeks of not hearing anything, we stopped getting paid, so it’s like, we just feel like the company is over.” Still, as recently as last week, the Imperium Group website was being altered. On Sept. 4, Gjonaj’s biography was listed, describing him as “an industry leader and an active investor with over 20 years of real estate experience.” “His proven development capability in navigating complex transactions includes retail, multifamily, office, and vacant land. His success is due in part to his ability to structure deals, the orthodontics startup’s board of directors. The company said at the time it would use the funding for research and development, and international expansion. Before the fall round, most of its funding came from Camelot, though it has other minority investors. Daniel Sillman, a Birmingham native and childhood friend of the founders, invested in SmileDirectClub with business partner Draymond Green, the Saginaw native and Golden State Warriors and Michigan State University basketball star. “When I was presented with the opportunity to invest, it was a no-brainer for me, you know, obviously, having someone like David Katzman, who’s a genius in building direct-to-consumer business,” Green said, adding that he sees a growing international market for the lower-cost teeth straightening option. Sillman — CEO of Relevent Sports Group, owned by billionaire real estate developer and Detroit native Stephen Ross — called the IPO a “moment of validation.”

and his relationships with lenders, national retailers, and capital markets,” the website read. He has previously worked for Southfield-based Signature Associates Inc. and Farmington Hills-based Landmark Commercial Real Estate Services Inc. The next day, that biography had been removed, leaving just Gjonaj’s photo, name and title. Gjonaj’s apparent disappearance has rattled longtime friends and business partners. “He was very effective,” said Joseph Sowerby, partner for Mt. Clemens-based commercial real estate firm Anton, Sowerby & Associates, who has done deals with Gjonaj in the past. “He was always on the ball, and he was very honorable. I am genuinely fond of this guy.” In an October email to a Crain’s reporter, Gjonaj had a wave of momentum and was excited to be adding a high-profile name to his C-suite roster, bringing a former Ramco-Gershenson Properties Trust heavy-hitter on board to join Imperium. It would be a well-known name, a sign of confidence in his fledgling company. It was a high point for Gjonaj, who was described by former associates and friends as smart, funny and a hard worker who generally began his work days at 6 a.m. “You know me by now,” Gjonaj said in an October 2018 email to a Crain’s reporter. “I am very shy when it comes to press however, I’m immensely proud and excited of this hire. I’m sure you will understand why.” But the nadir was to come only a couple of weeks ago, according to lawsuit allegations, when Gjonaj seemed convinced the U.S. Department of Justice was pursuing him. “Just met with attorney,” he allegedly wrote in a text message to Masakowski on Aug. 18, according to the complaint. “Unless there is a miracle in the next 24-48 hours this whole thing gonna blow up. Plz get prepared because the feds probably will come after our stuff. I’m truly sorry. I know sorry doesn’t do anything but it’s all I can say at this point. Just told my kids 30 min ago. Nothing like watching your kids lose it ... Jerry if there is anything you can think of plz plz let me know. I don’t want the whole ship to sink ... “ Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB “There’s a lot of institutional investors who have wanted to invest in SmileDirect for a long time, but haven’t had access, so a lot of institutional capital wanting to invest in them in market … that’ll really put a tailwind behind them in the IPO,” he said. Sillman and Green invested in 2016. Before that, Green said, he used the startup’s aligners to fix his bottom row of teeth after he lost his retainers, his teeth moved and he felt self-conscious about how they looked for years. “I think the best experience, knowledge, you can get from a specific product is to use it yourself,” he said. “I’m a happy customer.” Align Technologies, which makes another invisible aligner brand, Invisalign, was supplier for and had a 17 percent stake in SmileDirectClub, according to Camelot. But it sold back its shares over a lawsuit regarding breach of a noncompete clause in its contract, Forbes reported. Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

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C R A I N ’ S D E T R O I T B U S I N E S S // S E P T E M B E R 1 6 , 2 0 1 9

THE WEEK ON THE WEB

RUMBLINGS

WeWork to more than double Detroit footprint

Detroit Youth Choir sees benefits from TV spotlight

SEPTEMBER 6-12 | For more, visit crainsdetroit.com

o-working space giant WeWork LLC expects to double its Detroit footprint by opening its largest location to date, in the TechTown area of Midtown. The New York City-based company, whose parent is We Co., has signed a lease for more than 91,000 square feet at 6001 Cass Ave. at York Street, said Dan Austin, a spokesman for Detroit-based developer and landlord The Platform LLC. That adds to the more than 85,000 square feet WeWork has spread across 11 floors in a pair of Dan Gilbert-owned buildings downtown: 1001 Woodward Ave. (four floors) and 1449 Woodward Ave. (seven floors). It’s not known precisely when WeWork will have space available for users on Cass, but it will take part of the first floor, along with all of the second through fifth floors, Austin said. Tata Technologies, the Novi-based division of Tata Group, is leasing the sixth floor for its new headquarters that’s expected to open this fall. The building, which is about 130,000 square feet, is also slated to house a Wayne State University art gallery. Constructed in 1927 as the Cadillac LaSalle sales and service building, the building is expected to house more than 150 Tata Technologies workers following their move from their current location at 41050 11 Mile Road east of Meadowbrook Road. Prices haven’t yet been set for WeWork space at 6001 Cass, according to the WeWork website. Space at 1001 Woodward starts at $300 a month for a desk in a common area, $380 a month for a dedicated desk and $580 per month for a private office. At 1449 Woodward, desks in common areas start at $300 per month, while dedicated desks start at $440 per month and private offices start at $590 per month. Leor Reef, a local spokesman for WeWork, last week said that he was unable to disclose additional information about the Cass Avenue spot. WeWork has been pushing forward on an IPO although there have been concerns about the company as it continues to lose money. Its valuation has wildly fluctuated, Bloomberg reported Wednesday morning: Some as high as $65 billion and perhaps as low as $15 billion. Founded more than a decade ago, it has never turned a profit.

BUSINESS NEWS J The owner of the former Leland hotel in downtown Detroit is leading development of an apartment building, parking deck and renovation project on the edge of the east-side West Village neighborhood. The $21 million commercial and residential project is seeking public financing through the city’s Brownfield Redevelopment Authority to assist with environmental cleanup, according to public documents and the Leland owner, Michael Higgins. J A San Diego-based maker of cannabis-infused, nonalcoholic and traditional beer lines is acquiring Auburn Hills-based Rochester Mills

KIRK PINHO/CRAIN’S DETROIT BUSINESS

WeWork LLC is slated to fill more than 91,000 square feet of the 6001 Cass Ave. building in the TechTown neighborhood.

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

$1.3B

Amount of money SmileDirectClub aims to raise in its IPO

$350M

Latest investment landed by Plymouth-based upstart Rivian Automotive

85 years

How long the Musser family has run the Grand Hotel on Mackinac Island

Production Brewery. Two Roots Brewing Co., a licensed trademark of California-based portfolio management company Lighthouse Strategies LLC, is purchasing the company J Rivian Automotive LLC, the upstart electric vehicle company based in Plymouth, has scored a third large investor as it races to complete development of its battery-powered truck and SUV for 2020 launches. Atlanta-based Cox Automotive, parent company of well-known brands Manheim, AutoTrader, Kelley Blue Book and DealerTrack, is investing $350 million in Rivian. J Jack Entertainment LLC is closing its Detroit office and laying off 92 employees following Dan Gilbert’s $1 billion sale of Greektown Casino-Hotel earlier this year. The layoffs are expected to begin in November and be complete by the first quarter of 2020. J Horse racing aficionados will be able view live racing for four additional weekends at the track in Northville. The Michigan Gaming Control Board granted a total of eight additional days to Northville Downs on Fridays and Saturdays in November and December. J Pure Michigan is pushing out a new $7.7 million fall advertising campaign promoting the season in all its color-changing, pumpkin-picking glory. It is the first national fall ad campaign for the state. J In an effort to improve customer response times, Detroit-based DTE Energy Co. is opening a new call center in early spring that will generate more than 100 full-time, customer

service positions. The Cass City call center, the company’s third in Michigan, will be located inside the North Area Energy Center. J The U.S. Department of Transportation has awarded a $7.5 million federal grant to help strengthen research and development of self-driving technologies in Michigan. J Henry Ford Health System in Detroit has signed an exclusive licensing agreement with Semita, a cloudbased software company, to market a software application to manage patients’ medication therapy. It is the 30th licensing agreement for Henry Ford Innovations since it was founded in 2011. J Nestlé USA Inc. and its Nestlé Dreyer’s Ice Cream Co. plan to shut down a facility in Plymouth by the end of the year, eliminating 57 jobs. The closure comes as Nestlé’s stops delivering frozen pizza and ice cream to stores itself, instead shifting its model to ship to warehouses, Bloomberg reported. J True Value-branded hardware shop Hammer Time is replacing one in Detroit’s MorningSide neighborhood by the same name that closed in 2017 and left a hole in the community’s commercial district — a familiar occurrence for hardware stores in the city. The revamped 8,000-squarefoot shop offers tools, paint supplies, window and screen replacements, water heaters and plumbing essentials.

NONPROFIT NEWS Detroit-based Noble Child, an independent company spun off by Wolverine Human Services to market its new child welfare information system, has secured its first two contracts. Through the one-year agreements, two Colorado-based The Adoption Exchange Inc. and Cornerstone Programs Corp., are licensing use of the Noble Child system to manage child welfare data across their operations in several states. J The Detroit Institute of Arts has launched customer-order sales of museum-quality, digital reproductions of pieces in its collection. The move will make its collection more accessible, while also providing a new revenue stream for the museum. J A $3.5 million tiger forest opened Friday at the Detroit Zoo, with support from a $1 million donation by the Bloomfield Hills-based Richard C. Devereaux Foundation. J

in or lose on “America’s Got Talent,” the Detroit Youth Choir is already benefiting from its appearance the national television show. The Parade Co. has named the small nonprofit choir as the opening act for the 93rd America’s Thanksgiving Parade presented by Art Van in Detroit on Thanksgiving Day. The group will also perform on the main stage at The Parade Co.’s largest annual fundraiser, the Hob Nobble Gobble at Ford Field the week before. Detroit Youth Choir is headed to the finals in “America’s Got Talent” after winning the vote Wednesday night, with the finalists set to perform next Tuesday and a winner of the $1 million prize to be announced the next night. Formally known as the Detroit Youth Concert Choir & Performing Arts Co., the 23-year-old group operates on a budget of less than $50,000. It works to develop the talents of

Metropolitan Detroit students through music education, dance and theatrical arts. Detroit Youth Choir is the latest Detroit musical group to gain national attention in recent years. Mosaic Youth Theatre of Detroit garnered the spotlight in 2014 when one of its vocalists, then 16-year-old Malaya Watson, made the top eight. Its alumni have also performed on Broadway, on television and on a web series. Grosse Pointe’s Selected of God gospel choir performed in Chrysler’s “Born of Fire: Imported from Detroit” television commercial featuring Detroit rapper Eminem that first aired during Superbowl XLV in 2011. Among other performances, it went on to perform at the American Society of Association Executives’ annual conference in Detroit in 2015 (as did Mosaic Youth Theatre) and Michigan International Speedway.

GAGE CANNABIS CO.

Gage Cannabis Co.’s first Michigan retail shop opens Saturday at 1551 Academy St. in Ferndale.

Gage Cannabis to make grants in ‘social equity’ cities S helby Township-based Gage Cannabis Co. is piggybacking on marijuana regulators’ “social equity” program by divvying up $950,000 for cities disproportionately impacted by marijuana prohibition. The grower and retailer plans to give up to $50,000 each to prospective business owners in 19 cities where the Michigan Marijuana Regulatory Agency is cutting marijuana licensing fees by up to 60 percent. The program targets minority, poorer communities such as Detroit and Flint and college towns whose residents were disproportionately impacted by the drug war. Those getting reduced fees can also bring their business plans to Gage for additional money, as well as operations training. Gage has “witnessed the devastating impact marijuana prohibition has ... Ultimately, our goal is to strengthen the

entire cannabis community in Michigan,” said Rosie Riashy, the medical marijuana seller’s marketing and community manager. For its first recipient, Gage chose Ryan Basore, a marijuana advocate who aims to supply provisioning centers starting in January under his Lansing-based company, Redemption Cannabis. Gage would not disclose how much money it is awarding Basore. Asked if Gage is potentially funding competitors, Riashy said it could be a way to meet future product partners. Gage has its own products, but also sells those of other brands. It declined to disclose pricing. Gage promoted the grants ahead of the Saturday opening of its first provisioning center, in Ferndale. It’s the first of 13 planned locations, alongside 150,000 square feet of growing space and a processing facility.

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