NEWSPAPER
© Entire contents copyright 1985 by Crain Communications Inc. All rights reserved.
Crain~
Price: 50 cents a copy; $20 a year.
Businesses are dialing for dollars
•
PAGE 22
Yuppies snap up second mortgages PAGE 4
•
Japanese bank likes Detroit projects PAGE5
WEEK OF MAY 20 - 26, 1985 VOLUME 1
Shells: fast, low-cost way to go public BY CHARLES CHILD
BY JOYCE DAVIS ADAMS CRAIN'S DETROIT BUSINESS
DWIGHT CENDROWSKI
An everyday business takes an unusual route to public status: Tony Buscemi, president of Buscemi's International Inc., made his company a shell corporation's "subsidiary." sorbs the private company on paper. The result: the private company is now public, free to sell stock or bonds and raise capital. Buscemi said he is using a shell corporation to save money. The conventional method would have cost him some $250,000 in fees to lawyers, accountants, government agencies, printers and the investment banker. Conversion through Honey Cone, however, will cost only about $15,000 in fees, he said. Although the Buscemi's-Honey Cone merger is going smoothly, shell corporations must be handled with care, said George Harrison III, a Pleasant Ridgeattorney representing Buscemi's. They can ensnare See SHELLS, PAGE 26
Feds will drop Detroit from monthly CPI reports CRAIN'S DETROIT BUSINESS
WASHINGTON -Businesses and consumers in Detroit are destined to become second class citizens, at least according to the U.S. Bureau of Labor statistics. The statistical reporting arm of the U.S. Department of Labor currently publishes monthly Consumer Price Index figures for five cities - New York, Los Angeles, Chicago, Philadelphia and Detroit. Beginning in 1987, the BLS will only publish monthly figures for the nation's four largest metropolitan areas, eliminating Detroit. Under a revised CPI publishing plan, Detroit will join a group of second tier
NO. 16
BetaWest plans RenCen-sized office complex
CRAIN'S DETROIT BUSINESS
Buscemi's International Inc., an ambitious chain of restaurants in the Detroit area, agreed last week to become a subsidiary of an obscure, nearly worthless Utah company called Honey Cone Corp. Incorporated just last year, Honey Cone has assets of only $15,000, and has yet to transact a nickel's worth of business. Has Buscemi's management been overstuffing itself with its pizza? Does Honey Cone have a particularly persuasive salesman? Neither of the above. Honey Cone is known in financial circles as a shell corporation. It is a vital cog in Buscemi's ambitious plans to raise capital and nearly double this year the size of the chain of 19 restaurants and party stores. Shell corporations are used by capital-hungry private companies to go public. If handled with care, they can save expanding firms time and hundreds of thousands of dollars. "Honey Cone is the perfect tool for us," said Tony Buscemi, 25, president of Buscemi's. "It will give us the infusion of capital we need." Another Detroit area firm, Mason Dental Ceramics Inc., based in Livonia, went public with a Montana shell corporation called Environmental Recycling Technologies Inc. last year. Mason Dental, which had had sales of $1.8 million in 1984, is developing dental offices in shopping malls in Michigan. When Buscemi became president last summer, his first task was to plan the firm's conversion to a public corporation. His initial goal: raise $2.5 million. He found he had two ways to go public: eThe conventional method. After registering with federal and state agencies, a firm sells stock, called an initial public offering, with the help of an investment banker. eVia a shell corporation. The shell is already public, complete with registration and stock. It simply ab~
0
cities, like San Francisco and Houston ~here statis~ics will be compiled and pub~ hshed on a bImonthly basis. The CPI is an index of price changes for a mythical fixed market basket of goods ~nd services of constant quantity and qualIty purchased for consumption. The index is supposed to reflect price changes in items that consumers purchase on a regular basis, such as gasoline, food and clothing. Among major users of the CPI are labor u~ions, which usually tie cost of living raIses for workers to the index. It is also frequently used by national retailers as a rough gauge of prevailing consumer prices on certain items. CDS
~
BetaWest Properties Inc. of Denver says it plans to break ground this fall on a landmark riverfront project that could create more than 2 million square feet of office space - approximately the same space enclosed by the Renaissance Center's original four office towers. The first phase calls for a 25story, 500,000-square-foot office building to be constructed on a 6.3acre site at Atwater and Rivard streets, just east of the Renaissance Center, according to Ralph Youngren of Smith, Hinchman & Grylls Associates Inc. of Detroit, the senior designer of the project's master plan. Other features of the first phase to be built over a two-year period include a boat dock and a fine restaurant, he said. Company officials said the price tag on the project has not been decided yet. The second phase would either include two buildings of the same size or a 60-story building, creating at least another 1.5 million square feet of office space, Youngren said. BetaWest officers told Crain's Detroit Business in an exclusive interview last week that they were visiting Detroit to find tenants for the first phase of the yet unnamed project. William Moore, BetaWest's
vice president of the Design and Construction division, said company policy requires any new building be 20 percent to 30 percent leased before construction commences. Roy Fanning Jr., an officer with BetaWest's Finance Development division, said his company is also looking at constructing two "substantial buildings, about 250,000 square feet each," in the city's suburbs. BetaWest, a consolidated subsidiary of U.S. West Inc., the $7 billion telecommunications holding corporation based in Englewood, Colo., chose Detroit in January to build its "premier project." Moore said the riverfront project is the largest tackled by BetaWest on its own. Until a court ruling last December, BetaWest's real estate development services were confined to its parent's seven-member family of companies. The development will be owned 100 percent by BetaWest and privately financed by major financial institutions and lenders throughout the nation, said Moore. He stressed that BetaWest's parent company, U.S. West, will not be an investor in the development, although it will bolster BetaWest's credit status. "U.S. West only provides us with operating funds and does not proSee BETAWEST, PAGE 26
~
Dearborn Heights shopping center suit nears ruling BY AMY BODWIN CRAIN'S DETROIT BUSINESS
Borman's Inc. and Troy developer Stuart Frankel may get an answer soon in their bid to build a $10 million to $15 million shopping center in Dearborn Heights. On Wednesday, May 22, Wayne County Circuit Court Judge Lucile Watts will hear final testimony in a suit filed by Frankel and Borman's that asks the city of Dearborn Heights to rezone land at Ford and John Daly roads from single-family residential to commer~ial. No. homes are located on the 19-acre parcel, but it IS the SIte of the Dearborn Drive-In Theatre, which is owned by Benenson Capital Corp. in New York City. See SUIT, PAGE 21
~
GLENN TRIEST
Thorn Apple Valley Inc. Presi- ' dent Joel Dorfman says he's cutting fat from his company's operations to stem 10sses.Story, Page3~