MiBiz June 8, 2020 print edition

Hospital execs detail changes, challenges as care resumes

Grand Rapids convention center hotel put on hold

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JUNE 8, 2020 • VOL. 32/NO. 17 • $3.00

SERVING WESTERN MICHIGAN BUSINESS SINCE 1988

Office furniture makers find ways to promote products without NeoCon

‘TREMENDOUS WIN’ Tetra Therapeutics’ sale offers healthy returns for investors, validation for local ecosystem

By JAYSON BUSSA | MiBiz jbussa@mibiz.com

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week that was supposed to be bustling with news and information on new office furniture products and innovations in the world of commercial design will be a lot more reserved.

In line with virtually every other event attended en masse around the country, NeoCon became a casualty of the COVID-19 pandemic.

Organizers of the marquee trade show for the commercial design industry originally postponed the event, slated for June 8-10, even as the COVID-19 pandemic began to grip states across the country in early March. Later that month, they finally pulled the plug on the live show at The Merchandise Mart in Chicago, dooming plans for the more than 50,000 expected attendees and 500 exhibitors.

The next NeoCon is now slated for June 14-16 of 2021.

Since its inception in 1969, NeoCon has become a highprofile launching pad for both leading and emerging commercial design companies from across the globe to debut new products, innovations and services, always attracting a who’s who of firms from West Michigan’s office furniture industry.

While the occasion brought out the titans of the industry, NeoCon was arguably even more beneficial for smaller companies, which utilized the high-profile nature of the event and steady foot traffic to gain exposure in the space.

“I don’t know if we’ve really been able to gauge (the effect of the cancellation) yet,” said Nancy Stryker, director of marketing for Holland-based office furniture manufacturer Trendway Corp.

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About 100 businesses in downtown Grand Rapids suffered some sort of damage after peaceful protests erupted in violence on May 30 and 31. PHOTO: ANDY BALASKOVITZ

‘INSULT TO INJURY’ GR business owners rebound from protest damage as local leaders seek to mend old wounds

By KATE CARLSON & ANDY BALASKOVITZ | MiBiz editor@mibiz.com GRAND RAPIDS — The May 30 violence following protests against police brutality not only damaged dozens of downtown businesses on the verge of reopening, but also has caused local leaders to revisit efforts to mend the city’s historically strained police-community relations.

Following the protest that turned violent with burned police cars, looting and broken storefronts, City Manager Mark Washington said: “There is other damage that we need to address that is unrelated to property. It is the damage due to long-held tension between some members of the community and the police department. We continue to be committed to rebuilding that trust.”

City Commissioner Senita Lenear, who represents the southeast part of the city, said during a public meeting on June 2 there is a balance that must be struck between rightly frustrated business owners and ongoing police brutality toward minorities.

“I think the balance with that is making sure we side with lives over Lenear property,” Lenear said.

Grand Rapids — with its own recent history of police mistreatment of minorities, including the Michigan Department of Civil Rights’ current investigation of 35 complaints against the city’s Police Department — is part of the national discussion sweeping U.S. cities since the killing of George Floyd in Minneapolis last month. Floyd was killed by a white police officer who kneeled on his neck for nearly 9 minutes. Local See GR UNREST on page 3

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

GRAND RAPIDS — Tetra Therapeutics Inc.’s sale to a Japanese pharmaceutical company provides a final pathway toward bringing to market potential new drugs to treat Alzheimer’s disease and a form of autism, as well as generates a handsome return for financial backers.

Investors in a $7.2 million Series A capital round Tetra raised in 2016 got a return of five times their original investment, founder and CEO Mark Gurney said. Participants in an earlier July 2013 debt offering got an ROI that’s close to 13 times their investment, he said.

“We returned a lot of capital to Michigan,” said Gurney, who started Tetra Therapeutics in 2011 and methodically built and led the company down Gurney the R&D pathway toward an exit for investors.

“This is a tremendous win for West Michigan, both for our investors and stakeholders,” he said.

Tetra’s merger into Shionogi & Co. Ltd. could ultimately reach a transaction value of $500 million if certain regulatory and sales milestones are met over the years.

The deal represents one of the largest exits to date for a startup company formed and nurtured in Michigan and supported by local investors.

See TETRA on page 20

Tribally owned firm secures $161M federal contract, expands GR headquarters

By JOE BOOMGAARD | MiBiz jboomgaard@mibiz.com GRAND RAPIDS — A federal contracting firm owned by Waséyabek Development Co. LLC has begun work on a five-year, $161 million contract with the Department of Energy to provide site operations and support services at three National Energy Technology Laboratory locations.

The contract — Waséyabek Federal Services LLC’s largest to date — helps illustrate the growth story for the non-gaming investment arm of the Nottawaseppi Huron Band of the

Potawatomi. The Waséyabek parent company recently started work on the third floor of its Kendall Building headquarters in downtown Grand Rapids to convert apartment units into additional office space and a large conference room to support the expanding federal services division.

“Right now, we’ve got about 15 positions that we’re advertising for, so we are growing and hiring,” Waséyabek President and CEO Deidra Mitchell told MiBiz. “And then as we bring on more and more federal contracts, those support positions are going to have to grow, too — things like finance,

contract administrators, legal support, technical writers, HR. We were already bursting at the seams.”

The firm is working on the Mitchell expansion project with architecture and engineering firm TowerPinkster and general contractor McGraw Construction Inc., both of Grand Rapids.

Waséyabek also launched FED95 LLC, a new Grand Rapids-based

environmental remediation subsidiary. FED95 and the tribally owned Baker Engineering LLC, a precision performance engine manufacturer and defense R&D supplier based in Nunica, both received 8(a) minority business certifications in March and February, respectively, from the U.S. Small Business Administration.

For FED95, the 8(a) certification came just as the COVID-19 pandemic started to spread throughout the country, which led the company to form new teams to bid on coronavirus cleaning and disinfection contracts See WASÉYABEK on page 3

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Lakeshore communities hope for midyear rebound PAGE 12

INSIDE:

Commercial Lending Report SEE PAGE 14

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GR UNREST

Continued from page 1 business advocates say it will take proactive measures to repair decades of systemic racism.

“We do not condone violence and destruction of businesses and property, however we acknowledge we’re at a critical point,” said Kenneth James, director of inclusion for the Grand Rapids Area Chamber of Commerce. “There is a lot of frustration with the systemic racism that is playing out in this country. The Grand Rapids Chamber wants to be part of the solution.”

James said he hopes the current “energy and attention” will help move to a point of “racial reconciliation.” The Chamber has several proJames grams focused on race and inclusion, he said, and “we would like to see like-minded organizations and individuals talk about what’s next.”

On June 2, Washington and other city officials released a plan that indeed looks at what’s next. The city’s Office of Equity and Engagement and Office of Robinson Oversight and Accountability plans to increase summer job opportunities for youth and “increase restorative justice programming, elevating community voices, and public safety engagement,” among other measures.

James saw three events take place on May 30 and in the following days: a “peaceful protest” followed by a “few dissenters and agitators” and then the volunteer cleanup efforts.

“No, we don’t condone (property destruction), but we need to look at what precipitated that: pain and anger,” James said.

Jamiel Robinson, CEO of Grand Rapids Area Black Businesses, said city leaders are seeing the “utter frustration” from community members, particularly the targeting of minorities by the police.

“Whether people feel (the destruction) was right, wrong or are indifferent to it, we have to acknowledge the fact that there’s a large portion of our community that has been oppressed from that standpoint,” he said. “We have to stop looking at protesters as the problem and have to look at institutional racism and the policies of the Police Department and keep addressing those.”

Bad timing City officials reported roughly 100 businesses were affected by the damage left in the wake of the May 30 protests. Days after the protest, most downtown storefronts remained boarded up with plywood to shield broken windows, and as a precaution in case

WASÉYABEK Continued from page 1

with the federal government, as well as offer industrial hygiene and other services.

“We haven’t been awarded anything yet, but we bid on several things for the emergency response piece of it so that when a COVID-19 confirmed case is onsite, you need to come in and do the disinfection and testing to make sure that it’s clean,” Mitchell said.

FED95 also tapped Truscott Rossman Group LLC, a public relations agency with offices in Lansing, Grand Rapids and Detroit, to provide communications services for customers in the case of a COVID-19 outbreak or if their building gets commandeered to provide emergency services to patients, for example.

CEO and Principal John Truscott said the partnership will operate similarly to the work the firm does with I.T. companies when clients have a cybersecurity issue.

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of further damage in future protests. Some business owners are reassessing when they will be able to reopen their brick and mortar locations because of damage and the potential for additional unrest.

Most of the damage to downtown storefronts happened late in the night on May 30 and early morning of May 31 by a significantly smaller group of people than the estimated 3,000-4,500 who gathered at the beginning of the protest.

Hundreds of volunteers descended on downtown the morning after the unrest and swiftly cleaned up glass and graffiti and helped to board up windows.

“I have a lot of glass to replace,” said Peter Krupp, co-owner of CDKI Holdings LLC, which owns Sandy Point Beach House in West Olive and Grand Rapids, and Mexo in Grand Rapids, which was damaged during the protest.

Mexo had been offering a limited amount of takeout during the pandemic and plans to reopen on June 8. But diners may have to sit amid plywood, Krupp said. Along with the broken glass windows, Krupp said the inside of the restaurant was vandalized and a computer terminal and cash drawer was stolen.

“It was insult to injury,” Krupp said of the damage at the tail end of the pandemic-related closure.

“I’m very sympathetic to the (protesters’ cause). It was hard enough being shut down, then to have to rebuild everything to reopen is tough.”

Robinson — a co-owner of Ambiance GR, a lounge that was set to open downtown before the pandemic hit — said one of the building’s windows was broken on May 30.

“Windows can be replaced, lives can’t be replaced,” Robinson said. “It would be insensitive on our part to gripe about windows even though we’re as invested as anyone downtown.”

‘Flood of emotions’ Seeing some of the damage play out on TV was overwhelming for Ashley Pipe, manager of Ali Nicole Bridal, but she said it was a relief there was not more damage caused to the store, located at 52 Monroe Center St. NW. Pipe went to the store with her sister the night of the protest to do her best to secure the business. One window of the bridal store was broken, but not all the way through, and nobody had entered the store.

“Because our store was affected in a less critical way than so many other businesses around us, we’re really grateful, but we’re doing a lot of reflecting on why what happened did happen,” Pipe said.

“We’re trying to figure out the best way to do our part to ensure nothing like that happens again.”

Pipe describes the damage during the protest and coming into town the next day to clean up as “a flood of emotions.”

“Coming into Grand Rapids the next day and seeing the community come together in a new way and all the support and encouragement that was sent to us as a business through messages and emails, it definitely comforted any feelings of unease in terms of the damage of the store,” Pipe said.

“It may just be internal communication to help keep everyone calm and let them know what’s going on, but there might also be some external communication, too,” Truscott said.

The partnership is an extension of a client relationship Truscott Rossman has developed with Waséyabek for more than a year as the tribal firm has “really emerged as an investing organization doing some innovative things,” Truscott said.

Like many non-gaming tribal economic development organizations, Waséyabek has leaned into federal contracting as a way to diversify revenue for the tribe. Tribally owned companies qualify for minority business status, which opens them to opportunities to compete for federal set-asides.

The Department of Energy awarded Waséyabek Federal Services the site operations contract in December, with the firm fully taking over the project on April 1 after a transition period. The contract covers National Energy Technology Laboratory sites in Morgantown,

Community strength Several shop owners that sustained damage to property, including the bridal shop, have expressed support for the Black Lives Matter movement on social media. People in the community have also taped notes of support on many businesses’ boarded-up windows.

The damage was a little more extensive to Old World Olive Co., located at 108 Monroe Center St. NW. Three of its four windows along Ottawa Ave. were smashed out, according to owner Shasta Fase.

Mostly everything in the display right behind the window was destroyed, she said, resulting in a lot of broken product.

Old World Olive Co. has been doing curbside pickup throughout the pandemic, but was set to reopen its shop to in-person customers by appointment on June 2, which was delayed because of the damage.

“Seeing the damage was one of the more difficult things we’ve gone through in the 11 years we’ve been in business,” Fase said.

Despite this, Fase said the company was embraced by the community the next morning as volunteers helped quickly clean up the store.

“We know that Grand Rapids is awesome and that the community is by and large a caring and giving community, but I’ve never experienced acts of strangers and acts of such kindness,” Fase said.

The company is still estimating the lost product, but Fase hopes to reopen the store in two weeks, depending on how quickly the windows are replaced.

Like most business owners, Fase said she worries about more damage in the future from protests.

“This will be a lesson we’re all going to learn something from,” Fase said. “But you’ve got to move forward with strength and courage and know the community is there for you.”

Reopening for business Despite Osteria Rossa restaurant being located in the thick of where the protest and much of the damage took place, the business was left unscathed, said one of the restaurant’s owners, Karie Koster.

“We made it through undamaged, but our landlords demanded we put up boards,” Koster said.

“We actually made it through though, which is incredible and lucky.”

Koster said she hopes to reopen Osteria Rossa for dine-in customers the week of June 8, but the business needs to make sure it will be safe for staff and guests because more protests are possible.

“We’ve had a lot of people call and say they want a reservation as soon as we open,” Koster said.

The restaurant has been open for takeout throughout the pandemic, but had to temporarily close for a couple of days because of the damage to the majority of downtown and blocked off streets.

“I just felt so bad for every single business that got hit,” Koster said. “None of those businesses did anything to deserve it.”

W.Va., Pittsburgh, Pa., and Albany, Ore. with a collective 200 employees, Mitchell said.

Waséyabek serves as the prime contractor, and formed a joint venture with Emeryville, Calif.-based E2 Consulting Engineers Inc. to offer a range of R&D, engineering, facilities, environmental, safety, health and quality support services.

Mitchell said Waséyabek’s goal for the federal contracting group is to generate $20 million in annual revenue by the end of 2022.

The growth for Waséyabek also comes as the firm expands its buyand-hold investment strategy beyond small businesses into the middle market for the first time, Mitchell said. Waséyabek is prospecting for operating company acquisitions in the $10 million to $30 million revenue range “hopefully here in the Grand Rapids area, or the Michigan area,” she said.

“We’re hoping to do a mid-market acquisition — or two, or three — before year end 2022,” Mitchell said.

“We’d love to have one done by the

end of 2020. We’ll see how that goes.”

To cap it all off, Waséyabek in January partnered with Gun Lake Investments, the non-gaming economic investment entity of MatchE-Be-Nash-She-Wish Band of Pottawatomi Indians, or Gun Lake Tribe, on the $17.5 million purchase of the iconic McKay Tower in downtown Grand Rapids.

The building suffered damage and looting after protests against police brutality turned violent at the end of May, Mitchell said, noting the Kendall Building was spared in the incident. Prior to that, the owners had been working with McKay Tower’s retail tenants as they’ve been seeking out various COVID-19 relief programs.

“The relationship with Gun Lake has been great,” Mitchell said.

“There’s a lot of pride in both tribes of owning a building of that caliber, and in us being able to remain committed members of the Grand Rapids community. We both really set down deep roots and we’re happy to be here.”

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MANUFACTURING

Holland-based Haworth Inc. developed a variety of virtual features and experiences for potential clients that the company will unveil to coincide with NeoCon, whose organizers canceled this year’s live event in Chicago. This digital offering includes a virtual showroom that features several new products. COURTESY PHOTOS

OFFICE FURNITURE MANUFACTURERS Continued from page 1

Trendway does not maintain a showroom within The Merchandise Mart itself, but has a permanent space nearby.

“NeoCon is a huge time to meet with our dealers and continue to build those relationships,” Stryker said. “It’s a focal point for our industry. It’s a great time to gather all our dealers together and engage with them. Missing out on that is probably one of the most painful things.”

However, the NeoCon concept isn’t disappearing completely. In lieu of the live Merchandise Mart event, NeoCon organizers have created NeoConnect, an online hub that features access to exhibitor product launches in addition to panel discussions, webinars and other market education opportunities.

The NeoConnect hub — found at NeoCon.com — was established on June 1 and its information and programming will steadily trickle throughout the month.

Reaching customers where they are Trendway did not develop any special

programming for NeoConnect, but was strategic when it came to rebounding from an opportunity lost to show off its latest innovations to a broader audience.

“For us, we wanted to be more adaptable to what our customers were asking for and what they were needing,” Stryker said. “We had accelerated some product launches that covered the needs that the pandemic created for our customers.”

Single and U-shaped acrylic screens that can be retrofitted to existing open-plan office environments were one such example. The product met a surge in demand for increased barriers for open settings to minimize and eliminate the transfer of germs.

Stryker also said that an advantage for Trendway is that it is able to maintain close relationships and consistent engagement with its dealers, and can bring products to market without all the pomp and frills that come with NeoCon. “We bring our dealers in periodically for large training events and we get those interactions with them,” she said. “We hold events in our showroom for our dealers. So, we have a more personal relationship with our dealers because of our size.”

Of f ice f u r n it u re g ia nt Haworth Inc., based in Holland, chose to dive headfirst

into the virtual arena to fill the void left by NeoCon, providing a wide range of opportunities for digital engagement with potential customers.

This includes a series of webinars that is set to launch this week, featuring the likes of speakers Anders Byriel, CEO of global textile house Kvadrat, as well as University of Michigan professor, author, and innovation expert Dr. Jeff DeGraff, among others.

These presentations will lead up to the launch of Haworth’s new digital showroom, featuring more than a dozen new products.

Post-NeoCon, Haworth will begin sending samples and stocking them in the company’s physical showrooms.

“In April, we didn’t know if (the COVID-19 pandemic) was just a bad dream, but in early May, it was hard to see an end in sight,” said Kurt VanderSchuur, global brand director for Haworth. “We kind of decided we’d go virtual and do NeoCon that way.”

Virtualization came relatively easy for Hawort h, which leans on technolog y to work with its design teams across the globe to launch products at the world’s premier shows. Haworth traditionally has a presence at other international shows such as Salone (Milan Furniture Fair), Orgatec in Germany and NYCxDESIGN in New York City.

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“In the end, our industry, we’re a tactile industry.

People want to touch and see. If they’re buying chairs, they want to sit in them and feel the textile.”

— KURT VANDERSCHUUR Global Brand Director for Haworth Inc.

“For product development teams, it’s really hard to do it all virtually — models and prototypes and the physical things,” VanderSchuur said. “You really test your rendering ability and your 3-D modeling abilities.”

Virtualization is a concept that VanderSchuur and the team at Haworth are really embracing.

He said that the company would be unveiling new virtual features this summer but wouldn’t provide much more information beyond that.

Trade shows obsolete?

A wide range of virtual tools now give commercial designers the opportunity to reach a broad audience, providing detailed looks at their latest innovations without having to rely on in-person shows like NeoCon. “Most of the v isitors (to NeoCon) are designers and architects — and say you have a firm of 50 people and they send five people to the show,” VanderSchurr said. “(Through virtual features) you can reach everyone at that firm, where before you were just reaching the five people. You can speak to all 50. It makes it more accessible.”

Haworth’s debut into the digital world was when its team designed a virtual house for NYCxDESIGN, stocking it with products from its brands. VanderSchurr said that it received over 100,000 views, which confirmed to his team that this was an effective way to promote and sell products.

Still, VanderSchurr admitted that traditional trade shows like NeoCon still have a place in the industry, especially because of its tactile nature.

“In the end, our industry, we’re a tactile industry,” he said. “People want to touch and see. If they’re buying chairs, they want to sit in them and feel the textile. That’s the part that’s hard (to replicate virtually).”

Trendway ’s St r yker ag reed, poi nt i ng again to the face-to-face opportunity to foster relationships.

“My personal opinion is that nothing beats that live interaction and we embrace that and want that,” she said.

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Unconsciously Competent: How core competencies can drive manufacturers through crises and position them for future growth hierarchies -- boy did that really come to play when we had to respond quickly to this situation.”

A PATH AHEAD Going forward, Profile Films plans to keep its core competencies front-of-mind as West Michigan, and global economy, reposition after the COVID-19 Pandemic. Company executives and employees alike will continue to openly discuss Profile Film’s core competencies and how to leverage those in the future, Tjoelker said. Executives are hosting more meetings discussing competencies, as well as oneon-one conversations, and frequent team huddles to ensure cross-talk regarding core competencies between departments.

While the COVID-19 pandemic has sent the global economy reeling, it also forced many manufacturers to reexamine the foundations and principles their businesses were founded upon.

Though they are often referred to in dry and academic terms, core competencies form the bedrock of an organization. In line with the Japanese model of doing business, core competencies are like the root system of a tree. In more Americanized terms, they are an organization’s “special sauce.” Many smalland medium-size manufacturers focus on aspects of their business outside what they produce, such as customer service, quality, and reputation, but do not take time to drill down into these attributes to figure out how or why they work. Likewise, many times those core competencies are embedded so deeply within the culture that they can be overlooked when it comes to seizing new opportunities or planning for future growth. Likewise, in times of economic turmoil -- such as during the current COVID-19 pandemic -leveraging your business’s core competencies allows an organization to pivot rapidly into new areas, said Terry Hossink, a business development specialist at the Michigan Manufacturing Technology Center - West (The Center-West).

to fall back on its core competencies to find a path ahead in the new economic environment.

“COVID really accentuated that character [of Profile Films],” said Todd Tjoelker, Profile Film’s new CEO, who joined the firm in February 2020. “It gave me a chance as a newcomer to see the team in action. You never want a crisis to occur but when they do, it really is an opportunity to see how the team interacts and works and solves problems and creates a new normal. That came out in spades over the last month and a half.”

As the full force of the pandemic took hold over the global economy, Tjoelker found himself positioned to observe and assist the rest of the executive team in leveraging Profile Films’ core competencies to navigate the crisis.

The company “turned the place upside down,” cordoning off separate entrances, closing lunch and locker rooms, and implementing other procedures to ensure its employees’ safety, said Steven Ehmann, founder and owner of Profile Films. Then, the manufacturer turned its attention to serving its customers in the food processing sector and continued to run three shifts, seven days a week. Aided by Tjoelker’s experience with large organizations in the automotive and aerospace “The key here is to truly understand what your company, your talents and your abilities are, and how sectors, Profile Film’s executive team formed continuity and contingency plans, conducted risk to use these assets moving forward so you don’t fall behind the curve.” Hossink said of core competencies. assessments and continued to revamp its facility to both meet customer demand.

Hossink along with other business executives spoke “We often say we don’t really sell bags, we sell trust about the importance of core competencies during the second webinar in the 2020 Back to Basics series and dependability,” Ehmann said. “We’ve taken what hosted by The Right Place, The Center-West and MiBiz. is normally a commodity industry… and have created quite a nice niche where we service companies that The webinar also included executives from Grand Rapids-based Profile Films, Inc., who shared how they are dependent on us and we become dependent on them.” used core competencies to navigate their business through the current pandemic.

While core competencies are often equated to outsourcing all processes not unique to the A CASE STUDY IN COMPETENCE organization, that is not necessarily the case, Tjoelker said.

Like many small- and medium-sized manufacturers in West Michigan, Profile Films has maintained the “When you really have to flip the place upside down, majority of its executive leadership team and many you find yourself taking on those competencies of employees since its founding in 1994. Because of nimbleness and creatively to allow you to re-layout that, the manufacturer of polyethylene bags and your floor plan [and] understand how you’re going to sheeting maintains a trove of inherent institutional clean the place and serve food to your teammates,” knowledge. So much so that Profile Films’ core competencies are embedded into everyday processes Tjoelker said. “All of these things aren’t necessarily a normal part of your business. The core competencies and rarely discussed outloud among the executives or employees. That was until the COVID-19 pandemic of being nimble and trusting, being an open forum where no one has a bad idea and breaking down struck in March 2020 and forced the manufacturer

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Tjoelker also plans to incorporate Profile Film’s core competencies as he continues to integrate new metrics, transparency, and other procedures.

However, he is quick to note that integrating these new processes cannot be done at the expense of the original foundation that built Profile Films into the business it is today. Similarly, letting core competencies drive business decisions too rigidly can also be risky, according to Hossink of the The CenterWest.

“If you follow the path too closely you can actually stifle innovation and that will reduce your ability to react to rapid changes,” Hossink said. “If you ignore the human element of your culture, that can suffer as well. People could feel less a part of the organization and their output could suffer.”

Outside of looking to improve its future operations through its core competencies, Profile Films also plans to leverage its core competencies when it comes to future acquisitions. Traditionally, the firm has concentrated on organic growth, however, as the economy emerges from COVID-19, Ehmann and Tjoelker noted they are keeping their options open for opportunities. For them, having a firm grasp of their company’s core competencies will aid in choosing the correct fit for their organization.

“Knowing who you are is the starting point of being able to perpetuate the culture somewhere else,” Tjoelker said.

Despite the economic situation caused by the COVID-19 pandemic, small- and medium-size manufacturers have the ability to refocus their businesses and find new opportunities for growth.

Office furniture makers saw an opportunity to leverage their design and manufacturing skills to produce masks, Hossink said. Likewise, another organization did not see itself as only a maker of eco-friendly glove drying machines, but as an importer, and are now providing much needed PPE to West Michigan.

“In the COVID-19 world we’ve seen a number of manufacturers pivot to supply PPE,” Hossink said.

“For the most part, it was because they understood what they were good at and could translate that into action...Keep your minds open. There are pivots that some made to meet today’s market... If you begin your journey don’t lose your heart for adventure. It can be hard work but it can also be fun.”

Find the webinar recap at mibiz.com/backtobasics

MiBiz / JUNE 8, 2020

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MANUFACTURING

Pandemic forces mobility firms to pivot, renew focus on rider safety

By JESSICA YOUNG | MiBiz

in Detroit, Columbus, Ohio and Providence, R.I. By early this year, the system was averaging more than 500 riders per day who were mostly commuters and college students, according to the company.

“Ridership in Grand Rapids was our highest,” McCurry told MiBiz. “We’ve gotten a lot of people to try public transportation for the first time.”

But the bottom dropped out of the pilot program earlier this year when the deadly coronavirus spread to Michigan and service was suspended by the company in March.

New concerns surrounding the safety of shared transportation came to the forefront. People who ride shared or public transportation are uniquely vulnerable to the highly contagious coronavirus, which is spread mainly between people who are in close contact with one another and through respiratory droplets produced when an infected person coughs, sneezes or talks, according to the Centers for Disease Control and Prevention.

“Mid April was when we really decided that we need to make a product that can address these concerns so that we can get back on the road as

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hared transit presents unprecedented risks as communities and businesses around the state reopen and people come out of isolation following a monthslong shut down because of the COVID19 pandemic.

However, companies and partnerships in West Michigan are at the forefront of innovation when it comes to protecting future riders and drivers of public and shared rides, according to Erin McCurry, product manager for accessibility at Tyson May Mobility Inc. The company, which is based in Ann Arbor, launched an autonomous “micro-transit” shuttle f leet in Grand Rapids last year. The project is a partnership between May Mobility, the city of Grand Rapids and a number of private companies along the fixed route between downtown and the city’s west side.

The company also has similar fleets

soon as possible,” McCurry said.

The company is now building a prototype shuttle that will be partitioned into three separate sections.

The vehicles, which were originally designed with six seats, will now hold two riders and an attendant each in a divided area. Continuously running HVAC filters will circulate the air and the shuttles will be disinfected with hydrogen peroxide fogging units obtained through a partnership with Faurecia Automotive Seating in Grand Rapids and a UV-C lighting unit manufactured by Grand Havenbased GHSP.

Speed to market GHSP, a division of JSJ Corp., is one of three companies with a reach into West Michigan to recently receive grant funding from the state’s PlanetM initiative. The resources are intended to jumpstart solutions to mobility challenges and public health concerns presented by the spread of the coronavirus.

“We are dedicating a lot of our work right now around how we can help combat the virus when it comes to transportation,” Charlie Tyson, technology activation manager at PlanetM, told MiBiz.

The Michigan Economic Development Corp. initiative pivoted resources from planned technology grant programs to focus on programs that could be used to prevent further outbreaks of the virus, according to Tyson.

“The big thing here was that we knew that we had to get these solutions into the market as soon as we could,” he said.

PlanetM expedited the grant timelines to help companies quickly deploy their technologies to address challenges facing the market in the wake of the continued COVID-19 crisis.

“In the mobility market, which is always changing, we noticed that helping companies deploy their technology in real-world settings not only validates the technology further but then they’re also going to get feedback from the community that they’re deploying in. At the end of the day, that helps them establish new partnerships, potentially raise more funding if they’re a startup, and it really helps accelerate the adoption of the technology,” Tyson said.

Ultraviolet light is one technology that can be used to disinfect and kill germs, including pathogens such as the coronavirus that causes COVID-19. GHSP uses technology licensed from Grand Haven-based UV Partners Inc. that it developed for its UV Angel devices used in health care settings to disinfect equipment.

The company received $80,000 from PlanetM to expand the UV products

into shared and public transportation settings.

“They’re putting tools into the vehicle to combat the virus and hopefully change the negative perceptions on transportation that we think arose from COVID-19,” Tyson said. “We’re also very excited about the fact that GHSP technology could not only go into emerging mobility options like May Mobility but also traditional transportation vehicles like police vehicles and ambulances.”

Moving quickly May Mobility plans to have a prototype of the remodeled shuttle ready to demo by mid June, however, that timeline is v ulnerable to supply chain disruptions or other unforeseen circumstances, according to McCurry.

“If we can move quickly and prove that this technology is safe and get it out into the world, we’d obviously like to do that as soon as possible,” she said. “This is the fastest that we can go while making sure that it’s safe and thoroughly testing everything.”

Enthusiasm for the project is spreading through May Mobility, McCurry added.

“People who are immunocompromised still need transit and I think that everyone really jumped at the chance to work on this,” she said. “It goes back to our roots as a startup and it’s great to be able to work really quickly on a product that will really impact people’s lives.”

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SPORTS

Whitecaps front office awaits answers on future of 2020 season

By JAYSON BUSSA | MiBiz jbussa@mibiz.com

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riginally scheduled to kick off the 2020 season on April 9, the West Michigan Whitecaps remain in limbo along with 140 other Minor League Baseball teams across the

country.

Acknowledging that each day that goes by without baseball activity is certainly not a good sign amid persistent rumors that the COVID-19 pandemic might wipe out the season entirely, Joe Chamberlin said the Whitecaps front office continues to wait for the official word from the league.

“I’m just trying to read the tea leaves in the press and see how things are progressing,” said Chamberlin, CEO of the Class A Minor League affiliate of the Detroit Tigers, which has been a mainstay in the West Michigan community for 26 years.

“Until they make some solid decisions at the Major League level, we will not have any firm answers on what something like the Midwest League will look like,” he said.

Chamberlin was referring to the fact Major League Baseball has yet to establish any semblance of a concrete plan on how to salvage the 2020 season, even while the NBA, NFL and NHL have developed, at a minimum, tentative plans to return from the shutdown.

The battle between the MLB and the players union continues. The latest development came on June 3 when the league rejected the players’ proposal for a 114-game season with no additional salary cuts. This year’s season could boil down to as few as 50 games.

Meanwhile, the Whitecaps and other Minor

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League teams are at the mercy of their parent organizations.

“We are directly dependent on what they decide,” Chamberlin said. “We get our team from the Tigers. We’re completely dependent on what the Major League clubs decide for the season and how they decide to handle the Minor League operations.”

If rumors and emerging reports are any indication, the future is not very bright for local baseball fans.

Not only have Minor League teams across the country made drastic roster cuts en masse but recent reports from Forbes and The Athletic cited sources inside the Washington Nationals’ Minor League organization who indicated the season is dead in the water.

Minor League Baseball President Pat O’Conner has yet to speak publicly about the fate of the 2020 season.

“Any speculation that you’re reading is the same speculation that I’m reading and seeing,” Chamberlin said. “We get questions as an organization about it. At this point, our answer is unfortunately that we don’t have the answer yet.

“As Major League Baseball and the players association hopefully come to terms with what a Major League season will look like, that is when I think we’ll get some quick answers about how Minor League Baseball fits into that.”

The Detroit Free Press reported that the Detroit Tigers would indefinitely pay Minor League players a $400 weekly stipend as the matter is sorted out and has avoided cuts to its Minor League rosters.

Compensation for Minor League players relies heavily on ticket sales, which highlights a caveat: If baseball returns, chances are high that it will be in front of few or no fans, which is a major blow

to teams’ business models. “(Major League teams) have other revenue streams that might make it worth their while to still play,” said Chamberlin, referring primarily to TV contracts. “In West Michigan, I don’t think it’s a hidden fact that we don’t have those revenue streams. Baseball doesn’t make sense for us if we can’t invite fans into the ballpark. … It’s a math equation: At what capacity does it make sense to open up the gates?”

Chamberlin also said that he was confident Major League Baseball would never force its Minor League organizations into an arrangement that was not viable.

Growlers, Bombers and Pit Spitters still optimistic As if stressing over one team wasn’t enough, Chamberlin is also CEO of the Traverse City Pit Spitters, an organization that belongs to the Northwoods League, a summer collegiate wooden bat baseball league with Great Lakes and Great Plains divisions.

While many similar leagues across the country have folded up shop for 2020, including the iconic Cape Cod League, the Northwoods League plans to play baseball in some form.

The league is ramping up competition in Bismarck, N.D., home to the Bismarck Larks, which plans to host games in June. Additional teams are able to come on line over the course of the summer once health conditions in their respective states allow.

Chamberlin credited the Northwoods League for what he called “sophisticated operations” and “operationally-sound franchises.”

The West Michigan Whitecaps have yet to kick off their 2020 season because of health concerns associated with the COVID-19 pandemic as speculation mounts over whether or not Minor League Baseball will ever compete this year. COURTESY PHOTO “They are very determined and are going to be as creative as they need to be to play baseball in 2020,” Chamberlin said of the League. “As a Northwoods League franchise, we feel good about that. They’re going to leave the door open to as many places as they can so that people can enjoy baseball in a safe and socially-distant way.”

The Northwoods League consists of collegiate players that are unpaid in order to comply with NCAA regulations. Still, ticket sales are the key driver for operations, which is why Chamberlin wants to welcome as many people as possible to Turtle Creek Stadium.

“I can say that opening up a ballpark for a group of 100 people is probably not going to get it done,” he said. “But hey, as things continue to progress over the next month or so, I think we’re getting to the point where we might have something we can take a look at.”

The Kalamazoo Growlers and Battle Creek Bombers also belong to the Northwoods League.

Brian Colopy, managing partner for both organizations, did not respond to requests for comment on the upcoming season, but both teams continue to update their fans on the status of the season through social media.

MiBiz / JUNE 8, 2020

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REAL ESTATE & DEVELOPMENT

Retail shops focus on customer service in gradual reopening

By KATE CARLSON | MiBiz kcarlson@mibiz.com

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everyone who has supported us during our closure.”

The business has been in operation since 1967 in Holland, so it has a loyal following in the community, she added.

“We have a lot of people that support us, so we were really happy to have the orders we did have,” Hungerink said. “Once we could open our doors, we still continued to do curbside for people that wanted it.”

roviding different ways to shop and making customers feel as safe as possible remains the focus for retailers as they gradually work to reopen their stores.

Many small retail shops in West Michigan have been in survival mode with limited operations for the past few months because of mitigation steps put in place to curb the spread of Missed opportunities COVID-19. As well, stores face an added cost to Although most stores had to close during the buy personal protection equipment, and a learnwhole month of April because of COVID-19, 59 ing curve for staff and customers to follow new percent of retailers in the state expect increased safety procedures. sales through July, according to a survey from On June 1, Gov. Gretchen Whitmer rescinded the Michigan Retailers Association. Among surher stay-home order and announced retail vey respondents, 37 percent predicted decreased stores would be among the next wave of busisales, while 4 percent expected no change. nesses able to reopen starting June 4. Previously, “Retailers were worried shoppers may be hesretail stores had only been able to operate on an itant to venture out, but Memorial Day weekend appointment-only basis with a 10-person limit in northern Michigan quickly revealed there is a since May 26. Before that, non-essential physical pent-up demand,” MRA President and CEO Bill stores were completely closed and retailers were Hallan said in a June 1 statement. “Many retailoperating through delivery and curbside service. ers all over the state said they’ve been busy with Several local shop owners said they did not appointments and filling orders the past week, have a problem abiding by the 10-person limit, so we hope this broader opening allows and could usually allow walk-in appointmore stability as stores recover from the ments. Since June 4, store owners were shutdown.” no longer required to use an appointDon’s Flowers & Gifts Inc. has ment system, but now have to folnot seen the usual foot traffic at low capacity restrictions based on this time of the year, but people the square footage of their locaREAL ESTATE started coming into the downtion, the same as essential retail+ DEVELOPMENT town Zeeland store as soon as it ers like grocery stores.

Sponsored by reopened on May 26.

Lisa Hungerink, owner of ROCKFORD CONSTRUCTION CO. “There is some confusion in Reader’s World Bookstore, said the general public of what is and she has spent nearly $500 buyisn’t open, and do they need to ing masks and hand sanitizer call ahead,” co-owner Doug Vos said. “People and installing a sneeze guard at her downtown are still trying to navigate the executive orders.”

Holland store. Sales are not what they usually The flower and gift shop has been posting would be, she said, but customers are still supphotos of its products on Facebook to make it porting the store and have been understanding easier to showcase items to customers. The comwith the new safety precautions such as wearpany is continuing to offer curbside service for ing masks. people who are not comfortable coming inside “Everybody has kind of learned how to be the newly reopened store. more patient,” Hungerink said. “I want to thank

Tenden in downtown Grand Haven sells handmade clothing and handcrafted goods, and has reopened its storefront, above, to in-person shopping in the wake of closures stemming from the COVID-19 pandemic. Gina’s Boutique in Grand Rapids, left, has a sign directing customers to sanitize their hands upon entering the shop. COURTESY PHOTOS “We just want our customers to know that we’re here for them,” Vos said. “If there’s anything we can do to make them more comfortable, don’t be afraid to ask.”

“The March and April timeframe is always a busy time for us with proms, Easter and administrative professional day, and we’ve lost all of those,” Vos said. “Mother’s Day we were allowed to be open for curbside and deliveries, but we still missed out on in-store traffic.”

Before the pandemic, most customers at Don’s Flowers & Gifts would walk into the store to shop. When the company was able to open for curbside service, it moved its in-store cooler with flowers to the door so customers could see arrangements without coming inside.

“People want to be able to see it,” Vos said.

“You can’t always describe it over the phone.”

Vos said the company invested quite a bit into personal protection equipment and hand sanitizer to protect employees and customers.

Finding the products was a battle of its own, with a shipment of masks delivered to the store the same day it was allowed to open for appointment-only customers.

Rekindling the fire A similar standard of service and safety measures can be found at Gina’s Boutique in downtown Grand Rapids.

As soon as shoppers walk into the downtown clothing boutique, they are asked to sanitize their hands and are provided masks if they don’t already have one. Employees wash their hands every half hour, and the company also set up a touchless payment system, said Gina VanTimmeren, owner of Gina’s Boutique.

Employees also set aside clothes that customers have tried on previously.

“At this point, I’ve spent about $350,” VanTimmeren said of the company’s PPE expenditures. “I did not expect the masks to go as fast as they have. They’re probably about $50 for 50 of them and I went through 50 in one day at my Saugatuck location.”

People usually stop into her shop when they come to downtown Grand Rapids to eat, VanTimmeren said. Restaurants that are closed or operating with just takeout and delivery do not provide as much of a draw, she added.

One thing the executive orders have done is force VanTimmeren as a business owner to work harder to find creative ways to reach her customers. Customers can still shop on the boutique’s website, and there is free local delivery. She has also started “virtual styling” by trying on new outfits and posting the videos to Facebook.

“That part has been cool, being able to serve my customers in a new way,” VanTimmeren said.

“It has brought back my hustle and reminds me of when I first opened and had that fire to do creative things that you can’t get from a chain retailer.”

With most trade shows canceled this year, the boutique could struggle in getting enough clothes for spring and winter in 2021, VanTimmeren said, noting the store will likely have a lighter inventory next season.

“I usually go to three or four trade shows and I think a lot of vendors will probably go out of business on that end,” she said. “That industry is so unknown, it will just be a challenge for me trying to pick out everything because usually you get to see it in person.”

Seeing the process Todd Hancock, owner of Tenden, a Grand Havenbased store with clothing and handcrafted goods,

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JUNE 8, 2020 / MiBiz

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Downtown Grand Rapids convention hotel, amphitheater projects put on hold

“We just want our customers to know that we’re here for them. If there’s anything we can do to make them more comfortable, don’t be afraid to ask.”

By KATE CARLSON | MiBiz kcarlson@mibiz.com

— DOUG VOS Co-owner of Don’s Flowers & Gifts Inc.

feels fortunate that he makes most of his products. Hancock also was able to sew masks, which helped him maintain cash flow to pay for utilities, for example, when he was closed to the public.

“Material is taking quite a bit longer to ship, so I might have to adapt a little bit, but for the most part I stock all my materials pretty far in advance,” he said.

Hancock’s small downtown shop can only hold a few people anyway, so he adapted well to the appointmentonly restriction. Customers were supporting him with online sales and curbside pickup, but Hancock said he was happy to reopen his shop to some foot traffic.

“When people come into the shop, they see me, see how everything was made, and all my sewing machines are out in public view,” he said. “It gives me energy and is rewarding for people to see part of the process. It’s part of the shop itself.”

GRAND RAPIDS — The Grand RapidsKent County Convention/Arena Authority is hitting pause on a task force that is considering the feasibility of building a new convention center hotel and adding a large-scale amphitheater in the city’s downtown.

Citing the effects of the COVID-19 pandemic on the hospitality industry and on local government budgets, Doug Small, president and CEO of Experience Grand Rapids, now expects discussions about a convention hotel will be on hold until 2021.

Small chairs the task force the CAA asked to study whether building a new hotel at the DeVos Place Convention Center would make financial sense.

He said the task force was a month or two away from presenting its findings to the CAA board when the coronavirus began to spread throughout Michigan, causing the statewide shutdown in March.

Noting that the task force has not convened for several months now, Small thinks a convention hotel could still be built downtown, but just on a delayed schedule.

“The last part of our industry that will probably come back is the large venues,” Small told MiBiz. “What people will be most scared about is not going to be getting into a restaurant or bar, it’s going to be going to a concert or convention.”

The CAA, a public body that owns Van Andel Arena, DeVos Place

Convention Center and DeVos Performance Hall, was initially expected to make a decision on the convention hotel project by the end of 2019. The task force had estimated the convention hotel would cost between $140 million and $180 million, with an annual economic contribution of $82.3 million, based on data from a 2018 study from Chicago-based HVS Convention, Sports & Entertainment Facilities Consulting.

The plan was for the 400- to 500room convention hotel to be constructed on top of DeVos Place, with a restaurant, lounge, coffee shop, 40,000 square feet of meeting space and a 20,000-square-foot ballroom.

Chris Knape, founder of K Corner Consulting LLC, attributed the pause in part to the task force’s consideration of using the city or county bonding authority to help finance the project.

“Frankly, (COVID-19) has had a huge impact on local government, and with all the uncertainty with local funding on the city and county level, it made sense to see what the long-term effects of this might be,” Knape said.

Much of the data the group had almost finished compiling quickly changed as Michigan became one of the states with the highest number of coronavirus cases in the country, causing shutdowns of most businesses, Knape said.

“We can’t rely on that data in the same way we could in normal circumstances,” Knape said. “It made sense to take a pause and see what longterm impacts this might have.

“This is certainly not the CAA or task force saying that the projects are dead or that they’ll never happen, but the responsible thing is we’re taking care of the aspects CAA has already invested in and evaluating what makes sense from a financial standpoint and economic stimulus standpoint.”

Questions remain The coronavirus has negatively affected most industries, but particularly the tourism and hospitality industries have taken a blow as governors across the country limited travel to prevent the spread of the virus.

The majority of hotels in Kent County have remained open, Small said, but as many as 15 hotels had closed at one point this year because of COVID-19.

Hotel occupancy for April plummeted 85 percent year over year, from 56 percent last year to just 18 percent in 2020.

Similarly, venues of all sizes have been empty since the coronavirus took hold in Michigan, said Rich MacKeigan, regional general manager of DeVos Place and Van Andel Arena.

“We’ve been busy rebooking business, moving business around and dealing with different industry groups in terms of different plans for reopening,” MacKeigan said.

MacKeigan said it is too early to tell when a decision will be made about the convention hotel and amphitheater.

Neither the CAA nor the task force

has set specific benchmarks on when to resume consideration for the project, Knape added. The governor’s stayhome order was in place from March 24-June 1.

“Until the country has fully opened up, I just can’t see anything happening until that happens,” said Small at Experience Grand Rapids. “Our priority is going to be on helping those hotels that have reopened to regain their footing.”

Looking outdoors Once the task force reconvenes in the future, Small said it is more likely the amphitheater project has “more solid footing” to move forward before the hotel because its outdoor setting better allows for social distancing.

“It’s an outdoor setting, and you can space it out,” he said.

One decision the task force made about the amphitheater was that it should be located somewhere in downtown Grand Rapids, Small said.

The group previously considered Millenium Park as a potential location for the large outdoor venue. The focus now is on an urban downtown setting, Small said, but the group has not landed on a specific site.

The CAA received $5 million from the state in 2018 for the estimated $40 million amphitheater project.

It was estimated that the amphitheater would create $5.9 million in new spending annually, 410 full- and parttime jobs and $456,000 in new tax revenue.

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HEALTH BIZ

GETTING BACK TO CARE Hospitals resume services as COVID concerns linger

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

rior to the COVID-19 pandemic, primary care physicians and specialists at Metro Health-University of Michigan Health typically saw about 2,250 patients each day.

Patients and visits dropped dramatically during the pandemic, as Metro Health and other health care providers were forced to postpone or cancel non-essential surgeries, procedures, diagnostic tests and patient visits because of state orders, and as they deployed staff and resources toward handling the pandemic.

By late May, as hospitals were allowed to resume non-essential care, patient visits had recovered somewhat and Metro Health doctors were seeing about 1,800 patients a day at their offices, which had been closed for weeks from the pandemic.

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“We do expect that volumes will be less than planned, but I do think that people will gradually feel more comfortable getting their care.”

— TINA FREESE DECKER President of Spectrum Health

Dr. Rakesh Pai, medical group president and chief population health officer at Metro Health, expects that getting back to pre-COVID-19 volumes will take months as the pandemic and patient concerns linger.

“It’s just a reality that we’re not going to be able to recapture all of the volume that we were doing in February overnight. It’s going to be a slog,” said Pai, acknowledging that some people

“are very nervous about going into a h e a l t h c a re environment.” “ T h e r e ’s a group that you’re not going to be able to convince until you get a vacPai Freese Decker Kim Berkovitz cine or they know for sure there’s a treatment that can cure them or make their fully back to pre-COVID volumes comes down COVID-19 less bad if they get it, so that’s a hard to “addressing patients’ concerns and fears,” group to reach,” he said.

Freese Decker said.

All hospitals face the same reality today as “We do expect that volumes will be less than they get back to performing elective procedures planned, but I do think that people will graduand surgeries and their physicians again see ally feel more comfortable getting their care,” patients for routine office visits. They have to she said. “In health care, we have always been deal with people’s comfort level in going to see focused on infection prevention. It is something their doctors, having a needed diagnostic test we do every single day to keep people healthy, performed at the hospital, or venturing into an so we are taking the best practices that we’ve ER for emergency care. done for years and we’re making sure that they At Spectrum Health, returning patient volare known and practiced in every way and bolumes vary among different types of care, from stered on top of that.” surgeries to primary care office visits to tests Since March, hospitals have reported declines such as medical imaging, President and CEO in ER visits even for emergencies such as heart Tina Freese Decker told MiBiz. On some days, attacks and strokes, as people stayed away despite volume “in a couple areas” has gotten back to the obvious risk. Metro Health’s ER traffic declined 90 percent, “and there are days where it’s lower,” “fairly significantly” in the pandemic, from a norFreese Decker said. The health system has expemal of 170 daily visits, Pai said. As of late May, it rienced some patients expressing lingering conhad rebounded to about 126 visits a day, he said. cerns when they are called to reschedule post“We do think that’s a consequence of people poned care. being afraid to come in,” said Pai, who called “What we’re finding is between 75 percent the tendency for some people to avoid care and 85 percent of people are saying that they even for emergencies or chronic illnesses “super will come in for a visit or a surgery, and 15 to 25 concerning.” percent of people are saying, ‘No thank you, I’d “Strokes don’t stop because COVID’s around. rather wait’ or ‘I don’t want the procedure anyHeart attacks don’t stop because COVID’s more’ or ‘I did something else,’” Freese Decker around,” he said. said. “When we call patients for rescheduling, A study the U.S. Centers for Disease Control it varies by what we’re calling to schedule for and Prevention released last week showed that and their response about what they want to do.

ER visits to U.S. hospitals declined 42 percent In many cases, they’re saying, ‘Yes, I’m ready to from March 25 to April 29. ER visits nationally come back,’ and in some cases they’re saying, since the low point in mid-April have increased ‘give me another month.’” somewhat, but were still down 36 percent for the In scheduling alone, Spectrum Health is last week in May versus the prior year, according back to 100 percent in some areas. Getting to the CDC.

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Deferring care for chronic conditions such as diabetes, COPD and heart disease “that require a regular tune up” may lead to patients becoming sicker, Pai said.

Ensuring safety How quickly hospitals are able to get back to preCOVID-19 patient volumes depends on “how people in the community view the urgency around getting their health care-related services, versus the safety of it,” said Dr. Hyung Tai Kim, president of Mercy Health Saint Mary’s in Grand Rapids.

As they resume regular operations, hospitals and health systems need to emphasize both the safety protocols they’ve put in place to minimize risks and for people to seek the care they need, especially for an emergency or chronic medical condition, said Dr. Ken Berkovitz, CEO of Ascension Michigan.

“There is some concern and hesitancy to coming back,” Berkovitz said. “Our messaging needs to include that it’s safer to come in to see us than to stay home with some of these life-threatening conditions.”

Ascension Michigan consists of 16 hospitals across the state, including Ascension Borgess Hospital in Kalamazoo, plus Borgess Lee Hospital in Dowagiac, Borgess Pipp Hospital in Plainwell, and Borgess Allegan.

As of last week, Ascension Michigan was back to nearly 70 percent of the volume of procedures, surgeries and diagnostic tests from pre-COVID volumes, and 50 percent for ER visits.

The medical group for Ascension Michigan reopened May 18, and in West Michigan, “We hope to be back to our normal in-person rates probably by early July,” Berkovitz said.

Hospitals have put numerous safety protocols in place to prevent infections, some of them mandated by the state. Measures such as enhancing cleaning and sanitizing, social distancing, screening people for COVID-19 symptoms and checking their temperature when they come into the hospital, and requiring them to wear masks will likely remain in place for some time, and perhaps permanently, administrators said.

Similar safety protocols have also been put into place for physician offices and ambulatory care sites. Changes also have been made to how they manage patient flow to minimize risks.

At Metro Health, for example, patients visiting their doctors wait in their cars and receive a message when it’s their turn, Pai said. They must wear a mask and are escorted by a medical assistant through the office to the exam room. Once their visit is done, they are checked out in the exam room.

“They don’t have to linger or stop anywhere at the front desk or anything like that. It’s all done relatively seamlessly,” Pai said.

Benefits uncertainty Hospitals looking to get back to business also have another obstacle in addition to reassuring people their facilities are safe: a surge in unemployment from the economic downturn the pandemic triggered. Higher unemployment results in many people losing their employer-sponsored health insurance, potentially causing some to opt not to seek care for a medical condition because they can no longer afford it.

“We’re trying to help people understand that it’s both safe and smart to get needed medical care. That’s still definitely true and we still have a need for them to understand that more and more. On top of that has been the economic difficulties that are caused by coronavirus and the closings and everything. The personal economic element comes in,” Kim said. “People are trying to decide, as they did in 2008, whether just from an economic standpoint, ‘Can this wait because I have other bills that I need to pay?’”

The Kaiser Family Foundation estimates that 26.8 million people nationwide could lose their health coverage as of May because of a job loss from the pandemic.

As some job losses become permanent in the weeks and months ahead, Pai expects Metro Health to see an uptick in patient volumes from Visit www.mibiz.com

people seeking to address a medical issue before their health benefits run out.

“When you lose your job, you lose your ability to pay, but we do think these 90 days here this summer will be really important to accommodate (as many) people as we can before there’s material change to their health benefits,” Pai said. “We think there’s a window this summer where people still have benefits, need to get stuff done and we need to be able to accommodate those patients because they may not have those benefits for much longer.”

‘Extraordinarily difficult’ The inability to perform non-essential procedures and surgeries and the reduced physician visits led to mounting losses for hospitals from lost revenue, which was on top of the higher spending to build inventories of personal protection equipment for staff, testing for the coronavirus and COVID-19, setting up temporary test locations and preparing added bed capacity.

A month ago, the American Hospital Association issued a paper that estimated hospitals and health systems across the U.S. would lose a collective $202.6 billion between March 1 and June 30. The estimate includes $161.4 billion in revenue lost over four months from not performing elective surgeries and procedures because of stay-at-home orders in several states, and people deferring care during the pandemic or not seeking emergency care when needed. The estimate also takes into account the cost to treat COVID-19 patients, add temporary capacity and locations to test people, and a $2.4 billion price tag for personal protection equipment for staff.

West Michigan hospitals have seen the financial hit from the pandemic as well.

At one point early in the pandemic, patient volumes at Mercy Health Saint Mary’s “were less than 50 percent of what they usually are,” Kim said. Surgical volumes that are “especially important to the financial sustainability of the health system” were “well below 20 percent of the norm,” he said.

“Financially, it’s been extraordinarily difficult.

We’ve been affected in ways that everyone else has because (as) our volumes have gone down, our revenues have really plummeted and we’ve added additional expense to make sure we were prepared” for the coronavirus, Kim said.

The support of parent corporation Trinity Health’s financial reserves has enabled Mercy Health Saint Mary’s to remain financially stable, “and we’re confident that we’re going to be able to serve the community’s needs going forward,” he said.

and “as we’re doing more necessary procedures and helping people with their health needs for the month of May and now into June, that our finances will improve as we go forward and every month, I’m hoping, is a better month.”

Spectrum Health’s cash on hand during the first quarter declined by 5.7 days to 224.5 days as of March 30, according to the quarterly financial statement.

Federal help In response to the losses, Spectrum Health, Metro Health, Mercy Health in Grand Rapids and Muskegon, Bronson Healthcare in Kalamazoo, and other health systems implemented staff furloughs and moved to cut costs that included reducing executive pay and halting retirement plan contributions for employees.

Ascension Michigan was able to avoid furloughs by “dipping” into reserve funds and with

the support of the parent cor$4.4 million at Bronson South poration, St. Louis, Mo.-based Haven.

Ascension Health, a lthough Federal aid totaling $9.6 mil“like every health care organilion went to Ascension Borgess zation, we are very challenged,” Hospital in Kalamazoo and Berkovitz said.

Borgess Lee received $441,948.

Operating loss in The operating losses and The aid “certainly helped, but the first quarter for higher spending during the panin no way did it make us whole,” Spectrum Health, demic was somewhat offset by Berkovitz said. “Our economic compared to proaid from the federal CARES Act losses are significant.” jected income of that Congress enacted early in Metro Health got $8.8 mil$31.5 million the pandemic. l ion f rom t he federa l govSpectrum Health Hospitals er n ment. Hol la nd Hospita l received $43.9 million, the largreceived $4.6 million, according est single amount for any health system in to the HHS database. the region, according to a U.S. Department of Mercy Health in West Michigan got about $23 Health and Human Services online database. million in HHS grants as part of the CARES Act. Bronson Healthcare in Kalamazoo received The money still will not cover losses from the first $10.8 million for Bronson Methodist Hospital, two months of the pandemic, when patient revplus $5 million for LakeView Hospital in Paw enues were down by about $75 million, according Paw, $3.9 million for Bronson Battle Creek and to a spokesperson.

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Finances suffer Prior to the COVID-19 pandemic, Metro HealthUniversity of Michigan Health was on track to record $480 million to $485 million in revenue for the fiscal year that runs through the end of this month. Now, after the business lost during the last three months of the pandemic, the health system expects to record about $430 million in revenue for the fiscal year, and that’s based on “moderate assumptions,” Pai said.

Metro Health CEO Peter Hahn earlier indicated to MiBiz it was projecting a $40 million net loss for the 2020 fiscal year.

Grand Rapids-based Spectrum Health, which routinely posts quarterly financial reports online, recorded a $22.8 million operating loss for the first quarter on revenue of $802.5 million across its West Michigan hospitals. The health system had been budgeted for operating income of $31.5 million.

Spectrum Health Lakeland in St. Joseph, which operates as a separate division, recorded a $4.7 million operating loss on $137.2 million in operating revenue. Lakeland was budgeted for $5.3 million in operating income for the first quarter.

“It wasn’t the quarter we had planned for,” Freese Decker said. “We’re in consistent company across the country. It’s going to be a much different year than expected, and that’s true for most businesses.”

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11

ECONOMIC DEVELOPMENT

PENT-UP DEMAND

Battling COVID-19, cancellations and high water, lakeshore communities hope tourism rebounds

By MARLA MILLER | MiBiz mmiller@mibiz.com

P

lagued by high water, COVID-19 business closures and canceled festivals, officials in lakeshore communities are developing plans to bring visitors back to restaurants and lodging in hopes of tourists’ return this summer.

West Michigan community officials also agree with the sentiment from state tourism executives that the widespread closures since mid March have created pent-up demand for travel. They remain optimistic the industry will rebound despite the challenges brought so far in 2020.

Because of the timing of the coronavirus closures and travel bans, many people missed out on spring break trips, said Dave Lorenz, vice president of Travel Michigan, a division of the Michigan Economic Development Corp. He believes people will stay closer to home and plan vacations within the state this summer.

“There is no reason to leave the area now, so when they can travel, I think they will spend their time and money in this state,” he said.

On June 1, Gov. Gretchen Whitmer announced a “big step forward” by lifting the statewide stay-home order and opening retail stores, restaurants and bars with occupancy limits. Previously, restaurants and bars were only allowed to reopen in 17 northern Michigan counties and the Upper Peninsula.

Retail businesses reopened June 4, and restaurants and bars can offer dine-in service beginning June 8 with safety precautions and at 50-percent capacity. Hotels, short-term rentals and campgrounds also are back in business, Lorenz said.

City and tourism officials across the state — including in Grand Haven, Saugatuck and Muskegon — have been working behind the scenes so they are ready to welcome visitors. As local officials have explained, tourism is a key source of revenue for local governments.

“People greatly underestimate the financial impact of travel and tourism and what our industries do to support the state,” Lorenz said, adding “it won’t be a year to make money, it will be a year to survive.”

Lorenz helped coordinate a statewide effort of more than 100 volunteers in the travel industry — divided into eight subgroups — working on protocols for safe reopening procedures to keep employees, travelers and local citizens safe, he said.

“As important as jobs, the economy, the freedom to travel are, I really hope people will follow those directives to safely open the state,” he said. “If we do this right, we won’t go backwards.”

Grand Haven tackles outdoor dining The varying forms of tax revenue from travel, tourism and retail businesses are vital to lakeshore communities.

Roger Bergman, chairman of the Ottawa County Board of Commissioners, said most retail stores are “dream” businesses and operate on slim margins, and many of them were left in a precarious position from COVID-19.

“If people don’t come back in the numbers they did before, the lack of business is going to be detrimental,” said Bergman, who lives in downtown Grand Haven and was a longtime shoe retailer in Grand Haven and Holland.

Bergman worries that many businesses will have a hard time reopening or staying open a year from now, especially bars and restaurants that can only operate at 50-percent capacity.

“The county is going to be impacted, but we have a fairly good rainy-day fund to tide us over,” he said. “But the problem is we don’t know how long this is going to go on. If restaurants can only serve half of their customers, for a lot of restaurants, that is not sustainable. They can’t operate on only half of their revenue.”

In response, Grand Haven officials created a one-page application and streamlined the process for expanded outdoor dining, including serving alcohol, until Oct. 31.

Grand Haven City Manager Pat McGinnis said one side of

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JUNE 8, 2020 / MiBiz

High water levels are wreaking havoc on lakeshore communities and limiting some recreational opportunities. PHOTO: MARLA MILLER Washington Avenue between Harbor Drive and First Street will be closed to traffic so restaurants can set up tables on the street.

Stanz Café, Snug Harbor, Porto Bello, Odd Side Ales, JW’s Food & Spirits, Morning Star and other restaurants also want to add or increase outdoor dining areas.

City officials have worked with Lorenz and others on a “Pure Michigan” pledge for businesses to assure patrons they are following guidelines established by the state and U.S. Centers for Disease Control and Prevention.

“We want to make sure people feel comfortable,” McGinnis said. “There is still some anxiety about being in large groups. We want to ensure all these safeguards are in place. It’s not just something we’re saying, it’s something we’re doing.”

Flooding continues Meanwhile, high water continues to cause problems and put a damper on boating. Grand Haven officials closed the city’s Harbor Island boat launch last year because of flooding, and repairs are expected to cost $1 million. The city is losing $80,000 annually from launch permits and faces more than $5 million in direct costs because of the high water, including tearing down Chinook Pier retail stores because of mold and repairing damage at Linear Park, McGinnis said.

The city council approved a temporary administrative order prohibiting boat mooring along the city’s popular channel seawall this summer, effective until Aug. 20, but the order is flexible and can be lifted if water levels recede. As an alternative, boaters can temporarily dock at the Grand Haven Municipal Marina for free and go have dinner, if the slip is not rented, McGinnis said.

All of Ottawa County has been affected by the cancellation of major events such as Tulip Time Festival and Grand Haven Coast Guard Festival. Bergman thinks downtowns will be much quieter this summer with other art fairs, car shows and weekly entertainment also canceled.

“My hope is that as many as possible of those people that were planning on coming to the west side of the state for a week of vacation, or two or three days of vacation, will still come and order food and find a nice park to eat it in or down by the waterfront,” he said.

“That is the optimism I have. We still have Lake Michigan, and we have parks and a beautiful waterfront and a beautiful boardwalk.”

Saugatuck ready to welcome tourists The Saugatuck-Douglas area, known as Michigan’s Art Coast, relies on tourists to support downtown specialty shops, restaurants and bed and breakfasts. A handful of restaurants opened for takeout, and retail stores recently opened their doors on a limited basis. But the evenings have been quiet due to the bars and lodging being closed since mid March, said Lisa Mize, interim executive director of Saugatuck Douglas Area Convention & Visitors Bureau.

“I know that everybody is struggling,” she said. “There is a lot of frustration (among) business owners.”

Community leaders, business owners and residents formed Saugatuck Douglas Together to develop a safe reopening plan, including an Art Coast Safe seal of approval for businesses, and to brainstorm ways to come out of the extended closure. Whitmer’s lifting of the stay-home order was welcomed news. Prior to the announcement, Mize said people were calling the bureau to ask what was open and if they could visit.

“My gut is people are going to come, and I think they’ll be concerned for safety protocols to be followed by restaurants and lodging,” Mize said. “I think the pent-up demand is such that they are

still going to come. People want to get out. They want to go out and eat and get a drink.”

Since last summer, some Saugatuck businesses along the river have experienced flooding and added sandbags, but the beaches, parks and boat launches remain open, Mize said.

‘Social districts’ could help in long run In Muskegon, officials also plan to allow restaurants and other businesses to apply to the city to use public streets, sidewalks and parking lots for dining, shopping and other activities. The city may allow outdoor dining districts on Western Avenue, between Second and Third streets, between Fourth and Fifth streets, and in the Lakeside district.

“I do feel there is a significant segment of our population that is ready to travel, and they will prefer a location that is within just a couple of hours,” said Cindy Larsen, president of Muskegon Lakeshore Chamber of Commerce. “Muskegon is in a great position for that.”

Although the cancellation of Muskegon’s major festivals — including Lakeshore Art Festival, Rebel Road, Unity Christian Music Festival, Burning Foot Beer Festival and Michigan Irish Music Festival — won’t bring large crowds to the area, it will give people a chance to explore new attractions or visit museums and public art. The one bright spot is Muskegon County still has beaches, lakes and rivers and plenty of access for kayaking and other outdoor recreation, Larsen said.

“We are fortunate to have those expansive beaches at Pere Marquette as well as Muskegon State Park,” Larsen said. “That in combination with the plans for downtown to provide an outdoor eating district should help significantly.”

As a growing cruise ship port, Muskegon tourism received another blow with the announcement that Great Lakes cruising is off this year due to COVID-19. Michigan’s Adventure, the state’s largest amusement park, also remains closed. Both of those losses will have negative economic impact, Larsen said.

“It’s not too early to tell, but it’s too early to measure,” she said.

Larsen said local officials have been advocating for outdoor “social districts” for a number of years and changes at the state level to cut the red tape could help bars and restaurants in the long run. State Rep. Terry Sabo, D-Muskegon, is co-sponsoring a bill that would allow local governments to create areas where people could buy to-go drinks from bars and restaurants and consume them anywhere in designated spaces.

Until now, bars and restaurants faced a “long laundry list” of requirements to have an outdoor event space with beer and wine, Larsen said.

“This is exciting,” she said. “This could be a big deal.”

At Pere Marquette Beach, visitors also will experience detours and rerouted traffic because of construction on a roundabout and new pay-to-park machines. High water has eroded portions of the beach along Beach Street and closed the city’s Hartshorn Marina and portions of the Lakeshore Trail from downtown to Lakeside.

Heavy rain in May caused severe erosion at the county’s Pioneer Park campground, and Muskegon State Park’s channel campground only will take walk-in reservations if high water goes down later this summer.

The Michigan Department of Natural Resources plans to reopen state park modern campgrounds and lodging by June 22.

Ron Olson, chief of the DNR’s Parks and Recreation Division, said campground reservations after June 22 “are pretty strong.”

“A lot of people who had reservations over Memorial Day, some of them rebooked for later in the summer,” he said. “We’ll have to see how things play out. Obviously, the public will decide what level of comfort they feel to go out once things resume.”

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ENERGY

Report: Uneconomic coal plant management costs ratepayers millions abalaskovitz@mibizcom

M

ichigan’s two largest utilities have operated coal plants uneconomically in recent years, costing customers tens of millions of dollars when cheaper and cleaner resources are available, according to a recent study by the Union of Concerned Scientists.

The report released late last month analyzed 2018 utility data across 15 Midwestern states. In total, the report found $350 million in excess costs related to a process known as self-scheduling, when utilities run coal plants regardless of the price grid operators are willing to pay for the electricity.

In Michigan, the report found Detroit-based DTE Energy could have saved customers $94.7 million across five coal plants in 2018, ranking it second behind Louisiana utility Cleco. Jackson-based Consumers Energy could have saved customers $25 million, including $24.7 million by changing operations at the J.H. Campbell plant in West Olive.

Coal is increasingly uneconomic as cheap natural gas and increasingly cheaper renewable energy come online.

UCS Senior Energy Analyst Joseph Daniel, who co-authored the report, said modeling the 2018 data was finished at the end of last year and analysts “poured over” the findings for the following six months. He said the 2018 data is still relevant today.

“If people want to take away from this report that utilities don’t necessarily respond to the wholesale market price, that is clearly still visible today,” he said.

A recent report from the regional grid operator — Midcontinent Independent System Operator (MISO) — confirms that 15 percent of coal plants in its region are still operating uneconomically.

“So it’s still a problem,” Daniel said.

And while several of these plants are scheduled to come offline in the coming years: “There’s still tens of millions of dollars in potential savings in operating those coal plants less between now and their closures,” Daniel said. “Secondly, this problem is illustrative of a larger problem: Utilities aren’t running their resources efficiently.”

operator, ensuring that residents of Michigan and other states have reliable, affordable energy,” said spokesperson Katelyn Carey. “As a regulated energy provider, the costs to operate our plants and provide energy to our customers face regular review by the Michigan Public Service Commission. Consumers Energy is committed to providing energy at the lowest cost possible to the 1.8 million homes and businesses we serve, and will continue to do so as our coal-fired plants are replaced by renewable energy sources through our Clean Energy Plan.”

Consumers’ Karn plant in Bay City is scheduled to close in 2023, while its Campbell plant may continue to run at least one coal-fired unit beyond the next decade.

DTE spokesperson Renee McClelland said the utility follows a “robust process” that includes considering MISO rules for dispatching coal plants and performing a two-week look-ahead based on changing market conditions.

“DTE disagrees with UCS’s claims related to self-scheduling of DTE coal plants,” McClelland said. “UCS has made incorrect assumptions related to coal plant operations, using data not specific to DTE plants, and ignored many factors that affect the economic operation of coal plants, resulting in incorrect conclusions.

UCS’s May 2020 report also lacks accurate input to support their claims regarding DTE generating units.”

She added that DTE has proven the economics of its coal plant scheduling “against similarly flawed claims made in the past,” citing a recent MISO report saying the “vast majority” of selfscheduled coal is dispatched economically.

“DTE is wrong,” Daniel responded, saying the UCS analysis assumptions and inputs were vetted to the “highest degree” and that the group relied on DTE’s own information about its coal plants.

Additionally, the MISO report DTE cites says over the past three years, 12 percent of the coal dispatched in its territory was uneconomic.

“The fact that other utilities are operating economically doesn’t absolve DTE from operating coal plants uneconomically,” Daniel said.

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By ANDY BALASKOVITZ | MiBiz

Utilities dispute claims In response to questions from MiBiz, DTE and Consumers both issued statements that disputed the UCS report’s findings.

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13

FOCUS: COMMERCIAL LENDING

Restrictions in Fed’s Main Street Lending Program could limit appeal

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

he Federal Reserve Bank’s $600 billion Main Street Lending Program promises to offer small and mid-sized businesses hurt financially by the COVID19 pandemic with another option to access credit and operating capital.

However, borrower interest in the loans may be limited given the strings attached, according to sources contacted for this report.

Created under the federal CARES Act that Congress enacted in late March in response to the pandemic, the Main Street Lending Program offers three varying credit options, or facilities, that are available through banks.

The loans are intended for companies that were in sound financial condition prior to the pandemic, “and now face economic uncertainty and liquidity constraints, but are otherwise bankable in the eyes of their lenders,” said attorney Seth Ashby, a partner in the business and corporate services practice at Varnum LLP in Grand Rapids.

Ashby The Main Street loans are available to private and public for-profit companies that have 15,000 or fewer employees, or 2019 revenues of $5 billion or less, and have not yet received support under the CARES Act. At Independent Bank in Grand Rapids, commercial lending head Jim Mack considers the Main Street Lending Program “another tool that we can look at using to help companies get through all of this.”

“We’ll be assessing it, understanding it better, educating our customer base and seeing where it might fit in for customers and for prospects as well,” Mack said. “It does fit in well with our larger small business customers and our middle market customers.”

T

Three options The three loan options share some similar features, although each differs somewhat.

The New Loan Facility allows an eligible

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JUNE 8, 2020 / MiBiz

business to borrow from $500,000 to $25 million.

The maximum amount depends on a company’s existing debt. The New Loan Facility is limited to four times a borrower’s 2019 adjusted EBITDA, Ashby said. The bank can sell up to 95 percent of the loan to the Federal Reserve.

In the Priority Loan Facility, eligible businesses also can borrow $500,000 to $25 million with a cap of six times 2019 EBITDA. The bank retains more of the loan, 15 percent, and may sell the remaining 85 percent to the Federal Reserve.

The Expanded Loan Facility allows a borrower to increase the amount of an existing loan with a lender and borrow $10 million to $200 million, with a cap of six times 2019 EBITDA, or 35 percent of existing, undrawn debt. Lenders can sell 95 percent of Expanded loans to the Fed, Ashby said.

The Main Street Lending Program follows the Paycheck Protection Program that Congress created under the CARES Act and the U.S. Small Business Administration quickly put into operation in April.

Through May 26, the SBA approved more than 4.4 million loans for small businesses nationwide totaling $511.2 billion. In Michigan, the SBA approved 113,067 loans totaling $15.7 billion through May 26.

The PPP was designed to help borrowers keep employees on the payroll for an eight-week period. If they did, they can become eligible to have all or part of their loan forgiven by the SBA.

Quick payback The key difference with the Main Street Lending Program is that unlike PPP, the loans are not forgivable. That may limit the program’s appeal, Mack said. He expects a demand for the program that’s “nowhere close” to what Independent and other banks experienced with the PPP. “It’ll be more selective because it’s real debt for people to take on,” he said. “They’re going to take it on because they have a use for it to help bridge them through and get to the next side. I think it’ll really be used for ramp up, so when they really see things coming back and they need some more capital support, maybe some equipment they want to do, it’ll fit in in that regard.”

The Main Street Lending Program has a fouryear repayment period with borrower payments deferred in the first year.

borrowers are going to find it fairly challenging to In loans through the Priority Loan Facility and obtain credit under this program because of the Expanded Loan Facility, 15 percent of the princiunderwriting,” he said. “It’s going to be interestpal is due at the end of year two, another 15 pering to see what businesses actually take advancent at the end of year three, and then a balloon tage of this. It’s going to be a narrow band of borpayment of 70 percent at the end of the fourth rowers who are still in relatively good condition, year, according to the Federal Reserve. Borrowers but they have tapped out their lines of credit and through the New Loan Facility will have to pay still have a good outlook.” one-third of the principal at the end of the secSome banks that dealt with “quite a bit” of ond, third and fourth year. changes in PPP rules even While the first-year as that program was in payment deferral is a progress also may prove “clear advantage of the reluctant to jump into program,” the overall the Main Street Lending payback period is “fairly Program, Ashby said, addquick” and “may be a hesing they may opt “to take a itation for people,” Mack wait-and-see approach.” said.

“The banks and bor“They have to be comrowers alike have been fortable being able to gensomewhat surprised and erate the cashflow to pay taken off guard by the it back over a four-year way that the SBA and timeframe,” he said. “One Treasury have seemed to year with no payments is good, but then you have — JIM MACK change the rules on them.

I think there may be some three years to pay it back Head of Commercial Lending at leeriness of jumping into after that.”

Independent Bank another program,” he Fifth Third Bank, the said. “Quite honestly, the market leader in West PPP will pale in compariMichigan, does “not see son to the complexity of the Main Street program. near the demand for this that you saw with PPP” It’s going to be the most complex lending facility because of the lack of forgiveness and the four-year the Fed ever endeavored to establish. That means repayment term, according to Mike Chaffin, the also lenders are going to think carefully about bank’s senior commercial executive in the region. what is in it for them.

Fifth Third Bank has a team of lenders ready to work “The intent for this is to have broad appeal, with commercial clients interested in considering but I think in practice it’s going to have limited the Main Street Lending Program, Chaffin said. appeal and limited participation, and that’s unfortunate.”

“It’ll be more selective because it’s real debt for people to take on.

They’re going to take it on because they have a use for it to help bridge them through and get to the next side.”

‘Fairly challenging’

The Federal Reserve requires lenders to apply all of their customary underwriting standards to Main Street applicants, plus their usual collateral and guarantees, Varnum’s Ashby said. That’s another difference from the PPP. “The Fed has indicated very clearly that it’s not willing and it doesn’t expect to take any losses on the program,” said Ashby, who wonders how many companies will actually use the Main Street Lending Program to access credit.

“The reality is going to be that not too many banks are going to be willing to participate and

Interest varies Main Street Lending Program loans come with restrictions on the ability of borrowers to pay dividends to owners and do stock repurchases and also place limits on executive compensation.

Those restrictions would remain in effect a year after a loan is repaid and may lead some prospective borrowers to pass on the program.

“That’s going to give a lot of owners and management teams pause before they jump into this program,” Mike Stapleton, a senior vice president and commercial lender at Mercantile Bank, said during a podcast last month with accounting and consulting firm Rehmann.

As of late May, Chemical Bank was “still evaluating this program to see how we can best do this with our customers. We do plan to participate (and are) figuring out the how at this point,” a spokesman wrote in an email to MiBiz. At Kalamazoo-based First National Bank of Michigan, “we are very, very interested” in the Main Street Lending Program, said Jefra Groendyk, executive vice president, senior lender and Grand Rapids market president.

“We have a select handful of customers that we think could benefit from it,” Groendyk said.

As the Federal Reserve developed the Main Street Lending Program following adoption of the CARES Act, changes were made from the original plan.

A few weeks ago, Chairman Jerome Powell told the U.S. Senate Committee on Banking, Housing, and Urban Affairs that based on public comment, the Federal Reserve lowered the minimum and raised the maximum loan amounts for each of the three lending options, and expanded the size of the companies that can borrow to up to 15,000 employees.

“These changes should help the program meet the needs of a wider range of employers that may need bridge financing to support their operations and the economic recovery,” Powell said in his committee testimony. “We will continue to adjust facilities as we learn more.”

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UPCOMING ISSUES

PREPARING FOR THE SURGE Hospitals look to add beds, meet staffing challenge in COVID pandemic

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

A

line in Bronson Methodist Hospital’s emergency state filing to temporarily add 300 beds epitomizes the main challenge for boosting capacity for an expected surge in COVID-19

West Michigan will work differently post COVID-19

patients in the coming weeks.

How The Kalamazoo hospital’s employers ability to put the added beds into operation “will be depencan help with dent on staffing,” according mental health to a filing with the Michigan

PAGE 2

Department of Health and PAGE 13

SERVING WESTERN MICHIGAN BUSINESS SINCE 1988

SBA races to provide relief to small businesses, but some hiccups remain

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

T

he sheer volume of small businesses that have sought federal relief loans illustrates the depth and scope of the economic pain brought on by the COVID-19 pandemic.

The U.S. Small Business Administration quickly blew through $349 billion in just 14 days and approved loans for 1.6 million small businesses nationwide before halting new applications April 16 for the Paycheck Protection Program. That’s as many loans as the SBA processed in the previous 14 years combined.

Congress last week allocated another $320 billion for the PPP, $30 billion of which will go to federally designated community development financial institutions, plus banks and credit unions with less than $10 billion in assets. Banks and credit unions with assets between $10 billion and $50 billion will get another $30 billion.

The legislation also directed $60 billion in funding to the SBA’s Economic Injury Disaster Loan program Congress set up earlier in the pandemic.

Before running out of money for the first round of the PPP, the SBA approved relief loans totaling $10.38 billion for nearly 43,500 small businesses in Michigan.

Executives at banks and credit unions say applications for the PPP came from across the economy, including Main Street-type businesses, companies up to the 500-employee threshold, the hospitality sector, restaurants, manufacturers and retailers that have been hurt by the pandemic and resulting stay-at-home orders.

“If you connect enough dots, and some you have to connect more dots than others, you can almost see where every single human being and every

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Diversity/Equity/Inclusion

By JOE BOOMGAARD | MiBiz jboomgaard@mibiz.com

hospitals a fighting chance against the highly contagious COVID-19.

Once they got past the chaos in which the rules seemingly changed by the hour, they all needed to take a step back, assess what their next steps would be and recalibrate their business strategy.

In many cases, that strategy focused on figuring out how best to take care of employees in the short term while also addressing the company’s viability in the long term as the crisis continues to play out without a realistic end date in sight.

To that end, business owners also thrust themselves into applying for government relief programs, finding novel ways to generate revenue, and — this being West Michigan — figuring out how they could use their platforms to help others in need.

Here are six stories of local executives dealing with the crisis, coping with the “new normal,” and looking ahead to how their companies and society could change as a result of the pandemic.

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the region’s busiest tourist towns, as Main Streets across the state are bearing the brunt of COVID19 closures.

While some restaurants and breweries have pivoted to takeout and delivery, retailers deemed nonessential fall into more of a gray area. Some have shut down entirely, while others are transitioning online to remain at least partially open for e-commerce.

Under a new executive order issued April 24, those stores now have more clarity: Retailers selling non-essential items can open for curbside pick-up and for delivery.

See LAKESHORE RETAILERS on page 10

s the owner of longtime downtown Grand Haven retailer Down To Earth, Sholeh Veiseh has turned to hosting virtual fashion shows and offering sales on social media to bring in some revenue during the coronavirus closure.

Gov. Gretchen Whitmer’s initial executive order closing non-essential businesses through April 30 shuttered most storefronts on Washington Avenue, an established shopping district in one of

How should marketing change in the wake of COVID-19?

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VC, PE firms steer companies through crisis

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After unbridled growth, Michigan craft Experts warn of beverage companies possible mental gird for devastating lows

By JOE BOOMGAARD | MiBiz jboomgaard@mibiz.com

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ichigan’s craft beverage industry is facing a challenge with the economic fallout from the coronavirus pandemic that is unlike any other in its history.

Many companies have been completely closed for weeks as a result of state-mandated orders to end all

health ‘aftershock’ from COVID-19

in-person dining and drinking in their establishments in an effort to curb the spread of COVID-19. For the first time in many of their histories, the owners of breweries,

By MARK SANCHEZ | MiBiz distilleries, wineries and cideries have msanchez@mibiz.com been forced to lay off staff members — theirf the companies’ direct connecSARS outbreak 17 years tions with consumers in their inditapago in Asia is an accurate rooms cator, and bars. behavioral health care Theproviders craft beverage companies that could see a patient remain are coming leveraging skeleton surgeopen in the weeks and months as the COVID-19 pandemic takes an emotional toll on people.

One-third of the people in Asia were unable to return to work full time after the SARS pandemic, six in 10 experienced fatigue, and half had difficulty sleeping.

In Hong Kong, the suicide rate spiked nearly 32 percent for two years after SARS. Hong Kong also experienced “increases in persistent PAGE 12 depression, anxiety, panic attacks, psychomotor agitation, psychotic symptoms, delirium, and suicidality,” according to a white paper from Pine Rest Christian Mental Health Services on the potential mental health effects Eastburg of the COVID-19 pandemic.

The white report pulls data from a number of sources to issue a call to action for care providers to prepare for the “aftershocks” from the pandemic and “minimize the fallout of COVID-19 on mental health in our communities.” “ The wa r n in g sig n s a re there right now that we could in Michigan experience a significant surge in behavioral health needs that emerge out of this COVID crisis,” Pine Rest CEO Mark Eastburg told MiBiz. “We ought to be prepared as a state and a community for that in case that happens.”

T he s t r e s s, a n x iet y a nd depression the pandemic triggers can come from the loss of a job or income, grief, and uncertainty about the future. At Pine Rest, “we’re experiencing a rise in many of the stressors that are known to increase risk for suicide,” Eastburg said.

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crews for to-go orders, curbside pickup or home delivery of beverages and food. Meanwhile, distilleries have repurposed their stills to produce ethanol in an effort to answer the call to boost critical supplies of hand sanitizer.

These scrappy and resilient companies are finding revenue wherever they can, but few could have prepared for such an abrupt sea change that’s been brought on by the pandemic.

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Industry 4.0 SEE PAGE 4

EXPLORING WHAT’S NEXT

In a survey compiled by Boulder, Colo.-based Brewers Association in early April, 14.1 percent of respondents indicated their business could sustain for four weeks or less if the current conditions persisted. An additional 45.8 percent of respondents said their businesses could only sustain for one to three months if the social distancing measures and restrictions on sit-down service remain in place.

See CRAFT BEVERAGE on page 14

Experts preview workplace changes as economy slowly re-emerges

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

COPING WITH Drinking economy COVID-19

Foodservice disruptions cause crisis for farmers

By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com

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LAKESHORE RETAILERS ADAPT, MOVE ONLINE AS SOME SCRAMBLE TO STAY AFLOAT

By MARLA MILLER | MiBiz mmiller@mibiz.com

www.mibiz.com

State, local officials seek federal help as COVID-19 budget deficits loom

hrinking revenue from sales, income and gasoline taxes could cost state and local governments billions of dollars in the coming months, potentially cutting already stretched services and leading to a prolonged recession without sufficient federal support. all it the six stages of COVID-19 copState officials reported earlier this month Human Services. ing: Experiencing shock. Assessing. that the fiscal year general fund and school As with every hospital durRecalibrating. Cash Flowing. Helping. www.mibiz.com aid budgets ending on ing the COVID-19 pandemic, Imagining.

Sept. 30 could see a $1 bilBronson has been planning That seems to sum up an emotional and intellion to $3 billion shortfall, for a patient surge by simultalectual path many West Michigan business owna result of the public health neously looking at how to add ers have travelled recently as their companies measures taken to prevent capacity and then staff those faced extraordinary circumstances brought on the spread of the coronabeds, if needed. by the spread of coronavirus. virus. The higher range is “In order to care for an Over the last two weeks, MiBiz spoke with a decline of more than 10 increased number of patients, owners and executives in a variety of industries. percent. Next fiscal year, Bronson plans to redeploy staff No matter what sector they work in, they all Bartik the deficit could be up to members who are not curpretty much experienced the same rollercoaster $4 billion.

Yet those are just estimates at this rently in clinical roles, but who of emotions. point, and it’s difficult to predict the ultimate are clinically First came the shock at how fast the virus was effect of the pandemic on the budget. licensed. We spreading throughout the United States, then “My own guess is it might be worse than h a ve ma n y panic when it became clear that all non-essenthat,” said Tim Bartik, senior economist with RNs who tial businesses in Michigan would need to close the Kalamazoo-based W.E. Upjohn Institute work in eduto help “flatten the curve” and give the state’s See BUSINESS OWNERS REACT on page 12 cation, qualSee STATE BUDGET on page 14 ity and safety,

By MARK SANCHEZ | MiBiz management msanchez@mibiz.com and other Neely departments n normal who will return totimes, a roleTrinity of pro- Health’s seven vidinghospitals patient across care,”Michigan Denise generate comincome Neely, bined senioroperating vice president forof $9 million to $10Healthcare million a month.

By MARK SANCHEZ | MiBiz revenues, assess the effects, and conportfolio compavisualize how we will steer out of this Bronson and chief But the current operating msanchez@mibiz.com tinually revise projections based on nies. We immediately fog,” Parker said. “Sometimes, it is operating officer and chief environment is far from normal, and the COVID-19 panthe data they see. shifted into crisis difficult for a small company in the nursing officer for Bronson demic has pushed said the Catholic health sys-he COVID-19 pandemic that Investment firms say they continue management mode trenches to see the entire battlefield.

Methodist Hospital, in a tem’s financial to scout for new deals, although some and began working We can provide that vision and bring statement to MiBiz.performance deep into thedismantled daily routines red. and hammered the economy are generally doing so at a slower pace. each step of the probest practices, along with resources “We are currently identifyThestaff Michigan for Trinityhas forced investors to pivot Their immediate priority is to focus cess in parallel,” Tim to help them develop and implement ing those membersoperations and will Health, the parent corporation along with the companies they back on portfolio companies in which they Parker, the president safe and smart strategies.” refresh them onLivonia-based current processes Parker of Mercy Health West care.

Michigan and Saint financially. have already invested to help them of Grand RapidsGrand Angels has angel investor before they return to in clinical Joseph Venture capital and private equity navigate the crisis, and in some cases based Grand Angels, groups in West Michigan and affiliWe are also calling on retirees whoMercy Health System investors contacted by MiBiz say provide an injection of capital. wrote in an email to MiBiz. ates in Kalamazoo, Detroit and Flint. may be willing to return to the in Southeast a $50advised portfolio companies they’ve “The crisis certainly caused a sud“One aspect of our role is to help The investment firm closed in late workforce,” Neely said. Michigan, recorded toloss stayforsafe, preserve cash, control den change in the way we all work companies deal with the current realiDecember on $11.7 million raised See SURGE on page 17 million operating March, “and remember See VC/PE on page 18 expenses and capital spending, secure and live. Its impact jolted us and our ties and at the same time help them in March half the month was a normal month,” President and CEO E R I O D I C A L said S Rob Casalou.

The operating loss Casalou stems from the lost revenue from canceling non-essential surgeries and procedures, combined with ramped up spending to test and care for COVID-19 patients.

See FINANCIAL CRISIS on page 6 PAGE 3

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Downtown Grand Haven. MIBIZ PHOTO: MARLA MILLER

See MENTAL HEALTH on page 6

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Small businesses around West Michigan have been affected in many ways by the ongoing pandemic. While some are seeing increased business, most companies are being forced to deal with the fallout by getting creative, managing cash and finding new ways to stay engaged with customers and clients. In this Coping with COVID-19 special report, MiBiz speaks with two dozen West Michigan companies to hear how they’re navigating the current uncharted waters. SEE PAGES 12-19

eople who have been working from home for weeks because of the COVID-19 pandemic will return to a decidedly different workplace than they had previously once the economy gets going again.

Changes will span a range of workplace environments, including offices, shop floors, breakrooms and conference rooms. Wearing face masks and having more distance between workers will become the norm, along with routine temperature checks and continually cleaning and sanitizing the workplace, tools, equipment and workstations.

Those and other practices are all part of the proverbial “new normal” for employers working to navigate the deadly pandemic that has disrupted daily routines, thrown the economy into recession and may linger for many months until a Kennedy vaccine is developed.

“As business leaders, you have to make sure you’re taking the responsibility for your employees,” Kentwood-based Autocam Medical Devices LLC CEO John Kennedy said during a recent back-to-work webinar hosted by Advantage Benefits Group Inc. “It’s incumbent on us as businesses to make sure See WHAT’S NEXT on page 8

COVID-19 highlights structural changes needed for unemployment system, researchers say

By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com

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s some employers express concern about retaining workers who are earning more income through unemployment benefits than their normal paychecks, researchers say long-term structural fixes are needed to state and federal programs.

The $2.2 trillion CARES Act passed in late March included provisions to add $600 in weekly unemployment

benefits for people active in their state’s system. In Michigan, this means workers unemployed as a result of the pandemic could receive up to $962 a week.

The federal benefits are available for up to 39 weeks, while state benefits were expanded to more workers and extended for 26 weeks.

Media reports have shown concern among employers who pay less than the amount of benefits workers are receiving. In at least one case in Washington state, a company that received a Paycheck Protection

Program loan — which requires 75 percent of the loan to be used for payroll in order to be forgiven — faced backlash from employees, since the loan effectively means workers would be paid their typical wages.

Kelly Presta, vice president at Sturgis Molded Products Co., shared these concerns during an April 22 conference Presta

call hosted by the West Michigan Policy Forum. As of early May, Sturgis Molded Products was running at about 10 percent capacity involving transportation and medical devices. The company has about 200 employees.

“I’ve called people and there has been communication that said, ‘I make more by not coming in,’” Presta told MiBiz. “That’s out there.”

Sturgis Molded Products’ operators and first-line positions make less than the maximum amount See UNEMPLOYMENT on page 5

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FOCUS: COMMERCIAL LENDING

Commercial lenders discuss effects of pandemic on West Michigan businesses, banking industry

Chaffin

Dyer

Groendyk

McLean

Quade

Welsh

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

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ankers across the region have been focused on working with small business clients to secure loans from the federal Paycheck Protection Program, as well providing payment deferrals and adjusting loans for business borrowers hit hard by the COVID-19 pandemic.

Banks also had to quickly adjust their operations as the pandemic hit Michigan, and now operate in a down economy.

MiBiz interviewed several commercial lenders in the West Michigan market to discuss how business is holding up and how the crisis has affected them. They were: n Mike Chaffin, senior vice president and senior commercial banker in West Michigan for Fifth Third Bank n Rick Dyer, president and CEO of Edgewater Bank in St. Joseph n Jefra Groendyk, executive vice president, Grand Rapids market president and senior lender for Kalamazoo-based First National Bank of Michigan n Dan McLean, vice president of commercial lending at Grand Rapids-based Lake Michigan Credit Union n David Quade, Grand Rapids market president for Horizon Bank n Sean Welsh, regional president for PNC Bank in Grand Rapids Here are the highlights of what they had to say:

Other than the PPP, how has your lending volume been holding up during the crisis?

What do you see ahead for the rest of 2020? on a pretty good roll. Our pipeline was good and we were pretty busy. All of a sudden, things just slowed right down to a stop. I still think it’s fairly temporary. I think we’ll get back to it. Everything that wasn’t in process or truly required or needed, like a new piece of equipment because one broke down or something, everybody put on hold. Everyone went into just kind of a holding pattern. We have a number of

DYER: This kind of holding pattern is going to continue at least through the third quarter. Some of my clients, as I talk to them, they are cautiously optimistic things will bounce back late in the year and early in ’21, but I think everyone’s expecting the third quarter to be still that recovery stage, just sit back and make sure because there’s still all of the talk about the second phase of the coronavirus. So, I think everyone’s

just kind of (thinking), ‘Let’s make sure we’re in good shape, we have people back, let’s get organized, let’s get ready to roll, and the day that we’re 100-percent confident we’ll be able to take off.’

GROENDYK: You can’t live through all of this and not expect some impact. There has to be some fallout. I just think it’s too soon to know with certainty. I don’t think we’re going to see the ramifications of this until probably the fourth quarter of this year and then the real impact will show up in 2021. It takes time for all of this to kind of fall out.

MCLEAN: Assuming rates stay low like they are, I think the second half of the year should return to historical activity levels.

WELSH: It goes without saying that we are in unique and uncertain times. We are doing our best to assist our clients by providing information and solutions designed to help them negotiate that uncertainty. PNC Chief Economist Gus Faucher expects the economy to stabilize in the third quarter and then close with stronger growth at the end of the year. However, he stresses that the longer this disruption lasts, the greater structural damage to the economy and the weaker the recovery will be.

For companies that are borrowing right now, what are their main reasons or credit needs?

CHAFFIN: What I see is a lot of the market is not overly focused on borrowing money right now,

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CHAFFIN: Up until COVID, it looked like we were off to a pretty good start (in 2020) and things would continue to hold out at least through this year, but obviously as COVID really moved into the United States, we know the story from there.

DYER: From a volume point of view, we were

projects and a number of conversations we’ve had that we’ll get back to. I don’t think it died.

I think it has just been postponed.

GROENDYK: We continue to have a robust pipeline. There are a lot of financing opportunities that continue to move forward and continue to make a lot of sense right now. That’s been very surprising for me, and refreshing.

MCLEAN: As expected, volume is down due to COVID-19, shutdowns and the stay-at-home order. Early indications are showing some good activity in certain sectors as we get closer to a full reopening of the economy.

QUADE: We had a solid first quarter and had built a pretty robust pipeline for the second quarter, but obviously the PPP took a lot of energy out of the system. We’ve had good loan volume, but once the PPP hit, that became the priority.

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in general. They’re more focused on shoring up their balance sheet and making sure they understand what their business needs to continue operating in the environment they’re in right now. They’re more focused on what we can help them on as far as their working capital and liquidity planning. Obviously, there was a lot of concern over the last 60 days about just making sure everyone got their PPP funds, and then there’s a lot of companies out there that are very focused on AR (accounts receivables) and AP (accounts payable) solutions so that they can further automate in this environment where it’s a little harder for everybody to be in the same place.

Where conversations are today, they’re thinking about, ‘How do I automate today so if this happens again, in the fall or whatever, then I’m not relying on being inside these four walls to be able to function appropriately.’

DYER: I have a couple of hotels that were in process and they’re still borrowing because they’re finishing up things. I have a couple of manufacturers that had plants and equipment expansions and it still makes sense, intermediate and long term, because the automation they’re introducing to their process is going to cut costs. Even though there’s a little uncertainty right now, in the long run it’s still a good move. Most of the borrowing right now is a continuation of programs and projects that were planned for the year, and after thinking it through and working through all of the numbers, they decided it still makes sense to continue on that road.

GROENDYK: It’s across the board. Obviously, we have been very active in the PPP process. That is the obvious thing that’s going on right now. In addition, we’ve had a few companies that have asked for increases in their availability in their lines, just given the uncertainty in the world right now, that we’ve been able to accommodate. We also have companies that are growing.

Although it sounds a little strange, they have a need to purchase equipment or have more availability on their lines to support receivables. We are seeing some bright spots here.

MCLEAN: We are seeing two types of need for credit right now. First, companies that have growth opportunities are taking advantage of low rates to invest in new or additional real estate and equipment. Second, companies that have had a ‘delay’ in revenue have needed to lean a bit more into their lines of credit for temporary funding through the slowdown.

QUADE: What we’ve seen from people that are still actively borrowing, obviously PPP and working capital is high. But there are people that are looking for new banking relationships out there and we’ve seen a boost from some of that volume as well.

What sectors are still busy?

CHAFFIN: Anyone that obviously provides any type of supplies, whether medical supplies or cleaning supplies, or those types of services.

We continue to see a lot of activity in those sectors. In general, I would tell you if you look at things from 50,000 feet, no one’s really busy right now as far as generation of new business.

There are a lot of people busy because the world has changed, but I wouldn’t say there’s just any one industry that’s flowing and going right now because if it’s not impacting them specifically, it’s impacting their clients and sometimes it’s impacting their supply chain.

DYER: We have a couple grocery stores that are having great volume because even though they have a little challenge with getting enough supplies and product, no one’s going out to eat.

Everyone’s eating at home.

GROENDYK: Anyone that is supporting the need for PPE. Those companies that could pivot and start manufacturing PPE are seeing a lot of activity right now.

MCLEAN: Certain spots in the real estate sector are still very busy, while non-essential manufacturing has seen slowing at this time.

QUADE: Anything that’s medical supply related, Visit www.mibiz.com

logistical, and people who support retail that is grocery based or pharmacy based. That’s still strong.

WELSH: As the economy has begun to bounce back, a number of sectors are busy, including manufacturing.

Who’s hurting the most?

DYER: We’re in a tourist town with our small downtown businesses and our hospitality, restaurants, bars and hotels.

GROENDYK: The obvious ones: Restaurants, hospitality, retail, and the landlords for those segments are hurting as well. The others that are hurting are companies that support large gatherings. Think about any large gathering — whether it’s Tulip Time (in Holland) or Festival of the Arts (in Grand Rapids), or anything like that — and all of the printed material that is typically prepared for those gatherings, or

banners and things like that.

QUADE: Hotels, restaurants, venues for conferences or concerts, and things along those lines, and that’s pretty much driven by the restrictions.

WELSH: Any business that had to temporarily close during the pandemic is likely struggling.

How are you preparing for the down economy over the next year or two, and for potential loan losses?

DYER: We’re just watching things really closely.

We’re one of those banks that went through some really tough times (following the 2008 financial crisis) and we remember that. We’re positioned pretty well to withstand even tough economic times. Part of it is just being close to our customers, understanding what’s going on and working with them. You just have to stay on top of things and work with people and try to be

more proactive in working with clients, instead of just making some assumptions. And we’re making sure we’re taking extra caution as we look at our loan portfolio. We’re probably stress testing a little bit more than we would.

GROENDYK: Our bank is very well positioned.

We have an incredibly strong balance sheet, we’re well capitalized and we have significant liquidity. We have increased funding for loanloss provision in anticipation of difficulty in the coming months. We’re not sticking our head in the sand. We certainly expect some impact.

We’re prepared for that.

MCLEAN: Thankfully, our credit metrics continue to hold with minimal credit issues to date. We are continuing to remain disciplined in managing our credit metrics, which includes monitoring both individual loan and aggregate portfolio loan-to-values, reviewing See ROUNDTABLE on page 18

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FOCUS: COMMERCIAL LENDING ROUNDTABLE Continued from page 17

financial performance of borrowers more frequently, and maintaining a f luid risk rating system of the portfolio. We have been able to quickly identify potential risks, which in turn allows us to better determine and calculate the proper reserve amount taken per loan.

Now more than ever, the ability to maintain credit quality within a loan portfolio means we respond quickly, not only to identify potential loan losses, but to better assist our members through economic challenges.

QUADE: We have strategically looked at specific industries that are challenged that we are just keeping a much closer eye on and increasing our communication with those specific industries.

How do you see low interest rates playing into things?

CHAFFIN: It could be zero percent interest right now and there’s not a lot of people who want to take on leverage. Our clients are good operating businesses and, as a general rule, they’re not looking at debt as a way to do things. They’re looking at, ‘How do I operate my business more efficiently? What can I do to make sure that I’m cutting out any costs that are unnecessary?’ You would think in a low interest rate environment, everyone’s going to go borrow money, but the lack of certainty on what’s next for them is actually prohibitive for them in a lot of ways for them to want to go out and borrow.

GROENDYK: The interest rates being low right now, that will keep the financing burden for borrowers low and will certainly help them

a lot during this time. I will say that the low interest rates have a negative impact on banks for their earnings. It’s kind of a double-sided coin. It will help the borrowers for sure, but it certainly doesn’t help the banks at all.

MCLEAN: Lower interest rates definitely are one of the deciding factors for companies to acquire additional real estate and equipment.

QUADE: It can be an advantage for companies that are a little more leveraged at higher rates right now, but bigger picture, rates have been low for the last 10 years, so I don’t think it’s going to be that big of a benefit for people.

Has the pandemic changed how you approach the market or how you underwrite credit?

CHAFFIN: Our underwriting has always been what I consider to be strong, safe and sound practices from a banking perspective, and we really haven’t changed our underwriting standards, but we have to look at where things are today and what companies are forecasting for the rest of the year. Now there’s more focus on how do they continue to function through a down economy when revenue for that company may be somewhat or significantly depressed.

DYER: It’s another good reminder of why we stress test and why we always look at worstcase scenarios when we underwrite all along.

One of the interesting things is I have some young lenders. They weren’t lending in 2008 (and) ’09. They just got into the lending world in the last 10 years. This is the first time they’ve really been through this type of challenge, and so it’s a wonderful learning opportunity for them. I’d rather just be able to sit and talk to them about, ‘Hey, this is what happened back then.’ But having to go through times like this

makes good lenders, and in the long run we’ll have better lenders as a result. They’ll understand why we stress test loans and why we look at worst-case scenarios.

GROENDYK: We have always been a very conservative and diligent underwriter. We don’t grow just for growth’s sake. We’re very careful in our approach to lending, so our approach really hasn’t changed. We continue to operate in the same manner. The customers that we work with, they know what to expect from us, and because we have a pandemic doesn’t mean we’re going to change our spots and do something differently. We may ask more questions and want to know how they’re being impacted by all of this, but we’ve not really changed our approach as of yet. I would expect, as we get close to the end of the year and some of this pans out a little bit, maybe beginning in the third or fourth quarter, as we see stress in the portfolio, we may choose to review specific segments more frequently. We review all of our credits annually and maybe we’ll go to a more frequent review just to keep an eye on companies as they make their way out of the pandemic and into recovery.

QUADE: We do have the conversation as far as how they are prepared and what they’re doing for COVID. That’s a conversation that we have now that no one had (pre-COVID), just kind of how they’re set up and their contingencies.

What best practices or lessons from the last recession might apply in this crisis?

CHAFFIN: We’re more proactive this time than perhaps the entire industry was. It was somewhat of an overnight crash to real estate that started the dominoes falling the last time.

We’re much more closely in touch with our

clients and really working with them much more holistically, going back to working capital and liquidity planning and understanding their business needs and making sure we’re there to help them as they need support on predicting what the impact of anything that’s going be, whether it’s new business, reduced business, and that their balance sheet is properly positioned to manage through any cycle, whether it’s up or down.

DYER: I’ll go back to that proactiveness. What we learned last time was to get more proactive earlier on with situations and not just assume that they were going to work their way out, that maybe in some cases we needed to help work them out. It may have just taken a little tweak in a payment, a little tweak in a rate, a little tweak in some terms that could have gotten someone through some tough times quite a bit faster. Don’t just assume and let things happen, let things work out. Do what you can to get them worked out faster for your client.

MCLEAN: Maintaining proper loan structure as part of consistent underwriting and not ‘stretching’ our credit standards to make a deal work.

QUADE: As long and you’re dealing with proven, successful clients that have navigated these situations before, everything’s going to just be fine. The lesson learned is make sure you’re dea ling w it h compa nies t hat have been through this before and have been successful.

WELSH: PNC’s st rateg ies for ma i nta i ning strong capital levels and liquidity have allowed us to serve our clients in both good and challenging times. In addition, our disciplined risk management principles served us well in the last recession and are a major factor in our ability to be there for our clients during the pandemic.

We know what’s at stake.

That’s why we’re here.

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SMALL BIZ: COPING WITH COVID-19

San Chez bistro rethinks shared plates, new project delayed

By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com Restaurants across Michigan are slowly reengaging under occupancy limits and heightened measures to protect workers and patrons’ safety.

Under those measures, a menu built around tapas, or small plates meant to be shared with the table, would be naturally difficult to accommodate during COVID-19.

That’s why Cindy Schneider, the owner of San Chez: A Tapas Bistro and Roam by San Chez in Grand Rapids, is tweaking the concept to meet customers’ needs in the coming months.

“We’re tapas, and we share — that’s difficult for us,” Schneider said. In addition to offering additional dining ware for patrons, “we’re taking different approaches to entrees.”

That includes adding “entradas,” or a variety of tapas on one plate for an

individual that the Spanish-inspired San Chez first offered on its original menu in the early 1990s. Schneider also said customers will be asked if they plan to share plates or are eating individually.

“We’d always be like, ‘Nope, you’ve got to share.’ We’re going to be sensitive to people and their needs,” she said.

Schneider spoke with MiBiz on June 1, just minutes before Gov. Gretchen Whitmer formally announced restaurants and bars across the state could reopen. Roam, which bills itself as “global street food,” and San Chez have been open for takeout with limited menus.

She was excitedly texting with managers about reopening plans, but the outlook isn’t entirely optimistic. To start, takeout in downtown Grand Rapids while much of the business activity is shutoff is like “finding a

The pandemic caused San Chez, a longtime eatery in downtown Grand Rapids, to put plans on hold to open seafood boil concept Beacon in the same building as its legacy restaurant. The building also suffered some damage from the unrest over police brutality in late May. PHOTOS: ANDY BALASKOVITZ needle in a haystack — pretty rough,” Schneider said.

Aside from ArtPrize, which is still scheduled in late September, events at the Van Andel Arena, concert venues and convention sites have been canceled this summer.

“We know we have to rely on Grand Rapidians to come into our restaurants and be there for us,” as opposed to large numbers of visitors, Schneider said. “We really rely on events.”

On top of the uncertainty, the side of the San Chez building along Fulton Street was damaged by a fire during the May 30 protests. The rest of the building was unharmed, which was welcome news for Schneider, who is planning a third restaurant on the same block as San Chez.

With Beacon, a seafood boil concept, “everything stopped” as the pandemic shut down dine-in restaurants in March. Schneider said

Little Space Studio pivots to digital focus during pandemic

Central District Cyclery keeps busy as more people bicycle during pandemic

By KATE CARLSON | MiBiz

By KATE CARLSON | MiBiz

kcarlson@mibiz.com

kcarlson@mibiz.com

GRAND RAPIDS — The COVID-19 pandemic interrupted the opening of a coworking space this summer in the historic Harris Building downtown, so the business is pivoting to offer digital memberships.

Little Space Studio LLC was wrapping up extensive renovations when the coronavirus pandemic took hold in Michigan in March, around the time Gov. Gretchen Whitmer issued the stay-home executive order.

Owner and founder Alysha Lach White had planned a soft launch in March and a full opening in June for the coworking space, located at 111 S. Division Ave. Despite not yet fully opening, Little Space Studio started operating in a beta testing phase in 2019, hosting workshops and classes and operating a coworking space on a small scale.

“A lot of people we serve are creative freelance professionals that got hit pretty hard from the pandemic,” Lach White said. “All or a lot of their work has been cut. I know a handful of people still working, but the work dried up really quickly.”

Without being able to work in the physical space, Little Space Studio is expediting an affordable digital membership that’s expected to launch this summer.

The membership will include an online message board, job search portal, digital workshops and Visit www.mibiz.com

Alysha Lach White, founder of Little Space Studio LLC. MIBIZ FILE PHOTO: KATY BATDORFF

online classes. Lach White also is starting a remote mentoring program to connect fellow creatives who want to bolster their careers or pick up a new professional skill.

“This was a pivotal moment,” Lach White said. “We have a lot of excitement because we don’t know how else to be right now. Our big mission over the summer and fall is to continue to engage our membership and continue to educate.”

Because Little Space’s services will be mainly on a digital platform for a while, people from outside of West Michigan will be able to take advantage of online programs, Lach White said, adding she has seen some non-local interest. All of the studio’s workshops will be online until at least 2021. The coworking space also offers an internship program that it switched to a remote model and has since received applications from across the country.

“It’s really exciting to see that people are reading about our studio and get really excited about the momentum,” Lach White said.

As far as opening up the physical coworking space, Lach White is taking the virus seriously, and does not anticipate being able to fully open the space until there is

a vaccine or other proven way to safely operate. Her company could capitalize on some opportunities for private rentals or rent out some individual offices, she added.

The golden question, Lach White said, is how soon people will be comfortable coming to work again in a coworking setting. More and more people are working from home, and some are adjusting better than others, Lach White said.

“It really doesn’t matter what restrictions are in place, it matters how members feel and how clients feel,” she said. “I’ve been getting mixed signals on that. Some people are not meant to work at home and need human interaction, others are adapting but still miss the community so they are looking for more digital ways to connect.”

Despite the setbacks, Lach White said Little Space Studio is there to stay in the Heartside neighborhood of Grand Rapids.

“It’s heartbreaking not being able to use (the studio) but I would kick myself if I didn’t do it safely,” she said. “We are in it for the long haul and we’ll be in that location for at least five years. We’re building something that will be steady and last.”

GRAND RAPIDS — While most small businesses have been struggling and closing during the COVID-19 pandemic, Central District Cyclery has been overwhelmed with business over the last few months.

With an increase in people with more time on their hands because of the coronavirus, Central District Cyclery Owner Nate Phelps said he’s seen a lot of new riders. Phelps estimated that he and his three part-time employees are repairing about 50-60 bikes a week. Sales were up last month by about $20,000-$25,000 compared to May 2019.

Located at 1309 Plainfield Ave. NE in Grand Rapids’ Creston Neighborhood, Central District Cyclery specializes in mountain bikes. Currently, the shop is operating on an appointment-only basis for bike repairs and is limited to two customers in the showroom at a time.

“It’s been working well; I think we might keep operating this way,” he said.

Bicycle repair shops were among the first few businesses that were allowed to reopen on April 24 under Gov. Gretchen Whitmer’s revised stay-home order. During about a month of being shut down, business was kind of scary, Phelps said. The company was able to maintain some cash flow after receiving a contract from the City of Grand Rapids to fix city and Grand Rapids Police Department bikes.

Business is now booming, but the increase in people biking is causing a few supply issues, he said. Central District is sold out of bikes currently, and is unable to get more in stock. Certain parts also are taking longer to order and some are out of stock.

the project is about 65 percent complete with the electric, plumbing and walls installed and painting done.

Financing has also been a challenge as federal loans were targeted at keeping existing businesses running, she said.

“We’re just waiting to get our restaurants up and running,” Schneider said. “From there, we’re going to get focused back on Beacon going again.”

Central District Cyclery is located at 1309 Plainfield Ave. NE in Grand Rapids’ Creston Neighborhood. PHOTO: KATE CARLSON “I think customers are going to be looking for end-of-the-year sales, and that’s not going to happen this year because it will be sold out,” Phelps said.

Because of all the demand, the company is not able to take walk-in appointments, which customers had been accustomed to over the shop’s history.

“The community has been really supportive,” Phelps said. “I’ve seen a lot of department store bikes that have been dusted off because people have time to ride again.”

Many of the company’s loyal customers have visited over the past couple of months, but new riders are making up a large chunk of the business in the last few months, he added.

“I’m seeing a ton of new faces to me, and they outweigh my regulars,” Phelps said. “If you’re in the biking world and start to be part of the biking community, it’s pretty receptive. People have had enough time off right now and it’s a bit of a habit that you fall into.”

It remains unlikely that everyone will keep biking as more parts of the economy start to reopen, but some people will develop a new affinity for the sport, Phelps said.

“I’ve seen more families riding together,” he said. “The trails are full, everybody is out there, so I do think some people will stick with it.”

MiBiz / JUNE 8, 2020

19

FINANCE TETRA

Continued from page 1 The company developed its drug compounds during the last decade with the backing of $27 million in federal grants, including National Institutes of Health funding. Millions more came from several Michigan-based investors. They included Grand Angels and its Ka-Zoo Angels affiliate, Kalamazoo-based Apjohn Group LLC, Muskegon Angels, Traverse City-based Northern Michigan Angels, Ann Arbor SPARK, the Michigan Economic Development Corp.’s Invest Michigan fund, and the Bioscience Research & Commercialization Center at Western Michigan University, plus local high net worth individuals.

‘A great outcome’ The deal was the best exit yet in a drug development company for Grand Rapids-based Grand Angels, which provided Tetra early seed capital and later co-led the Series A round. Grand Angels invested in Tetra through its venture capital funds and member angel investors.

“It’s an excellent validation of our business model and the kinds of companies we want to promote. It’s also a validation of West Michigan in general. This is a success story not only from Grand Angels, but the West Michigan ecosystem,” said Paul D’Amato, managing director of Grand Angels’ venture capital funds.

“It’s a great outcome for everybody,” D’Amato said. “We’re also proud of what we were able to create together. Our goal is to build these companies in West Michigan and this is just an amazing success.”

At the nonprofit Bioscience Research & Commercialization Center at WMU, proceeds from the Tetra deal went back into an investment fund that invests in early-stage life sciences startups across Michigan.

The BRCC, an evergreen fund formed in 2004 with backing from the state and WMU, invested $450,000 in Tetra and received an ROI that was in the “many multiples,” said Executive Director Stephen Haakenson.

“That was one of those exits that an earlystage investment fund counts on, that one out of 10 returns that covers the others. So, it was very successful,” Haakenson said. “This allows us to continue to put further funds out the door.”

Don Parfet, founder and general partner at Apjohn Group, credits Gurney for having

‘Another success story’ Although Tetra still has a “a fair bit of clinical development to do” to get to market, Shionogi “wouldn’t have made the deal that they did if they didn’t see some promise for outcome,” said Steve Rapundalo, the president and CEO of Ann Arbor-based MichBio, a bio-industry association.

D’Amato Haakenson Rapundalo The deal “was another success story for us in Michigan in the bio-pharma the scientific background and business acuworld” that could bring further attention to the men to create, lead and build the company. state’s industry from both pharmaceutical comGurney based Tetra’s headquarters in Grand panies and capital investors, as well as serve as Rapids and his lab in Kalamazoo at the WMed an example to promote the state as a Midwest Innovation Center, and “was able to attract biotech hub, Rapundalo said. great talent at both locations,” Parfet wrote in “It’s a testament that our bio-pharma universe an email to MiBiz. is doing quite well,” he said. “Success breeds sucApjohn Group formed a special purpose cess. If we can make this visible and promote investment company, Apjohn TDP LLC, that cothose successes, the more they hear about it, led the Series A financing round for Tetra. wherever they’re located, hopefully that will bring “This company has achieved very signifimore attention and interest and money to the cant milestones and holds significant promise in others that are following in the tracks of a Tetra.” treating cognitive disorders within any number The deal further shows that in Michigan, of neurological conditions, including Alzheimer’s “we’ve got the experience and the manpower Disease, Traumatic Brain Injury and Fragile here to move science such as this along,” and X,” Parfet said. “We have been very pleased by that the “brain power is here and the abilities Shionogi’s interest and commitment to Tetra and are here” to form and build a successful pharma the outstanding opportunity this next developstartup, Haakenson said. ment phase represents for medicine.”

“You don’t have to go to the coasts to find the individuals to support businesses such as this,” he said.

Keeping intact

Tetra Therapeutics closed in late May on a merger with Shionogi & Co. Further financial details of the deal were undisclosed.

Under the deal, Shionogi & Co. acquired Tetra’s portfolio of drug compounds for treating Alzheimer’s disease, Fragile X syndrome and other brain disorders associated with cognitive or memory conditions. Tetra became a wholly owned subsidiary of Shionogi, which obtained global rights to all of Tetra’s drug compounds, including one known as BPN14770 for Alzheimer’s.

Shionogi intends to maintain Tetra’s operations in West Michigan, although production of the new drugs — if and when they come to market in the years ahead — likely would occur in Japan, Gurney said.

“Shionogi wants to keep our team intact,” said Gurney, who continues as CEO at Tetra under Shionogi’s ownership. “They understand the depth of our experience and our ability to execute with minimal resources, and they are interested in continuing that.”

Trials continue The merger agreement follows Shionogi & Co.’s prior $35 million strategic investment in late 2018 in Tetra Therapeutics, which is presently conducting separate Phase 2 clinical trials in the U.S. The trial for Alzheimer’s was completed in January, just prior to the COVID-19 pandemic spreading into the U.S. By that time, Tetra was already analyzing data from the trial and “in advanced businesses discussions” with Shionogi, which in March made another equity investment beyond the 2018 deal.

Shionogi then decided to make a full acquisition of Tetra, Gurney said.

“Tetra’s deep level of drug discovery knowhow in the CNS area will help us to solve for the cognitive disorders our aging population is facing, and we believe we are well-positioned to bring BPN14770 to patients in need,” Isao Teshirogi, president and CEO of Shionogi & Co., said in a statement.

Tetra has a few patients remaining in the Phase 2 trial for Fragile X, Gurney said, adding

“It’s an excellent validation of our business model and the kinds of companies we want to promote. It’s also a validation of West Michigan in general. This is a success story not only from Grand Angels, but the West Michigan ecosystem.”

— PAUL D’AMATO Managing Director of Grand Angels

that the trial has been delayed by the pandemic.

He wants to begin Phase 3 clinicals trials for both drugs in 2021.

The Phase 3 trials could lead to the filing of applications to the U.S. Food and Drug Administration for approval to bring the drugs to market. The Fragile X drug could come to market within three years, and the Alzheimer’s drug in four to five years, Gurney said.

Pivot from IPO As Tetra progressed in developing the drug compounds, work began toward an initial public offering. The company made presentations at investor “roadshows” in October and November 2019 in New York City, he said. The company was getting “very strong interest in Alzheimer’s and in Tetra,” Gurney said.

“In the end, the merger path provides a better outcome to our investors and stakeholders than pursuing the IPO,” he said, citing added difficulty because of the COVID-19 pandemic. “At this point in time, no one’s doing an IPO. It’s very, very difficult to execute an IPO now.”

Tetra’s progress to this point “gives us some kind of successful guideline of what works for startup companies, especially with drug development,” a sector that is “unique from other industries,” Haakenson said.

“It takes time and it takes patience to invest in a company such as this. The product’s still not in the commercial market and we hope to see it go there and make it with Shionogi taking the reins of the assets,” he said.

Asked for advice for other bio-pharma startups, Gurney said: “Keep with it. Don’t give up.”

“Create a network and rely on your network to build your company,” he said.

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JUNE 8, 2020 / MiBiz

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NONPROFIT ORGANIZATIONS

Crisis puts spotlight on food issues

By JANE SIMONS | MiBiz jsimons@mibiz.com

O

9,000 meals were being delivered to more than 50 schools in Allegan, Kent, Muskegon, and Ottawa counties, the four-county area served

by Kids’ Food Basket. The organization’s target clientele is children who were receiving the packaged meals through the various school systems, but when the needs for access to healthy food scaled up, so did Kids’ Food Basket, Clark Whitney said.

As an example of the increased need, she said there was one site in the Wyoming-Kentwood area that requested an additional 2,500 meals to augment the 500 it had been providing.

The organization has been able to meet the demands through ongoing fundraising efforts.

“We are not funded by government dollars, which allows us flexibility,” Clark Whitney said.

“Because of people in the West Michigan community, we are able to respond and use every single dollar we receive as efficiently and effectively as possible.”

Fundraising efforts have largely relied on the group’s message that, “Our collective health as a community depends on our ability to care for our most vulnerable citizens.”

“We are 18 years old and since day one we have been in emergency work. Hunger is emergency work and for us now it’s just become a scaled-up emergency,” Clark Whitney said. “I think people really trust us to use their dollars and resources to ensure that kids have healthy food. The community knowing that about us is one way to fundraise.

“Our children have had a disrupted school and life experience. Between the four counties we serve, 75,000 kids receive free or reduced lunch, and so 75,000 children who were relying on school meals no longer have that resource. That’s a really important message.”

ne week before schools throughout Michigan were ordered to shut down, leaders with Kids’ Food Basket had already begun to put a plan in place to meet the needs of the children they serve on a daily basis.

“We were watching what was happening around the world and watching Italy and seeing that their schools were shutting down,” said Bridget Clark Whitney, founding CEO of Kids’ Food Basket.

“Very, very suddenly, schools here were shut down and a stay-at-home order was put in place.”

Un l i k e m a n y b u s i nesses and organizations Clark Whitney that were caught off guard by the ensuing chaos created by the coronavirus, Clark Whitney’s organization was ready because it knew how important it was going to be to continue to provide healthy and nourishing food to the children living in a four-county area Eddy that the nonprofit serves.

At the same time, the organization recognized that the way it would get its work done would have to change to comply with social distancing guidelines and the stayat-home orders.

The 250 volunteers who packed up thousands of meals during the week at three different locations have been replaced temporarily by Kids’ Food Basket team members who Competing are doing that work until it’s again Sponsored by: interests safe to gather.

GRAND RAPIDS Heather Eddy, president and “Our team members from COMMUNITY CEO of Kistner Eddy Executive week two of the stay-at-home FOUNDATION Services, a Naperville, Ill.-based orders through now are packing group offering a broad range of meals,” Clark Whitney said. “I’ve services to the nonprofit sector throughout the been doing my CEO job for 40 or 50 hours each United States, said during this time of economic week and then packing meals on weekends and uncertainty, she has been counseling her cliat night for 20 hours.” ents to constantly engage with their volunteers Volunteers have been able to assist team and communicate with their board members. members with the distribution of these meals Eddy notes philanthropy for children’s issues to more than 70 distribution sites located in has been receiving greater attention lately. the neighborhoods of schools served by the Donors who may be supporting a food bank organization. will continue to give at the same level, but now Prior to COVID-19, Clark W hitney said

NONPROFIT SECTOR NEWS

farm that it owns. Clark Whitney said the group is not taking donations from individuals because it does not want to encourage trips out to the grocery store.

“The food we’re providing looks different based on the best prices we can get. Healthy food costs more. If we’re just serving processed food, it potentially could be adding to the problems we’re already seeing,” Clark Whitney said.

Meeting immediate needs is the first phase of a three-phased approach being taken by Kids’ Food Basket. The second phase is replenishing the depleted food supply followed by a long-term strategy that will enable the group to meet future

also are giving to other organizations that supply food. Meanwhile, donors who support arts and culture may continue to support that while also asking how they can support the needs of children.

“Children can’t control their environment and they need us to keep them healthy and protected,” she said.

Un l i ke t he sit uat ion ch i ldren and families face in many Michigan communities, Eddy said schools in her community are continuing to provide meals during the summer. The school district she lives in has reallocated a portion of the dollars it would have spent on its summer school program to the food program.

Those organizations that have been able to meet basic human service needs during the course of the COVID-19 response will likely see an increase in financial support because there is more compassion toward addressing basic human needs, Eddy said, noting her cur— HEATHER EDDY rent clients include the Y WCA President and CEO of Kistner Eddy Executive Services i n Ka la ma zoo a nd Covena nt Community Care in Detroit.

“We know that going into economic turmoil, nonprofits in genneeds, which includes identifying new revenue eral do OK if they’re providing direct human streams to bring in additional resources. services,” she said.

Among these is a Community Supported Eddy’s personal passions that she supports Agriculture (CSA) program that gives members with her time and money are programs that the option to fund some of Kids’ Food Basket’s focus on food, housing and domestic violence. meals.

“Those who have the privilege not to be hun“This is just the beginning,” Clark Whiney said gry generally have more compassion toward of a response that will need to be long-term. feeding people in hunger,” Eddy said. “There’s Eddy agreed, adding that, “We also know that a lot of intersection we see globally around an economic crisis begins to hit people six to nine food and the importance of providing healthy months down the road.” and nutritious food to kids. Hunger becomes a She said this may mean that people who can’t health as well as a societal issue.” give financially may volunteer and that people who can give will give less because donors at all Planning ahead levels have taken a financial hit. The situation is While working to address the immediate needs compounded by the recent protests and riots, created by the pandemic, Clark Whitney said her which can further distract people from giving. organization put together a four-month emer“As people feel moved to do something about gency plan and a 14-month strategic plan for social justice, racial equity and injustice, they the year. may give to that instead of a food bank,” Eddy Since March 12, prior to the state-mandated said. closures, food costs for Kids’ Food Basket have Even so, Clark Whitney remains optimistic increased by 66 percent. The organization is about her organization’s capacity. sourcing food from local vendors and farmers “Because we’re working so deeply in all three and Feeding America, among other avenues. The phases, we are positioned to continue to serve organization also is growing food on a 10-acre our community with strength,” she said.

“Those who have the privilege not to be hungry generally have more compassion toward feeding people in hunger. There’s a lot of intersection we see globally around food and the importance of providing healthy and nutritious food to kids. Hunger becomes a health as well as a societal issue.”

Our future is bright.

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Congratulations to the Class of 2020!

grfoundation.org MiBiz / JUNE 8, 2020

21

Q&A Jelena McWilliams

IN THE NEWS

Chairman, Federal Deposit Insurance Corp.

The FDIC intends to keep providing regulatory flexibility to banks as they navigate the economic recession brought on by the COVID-19 pandemic. The federal regulatory agency wants banks to remain agile and do what they can to support consumers and small business owners during the crisis, according to FDIC Chairman Jelena McWilliams.

McWilliams, who began a six-year term on the FDIC Board of Directors in June 2018, previously served as executive vice president, chief legal officer, and corporate secretary for Fifth Third Bank in Cincinnati, Ohio. She addressed a group of bankers last week in a virtual meeting hosted by the Michigan Bankers Association to discuss issues the industry faces and the economy. McWilliams later spoke with MiBiz.

What’s your key message for banks these days?

To continue reaching out to their businesses, and small businesses in particular, to see whether they need to proactively react to the changes in the marketplace for those businesses and residential borrowers and consumers. On the other side, my message is they cannot be stressing out their portfolio internally enough because things are fluid and they’re changing on a daily basis.

The bankers need to know and understand their communities and to proactively reach out to understand what’s going on. If they have high concentrations in the industries that have been particularly impacted — and now it seems like it’s every industry, but early on it was the hospitality and airline industries, tourism and some of the supply chains that support those industries — our message is they have to take a look at those concentrations and figure out and understand how they’re going to address the risks if there’s a prolonged period to recovery.

How do you assess the state of the industry going into the crisis and the economic period that we now face?

Based on the data we’re looking at going into this crisis, which wasn’t a financial crisis — and we’re going to do everything we can to make sure it doesn’t turn into a financial crisis — luckily and fortunately banks were well capitalized (and) they had a lot of liquidity. Their loans that they underwrote were based on sound underwriting principles, so this was not like 2008. The one difference that has been worse, I would say, and more shocking to the system than 2008 is how quickly this descended upon us and the resulting government closures that resulted in business closures.

As we look at the next few months, our internal stress testing of the larger banks, and the internal stress testing of the banks themselves, have shown them to be pretty resilient, even to a shock like this. Now, the level of their resiliency is going to be tested by the duration of the times … and understanding that if it’s a quick down and a quick up, we’re going to be OK. If it’s a quick down, a prolonged down, and then some up, we’ll probably be OK, depending on how long the down is. If there is a ‘W,’ that’s going to stress everyone’s portfolios.

How have banks handled the crisis to date?

Lenders have had to adjust for this constantly evolving and changing marketplace where literally in the first few days and weeks of the pandemic back in March, you didn’t know what to expect and how to look at your portfolio, and what does this mean for the economy. I think they have been able to do enough stress-testing of their portfolios internally to take a look at the concentrations and risk exposure to be able to understand how best to navigate the landscape in the next few months. What we told them is start adjusting your loans, start modifying your loans, go ahead and reach out to your borrowers proactively on the commercial and residential and consumer side, and figure out what do they need. Do they need you to modify a loan? And if they do need you to modify that loan, tell us if you have any regulatory concerns.

What can banks expect in the regulatory environment as they navigate the economic conditions?

We have been urging with the other agencies to have utmost regulatory flexibility. Unlike the 2008 crisis, this came upon us very quickly. The lessons learned from the 2008 crisis is that it is better to be proactive, even if the issue is not clearly big at the onset, but you don’t want it to develop into a big issue. I call it putting out fires. You want to put it out while it’s still small. So, we have decided to give utmost flexibility on our exams. Banks can be a vehicle to recovery. We need to make sure there are no roadblocks to that vehicle.

What’s an example of the FDIC’s flexibility?

All of our exams have moved offsite. We informally surveyed our banks early on in March to see, would they prefer to continue with their exam on the current schedule. Surprisingly, most of the banks said yes. The banks that asked for a delay — not many have, but some have — we granted 30 to 60 days.

Then we had a handful of banks that were unable to proceed because they have personnel that is affected directly by COVID-19. We don’t want to put on the added pressure of having to go through a bank exam while they’re dealing with key personnel that have been impacted.

What’s your expectation of banks during this period?

I’m urging management teams at different banks to think through the experiences they have had in the past and to proceed wisely, knowing that we’re not going to be back to maximum employment for some time, which could be years. So in the meantime, they will have to adjust their portfolios, they will have to err on the side of being more prudent, rather than less. This is definitely — and more of the banks that I’ve talked to have agreed — and absolutely no time to be exuberant.

What’s your biggest concern right now?

The overall economy. Sooner or later we’ll have a vaccine, and the question in the meantime is what happens with folks who actually can’t make their bills. Government stimulus can only go so far, so it is going to be crucial that we reopen the economy and be smart about it because there are absolutely people dependent on daily income.

A lot of our community banks are small. They function in local communities and they’re overwhelmingly represented in rural communities, and in those communities you don’t have many choices for jobs.

When local businesses close, some of them won’t be able to withstand the shock. What does that mean for the local communities and what does that mean for the survival of small banks in America?

What permanent changes do you see coming out of this for the banking industry?

What I think is going to be the biggest long-term change, and it’s not actually driven by the pandemic, is there has been a shift to digital channels. There has been a transformation in the sector of more banks going digital and delivering services and products digitally, and now because of the pandemic their systems have been tested and a lot of them have fared very well. So, if anything, there’s a silver lining: the ability of banks to transform their processes to go digital. I think you’re going to see the digital evolution exacerbated at every level of banking.

Interview conducted and condensed by Mark Sanchez.

22

JUNE 8, 2020 / MiBiz

COURTESY PHOTO

M&A

n Family-owned investment firm Coastal Group has acquired Bogalusa, La.-based Veecor Co. Inc., a honeycomb packaging manufacturer, and has moved all of the company’s operations to Holland.

Two Veecor employees also moved permanently to the Holland area to remain with the company, while another is working remotely on a contractual basis, according to a spokesperson. The acquisition and launch of Coastal Honeycomb LLC is expected to lead to 12 new jobs in Holland to produce the company’s lightweight packaging materials, according to a statement. Coastal Group’s holdings also include Coastal Automotive, Coastal Container and TKP Investments. With the Veecor deal, the company’s packaging services now span design, testing, corrugated, honeycomb, packaging supplies and foam.

Terms of the Veecor deal were not disclosed.

EXPANSION

n Kentwood-based Integrated Architecture LLC will invest about $2 million into renovating a 13,600-square-foot building at 840 Ottawa Ave. NW north of downtown Grand Rapids into its new headquarters. Integrated Architecture plans to occupy the newly renovated space in the Monroe North district in mid to late November this year. The new office will be designed for 70 people, but 50 people will move into the building initially, with the opportunity for growth, said Mike Corby, executive vice president of Integrated Architecture. The architecture and engineering firm first proposed the headquarters relocation project in 2017. Integrated Architecture is working with Caledonia-based FCC Construction Inc. for the exterior and site work, and Grand Rapids-based Rockford Construction Co. Inc. for the interior improvements.

Van Haren Electric Inc. and River City Mechanical Inc. are also part of the renovation project.

FUNDING

n The U.S. Department of Agriculture has awarded $22.5 million to expand rural broadband access to thousands of residents and dozens of businesses in Southwest Michigan. The $11.8 million for Barry County Services Co. will be a combination of grants and loans for fiber-based broadband access for 17 farms, 16 businesses and 12,000 residents over 127 square miles. The remaining $10.7 million for Southwest Michigan Communications Inc. is a combination of grants and loans for fiber-tothe-premises (FTTP) broadband in Van Buren and Allegan counties, extending access to 22 farms, 19 businesses and 7,700 residents over 100 square miles. n Grand Valley State University raised $130 million via its Laker Effect capital campaign. Launched in 2012, the campaign was the largest GVSU ever conducted. The university originally sought to raise $85 million. After exceeding that goal, GVSU a year ago raised the goal to $100 million, as MiBiz previously reported.

GVSU received contributions from a record 35,000 donors. Proceeds from the Laker Effect campaign will go toward increased scholarships, expanded academic programs, and facilities such as the Health Campus near the Medical Mile in Grand Rapids, as well as to support programs for students.

DEVELOPMENT

n New York City-based developer Magnus Capital Partners has proposed a 240-unit affordable housing complex along Lake Michigan Drive on the west side of Grand Rapids. Subject to final site plan approval, the development will consist of five, fourstory buildings located at 3059 Lake Michigan Drive NW. The developer plans to apply for the competitive Low Income Housing Tax Credits for all 240 units included in the development, said Vishal Arora, managing principal with Magnus Capital Partners.

The apartments will be pet-friendly with amenities including a dog park on site, walking paths and a fitness center, according to the preliminary plan overview. Units will consist of 40 one-bedroom units, 102 two-bedroom units, and 98 three-bedroom units.

MANUFACTURING

n Specialty vehicle and chassis manufacturer Spartan Motors Inc. has changed its name to The Shyft Group Inc. and relocated its corporate headquarters from Charlotte to Novi. The name change comes after the company divested its emergency response vehicles division to Milwaukeebased REV Group Inc. back in February 2020 in a $55 million cash deal. The REV Group also purchased the rights to the “Spartan” name and logo, prompting the name change for the company.

HEALTH CARE

n Blue Cross Blue Shield of Michigan reports a surge in the number of physicians now offering telehealth visits for patients. The COVID-19 pandemic and assistance for doctors to adopt or expand a platform pushed the telehealth participation rate to 82 percent over four weeks among Blue Cross Blue Shield participating physicians, an increase of more than 72 percentage points from a rate of less than 10 percent previously. The health insurer helped drive that rate far higher by offering up to $5 million in incentives to physician groups to assist in launching or expanding a telehealth service and provide virtual visits to patients. n Pine Rest Christian Mental Health Services added an urgent care telehealth service as a way to provide greater convenience and access to mental health care. People experiencing symptoms and needing mental health care can get assessed the same day by a Pine Rest clinician through the telehealth service. Pine Rest added the service for urgent care after transitioning to telehealth weeks ago for all outpatient sessions during the COVID-19 pandemic and seeing how well that has worked. An urgent care telehealth service “was the obvious next step,” said Megan Zambiasi, director of clinical practice at Pine Rest Hospital and Residential Services.

FINANCE

n Grand Rapids-based Independent Bank Corp. raised $40 million in a debt offering that comes amid the economic downturn and uncertainty from the COVID-19 pandemic. Independent Bank (Nasdaq: IBCP) completed the offering of subordinate debt through a private placement. Proceeds raised from the fixed-to-floating rate subordinated notes that are due in 2030 “will be utilized for general corporate purposes,” according to the bank. Both the corporate holding company and Independent Bank “are well capitalized today and our forecasts have us continuing to be so prospectively,” President and CEO Brad Kessel said. “With the significant uncertainty in the current operating environment, we thought it prudent to raise this capital today as it will provide additional flexibility for greater-than-expected challenges and/or take advantage of opportunities over the next 12 to 36 months.”

BANKRUPTCY

n Grand Rapids-based BarFly Ventures LLC, the parent company of the HopCat chain of beer bars, filed for Chapter 11 bankruptcy last week in the U.S. Bankruptcy Court for the Western District of Michigan. The company said in court documents that it had $1 million to $10 million in assets and $10 million to $50 million in liabilities. BarFly operates more than a dozen HopCat locations in Grand Rapids, Holland, Kalamazoo and East Lansing, as well as in Southeast Michigan and throughout the Midwest. The company also runs Grand Rapids Brewing Co. and Stella’s Lounge in Grand Rapids. Founder and Chairman Mark Sellers III said the restaurants and bars will reopen amid the bankruptcy proceeding. BarFly estimates that it has 50-99 creditors, according to the court filing. The company is represented in the case

by Warner Norcross + Judd LLP and Pachulski Stang Ziehl & Jones LLP. Visit www.mibiz.com

We’ll get through this together.

To all the unsung heroes who provide for our health, our safety, our wellbeing, our food, our supply chain—thank you from all of us at Enbridge.

To those of you staying home, practicing social distancing and flattening the COVID-19 curve, we also say thank you.

We’re working closely with our nonprofit community partners, our closest Indigenous and Tribal neighbors, and local governments to help where resources are needed most—including food banks, social service agencies, mental health organizations, first responders and health care providers.

The energy we deliver, safely and reliably, heats homes, fuels lives and keeps vital services operating. While we continue this essential work, we have also taken steps with our people and in our workplaces to do our part to help prevent the spread of the virus.

Stay healthy. Stay safe. We’ll get through this together.

Visit www.mibiz.com

MiBiz / JUNE 8, 2020

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Since we first opened our doors in 1858, we’ve put our clients and their businesses at the center of Andeverything we’re here to wehelp do. make it happen.

And that’s never going to change.

We’re here to answer your questions.

For the most up-to-date information, speak to your relationship manager, or visit us at 53.com.

Our business continuity plans and preparations ensure that critical functions will continue in the event of any disruption, with policies, people and processes aligned to provide continuous service.

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Our experts are continually focused on maintaining the safety, security and success of your business today and in the future.

For more information on how we can help with COVID-19-related disruptions to your business, visit 53.com.

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