MiBiz August 3, 2020 print edition

Former jail eyed for space command center

Biz groups push for liability protections during pandemic

PAGE 3

PAGE 10

AUGUST 3, 2020 • VOL. 32/NO. 21 • $3.00

SERVING WESTERN MICHIGAN BUSINESS SINCE 1988

LITIGATION, VACANT SPACES:

Leveraging tribal sovereignty gives cannabis firm entry to off-limits Michigan markets

How COVID-19 is shifting commercial real estate

By KATE CARLSON | MiBiz kcarlson@mibiz.com

W

hen a California-based marketing firm consolidated 450 employees from Grand Rapids-area offices into a vacant commercial building three years ago, the move was celebrated

by Wyoming city leaders and supported by a $550,000 state business development grant.

Since the COVID-19 outbreak, however, those Advantage Solutions employees have been working remotely. Although the company still has the space under lease, the offices and parking lot were empty on a recent Thursday morning.

It’s unclear whether the company’s employees will return to the former Klingman’s Furniture and Roger’s Department Store location, since current state guidelines require employers to promote remote work “to the fullest extent possible.” Companies that require employees to leave their homes must abide by numerous safety procedures, including wearing face coverings in shared spaces, adopting cleaning protocols, and following social distancing practices.

This example is one of many ways the COVID-19 pandemic and ongoing concerns about the virus spreading are causing key shifts in the commercial real estate market, driven by remote working and a decline in business activity. The pandemic-led closures also are leading to new litigation over unpaid rent and raising questions about the future uses of space, all while landlords and tenants seek recourse.

For some commercial properties, the pandemic created immediate cash flow challenges as tenants saw steep revenue cuts.

Brad Defoe, a litigation attorney at Grand Rapids-based Varnum LLP, said landlords are quicker to work with smaller mom-andpop tenants struggling to pay rent than larger companies.

“There is a sense of ‘we’re all in this together,’ so some are willing to negotiate with tenants and will let them pay back rent at the end of their lease or defer payments,” Defoe said.

Conversely, Defoe has seen several recent cases filed in which landlords are suing national companies for back rent owed on retail spaces.

See REAL ESTATE on page 8

P

E

R

I

O

D

I

C

A

L

www.mibiz.com

By JOE BOOMGAARD | MiBiz jboomgaard@mibiz.com

Last month, Lume Cannabis Co. opened a provisioning center in Bear Lake Township on land held in trust for the Little Traverse Bay Bands of the Odawa Indians. While the township opted out of allowing marijuana businesses, those restrictions do not apply on sovereign tribal trust lands. COURTESY PHOTO

SAULT STE. MARIE — Lume Cannabis Co. has figured out a way to open retail marijuana dispensaries within communities that have blocked businesses that participate in Michigan’s adult-use market.

For the vertically integrated marijuana company, the strategy lies in leveraging the benefits of tribal sovereignty, while simultaneously operating within the state’s regulatory scheme for the industry.

Last month, Troy-based Lume opened retail dispensaries in Bear Lake Township near Petoskey and in Mackinaw City, its ninth and tenth stores in the state, and announced plans for a dispensary in Sault Ste. Marie in the eastern Upper Peninsula after receiving license approval from the state’s Marijuana Regulatory Agency.

Each of the municipalities surrounding the company’s stores opted out of the state’s recreational marijuana market, as allowed under the 2018 law passed by voters that legalized the drug. However, local and state restrictions do not apply to lands in those communities that are held in trust for federally recognized American Indian tribes, which are sovereign nations under federal law.

“We govern our lands that are often located within other municipalities,” said Joel Schultz, executive director of Sault Tribe Economic Development, the nongaming arm of the Sault Ste. Marie Tribe of Chippewa Indians that is leasing trust land to Lume in Sault Ste. Marie.

See LUME CANNABIS on page 9

New diversity-focused VC fund seeks $5M locally before making national pitch

By MARK SANCHEZ | MiBiz msanchez@mibiz.com GRAND RAPIDS — A new venture capital fund to invest in businesses owned by racial and ethnic minorities looks to secure financial backing locally before reaching out nationally for investors.

Organizers of the Grand Rapids-based New Community Transformation Fund LP want to secure an initial $5 million commitment from local investors before approaching prospective investors across the country. That would give the venture capital fund momentum and the credence that’s needed to make the case

to prospective investors elsewhere.

“We have to do something significant as a community to let the nation know that we’re serious,” said Skot Welch, managing partner of the New Community Transformation Fund. “We have to vote with Welch our dollars as a community, and if we don’t, it’s another exercise in theory.”

In a move to do more to support economic inclusion, The Right Place Inc. last year initiated the formation of the New Community Transformation Fund to invest in businesses

owned by people of color. That’s been an area where venture capital historically has flowed the least.

The new venture capital fund aims to raise up to $25 million. Founders in January announced the formation of the fund with the backing of $200,000 each from Bank of America and the Consumers Energy Foundation to pay startup costs such as legal work.

Organizers formally established the fund in May as its own entity and have since made nearly 20 presentations to prospective investors locally that led to the first $2 million in commitments.

Grand Rapids-based Mercantile Bank Corp.

See NEW VC FUND on page 19

S

Banks boost loan-loss reserves PAGE 19

INSIDE:

Nine Industries Disrupted by AI SEE PAGE 14

Creative Ways to Cut Down Your Business’s eDiscovery Costs Advertisement

In the wake of COVID-19, litigation is on the rise, and with that, escalating costs.

Electronic discovery (“eDiscovery”) is often the most expensive component of litigation. As we use more technology in our daily lives – computers, cell phones, email, smart watches, smart home devices, etc., the amount of data we are creating is growing exponentially. When litigation strikes, that data now must be collected, reviewed and potentially produced.

COVID-19 has disrupted what we all knew as “business as usual.” Organizations are leaving no stone unturned when reevaluating business expenses and processes. This may finally be the time to address your organization’s litigation and eDiscovery process – and could prove to be one of your biggest cost-savings opportunities.

So what are some key strategies to cutting costs in litigation and more specifically, eDiscovery? Warner Norcross + Judd attorneys Janet Ramsey, Madelaine Lane and Scott Carvo offered cost savings strategies in a recent webinar titled, “Strategies for Reducing Litigation Spend During COVID-19.” Here are some of their key strategies for reducing litigation and eDiscovery costs:

1. Have a Plan: The best time to prepare for a grand jury subpoena, search warrant or a document request is to proactively prepare in advance. Do you have a plan for when law enforcement knocks on your door? If not, it is time to put one in place.

Develop a one-page policy for how you want your employees to conduct business communications – limiting or eliminating instant messaging and texting as a way of doing business. Develop a records retention policy that is accessible and limits the amount of data you keep.

2. Identify Key Personnel and the Locations of your Data and Documents: Identify members of your HR, administrative, board and legal counsel and equip them with the knowledge and information they need if a situation occurs.

Put a system in place of where and how documents are stored and accessed, and how to obtain these documents remotely.

3. Engage Early: Do not let a subpoena or document request sit on your desk.

Contact your legal counsel right away. It takes time to identify sources of potentially relevant documents and then collect and review the material. And, extensions are not always possible. It is also important to be part of the discovery process with your legal counsel. A collaborative process that begins on the front end will reduce expenses and liability throughout the process.

4. Choose Experienced Litigation and eDiscovery Counsel: Consider what kind of legal counsel makes the most sense. Choosing experienced attorneys with a dedicated eDiscovery team will keep the knowledge centralized, which is more efficient. Also, decide up front with your legal counsel if the case is a “bet the company case,” or if there are alternatives to resolving the case.

5. Narrow Your Scope: Contrary to popular belief, you don’t need to look under every rock. Understand your risks and develop a strategy to focus only on the necessary documents and evidence. Define your business goals in the beginning and work backwards from there.

6. Leverage Technology: Speak with your counsel early about ways to use technology, like technology assisted review (TAR), to reduce costs. Warner regularly uses TAR to quickly and efficiently identify likely relevant documents, reducing the number of documents that need to be reviewed by the eDiscovery attorneys.

Because the cost-savings benefit of predictive coding comes from the dramatic reduction in the number of documents that need to be reviewed, these savings can be substantial.

7. Meet with Your Counsel after the Case is Resolved: It is true that after a case is resolved, no one wants to see their attorney again. However, you could miss a big opportunity to conduct a “lessons learned” evaluation and uncover ways to cut costs going forward. This is an incredible opportunity and can end up saving you a lot of money.

Warner’s Data Analytics and eDiscovery Practice Group is one of the largest in the state of Michigan, with 23 attorneys who focus on pre-litigation and litigation strategies, including 10 full-time, experienced eDiscovery project managers and staff attorneys with well-established protocols and practices in all aspects of data review, production and quality control. Warner’s project management and review group members are fully integrated with the client’s trial team and in-house counsel via video conference calls and a web-based dashboard with advanced metrics for each project.

For more information about Warner’s litigation and eDiscovery services, contact Warner attorneys:

Madelaine Lane 616.752.2468 mlane@wnj.com

Scott Carvo 616.752.2759 scarvo@wnj.com

www.wnj.com

Here for you today.

And tomorrow.

In this time of uncertainty, the business world is pivoting faster than ever before with new challenges emerging every day. We are grateful to our customers who have entrusted us to help them prepare and get through these challenges over the last 150 years. Whether it is today or a distant tomorrow, Commerce Bank is here for you.

Mike Hollander 616.233.0437

commercebank.com © 2020 Commerce Bancshares, Inc.

Commercial MiBiz FY20 Print Ad_10.25x6.625.indd 2 WF591218 AUGUST 3, 2020 / MiBiz

1

4/8/2020 10:16:37 AM

Visit www.mibiz.com

Northern Michigan tribe pitches former Pugsley jail site for space command center

By JAYSON BUSSA | MiBiz jbussa@mibiz.com KINGSLEY — Among the many plans sketched out for the Grand Traverse Science and Technology Innovation Center, the roughly 145-acre location could potentially become a key component in making Michigan a bonafide space state.

Owned and operated by Grand Traverse Economic Development (GTED), the non-gaming commercial investment arm of the Grand Traverse Band of Ottawa and Chippewa Indians, GT STIC is a proposed site for a state command and control center, the final piece of a growing space ecosystem in Michigan.

The GT STIC has taken up residency at the former Pugsley Correctional Facility in Kingsley, a 1,300-bed state prison complex that was shut down in 2016.

The process of creating this ecosystem began in June of last year when the Michigan Legislature appropriated $2 million to assess the feasibility of developing one or more low-orbit launch sites in Michigan. This year, the Michigan Aerospace Manufacturers Association (MAMA), a membersupported organization that serves the interests of Michigan’s aerospace and defense manufacturing firms, revealed that Oscoda and, more recently, Marquette were ideal for the horizontal and vertical launching sites, respectively.

Operations are expected to begin in Marquette in 2025 and in Oscoda in late 2023.

Along with the yet-to-be-announced command and control center, MAMA hopes to build out all three components fully by 2025.

Establishing both launch sites and the command and control center would create 2,000 jobs, while employment could balloon to 40,000 jobs once they’re fully built out, according to MAMA. “It would bring hundreds of jobs to the area — higher paying, I.T., technology jobs but it will also bring construction opportunities and other work,” Grand Traverse Economic Development CEO Roger Stull said of the prospect of the command center coming to Kingsley. “It would also bring a lot of companies to the area — probably satellite system companies and others that could be involved in the whole (Michigan Launch Initiative).”

MAMA has conducted a phase one feasibility study on the GT STIC, which takes into account landscape, resources and assets. In many ways mimicking a military base, GT STIC is certainly attractive to MAMA as the public awaits the official announcement, slated for November or December.

Gavin Brown, executive director of MAMA, said that GT STIC is one of 10 candidates that are all on equal footing.

“GTED has done a good job of vertically integrating many different aspects of engineering, manufacturing and addressing both the ecosystem of capabilities and advanced manufacturing and then looking outward and saying ‘Where is this most applicable?’” Brown said. “With our organization, it’s utilizing those capabilities for space and aerospace.”

Training focus

In addition, GTED will be home to STEM, manufacturing, construction and other trades training and certification courses and on-site technology Seeking tenants job opportunities for Grand Traverse Band and GTED has been busy over the spring and sumother tribe members, veterans and more. mer preparing the former Pugsley Correctional “A large component of what we’re doing here Facility to welcome tenants and serve as a home is trades training for manufacturing, construcfor a variety of jobs training. tion, any of these advanced manufacturing operGrand Traverse Engineering and Construction ations,” Bussey said. “(We’re doing anything) to (GTEC), a tribally-owned firm specializing in civil get our service members who are leaving service engineering, construction management, and trained into new career paths — any of the tribal transportation planning, has been managing the members of any tribe and also really for anyone. property and spent the spring and summer workSince we operate a diverse array of business lines ing on infrastructure upgrades to the old correcunder the GTED umbrella, we’re kind of serving tional facility. GTED’s vision for GT STIC is to our self-interest by building this pipeline of talutilize the 40 acres inside the ent to work at our various secure fencing and 105 acres “A large component companies.” outside, in addition to about GTED considered other of what we’re doing a dozen buildings on campus. properties for GT STIC here is trades training before Pugsley became GTED is in the process of welcoming in two early tenavailable, but the former for manufacturing, ants, one of which is Bayshore correctional facility was construction, any Steel Works, a company it too good to pass up after a of these advanced acquired in January 2019. redevelopment project fell Bayshore Steel Works is a through at the beginning of manufacturing Charlevoix-based steel fabrithe year. operations.” cator that works as a defense “ We w e r e a l r e a d y subcontractor making searching for prop— PAUL BUSSEY erty in the Traverse City/ armored plating for products.

CEO of Grand Traverse Engineering The expansion at GT STIC Grand Traverse area for and Construction allows BSSW to do work that the Bayshore expansion,” it would otherwise outsource, Bussey said. “We had setwhich is a rarity for a steel tled on a couple of sites that manufacturer to manage the entire spectrum of were interesting and we were down to the wire its production. to make a decision on the property. (Then) we “One process they hire out is a water jetting became aware of the Camp Pugsley facility – it operation,” said Paul Bussey, CEO of GTEC. “If wasn’t an option before. they have certain cuts in the steel that require a “We said, well, this checks the box for what water jet, they hire that out. Instead of continuing Bayshore was requiring but also all the opporon that path, they’re able to bring that in house tunities that were available based on the existand do that in Traverse City.” ing infrastructure, amount of property that was Satellite communications firm ATLAS Space available and it was in line with a couple of the Operations, a prototypical tenant GTED is other businesses that (we had developed). ... It wooing to the facility, also will set up a satellite was a very logical process.”

WHATEVER IS

NEXT…

communications asset on the property with a second one planned shortly thereafter.

GTED continues to seek GT STIC tenants in industries such as aerospace and satellite manufacturing, cloud-based big data, data warehousing, secure data centers, product distributors and other associated industries.

For Grand Valley students, next is opportunity and innovation. Next is global, connecting and uniting us. It’s local, shaping the spaces in which we work and live. It’s a commitment to progress. Next is where minds are free to imagine what could be.

At GVSU, next is now. And whatever’s next for you, we will help you get there.

Published since 1988 MiBiz® is a registered trademark of MiBiz, Inc.

Publisher Brian Edwards / bedwards@mibiz.com Associate Publisher Denise Montambo / denise@mibiz.com Editor Joe Boomgaard / jboomgaard@mibiz.com Managing Editor Andy Balaskovitz / abalaskovitz@mibiz.com (energy, policy) Senior Editor Jayson Bussa / jbussa@mibiz.com Senior Writer Mark Sanchez / msanchez@mibiz.com (finance, health care, life sciences) Staff Writer Kate Carlson / kcarlson@mibiz.com (real estate & development, small biz) Contributing Reporters Marla Miller, Jane Simons Copy Editor Claire Boomgaard VP of Production & Audience Development Kristi Kortman / kkortman@mibiz.com Senior Advertising Consultant Shelly Keel / skeel@mibiz.com Digital Specialist Danielle Affholter graphics@mibiz.com

Circulation For address corrections or subscriptions, contact MiBiz at 1-877-443-1977 or subscribe@mibiz.com

MiBiz ISSN 1085-4916 • USPS 017-099 Established 1988 MiBiz is published every other week by MiBiz, Inc., P.O. Box 1629, Grand Rapids, MI 49501. Telephone (616) 608-6170. Fax (616) 608-6182. E-mail: info@mibiz.com.

Subscription changes: subscribe@mibiz. com. Periodicals Postage is paid at Grand Rapids, MI. POSTMASTER: Send address changes to MiBiz, P.O. Box 1629, Grand Rapids, MI 49501. Subscriptions are available without cost to qualified readers. Paid subscriptions are available to those not meeting qualified circulation requirements. Paid subscriptions are $99/year. Single copy and back issues (when available) are $3 each, plus first class postage. Call 1-877-443-1977 to order.

HEADQUARTERS 1059 Wealthy St. SE, #202 Grand Rapids, MI 49506 616-608-6170 phone • 616-608-6182 fax COPYRIGHT ©2020. All Rights Reserved.

Reproduction or use of any portion without permission of the publisher is prohibited.

gvsu.edu/next

Visit www.mibiz.com

MiBiz / AUGUST 3, 2020

3

FOCUS: INDUSTRY 4.0

Pandemic pushes manufacturers to lean on, reconsider Industry 4.0 technologies

By JAYSON BUSSA | MiBiz jbussa@mibiz.com

W

hen the effects of the COVID19 pandemic made life complicated for Eaton Corporation plc’s Vehicle Group, the company leveraged Industry 4.0 technology to wade through it all.

Eaton, whose Vehicle Group is headquartered in Galesburg east of Kalamazoo, provides automotive and commercial vehicle manufacturers around the globe with products and systems.

As a corporation that generated $21.4 billion in revenue last year, employs 95,000 employees and sells products to clients spread throughout 174 different countries, Eaton (NYSE: ETN) faced plenty of hurdles. However, its Vehicle Group also had advanced resources to work with.

“I think certain elements (of Industry 4.0) during a COVID situation are going Georgetti to help more than others,” said Alexandre Georgetti, director of manufacturing strategy for Eaton’s Vehicle Group. “For example, when you think about augmented reality, that’s one of the things we’re leveraging a lot.

That was really a big contributor during this COVID-19 Burdette situation because it allowed us to connect with our team faster and in a more safe way.”

With the aid of Microsoft’s HoloLens 2 augmented reality goggles, Eaton team members could project 3-D images in a physical space so that technical work could be conducted remotely. The company also used augmented reality to train operators and engineers on new equipment without instructors having to travel from facility to facility.

And that was just part of Eaton’s space-aged operations. The company also uses digital simulation to improve production efficiency in addition to autonomous robots — autonomous automated guided vehicles (AGVs) or autonomous mobile robots — and cobots that handle both complex and repetitive tasks.

While these measures encouraged efficiency and employee safety through social distancing, they were not specifically developed and implemented because of the pandemic. Rather, they are part of a robust Industry 4.0 infrastructure already

put in place by the auto supplier, which is run from Beachwood, Ohio and headquartered in Dublin, Ireland. The pandemic did, however, change Eaton’s Industry 4.0 strategy in the short term. “(COVID-19) made us expand (our strategy) in a couple of different areas,” Georgetti said. “For example, our work on AR, we had a plan that was to cascade it to all of our global sites at a certain pace. Because the pandemic came, we sped up that plan to make sure that all the sites would have the hardware and software so we could leverage that straight away globally.”

Georgetti said the Vehicle Group continues to evolve on the Industry 4.0 front, tweaking its strategy as it goes along to meet the evolving challenges of the industry.

“We hold weekly calls with our global teams because if a best practice is identified in one of our regions, we share that so the other sites can also leverage that everywhere,” he said.

Accelerated innovation Many of the technologies involved in Industry 4.0 — everything from additive manufacturing (3-D printing) and simulation to the cloud and autonomous robots — are proving beneficial in navigating the rigors of an unprecedented health pandemic.

Some manufacturers are looking to make a sharp pivot to manufacture PPE, PPE components or other products made available from reshoring work from low-cost countries. Others are trying to facilitate remote workforces and socially distanced in-person workforces.

Manufacturers that are already invested in Industry 4.0 technology certainly found a leg up throughout the process so far.

“I think what you’re seeing is some of them that have set themselves up on 4.0 already are at an advantage at this point,” said Ryan Lillibridge, director of business development at Hollandbased Mission Design & Automation LLC, which works with manufacturers to concept, design, build and integrate custom automation cells.

“They’re able to run their factories a little bit easier if they already have 4.0 ideas, that connectedness in place,” he said. “I think other ones are probably seeing they’re probably behind on that.”

While the COVID-19 pandemic may have accelerated some innovations, manufacturers also have been forced to innovate quickly, especially if they want to capture business opportunities associated with it.

In situations where manufacturers are looking to try something new, the team at Mission Design & Automation strives to serve as a partner to move the process along quickly.

BUILDING ON OUR PROMISES Construction. Commitment. Unparalleled.

4

AUGUST 3, 2020 / MiBiz

Eaton Corporation’s Vehicle Group, which is based in Galesburg in Southwest Michigan, has leveraged Industry 4.0 technologies during the pandemic to keep operations running as smoothly as possible. COURTESY PHOTOS

www.triangle-inc.com

“Short-term strategy can be very reactive,” said Scot Lindemann, who took over as CEO of Mission Design & Automation in January and has worked with clients to adapt to their automation needs.

“The ability to pivot quickly and listen to your customer is keeping you on the forefront of being their supplier of choice for automation,” said Lindemann, who also previously led Hollandbased JR Automation. “The relationships you have with those end users and with the customers allows you to follow them as they’re pivoting back and forth, because quite honestly, their long-term plans are up in the air and everything is a short-term, reactionary plan right now.”

Silver linings While the COVID-19 pandemic stress tested the existing Industry 4.0 strategies of some manufacturers, it served as a bit of a reckoning for the many companies who have yet to give much thought to it.

The disruption in how manufacturers do business during the pandemic provided an opportunity to step back and truly assess operations.

Tom Kelly, executive director of Automation Alley in Troy, which is a World Economic Forum Advanced Manufacturing Hub and Industry 4.0 knowledge center, said that the primary barrier standing in the way of a manufacturer and Industry 4.0 technology is culture, and quite frankly, stubbornness.

The trials of the COVID-19 pandemic may have served as an epiphany for these businesses.

“The silver lining in this pandemic is that the culture has been blown up completely,” Kelly said. “The pandemic required us to think differently. They’re saying ‘Hey, I can’t work side-byside, I have to figure out what I need to do differently.’ They all figured it out and these processes are still being figured out on the fly. But they’re getting it.

“The silver lining of COVID is that it’s accelerating 20 years of culture change in six months.

It’s crazy to watch.”

Justine Burdette, regional director for the Michigan Manufacturing Technology CenterWest office in Grand Rapids, highlighted that another silver lining to the COVID-19 pandemic was that some manufacturers are unlocking the capital needed to start investing in Industry 4.0 technology.

“I just heard recently from a couple other folks that some manufacturers are using their newly found travel dollars to actually push them into innovation projects, including automation that they just kind of had sitting on the shelf. It’s like ‘OK, when we get the capital for a project, we’ll pick one off the shelf, and decide what we want to do,’” Burdette said.

“And now, because people aren’t traveling as much, they’re like, ‘Hmm, OK, here’s some space and some dollars in our budget that we didn’t have before.’ I think people are making some lemonade out of lemons.”

This found money, paired with the fact that technology providers and automaters are also struggling for business during the pandemic, makes for a great time to buy, Burdette added.

“If you’re a manufacturer who was well capitalized and you had prepared for a rainy day, the rainy day is here,” she said. “If your business is at a stable point where you can actually capitalize on some of these opportunities, now is a great time to buy a robot — most of them are on sale.

Or, now is a great time to add some automation to your shop floor.

“Most automation implementers are slower and have super short lead times. If you wanted to put something in small, test it and then put it in elsewhere, now would be the time to do that because it can be done relatively quickly.”

“If you’re a manufacturer who was well capitalized and you had prepared for a rainy day, the rainy day is here. If your business is at a stable point where you can actually capitalize on some of these opportunities, now is a great time to buy a robot — most of them are on sale.”

— JUSTINE BURDETTE Regional Director for MMTC-West

Visit www.mibiz.com

O U R

R E A C H B U T

C O U L D N ’ T

M A Y

O U R B E

B E

H E A R T S M O R E

Being a part of West Michigan for over 50 years has not only shaped who we are as a company, it’s profoundly impacted us as individuals. Its work ethic and passion for innovation are infused in our DNA. We are known throughout the world for our excellence in developing automotive décor components, and we attribute much of our success to the place we call home.

Visit www.mibiz.com

G L O B A L , L O C A L .

lacksenterprises.com

MiBiz / AUGUST 3, 2020

5

FOCUS: INDUSTRY 4.0

Manufacturers balance generational knowledge, skills to achieve effectiveness in Industry 4.0

By JAYSON BUSSA|MiBiz jbussa@mibiz.com

W

hen Rolar Products Inc. recently added a 10-axis Swissstyle screw machine to its shop floor, the Muskegon-based provider of precision machine products turned to its senior-most employee to take the reins of the latest innovation.

“We’ve been in the screw machine business for 35 years and one of our original employees is here — he’s been here for 35 years,” Rolar Products President Jack Russell told MiBiz. “He ran screw machines (throughout his career) and we’re training him on the big brother, automated, magic machine that can do 10 axes. A lot of that machining talent and knowhow transfers.”

That situation is essentially a microcosm of a talent dilemma that many manufacturers are

dealing with as they migrate to the smart technologies associated with Industry 4.0.

Manufacturers such as tool and die makers that rely heavily on the advanced skills of senior workers are left trying to balance that with the incoming Industry 4.0-centric talent that is traditionally lighter on the skills but more tech savvy.

Rolar’s latest investment is certainly a stride in the direction of Industry 4.0. The bar-fed

“Education has been a struggle since technology entered the workplace. I think our educational institutions are doing a decent job, but my vision is something so symbiotic and so together that it’s working at a much faster pace.”

— JOHN WALSH President of the Michigan Manufacturers Association

CNC machine is capable of running continuously as long as it has feedstock.

Right now, Rolar operates the machine unattended during the second shift, and when that crew goes home, it remains operating overnight, dumping products in the bin roughly every 16 seconds.

Russell said that while the machine is currently underutilized because of a dip in demand brought on by the COVID-19 pandemic, he eventually looks to acquire additional models for the company.

Building up an army of these machines can ultimately lead to a lights-out factory floor, where humans are only used to feed materials throughout the operation.

This scenario is considered by many to be the end game of Industry 4.0, seemingly eliminating the human element from operations as much as possible and achieving greater speed and efficiency. However, humans will always be a factor — and the talent has a profound influence on a shop’s ultimate effectiveness.

“Technology is not the end all, be all,” said Justine Burdette, director of the Michigan Manufacturing Technolog y Center-West (MMTC) in Grand Rapids. “We’re not there yet. Humans are still going to have jobs, but they may look and feel a little different going forward.”

Changing of the guard

Running a growing business is difficult enough. And as you grow, knowing what resources are available, where to find them, and when to reach out can be another challenge entirely.

Fortunately, we're here to help make those challenges easier. The Right Place is your single source for business success in West Michigan, providing you with the tools and support you need to continue doing what you do best-running your business.

Find guidance, resources, and a team ready to assist at rightplace.org.

THE

RIGHT PLACE

Advancing the West Michigan Economy

info@rightplace.org \ 616-771-0325

6

AUGUST 3, 2020 / MiBiz

During this transition time, where many manufacturers are just now starting to embrace Industry 4.0 technology, the balance of knowledge and skill is a delicate one.

“The skills that perhaps an older generation has — I think about a tool and die maker, that’s still a lot of times a really hands-on, knowledgebased role,” Burdette said. “There has been innovation, there are ways to automate some of that work, but still it does come down to a very skilled person and that knowledge still has to be transferred from person to person.”

This exchange of knowledge can manifest itself in many forms, from sitting Walsh side-by-side at a bench or through developing some form of digital training. In some cases, a robot can be trained to carry out some form of the required tasks.

“I think about the sheer tribal knowledge of processes and how things are done in any manufacturing business,” Burdette said. “I think about any job you could have on a manufacturing floor: Who teaches you how to do it? It’s usually one of the most senior people on the floor who has done it for a long time.

Are there ways we can capture that extensive knowledge?”

With the generational exchange of knowledge and skills being so important to the Visit www.mibiz.com

Kelly Q&A Thomas CEO, Automation Alley Widely considered to be a trusted authority on all things Industry 4.0, Thomas Kelly serves as executive director and CEO of Troy-based Automation Alley, where he oversees strategic planning and all ongoing activities for the Industry 4.0 knowledge center. Kelly has developed programs and resources that help businesses increase revenue, reduce costs and make strategic decisions through Industry 4.0 strategies. He spoke with MiBiz about how manufacturers are reacting during the pandemic and how they should approach Industry 4.0 technologies — sooner rather than later.

Have we seen the merits of Industry 4.0 on display during the COVID-19 pandemic as it played a role in helping manufacturers solve unique challenges?

It’s been really bittersweet. Here we are involved in this terrible pandemic that is taking a real human toll. Companies that were moving along this digital path when the pandemic hit and we had to go into lockdown, those companies that have been preparing fared very well. It tended to be those companies that had a lot of white-collar workers that a lot of their work was involved in intellectual capital and idea generation and those kinds of things. … Those that didn’t prepare are left lamenting how difficult this environment is.

What barriers do companies face when it comes to implementing strong Industry 4.0 strategies? manufacturing industry today, the Michigan Manufacturers Association has focused efforts on providing training to allow all workers to acquire the tools they need to operate effectively inside Industry 4.0.

“We look for education partners, whether they’re community colleges or they might be something like the MMTC to provide training onsite and offsite,” said MMA President John Walsh. “Employers tend to do a lot of their own training. They have folks who have created the assembly line or the machinery that is used and they will provide training. But we need a more robust system to have employees leave the factory, get the training and come back.”

While large manufacturers can tap into the resources of local community colleges to provide training and education for prospective employees, Walsh said most of those opportunities tend to be one-offs. What he would like to see are more cohesive relationships.

“What I really hope for, and would be beneficial to the industry, is to make that more routine, to allow educational institutions to have better foresight of what’s coming. That’s where we want to get,” he said. “Education has been a struggle since technology entered the workplace. I think our educational institutions are doing a decent job, but my vision is something so symbiotic and so together that it’s working at a much faster pace.”

On top of this generational issue, there is the ever-lingering talent shortage and skills gap that continues to hang over manufacturers today, because fewer younger workers are interested in the industry at the same time older employees Visit www.mibiz.com

retire at a much greater rate.

The Michigan Manufacturers Association is doing its part to work with educational institutions and already is aiming its message at junior high students.

“Statistics show, in order to attract folks to engineering, production and manufacturing in general, you really have to get them in seventh or eighth grade to show them what it means and have them realize that they are good-paying jobs and stable,” Walsh said. “We’ll be reaching out to school systems to get students at factories to see it’s a viable career choice.”

Keeping talent in the shop Still, it is impossible to train and develop talent within a company if that talent leaves, which underscores the importance of retention.

At Rolar Products, Russell incentivizes his team in a few different ways.

“For us, we’ve got a very strong corporate culture,” he said. “I try to pay my people more than anywhere else. A lot of people say, ‘Why would you do that?’ and I always say because they work here.

“Ou r approach to employees a nd engagement — whether you’re tech savvy or you’re an old dog and need to get taught some new tricks — the key to me is the buy-in of the employee. My opinion is: You don’t get buy-in unless they understand what they’re part of and why they matter.”

The barrier is almost always related to culture.

It’s not about money anymore and it’s not about technology. Technology is cheap enough for everyone to implement. It’s the culture. They can’t think differently — in other words: ‘This is the way we’ve always done it. We’ve had these machines that we’ve had for 50 years and this is the way we do it and we understand how to put people to work around the assets we have.’ … The silver lining in this pandemic is that the culture has been blown up completely. The pandemic required us to think differently.

Do you think many manufacturers consider Industry 4.0 as an all-or-nothing strategy when they can really implement some of this technology individually?

I don’t think they’re thinking it’s an all or nothing — I think they’re thinking ‘I really don’t have a handle on what this means.’ Even if I wanted to spend a dollar, where do I put that dollar? We have 1,100 members at Automation Alley. What we say to our members is that the very first thing you have to do is you have to survive. You cannot plan for the future unless you survive the next six months (with the pandemic). You have to do everything you can, and if that involves technology, great. If it doesn’t involve technology, that’s great, too.

What’s a good starting point for a manufacturing company that gets a little overwhelmed looking at all the components and technology associated with Industry 4.0?

It’s not a plug for us, but we get paid by the state of Michigan to do assessments with small and

medium manufacturers. Let’s go in and see what you do and then try to figure out where you should pay attention when you look at this Industry 4.0 landscape. Do you look at 3-D printing first? Do you look at Industrial Internet of Things (IIoT) first? Do you look at artificial intelligence first? We do that with hundreds of companies. We help assess them on what they should pay attention to.

Try to understand just a little bit about Industry 4.0 and the different technologies. As you’re (doing that), ask yourself which technologies scare you. With technologies where you’re thinking, ‘Wow, that could put me out of business,’ that’s a very good one to focus on. … Turn the threat into an opportunity.

Are more manufacturers further along in Industry 4.0 than they might give themselves credit for?

No. (Laughs.) Plain and simple — there’s a oneword answer. The reason I say that is I think we’ve done a great job collecting and analyzing data like putting sensors on everything and getting data and being able to become more efficient in sharing that data between our suppliers and customers. It then seems like you’re doing a lot of great work in Industry 4.0. The problem is, these sensors and data are going on Industry 2.0 and 3.0 machines and what’s happening is the whole business model is shifting. … I need to not only do Industry 4.0 in the sense that I’m making what I know today more efficient, I need to have a path that says when it is appropriate to abandon ship and get on the next ship.

Like in any industry, it’s evolve or die. But how long do manufacturers have?

The evolution is accelerating. I don’t have a million years to evolve from sea to land and grow legs. You have to evolve much more quickly because the tech industry is moving so rapidly; software iterates so quickly. It’s all virtual — it can iterate, iterate and iterate without worrying about physical production that slows the process down. Technology is going to continue to evolve at a very rapid pace, and if you’re not evolving at the same rapid pace, you’re going to pay a price for that. No one can predict what that price is. It can be different for everyone.

Interview conducted and condensed by Jayson Bussa. COURTESY PHOTO MiBiz / AUGUST 3, 2020

7

REAL ESTATE & DEVELOPMENT REAL ESTATE Continued from page 1

“I think landlords are more likely to file cases like this against larger national tenants because they believe they’ve got the wherewithal to pay,” he said. “It wouldn’t surprise me if we see more and more cases like this.”

Seeking payment To that end, a pair of local landlords have filed lawsuits against clothing store brands owned

by San Francisco, Calif.-based The Gap Inc. over nonpayment of rent for retail locations in East Grand Rapids and Holland.

In one case, an affiliate of Jade Pig Ventures LLC, a Grand Rapids-based real estate investment, development and property management company, sued athletic clothing brand Athleta LLC, for failure Defoe to pay at least three months of rent for its retail space at 2213 Wealthy St. SE in East Grand Rapids. With the $30,421.33 in back rent, plus attorney fees and other costs, the landlord says it is owed in excess of $75,000, according to the case in the U.S. District Court for the Western District of Michigan.

Makowski Additionally, an affiliate of Whitehouse, Ohio-based Devonshire REIT Inc. filed a lawsuit against Old Navy for $85,356.46 in unpaid rent at its location at 12635 Felch St. in Holland, according to federal court records.

Both brands are owned

by The Gap Inc. “The landlord is not askShoemaker ing for possession of the property, and that approach is consistent with what I’m seeing in my practice,” Defoe said of the Jade Pig lawsuit, which he is not involved with and reviewed to comment for this report.

“Landlords are just asking for the back rent.”

This is largely because landlords do not want to lose their tenants, especially during a pandemic when it will likely be harder than usual to fill vacant retail spaces, he added.

“Everyone is trying to control costs to the best of their abilities, and office space downtown is more expensive than suburbs, usually because of parking costs.”

— JASON MAKOWSKI Partner at NAI Wisinski of West Michigan

Occupancy still high

The Advantage Solutions office and parking lot at 1001 28th Street SE in Wyoming remain empty after the company told workers it was moving to a remote working format indefinitely, according to an employee who spoke with MiBiz on the condition of anonymity. MIBIZ PHOTO: KATE CARLSON

To date, occupancy trends have held steady across the region, according to second quarter data from the Grand Rapids office of Colliers International. from home, according to the National Bureau of The commercial brokerage reports a 3.16 percent Economic Research. vacancy rate for retail space across the region, Despite having employees work remotely although it expects more brick-and-mortar locaduring the pandemic, Advantage Solutions still tions to close because of financial issues, leading has “several years left” on its lease at the forto an increase in vacancy in the coming months. mer Klingman’s Furniture building, said Kirk Retail tenants unable to pay rent during the Driesenga, leasing agent for property owner pandemic may attempt to rely on a force majeure Hinman Co. of Portage. clause in their lease, Defoe said. The clauses are However, two former Advantage Solutions generally included in contracts to excuse one employees told MiBiz the company is moving party from its lease requirements in cases of a out of the facility at 1001 28th St. SE. As well, the natural disaster. company told workers it would be switching to a For the most part, Defoe said the leases he remote working format indefinitely, according has seen are landlord friendly and would to an employee who spoke with MiBiz on not excuse a tenant from paying rent the condition of anonymity. because of the COVID-19 pandemic.

Advantage Solutions did not “In Michigan, we’re a little respond to multiple requests for different and we don’t have hurcomment. ricanes or earthquakes,” Defoe Driesenga said he has “no REAL ESTATE said. “But going forward, espeknowledge” of whether the com+ DEVELOPMENT cially in states like Michigan pany is permanently leaving.

Sponsored by where we don’t worry so much Hinman is actively marketing ROCKFORD CONSTRUCTION CO. about natural disasters, I think the property, as well as its indiyou’ll see this type of clause negovidual suites. tiated more to account for someJason Makowski, a partner thing like a pandemic in the future.” and office specialist at NAI Wisinski of West Michigan, anticipates an influx of office space hitting the market as many companies will likely ‘We have seen a pullback’ downsize.

Record-high unemployment rates, coupled with “We have seen a pullback,” Makowski said.

Gov. Gretchen Whitmer’s executive order man“Ever since COVID hit, the office market has dating that non-essential employees work from been slower. We saw a little bit of a resurgence home, have led to a growing number of empty in the month of June, and from July 4 to today office spaces. it’s slowed back down.”

Across the U.S., about half of the people who According to the second quarter Colliers marwere employed pre-COVID-19 are now working ket analysis, the vacancy rate for office space in

BUILDING MORE THAN A RESUME Instead of the standard 9-5, tradesmen and women are choosing to write a different story - one built on refined skill-sets, creativity, attention to quality and grit.

8

AUGUST 3, 2020 / MiBiz

ROCKFORDCONSTRUCTION.COM

downtown Grand Rapids stood at 9.63 percent, and was 6.10 percent for the suburban market.

“Everyone is trying to control costs to the best of their abilities, and office space downtown is more expensive than suburbs, usually because of parking costs,” Makowski said.

Hitting pause Across the board, companies are slow to “rush back” to occupy office buildings, said Don Shoemaker, managing partner at Franklin Partners LLC. The Oak Brook, Ill.- and Grand Rapids-based commercial real estate firm owns industrial and office buildings in West Michigan, Chicago and metropolitan St. Louis, Mo. Many landlords are saying the pandemic is causing a “flight to the suburbs,” Shoemaker said, which would make sense in a commuter city like Chicago.

“There are a lot of people who don’t want to go to the train station full of people and then walk in a street full of people to get to their downtown office,” Shoemaker said.

Franklin Partners is building out spec suites for suburban offices for what he suspects will be a growing number of employers that do not want to work out of downtown high-rise buildings, he said.

Across all of the Franklin Partners’ properties, Shoemaker is not optimistic the company will lease many vacant spaces in the next year.

“It’s almost like a pause button has been hit and everyone just wants to wait and see what happens,” he said.

Another trend Shoemaker has noticed is that most bigger companies are taking a harder line on employees continuing to work remotely. To that end, tech giant Google last week rolled out an extended work-from-home plan for its employees. The company is keeping its employees working remotely until at least July 2021, according to a report from The Wall Street Journal.

Shoemaker’s properties with smaller law firms and boutique shops are quicker to return to offices, he said, while most of the larger corporations do not have plans to come back to their offices until at least September.

Makowski is optimistic that remote working is temporary, and the office space market will start to bounce back because of the benefits of conducting business in person.

“As time progresses and we get vaccines in place for COVID, I think more and more people will start returning to the office,” he said. “Certain companies will continue to test the waters, but I think for a lot of companies, you lose something important when you have all of your employees working remotely.”

Despite the uncertainty of the office space market, Shoemaker said most tenants have continued to maintain rent payments, although tenants in the retail and restaurant industry have continued to request concessions.

“We have and do work with companies that need it,” Shoemaker said. “Overall, our delinquencies are pretty much limited to first-floor tenants like restaurants and hair salons — none of them are paying rent and it’s kind of, ‘OK, we are working with them.’”

Visit www.mibiz.com

ECONOMIC DEVELOPMENT LUME CANNABIS Continued from page 1

“The other municipalities may choose not to participate, and we may, which gives market opportunities in certain areas that wouldn’t exist without our participation,” Schultz said. “We do have a couple of advantages.”

‘A different situation’ In announcing the Sault Ste. Marie location, Lume said that it had committed to opening an additional five dispensaries on the Sault Tribe’s trust lands throughout its seven-county service area, which goes as far west as Marquette and Delta counties in the central Upper Peninsula.

That’s in addition to the two northern Lower Peninsula locations the company opened in July on lands held in trust for the Little Traverse Bay Bands of Odawa Indians, representatives of which did not respond to requests for comment.

More deals with Michigan-based tribes are also in the works.

Sales of recreational“ Ye s , w e a r e use marijuana in actively in develMichigan through opment with other the first half of 2020 tribes at this time,” said Doug Hellyar, president and COO of Lume Cannabis Co. “As you can imagine, the word spreads and they get curious.”

The same tribal sovereignty the company is leveraging to skirt local ordinances prohibiting marijuana businesses within their boundaries also applies to state law, including the Michigan Regulation and Taxation of Marihuana Act (MRTMA) voters passed in 2018 that established the adult-use market. As such, the state Marijuana Regulatory Agency lacks jurisdiction over tribal lands, yet Lume and the tribes opted to go through the state’s licensing process for the locations.

The state-licensed stores on tribal lands also will collect excise and sales taxes on the products sold from the stores.

Industry sources told MiBiz the company’s decision to go through the Marijuana Regulatory Agency likely was necessary to ensure the legal status of its existing licensed supply chain.

David Harns, the interim director of communications for the Michigan Department of Licensing and Regulatory Affairs, the body that oversees the Marijuana Regulatory Agency, acknowledged that a company seeking state licensure for business activity on tribal lands “is definitely a different situation.”

“The MRA will issue a license to an applicant in a municipality as long as there is not a prohibitive ordinance in place,” Harns said. “Under MRTMA, you had to take action, you had to put a prohibitive ordinance in place, and there are many townships and villages that did. These tribal nations did not put a prohibitive ordinance in place.”

The regulatory agency took the novel approach of recognizing the sovereign tribal nations in the same manner as any other municipality in approving Lume’s licenses.

“They had to have a helluva lobbyist,” said Ben Wrigley, Jr., partner at Grand Rapids-based Cannalex Law. “I think it is fantastic. You know what it is? It’s innovation, it’s imagination, it’s utilizing the brains that we’re given. … I applaud the people who thought this up and researched it.”

Even so, Wrigley remains unsure how the MRA can grant a license to a company to operate within a sovereign nation where it has no jurisdiction.

“I’m really intrigued in how it is they were able to convince the agency to allow this to occur,” he said of Lume.

191M

$

Visit www.mibiz.com

A careful approach While marijuana remains listed as a Schedule 1 controlled substance and is illegal under federal law, the Department of Justice in 2014 issued a policy statement noting that it would treat marijuana legalization in Indian Country the same as it does in states like Michigan that have legalized medical and recreational uses of the drug.

Un d e r w h a t’s k n ow n a s t h e Co l e Memorandum, the DOJ said it reserves the right to prosecute violations of federal marijuana laws in those states, but only if the activity jeopardized the federal government’s preventionfocused priorities in eight key areas, including sales to minors, drug cartels, violence, trafficking, drugged driving and the use of federal lands.

While then-Attorney General Jefferson Sessions rescinded the Cole Memorandum in 2018, legal experts say little has changed from a federal enforcement standpoint regarding marijuana, which has been fully legalized for recreational purposes in 11 states plus the District of Columbia.

The Sault Tribe, Michigan’s largest federally recognized American Indian tribe with about 40,000 enrolled members, voted in 2019 to legalize the adult use of marijuana on its reservation, mirroring state law.

The Cole Memorandum instructed U.S. Attorneys not to prosecute federal marijuana laws in states that “implemented strong and effective regulatory and enforcement systems.”

With the follow-up policy statement to the Cole Memorandum, the department committed to the same handling of the drug where it was legalized in Indian Country.

In opting to have Lume go through state licensing, the Sault Tribe took a careful approach to bringing the marijuana industry onto tribal lands.

“We as a sovereign nation have not fully developed our codes,” said Schultz at Sault Tribe Economic Development. “If we were to go ahead and rush out and do something, we’d risk the federal level not viewing us as being prepared or having the same safety measures or not being at the point that’s allowing them to allow states to do it. But in this particular scenario, we’re following the state guidelines. It’s a state-licensed facility. We’re not actually participating in the operation of it. We’re just making our lands available for it.”

After Michigan voted to legalize marijuana, the Sault Tribe’s board tasked Schultz with finding ways the tribe could make money in the industry. Schultz said he fielded 25 proposals from companies or individuals regarding the marijauna industry before moving forward with Lume.

“There are some impressive, capable people within that organization that could assure us they were going to do it in a professional, classy manner and that we were going to be safe and we

“It’s something that I’d love to get all excited about and say it’s all great, but I know depending on who’s walking up to me, some want to punch me in the face, some want to say ‘way to go.’ It’s a politically charged topic.”

— JOEL SCHULTZ Executive Director of Sault Tribe Economic Development

were going to provide our people and the community with a responsible, quality product,” Schultz said. “And it provided us with pretty good revenue on land that we didn’t necessarily have other options for at that point.”

‘Tough topic’ Hellyar at Lume said the licensing process for the first sites on tribal land “absolutely” took extra time because of the special considerations the state regulators needed to take.

“Just like any location that we’ve opened in the state, the MRA has final say in whether or not we can operate a store or provisioning center, and we followed the exact same rules and regulations and guidelines and approvals (on tribal land) as we do for any other location,” he said.

“There were no exceptions made.”

Executives at Lume initially connected with the tribes via a mutual acquaintance, with the aim of discussing possible business opportunities they could pursue together. Michigan tribes largely felt left out of the state’s rule-making process for the marketplace, which put them behind other entities seeking business opportunities, according to Schultz.

“The goal was to talk about is there a way the tribes can participate in the marketplace,” Hellyar said. “We were able to say, ‘If we can open on tribal land, then we’d be happy to open a store.’”

Under the current relationships, the Little Traverse Bay Bands and the Sault Tribe are operating purely as landlords for the company, with Lume leasing the land on which to build its stores, he said. The long-term leases provide revenue streams for the tribes, while the store locations also create job opportunities for tribal members in each of the communities.

Even with the economic benefits, Schultz acknowledged the marijuana industry remains a “tough topic” among members of the Sault Tribe, some of whom would have rather had the tribe start its own company or support a tribal

member in getting into the business — or avoid the industry altogether.

“It’s something that I’d love to get all excited about and say it’s all great, but I know depending on who’s walking up to me, some want to punch me in the face, some want to say ‘way to go,’” he said. “It’s a politically charged topic.”

As well, nothing is preventing any of the 12 federally recognized tribes in Michigan from launching their own licensing schemes for marijuana businesses, which would allow them to capture additional revenues from taxes on the products sold on reservation land.

Legal sources contacted for this report noted the tribes are leaving significant revenue on the table by having the Lume stores go through the Marijuana Regulatory Agency, with the excise and sales taxes going to the state’s coffers instead.

To that end, adult-use marijuana sales reached more than $191 million through the first half of 2020, according to the latest data from the Marijuana Regulatory Agency.

Schultz said in the future, the tribe may explore other options in the industry beyond leasing land to Lume for dispensaries.

“There’s nothing that says this is the only thing we do,” he said. “It’s just that the more that you look at the industry, the more you see it’s a big money, big player industry. … For us to introduce ourselves to the industry, it was ‘let’s do it with the professionals, the best of the best,’ and then let the future bring what it will bring.”

Rolling ahead The stores on tribal lands form part of an aggressive growth strategy for Lume, which currently has 10 stores in Michigan, including West Michigan locations in Kalamazoo, Big Rapids and Evart, where the company also operates a 50,000-square-foot grow facility.

Hellyar said the company is working on “several locations” in Grand Rapids, which he called “a very important market,” but the first it plans to build in Kent County will begin construction this month in Lowell.

Lume also is in the process of tripling its cultivation capacity in Evart by the end of the year, with plans to expand the facility to 450,000 square feet by the end of 2024. That added capacity will come online as Lume targets having 100 stores in operation across the state in the same time frame.

The company typically invests between $750,000 to $1.25 million into a retail location, each of which is privately financed, and creates about 15 to 20 jobs per store, Hellyar said.

“What’s going to be really important is making sure that we have good distribution throughout all of the stores in the U.P.,” he said, noting targets for as many as 10 locations in the Upper Peninsula. “Since we opened, our store in Negaunee is one of our top-performing stores. It’s doing extremely well. We’re really excited about it.”

Lume Cannabis Co., which opened retail stores on tribal land near Petoskey, shown here, and in Mackinaw City, announced a deal last month to work with the Sault Ste. Marie Tribe of Chippewa Indians to open six dispensaries on tribal lands throughout the Upper Peninsula. COURTESY PHOTOS MiBiz / AUGUST 3, 2020

9

SMALL BIZ

SBAM backs legislation to provide liability protection to businesses during pandemic

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

I

f an employer follows the rules and complies with requirements to maintain a safe workplace during the COVID-19 pandemic, business advocates argue the company should not have to face liability claims if someone there contracts the coronavirus.

Providing that protection from legal liability for businesses that adhere to requirements ranks as a top priority in a series of state and federal public policy proposals the Small Business Association of Michigan issued late last month. SBAM believes the proposals a COVID-19 task force developed could help

small businesses that are recovering from the pandemic.

Liability protection and other moves would “result in a higher survivability for small businesses,” said SBAM President Brian Calley.

“Ultimately, what we’re just looking for is to create a predictable environment where small businesses owners have a better chance at surviving. We’ll talk about thriving later on once we survive,” Calley said. “We need to find clarity and more certainty in a world that is full of unprecedented uncertainty.”

SBAM considers providing legal liability protections for businesses and their employees that make a “good faith” effort to comply with rules and guidelines for COVID-19 as a

“very, very urgent” action that state or federal lawmakers can take to aid small businesses, Calley said.

The task force proposal does not urge blanket liability protections, he said. Nor does it propose liability protections for businesses that ignore rules and regulations intended to protect public health and prevent infections.

“Small business owners don’t look for a free ride,” Calley said. “There is a tremendous amount of uncertainty around the legal landscape surrounding this virus, and if there’s one thing that can dampen economic activity, it’s uncertainty and unpredictability.

Putting some expectations in place about what is expected, especially when a business is

We are here to make your project easier.

With engineering, architectural, infrastructure, and environmental services in-house and 14 offices for local attention, Fishbeck is your all-in-one solutions provider.

following the rules, would go a long way to give small business owners the confidence to soldier on, to continue pushing forward against so many obstacles.”

‘Very Optimistic’ St ate Rep. Tom A lber t, a second-ter m Republican from Kent County, introduced legislation in late July that would enact those protections for employers and employees.

The legislation would provide what Albert calls “common sense” protections for businesses and their employees who follow requirements and guidelines intended to mitigate the spread of COVID-19. He expects the legislation to move to a hearing yet this summer.

“I’m very optimistic that we’ll be able to get something done here,” Albert said. “I’ve had conversations with my colleagues on the other side of the aisle and they get it that legislation like this is pretty necessary. Everyone wants to try and move forward safely.”

A l b e r t ’s l e g i s l a t i o n would exempt businesses from legal liability when they are “in substantial compliance with or (operate) reasonably consistent” with requirements.

The bill makes exceptions Calley when there is “clear and convincing evidence that the injuries were caused by a reckless disregard of a substantial and unnecessar y risk that an individual would be exposed to COVID-19, or the person engaged in a deliberate act intended to cause Albert harm,” according to the bill’s language.

The legislation, which was referred to the House Judiciary Committee, would make the liability protections retroactive to Jan. 1, 2020.

Liability protections would not apply if a business or employee willfully disregarded COVID-19 requirements or was negligent, Albert said.

“If somebody’s grossly negligent, they’re not going to be protected,” he said. “If an employee calls in and says, ‘Hey, I’m positive,’ and the employer says, ‘Come in to work,’ that would be gross negligence and they would not be protected from a lawsuit in that situation.”

Federal action

800.456.3824 fishbeck.com

10

AUGUST 3, 2020 / MiBiz

Legal liability protections for businesses also are pending at the federal level in Congress.

In a recent letter, a coalition of business advocates urged Michigan’s congressional delegation to back “a bi-partisan compromise that will help ensure businesses are able to safely bring back their employees through careful liability protection for businesses.”

“While businesses that act with negligence, ignorance or malice should be offered no protections, businesses that operate in good faith need liability protection in order to welcome their employees and customers,” according to the letter signed by 15 organizations, including the Grand Rapids Area Chamber of Commerce and Kalamazoo-based Southwest Michigan First. “We urge you to find a reasonable compromise that balances protections for employers and employees as well as recognizes the unchartered health, economic and legal landscape the COVID crisis has forced upon us.”

In addition to the legal liability protections, the SBAM task force urges action to prevent Visit www.mibiz.com

“There is a tremendous amount of uncertainty around the legal landscape surrounding this virus, and if there’s one thing that can dampen economic activity, it’s uncertainty and unpredictability.”

— BRIAN CALLEY President of Small Business Association of Michigan

local restrictions that are more rigid than state requirements and to create a regulatory environment that focuses on “compliance and remediation over penalties.”

The state needs to “develop a sense for helping businesses to comply, rather than just catching them doing something wrong,” Calley said.

Other SBAM task force policy recommendations include: • State policies to ensure the long-term solvency of the state unemployment insurance trust fund to avoid a tax increase, “while providing competitive rates compared to other states;” • Not automatically presuming that a person with COVID-19 became infected at work, and not expecting that employers are responsible for employees’ activities or conduct outside of work; • Enhancing state economic development programs to “explicitly focus on small businesses, including rural broadband expansion, stronger small business procurement policies, and entrepreneurship-led economic development;” and • Allowing small businesses to fully deduc t ex pen ses covered by a federal Paycheck Protection Program loan that’s forgiven by the U.S. Small Business Administration.

Deferring taxes Another top priority for SBAM is legislation to put off property tax payments.

Deferring summer property tax payments to the winter is “just a flat out cash f low consideration” for small businesses that “would go a long, long way to helping small business owners who are slowly rebuilding their customer base,” Calley said.

“They’re not asking for the taxes to be wiped out, just deferred,” he said. “A lot of small businesses are experiencing very dramatic declines in their sales and they’re rebuilding their customer bases, and in some cases having to reinvent how they do business.”

Gov. Gretchen Whitmer on July 8 vetoed two bills passed by the state Legislature that would have deferred summer property tax payments to provide relief to struggling businesses and property owners during the pandemic. Whitmer cited “fatal constitutional flaws” with the legislation and said she heard an “overwhelming consensus” from taxable entities across the state “that these bills create more problems than they solve.”

SBAM hopes lawmakers can renew talks with the governor’s office to revisit property tax deferment legislation, and some GOP lawmakers have urged a vote to override the veto since the legislation passed the state Legislature with bipartisan support. A substitute version of a similar bill to allow deferred property tax payments recently passed the House and was referred back to the Senate for consideration.

Visit www.mibiz.com

In lawsuit, Kent Co. sports bar argues for insurance adjustment, citing pandemic closure Federal case references auto insurers’ premium credits in seeking relief

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

BELMONT — As many people stayed home and ventured out less for several weeks during the closures related to the COVID-19 pandemic, auto insurers responded.

Since people were driving less and claims declined accordingly, auto insurance carriers started to provide credits or adjustments for premiums, moves that were eventually required by state regulators and spelled out in an executive order signed by Gov. Gretchen Whitmer.

Those adjustments and credits totaled $96.7 million, according to the Michigan Department of Insurance and Financial Services.

A federal lawsuit filed in Grand Rapids now raises the question: What about similar rate adjustments or credits for businesses on their liability insurance coverage?

After all, argues the lawsuit filed on behalf of 1259 Post LLC, which does business as Flo’s Pizzeria & Sports Bar on Post Drive in Belmont, many businesses — particularly bars and restaurants — were shut down for weeks under the governor’s executive order. That resulted in a “dramatic departure” in the restaurant’s liability exposure from when the policy was purchased and “materially changed” applicable underwriting guidelines, an attorney for Flo’s Pizzeria claims in a court filing.

Michigan Liquor Control Commission records indicate the sports bar is owned by Davide Uccello and Daniele Uccello.

The lawsuit against Des Moines, Iowa-based EMC Insurance Group Inc., which has an office in Lansing, contends that because the sports bar had a “significantly lower” exposure to liability claims while it was closed, it overpaid premiums for the period and should receive an adjustment or credit accordingly.

underwriter if you had to close. But I think an across the board policy adjustment for all policyholders would be less clear than on auto policies.”

‘Dramatic departure’ The federal lawsuit indicates that Flo’s Pizzeria & Sports Bar, which was closed from March 6 to June 8, paid $4,317 for 12 months of liability coverage, an amount EMC calculated using the company’s “gross sales, sale of alcohol, and percentage of sales related to alcohol versus total sales.”

Under the policy, EMC would conduct an audit and compute an earned premium for the period. If the sum paid for the prior period exceeded the earned premium, EMC would return the excess.

“This provision is an admission by EMC that the premium is an estimate, that it is possible to overpay, and that Defendant EMC is required to return overpayments by the class,” the sports bar claims in the lawsuit. “However, EMC systematically ignores its obligations to return excessive premium payments made by the class. Instead, EMC uses audits to increase the amounts of premiums.”

Court papers indicate that EMC “evaluated the exposure” of Flo’s Pizzeria but the review “did not consider the shutdown due to COVID-19.”

The case argues that the sports bar’s “current exposure is a dramatic departure” from when the company bought the coverage from EMC, and that “materially changed the underwriting guidelines applicable” to the coverage.

“In this respect, (Flo’s) premium rates are excessive and unlawful because they are

unreasonably high for the insurance coverage provided. Like automobile policyholders, (Flo’s) … overpaid their commercial insurance premiums in an amount to be determined,” the company claims in court documents.

Flo’s also paid EMC $10,040 for liability, personal injury protection, property protection, and uninsured and underinsured motorist coverage on its commercial vehicles that had “a substantial decrease in use due to COVID-19.” As well, the business paid $1,266 for a commercial umbrella policy, according to the court filings.

The case seeks restitution, damages and “other equitable relief as the Court deems proper.”

Surplus continues The lawsuit comes after the surplus for property and casualty insurers declined $79.5 billion in the first quarter to $771.9 billion as of March 31, the largest-ever quarterly decline in the industry’s surplus, according to a report last week from the American Property Casualty Insurance Association (APCIA) and Verisk Analytics Inc., a New Jersey-based data analytics company. The decline, which followed a $35.6 billion surplus increase for the industry in the fourth quarter of 2019, came mostly from investment losses in the first quarter.

APCIA reports that property and casualty carriers recorded collective net income of $17.9 billion in the first quarter, about the same as the first three months of 2019. Carriers had a net underwriting gain of $6.3 billion, an increase of nearly 20 percent from a year earlier.

In the first quarter, property and casualty carriers had net premium revenue of $164.4 billion, a 6.2-percent increase from 2019.

The association’s report noted that Verisk estimates auto carriers offered more than $13 billion in rebates and credits in the first half of the year. An arm of Verisk, MarketStance, also estimates that at least 1 million insured businesses in the U.S. will fail in 2020, resulting in a direct decline of 2.8 percent in commercial insurance premiums.

‘Reduction in exposure’ Filed last month in U.S. District Court for the Western District of Michigan, the case seeks class-action status and “to remedy that disparity … on behalf of businesses who were overcharged premiums during the COVID-19 pandemic.”

“Despite a comparable drop in insurable conduct, insurers have not offered any sort of premium relief to businesses, even though they also have experienced a substantial reduction in business and exposure due to COVID-19,” according to a court filing. “Thus, while insurers offer billions of dollars in insurance premium relief to automotive policyholders, they are offering no premium relief to businesses that are experiencing a similar reduction in exposure.”

The lawsuit was filed by M. Blake Heath, a trial attorney in Kansas City, Mo. He did not respond to requests for comment from MiBiz. A spokesperson for EMC Insurance Group declined to comment, saying the company does not discuss pending litigation. As of late last week, the company had yet to file a response to the lawsuit.

MiBiz also reached out to a few West Michigan law firms for a perspective on the case. In each instance, they also declined to comment.

Brian Calley, the president of the Small Business Association of Michigan, offered the perspective that liability coverage for businesses has several components. Some types of coverage may have higher risk in the pandemic, such as worker’s compensation if a company remained open, while instances in which a business closed clearly generated less risk, Calley wrote in an email to MiBiz. “Whereas with auto policies, the dramatic decline in the movement of people was nearly universal,” he wrote. “Seems like it’s definitely worth a conversation/negotiation with the

a provider of commercial debt collection services and more for clients around the world has acquired a new website: rsdcollects.com The undersigned served as exclusive web development adviser to Ross, Stuart & Dawson, Inc.

Affordable, common-sense websites.

MiBiz / AUGUST 3, 2020

11

SMALL BIZ: COPING WITH COVID-19

Michigan bowling centers press case to be spared from ongoing closures

By JAYSON BUSSA | MiBiz jbussa@mibiz.com

Westgate Bowling Center in Comstock Park diversified its business model to include operating suites for beauty salons, which has helped the company to some degree as it tries to weather the pandemic-related shutdown. COURTESY PHOTO

W

enger’s Bowling Center, the oldest bowling facility in Grand Rapids, has hosted patrons for the last 100 years, but not so much in the last four and a half months.

The two-story center located at 629 Leonard St. NW is one of the many bowling centers

Building Your Culture August 11, 2020 The Center-West and MiBiz are teaming up to present an industrial-strength quarterly webinar series focused on best practices for small and mid-sized manufacturers. Each webinar in the 2020 series — Back to Manufacturing Basics — will feature experts on the topic at hand as well as Michigan manufacturers sharing their stories. The 50-minute webinars will provide actionable, real-world information to help manufacturers improve their efficiency, enhance quality and drive profitability.

12

AUGUST 3, 2020 / MiBiz

Life is changing rapidly for manufacturers and their employees as we navigate the COVID-19 pandemic. As priorities shift, many companies are finding that their company culture is shifting, too. How can you, as a leader, embrace those changes and take an intentional approach to building your company’s culture for the future? This 50-minute webinar will feature experts from the Michigan Manufacturing Technology Center-West and executive coaching firm Vistage Michigan. They’ll share best practices for building culture and amplifying your values to assemble a high-functioning team that’s ready to take on the evolving challenges and changes ahead.

To register, visit mibiz.com/backtobasics

around the state of Michigan that remain dark, unable to open after Gov. Gretchen Whitmer shut them down in late March because of concerns over the spread of COVID-19.

Bowling centers have been lumped in with the likes of gyms and indoor recreation centers, which also remain closed because of the pandemic.

“There are bowling centers all over Michigan that are closed right now and we still have to pay our money to be able to operate as a business,” said Tyler Ladwig, who is in his fifth year operating Wenger’s. “Well, if we can’t operate, that’s kind of a double-edged sword.

“We get penalized if we open our doors because the health department threatens to take our food license. The state of Michigan threatens to take our license away plus the liquor commission wants to take our liquor license away. There are so many things that they come at us for if we operate as a fullfledged bowling center.”

With bowling open for business in 45 of the country’s 50 states, proprietors of these Michigan bowling centers are beyond antsy, especially as they witness businesses with seemingly equal risks for transmitting COVID19 open back up.

To force the issue, Michigan groups like the Independent Bowling and Entertainment Centers Association (IBECA) and the Bowling Centers Association of Michigan (BCAM) are considering legal action, similar to the steps taken by Michigan gyms.

Now, a spike in new COVID-19 cases threatens to set the state back in its progress and could potentially keep bowling centers out of action even longer.

“I know there are a couple centers in Michigan that have opened in other areas, but once the state caught wind of it, they were basically given a fine and forced to shut down as well,” Ladwig said. “It doesn’t sit very well with me. It’s kind of bullshit because we still have to pay our money. Our bills are still coming in. I don’t know how much money I’ve forked over to the state of Michigan to be closed for four months.”

Avoiding seasonal disaster While a four- to five-month closure might seem like a death sentence for most businesses, if there was ever an ideal time for this to happen to bowling centers, that time is now.

The summer months signify a slow period of business for bowling centers, but opening up by the first of September is crucial to accommodate the start of league play.

According to Bo Goergen, executive director of BCAM, there are 80,000 sanctioned league bowlers in the state of Michigan and bowling centers also can rely on an additional 30,000 to 40,000 unsanctioned bowlers who are all planning to start play in the first week of September.

By remaining closed during this crucial time, Goergen estimated that potentially 50 percent of these businesses could be wiped out — businesses that generate $375 million in revenue each year, equating to $190 million to the Michigan economy. The closures would also put 5,000 employees out of work.

“We’re running out of resources on what we can do,” said Goergen, who is also a professional bowler and the proprietor of Northern Lanes Recreation in Sanford, located in Midland County. “We’re grown adults; we know how to operate a facility. We have all the protocols in Visit www.mibiz.com

place from masks to gloves to sanitizers to plexiglass to paper cups, sanitation for shoes and balls and decals for social distancing.”

Last week, many media outlets were reporting that BCAM had filed legal action against Gov. Whitmer, but Goergen said the lawsuit was put on hold as the group explored alternative avenues to lobby for the reopening of their businesses.

Goergen said that, based on the outcome of the case involving Michigan gyms — where industry members won the initial suit, but saw the ruling overturned in a federal court of appeals — BCAM wasn’t confident in the lawsuit’s potential for success. Instead, BCAM is striving to gain the attention of advisers close to Gov. Whitmer and members of her administration to prove that the bowling centers can reopen in a responsible fashion.

With the average size of a bowling center being 30,000 square feet, Goergen argued that bowling centers are no different in their level of risk than grocery or retail stores.

When member organizations have come to BCAM for help and insight on how to weather the pandemic, the group encourages its members to get with their banks to explore their financial options as they wait to reopen, Goergen said.

“Nothing is more frustrating when you look, and at the end of the day, I can go get a haircut,” Goergen said. “I can go get my nails done. I can get a full body massage. I can go to the dentist and have someone with their hands in my mouth. I can even go to a freakin’ strip club and put nasty dollar bills in G-strings, but I can’t open up a bowling center. Seriously.”

Benefit in diversifying Many facilities around the state have meshed bowling with other activities, ranging from bars and restaurants all the way to outdoor entertainment, all of which can remain open to drive revenue. Centers that have diversified their revenue streams see a slight leg up when compared to the more traditional bowling centers.

Goergen’s 24-la ne Nort hern La nes Recreation is also home to a lounge and bar in addition to two beach volleyball courts.

Still, opening just a small portion of his business didn’t seem worth it.

“To turn on your air conditioning and bring staff in, you’re actually losing money, especially during the summer,” Goergen said. “We stayed closed.”

Westgate Bowling Center in Comstock Park is home to 60 lanes and its ownership has diversified in an unconventional way.

Westgate is home to 14 individuallyowned and operated beauty salons that take residence in individual suites maintained by Westgate’s staff.

Salons also have had a rough path through the pandemic, finally reopening in mid June.

“To be honest, we are family-oriented so we did give everyone breaks on their rent during the pandemic because they weren’t able to have any income, either,” said Jena Kehoe, general manager at Westgate. “In order to keep tenants and the business relationships fair for fellow human beings, we didn’t start charging rent until they were allowed to work again.”

Even when proprietors get the green light, many of them are wondering how quickly crowds will come back to bowling centers, or if many people will stay away out of health concerns.

“There are a lot of unknowns, which is one of the reasons I would love to open just to start testing the waters and seeing some of our regular customers and being able to show them that we think we would be able to do a good job (operating safely),” Kehoe said.

Visit www.mibiz.com

Food pickup, delivery service will source from Black, Indigenous, women farmers

By KATE CARLSON | MiBiz kcarlson@mibiz.com GRAND RAPIDS — Grand Rapids native Alita Kelly saw a market need on the south side of the city and formed a pickup and delivery food service that will mainly source from Black and Indigenous farmers, as well as women producers.

The South East Market is still in its development stage, but Kelly plans to launch it in a couple months to members who have donated, and then to the general public in January 2021.

The 30-year-old became more conscious of food and nutrition when she had her daughter.

Kelly studied dietetics in college, and recently graduated from the University of Michigan in environmental science and sustainable business.

“With everything happening as far as COVID19 and the national conversations we’re having about race, I’m an entrepreneur by heart and my passion is solving issues through business,” Kelly said. “I saw all of the possibilities for a food business here that supports our entire community, not just the southeast side (of Grand Rapids).”

Access to healthy food is harder to come by on the southeast side of town, Kelly said, and she is working to bridge that gap with her delivery service. The South East Market’s mission is aligned very similarly with the goals of the Southtown Market, a weekly market that will launch Aug. 15, as MiBiz previously reported. Both concepts are geared toward providing the community with fresh produce that is largely currently unavailable in the area.

Black Lives Matter protests that have been happening in Grand Rapids this summer and around the world — sparked by the killing of George Floyd and Breonna Taylor by police officers — have put a renewed focus on supporting Black businesses.

“We keep hearing this dialogue of ‘vote with your dollars,’ and ‘where are you going to spend your money?’ and this really brings the two together,” Kelly said.

Aside from the protests and national discussions occurring about race relations, most people are doing more grocery shopping and their own cooking because of shutdown orders related to the coronavirus. While Kelly acknowledges grocery delivery services like Shipt are available, the money going to those national providers will not be funneled directly back into the community the way it would by buying from a local farm.

The South East Market will operate as a grocery service with options for pickup or delivery once or twice a week, Kelly said. The plan is to have people go on the market’s website to choose what they want in their food order. Everything sold through the market will be “highly vetted” for how sustainably it is produced, Kelly said.

“There is going to be an educational piece on the website around how to shop — that’s another need we have,” Kelly said.

Kelly is working to add options to the website that will cater to people’s health goals and will include recipe cards and necessary ingredients to make healthy meals.

Sourcing products from Black, Indigenous and women farmers and food suppliers is one of the “greatest barriers,” Kelly explained, noting the lack of farmers in that demographic locally.

Despite this, Kelly said she has been able to use social media to connect to the farmers she wants to support both locally and on a statewide level.

“In order to serve West Michigan with a diverse group of vendors, it’s going to require us to drive some, and while we’re trying to keep it as local as possible, local to us as far as food goes will mean being produced in Michigan,” she said.

Alita Kelly, founder of South East Market.

COURTESY PHOTO

Kelly is currently working to secure a space for The South East Market to operate. She also is working to be able to accept both Electronic Benefit Transfer (EBT ) and Supplemental Nutrition Assistance Program (SNAP) payments from patrons.

Kelly formerly served as the board vice president for Urban Roots, sat on the Urban Agriculture committee for the city of Grand Rapids, and helped launch the 2020 season of the Southeast Area Farmers Market in Grand Rapids.

“As a Black woman and someone who worked in the food system here and tries to uphold high standards of sustainability in everything they do, people in the community look to me for what they should eat and where they should buy their food from,” Kelly said. “I’ve been talking to my community and they want to invest in this work.”

Park Theatre sits tight but is ‘here to stay’ in Holland

By KATE CARLSON | MiBiz kcarlson@mibiz.com HOLLAND — When officials with the Park Theatre first decided to close in early March because of concerns of spreading COVID-19, they weren’t anticipating a complete lack of concerts or events in the historic venue for months to come.

The venue has operated as a nonprofit, multi-use event space since 2001. Since the shutdown, the Park Theatre Foundation and leadership staff have taken several measures to cut costs, such as laying off staff and shutting off the office’s internet, said General Manager Brandon Blank.

“We’re paying the bills as they come, and just hope we don’t have to call on any of our parents to bail us out,” Blank said. “At this point, fundraising and donations have completely stopped.”

Venue officials are hopeful the community support would be there if needed. Late last year, Park Theatre raised $42,000 in about three weeks to pay for exterior renovations that saved the venue.

However, given the widespread challenges of COVID-19, he called fundraising a “last resort.”

“We think our best option right now is to just hold tight and make sure we’re doing anything we can to make the experience excellent when people do come back,” Blank said, adding that the venue is “here to stay” in Holland.

Meanwhile, thousands of venues across the U.S. are hoping for a lifeline from Congress. Last month, 66 independently owned venues in Michigan called on Congress to pass the Save Our Stages Act and the RESTART Act that would bring direct funding to venues that have had virtually no revenue over the past four months. Ninety percent of the 2,000 members of the National Independent Venue Association have said they’ll close if the support doesn’t come within the next six months.

For now, future Park Theatre bookings are on hold since it could be into 2021 when indoor concerts — as we knew them — are allowed. The Park

The nonprofit Park Theatre in Holland has been closed for events since early March. COURTESY PHOTO Theatre may gradually open with sit-down events with a capacity of around 50 people, even though they usually aim to sell about 300 tickets to events.

A walk-up bar would likely be replaced with table service.

Even though he is not booking future acts, Blank is confident that whenever the venue gets the greenlight to reopen, he will be able to quickly pull together a strong local showcase of acts.

“We’re just holding out,” Blank said. “We know as soon as those lights get turned on, people will be there and I truly feel as though we do a service in this community that nobody else can do, and that’s the reason we will stay right where we are.”

MiBiz / AUGUST 3, 2020

13

FOCUS: 9 INDUSTRIES DISRUPTED BY AI

TEACHING THE MACHINE Artificial intelligence is transforming industries across West Michigan — and picks up steam during the pandemic

While some industries are slow to adapt and others put up a futile fight, artificial intelligence is causing sweeping disruptions across West Michigan.

From grocery stores to courtrooms to doctors offices, AI — or teaching machines to do the work of humans — is changing the way we grow and buy food, invest money, travel, plan and design cities, and treat ailments. In many ways, the COVID-19 pandemic has accelerated this transition as we reduce in-person interactions.

In this issue, MiBiz identified nine sectors being transformed by AI. Experts report a host of efficiencies that come with machine-learning and identify best practices.

Luddites beware: The window to escape tech’s influence is quickly closing.

ADVANCE PACKAGING GRAND RAPIDS, MI

— Andy Balaskovitz

SEEK POSSIBILITIES 14

AUGUST 3, 2020 / MiBiz

WOLVERINE

BUILDING GROUP

Visit www.mibiz.com

Finance, banking sectors among early adopters of AI Tech aids decision making, helps companies tailor service delivery to customers

By MARK SANCHEZ | MiBiz msanchez@mibiz.com The software platform behind a new tech startup backed primarily by West Michigan investors learns about users and offers them ideas on what to buy next.

Based on users’ assessments and their investment decisions, TiiCKER can recommend public company stocks that may interest them based on their brand preferences, as well as direct content on stock trading and inform individual investors about discounts and perks provided by the companies whose shares they hold.

Jeff Lambert, the co-founder and CEO of Detroit-based TiiCKER and CEO of Grand Rapids-based public relations and investor relations firm Lambert & Co., describes the software platform as a “perfect example” of how artificial intelligence continues to alter the financial services industry, from investing to banking, by learning the habits of users.

Lambert and his partners formed TiiCKER “as a way to reward the loyalty of individual investors who put their money into the brands they use each day.”

“The ability to look at a portfolio gives us that insight into the individual, yet we Lambert don’t know their name.

We just simply know their demographics and then can bundle that and say, ‘People that like apparel stocks may also be interested in footwear stocks,’” Lambert said.

The use of artificial intelligence (AI) in financial services is not new. It was first Paynter used in sophisticated automated trading systems to determine investment risk and market fluctuations, eliminating human emotion from the trading decisions.

In finance, humans traditionally made decisions and managed money. Today, “there’s more and more money going to program trading and program-based trading,” according to Lambert.

“The financial industry has had some AI probably as long as any other industry, and they’ve done it simply by more than the mathematics of it,” Lambert said. “Machine-learning is really going to be interesting going forward.

It’s here to stay and it will impact every industry in some way.

“It could actually actively manage your portfolio with your ability to take the wheel, if you will. It could be on autopilot with your involvement. Ultimately, it could be you give over that control and the machine does all of your financial services.”

In banking, AI tools built into mobile banking apps and online banking websites are learning about customers’ habits based on their transactions.

Banks then can use that information to tailor services and financial products to customers, said T. Rann Paynter, president and CEO of the Michigan Bankers Association.

“It is providing banks another resource to learn about the customer and the customer’s needs, and the things that they’re searching for and looking for so they can better help them Visit www.mibiz.com

VC for AI

Venture capital investments in artificial intelligence and machine-learning technologies have grown steadily in the last decade, topping $20.7 billion across more than 1,500 deals in 2019, according to PitchBook and the National Venture Capital Association. Here’s a look at AI investments for the first half of 2020 and each year going back to 2010: $25B

2000

n VALUE — DEALS

$20B

1500

$15B 1000 $10B 500

$5B

$0

2010

2020*

0

* 2020 figures are through the first six months of the year SOURCE: PITCHBOOK, NATIONAL VENTURE CAPITAL ASSOCIATION, SECOND QUARTER 2020 VENTURE MONITOR REPORT

meet their financial needs and goals for the future,” Paynter said. “Certainly, there are data points that give the bank information on things that you’re researching, whether it’s savings or investing, or potentially modifying a loan for your business or your home.”

The advanced data analytics of AI in banking also can help banks to automate some processes and repetitive tasks, according to a 2018 paper by Accenture, which said the technology will “clearly have a huge impact on the financial services sector.”

“Banks will redefine how they work (their processes), what they sell (their products and services) and how they interact with their customers and employees (their user experiences),” according to the Accenture report.

The use of AI platforms in banking will continue to grow, particularly as mobile and online banking are used today in the COVID-19 pandemic at greater rates than before, Paynter said.

“I see it continuing to escalate and enabling our industry to be nimble to the needs of our customer base and to serve them in more efficient ways and perhaps new ways they may not yet even be determined,” he said.

AI speeds development of personalized health care

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

When the COVID-19 pandemic took hold in Michigan, Priority Health turned to predictive analytics to identify which members were at the highest risk.

T h r ou g h m o de l i n g , t h e G r a nd Rapids-based health pla n t hen reached out to those members. Care management nurses sought to make sure those members understood their risks and what they could do to stay safe. They also reminded the members of the availability of virtual visits if they needed to see a doctor and of mail-order prescriptions so they didn’t have to leave home to go to the pharmacy.

The information forwarded to members included standard adv ice from the U.S. Centers for Disea se Control and Prevention, “giving them another sou rce a nd a not her rem i nder to stay a s healthy as they can,” s a i d Na t h a n Fo c o, Priority Health’s vice Foco president of marketing and customer experience.

The effort is just one example of how health care today uses artificial intelligence. In health benefits, the technology is “helping us be much, much more personalized in our interactions with our members,” as systems learn about people’s health and habits, Foco said.

For example, artificial intelligence guides how Priority Health reaches out to members for “care nudges,” or reminders for them to get their annual checkup or a seasonal flu shot, and how best to connect with the person, whether via phone

call, email or a text message. The health plan’s system can tell which form of outreach members prefer and will resonate with them, which ultimately can lead to them taking better care of their health, Foco said.

“Predictive modeling really helps us hone in on what we should talk to somebody about and how we should talk to them,” he said. “As we continue to use data and use predictive modeling, we are seeing improvement in the actions we’re reminding or letting our members know they can take.”

Artificial intelligence has been effecting change across health care, including how insurers and health plans connect with members. As well, mobile apps developed by digital health companies learn about users and, based on their lifestyle, can help them to maintain their health or better manage a chronic medical condition.

The technology and health care apps hold “a lot of opportunity for innovation and a lot of entrepreneurial spirit,” Foco said. “I’m really excited to see what these firms are going to come out with in the next couple of years.”

Priority Health recently offered members free access to a mobile app known as Brook that’s designed to help with sleep management, nutrition and their overall health, as well as a wellness app from Livongo Health Inc. A 2017 report by Accenture said the use of AI in health care is moving at “hyperspeed” and “re-wiring our modern conception of healthcare delivery.”

The technology “can truly augment human activity, taking over tasks that range from medical imaging to risk analysis to diagnosing health conditions,” according to the Accenture analysis, which estimated artificial intelligence in health care will become a $6.6 billion market by 2021 and generate $150 billion in annual savings in the U.S. by 2026.

More recent research reports expect rapid growth for AI in health care in the U.S. market in the coming years.

Northbrook, Ill.-based MarketsandMarkets predicts the U.S. sector will grow from $4.9 billion in 2020 to $45.2 billion by 2026.

A report in late December by San Francisco, Calif.-based Grand View Research Inc. estimated the market will grow to $31.3 billion by 2025.

MiBiz / AUGUST 3, 2020

15

FOCUS: 9 INDUSTRIES DISRUPTED BY AI Ag sector leans on AI tools to better inform crop, nutrient decision making

By JAYSON BUSSA | MiBiz jbussa@mibiz.com

Manufacturers must focus on ROI when investing in artificial intelligence to generate real innovations, according to Ken Seneff, co-founder of Jackson-based Lean Rocket Labs. COURTESY PHOTO

In manufacturing, AI helps companies go beyond human capabilities

By JAYSON BUSSA | MiBiz jbussa@mibiz.com The manufacturing industry is under a crucial transformation as businesses of all sectors are faced with the idea of adopting what is referred to as Industry 4.0 technology and strategy.

Industry 4.0 is the idea of transitioning out of traditional manufacturing methods and utilizing cutting-edge smart technology. Artificial intelligence is one of the nine core tenants of Industry 4.0 — and a crucial one at that.

Whether AI is used to allow a robot or cobot to think or to scan for quality checks, implementing various forms of it can prove to be a major benefit for manufacturers.

“Companies that are incorporating AI properly are seeing tremendous ROI on it,” said Ken Seneff, co-founder and operator of Jackson-based Lean Rocket Labs, a manufacturing technology business incubator and Industry 4.0 startup accelerator.

Seneff is on the front lines of Industry 4.0 innovations from around the world as Lean Rocket Labs works with entrepreneurs who are creating innovations around physical products and manufacturing processes.

As an example, Seneff and his team have been working with a startup originally from Brazil that has moved to Michigan.

The startup’s platform uses AI to replace visual inspections of paint, surfaces and finishes in manufacturing applications. In the automotive world, instead of a human walking around a vehicle with a clipboard looking for surface issues, a camera mounted to a robot can do the same thing more accurately and efficiently.

“When you’re relying on the human eye, there are only certain things the eye can see, but it’s not going to be consistent and you’re not going to catch everything,” Seneff said. “And, if you don’t catch an issue, soon enough you might have a problem in the manufacturing process that costs you lots of money.”

The same platform can also run a simulation of stamping and pre-stamping processes to check for the probability of the process creating defects.

Seneff said ROI is crucial when it comes to identifying a real innovation in AI. “It’s about producing better products and producing better ROI, because at the end of the day, if it’s not producing better ROI or making me more money or more efficiency, then what’s the point?

Seneff “Unfortunately, I think there is a lot of what I call ‘fake innovation’ out there. That’s stuff that’s cool but doesn’t actually provide any value.”

WEST MICHIGAN’S LEADING COMMERCIAL ROOFING AND SHEET METAL CONTRACTOR

A SUBSIDIARY OF EAST MUSKEGON ROOFING AND SHEET METAL • EASTMUSKEGON.COM • 231.744.2461

16

AUGUST 3, 2020 / MiBiz

When 2012 brought a drought to the state, it had corn growers feeling a bit skittish about their yield potential, which caused corn prices to peak.

If a similar scenario were to play out today, modeling software can provide clarity through more accurate yield forecasting.

“The model could have looked at that and said, ‘You know, you guys are probably not going to be average or have record yields, but you’re not as bad as you think you are’ and that’s the way it turned out,” said Jeff Sandborn, a fourth-generation cash crop grower located in Portland, referring to the 2012 panic.

“You would have felt a little better about taking advantage of some of those crazy market prices,” he said.

The power to collect and analyze data is not only essential for growers, but it’s now easier and far more advanced thanks to artificial intelligence.

For decades, farmers have collected and archived data from their fields in both digital and analog ways, which can be loaded into modeling software to provide historical context.

Now, through components like yield monitors, sensors on planters and even aerial imaging with drones, farmers are able to collect more extensive data.

Sandborn has diligently collected and archived data from his farm and now is working to apply that data with the help of Bruno Basso, an earth science professor at Michigan State University who specializes in crop modeling and land use sustainability.

“This is where data is important — bad data can give you bad results,” Sandborn said.

Not only does Basso’s modeling software take into consideration the history of the field to plot out stability zones — identifying areas of traditionally low, high, average and inconsistent yield — but also he uses 40 years of weather data to provide yield projections for various weather patterns.

Ultimately, the information is used to grow more crops per acre using fewer nutrients.

Another common use of precision agriculture technology is GPS grid sampling, in which farmers take samples of soil throughout multiple grids of fields to identify exactly which nutrients and the quantity of them that is needed.

Optimizing fertilization leads to cost savings for farmers, uniform crops and uniform yield while also benefiting the environment, said Dwayne Ruthig, CEO of the Caledonia Farmers Elevator Co. Despite a perceived cultural divide between farmers that heavily utilize AI technology and traditional farming purists, Ruthig estimated that around 90 percent or more of farmers are routinely using technology such as GPS grid sampling.

“The ones that are not are typically our organic farms. Obviously, they don’t use commercial fertilizers in the same way,” he said.

“They use different processes to get their nutrients. They may be grid sampling to see what they need to do in certain areas, but they are not (using) commercial fertilizers.”

With self-driving equipment, computer modeling and forecasting, and yield imaging conducted by drones already in existence, many farmers might be left wondering what could be next.

“I think we’re heading down the road to full autonomy,” Sandborn said.

Visit www.mibiz.com

Transportation poised for wild ride over next decade

Michigan courts, law firms turn to AI to manage explosion in case material

By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com The coming decade is expected to bring a seismic shift to the transportation sector, filled with more electric and autonomous vehicles, technology-connected roads and fierce competition to build the components that support it all.

Trevor Pawl’s job is to make sure Michigan doesn’t fall behind.

Pawl, who was appointed as the state’s chief mobility officer last month

by Gov. Gretchen Whitmer, will lead the newly created Office of Future Mobility and Electrification.

His top priorities include attracting mobility investment and talent, helping deploy the “roads of the future” and other infrastructure to support autonomous and electric vehicles, and “making sure we bolster Michigan’s mobility manufacturing core.”

It’s a tall order from Whitmer, but necessary to protect Michigan’s reputation as an automotive capital as vehicles increasingly rely on software, state officials say.

“Something concerted needs to be done,” Pawl told MiBiz. “Other industries are converging on the future of transportation.”

Indeed, some reports show electric vehicle sales globally will outpace internal combustion models by 2030, while automakers have announced $300 billion in EV models and charging investments. Software is expected to represent about 50 percent of a vehicle’s value by 2030, up from 35 percent now, Pawl said. Meanwhile, Pawl cited a recent forecast from McKinsey & Co. predicting Michigan’s share of electric vehicle manufacturing to drop slightly by 2025.

“I think we need to be creative as a state about how to work with these emerging electric vehicle compaPawl nies,” Pawl said, including lifting regulations and offering incentives for companies that locate here.

At this point, though, the advanced transportation sector is in the nascent stage of pilot programs — such as an autonomous shuttle service in downtown Grand Rapids — and product announcements.

The pandemic also has slowed some of these efforts. A partnership

By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com

May Mobility operated an autonomous shuttle along the DASH route in cooperation with The Rapid, the city of Grand Rapids, Planet M and other partners. COURTESY PHOTO between May Mobility Inc., the city of Grand Rapids, PlanetM and others sidelined the city’s autonomous vehicle shuttle project on March 16. The shuttle service is expected to resume in late August or early September.

May Mobility Director of Business Development Tara Lanigan said prior to the pandemic shutdowns, ridership was “quite high” and surveys showed it supplemented existing bus services from The Rapid.

The project’s focus has since shifted. Ridership is “no longer going to be a success metric” as the pandemic presses on. Also, May Mobility has been redesigning vehicles to help stop the spread of COVID-19 among passengers.

“One of the biggest priorities is keeping shared mobility a priority and working around COVID to keep that as our roadmap,” Lanigan said.

Looking beyond the nascent stages, Pawl sees a safer future for drivers when AI can help reduce the number of fatal crashes in Michigan, which now are nearly entirely due to human error.

He also envisions more AI-powered shipping vehicles, including “lastmile” delivery services via drones.

“Shipping innovations are going to change smart infrastructure, and smart infrastructure will change economies,” Pawl said. The shift has potential to significantly reduce logistics costs, by some estimates near 50 percent by 2030.

“I feel like that’s where the industry’s going,” he said. “Michigan needs to head there as well.”

Though ‘late to the game,’ food retailers undergo major AI-powered shift

By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com Prior to the COVID-19 pandemic, major grocery retailers were already shifting to a more futuristic shopping experience in which customers either pre-order online and pick up at the store or act as their own clerk by scanning items as they go.

Food industry experts say the pandemic will accelerate these trends as customers seek touchless and contactless options and are increasingly driven to e-commerce grocery shopping options.

“It’s going to change a lot more and so quickly because of the current environment,” said Doug Baker, vice president of industry relations for the Food Marketing Institute, a Washington, D.C.-based trade group.

Though Baker said food retailers are “a little bit late to the game” compared to Baker other retail sectors when it comes to AI deployment, they are advancing quickly, not just to change the customer experience but also with mining data to track consumer trends and laying out and stocking stores.

For example, customer shopping data can Visit www.mibiz.com

inform which products stores market, Baker said. Stores also can use those shopping trends to determine which products are featured and where on the store floor. It’s all about customizing the shopping experience and operational efficiencies.

“At the base of everything, AI has been really effective for retailers (and they can) analyze that data and come away with some trends and recommendations,” Baker said.

It’s part of a broader shift in the food shopping experience on both ends. Monthly e-grocery sales have spiked during the pandemic, from $4 billion in March to $7.2 billion in June, according to a recent Brick Meets Click/Mercatus Grocery Survey. That changes how stores use labor, shifting from traditional checkout clerks and inventory staff to more fulfillment and customer service roles. However, the shift isn’t raising labor concerns for Baker.

“We’ll never throw the baby out with the bathwater,” he said. “What it does is there’s an expectation from consumers that we want to be entertained. You need employees in the store who are highly service-oriented.”

Robots are also replacing human labor for checking out-of-stock inventory and reporting hazards on floors. Pennsylvania-based Giant Food Stores LLC last year deployed nearly 200 such robots in stores across four states.

If the self-checkout lane was one of the first major AI disruptions in food retail, companies including Meijer Inc. and Kroger Co. are fundamentally changing the grocery shopping

The new Shop & Scan option from Meijer allows customers to register and bag items as they go and pay when leaving the store.

COURTESY PHOTO

experience. Kroger recently announced it’s launching three new fulfillment centers, including one in the Great Lakes region, where automated warehouses use robots to fill customer orders and offer home delivery. Meijer’s mobile app includes a “Shop & Scan” option that allows you to register and bag items as you go.

“You don’t need additional equipment for (scan-and-go),” Baker said. “On the back end, you manage the transaction and allow customers the freedom to do that on their own. It also allows consumers to see what they’re scanning against the shelf tag.”

In the years ahead, Baker sees only growth for food e-commerce, touchless interactions and greater use of voice and visual AI. “I think in the next five years we’ll see some really neat things coming out of that as well,” he said.

Last year, Michigan became the 37th state requiring attorneys to maintain ethical competence in technology, signaling the growing role of artificial intelligence in the legal sector.

The order handed down by the Michigan Supreme Court requires continuing education in emerging technology so attorneys can “provide competent representation for the client in a particular matter.”

The new requirement took effect on Jan. 1, along with supplemental rules involving “ediscovery,” or AI-powered systems that sort relevant case material during the discovery process when opposing parties share documents. The rules require setting an ediscovery plan early on in the case and outlining potential sanctions for parties that don’t act in good faith.

Scott Carvo, partner at Warner Norcross + Judd LLP’s Grand Rapids office, said ediscovery and computerautomated review is a common way that AI has disrupted — or rather aided — the legal sector.

“With the proliferation of data, email and devices, the amount of data corporations kept increased 10-20 fold in Carvo some cases,” Carvo said.

“We needed a solution to deal with it.”

Carvo, who had information technology experience before going to law school, said his firm embraced ediscovery when it began taking off across the industry roughly a decade ago. The goal is to save clients money, which has taken on greater importance during the pandemic.

“At this point, every one of my clients is looking for ways to keep their costs down,” Carvo said. “Every dollar matters these days in light of how things are with the economy.

Every client I have wants to reduce their legal spend.”

Ediscovery may be just a starting point for sweeping AI-driven changes in the legal sector. Carvo said algorithms are being developed that can predict case outcomes, such as in tax disputes. Companies also can use AI to feed in criteria or various desired outcomes in contracts, or can use it to power M&A due diligence.

However, embracing AI-driven technology has been a “hodgepodge” within the legal field and can vary among firms and attorneys, Carvo said. Some carry “bad assumptions about technology,” convincing them it will lead to more errors than manually combing through documents.

“It’s interesting the AI piece is coming to the legal sector because it’s notoriously a field that’s slow to adapt to change,” Carvo said. “Lawyers tend to be set in their ways.

It’s always a difficult proposition when you’re talking about innovation.”

He added, however, that under the state’s new rules, “lawyers have a duty to keep up with technology.”

MiBiz / AUGUST 3, 2020

17

FOCUS: 9 INDUSTRIES DISRUPTED BY AI West Michigan architecture firm seizes ‘cutting edge’ AI technology

AI helps regional approach to city planning

By KATE CARLSON | MiBiz kcarlson@mibiz.com

By KATE CARLSON | MiBiz kcarlson@mibiz.com The Grand Valley Metropolitan Council, which serves as the centralized hub of information for 39 West Michigan municipalities, has been using AI and machine learning to store, analyze and forecast data to plan for regional growth.

The council employs AI as it helps coordinate government services across the region.

This includes overseeing a regional geographic information system, known as REGIS, and using transportation modeling and forecasting to let municipalities know when they should invest in infrastructure improvements.

The biggest role of REGIS Moore is housing data and tracking it for cities, said Jason Moore, GIS Manager of REGIS for GVMC. “We do a lot with utility lines, water and sanitary sewer — that’s probably one of our biggest roles is maintaining that infrastructure,” Moore said.

Joseph The REGIS data is stored and updated by GVMC, which makes it accessible to members in the region for city planning purposes.

Laurel Joseph, director of transportation planning for GVMC, uses a travel demand model to analyze congestion and other performance measures on the regional transportation system. Her department also analyzes pavement condition data and modeling to forecast when roads will need maintenance, as well as different

GVMC’s single source map created by REGIS helps capture regional zoning trends by sector, including agriculture, commercial and industrial. SOURCE: GRAND VALLEY METROPOLITAN COUNCIL investment strategies municipalities could take.

“We look at the current year, and using our modeling growth factors we try to project what the travel demand on our transportation system could look like in the future,” Joseph said.

The models can also forecast the effects on transportation infrastructure for different land uses and predict what an area could look like under development scenarios, Joseph said.

As the GVMC compiled the 2045 Metropolitan Transportation Plan, the biggest takeaway was that citizens’ main priority was improving road condition and safety in transit systems.

The GVMC is working on a way to model travel time reliability, which they have not been able to predict in the past, Joseph said.

Typically, a city has a rush hour when residents and commuters can expect a longer travel time,

but it becomes an issue if that rush hour period becomes unpredictable and hard to plan for, Joseph said.

“We have current and past data, but haven’t been able to use our model to forecast for the future, like how reliable will (travel time) be in 15 or 20 years,” she said.

In light of the pandemic, the GVMC’s transportation division is tracking traffic counts to see if travel will get back to pre-stay-at-home order levels. Counts show that traffic in the region is 20 percent lower than it was last year, Joseph said.

“We’re doing pre-work on a regional freight plan and thinking about supply chain management related to pandemics like this and other natural disasters to see how we can make sure our transportation system is more resilient to unanticipated changes,” Joseph said.

GRAND RAPIDS — Artificial intelligence is growing increasingly common in the construction industry to automate mundane yet critical tasks.

Its use at Grand Rapids-based Ghafari Associates, however, is on the “cutting edge” compared to other engineering and architecture firms in the region, company officials say.

While Ghafari Architecture Manager Andrew Eckert doesn’t see AI replacing architects like himself, he said the technology speeds up the design process and has potential to create high-tech “smart buildings” embedded with AI for future building users.

Ghafari is looking to use a new AI program that runs scripts to automate repetitive tasks, which could quickly lay out various project site plans. This could swiftly create different options and rule out the plans that do not align with a project.

“If I’m laying out an apartment building on a specific site and I want to try to come up with four or five schemes that maximize the site looking at different options for stories and scales, then this could Eckert do that,” he said.

Ghafari is also using a high-tech scanning technology connected to GPS that can scan buildings and sites of potential projects via drone.

“Once the building scan is done, we never have to go back to the area again,” Eckert said. “So if we were working on a building in California, we could cut down on how many times we would have to go out and visit the site.”

Last year Eckert recalls his firm forming a master plan for a client on a site with 25 buildings. Instead of having someone go out and survey the site, they scanned the area with a drone and created a full, three-dimensional site plan in a day and a half, he said.

The scanning technology is also used frequently for health care buildings, Eckert said, because of how frequently renovations are done on hospitals with technology continually being updated for health care. Before the drywall goes into a new hospital building, the firm can scan each room to keep a record of where pipes and electrical lines are located. This way, Eckert said, when a hospital gets renovated it knows exactly where everything is located before it tears open walls.

Future of AI in construction Creating “smart buildings” that use AI will likely become more cost effective in the future, Eckert said. This would involve the Ghafari team getting reports from buildings they have designed detailing how people use the facilities.

“That would be pretty interesting because we could take that data and apply it to new designs and technology based on how users interact with spaces,” he said.

Another possibility for tracking information on future buildings is putting QR codes on different appliances and pieces of a building that can predict when each piece needs maintenance or to be replaced, Eckert said. This would likely involve giving the building user access of some kind to AI modeling Ghafari created to design the space that is linked to each part of the building.

“For me, it’s important being on the cutting edge, and looking forward and not looking backwards,” Eckert said. “We never want to say ‘This is how we’ve always done it,’ because then we’d be doing a disservice to our client.”

18

AUGUST 3, 2020 / MiBiz

Visit www.mibiz.com

FINANCE NEW VC FUND Continued from page 1

and Spectrum Health Ventures, the corporate venture capital arm of Spectrum Health, each committed $1 million.

“We’ve had a very, very positive reception,” Welch said. “We’re on our way.”

Spectrum Health Ventures was the first to commit. When presenting to Spectrum Health, “we didn’t have to do hardly any convincing,” Welch said.

“With them coming on board, that set the wheels in motion,” he said.

Making investments in “partnerships that enhance equity and strengthen our community is consistent with our mission to improve health, inspire hope and save lives,” said Spectrum Health President and CEO Tina Freese Decker.

Freese Decker

‘On target’ For Mercantile Bank, the New Community Transformation Fund “has the potential to be a needle mover for the advancement of racial diversity for business ownership in Kaminski West Michigan,” CEO Robert Kaminski told MiBiz. Mercantile Bank views the investment as a way to back an initiative that furthers economic diversity and inclusion in West Michigan.

The bank invested in the venture capital fund “very enthuKlohs siastically,” Kaminski said.

“It feels like it was a really solid opportunity.

We’re all looking for opportunities to increase the diversity of the business ownership in our community,” Kaminski said. “We believe that this is as good of a plan as we’ve seen to be able to expand minority business ownership in West Michigan.”

Two more local investors could close on commitments soon, and “we have other asks that are outstanding that are in various stages of decision making,” said Birgit Klohs, president and CEO at The Right Place.

The fund has met timeline goals for organizing and fundraising, Klohs said. Organizers hope to secure $5 million in commitments from local investors by early fall, “and then we’re going to go national,” said Klohs, who serves on the venture capital fund’s board of directors.

“We are on target,” she said.

Addressing needs The concept for the new venture capital fund took root in 2019 as The Right Place crafted a new strategic plan. During the planning process, the need to do more to support economic inclusion became a common theme in conversations with more than 100 community and business leaders across the region, Klohs said previously.

Only a small portion of the venture capital invested in the U.S. goes to businesses started by ethnic and racial minorities.

Of the 144 companies in Michigan backed by venture capital as of 2019, just 13 percent are led by a CEO who is a racial minority, according to the annual research report by the Michigan Venture Capital Association.

Only $109.2 million of the $2.1 billion invested in Michigan in 2019 went to a startup led by a CEO who was a racial minority. The MVCA’s 2020 research report noted that over the last five years, the number of startups in Michigan led by racial minorities increased 138 percent, although “statewide funding data indicates that companies led by underrepresented groups are systemically underfunded.”

Visit www.mibiz.com

“We have to do something significant as a community to let the nation know that we’re serious. We have to vote with our dollars as a community, and if we don’t, it’s another exercise in theory.”

— SKOT WELCH Managing Partner of the New Community Transformation Fund

The need for greater minority inclusion in venture capital has been growing in the venture capital industry. The National Venture Capital Association in June launched a new nonprofit organization whose mission includes “advancing a more diverse, equitable, and inclusive ecosystem.”

In the spotlight The issue has been elevated further by the events of this spring and summer, with the protests and movement triggered by the killing of George Floyd by a Minneapolis, Minn. police officer. The events led to commitments by large banks and several corporations in the U.S. to put large sums toward addressing racial economic disparities.

The New Community Transformation Fund may reach out to those initiatives after securing enough backing locally to expand fundraising nationally, Klohs said. She cites corporations such as Bank of America, PNC Bank, Google, Apple Inc., PayPal Holdings Inc., and Comcast Corp. that have “stood up hundreds of millions of dollars of investable funds into the communities of color in the United States.”

“We need to get this fund in front of some of those. You can’t do that if the local community hasn’t really committed,” Klohs said. “We need to seriously show that West Michigan is as committed to this as we think they need to be and then we can go and ask people who are not local to be part of the fund.

“Raising money for a fund that’s headquartered in Grand Rapids and getting no local money or little is not going to work.”

Driving awareness The greater awareness today of economic and racial disparities and the protest movement of the last few months that came on top of the COVID-19 pandemic have “only given lift and even greater visibility to what we’re doing,” Welch said.

“It’s so ubiquitous now. It’s everywhere.

You cannot avoid the need and the necessity for communities to take this very seriously,” he said. “It’s really helped us a bit because it really frames everything we do. There’s not much to explain in presentations now as to the need.”

The New Community Transformation Fund intends to make investments of at least $250,000 in Series A rounds for scalable businesses that are approaching their next stage and need growth capital. The fund will target companies involved in advanced manufacturing, food processing and agribusiness, life sciences and medical devices, and information technology.

The venture capital fund will require founders and companies receiving investments to locate and operate in West Michigan.

The fund also will make investments in minority entrepreneurs buying family-owned companies whose owners are exiting the business, thereby ensuring the firms remain locally owned.

Bracing for more economic fallout, West Michigan banks boost loan-loss reserves

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

iven how hard the economy fell in the s e c o n d q u a r t e r, earnings for West Michigan-based banks held up relatively well, although they were primarily lower than a year earlier as banks set aside more in reserve to cover potential future loan losses.

Ba n k s sig nif ica nt ly b o o s t e d t hei r lo a n-lo s s reserves amid the economic downturn from the COVID19 pandemic and the effects of what Independent Bank CEO Brad Kessler told brokerage analysts was the “literal shutdown of the Michigan economy during the second quarter of 2020.”

The Grand Rapids-based Independent Bank (Nasdaq: ICBP) recorded a $5.2 million loan-loss expense for the second quarter. That provision was just $ 652,000 for t he same period a year earlier, reflecting concerns about the economy for the rest of 2020.

“This increase principally ref lects t he unique cha llenges and economic uncertainty (that) resulted from the COVID-19 pandemic and the potential impact on our loan portfolio,” Independent CFO Bob Shuster said in a conference call to discuss quarterly results.

Independent Bank repor ted qua r terly net income of $14.7 million, or 67 cents per diluted share. That compares with $10.7 million, or 46 cents per diluted share, in net income for the second quarter of 2019.

Likewise, Grand Rapidsb a s e d Mer c a nt i le Ba n k Corp.’s significantly higher quarterly loan-loss provision ref lects the pandemic and “its impact on the economic environment,” CFO Chuck Christmas said.

Resu lts for Merca nt i le Bank (Nasdaq: MBWM) in the second quarter included a $7.6 million quarterly loanloss provision expense, which compares to $900,000 in the second quarter of 2019. The higher expense consists primarily of allocations for a new “COV ID-19 pandemic environmental factor” and ex isting economic conditions, Christmas said.

“The COVID-19 factor was added to address the unique challenges and economic uncertainties resulting from the pandemic and its potential impact on the collectability of

G

the loan portfolio,” he said.

Mercantile Bank reported second quarter net income of $8.6 million, or 54 cents per diluted share. That compa res to $11.7 mi l lion in net income, or 71 cents per diluted share, in the same period a year earlier. The previous year’s results included a $1.3 million gain, or 8 cents per share, from the sale of a bank-owned life insurance claim.

Monitoring continues Other West Michigan-based banks also reported higher reserves cut into quarterly earnings.

Holland-based Macatawa Bank Corp. (Nasdaq: MCBC) attributed its year-to-year ea r nings decline to adding more than $1 million to a loan-loss provision in the second quarter. Macatawa Bank reported quarterly net income of $7.6 million, or 22 cents per diluted share.

That’s down 5 percent from the $8 million, or 24 cents per diluted share, in the second quarter of 2019.

Sparta-based ChoiceOne Fi na nc ia l S er v ic e s I nc . ( Na s d a q : C OF S ) t r iple d earnings after making two acquisitions in the last year.

The bank also significantly increased its quarterly loanloss provision, which grew to $1 million. Much of the loan-loss provision increase “was related to the impact of COVID-19,” according to bank executives.

“Although ChoiceOne has not seen significant increases in charge-offs or delinquencies, we are continuing to monitor deferrals and economic indicators which may signify the need for increased prov ision for loa n losses expense,” the bank said in an earnings release.

ChoiceOne reported second quarter net income of $4.4 million, or 61 cents per diluted sha re. That compares to $1.4 million in quarterly net income in the same period in 2019, or 45 cents per diluted share.

Last October, ChoiceOne closed on the $89 million acquisition of Lapeer-based County Bank Corp., the parent company of Lakestone Bank & Trust. ChoiceOne subsequently acquired Muskegon-based Community Shores Bank Corp. in a $20.8 million deal that closed in July. Community Shores’ three

offices in Muskegon County and one in Grand Haven in neighboring Ottawa County will integrate into ChoiceOne Bank later this year.

Loan deferrals In reporting results for the second quarter, the banks listed the thousands of loans t hey processed for businesses under the U.S. Small Business Administration’s Payroll Protection Program.

Bankers said they are now awaiting final guidance from the federal government on assisting PPP borrowers to secure forgiveness from the SBA on the loans.

Bankers also spoke of the forbearance and payment deferrals on loans they prov ided retail and commercial borrowers. Those deferra l periods have recent ly expired or will soon expire this summer.

As the economy begins to recover, ba n kers sa id they are getting few requests from borrowers to extend deferrals.

Mercantile Bank provided 705 payment deferrals during the quarter, which represented $718 million in loan exposure and $23 million in deferred payments. As of mid July, Mercantile Bank had just 33 deferrals outstanding with $130 million of exposure and $4 million of deferred payments, President Ray Reitsma said.

The bank expects more requests in the near future to extend deferral periods, a lthough “these relatively modest numbers, combined w it h our expectations for future requests and our past due per for ma nce a re (a) positive indicator,” Reitsma said.

Independent Bank had 259 loans and $210 million of deferrals, mostly on loan principals, said Jim Mack, the bank’s head of commercial lending. Many of those deferrals were approved in late April or May, “so August will be the first period where those payments will resume to t he norma l schedu le,” Mack said.

“We’ve se en ver y fe w for s e c ond r ou nd a dd itional requests. There have been f ive so far to ask us for another three months,” he said. “And that remains to be seen how many more (requests the bank will get), but it’s been low activity at the moment.”

MiBiz / AUGUST 3, 2020

19

UPCOMING ISSUES

8.17.2020

Automotive Supply Chain Contract Deadline: 8.5.2020

8.31.2020

Small Business

Contract Deadline: 8.18.2020

9.14.2020

Family Business

Contract Deadline: 9.2.2020 How should marketing change in the wake of COVID-19?

Aerospace suppliers brace for continued turbulence

PAGE 9

PAGE 5

MAY 11, 2020 • VOL. 32/NO. 15 • $3.00

SERVING WESTERN MICHIGAN BUSINESS SINCE 1988

Experts warn of possible mental health ‘aftershock’ from COVID-19

www.mibiz.com

EXPLORING WHAT’S NEXT Experts preview workplace changes as economy slowly re-emerges

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

I

f the SARS outbreak 17 years

By MARK SANCHEZ | MiBiz ago in Asia is an accurate indimsanchez@mibiz.com cator, behavioral health care providers could see a patient eople who have been working from surge in the coming weeks and home for weeks because of the months as the COVID-19 pandemic COVID-19 pandemic will return to a takes an emotional toll on people. decidedly different workplace than One-third of the people in Asia they had previously once the economy gets were unable to return to work full going again. time after the SARS pandemic, six Changes will span a range of workplace in 10 experienced fatigue, and half environments, including offices, shop floors, had difficulty sleeping. breakrooms and conference rooms. Wearing In Hong Kong, the suicide rate face masks and having more distance spiked nearly 32 percent for two between workers will become the norm, years after SARS. Hong Kong also along with routine temperature checks and experienced “increases in persistent continually cleaning and sanitizing the workdepression, anxiety, panic attacks, place, tools, equipment and workstations. psychomotor agitation, psychotic PAGE 12 PAGE 14 Those and other pracsymptoms, delirium, and suicidtices are all part of the proality,” accordMARCH 16, 2020 • VOL. 32/NO. 11 • $3.00 SERVING WESTERN MICHIGAN BUSINESS SINCE 1988 www.mibiz.com verbial “new normal” for ing to a white employers working to navpaper from Pine igate the deadly pandemic Rest Christian that has disrupted daily rouMental Health tines, thrown the economy Services on the into recession and may linpotential menSmall businesses around West Michigan have been affected in many ways GR debates increasing ger for many months until a tal health effects Kennedy sites for marijuana by the ongoing pandemic. While some are seeing increased business, most Eastburg vaccine is developed. of the COVID-19 businesses; equity, “As business leaders, you have to make pandemic. companies are being forced to deal with the fallout by getting creative, manlocal ownership sure you’re taking the responsibility for your The white report pulls data from aging cash and finding new ways to stay engaged with customers and cliconcerns remain employees,” Kentwood-based Autocam a number of sources to issue a call to Medical Devices LLC CEO John Kennedy action for care providers to prepare ents. In this Coping with COVID-19 special report, MiBiz speaks with two said during a recent back-to-work webinar for the “aftershocks” from the panBy SYDNEY SMITH | MiBiz dozen West Michigan companies to hear how they’re navigating the current hosted by Advantage Benefits Group Inc. “It’s demic and “minimize the fallout of ssmith@mibiz.com incumbent on us as businesses to make sure COVID-19 on mental health in our uncharted waters. SEE PAGES 12-19 communities.”

See WHAT’S NEXT on page 8 GRAND RAPIDS — Following “ Th e w ar n in g sig n s are mixed messages from the Grand there right now that we could in Rapids City Commission late last Michigan experience a significant

By MARK SANCHEZ | MiBiz month, marijuana advocates surge in behavioral health needs msanchez@mibiz.com hope city officials will ultimately that emerge out of this COVID criopen more properties for medisis,” Pine Rest CEO Mark Eastburg he coronavirus outbreak that’s batcal and recreational facilities.

By ANDY BALASKOVITZ | MiBiz benefits for people in their state’s Program loan — told MiBiz. “We ought to be precall hosted by the West Michigan Policy tered Wall Street andactive caused supply On Feb. 25, the commission abalaskovitz@mibiz.com system.

In Michigan, this means workwhich requires 75 pared asimplications a state and aofcommunity Forum. As of early May, Sturgis Molded Visit mibiz.com for ongoing coverage of the business COVID-19 in West Michigan. chain disruptions for some manuwent back and forth on appliers unemployed a result oftransthe panpercent of the loan for that in case that happens.”

Products was running at about 10 perfacturers has yet toasinterrupt cations for both types of facilis some employers actions, express although demic could receive up to $962 aare week. to be used for payT he s t r e s s, a n x iet y a nd cent capacity involving transportation more conversations ties. The city has approved 24 PAGE 2 PAGE 13 concern about retainfederal areaccording available for roll in order to be depression the pandemic trigand medical devices. The company has occurring asThe part of duebenefits diligence, licenses for medical marijuana ing workers who are up to 39 weeks, while state benefits forgiven — faced gers can come from the loss of a about 200 employees. to earnM&A professionals. businesses, while another 14 APRIL 27, 2020 • VOL. 32/NO. 14 • $3.00 SERVING WESTERN MICHIGAN BUSINESS SINCE 1988 www.mibiz.com ing more income through were more workers backlash from job or income, grief, and uncer“I’ve called people and there has Deals that areexpanded in processtoinvolve a deeperand are waiting for approval. The unemployment benefits than their extended for 26 employees, since tainty about the future. At Pine been communication that said, ‘I make dive into due diligence inweeks. situations where city hasn’t finalized recrePresta normal paychecks, researchers say Media have shown conthe loan effectively Rest, “we’re experiencing a rise more by not coming in,’” Presta told one reports company is acquiring ational marijuana zoning reglong-term structural fixes are needed cern among employers who pay less means workers would be paid their in many of the stressors that are MiBiz. “That’s out there.” another that sources raw ulations and won’t start acceptto state and federal programs. than the amount of benefits worktypical wages. known to increase risk for suiSturgis Molded Products’ operamaterials or components ing applications until April 20.

The $2.2 trillion CARES Act passed ers are receiving. In at least one case Kelly Presta, vice president at Sturgis cide,” Eastburg said. tors and first-line positions make

By JESSICA YOUNG | MiBiz Ea rlier t his mont h at t he West Michiga n from China. Buyers are Hours after voting to delay in late March included provisions to in Washington state, a company Molded Products Co., shared these less than the maximum amount See MENTAL HEALTH on page 6 Symposium jyoung@mibiz.com Automotive Suppliers in Grand Rapids, asking for more informarecreational and pause mediadd $600 in weekly unemployment that received a Paycheck Protection concerns during an April 22 conference See UNEMPLOYMENT on page 5 Mike Wall, director of automotive analysis in Grand tion about supply chains, cal applications, the City he automotive industry is scrambling to strike Rapids at IHS Markit, forecasted light vehicle sales backup plans and the Commission reversed course SBA races to provide relief a balance between near-term execution and of 16.8 million units in the U.S. this year, in the segcapabilities of replacement after the six commissionto small businesses, but P E R I O D I C A L S unsteady industry disruption from the novel ment that includes cars, utility vehicles and pickup suppliers. ers could not agree on how to some hiccups remain Brown coronavirus outbreak. trucks.

“It’s still very new. move forward. A last-minute That’s according to industry experts who say the Already, that outlook is changing as COVID-19 conEveryone’s trying to figure it out on the fly, dispute among commissioners

By MARK SANCHEZ | MiBiz effect of the virus, which has been spreading around tinues to develop across the country, he told MiBiz. but if clients were selling source parts from also involved equity and local msanchez@mibiz.com the globe since late December and shut down producAs of this report, IHS Markit was still finalizing a China, you’re going to have to make sure ownership. tion in specific regions, has shifted forecasts for global revised sales projection, but Wall expects the new forethey have a backup supply-chain plan in Commissioners were conhe sheer volume of small automotive production and U.S. sales downward. cast to drop to 16.5 million units. case there is a major disruption,” said Mike sidering zoning amendments businesses that have Indeed, Gov. Gretchen Whitmer announced “Everything is happening so quickly and there is Brown, who leads the M&A practice at investrecommended by the Planning MARKcases SANCHEZ | MiBiz sought federal relief the state’s first two presumptiveBy positive so much volatility that given the circumstances, 16.5 ment bank Charter Capital Partners LLC in Commission that would have msanchez@mibiz.com loans illustrates the PAGE 11 in Oakland and Wayne counties on March 10, fol(million) will still be a very good year,” Wall said.

Grand Rapids. eliminated a waiver process depth and scope of the economic See SHIFTING DYNAMICS on page 4 lowed by a state of emergency declaration. for sensitive land uses like reliSee DUE DILIGENCE on page 9 n normal times, Trinity Health’s seven pain brought on by the COVID-19 gious institutions and opened hospitals across Michigan generate compandemic. more properties for cannabis bined operating income of $9 million to The U.S. Small Business development. $10 million a month.

Administration quickly blew Marijuana advocates have But the current operating environment through $349 billion in just 14 sought to relax distance requireis far from normal, and the COVID-19 pandays and approved loans for 1.6 ments in order to expand the Downtown Grand Haven. MIBIZ PHOTO: MARLA MILLER demic has pushed the Catholic health sysmillion small businesses nationnumber of properties qualified tem’s financial performance deep into the wide before halting new applifor marijuana business use, red. seeking a constitutional amendment cations April 16 for the Paycheck

By ANDY BALASKOVITZ | MiBiz graduated, or progressive, income tax. schools and road and water infrastrucwhich they say could also help The operations for percent Trinity Protection Program. That’s as abalaskovitz@gmail.com to Michigan change Michigan’s flat 4.25 The Democratic-backed proposals have ture starting in 2022. The plan would address concerns over a lack of Health, the Livonia-based parent corporation many loans as the SBA processed income tax to a graduated structure failed to gain traction in the Republicanreduce the state income tax rate for local ownership. of Mercy Health in West Michigan Saint in the previous 14 years combined. s progressive political advobased on income.

The Boardand of State held state House and Senate. individuals with income of $175,000 or Joe Neller, co-founder and Health Congress last week allocated cates seek lower state income Canvassers is Joseph expectedMercy to decide in the In t he late 1960s a nd 1970s, less and joint filers with income at or chief government affairs offiSoutheast another $320 billion for the PPP, tax rates for most Michigan coming weeksSystem whether in organizers can Michigan voters by wide margins below $350,000. According to organizcer at Dimondale-based Green Michigan, recorded a $50 $30 billion of which will go to federresidents while higher earncollect signatures in hopes of putting rejected ballot proposals for a graduers, 95 percent of Michigan residents Peak Innovations LLC, said the

By MARLA MILLER | MiBiz the region’s busiest tourist towns, as Main Streets million operating loss for ally designated community develers pay more for infrastructure needs, the question to voters in November. ated income tax. Such a change would would pay a lower state income tax rate Planning Commission rejected mmiller@mibiz.com across the state are bearing the brunt of COVIDMarch, “and remember opment financial institutions, plus the state’s leading business group is “If this qualifies for the ballot, require a constitutional amendment. than they do now. a provisioning center proposed 19 closures. in March half the month banks and credit unions with less bracing for a highly contentious politfrankly, it would be war,” said Rich However, supporters say growing Of the 41 states with income taxes, by his company because of the s the owner of longtime site’s downtown some restaurants and breweries have pivwas a normal than $10 billion in assets. Banks ical campaign.

Studley, president and CEOmonth,” of the income disparities and declining pub33 have a progressive structure. Federal proximity toWhile a church, Grand Haven retailer Down To though Earth, theoted to takeout retailers deemed nonsaid President and CEO and credit unions with assets Organizers behind the Fair Tax Michigan Chamber of Commerce. lic services have shifted public opinion. income tax also follows a graduated even company had and delivery, Sholeh Veiseh has turned toahosting essential fall into more of a gray area. Some have shut Rob Casalou.has opposed between $10 billion and $50 billion Michigan campaign, which was For years, the Chamber The Fair Tax Michigan plan would raise model. waiver virfrom the church. tual fashion shows and offering sales onQUO down entirely, while others are transitioning online to TheLegislature operating for loss will get another $30 billion. announced in late February, are Casalou efforts in the state a See INCOME TAX on page 3 $1.5 billion in additional revenue for See STATUS on page 8 social media to bring in some revenue during the remain at least partially open for e-commerce. stems from the lost revThe legislation also directed coronavirus closure.

Under a new executive order issued April 24, enue from canceling non-essential surger$60 billion in funding to the SBA’s Gov. Gretchen Whitmer’s initial executive those stores now have more clarity: Retailers sellies and procedures, combined with ramped Economic Injury Disaster Loan P E R I O D I C A L S order closing non-essential businesses through ing non-essential items can open for curbside up spending to test and care for COVID-19 program Congress set up earlier April 30 shuttered most storefronts on Washington pick-up and for delivery. patients. in the pandemic.

See FINANCIAL CRISIS on page 6 Avenue, an established shopping district in one of Before running out of money See LAKESHORE RETAILERS on page 10 for the first round of the PPP, the SBA approved relief loans totaling $10.38 billion for nearly 43,500 PAGE 21 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 SEE PAGE 16 500-employee threshold, the hosBy JOE BOOMGAARD | MiBiz in-person dining and drinking in crews for to-go orders, curbside pickup In a survey compiled by Boulder, pitality sector, restaurants, manujboomgaard@mibiz.com their establishments in an effort to or home delivery of beverages and Colo.-based Brewers Association in facturers and retailers that have curb the spread of COVID-19. For food. Meanwhile, distilleries have early April, 14.1 percent of responbeen hurt by the pandemic and ichigan’s craft beverage the first time in many of their his- repurposed their stills to produce eth- dents indicated their business could resulting stay-at-home orders. industry is facing a chal- tories, the owners of breweries, dis- anol in an effort to answer the call to sustain for four weeks or less if the “If you connect enough dots, lenge with the economic tilleries, wineries and cideries have boost critical supplies of hand sanitizer. current conditions persisted. An addiand some you have to confallout from the corona- been forced to lay off staff members These scrappy and resilient com- tional 45.8 percent of respondents said nect more dots than others, virus pandemic that is unlike any — their companies’ direct connec- panies are finding revenue wher- their businesses could only sustain for you can almost see where every other in its history. tions with consumers in their tap- ever they can, but few could have one to three months if the social dissingle human being and every Many companies have been com- rooms and bars. prepared for such an abrupt sea tancing measures and restrictions on See SBA LOANS on page 8 pletely closed for weeks as a result The craft beverage companies that change that’s been brought on by sit-down service remain in place. of state-mandated orders to end all remain open are leveraging skeleton the pandemic.

See CRAFT BEVERAGE on page 14

COPING WITH COVID-19

Former Muskegon coal plant to get new owners

P

Spectrum Health prioritizes buying local

STATUS QUO

West Michigan will work differently post COVID-19

How employers can help with mental health

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

A

Automotive analysts see shifting dynamics amid coronavirus spread

T

T

T

Health systems face financial crisis brought on by pandemic

Construction industry adapts to new safety protocols

I

Michigan Chamber prepares for ‘war’ over graduated income tax proposal LAKESHORE RETAILERS ADAPT, MOVE ONLINE AS SOME SCRAMBLE TO STAY AFLOAT

A

A

Leaders push for action to raise wages

After unbridled growth, Michigan craft beverage companies gird for devastating lows

E

R

I

O

D

I

C

A

L

Business of Senior Care

PAGE 12

10.12.2020 Industry 4.0

Contract Deadline: 9.30.2020

10.28.2020

M+A: Deals & Dealmakers Awards Contract Deadline: 10.14.2020

11.9.2020

Food Economy

Contract Deadline: 10.28.2020

S

Foodservice disruptions cause crisis for farmers

Contract Deadline: 9.16.2020

INSIDE:

M

P

Diversity/Equity/Inclusion

— C ORON AV I RUS I N M IC H IG A N —

Virus concerns drive additional due diligence in M&A transactions

TRIAL

BY FIRE:

9.28.2020

INSIDE:

Drinking economy SEE PAGE 14

11.23.2020

Education & Talent Development Contract Deadline: 11.11.2020

12.7.2020

Construction Wrap-up

Contract Deadline: 11.25,2020

12.21.2020

Crystal Ball Special Year-End Edition Contract Deadline: 12.9.2020

Contact Us Today!

sales@mibiz.com | editor@mibiz.com 616-608-6170

20

AUGUST 3, 2020 / MiBiz

Visit www.mibiz.com

NONPROFIT ORGANIZATIONS

Fundraising, maintaining morale among challenges for new nonprofit leaders

By JANE SIMONS | MiBiz jsimons@mibiz.com

S

heldon Schwitek is among a number of West Michigan nonprofit executives who found themselves in new leadership positions in the middle of a pandemic.

Schwitek, executive director of The Arc Community Advocates in Kalamazoo, officially started on Jan. 6. He spent a month in Australia — a trip that had been planned prior to starting the job — before returning to host the ARC’s inclusion conference. It would be his last in-person gathering before state-mandated shutdown orders.

“I just made it under the wire,” he said. “In some ways it’s been easier for me to step into this role at this time because I didn’t have any preconceived notions about what it was going to look like, which would have added another level of complexity.”

Jeff Romig, now president and executive director of the Gilmore Car Museum, said Schwitek he knew what he was walking into when he was asked to assume a greater leadership role.

He had been a board member of the Hickory Corners-based car museum for four years.

Romig — who retired a few years ago as vice president and general manager of the Eaton Corp. Vehicle Group — said leaders in all sectors have been affected.

“I have to say in my career that this has been one of the most significant leadership Gowdy challenges I’ve ever had. This issue affects every man, woman and child in the world,” he said. “There weren’t really any answers. In a normal business situation you can say, ‘This occurred and now we have to come up with a plan to deal with it.’”

Developing a strategy to operate as normally as possible has been a challenge due to varying messages from the state and federal government, Romig said.

“From that standpoint with all of those Kuhn things combined, it’s been a significant leadership challenge for anyone to get through. Decisions need to be made,” Romig said. “Our No. 1 priority is the health and safety of our employees and visitors. We’ve set that as the benchmark.”

Shared experiences, fundraising challenges The list of nonprofits making leadership transitions during the pandemic also includes Grand Rapids-based Wedgwood

Christian Services, which appointed Dan Gowdy as president and CEO on May 19; the Grand Rapids African American Health Institute, which launched a search for a new executive director on July 29; and the Kalamazoo Civic Theatre, which expects soon to name an interim executive director.

The Michigan Nonprofit Association has taken a lead role to ensure these new leaders have the support and tools they need to navigate the landscape.

MNA Vice President and Chief Strategy Officer Kelley Kuhn said nearly a dozen new executive directors and CEOs have reached out to MNA to share their experiences, while the association also made wellness calls to nonprofit leaders.

“The resources we offered were very situational because some leaders were experiencing things differently,” Kuhn said. “Some common themes we shared with them were to ensure that they were communicating with the community and engaging with their board of directors first and foremost.

And secondly, that they would be reaching out to their funders Sponsored by: and donors.”

GRAND RAPIDS Romig said he was holding COMMUNITY daily meetings with his leaderFOUNDATION ship team and leading weekly meetings with his roughly 20 employees to update them on latest developments. He said he was uncomfortable seeking donations in the initial stages of the pandemic when the stock market was down and unemployment was high.

“We did have a spring membership drive where we actually did have a very generous partner that agreed to do a dollar for dollar match in April and May,” Romig said. “We doubled what our membership would have been and reconfigured our schedule for summer.”

The Arc’s two major fundraisers were canceled — Ribfest in August and Arctoberfest in the fall.

“Those were two pretty significant hits for us,” Schwitek said.

“We’re really fortunate and got the Payroll Protection Program loan pretty quickly. The PPP loan was definitely a lifesaver for us. We haven’t had to lay anybody off. As things start to ramp up, our work will start to get busier.”

This includes writing five grants in the next two months, he said.

NONPROFIT SECTOR NEWS

Shifting operations In addition to the outreach to stakeholders, Kuhn said there also has been discussion with nonprofits about looking at their business models and seeing how they could realign their work and take programming virtual.

As a consultant who spent the past 20 years traveling and working domestically and internationally, Schwitek says working remotely and virtually was not a new concept for him.

“Thinking on my feet” is a phrase often used when he describes taking over a nonprofit during such uncertainty.

The Arc is an advocacy organization that helps people with a developmental disability participate fully in all aspects of the community and to support the effort of individuals to determine their own future.

Schwitek says it is a small organization with four full-time employees and one part-time employee. Typically, he and his staff would have been focusing their efforts on helping their younger clients wrap up their school year.

“Almost immediately, we all started working from home and sorting that out. This has been an ongoing process for everybody,” Schwitek said. “I’m very much relationship-based. Much of the work and expertise relies on relationship-building. Much of the work the Arc should be doing is building relationships around the community. … Much of my time was spent trying to keep staff morale up and the staff together.”

Annually, the ARC serves about 300 adults and children.

Schwitek said he and his staff have done very little adult advocacy, answering about four calls in the last month. He said there are indications that this will increase.

Meanwhile, his staff has been checking in with clients to make sure they aren’t experiencing food or housing insecurity.

“Many of our clients are families with s c h o o l - a g e k i d s ,” Schwitek said. “What we do as a team is to make sure the other needs of our clients are being met.”

Kuhn said the MNA will be helping nonprof its t hin k about how their response is — KELLY KUHN going to happen in the coming months.

VP and Chief Strategy Officer at “Just imagine the Michigan Nonprofit Association over whelming feeling of being a new nonprofit leader,” she said. “We want to help them realize the immediate relief that’s happening.”

The next phase — which Kuhn calls the response phase — will involve conversations about funding to cover operational expenses.

Kuhn said the economy is among a number of factors that will play into how well the nonprofit sector as a whole responds during these different phases.

“One of the things that’s helpful is creating opportunities for nonprofit leaders to connect or convene with one another. I think there’s some relief in knowing that you’re not going about it alone,” she said.

“I think long term there will be space for leaders to lead. This will involve breaking through the noise to identify protocols or processes, encouraging some longer-term thinking, and connecting with like-minded leaders facing similar circumstances.”

“Just imagine the overwhelming feeling of being a new nonprofit leader. We want to help them realize the immediate relief that’s happening.”

Our future is bright.

Hats off to all graduates who followed their dreams and are ready to become tomorrow's leaders.

Melanie Orozco-Zavala Union High School Class of 2020, Challenge Scholar Visit www.mibiz.com

Congratulations to the Class of 2020!

grfoundation.org MiBiz / AUGUST 3, 2020

21

Q&A Sandra Gaddy

CEO, Women’s Resource Center The Women’s Resource Center has played an increasingly important role during the COVID-19 pandemic, offering crucial support to women for housing, food and employment at a time when each is shrouded in uncertainty for some. In the first two months of the pandemic, the Grand Rapidsbased nonprofit served nearly as many women as it typically does in a year, said CEO Sandra Gaddy.

Recently, the center also has partnered with the Kent County Sheriff’s Department to help women re-enter the community after being released from jail or prison to avoid overcrowding. On top of the pandemic challenges, Gaddy also is closely involved in the empowerment of people of color — particularly Black women — in a region where she says too few have attained leadership roles.

Gaddy recently spoke with MiBiz about the ongoing challenges of the pandemic as well as barriers to leadership roles for women in West Michigan.

How has COVID-19 shifted operations or priorities for the Women’s Resource Center?

Like almost everyone else in the world, we’ve had to go virtual, although we have reopened our center at full capacity somewhat. During the primary portion of the shutdown, we were open with limited hours. We continue to have those special time frames serving women and their families with critical needs around gift cards for food and resources. We still continue to provide services around making sure they’re able to keep their homes or apartments or helping with the replacement of major appliances that go out. Those are necessities we continue to help support with funding partners we’ve been blessed to have over this time frame. Our team has really gone nonstop since the pandemic.

We also serve women coming out of Kent County corrections. Jails and prisons are having to release men and women at high rates to reduce the number of folks in jail and prison to help prevent the spread of COVID-19. As that was happening, we just saw that if we didn’t help manage that, they could go into some situations that would be detrimental to them re-entering the community well.

What role does the Women’s Resource Center play in helping women re-enter from jail or prison?

We’d receive the phone call from Kent County and would then help coordinate their re-entry, especially if they didn’t have a safe space to go. Whether finding temporary shelter, ensuring they had clothing, food and also helping several women obtain employment upon re-entry.

As an employment resource agency, what challenges have you seen during the pandemic?

Across the country, women are facing the highest numbers of unemployment. It’s women who are at that lower to moderate income level who are facing the crisis around that area. Because we haven’t had classes, we are doing just as many virtual sessions for coaching appointments with volunteers or coaching teams for employment opportunities, including mock interviews and resume help.

We’re really just helping ensure these women and their families do not get kicked out of their apartments or lose their homes or vehicles. Even though there’s a mandate by the governor to not evict tenants from their apartments or homes, that (rent) has come due and in many cases we’ve seen these rental and utility payments building. How are these families going to afford to pay such high rental or utility payments when they haven’t been employed or are working part time?

We’ve been able to assist these families with support from funders in our community to ensure they can stay housed, can continue to feed and and also ensure their utilities and services are not just shut off. To give you an idea, we normally serve 600-650 women a year. Between March 19 and May 22, we served 459 women and made over 100 referrals to other partners.

You mentioned the role of community funders: Has that dropped off at all during the pandemic?

I haven’t seen any real challenges currently. I think West Michigan is known for having very generous donors in our community. My biggest concern is for the fall and what that will look like for us and other nonprofits in the community so we can continue to support and serve the families that are going to be facing the greatest economic challenges and burdens because of COVID-19.

Based on what we’re hearing, this is going to continue well into the fall and possibly the winter.

Right now, we’ve been able to support the needs of the women that we are serving, but we continue to seek funding. The support is very important to take care of women and families.

Last month, you were a panelist in a virtual town hall forum called “The Urgency of Now: Economics and Empowerment in Black GR,” which addressed systemic barriers to the advancement of African Americans in the community. Revisiting a point you made: Why do you feel there aren’t more minorities, particularly Black women, in leadership positions in Grand Rapids?

Just so often we’re overlooked. I do believe there are still stereotypes that exist for Black women.

Within our community, we have just a wealth of women with experience and education. There’s no reason why we shouldn’t see more Black women in senior level positions. I also believe it’s a lack of understanding. I believe people truly do want to have some level of diversity and equity and inclusion in their companies. But that has to happen at the very top of the organization. I challenge the CEOs and leadership teams to look at their leadership team: Does that reflect the community and does that embody what you want your organization to reflect?

In the wake of the George Floyd killing, many companies have stated their support for and made commitments to equity, diversity and inclusion. How do companies get beyond statements?

They have to put real action into place. So often, companies will reach out to one or two African Americans, Black or Latino individuals and expect them to speak for the entire communities of color they serve. That is an unfair position to put those individuals in.

There are many companies in our community that have had Black or Latina female leaders and for whatever reason, many of these women have been denied those positions (given) to white male or female counterparts. If they can examine the obstacles they’ve put before these women and the lack of opportunity they’ve presented to women of color, I think they’d be able to see the challenges they have within.

Interview conducted and condensed by Andy Balaskovitz. COURTESY PHOTO

22

AUGUST 3, 2020 / MiBiz

IN THE NEWS M&A

n Grand Rapids-based Acrisure LLC has acquired the insurance practice of Tulco LLC, a provider of artificial intelligence and machine-learning technology based in Pittsburgh, Pa. The $400 million deal “enables true deployment of ‘insurtech at scale’ as it combines the global distribution power of Acrisure, the fastest growing broker in insurance industry history, with the world-class, proven AI expertise of Tulco,” according to a statement. The acquisition follows a year-long partnership between Acrisure and Tulco and the formation of Altway Insurance, an AI-backed insurance brokerage initially focused on individual health benefits.

The deal was structured as a stock-for-stock trade, with Tulco becoming a significant minority shareholder in Acrisure. Corporate partners Michael Wooldridge and Seth Ashby at Grand Rapids-based Varnum LLP advised Acrisure on the deal. n Kalamazoo-based National Flavors LLC, a producer of flavors and extracts for the food and beverage industry, acquired GSB & Associates Inc., a Kennesaw, Ga.-based company specializing in flavor development. The deal was the first bolt-on acquisition for National Flavors since becoming a platform company for The Riverside Co., a Cleveland, Ohiobased private equity firm. GSB’s portfolio of liquid and powdered flavors, masking agents and flavor enhancers complements National Flavors’ existing library of flavors, according to a statement. Terms of the acquisition were not disclosed. n Via its Italy-based Poltrona Frau Group, Hollandbased Haworth Inc. acquired Luxury Living Group, an Italian furniture maker and interior design company that produces and distributes high-end furniture in Italy, working under licensing agreements with such brands as Fendi Casa, Bentley Home and Bugatti Home. Luxury Living has a worldwide network of 80 retailers and directly owned stores in Milan, Paris, New York, Los Angeles and Miami. The company generated about $104 million in revenues, down from a reported $139 million in 2017, and employs 250 people. Terms of the deal with Haworth were not disclosed. n Wyoming, Mich.-based C.G. Witvoet & Sons Co., a fourth-generation family-owned custom sign maker, has been acquired by JBLR & Associates LLC, a Jackson-based investment group. C.G. Witvoet & Sons, founded in 1932, operates from two facilities in the Grand Rapids area and serves as a manufacturer and wholesaler of interior retail store décor, signage and displays. The company had been looking for a partner with additional resources to help scale up, CFO Pete Musser said in a statement. Terms of the deal, which was finalized in June, were not disclosed.

C.G. Witvoet & Sons was advised on the deal by Grand Rapids-based M&A firm Calder Capital LLC.

EXPANSION

n Grand Rapids Aseptic Manufacturing completed a $60 million facility that more than tripled its existing footprint in Grand Rapids. The new facility, located on Butterworth Avenue near downtown Grand Rapids, is GRAM’s third fill and finish facility. The company now has more than 100,000 square feet of production space. n Jackson-based Alro Plastics has started building a 160,000-square-foot facility located near the intersection of 60th Street and Patterson Avenue in Kentwood. The new Grand Rapids-area location is slated to open in the coming spring. Alro Plastics will run sales, fabrication, logistics and warehousing out of 65,000 square feet of the space. Wolverine Building Co. will handle construction for the project, which will begin once Dykema Excavating completes site preparation work. Alro Plastics is also working with Robert Grooters Development Co. on the project. Alro plans to offer the remaining space at the facility for lease. n To take pressure off of its existing two facilities, Flat River Group recently announced the opening of a new 160,000-square-foot distribution center in Kentwood at 3729 Patterson Ave. SE, near the Gerald R. Ford International Airport. Flat River Group was established in Belding in 2011 and serves as a distributor of niche and mainstream toy and game products. It also acts as a full-service provider for warehousing and fulfillment to a variety of

e-commerce retailers in the U.S. and Canada. The facility is owned and operated by Sibsco LLC. n Elk Rapids-based Short’s Brewing Co. and its Starcut Ciders and Beaches Hard Seltzer lines expanded distribution last month to five new states: Tennessee, New York, New Jersey, Rhode Island, and Massachusetts. The company also distributes to Colorado, Indiana, Illinois, Ohio and Wisconsin, as well as parts of Pennsylvania. n Classic Transportation & Warehousing broke ground on a $5.5 million facility in Wayland next to its corporate offices. FCC Construction Inc. is the general contractor for the 145,000-square-foot project at 1175 147th Ave., which is expected to be completed in the first quarter of 2021. Classic Transportation & Warehousing is a third party warehousing and transportation company. The new facility will consist of food-grade storage and an office area for support staff. The space will serve new and existing customers as the company explores leasing options for refrigerated and freezer space, which the company currently doesn’t offer.

HEALTH CARE

n Bronson Healthcare expanded primary care services in the Kalamazoo area with the opening of seven Bronson Primary Care Partners offices. The offices are staffed by 62 care providers from Portage Physicians P.C. who previously practiced at Ascension Borgess ProMed and moved to Bronson this year. Bronson Healthcare also opened a new testing laboratory across John Street from the Bronson Methodist Hospital North Campus. The lab provides an array of clinical services to Bronson system hospitals, practices and outpatient clinics and other providers and health care facilities throughout Southwest Michigan. n The Grand Rapids African American Health Institute has launched a search for a new executive director. The institute, which works to address racial and ethnic disparities in health care, hopes to find a new leader who’s from West Michigan and familiar with the community. Micah Foster, a certified physician assistant, has led GRAAHI for a year as interim executive director. Foster serves on the search committee with the GRAAHI board of directors and HR Collaborative LLC, a Grand Rapids-based human resources and talent firm that will lead the search.

After GRAAHI hires a new executive director, Foster takes on a new role to oversee development of a medical advisory council of African American health care providers and community health practitioners. n Grand Rapids-based Advanced Cardiac & Vascular Centers for Amputation Prevention PLC opened an office in Las Vegas, Nev., the practice’s fourth location and first outside of Michigan.

The outpatient center, led by Dr. Rick Bernstein and Dr. George Pliagas, offers comprehensive vascular, arterial and vein care. ACV Centers opened in Grand Rapids more than two years ago. ACV Centers, which specializes in treating peripheral artery disease and complications from critical limb ischemia, preventing limb amputations, has two Grand Rapids locations and a Lansing office. The practice draws 10 percent of its patients from outside of Michigan. n Four physicians in rehabilitation care have begun post-graduate training in Mary Free Bed Rehabilitation Hospital’s Physical Medicine and Rehabilitation Residency. The four were selected from an applicant pool of more than 300 candidates.

Launched in 2017, the Mary Free Bed residency program now has 12 residents who are in various stages of training to care for children and adults who need intensive rehabilitation.

HIGHER ED

n Grand Valley State University’s Kirkhof College of Nursing received a $1.5 million federal grant to provide primary and behavioral health care at housing sites in Grand Rapids’ Heartside neighborhood through the GVSU Family Health Center and Dwelling Place. The grant came from the Health Resources and Services Administration of the U.S. Department of Health and Human Services. The federal program aims to increase access and quality of primary care and behavioral health services to individuals living in low-income housing.

Visit www.mibiz.com

MICHIGAN’S ROAD TO TOP TEN

W

hen things seem uncertain, there’s no substitute for a great plan.

for jobs, income, and economic growth—and it’s grounded in facts, data, and research.

After a decade of recovery following the Great Recession, Michigan’s economy is imperiled

by COVID-19-related business closures and layoffs. How our state responds will define us for a generation.

The tenets of that plan are simple. To make a meaningful impact on the state’s ability to grow and attract good jobs and improve the quality of life for Michigan’s residents, we must focus on strategies and actions that help us compete for high-quality jobs, maintain our long-term fiscal stability, invest in our people, strengthen our communities, and leverage Michigan’s many strengths.

Fortunately, Michiganders are resilient. Tough. Innovative.

And we’ve already got a great plan.

Michigan’s Road to Top Ten plan, developed by Business Leaders for Michigan, has been designed to build on our state’s reputation as a great place to live, work and raise a family. It’s a plan aimed at making Michigan a Top Ten state

The fact is Michigan has made great strides in the past decade - even though we are not yet fully capitalizing on the many things that make our state stand out. With an amazing higher education system,

ADVERTISEMENT

well-developed high-tech manufacturing capability, and robust tourism and agriculture industries, Michigan has the kind of natural advantages that would be the envy of most. Properly marshalled, we undoubtedly have the talent, the resources and the will to emerge as a world-class destination for building a career and raising a family.

That’s an exciting future and one that Michigan can certainly have if we all work together.

Read the plan at businessleadersformichigan.com, get involved, and join us on the road to making Michigan a Top Ten state.

Outfit your team with the essential business-development tool:

Timely, relevant business news.

Professionals with sales and business-development responsibilities rely on timely business news and intelligence to drive revenue, create new relevant opportunities and expand brand presence.

With MiBiz subscription packages, you can arm your team with 24/7 digital access to real-time news, exclusive stories, market insights and business intelligence about the companies, policies and strategies that are driving Michigan business.

Contact MiBiz today for more information: 616-608-6170 • subscribe@mibiz.com

Visit www.mibiz.com

GROUP & CORPORATE SUBSCRIPTION PACKAGES MiBiz / AUGUST 3, 2020

23

Fifth Third Means Business™ From equipment leasing to assetbased lending, we know your business requires unique solutions to meet the specific moments you’re navigating. That’s why, at Fifth Third Bank, we have a team of local experts who understand your business. Whatever your business goals are, we’re here to help you succeed. Let’s build, together.

Fifth Third Means Business™

53.com/CommercialBank

Fifth Third Bank, National Association. Member FDIC. 24

AUGUST 3, 2020 / MiBiz

Visit www.mibiz.com