MiBiz February 3, 2020 edition by MiBiz

Proposed tower could help fill GR skyline

Grand Angels completes fundraising for third VC fund

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Backers hope new VC fund spurs more inclusive West Michigan economy By MARK SANCHEZ | MiBiz msanchez@mibiz.com

‘A NEW NORMAL’ Massive demographic shifts coupled with the declining popularity of hunting and fishing threaten to undermine the model that for generations has supported conservation in Michigan. Advocates for the $11.2 billion hook and bullet industry are doing what they can to patch the broken economic model, but a more sustainable future might need to bring other outdoor recreation participants to the table. SEE PAGE 17. STORY BY JOE BOOMGAARD // COURTESY PHOTO: MICHIGAN DNR

MIBIZ DEEP DIVE

OUTDOOR RECREATION FIRST OF A 3-PART SERIES

GRAND RAPIDS — The Right Place Inc.’s new venture capital fund plans to target investments toward an area of the economy where capital historically has flowed the least: startups and businesses owned by racial and ethnic minorities. With the New Community Transformation Fund, the nonprofit economic development organization aims to raise $15 million to $20 million in capital over the next year from individual and institutional investors — corporations and family offices, primarily — to support entrepreneurs from disadvantaged groups. The venture capital fund aims to become fully operational by 2021. Investments of at least $250,000 will go to 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 idea for the new venture capital fund took root in 2019 as The Right Place prepared a new strategic plan for the next three years. As part of the planning process, the organization noted the need to do more to support economic inclusion became a consistent theme in conversations with more than 100 community and business leaders across the region, according to The Right Place President and CEO Birgit Klohs. See VC FUND on page 14

The next water crisis:

West Michigan communities face millions in high water damage By SYDNEY SMITH | MiBiz ssmith@mibiz.com GRAND HAVEN — When the popular Harbor Island boat launch became unusable because of flooding last spring, Grand Haven City Manager Pat McGinnis thought it was a big deal. The persistent flooding last year meant the boat launch generated about $15,000 in users fees, well off P

the average of $80,000 in revenue the city usually brings in. Even so, McGinnis now views the boat launch issues with a new perspective. “That was really relatively minor,” McGinnis said of the effect of the flooding at the boat launch. “At the time, I was feeling like it was a big deal. Other things have dwarfed that kind of impact.”

In Grand Haven, three waterfront commercia l buildings w ill need to be demolished because of mold caused by levels in the Grand River channel, which connects to Lake Michigan. As well, some streets in the city remain under water, and huge potholes and sinkholes are developing in the parking lot near the Harbor Island facility. See HIGH WATER on page 7

The City of Grand Haven, which owns retail buildings along Chinook Pier, will have to demolish the facilities after high water levels caused flooding and led to mold. PHOTO: MARK SANCHEZ

Design for Manufacturing & Assembly February 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

Learn how small- and mid-sized manufacturers use Design for Manufacturing & Assembly as a core tenet of their product development efforts. We’ll highlight best practices for research, analysis, cross-functional teams and development processes that can help you rapidly create and validate designs that require the least time, material and capital resources. This 50-minute webinar will provide actionable, real-world information for owners, executives, engineers, and facilities managers in the manufacturing sector. To register, visit mibiz.com/backtobasics

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Publisher Brian Edwards / bedwards@mibiz.com Associate Publisher Denise Montambo / denise@mibiz.com Editor Joe Boomgaard / jboomgaard@mibiz.com Senior Writer Mark Sanchez / msanchez@mibiz.com (finance, health care, life sciences) Staff Writers Sydney Smith / ssmith@mibiz.com (real estate, economic development) Jessica Young / jyoung@mibiz.com (manufacturing, agribusiness, nonprofits) Contributing Reporters Andy Balaskovitz, Marla Miller Copy Editor Claire Boomgaard VP of Production & Audience Development Kristi Kortman / kkortman@mibiz.com

West Michigan renewable energy projects: wind out, solar in By ANDY BALASKOVITZ | MiBiz

“We weren’t trying to be exclusionary,” Ashbaugh said. “There were (residents) who supported it all along, and others who didn’t. It was fter plans for a wind energy project hard on the board and the planning commission.” north of Grand Rapids fell apart late The Kenowa Ridge project would have been last year, a separate developer is lookthe first wind energy development in West ing to use hundreds of acres of rural Michigan since 2012 when the Lake Winds Energy land in Montcalm County for solar. Park was built in Mason County near Ludington. In December, AEP Renewables — a subsidiary Meanwhile, a Brooklyn, N.Y.-based developer of Ohio-based utility American Electric Power is eyeing property in northeastern Montcalm Co. Inc. — withdrew plans for the 100 megawatt County for a $200 million solar project that would Kenowa Ridge project in Casnovia and Tyrone span up to 1,200 acres. townships that split Muskegon and Kent counties. Freshwater Solar would be Ranger Power’s AEP assumed ownership of the project last year third large-scale solar project in Michigan. when it bought out the previous owner, Sempra Construction has started on the firm’s 239 MW Renewables. Assembly Solar project in Shiawassee County, Casnovia Township and AEP Renewables while the company announced plans last year to were in a legal dispute over project conditions, sell power to Consumers Energy from its 149 MW including setback distances River Fork project in Calhoun for turbines. County. AEP Renewables “couldn’t Together, the three projreach agreement with the ects would total nearly 600 Casnovia Township Board MW. Michigan currently has to address some revisions less than 200 MW of installed and clarifications the townsolar capacity. ship board made in the projSean Harris, senior develect,” said AEP spokesperson opment manager at Ranger, Melissa McHenry. “Without said the company is still in some agreement on the the “landowner engagement” changes, the project was no process over potential leases longer viable and we deterand has started meeting with mined it couldn’t be built to local officials about the comour standards.” pany’s plan. McHenry added that AEP He said two key factors — SEAN HARRIS Renewables isn’t planning behind choosing Montcalm Senior Development Manager at any other wind projects in County for the site were Ranger Power the area. access to interconnecting Casnovia Township offito the grid and community cials approved a special use acceptance. permit for the project in April with 32 condi“We got on the ground, spoke to landowners tions. AEP challenged three of the conditions and found there was interest in the community,” in court, including the setback distances, said Harris said. “It certainly seemed like local folks Casnovia Township Supervisor Kelli Ashbaugh. are excited about it.” A separate lawsuit was filed against the townHarris added that Ranger started developing ship by residents opposed to the project as offisolar projects in Michigan in 2017. The state’s cials faced backlash over the prior special use newly raised 15 percent renewable energy stanpermit approval. dard, relatively high cost of electricity and a series Ashbaugh added that officials were concerned of coal plant retirements all “drove our interest in about noise, “shadow flicker” and the size of the Michigan.” turbines. The project was reportedly cancelled “We’re finding even more interest from utiliin December, and the lawsuits were formally ties in purchasing solar energy than we originally dropped in January. expected,” he said.

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“We got on the ground, spoke to landowners and found there was interest in the community. It certainly seemed like local folks are excited about it.”

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Solar and farmland Ranger’s latest project also follows a new policy from Gov. Gretchen Whitmer that opens agricultural land for solar development. In early June 2019, Whitmer issued an order allowing property enrolled in the state’s Farmland Preservation (Public Act 116) program to be used for commercial solar projects. Landowners and developers need to meet several criteria, such as including pollinator habitat alongside panels, to effectively freeze the farmland preservation designation during the life of the project. Ranger officials said they have encountered some Montcalm County parcels that are enrolled in farmland preservation. Developers are required to ensure drainage is maintained on the site and provide decommissioning bonds. The company’s “general policy is to avoid P.A. 116 parcels whenever possible,” Harris said. Whitmer’s farmland solar policy is relatively new, and just two properties in the state — in Escanaba Township and Shiawassee County, one of Ranger’s other projects — have taken advantage of it, according to the state Department of Agriculture and Rural Development. “The policy was really about using P.A. 116 parcels if that made sense in order for you to have one large contiguous block of land with solar panels on it,” said Jim Johnson, director of MDARD’s Environmental Stewardship Division. “There’s much less than I think a lot of people thought would be involved.” Whitmer’s policy drew support from clean energy advocates who cited potential benefits of farmers diversifying their revenue through solar land leases. Johnson added that requirements of returning the land back to agricultural use after the life of the solar project “are no different than what they would typically do for a non-P.A. 116 piece of property.” He said it’s still early to tell whether the policy will drive more solar on agricultural land. Most likely, large-scale solar projects may include a few parcels enrolled in farmland preservation rather than entire sites. “There was some fear early on that we’d take a lot of P.A. 116 land out of production, but I don’t think that’s going to be the case,” Johnson said. “(Developers) are doing their best to find contiguous blocks of land that impact P.A. 116 as little as possible to go forward.”

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MANUFACTURING

State energy retrofit grants spur investments, savings for small manufacturers By JESSICA YOUNG | MiBiz jyoung@mibiz.com

new program aims to incentivize small manufacturers to take on energy efficiency projects and “jump-start” energy waste reduction, ultimately helping them reduce their energy use, lower costs and become more competitive. The pilot program from the Michigan Department of Environment, Great Lakes, and Energy (EGLE) started last year with a group of applicants based in the Upper Peninsula. Now, the department is offering the Small Manufacturers Energy Waste Reduction Incentive Pilot to any Michigan manufacturer with 500 or fewer employees. The program can provide up to $15,000 in funding per company,

said Robert Jackson, assistant division director of the materials management division at EGLE. Farmhaus Cider Co. recently used the grant to fund a backup power generator at the company’s manufacturing facility in Hudsonville, according to co-founder John Behrens. “Our location is more rural and the power goes out often — six to seven times a year,” Behrens told MiBiz. “Doing the types of things that we’re doing making cider, that can cause a lot of problems and is just bad news all around.” The Small Manufacturers Energy Waste Reduction Incentive Pilot was the first statewide grant that Farmhaus has received, said Behrens, who estimated the grant was worth approximately $3,000. Companies are required to match the grant on at least a one-to-one basis. Behrens said Farmhaus ended up paying for more than half of the project.

“(The generator) was something we definitely thought about, because we were running into so many issues with the power going out so often,” he said. “Then we learned about the grant, and it helped tip the scales in favor of doing it sooner rather than later.” P.M. Power Group Inc. (PMPG), owner of White Pine Copper Refinery in Ontonagon County, was one of the first manufacturers to receive pilot funding. The company, which processes low-grade copper into a purer product that can be used as the primary raw material for making copper rod for the wire and cable industry, used the grant to invest in machinery upgrades. The improved equipment reduces the overall energy consumed by the machines through greater control of pumps and methods, according to Zachary Halkola, COO at PMPG.

SMALL MANUFACTURERS ENERGY WASTE REDUCTION INCENTIVE The energy pilot program from the Michigan Department of Environment, Great Lakes, and Energy helps small manufacturers based in Michigan with fewer than 500 employees or in rural or low-income communities to implement energy efficiency projects. Project timeline: Must be completed between Oct. 1, 2019 and July 31, 2020 Deadline for submission: Aug. 30, 2020 Maximum award: $15,000 per company, requires 100-percent match Available funding: Minimum of $150,000, deployed on a first come, first served basis Eligible activities: Technical assistance services from state, federal, and utility energy assistance programs; training courses or workshops focusing on energy efficiency; energy efficiency program adoption or enrollment; energy tracking or benchmarking systems; steam trap repairs; boiler, chiller or furnace tune-ups; infrared thermal imaging diagnostics; ultrasonic leak detection diagnostics; certain energy audits More information: michigan.gov/energy

“We have raw material and a solution that has to circulate through our digestion vessels,” Halkola said. “What this (upgrade) allows us to do is control the speed within the vessel and to lower the speeds along with the pressure. It saves energy on the front side, but then we get a more efficient digestion on the back side.” The copper products that PMPG recycles have historically been sent overseas for processing, but through rapid research and development, PMPG now produces a 99.9 percent pure copper product locally, according to Halkola. “Over the last decade or so, when these products were going overseas, they weren’t up to the best environmental specs,” Halkola said. “Our (domestic) environmental regulations are much tighter and we’re able to function within permitted limits of the state.” The company currently has 11 employees and expects to hire 15 more people this year. “This grant really helped us save on the energy side of things and save some big picture costs while we’re still growing,” Halkola said. PMPG used less than $1,000 in matching state funds for their initial energy project, but the grant has sparked more interest in similar plans at the facility. “This kind of opens our eyes,” Halkola said. “We’re actually looking at some larger pumps that we’re working on. The savings would be significantly larger. It could be about $7,000 per month in savings.” The company recently received a separate $425,000 Recycling Market Development Grant from the state. Halkola partially credits the success of that application to the relationships and opportunities that developed through the energy reduction pilot. “We are impressed with the overall recycling initiatives that are coming out and the energy waste initiatives,” he said. “Those are all things that are going to help keep businesses going, whether it be for costs, whether it be for sustainability incentives. Those are important pieces for investors.” Often, small businesses need help gaining the resources to initiate energy projects that can save them money, funds that can ultimately be reinvested into their businesses, said Jackson of EGLE. Grants from the Small Manufacturers Energy Waste Reduction Incentive Pilot are available for a range of activities including technical assistance services from energy assistance programs; energy efficiency training courses or workshops; enrollment in energy efficiency programs; benchmarking; or boiler, chiller or furnace tune-ups. For his part, Halkola said PMPG will be working closely through local economic development groups and directly with the state to research additional available funding and how it could fit the company’s overall business plan. “I can say we would be doing a lot more of these grant applications because we know there are efficiencies we could gain within the plant site,” he said.

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As West Michigan manufacturers begin 5G adoption, widespread use could be decades off By JESSICA YOUNG | MiBiz jyoung@mibiz.com

n the coming decade, the connectivity of smart factories will rely on next-generation 5G wireless technology. As the upcoming standard in digital connectivity, 5G has the power to “radically transform” the manufacturing sector, according to the Association of Equipment Manufacturers, which recently named 5G one of the trends to watch in 2020. Manufacturers will be some of the first adopters to take 5G beyond the personal device through applications in Industry 4.0, according to the report. Future smart factories will rely on 5G for connectivity technologies like automation, artificial intelligence (AI) and the Internet of Things (IoT). “Long term, 5G will have a significant impact on manufacturing and the flexibility to connect devices on the factory floor,” said Aaron Kamphuis, data analytics and IoT practice manager at Open Systems Technologies Inc., a Grand Rapids-based tech consulting firm. However, it’s going to take at least a few years for 5G networks to have a measurable impact on high-tech manufacturing, Kamphuis told MiBiz. “The infrastructure needs to be deployed, the people who are building connected industrial equipment are going to have to adopt that technology before it’s really going to get into the field, and people have to buy into it,” he said. “These are long cycles.” 5G networks can be built in different ways from multiple bands of the low-, mid- and highband wavelength spectrum. High-band frequencies on 5G have greater bandwidth and will increase speed and data limits to be capable of collecting data from hundreds of connected devices. However, the transition to 5G technology will take more time than people may expect, even though cell phone companies seem to be in a race to cover the globe in the next-gen network, Kamphuis said. The four leading U.S. wireless companies — Verizon Wireless, AT&T, Sprint and T-Mobile — began wide deployment of 5G last year, starting with major metropolitan areas. Each of the four companies reported increases in capital spending toward delivering 5G to the nation. Combined, the companies recorded total capital expenditures of $55.71 billion during 2018, up from $53.72 billion in 2017, according to financial and analytics company S&P Global Inc. In July 2019, Atlanta became the first city to have 5G available from all four carriers. Following Verizon Wireless’ rollout of 5G in Detroit, also in July 2019, the company expanded the new technology to Grand Rapids in December — making it the second 5G-connected city in Michigan. Some industry watchers expect that all of the carriers will have some form of coast-to-coast 5G coverage by the end of this year. Even so, that coverage may still be too unreliable for manufacturers to reasonably bite the bullet and invest in upgrading to the new technology, according to Kamphuis. “Rolling out 5G is going to take a long time,” he said. “If you’re a very large company, you might not be able to rely on it as a universal solution across your footprint. It might take a decade or longer.” In particular, that timeframe could pose problems for companies that must invest in 5G infrastructure in buildings that they lease or may not continue to occupy over the long term. As with previous standards, like 4G, 3G and LTE, the covered areas of 5G are divided into cells. High-band frequencies are able to carry more data but require cell sites to be in close proximity.

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They also have limited penetration in buildings. 5G could also pose an increased cybersecurity risk because it is a software-driven network, according to a recent report from the Brookings Institution. Still, it may also be the “last physical network overhaul” for the foreseeable future, because upgrades will be only a matter of updating or replacing software and low-cost, commodity components, according to the report.

Making moves Some manufacturers are speeding up the adoption process by partnering with specific U.S. wireless companies to create private 5G networks within individual facilities. “If you’re a large buyer, you could get early traction with a provider to influence how much coverage you have,” Kamphuis said. Representatives from Grand Rapids-based furniture manufacturer Steelcase Inc. (NYSE: SCS) said the company is partnering with Sprint to study how 5G will affect the way their office customers work, as well as how the new networks can advance safety and predictive maintenance in the company’s factories. “We have a long history of experimenting on ourselves before deploying solutions to our customers,” Steve Miller, chief information officer at Steelcase, said in a statement. “By working with industry leaders … we can develop and test prototypes of future solutions for the office and our factories that have the potential to change the way we support our customers.” Benton Harbor-based Whirlpool Corp. (NYSE: WHR) confirmed to MiBiz that the company is deploying 5G at a factory in Ohio — with the help of AT&T — as a solution to driverless vehicles that were backing up production due to spotty Wi-Fi connectivity. The project is still in development, with the first phase covering a reported 200,000 square feet in the center of the plant and connecting up to 100 vehicles. Global tech market advisory firm ABI Research predicts that by 2026 there will be 5.3 million 5G connections on factory floors that will generate more than $184 million in revenue globally.

IoT product manufacturers and developers also will be keeping an eye on the rollout of 5G this year, said OST’s Kamphuis. While service availability and coverage will limit factory floor adoption of 5G to small-scale projects in the coming year, smart product manufacturers will be looking for ways to add 5G value onto the products that they will be making in the years to come, he said. “Right now, transmitting data is one of the biggest limiters in IoT,” Kamphuis said. “(5G) will start opening up all these use cases around things like real-time control, new types of data including live video streams, high-density machinegenerated data. Whereas today we would have to super economize what you can do to make it affordable across the networks, the amount of data that you can transmit across a fully realized 5G network is absolutely amazing.”

“Rolling out 5G is going to take a long time. If you’re a very large company, you might not be able to rely on it as a universal solution across your footprint. It might take a decade or longer.” — AARON KAMPHUIS Data Analytics and IoT Practice Manager at OST

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REAL ESTATE & DEVELOPMENT

Kent County again weighs selling 82 Ionia, plans building projects By SYDNEY SMITH | MiBiz ssmith@mibiz.com GRAND RAPIDS — Among various other projects this year, Kent County officials again are assessing whether to sell a facility at 82 Ionia Ave. and construct a new building elsewhere in downtown Grand Rapids. The county continues to consider its options to move out of the 82 Ionia building, which includes possibly constructing a new building on its Fuller campus on the northeast side of Grand Rapids, or on Ottawa Avenue in downtown Grand Rapids across from Calder Plaza. Once any new building is completed, the county would then relocate its employees at 82 Ionia and sell the property. Officials will discuss the county’s downtown presence later this year, while the Board of Commissioners recently approved nearly $18.7 million in other building projects that will be funded with money set aside in a strategic capital fund. The other projects include a new building for fleet services, an office and visitor center for the parks department and a new North County Campus. “We’ve been very frugal about our expenditures, so we’ve been able to predict the need for these and not have to go out and bond,” said Kent County Administrator Wayman Britt. The county has identified about $19 million that it could use for these projects in its strategic capital fund.

“The hope is we will have enough of the research done, we will have spent the quality time I’ve felt we needed to put into this to really accommodate needs now as well as in the future, and make sure we have the most economical plan moving forward,” Britt said.

Downtown presence County officials have been assessing whether to sell the building at 82 Ionia since at least 2015, when a space needs study suggested that the facility, which is situated in the middle of the downtown business district and includes parking, should be vacated and sold to private developers. “At one point, we were near selling that building, but held off because we weren’t on the same page within the board as far as where we wanted to go with the services and programs,” Britt said. “Now we’re back at it; we think we have a better idea of where we want to go with this, but not completely yet.” One option is moving some services from 82 Ionia to 320 Ottawa Ave. NW, which currently houses the county’s I.T. department. Britt called this the likely option, but it would require expanding 320 Ottawa, and the estimated cost of such a project remains unknown. “The current footprint (of 320 Ottawa) would not allow us to plant the prosecutor’s office in

Kent County is revisiting plans to consider selling a building it owns at 82 Ionia Ave. in downtown Grand Rapids. MIBIZ FILE PHOTO back and do those projects,” Britt said. totality,” Britt said. “There’s a family operation Commissioners voted to allocate $12.5 milthere too, and we would want to make sure we lion for a new North County Campus that will be keep those together. That means we would need located on 14 acres of county-owned property at to have something larger.” 17 Mile Road NE, near U.S. 131. If the county does opt to sell 82 Ionia, the Plans for the site include a substation for the move could open up some new opportunities sheriff’s office, a clinic for the health department downtown, said Tim Kelly, president and CEO of and additional space for Downtown Grand Rapids other county services as Inc. The building is near needed. two key downtown corriMeanwhile, the parks dors along Monroe Center staff currently works out Street and Division Avenue, of two trailers at 1700 and repurposing the adjaButterworth Ave. SW that cent surface parking lot are in need of significant also poses some new posrepair, Britt said. County sibilities, Kelly said. officials proposed an “When you think about 8,000-square-foot parks that corridor and trying to office and visitor center continue to bring life into it at the site that includes as a retail street, I think anya workspace and storage thing that happens at 82 building and other site (Ionia) has the potential to improvements for a cost have a pretty big impact on of $2.68 million. Monroe Center,” Kelly said. A similar situation “Given that they have that exists with fleet services, parking lot, it’s something — TIM KELLY which has operated in a to think about. I think all the President and CEO of Downtown 6,500-square-foot buildsurface parking lots downGrand Rapids Inc. ing on the county’s Fuller town have the potential for a campus at 701 Ball St. NE. higher and better use.” When the building was Britt expects the county constructed, it handled 35 vehicles, but now Board of Commissioners to sign off on a plan in serves 290 vehicles, Britt said. the next couple of months. “There have been 44 vechicles added in the last six years,” he said. “It’s really outgrown the Other projects current location.” Because of the Great Recession, Kent County Kent County is currently assessing constructpostponed several capital projects, including ing a 16,100-square-foot building for fleet sernew parks offices and a new building to house vices, a project that will cost $3.5 million. the county’s fleet of vehicles, as well as the estabThe next steps are for the county Board of lishment of a North County Campus. Commissioners to consider and approve each “Now that we’ve rebounded, we’ve been able of the projects, which Britt expects to occur in to get back in a better position to be able to go the next couple of months.

“When you think about that corridor and trying to continue to bring life into it as a retail street, I think anything that happens at 82 (Ionia) has the potential to have a pretty big impact on Monroe Center.”

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The sale price per square foot for all sub-segments of the industrial building market less than 50,000 square feet increased in 2019, according to research from Colliers International.

n Kent County n Michigan n United States

n under 5,000 SF n 5,000-10,000 SF n 10,000-25,000 SF n 25,000-50,000 SF

SALE PRICE PER SQUARE FOOT

$2,043 $1,900 $2,142

APPAREL & SERVICES

$3,099 $2,994 $3,269

ENTERTAINMENT & RECREATION

$3,523 $3,296 $3,675

RESTAURANT/ DINING

$90 $80 $70 $60 $50 $40 $30 $20 $10 $0 2014

2015

2016

2017

2018

2019

OFFICE VACANCY HITS NEW LOW

HOUSING PRICES TREND UPWARD

The office market in Grand Rapids continues to tighten as vacancy rates have steadily declined since mid 2017, according to research from Colliers International. The firm expects rental rates to rise in response to the limited inventory.

Persistently high occupancy rates for rental housing are driving rents steadily higher, according to an analysis of Yardi Matrix data by Colliers International.

n Lease rate n Vacancy rate

n Rental rate n Occupancy rate

$18.50

12%

$1.20

$17.50

11%

$1.15

$16.50

10%

$15.50 $14.50 $13.50 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19

9% 8% 7% 6%

97.5% 97.0%

$1.10 96.5%

$1.05 $1.00

96.0%

$0.95

95.5%

$0.90 2017

2018

2019

OCCUPANCY RATE

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INDUSTRIAL COSTS RISING

Average annual household retail expenditures in Kent County are higher than the statewide average, according to an analysis of Bureau of Labor Statistics data by Colliers International.

VACANCY RATE

When the water levels recede, the city will need to address the damage at a cost well into the millions of dollars, McGinnis estimates. The troubles stem from historically high levels in the Great Lakes, which the U.S. Army Corps of Engineers forecasts will continue to rise in 2020 and stay above record levels by 1-4 inches at least through the first six months of the year. W hile private homes falling into Lake Michigan as a result of shoreline erosion grab the most headlines, local municipalities are shouldering the effects of high water on public infrastructure, and they’re bearing that burden alone, without the help of state or federal resources. Lake Michigan water levels have reached new record highs that are about three feet above their long-term average levels and more than five feet higher than they were in 2012 and 2013. The Army Corps predicts the water could rise another foot this year, putting coastlines, homes and beaches at risk. As well, the levels threaten to overflow sewers and cause additional flooding on public and private properties. The threat spurred the Michigan Department of Environment, Great Lakes and Energy (EGLE) on Jan. 16 to send a letter asking local municipalities and others to complete vulnerability analyses that will guide them in mitigating the effects of high water. “What we’re looking for is people to go through these assessments and determine if higher flows impact them,” said Phil Argiroff, assistance division director in EGLE’s water resources division. EGLE also will post guidance on its website regarding how to handle erosion issues, Argiroff told MiBiz. At the same time, many shoreline municipalities are already feeling those effects. McGinnis completed an informal poll of West Michigan communities regarding the damage they have already seen from high water. The nine communities he spoke with incurred more than $22 million in damage total so far. “The public interest we have is in our sanitary sewer. If that gets backed up, we’re going to have sanitary sewer releases into the freshwater in Michigan,” McGinnis said. “The roads and the parking lots and the boardwalk areas that are getting completely inundated are public investments we’ve got to correct.” In Spring Lake, the village saw severe erosion along both edges of its peninsula, beginning in 2018. Its fishing piers are under water, and the village has lost at least one beach. In a small community with a general fund of only $1.5 million, the costs to repair these public amenities could be insurmountable, said Village Manager Christine Burns. “We’re probably not going to be able to provide the level of service to our residents that they have historically seen,” Burns said. “We’re going to have public property that’s going to be closed, that’s going to be under water.” The effects so far have led McGinnis to advocate in Lansing for some kind of assistance to pay for damage from the water levels. McGinnis and other community leaders met with a House Appropriations subcommittee last week. Legislators also are waiting for Gov. Gretchen Whitmer’s response after sending a letter requesting an emergency declaration at the end of 2019. Whitmer and EGLE previously announced permits for shoreline protection would be expedited for people with at-risk homes and infrastructure. McGinnis said he sees legislators both in Lansing and Washington putting high water issues on the front burner. He expects it will take a combination of local, state and federal dollars to fix all of the issues after water levels recede. “We need to clamor to let people know this is emergent,” he said. “We need to look at our rules and regulations and our willingness to declare this an emergency — let’s act.”

RETAIL SPENDING TRENDS

RENTAL RATE

Continued from page 1

LEASE RATE

HIGH WATER

95.0%

Colliers 2020 real estate forecast: Expect prices to rise as vacancy declines By SYDNEY SMITH | MiBiz ssmith@mibiz.com GRAND RAPIDS — As vacancy rates remain low, experts are expecting a year of slow and steady growth in the West Michigan real estate market. While talent issues are affecting the industrial real estate market, a report released in January by the West Michigan office of Colliers International notes that vacancy rates are decreasing in the office market, the retail sector continues to show signs of strength and communities are attempting to keep up with population growth by adding multifamily housing. “A lot of the different markets are going to see vacancy rates continue to decrease and pricing continue to uptick a little bit,” said Mike Murray, a senior vice president at Colliers. The biggest issue going forward remains companies’ continued struggle to find talent as West Michigan grows, he added. “We’re so critically low in unemployment,” Murray said. “Until we get more people here who can work, construction prices will be up and retailers are going to have a hard time finding employees for their new locations.” Here is a closer look at Colliers’ data for each of the region’s commercial real estate segments.

Office Even with the addition of new office space in the Warner Building and Studio Park in downtown Grand Rapids, West Michigan continues to show strong demand for office space, according to Colliers. For all of 2019, office vacancy was below 10 percent for the first time in 30 years at 8.14 percent. As vacancy rates continue to decrease, it’s putting upward pressure on rental rates. The average rental rate is $17.12 per square foot in Grand Rapids, which Colliers expects to continue to go up. In the report, Colliers suggests additional demand exists for new development and new construction, especially as employers continue to struggle attracting and retaining talent. “There’s demand for new office space in a building that has a lot of amenities with it,” Murray said.

Industrial The manufacturing sector is struggling the most with prolonged labor challenges, with many companies focusing on training and development to create their own talent pipelines. A low vacancy rate, now at 2.39 percent, continues in the industrial real estate market. However, a slowdown in manufacturing could lead to a slight increase in vacancy and more inventory becoming available. “There were some slowdowns, but not to the point that most people are going to notice around our communities,” Murray said.

Multifamily As the population grows in West Michigan, the demand for multifamily units expands along with it. Occupancy rates continue to be high, and Colliers expects that trend to remain throughout 2020, likely resulting in rent increases. Developers have been building new housing across West Michigan, with 1,201 new units coming online in 2019, according to Colliers. The firm estimates more than 900 new market-rate units will hit the market in 2020.

Retail The story of West Michigan retail continues to be opposite of the national narrative. Although retail often looks different than it did in prior years, multiple national brands have entered West Michigan recently, including Von Maur at Woodland Mall and outdoor brands like REI, Moosejaw and more. “Grand Rapids was under-retailed for quite a while, just because we did not hit the radar of those big retailers,” Murray said. “But over the years, retailers and projects have come into the market, and we pop up on the radar of others.” The overall retail vacancy rate is 3.17 percent, and the average rental rate is $13.89. While retailers also have a hard time attracting talent, expansion continues with new construction in multiple retail corridors, including the areas of Knapp’s Crossing, Shops at CenterPoint and Breton Village. MiBiz / FEBRUARY 3, 2020

REAL ESTATE & DEVELOPMENT

— REAL ESTATE SPOTLIGHT: MUSKEGON COUNTY —

Muskegon County busy with redevelopment projects By SYDNEY SMITH | MiBiz ssmith@mibiz.com

3 QUESTIONS WITH:

Russ Schuitema, realtor with the Muskegon office of Nexes Realty Inc.

Russ Schuitema has lived in the Muskegon area all his life and has been involved in the real estate industry for decades. He is currently a realtor with the Muskegon office of Nexes Realty Inc., where he covers northern Ottawa County and the Muskegon County area, specializing in residential and vacant land.

What are your general impressions of the residential market in Muskegon county? The last few years it’s primarily been a seller’s market. The inventory levels have been down substantially from what they were probably 15 years ago. It is without question a seller’s market. Interest rates are great, the economy is good, and low inventory levels lead to higher prices in this market right now. The prices of homes have definitely increased over the last several years for sure.

Do you expect that to continue in 2020?

MUSKEGON — With a $19 million convention center underway, several projects on the waterfront, a micro hotel and some mixed-use buildings, downtown Muskegon has become an epicenter of development activity along the lakeshore. “We are in a historic transformation,” said Dave Alexander, the business development manager for the city of Muskegon. W hi le dow ntow n Muskegon remains arguably the busiest area when it comes to development projects, developments are happening elsewhere around the county as well. Muskegon Area First is tracking roughly 35 projects countywide that total $162 million in new investment over the next 18-24 months, according to CEO Jim Edmonson. Arconic, an aerospace and alloy meta l manufacturer headquartered in Pittsburgh, is wrapping up a $100 million expansion at the former Howmet location in Whitehall, while Mercy Health is building a $20 million outpatient facility in Norton Shores. Fueled by the aerospace, automotive and medical device industries, Muskegon County also has a very diverse manufacturing base, according to Edmonson. As well, the new developments are one factor that officials hope will attract talent to the potential 676 new jobs in the county. “Site visits to employers indicate that developing a pipeline of talent is the number one thing on their radar,” Edmonson said.

Things are starting off pretty strongly. I would imagine the real estate business is going to stay strong. I know a lot of people talk about it being an election year and there might be a little bit of a downturn because of that, but the start of 2020 has been pretty strong.

MUSKEGON COUNTY REAL ESTATE BY THE NUMBERS RESIDENTIAL n Units sold in 2019: 2,435 Median sales price: $143,000 Average sales price: $162,581 n Currently listed: 323 homes Median list price: $174,900 Average list price: $279,294 SOURCE: NEXES REALTY INC.

COMMERCIAL n Listings sold: 116 (2019) Average list price: $700,000 or $43 per square foot n Current listings: 217 Average list price: $896,000 or $44 per square foot SOURCE: CORE REALTY PARTNERS

Great Lakes Development Group is developing Lake View Lofts, one of a handful of new housing projects coming online in Muskegon. COURTESY RENDERING

Muskegon Community College is working on ways to train new employees, a nd employers a re “thinking outside the box” and bringing students into manufacturing facilities to get them interested earlier, said Muskegon County Administrator Mark Eisenbarth. Additionally, the construction of new apartment units throughout the county will help attract people to live and work there, officials told MiBiz. The new developments, coupled with the county’s relatively affordable prices, should continue to fuel the real estate market in Muskegon County, which officials don’t see slowing down anytime soon.

Real estate market Muskegon County’s commercial real estate market in general is “very active,” said Bryan Bench, a partner at Muskegon-based Core Realty Partners LLC who has worked in the area since 2000. “It’s a little bit different than it’s been in years past, primarily because of all the momentum and activity in downtown Muskegon,” he said. According to data provided by Core Realty, 217 commercial properties are currently listed on the market with an average list price of $896,000.

For resident ia l, t he average sales price is $162,581, and inventory is low across most sectors of the real estate market, according to Nexes Realty Inc., headquartered in Roosevelt Park, a small city sandwiched between Muskegon and Norton Shores. The county’s multifamily housing market is particularly busy, with multiple mixed-use projects coming online or in the works, said Edmonson of Muskegon Area First. “It’s a very strong market,” he said. “We don’t see that really falling off much. Housing prices are edging upwards, an indication that there’s more demand than what’s available.”

COMMERCIAL SITES IN MUSKEGON COUNTY

Along with the election, what else could have an effect on the housing market? The election, and if the economy turned south and if interest rates begin to creep up, that could have an impact. But things are pretty strong. We’ll have to see what the future holds as we draw closer to the election. The big thing has been the number of homes for sale in the county. I sold my first home 15 years ago, and there were probably four times as many homes on the market then as there are now. The demand is driving the price of homes up. Interview conducted and condensed by Sydney Smith. COURTESY PHOTO

FEBRUARY 3, 2020 / MiBiz

COURTESY PHOTO

2400 Lakeshore Drive

The former site of Sappi Paper Mill has been undergoing environmental cleanup by its owners Pure Muskegon LLC. The owners have been looking to sell the property once the cleanup is finished. The site is 120 acres and is situated along the shoreline of Muskegon Lake.

COURTESY PHOTO

930 Washington St.

A portion of the former Shaw Walker furniture factory remains for sale. The owners of the property, New York-based P&G Holdings, redeveloped the former factory into The Watermark Center. Another 492,000 square feet could still be developed.

COURTESY PHOTO

2500 S. Sheridan Drive

The city of Muskegon purchased the 66.5-acre former West Shoreline Correctional Facility in 2019 for more than $2 million, with hopes that it could become part of the Port City Industrial Park. The city is looking for potential buyers, which could be manufacturers or food processors.

— COMPILED BY SYDNEY SMITH

Visit www.mibiz.com

MUSKEGON COUNTY AT A GLANCE County seat: City of Muskegon Median household income: $48,329 Major employers: Mercy Health (4,674) Arconic Power & Propulsion (2,400) Muskegon County (990) Population: 173,588 (2018 estimate) SOURCE: U.S. CENSUS BUREAU

That is especia lly true for dow ntow n Muskegon, where several apartment projects have recently come online, including Lake View Lofts, Terrace Point Landing, Heritage Squa re, Hig hpoi nt Flats a nd Berk sh i re Muskegon, a senior living facility. “We have a window of opportunity for affordability in residential that will close, and we will become closer (in prices) to Grand Rapids,” Alexander said. “We need to move forward as aggressively as possible in the next couple of years when we still have that advantage to price competitively in the market.” Edmonson said Muskegon County is “ahead of other municipalities” because its zoning laws allow for smaller square footage in apartments and encourage the creation of “marketrate affordable housing.”

Opportunities Muskegon County features several sites, including the former Sappi Paper Mill and the former West Shoreline Correctional Facility, that could offer opportunities for new developments. Another possibility is the Foundry Square site in downtown Muskegon, where about 5 acres of property is available for more development. The project is being developed by Great Lakes Development Group. Meanwhile, some significant square footage is coming online in the industrial market. That includes a 490,000-square-foot distribution center available at 2420 Remembrance Drive and listed for $24.9 million. “That’s a pretty big nut for us to crack to find users for that kind of space,” Core Realty’s Bench said. Bench has heard from automotive users that the sector has “flattened out,” but companies in aerospace and food processing seem to be pretty optimistic. What concerns Bench the most is the office market, which is not taking up as much square footage as it used to because of the changing nature of office work. The trend is bolstered by large health care companies in Muskegon turning their attention to their main campuses in urban areas as opposed to suburban medical office spaces, he said. “The office side has been the toughest to backfill space county-wide, not necessarily downtown, but in Norton Shores, Muskegon Heights and other areas,” Bench said. “There’s plenty of space available.” As well, dema nd for reta il space has increased in the downtown market, with mixed-use developments underway to help fill the need, Bench said. “There’s some nice projects coming online that will start construction this year,” he said. “We’ll still see more demand downtown than probably we can handle, as far as filling small retail spaces.” Visit www.mibiz.com

Fluresh LLC has transformed the former Benteler Automotive plant in southwest Grand Rapids into a medical marijuana provisioning center, grow operation and processing facility. COURTESY PHOTO

Fluresh plans Feb. 7 opening for first GR medical marijuana provisioning center By SYDNEY SMITH | MiBiz

individuals needed to issue secured mortgage our communities safer and providing regulatory notes for Fluresh. certainty to banks, credit unions and other firms “We will probably end up raising something — many of which are not directly involved in the GRAND RAPIDS — Fluresh LLC plans to like $20 million of equity capital, and potentially marijuana industry — which are trying to operopen the first licensed medical marijuana borrow about $17 million from private investors ate their businesses in a safe and legal way,” the provisioning center in Grand Rapids on Feb. to complete the project,” Kanitz said. “It’s a lot of congressmen wrote in the letter. 7 in the former Benteler Automotive plant on work because you have to finance the equity side Kanitz said federal action could help reduce the city’s southwest side. and the debt side yourself.” the cost structure for companies like Fluresh as Founded by Thornapple River Capital Only a select few community banks and they’re able to participate in traditional bankLLC principals Brandon Kanitz and Genesis credit unions in Michigan will serve marijuana ing services. Guanga, Fluresh expects to invest nearly $27 businesses, although that small number pres“The hope is that there becomes clarity from million to transform the 200,000-square-foot ents an obstacle for operators starting up in the a federal level, and that we’ll be able to refinance building at 1213 Phillips Ave. SW into a proviindustry, as MiBiz previously reported. these investors out and materially lower our costs sioning center, as well as a processing opera“It’s a barrier to entry,” Robin Schneider, execwhen that happens,” Kanitz said. “We are seeing tion and Class C marijuana grow facility. utive director of the Michigan Cannabis Industry more non-traditional financing vehicles like priThe plans are comAssociation in Lansing, previvate equity firms and family offices invest in the ing together after the ously told MiBiz. “It makes it (marijuana) space.” company in November very difficult to get into this completed a $9.9 milspace.” The opening of Fluresh lion property transOfficials at Fluresh hope Executives at Fluresh hope the marijuana facilaction with TC 320 the U.S. Senate passes the ity will provide a needed economic development Hall LLC, a subsidproposed SAFE Banking boost to the southwest Roosevelt Park neighboriary of Grand RapidsAct, which was introduced hood of Grand Rapids. based Third Coast in March 2019 and provides The company expects to employ more than Development LLC. clarity on the disposition of 80 people. “When Michigan funds gained through mari“We are hoping to be a boon to the compassed the new juana businesses. munity from an employment standpoint,” said (Medical Marijuana The U.S. House passed Fluresh CEO Lea Bailey. Facilities Licensing the SAFE Banking Act in The Grand Rapids location will serve as Act) and opened up September, but the legislathe company’s headquarters. Fluresh also has medical marijuana, tion has stalled in the Senate. — BRANDON KANITZ invested about $37 million in a similar facility we decided to do what Sen. Mike Crapo, R-Idaho, Principal at Thornapple River in Adrian, Mich., about 30 miles southwest of we had done in other the chairman of the Senate Capital LLC Ann Arbor. states, but rather than Banking, Housing and Urban “Grand Rapids has seen a lot of investment investing in someAffairs Committee, said in between the Medical Mile, the west side, and for body else’s business, December that he opposed the most part the south side has lacked signifiwe decided to create our own company,” the bill as written and asked for feedback on cant investment,” said Jacob Fein, controller for Kanitz told MiBiz. “We recruited a managehow to address public health and money launFluresh. “As we were looking for places to put this ment team that had significant experience dering concerns. facility and our flagship store, we tried to focus in both operating companies and consumer In late January, the bipartisan group of four on those areas.” product experience.” House co-sponsors of the SAFE Banking Act Bailey said Fluresh will begin with medical Steele OZ LLC purchased the property wrote a letter to Crapo urging swift action on marijuana sales, but hopes to “be part of the and will lease it to Fluresh. Fluresh and Steele the legislation from a public safety perspective. adult-use community” as Grand Rapids decides OZ share many of the same investors, Kanitz “Our bill is about public safety. It does not how to regulate recreational marijuana busitold MiBiz. Most of the capital for Fluresh was change the legal status of marijuana and is nesses in the city beginning this month. raised through Steele Partners LLC, an entity focused solely on taking cash off the streets and Construction Simplified is serving as conthat invested in Steele OZ and is managed by aligning federal banking laws with the decisions struction manager for the Grand Rapids facility, Thornapple River Capital. states are already making regarding cannabis. while Toledo-based JDI Group Inc. served as the Steele Partners raised nearly $12.4 million This is a constructive step forward for our legislaarchitect. in a recent fundraising round that closed at tive effort and an important step toward making year-end and included 38 investors who put a minimum of $50,000 into the company, according to filings with federal securities regulators. Kanitz said investment came from a “hodgepodge” of private investors, with a large contingent through Ann Arbor-based investors in Thornapple River Capital, as well as other individuals in Grand Rapids and around the country. As traditional banking is currently www.triangle-inc.com Construction. Commitment. Unparalleled. unavailable to marijuana companies, private ssmith@mibiz.com

“The hope is that there becomes clarity from a federal level, and that we’ll be able to refinance these investors out and materially lower our costs when that happens.”

BUILDING ON OUR PROMISES

MiBiz / FEBRUARY 3, 2020

REAL ESTATE & DEVELOPMENT

Proposed Wheeler Development tower helps with downtown GR density goals By SYDNEY SMITH | MiBiz ssmith@mibiz.com GRAND RAPIDS — Wheeler Development Group’s proposed mixed-use tower could help the city accomplish several goals for the downtown area. The city of Grand Rapids has given the developer a one-year option on the wedge-shaped property at the northwest corner of Fulton Street and Ionia Avenue. The move came after the city issued a request for proposals from developers for the site. Wheeler Development proposed a $55 million, 24-story tower that includes ground-floor retail, parking, office space, apartments and condominiums in the 310,000-square-foot building. “Down in this general area, we’ve been working hard on creating mixed-use developments that have housing components and office and ground-floor retail and restaurants,” said John Wheeler, CEO at Wheeler Development. “This fit right in our wheelhouse of growing our residential portfolio.” Wheeler Development, as well as the affiliated Pure Real Estate Management, will locate its offices at the new building, and is in talks with other companies to move their headquarters there, Wheeler said. That mirrors the city’s goals for the site, which included increasing residential density and providing more parking options for downtown. The proposed development would connect with the city-owned Fulton/Ottawa parking ramp. “It’s a property we identified that could help us meet a lot of the objectives we’re trying to achieve

downtown: expansion of parking, ground-floor activation and additional residential and employment opportunities,” said Jono Klooster, acting economic development director for the city. The site also provides more vertical infill in downtown Grand Rapids, where space for new developments is increasingly limited.

GOING VERTICAL The new tower could serve as a catalyst for getting more height density in the Grand Rapids skyline, said Tim Kelly, president and CEO of Downtown Grand Rapids Inc. “You see that in most cities: As the land opportunities become more scarce, you have to go taller,” he said. “We have some height downtown, but we haven’t really seen a lot of infill projects that provide this type of density. It’s important to demonstrate for the market and to people who are thinking about investing that this is something we can support and accommodate.” Wheeler Development’s building would be the fourth-tallest building in Grand Rapids at 280 feet, behind the River House condo building, Plaza Towers and the Amway Grand Plaza Hotel. Having more density and “verticality” downtown is something officials have long discussed especially as the availability of sites to build new developments becomes more of a challenge, Kelly said. The city also hopes the vertical infill will continue, Klooster said. “We’re not making any more land downtown,” he said. “There are some more properties

Wheeler Development Group has proposed a mixed-use, 24-story tower for a wedge-shaped lot at the northwest corner of Fulton Street and Ionia Avenue in downtown Grand Rapids. COURTESY RENDERING

and the new Acrisure LLC headquarters that’s under construction at Studio Park, DGRI’s Kelly believes demand exists for more office space. In 2019, office vacancy remained below 10 percent for the first time in 30 years in the West Michigan market, according to data from the West Michigan office of Colliers International. Colliers expects the 8.14 percent vacancy rate to continue to decrease. “We’re seeing more office proposals coming along,” Kelly said. “I think the Acrisure announcement has been important for downtown.” The same is true for multifamily development, he said, adding that the strong occupancy rate for that segment also serves as a signal for further demand. “Investors think there are opportunities to provide more products, which is good as we think about reaching our critical mass goals,” Kelly said. “We’re excited to see more projects come online.”

downtown that could be developed, but because it’s limited, we want to take every opportunity that we can with what we make available or that comes available.” Previously, Grand Rapids-based CWD Real Estate Investestment had a three-year option to purchase the same property Wheeler Development is considering for its project. CWD had proposed an 8-story mixed-use building at the site, but those plans never came to fruition.

DENSITY DEMANDS Although negotiations are still in early stages, Wheeler Development has fielded “more than several” calls from parties interested in the retail, restaurant and office space included in the proposed development. “We’ve got many, many leads,” Wheeler said. While citing new downtown office developments like the recently-opened Warner Building

UPCOMING ISSUES

Hudsonville community bank completes $8 million raise

State maps optimal EV charger network

PAGE 2

PAGE 7

JANUARY 7, 2019 • VOL. 31/NO. 6 • $3.00

Law tying state rules to federal standard no big deal, biz groups say

SERVING WESTERN MICHIGAN BUSINESS SINCE 1988

www.mibiz.com

With $77M investment, Ablative could draw attention to Michigan’s life sciences industry

By ANDY BALASKOVITZ | MiBiz By MARK SANCHEZ | MiBiz Netherlands-based Gilde Fund in Kalamazoo co-led the venabalaskovitz@mibiz.com msanchez@mibiz.com Healthcare led the Series D financing ture capital round, which includes an round in Kalamazoo-based Ablative unnamed major strategic investor and KALAMAZOO — The $77 million usiness and environmental Solutions, which developed a cathseveral local investors, some of whom investment in Ablative Solutions Inc. groups were equally surprised eter system to treat uncontrollable have backed the company since its ranks as the largest known venture at one of Rick Snyder’s final acts hypertension by deactivating nerves beginning in 2011. Ablative Solutions of Kalamazoo capital deal ever in Michigan, possias Michigan governor: Signing a bill in renal arteries. The investment will fund the comdeveloped a catheter system to bly helping draw more attention to making it more difficult for state agenPetoskey-based BioStar Ventures, pany over three to four years through treat uncontrollable hypertension the state’s life sciences research and cies to adopt rules stricter than federal Michigan Accelerator Fund 1 in Grand a pivotal late-stage clinical trial in the by deactivating nerves in renal development. regulations. Rapids, and Novus Biotechnology See ABLATIVE SOLUTIONS on page 5 arteries. COURTESY PHOTO But while environmental groups say the move jeopardizes natural resources and public health, business advocates downplay the concerns. “I think everyone was a little surprised he signed it,” said Jason Geer, director of energy and environmental policy with the Michigan Chamber PAGE 11 of Commerce. Sponsored by state Rep. Triston www.mibiz.com By SYDNEY SMITH | MiBiz Cole, R-Mancelona, ssmith@mibiz.com H.B. 4205 prohibits Geer state agencies from GRAND RAPIDS — Executives at nonadopting rules more stringent than profit development organizations think federal law “unless the director of the dissolution of the Kent County Land the agency determines that there Bank Authority will affect their operais a clear and convincing need to tions, even if some of the specific effects exceed the applicable federal stanwill remain unknown until the agency is dard.” The law also exempts emerGroups still hope to form healthWest Michigan manufacturers mostly are keeping the status quo with their pre-employment drug screenofficially closed. gency situations and special educaplans if appeal proves successfuling practices even after Michigan voters legalized cannabis use in November. MIBIZ FILE PHOTO: KATY BATDORFF The Kent County Board of Commissioners tion programs. on Dec. 20 voted to dissolve the Kent County “It just requires that if a departBy MARK | MiBiz Land Bank Authority, which is operating as ment wants toSANCHEZ promulgate a rule more msanchez@mibiz.com Innova-Lab, after a lengthy discussion of stringent than federal, they just need the organization’s mission. Ultimately, the to explain it,” Geer said. “I don’t see remedy everIt’s comes, Thewhy Employers’ majority of commissioners decided the land this asf aa hindrance. showing Association still wants to offer members bank had completed its initial mission, espewe’re going beyond federal standards an option forwe’re employee cially in light of improvements in the real and justifying why doinghealth it.” coverage. The association was all set this past estate market since 2011. While more than a dozen states spring to launch an association health plan. Still, the end of marijuana proHowever, nonprofit developers who have similar laws that apply to enviManufacturers face questions Partnering with insurer Priority Health, The hibition will not mean a free-forhave come to rely on the Land Bank to ronmental standards, Michigan’s Employers’ Association planned to offer HMO over drug policies after all for citizens, according to Tami clear messy titles argued the organization applies across all state agencies. and point-of-service products to member VandenBerg, board member of still can play a role in the current market, Snyder vetoed similar legislation in Michigan legalizes marijuana employers, according to a filing with state MI Legalize, an organization that particularly given the affordable housing 2011, saying at the time he was conregulators who approved the coverage last fall. helped bring the legalization inistruggles in the region. cerned it would state’s Then came a“inhibit March 28the federal court ruling By JESSICA YOUNG | MiBiz tiative to voters. “It doesn’t seem like it cost the county ability to work withabusinesses and order by that struck down 2017 executive jyoung@mibiz.com The Michigan Regulation and really anything to have it in place,” said citizens to ensure regulatory President Trumpthat and our subsequent rules issued VandenBerg Taxation of Marihuana Act allows Jeremy DeRoo, executive director of LINC structure fits Department Michigan’s unique proby the U.S. of Labor that broadow that all adults in Michigan can legally individuals 21 years of age or older UP, a Grand Rapids-based real estate develfile.” In a bill-signing statement last of small ened the ability use marijuana, employers are weighto possess, consume, transport or process limited oper. “It seems to be more of an ideological month, Snyder said businesses his previous toconjoin together ing how the new law — and misunderamounts of marijuana or marijuana concentrate. difference between some of the commiscerns were addressed and that state health to form association standings about it — could affect their Smoking marijuana remains illegal in all public places. sioners and the role of a quasi-government rules can still be stricter “when accomplans. workforces. “People get a little too excited,” VandenBerg agency in the real estate market.” panied by the appropriate explanation “We ended up pulltold MiBiz. “You’re not going to be arrested for it. As it stands, the current Land Bank and support.” ing that off the table after Proposal 1 to legalize recreational cannabis passed 56 percent to 44 percent on the November That is a huge, huge win. That doesn’t mean you has 12 months to handle its liabilities and Geer wasn’t the only surprised thatone result from the court,” Jason Reep, presiballot and went into effect Dec. 6, making Michigan can smoke in your apartment if your landlord isn’t fulfill its agreements before it concludes. that Snyder backed said the bill. dent for The Employers’ the only state in the Midwest where adults can allowing that.” What happens after the Land Bank ceases See FEDERAL on page 3 Reep STANDARD Association, based in See LAND BANK on page 2 legally consume marijuana at any time. See DRUG POLICIES on page 4 Grand Rapids. The Employers’ Association stands among a handful of organizations in Michigan that P E R I O D I C A L S had their plans scrapped by the federal court ruling. Reep still holds out hope for launching PAGE 18 an AHP if an appeal turns out successfully. That could occur if the Department of SERVING MICHIGAN BUSINESS SINCE 1988 www.mibiz.com LaborWESTERN prevails in appealing the ruling by U.S. District Court Judge John Bates of the District of Columbia. As well, Congress could enact

Grow Michigan plans second mezz fund JULY 8, 2019 • VOL. 31/NO. 19 • $3.00

2.17.2020

Education & Talent Development Deep Dive: Outdoor Recreation Part 2

By SYDNEY SMITH | MiBiz ssmith@mibiz.com GRAND RAPIDS — The opportunity to lease brand new office space in the heart of downtown Grand Rapids offered Van Wyk Risk Solutions the chance to grow into a new location. This month, Van Wyk will be the first tenant to move into the new Warner Building, located at 150 Ottawa Ave. NW in downtown Grand Rapids. After outgrowing its space on Wealthy Street in East Grand Rapids, the insurance agency will occupy 17,500 square feet on the 10th floor of the Warner Building. Although the company viewed about 20 different potential office locations, the Warner Building came out on top because of its location, quality and amenities, and because it offered the firm the chance to move into new Class A office space, said Max Van Wyk, chairman and CEO of Van Wyk Risk Solutions. “When you’re starting from scratch in a space, I think it’s always easier and more convenient to have new space, because you can build it out the way you want it to be,” Van Wyk told MiBiz. “We needed to look at spaces where we could accommodate everyone in a central location and provide the amenities our employees deserve.” The vacancy rate for office space in the central business district and suburban market in Grand Rapids remained below 10 percent for the first time in 30 years, according to a report from the Grand Rapids office of Colliers International. The report highlighted the need for more new construction or renovations in older buildings, as companies continue to seek out amenity-rich offices to attract and retain their employees.

Industry 4.0

Contract Deadline: 4.1.2020

4.27.2020

Cybersecurity Deep Dive: Outdoor Recreation Part 3 Real Estate Spotlight: Newaygo County Contract Deadline: 2.19.2020

Contract Deadline: 4.15.2020

See CLASS A OFFICE on page 9

Contract Deadline: 4.29.2020

Business of Senior Care

BUSINESS AS USUAL?

WATERLOGGED WONDERLAND

Corporations re-examine their Unseasonably rainy weather coupled with near record-high shareholder Great Lakes water levels have left many West Michigan business commitment

owners hoping the region will PAGE 10 dry out in time to salvage the season for visitors and tourists. SEE PAGE 12 SEPTEMBER 3, 2019 • VOL. 31/NO. 23 • $3.00

STORY AND PHOTO BY MARLA MILLER

Lawmakers push economic case for ‘licenses for all’

Grand Rapids explores potential for Craft beverage producerssolar suepower MLCC,at allege 8 sites unconstitutional state laws, enforcement

See AHPs on page 7

By JOE BOOMGAARD | MiBiz jboomgaard@mibiz.com GRAND RAPIDS — Tensions between Michigan craft beverage producers and the state regulatory agency appear to be ratcheting up with the filing of a new federal lawsuit, MiBiz has learned. In the case filed last week in the U.S. District Court for the Western District of Michigan, Sawyer-based Greenbush Brewing Co., Hudsonvillebased Farmhaus Cider Co., the Michigan Cider Association and Grand Rapids-based Vander Mill LLC are suing the Michigan Liquor Control Commission. The parties allege the

New $20M PE firm to target rural Michigan companies

M&A remains active among West Michigan manufacturers

PAGE 11

INSIDE:

West Michigan Deals SEE PAGES 11-21

agency’s enforcement actions and licenses, was in violation of state law Regardless of the federal question revisions stateBALASKOVITZ liquor code enacted regarding the state law, Greenbush By to ANDY | MiBiz over its bonded transfers of cider, last fallabalaskovitz@mibiz.com are unconstitutional, and that which it purchased from Vander Mill. owner Scott Sullivan said the comthe state laws are preempted by federal In the court documents, Greenbush pany met the requirements in the laws regarding production sale aresaid the enforcement division told the revised Michigan Liquor Control GRAND the RAPIDS — Cityand officials of alcohol, particularly which is at acompany it “was required to ferment Code that would allow it to particireviving plans forcider, a solar project classified as wine. pate in the bonded transfer of wine. former Grand Rapids landfill as theevery drop of wine that it sold,” seized Plaintiffs, who say their businesses Greenbush produces some of its own city sorts through broader questionsall of its cider inventory and told the are being financially harmed because wine and cider under the new definiBy JESSICA YOUNG | MiBiz about potential generation at sevencompany to stop using its small wineof the actions, also allegeproperties. the new law maker license, effectively barring the tions, thereby qualifying it under state jyoung@mibiz.com other city-owned is unconstitutionally law to be eligible for bonded transfers. The Grand vague, Rapidsleaving Office ofproducer from selling all cider and wine. beverage producers open to “arbitrary “This has happened to a number hen Grand Rapids-based Sustainability is leading an Energy The lawsuit challenges the constiand capricious” actions. of breweries before us, and for whatMulti-Automatic Tool and Advisory enforcement Committee that, amongtutionality of the seizure, which was Theother lawsuit stems is from the MLCC theeffected without a search warrant. The ever reason, no one has been willSupply Co. started searchtopics, considering enforcement division’s finding on June ing to stand up and take MLCC head ing for prospective acquisipotential for solar projects to helpstate currently is holding about $7,200 19 thatmeet Greenbush, which holds both in Greenbush’s property, according to on,” Sullivan told and MiBiz. “IfCulver, I thinkright, formed their own company to Cedar Run Decoy founders Corey Lucas, left, Boyd tions several years ago, the move came as a 100-percent renewable microbrewer and small winemaker SeeinLAWSUIT on pagePHOTO: 3 JESSICA YOUNG stores today. a reaction to many of the company’s cusenergy goal for city operations bycourt filings. produce traditional waterfowl gear not found tomers buying directly from small shops. 2025. Convinced that he needed to diverA study conducted by the U.S. sify his business in order to compete, Department of Energy’s National President James Byl went looking for Renewable Energy Laboratory opportunities, but it looked at eight sites — including took a few years for the Butterworth Landfill on the the pieces to fall into city’s southwest side — for potential place and find the solar installations. After faulty modright target. eling this summer produced results By JESSICA YOUNG | MiBiz “We hunt and we spend a lot of time out there “I began to look showing most projects would have jyoung@mibiz.com talking about how we can do things better and how three years ago, but the cost the PAGE 4 city over the 25-year life of some of the products we were using just weren’t companies that I saw the projects, officials are revisiting BATTLE CREEK — Cedar Run Decoy Co. LLC aims working for us,” Lucas said. “We wondered why at the time just didn’t the study, said Alison Waske Sutter, SEE PAGE 16 to provide hunters with new ways to get back to we couldn’t just simplify things, get back to the seem to be the right who leads the sustainability office. Byl the basics of waterfowling. basics.” fit,” Byl told MiBiz. “We anticipate the results will The startup grew out of the frustration owners As a result, the experienced hunters decided “Five, six, seven years ago, coming out of show it does make sense economiCorey Lucas and Boyd Culver experienced in tryto team up and build their own products, at first the recession, I think I needed a few years cally and financially for us to install ing to find traditional gear — think hand-carved for themselves and now for others hunting from to rebuild as well. Now, banks are willing to solar at some facilities,” Waske Sutter decoys common in their grandfathers’ generation the potholes of the prairies to the big waters of the lend and it seems like a good time.” told MiBiz. — amid the motorized cheap plastic products freGreat Lakes region. In July, Multi-Automatic, a minorityThe biggest of the eight is the quently stocked at most sporting goods shops. owned wholesale distributor of machine Butterworth Landfill site, which See CEDAR RUN DECOY on page 6 could potentially host a 15-megaSee M&A ACTIVITY on page 5 watt project, according to studies. The city pursued a 2.25 MW project there in 2016, but the plan was abandoned after the developer “disappeared” and stopped communicating, city officials said previously. $2 million, according to federal securities filings. The city hopes to issue a request Partners hope to incentivize developers to add ‘hundreds’ of units The group as of early July said in the filing that it for proposals by the end of the year had secured more than $1 million from investors. for a new project that would simiBy SYDNEY SMITH | MiBiz and securing local planning approvals from a The six investors in the fund include the larly be developed by a third party. ssmith@mibiz.com municipality, said Ryan Kilpatrick, executive direcCommunity Foundation, Holland-based finanFor at least some of the remaintor of Housing Next, an initiative focused on supcial/investment services firm Brooks Capital ing sites, however, Waske Sutter HOLLAND — A new fund aims to cover pre-develporting housing solutions in Ottawa County. Management LLC, the West Coast Chamber of anticipates the city building and opment costs to incentivize developers to add “Very often, the development community is Commerce, and members of the Padnos family owning the solar projects. affordable housing in the Holland and Zeeland going to build what they know is successful in a who own Holland-based Louis Padnos Iron and The federal study looked at areas, MiBiz has learned. market,” Kilpatrick told MiBiz. “It’s a risk and it Metal Co. Two other investors asked to remain seven city-owned sites: the Lake The goal for the Holland/Zeeland Housing Pretakes a lot of front-end work to convince a municanonymous. Michigan water filtration plant in Development Fund Inc. is to create projects that ipality that it’s the right project. Our goal would be The capital should be enough to accomplish the Ottawa County, the Market Avenue would make financial sense for a public or private to position a development appropriately for the mission of the fund, said Mike Goorhouse, presiretention basin, City Hall, the Grand developer to take on after pre-development work right group.” dent and CEO of the Community Foundation. The Rapids Police Department downis completed. Housing Next, the Community Foundation of investors are hoping to initiate “hundreds” of units town station, the Bridge Street Fire The pre-development work can include site the Holland/Zeeland Area and several investors across the targeted communities, he said. See SOLAR on page 3 control, environmental inspections, site planning helped organize the fund, which is targeting to raise See HOUSING FUND on page 15

Manufacturers prepare ahead for cyber threats

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5.26.2020

Contract Deadline: 3.4.2020

3.30.2020

Drinking Economy Real Estate Spotlight: Mason County

5.11.2020

Court ruling dashes plans for new AHPs

Amenity-rich Class A office space still in demand in GR, suburban markets

Contract Deadline: 2.5.2020

3.2.2020

SERVING WESTERN MICHIGAN BUSINESS SINCE 1988

‘FLIGHT TO QUALITY’

4.13.2020

Closing of Kent County Land Bank presents unknowns for nonprofit developers

Could better commuter transit aid talent attraction?

PAGE 20

Transition/Succession Planning Real Estate Spotlight: Barry County

Education & Talent Development Deep Dive: Immigration Part 2 Real Estate Spotlight: Berrien County

Great Lakes VCs invest locally PAGE 8

INSIDE:

Multifamily development SEE PAGE 12

Contract Deadline: 5.13.2020

Contract Deadline: 3.18.2020

FEBRUARY 3, 2020 / MiBiz

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

FOOD BIZ

GTF Solutions mills hemp waste into new revenue streams By MARLA MILLER | MiBiz mmiller@mibiz.com

millions of pounds of hemp stalk waste material. The material’s value stems from its ability to enhance existing plastic and construction materials and reduce the need for fossil fuel petroleum-based products, Schuler said.

ary Schuler never expected to jump into the industrial hemp industry, but he finds himself now pitching the plant’s potential and its milled-down byproduct for Upcycling food waste new uses. GTF’s focus is to create revenue The founder and CEO of Grand streams from food waste, agriculture Rapids-based GTF Solutions credoverproduction and various plant its his son for convincing him to look materials, including hemp. The cominto the up-and-coming industrial pany plans to open a food-grade prohemp industry after the 2018 Farm cessing facility in West Michigan in Bill authorized hemp cultivation as spring of 2020. an agricultural commodity. Milling down excess fruits and Using innovative milling technolconsumer food products into fruit ogy, GTF Solutions can process parts powder, plant-based protein or brewof the hemp plant that are currently ers spent grain benefits the environconsidered waste for use in food prodment by reducing carbon dioxide and ucts, animal feed, bioplastics, textiles, greenhouse gases produced from rotinsulation and building materials. ting food. It also helps create a circular Michigan farmers grew the state’s economy by upcycling food material first legal industrial hemp crop in for new uses. more than 50 years in 2019, and growAs well, growers with excess fruits ers, processors and industry analysts or vegetables can have are optimistic about the their crop milled down promise hemp holds for into a powder that has farmers and businesses a multi-year shelf life. in the future. Sponsored by: Processors who make “The long-term lonDAN VOS apple and cherry juice gevity is going to be these CONSTRUCTION turn their wastes into industrial applications; COMPANY a powder that provides that is what is exciting,” them a secondary reveSchuler said. “It’s a viable nue stream, for example. product, and we’re in a great state to GTF Solutions can quickly extract grow it.” 97 percent of the moisture out of the Growing hemp flower for CBD oil food product and retain 100 percent of is currently garnering the most attenthe nutrient value, Schuler said. tion, but Schuler envisions everyday “Once that harvest comes in, products such as water bottles, pizza you’ve got a short time period,” he boxes, denim jeans and flooring being said. “We’re powderizing it, so it stops made out of hemp biomass. the clock on the food. I have powders “A hemp plant has tremendous I’ve had for four years. It’s similar to value,” he said. “The first pair of Levi’s baking materials in your cupboard.” blue jeans made was made out of hemp, not cotton. If we can reduce nylon and we use a natural fiber like New applications hemp, it is stronger and you are not GTF Solutions also has the technology taking fossil fuels to make a pair of and license agreement to put in milljeans.” ing centers for hemp waste material Hemp cultivation has surged in Michigan and beyond. The comin Europe, and the 2018 Farm Bill pany is in discussions with several legalized industrial hemp produclarge hemp harvesting and processing tion across the country, resulting in

FOOD BIZ

facilities in the U.S. and Europe to mill hemp stalks. The goal is to have initial operations milling hemp waste for the fall harvest in 2020 in several states and in Europe. “We’re trying to locate these facilities where a lot of the hemp waste is being collected,” Schuler said. “You can’t drop off a bale of hemp stalks to Ford Motor Company. It needs to be processed first. It is no different than an oil refinery. You put a refinery where a lot of the crude oil is being collected.” Right now, most growers are focused on selling the flower part of the hemp plant for CBD oil. Processors take the top 12 inches of the flower material. The remaining plant and organic material often is left to rot in the field or burned. “They (farmers) don’t know what to do with it, but the rest of the plant has an incredible application that really could be significant to helping reduce the carbon footprint,” Schuler said. “This is going to benefit the farmers to have a secondary source for their waste material.” Milling technology can turn the leftover parts of the hemp plants into a very fine, dry powder for use in bioplastics, textiles, insulation and building materials. “All of those things require the hemp to be milled so it can be integrated into the various industrial applications,” Schuler said. “It really is a critical part of the supply chain.” Bioplastic needs to have around 25 percent plant-based material, which involves replacing petroleum-based polypropylene and adding hemp waste material as the filler to make plastic polymers. The Hemp Plastic Co. also is processing hemp polymer in Michigan and exploring the future viability of hemp bio-resins. “We are creating the science as we go, and we are really learning a lot about the potential applications as we go,” said Greg Dean, chief commercial and operations officer for The Hemp Plastic Co.

GTF Solutions has milling capabilities that will allow it to convert waste from hemp growing operations into new products, including bioplastics and textiles. COURTESY PHOTOS Dean, who lives in Southeast Michigan, has 20 years of experience in the plastics industry. “I am very encouraged that there is a variety of channels and industries that our products will work well in,” he said. “The good news (is) I see a real case for these activities to be very much embedded in Michigan.”

Awareness needed Besides getting the infrastructure in place to process hemp biomass, growers need to ramp up cultivation of industrial hemp to fulfill the volume of hemp needed for these new industrial uses. Schuler and other hemp advocates aim to make state legislators, the public and business owners aware of the potential for the industry. “In the future, this is going to be a big part of all of our lives,” said Blain Becktold, government and business liaison for iHemp Michigan LLC, a member-based group that advocates for the industry. “Almost everything

can be made out of hemp or some part of it can be made out of hemp.” Hemp materials available today can be easily integrated within a company’s existing processes without having to retool, said Schuler of GTF Solutions. The key is getting larger companies to accept hempderived material, which will create more demand and additional value for the farmers. Hemp is a low-energy alternative that “could really move the needle from an environmental” standpoint, Schuler said. Hemp biopolymer products are renewable, sustainable and, in some cases, compostable, and can be used for injection molds, thermoplastics, sheet film and more. “I think the biggest challenge that I am seeing right now, the corporations have a stigma about hemp and not understanding that it is different than a marijuana plant,” Schuler said. “They are not aware of the industrial applications, that hemp can bring value in terms of their ability to reduce their carbon footprint.”

Vander Mill Cider

Cidery and Restaurant | Grand Rapids, MI

Design Build General Contracting Construction Management www.danvosconstruction.com

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MiBiz / FEBRUARY 3, 2020

SMALL BIZ NON-COMPETES BY PAY LEVEL

Legislation to limit non-competes for certain low-wage jobs draws concern from biz groups By MARK SANCHEZ | MiBiz

comes up” after they move on to a better job or start their own small businesses. The legislation as written would affect minors ackers of legislation that would bar and low-wage earners, such as a family of three employers in Michigan from requirwith a household income below 138 percent of the ing certain employees to sign a nonfederal poverty level, or $27,579 per year presently. compete agreement say they simply State Rep. Mari Manoogian, D-Birmingham, want the free market to work. cited the fast-food and food-service industries as In the case of their legislation pending in sectors that use non-compete agreements to limit Lansing, that means prohibiting the where employees can go to work after use of non-compete agreements that leaving a job. prevent workers from going to work Manoogian specifically pointed for a competitor, an employer in the to Jimmy John’s sandwich shops, same industry, or perhaps starting which halted the use of non-comSponsored by: SMALL BUSINESS their own business within the same pete agreements in 2016 to settle ASSOCIATION market or industry. The bill under litigation brought by attorneys genOF MICHIGAN consideration would better define eral in several states. Previously, and limit the use of non-compete Jimmy John’s had employees sign an agreements, and require employers using them to agreement that barred them from working for two inform people up front before they are hired. years or within three miles of a franchise location “Non-competes are inherently non-competitive at another company that generated more than 10 and contrary to most American concepts of a free percent of its revenue from the sale of sandwiches. market and free competition,” David Blanchard, an Manoogian called her legislation “common employment attorney with Blanchard & Walker sense reforms to ensure that we, as a state, are truly PLLC in Ann Arbor, told legislators during a recent a land of economic opportunity and a place where committee hearing on the bill. an individual actually has the freedom to work.” Blanchard has represented clients who were hired and then told the first day on the job they Ensuring fair use had to sign a non-compete agreement, “and Non-compete agreements are proper for many sometimes they didn’t even realize what they professions, but not for low-wage workers in were signing until years later when the issue

msanchez@mibiz.com

SMALL BIZ NEWS

You didn't go into business to be an expert in employee benefits. But we did. www.sbam.org

Workplaces where all employees subject to non-competes

Workplaces where some employees subject to non-competes

Less than $13

29.0%

37.9%

$13 to $16.99

30.9%

56.8%

$17 to $22.49

32.8%

46.6%

$22.50 and more

36.5%

55.4%

Workplaces where all employees subject to non-competes

Workplaces where some employees subject to non-competes

Average hourly wage

SOURCE: ECONOMIC POLICY INSTITUTE, DECEMBER 2019

NON-COMPETES BY INDUSTRY Industry Construction

30.7%

47.7%

Manufacturing

34.8%

54.1%

Wholesale trade

32.3%

67.6%

Retail trade

25.4%

41.8%

Transportation

21.0%

36.8%

Information technology

25.0%

54.2%

Finance, insurance, real estate

35.5%

58.1%

Business services

52.0%

70.7%

Education and health

28.7%

39.4%

Leisure and hospitality

14.3%

25.0%

Other services

31.4%

42.9%

SOURCE: ECONOMIC POLICY INSTITUTE, DECEMBER 2019

food, service, retail or other jobs, Manoogian said. The use of the agreements has “been abused far beyond their purposes,” she added, citing cases in which employees are barred from leaving a job to start their own business. “That costs our economy and it goes against the basic principles that every Michigander deserves the freedom to pursue economic opportunity,” Manoogian said. “If we want our state to be able to compete in this ever-changing economy, we need to ensure that our workers can start businesses without being bound by unreasonable employment agreements.” Manoogian and other backers of the bill are not seeking a complete ban on non-compete agreements. Under the proposed legislation, employers could still use the agreements to prevent clientpoaching, and to protect proprietary information and intellectual property, “and I completely understand that,” Manoogian said. “The objective of this legislation is not to end all non-compete agreements, but just to ensure that they are used fairly,” she said. “There are absolutely instances where non-compete agreements are justified, but I think we can all find consensus that the use of these agreements for low-wage workers and entry-level employees is just not appropriate.” The bill would retain a provision in present state law that allows an employer to obtain an agreement from an employee “that protects its reasonable competitive business interests,” according to a House Fiscal Agency analysis. The bill before the House Commerce & Tourism Committee would prohibit an employer from requiring or imposing a non-compete agreement for low-wage earners paid less than 138 percent of the federal poverty level, a threshold the state used years ago for Medicaid expansion. Under the bill, employers using non-compete agreements that have been allowed in Michigan since 1985 would have to provide job applicants written notice of the requirement, disclose its terms in writing prior to hiring an employee, and post the law or a summary in “a conspicuous place at the worksite where it is accessible to employees.”

Differing views Opposition to the legislation during the recent committee hearing came from the Michigan

FEBRUARY 3, 2020 / MiBiz

Chamber of Commerce, which considers the bill overly broad as written. “It doesn’t ta ke into account types of employees who might be subject to a non-compete agreement, regardless of their wage or income. It doesn’t take Manoogian into account things like the access to proprietary information, or access to trade secrets, or other competitive information that might require the employer to take a non-compete on t hat employee,” sa id Wendy Block, v ice president of business advocacy for the Michigan Chamber. “Access Block to this sort of information is not limited by income and it’s going to vary industry to industry, person to person, and that’s why we support continuing to allow this to be dealt with as it has for the last 30 years.” Block noted that the Michigan Chamber generally does not support “one size fits all” approaches. Nor does it support the use of noncompetes in cases such as Jimmy John’s. “It is ridiculous. It shouldn’t have been allowed to happen,” she said. “But the fact of the matter is it’s done and settled. It’s behind us.” The Small Business Association of Michigan and Associated Builders and Contractors of Michigan also oppose the legislation, but did not testify at the recent committee hearing. Supporters included the Michigan League for Public Policy and Gov. Gretchen Whitmer’s administration. “We believe that this bill is good for working families, that it’s fair, and it does not impair an employer’s ability to protect their legitimate business interests, which non-competes are originally designed to do,” said Sean Egan, deputy director of the Michigan Department of Labor and Economic Opportunity. Employers can use “other tools” such as confidentiality agreements and non-solicitation agreements to protect customer lists, sales data, intellectual property and other sensitive information when employees leave for another job, Egan said. Visit www.mibiz.com

ECONOMIC DEVELOPMENT Avoiding exposure However, non-competes are not easily separated from non-disclosure agreements, Block said. Michigan Chamber members have indicated the two agreements are used together most of the time, she said. “By separating those out and not allowing them to be used comprehensively, it does create exposure for the employer,” Block said. “There does seem to be some holes there if you say you can use one but not the other.” Employers have long used non-compete and non-disclosure agreements to protect trade secrets and technology, copyrights, intellectual property, patents and other confidential information, Block said. Two states, California and North Dakota, prohibit non-compete agreements, while most other states recognize them in some form, Block said. Existing state law has allowed their use to “protect reasonable competitive business interests” in cases when the specified duration, geographic area, type of employment and line of business in which an employee seeks to move is “reasonable,” she said. In cases where non-compete agreements were challenged, courts in Michigan consistently have penalized employers who use “overly broad non-compete agreements,” Block said. The Michigan Chamber supports continuing to have non-competes dealt with on a case-bycase basis where courts determine if they are unreasonable under the present law. However, not everyone can mount that kind of legal challenge, according to advocates of the legislation. Low-wage workers generally are unable to afford an attorney to go to court to invalidate a non-compete agreement, said Blanchard, who testified in support of the bill on behalf of the Michigan Association for Justice, where he serves on the executive board. “For low-wage workers, that’s just an impossible task. They can’t afford it, nor does their income level justify investing in a court legal process to determine whether they can work at the sandwich shop across town or down the block,” he said. Many workers also “generally are rule followers” and won’t challenge a non-compete anyway, Blanchard said.

Growing prevalence A December report from the Washington, D.C.-based Economic Policy Institute detailed the growing use of non-compete agreements nationally. The non-partisan think tank conducted a random survey between March and July 2017 that drew responses from 634 employers. Nearly half of the survey’s respondents said that “at least some employees in their establishment were required to enter into a non-compete agreement.” Nearly one in three reported that all employees needed to sign a non-compete. In Michigan, nearly 38 percent of the 29 companies that responded to the Economic Policy Institute survey said all employees had to sign a non-compete. The Economic Policy Institute noted the national findings compare to a 2015 report by University of Michigan researchers who surveyed more than 11,500 workers. At the time, about 18 percent reported they were bound by a non-compete agreement. “While establishments with high pay or high levels of education are generally more likely to use non-compete agreements, noncompetes also are common in workplaces with low pay and where workers have low education credentials,” according to the Economic Policy Institute report. The use of non-compete agreements for all employees ranged from 36.5 percent for positions paying $22.50 per hour or more, to 29 percent for jobs paying $13 an hour or less, according to the Economic Policy Institute. Visit www.mibiz.com

Thanks to a settlement with the state of Michigan, Tesla will be able to open sales galleries and service centers in the state. COURTESY PHOTO

Dealership group: ‘More questions than answers’ following Tesla settlement By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com

contract indicates the sale took place in a state other than Michigan; and, indirectly own service and repair facilities in Michigan through a subsidiary, Tesla Michigan.”

he statewide advocacy group for automobile dealers says “more questions than answers” follow a recent settlement agreement ‘Long overdue’ between California electric vehicle manufacturer Tesla Inc. and Electric vehicle advocates say the settlement should make it easier for the state. Michigan residents to become Tesla customers. The Michigan Conservative Under a Jan. 22 agreement between the attorney general, Energy Forum (MICEF), a politically conservative group that advocates for secretary of state and Tesla to dismiss the automaker’s lawsuit against clean energy policy, applauded the settlement. Michigan, the state will allow Tesla subsidiaries to operate sales galleries “As free market conservatives, MICEF has always believed that competiand service centers. tion and innovation are the key to advancing a clean energy economy that The agreement settles a lawsuit filed by Tesla in 2016 challenging a benefits people and protects our natural resources,” Executive Director Michigan law that prevented the company from directly selling cars to Ed Rivet said in a statement. “We know electric vehicles are the future and customers outside of the state’s dealership model. It’s also a setback for that to remain at the forefront of the transportation the state’s auto dealerships, as experts say the case sector, Michigan must foster a dynamic, competicould allow other manufacturers to bypass the dealtive market.” ership model. MICEF leadership council member and Crystal “We have no speculation” about the effects of the Mountain Resort CEO Jim MacInnes welcomed the settlement, said Terry Burns, executive vice presisettlement as a Tesla owner for the last five years. dent and secretary for the Michigan Automobile Over that time, he has had his vehicle serviced mulDealers Association. “We’re trying to make sure we tiple times in Toledo, Ohio. understand it. I think it did create more questions “This was something that was long overdue,” than answers.” MacInnes said of the settlement, adding that the Burns said the association was unaware of the in-state service centers will likely have more of an negotiations between Tesla and the state. effect than the galleries. “There’s operational questions we’re making Under the settlement, Tesla representatives at sure we understand,” Burns added. “As we progress, we’ll be able to make sure we incorporate them into — JIM MACINNES galleries can discuss pricing, financing, trade-ins, delivery and configuration of vehicles, according the way we do business.” CEO of Crystal Mountain Resort to the company. Tesla critics have said the company should play But legal experts say the settlement could have by the same rules for selling cars as large automakeffects beyond Tesla and Michigan. ers like General Motors and Ford. The state had University of Michigan law professor Daniel Crane wrote that the setpreviously refused to grant Tesla a Class A license to open a dealership in tlement could be a “tipping point in Tesla’s ongoing battle for the right to Michigan, which the company challenged in court. The case was schedengage in direct distribution in other states.” uled to go to trial this year. A 2014 law signed by former Gov. Rick Snyder Meanwhile, Crane notes other electric vehicle manufacturers like Rivian banned automakers from opening retail stores. Motors — which has financial backing from Amazon and Ford — “will However, the company and its supporters have argued that Michigan’s benefit from the trail Tesla has blazed. … It would seem legally very difdealership laws — some of the most stringent in the country — stifle comficult for the state to deny a similar arrangement to any other company petition rather than promote it. Tesla argued that the regulations were situated like Tesla.” unconstitutional. “Michigan, the state with the most pro-dealer law on direct distribution, It’s unclear when Tesla will open galleries and service centers in the state. has now opened the doors for new EV companies to bypass the traditional John Bursch, a Tesla attorney and former solicitor general in Michigan, dealer model entirely,” Crane wrote. directed questions to the company. Tesla did not respond to a request for Crane also told Automotive News: “The handwriting’s on the wall for comment about the settlement. the franchised dealer as the exclusive way consumers interact with car In a Jan. 28 email to customers from the “Tesla Policy Team” obtained companies.” by MiBiz, the company directed vehicle owners to a website that submitBurns of the Michigan Automobile Dealers Association said the industry ted thank you letters to Attorney General Dana Nessel and Secretary of is ready to adapt if needed. State Jocelyn Benson. “We continually evolve with the type of dealerships we have and the “Our goal is to make the customer experience for our Michigan vehinumber of cars we have,” he said. “We’re constantly changing and adaptcle owners as seamless as possible,” according to the website. “Thanks ing — customers are always telling us new things we like to see and do.” to the support of Tesla customers in Michigan … we have successfully For Tesla customers like MacInnes, though, the settlement shows advocated for the acceleration of sustainable transportation in the state Michigan is embracing a more electrified vehicle sector. of Michigan.” “This was really important to demonstrate our leadership,” MacInnes Nessel issued a statement on Jan. 22 noting the settlement “recognizes said of Michigan and its role in the automotive industry. “(The previous that any Michigan resident may lawfully buy a Tesla and have it serviced arrangement) didn’t send the right message about the state being open in Michigan. The stipulation acknowledges that Tesla may: operate under for business.” existing Michigan law; sell cars to Michigan customers as long as the sales

“This was something that was long overdue. … (The previous arrangement) didn’t send the right message about the state being open for business.”

MiBiz / FEBRUARY 3, 2020

FINANCE

New Community Transformation Fund could serve as a national model for inclusion By MARK SANCHEZ | MiBiz msanchez@mibiz.com

wame Anku believes the New Community Transformation Fund forming in Grand Rapids could become a national model for driving greater economic inclusion in venture capital. Anku, who serves as CEO of Sacramento, Calif.-based Black Star Fund, will advise local partners on the formation of the new venture capital fund. He said he knows of no other initiative in the U.S. led by an economic development organization and dedicated to investing in businesses owned by racial and ethnic minorities. “This could really be a breakthrough structure. It’s the coming together of powerhouses to create something new to have a powerful impact,” said Anku, who describes himself as “an evangelist for the uplifting and transformation for communities, particularly community of color, through capital investment.” “We believe this will have an extraordinary impact on the West Michigan community and marketplace, but quite frankly can and should be a national model for what is possible,” he said. “In West Michigan, we have the opportunity to be a beacon, an example and a national example, for what’s possible.” Anku also co-founded and was a principal at the Black Angel Tech Fund that focused on providing capital to black technology entrepreneurs. He was recruited to work on assisting in the design and development of the Grand Rapids fund, including recruiting a management team, “to be able to get the deals and get the job done,” he said. “All of that will be put together in short order,” Anku said. Then the hard work begins of finding investors to put money into the venture capital fund, which has a targeted goal of raising $15 million to $25 million. The group aims to begin operations by 2021. Anku expects the search for backers to extend well beyond West Michigan. He believes his peers on the West Coast will consider making an investment in the fund. Anku’s connections to West Coast funds is part of why he was brought in to consult with the New Community Transformation Fund, he said. “We believe there are extraordinary partners locally first, then statewide, and nationally and internationally, that will want to participate in this fund and we’re going to be working very hard to make that happen in short order,” Anku said. That interest could extend to funds on the coasts looking to partner on investments with the new Grand Rapids-based venture capital fund, Anku said. “The reality is anybody in business is looking for opportunities. Venture capitalists are looking for opportunities, and in business when you have that warm relationship — somebody I know, I like and that I trust — and somebody is making an introduction to the opportunity, it has a profound effect on their interest in being involved.” Fund managers will host investor summits in Grand Rapids and invite funds from both the West Coast and East Coast to “come and see what this fund is about, what the opportunities are and how they can participate not only to invest in the fund, but also to co-invest alongside of us as we are identifying those companies that we are going to invest in,” Anku said.

FEBRUARY 3, 2020 / MiBiz

The New Community Transformation Fund aims to deploy venture capital to minority communities in West Michigan. Partners in the fund include (from left to right) Skot Welch of Global Bridgebuilders, Birgit Klohs of The Right Place Inc., Garrick Rochow from Consumers Energy, Renee Tabben from Bank of America, and Kwame Anku of Black Star Fund. COURTESY PHOTO

VC FUND

Continued from page 1 “We can all agree that West Michigan has been extraordinarily successful over the last 10 or 12 years and beyond in our economy … but it certainly is not distributed evenly among all of our populations,” Klohs said. “One of the biggest barriers to entrepreneurship is always funding, always money. It doesn’t matter what (kind of ) entrepreneur you are, but it is particularly difficult for communities of color. It’s very, very hard. “We talked about a fund that will take those barriers down, that will in fact help us become a more diverse and inclusive economy in West Michigan.” The venture capital fund would operate separately from The Right Place and require founders and portfolio companies receiving investments to locate and operate in West Michigan. As well, the fund will make investments in minority entrepreneurs buying family-owned companies whose owners are exiting the business, thereby ensuring the firms remain locally owned, Klohs said. She noted that 60 percent of the manufacturing companies based in West Michigan are family owned. “How do we keep some of that ownership local as companies transition? We believe that there is an opportunity to keep those locally owned by having a fund like this to invest,” Klohs said. “Having them owned by minority ownership, we are getting a much more diverse supply chain that way, (and) faster.”

Spurring change Bank of America and the Consumers Energy Foundation each provided $200,000 in startup capital to design and develop the venture capital fund. Their contributions will cover costs such as crafting the legal structure and operational systems for the fund; establishing a management team, advisers and a board of directors; and securing local and national portfolio growth partners. Partners will also need to decide the minimum investment required from investors in the venture capital fund. By partnering with The Right Place and Bank of America to support the formation of the fund, “we can support people, neighborhoods, our community, our state, our economy for generations to come,” said Garrick Rochow, executive vice president of operations for Consumers Energy and a member of The Right Place board’s executive committee.

“Together we will create a stronger future and a more inclusive community,” Rochow said. Klohs likens the fund’s formation to the establishment 24 years ago of the Van Andel Research Institute that today anchors the Medical Mile, a life sciences, health care, and bio-medical research hub that employs thousands of people. “Back then nobody could envision what that would mean, and yet today it has transformed the business community in West Michigan,” she said. “We have a whole new industry along health care, life sciences and medical devices. The way I look at the start of this fund is the same thing. “Everything needs a catalyst. This fund will be a catalyst for diversifying our economy by investing in entrepreneurship. So 20 years from now, I hope somebody will sit up here and say, ‘Here’s how many companies we created and changed the trajectory of West Michigan, how we look at ourselves, and how successful we are.’” In looking to raise $15 million to $25 million, Klohs has had indications of interest from two large local employers and “quiet conversations” with others “who are excited” and are “giving us the thumbs up that this is needed,” she said.

Correcting disparities The leader of the Urban League of West Michigan considers a venture capital fund that actively scouts for investments in companies owned by people of color as “a long time coming.” In his work, the Rev. Joseph Jones sees entrepreneurs “every day” who need growth capital to scale their business but are unable to secure financing. “The fact that it is here is critically important because it, I believe, hasn’t necessarily been available in our community in our Grand Rapids,” said Jones, president and CEO of the Urban League of West Michigan and a Grand Rapids city commissioner. “It’s always required intentionality.” The issue of economic inclusion and diversity in venture capital has been rising nationally over the last few years amid heightened awareness of the need to grow access to capital and investments in startups and businesses owned by women and racial and ethnic minorities. Research shows that only a fraction of the venture capital invested annually in America goes to companies owned by ethnic and racial minorities.

“By investing in companies owned by people of color, we will work together to correct those disparities,” said Skot Welch, the founder of Grand Rapids-based Global Bridgebuilders that focuses on cultural transformation and inclusion. “Talk is good; action’s better.” Welch will serve as a general partner in the venture capital fund, taking on the role of “ambassador” and the “voice and the face to the fund,” he said.

‘The pendulum is swinging’ In 2018, less than 1 percent of the nearly $130.9 billion in venture capital invested in the U.S. went to startups held by African Americans, said Kwame Anku, chairman and CEO of Sacramento, Calif.-based Black Star Fund who’s a consultant to the New Community Transition Fund. Women-owned companies received just 2.2 percent of all venture capital. The New Community Transformation Fund is part of a national movement to reverse those kinds of disparities, he said. Anku noted the formation of three venture capital funds in the U.S. last year that focus on diversity: Harlem Capital that in December closed on $40.3 million in fundraising, San Francisco-based Plexo Capital that raised $42.5 million, and San Francisco-based Precursor Ventures that netted $31.5 million in a fundraising round that closed last May. In mid 2018, the $100 million New Yorkbased New Voices Fund launched to support ventures by women of color. “Tens of millions, and soon to be hundreds of millions of dollars in capital, will be in these funds and then deployed to the entrepreneurs. Those companies will start to grow, we’ll see successes, we’ll see exits, and those numbers are going to shift dramatically,” Anku said. “We are dealing with that issue, we are dealing with that reality in the marketplace. But the reality is that behind the scenes, the pendulum is swinging in a very positive way, and we see the New Community Transformation Fund as being one of the leaders and pioneers in this space.”

Breaking down barriers In Michigan, companies led by a CEO from an underrepresented group accounted for 13.7 percent of the $385 million in venture capital invested in the state in 2018, the most Visit www.mibiz.com

recent year for which data are available. That compared to just 2.8 percent in 2015 that went to underrepresented groups, according to the Michigan Venture Capital Association’s 2019 research report issued last spring. The MVCA report noted that 18 of the 140 VC-backed companies operating in Michigan in 2018 were led by a racial minority, an increase of 125 percent from five years earlier when the association first began tracking diversity data. Anku attributes racial, ethnic and gender disparities in venture capital investing to “a historical systemic issue” and the history of exclusion in the U.S. that combined in an industry where players tend to have long built familiarity and professional networks with people like themselves. Oftentimes in an industry largely dominated by white males, venture capital investors look at a prospective deal brought to their attention by their peers. “If you’re in Silicon Valley and you have mostly white males that for the last 30 years have a community, have relationships — no racism or exclusion in that equation, just literally the relationships — you’re going to have that disparity there,” Anku said. “That’s why we are here and, I think, we’re going to be an example. We are here to break down those barriers and to make those relationships happen, and in an ideal world, see the transformation we want to see.”

Being intentional In West Michigan, Jones at the Urban League views the relative lack of venture capital that has flowed to firms owned by people of color as “the historic homogeneous nature of the culture here in Grand Rapids.” West Michigan investors historically have not had ties to minority communities, he said. “Like many cities and communities throughout the country, there’s a level of comfort that you have working with people that look like you,” Jones said. “If you’re not intentional about trying to engage in developing a relationship in different communities, you’re going to get what you get, and that’s been the case for our beloved city. “This speaks to intentionality and it speaks to really the aspirational impact of wanting to be something different, and really wanting to be a city that embraces inclusion and equity and sees it for the value that it really brings. Because the more that we can really do to be a city that is seen as equitable and inclusive and has opportunity for more people, the better it is for all involved.” That change can attract to West Michigan more business and industry, more entrepreneurs and venture capital, and more coveted young talent “that has energy and ideas,” Jones said. How many companies the venture fund ultimately backs is hard to say right now, Klohs said. Once the venture capital fund begins operating and investing, Welch expects to see steady a deal flow. “I think where we might be surprised is not in the lack of deal flow but really the abundance of opportunity,” Welch said. “We just want to make sure … our systems and how we vet the deals are in such a way where we can get some good exits happening and some strong exits.” If successful exits occur, partners in the New Community Transformation Fund expect it to lead to larger, successor funds in the future. “We’re very optimistic and hopeful that we will be able to have successor funds off of the success of the first one,” Anku said. Visit www.mibiz.com

Grand Angels raises $11.7 million for third VC fund By MARK SANCHEZ | MiBiz msanchez@mibiz.com GRAND RAPIDS — After completing fundraising at the end of 2019, Grand Angels has a couple of new deals in the works for its latest venture capital fund. The Grand Rapids-based investment firm closed Dec. 31 on $11.7 million raised from nearly 100 investors for Grand Angels Venture Fund III LLC. Since launching in August 2018, the fund has co-invested in five deals, four of which were with companies based in Michigan, plus one in Chicago. Managing Director Paul D’Amato expects two more deals to close in the coming weeks. “We’re plugg ing away,” D’A mato told MiBiz. Grand Angels consists of a West Michigan angel investing network and three affiliated groups in Kalamazoo, Detroit and Flint, plus three venture capital funds. The two prior Grand Angels venture capital funds combined invested in 33 companies through initial and follow-on rounds made with other funds. In Fund III, Grand Angels initially targeted raising $15 million. The amount netted still represented “a substantial increase over our last fund,” D’Amato said. “It’s a successful outc o m e a n d w e ’r e v e r y D’Amato happy w it h it,” he sa id. “This will definitely meet our requirements for the fund and let us still support a lot of these companies in the area here.” Fund III will invest in about 20 companies with the goal that three-quarters of them will be based in Michigan and the rest in adjacent or nearby states. Grand Angels invests mostly in Series A rounds in companies involved in advanced manufacturing, advanced agriculture, life sciences and software. About half of the investors in Fund III put money into the prior two venture capital funds or have been involved with Grand Angels as an angel investor, D’Amato said. Many of the individual investors are from West Michigan. “One of the interesting things about our

fund is how much local support we have. This is a modest-sized fund, but we have almost a hundred investors,” he said. “So, really this is a fund supported by individuals in the community that are interested in building companies in this ecosystem. It’s a really nice show of support from a lot of our members and past investors.” Grand Angels Fund III also attracted a few institutional investors through family offices and professional investment groups, D’Amato added.

Building a network While the lengthy fundraising process for a fund is never easy, D’Amato finds that people who have the net worth to get involved in venture capital are more open today to conversations about putting a portion of their portfolio into an alternative investment class. “People seem interested in taking some money out of the public market and putting it into direct private investments,” he said. “The public market is high and so some diversification makes sense.” As Grand Angels Venture Fund III scouts Michigan and nearby states for further investments, there’s no lack of prospects to support good deal flow, D’Amato said. He looks at about 400 deals a year and will probably examine 500 prospects in 2020 as Grand Angels reaches into surrounding states. “I’m really excited about the companies and the technologies we’re seeing here in Michigan. There’s amazing research coming out of the University of Michigan, Michigan State and other universities, and I just love the deals we see and the deals we see in our portfolio already,” D’Amato said. Most recent ly, Gra nd A ngels Venture Fund III led a $2 million, later-stage financing round that closed Nov. 5 for Portageba sed Micro Laser Assisted Machining Technologies LLC. Like all of Grand Angels’ deals, the MicroLAM investment involved a syndicate of funds “committed to the long-term success of the company” that will participate in follow-on financing rounds, D’Amato said. “Our fund really leverages the investment of a lot of people,” D’Amato said. “We’re interested

in building a syndicate that will let the portfolio company be successful in the future and have future financing already wired.”

Active market Micro-LAM was among three West Michigan companies that secured a collective $7 million in later-stage venture capital funding during the fourth quarter, as investments in Michigan reached a new high. Locally, Grand Rapids-based VNN Inc., which provides hundreds of high schools across the country with a web-based platform to distribute content on sports programs, closed Nov. 11 on a $4 million round, according to a quarterly report from Pitchbook.com and the National Venture Capital Association. Grand Rapidsbased MessageWrap LLC, a maker of antimicrobial conveyor belts for store checkout lanes that carry advertising, closed Dec. 3 on a $1 million investment. Fourth quarter venture capital investments across Michigan totaled $147.1 million in 25 deals, with most of the funding going to firms based in the Detroit and Ann Arbor areas, according to Pitchbook. For all of 2019, Michigan saw 115 deals for $771.6 million. That compares to 126 deals for $458.4 million in 2018. The amount invested in the state in 2019 topped the previous best year in 2015, when venture capital firms invested $507.3 million in 135 deals. The NVCA and Pitchbook findings show that Michigan continues to make progress in building a broader venture capital industry, said Ara Topouzian, executive director of the Michigan Venture Capital Association. “2019 was a great year. We all thought it would be a great year. I think we just keep continuing to build on the momentum that Michigan has,” Topouzian said. “We’re a great state for innovation. More people need to realize that.” Nationwide, venture capital investments in 2019 totaled $136.5 billion across 10,777 deals. The amount is off slightly from the $140.2 billion in 10,542 deals in 2018, the best year ever for the U.S. venture capital industry, but marks the second year in a row that the dollar value nationally topped $100 billion.

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MiBiz / FEBRUARY 3, 2020

FINANCE

SEC considers modernizing accredited investor definition By MARK SANCHEZ | MiBiz msanchez@mibiz.com

f federal regulators want to increase the flow of capital to startups across the U.S., Tim Parker suggests they consider creating a new class of investor. The president of Grand Rapids-based Grand Angels, Parker envisions creating a form of “junior investor” who could get involved in an investment group, invest in companies at smaller amounts, and learn alongside seasoned investors. Grand Angels is structured “to be able to help people like that who want to come into this space” and can essentially train new accredited investors in the private capital markets, he said. Parker offered the idea in comments he submitted to the U.S. Securities and Exchange Commission, which has proposed altering the decades-old federal definition of an accredited investor to broaden the pool of people who can participate in private capital markets. “I’m a fan of changing those requirements and making this class of investing more accessible to more people,” Parker told MiBiz. “I would like to add to (the proposed new definition) and have an ability for people to participate at a lower level of investment, as long as they’re working with a group that could educate them and mentor them so that they’ll aspire as their career and as their net worth grows to go deeper into early-stage investing.” In the proposal, the SEC wants to go beyond the long-held definition that uses financial thresholds to qualify accredited investors. The SEC’s proposed language would enable people to meet the definition if they have the knowledge, expertise and sophistication, but not necessarily the income or accumulated wealth required currently. For example, by allowing individuals with

certain professional certifications to become accredited investors, federal regulators hope to create more investors who can participate in private capital placements, either by investing directly or as part of an investment fund. Parker, who also serves on the board for the Center for American Entrepreneurism in Washington, D.C., considers the proposal a “step in the right direction” that can expand and diversify the investor pool. “It brings more capital to the table, (and) it brings more expertise to make decisions and to mentor and support the scaling of these companies,” he said. Grand Angels manages three venture capital funds, plus angel investing groups in Grand Rapids, Kalamazoo, Detroit and Flint that have 105 members combined.

Expanding categories Under present SEC regulations, individuals who want to become an accredited investor must have a net worth of at least $1 million, minus their primary residence, or an annual income of at least $200,000 in each of the two prior years, or $300,000 combined if married. The regulations are designed to protect investors by ensuring they have the financial sophistication to analyze investment opportunities and understand the inherent risks of investing in private capital markets, and that they can handle any resulting losses. The SEC proposal leaves the existing financial thresholds intact and would modernize the rule by adding new categories under which an individual could become an accredited investor, such as holding “certain professional certifications and designations” or “other credentials issued by an accredited educational institution.”

You’ve felt it. The Lakeshore has shared in and been shaped by the Laker Effect. Many of our students live and work here, along the water. They are its analysts and engineers, its biochemists and health professionals, its leaders in business and of community. Here on the shores of The Big Lake you can feel the power of what can be.

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FEBRUARY 3, 2020 / MiBiz

T H E C A M PA I G N F O R G R A N D VA L L E Y S TAT E U N I V E R S I T Y

Parker

Crawford

Gross

The SEC also would add a new category for a person who is a “knowledgeable employee” at a private investment fund, as well categories for family offices with at least $5 million in assets under management and Native American tribes owning investments of $5 million or more. The proposal is an approach that attorney Justin Crawford, a partner at the Kalamazoo office of Honigman Miller Schwartz and Cohn LLP, endorses for the potential to broaden the investor pool. The present accredited investor definition was adopted in the 1980s, well before the emergence of the information age and the internet, said Crawford, who works with companies raising capital. “If you consider the increased availability of information and technology advances that have occurred since then, it makes sense to expand the definition in certain ways,” he said. “I view the rule as a positive development and update. It primarily updates the current accredited investor definition to reflect current societal and market reality when you look at it.”

‘Highly desirable’ The SEC did not propose raising the financial thresholds for an accredited investor. That could have defeated the SEC’s intent and decreased the pool of eligible investors, Crawford said. As written, “I think it will increase the pool of qualified investors and allow companies and startups and funds more flexibility in terms of who they can take on,” Crawford said. “While there’s some risks with that, there’s also the potential upside with the high technology and venture-backed companies. This expanded group of people can share, possibly, in that expanded upside. “In Michigan, it’s harder to raise money than it is in Silicon Valley or Boston, so if we can expand that pool of qualifying investors yet still provide a level of protection (for investors) that’s appropriate, I’m all for it and I think the rule as proposed would appear to accomplish that. From my clients’ perspective, a broadened pool of qualifying and accredited investors is highly desirable.” Michael Gross, managing director at venture capital firm Beringea in Farmington Hills and chairman of the Michigan Venture Capital Association, believes the present accredited investor definition that’s based on an individual’s wealth and income is “too narrow.” Gross likes that the SEC proposed keeping those thresholds and would add provisions that allow people who can show a sophistication through a professional certification, experience and skills to become an accredited investor. “The carve outs that are proposed are very well done and accurate to open up the private capital markets to another set of very sophisticated individuals who do have the knowledge to appropriately analyze those investments that put their capital at risk,” he said. “At the end of the day, it will open up the access to capital for emerging private companies which are so critical to our entrepreneurial ecosystem in the state.” The SEC proposal comes as venture capital firms and angel groups see more interest from prospective investors who want to get involved in either field as part of their investment portfolio, Gross said, “and this will be a pathway for the right ones to be able to invest.” Parker said he looks at the SEC proposal as a way for organizations such as Grand Angels to

Cassady

Mansberger

bring aboard the “next generation” of younger investors who are “just as capable as others” but are early in their careers and do not meet the present financial thresholds. “We want to be able to bring in more people because it makes us make better decisions,” he said.

Ensuring protection The SEC issued the proposed rule change Dec. 18. Publication of the proposal Jan. 20 in the Federal Register triggered a 60-day public comment period. Many of the public comments submitted as of last week supported the rule change, although some did mention the need to ensure investor protections. One of the comments submitted to the SEC noted that “financial scams, elder fraud, and Ponzi schemes are all too common” in private offerings made under federal Regulation D. Some of the comments urged the SEC to look at putting more investor protections in place if it wants to broaden the definition of accredited investors. John Cassady, chief investment officer at Red Cedar Investment Management LLC in Grand Rapids, sees the need to update and modernize the existing federal definition and expand the investor base, although concerns about the level of investor protections remain. “By its very nature, there’s not as much disclosure in the private markets. That’s one thing to keep in mind if you’re going to open this to investors from all walks of life,” Cassady said. “That could cause some issues. We’ll see how this all works out. Hopefully, there’s not any issues down the road.” Lucas Mansberger, senior manager selection analyst and investment strategist at Greenleaf Trust in Kalamazoo, notes the “very strong” divergence in public comments to the SEC between the investment industry and investor advocates and protection organizations. When people are moving from public to private capital markets that have less oversight, “we view that it’s much more likely that abuses will occur,” Mansberger said. “Our stance is that we believe investor protections are there for a reason and that in general, the idea of significantly expanding investor access to private alternatives without providing any additional disclosure requirements for private offerings or changing other investor protections in a way that benefits and protects investors is not necessarily a prudent idea,” he said. Mansberger does agree that an asset or income test “is no guarantee” of an investor’s financial sophistication.

More analysis needed? While the SEC proposes significant changes to the accredited investor definition and speculates on the possible effects for capital formation, it does not “talk at all about whether or not private market investing, as a whole, has not been favorable for investors in this class,” Mansberger said. From that perspective, “there’s a dearth of analysis, generally, from the SEC,” he said. “This goes to the point that even among sophisticated, professional investors with experience in private alternatives, there’s a divergence of opinion as to which strategies, which areas of the market are actually beneficial for investors to invest in, and in a situation like that where there is this huge divergence of opinion and there is a dearth of regulatory oversight, one should tread warily,” Mansberger said. Visit www.mibiz.com

“There’s a ton of handwringing about declining hunting and fishing numbers and there’s a lot of concern about that. (But) there is no shortage of people going outside to recreate. … We’re wringing our hands on one end, and I think the trick is, we’re not grasping and taking advantage of the opportunities that those changing numbers also present.” According to a Michigan Technological University study, the number of hunters in Michigan could plummet in the coming decades as fewer people pick up the sport and as existing participants age out. COURTESY PHOTO: MICHIGAN DNR

MIBIZ DEEP DIVE /

OUTDOOR RECREATION

FIRST OF A 3-PART SERIES

‘A NEW NORMAL’ M

Declining sportsmen’s dollars upend funding model for nature conservation, outdoor recreation By JOE BOOMGAARD | MiBiz jboomgaard@mibiz.com

ichigan’s outdoor recreation industry of today looks much differently than it did a generation ago. In an industry long dominated by the traditional hook-and-bullet pursuits, hunting and fishing participation peaked years ago in the state and has been slowly eroding ever since, mirroring national trends. At the same time, “non-consumptive sports” — hiking, cycling, bird watching and cross-country skiing and the like — that take advantage of Michigan’s natural attributes have grown in popularity, a reflection of a wide variety of societal, cultural and economic changes, according to researchers who track the sector. The problem: The decades-old system that STEINMAN enables many forms of outdoor recreation via the state Department of Natural Resources largely has not evolved. The broken national funding model is built on sportsmen’s license fees and federal excise tax revenues on their equipment. TROTTER In Michigan, sportsmen and women help form a $11.2 billion industry, and pay millions in user fees for the privilege of pursuing their passions. However, the same cannot be said about the fastest growing group of participants in outdoor recreation, the Visit www.mibiz.com

MICHIGAN DEPARTMENT OF NATURAL RESOURCES BUDGET (2019-2020 fiscal year) FUNDING SOURCES

Interdepartmental grants or transfers

$197,200

Federal

$75,501,200

Private

$7,431,600

Restricted

$308,570,400

General Fund Total

$46,985,000 $438,685,400

(Full-time equivalents: 2,340)

non-consumptive users whose “quiet” pursuits also directly benefit from sportsmen’s dollars. Without a new economic model, the continued erosion in the numbers of hunters and anglers also threatens the state’s ability to access federal conservation funding, since the formula that apportions those dollars is tied to a state’s license sales and its ability to provide matching funds. The effect of any lost conservation funding will be felt beyond hunters and anglers because those dollars also support the management of nongame species and habitat improvement programs, putting the state’s ability to maintain the quality of its natural resources at risk. While sportsmen’s groups have in the past advocated raising license fees as a potential solution, the overwhelming evidence suggests a fundamental rethinking will be necessary to fix the broken funding model on a national basis. One

change seems likely: As the base of payers funding conservation broadens, hunters and anglers will need to get used to having other voices at the decision-making table. “What we’re doing right now is not sustainable,” said Alan Steinman, the director of Grand Valley State University’s Robert B. Annis Water Resources Institute in Muskegon. “The state supposedly values its outdoor recreation so highly. We need to figure out how to preserve it and maintain it for the future and current generations.” The effects of the unsustainable funding model are already being felt in Michigan and elsewhere. The Michigan DNR ceased all hiring and cancelled five wildlife projects last year, as Crain’s Detroit Business reported in October. Similarly, the Wisconsin Department of Natural Resources also stopped hiring and scaled back management projects, while the Colorado Parks and Wildlife eliminated “tens of millions of dollars” in expenses and cut various programs, according to reports.

Boomers age out As the population of hunters and anglers declines, a demographic shift is putting new pressures on state fish and wildlife programs and their ability to maintain the quality of the natural resources they’re charged with protecting. That’s because state fish and game departments are tied to federal funding models developed in the 1930s and 1950s that govern how the federal government apportions excise taxes collected on range of items, including firearms, ammunition, archery gear, boats and fishing tackle. According to research from the Association for Fish & Wildlife Agencies, state natural resources departments derive on average about

— BRAD GARMON

DIRECTOR OF THE MICHIGAN OFFICE OF OUTDOOR RECREATION INDUSTRY

60 percent of their funding directly from hunting and fishing licenses or indirectly via federal excise taxes on sporting equipment. “Hunters, anglers and trappers have always been proud to pay for almost the entirety of fish and wildlife conservation here in Michigan,” said Amy Trotter, executive director of Michigan United Conservation Clubs, the state’s largest conservation organization. “Between our license fees and the federal excise taxes on sportsmen’s gear, we are pretty much funding a lot of the DNR’s wildlife and fisheries division, as well as a good portion of the law division,” Trotter said. “That has always historically been enough.” But the shift away from hunting and fishing suggests basing conservation solely on the backs of those participants may not provide enough revenue to support related programs and nonconsumptive outdoor recreational uses for much longer. According to a pair of studies involving researchers at Houghton-based Michigan Technological University, the aging of the Baby Boomer generation poses a large threat to the sustainability of the existing funding model for outdoor recreation. Under worst-case scenarios, researchers determined that by 2035, the number of in-state anglers could fall 11.3 percent while the hunting population could plummet by onethird when compared to their peaks in 2009 and 1998, respectively. The Michigan Tech reports found that hunting and fishing participants will continue to skew older as the Baby Boomer bubble retires and then quickly ages out of the sports: Participation in fishing “declines dramatically after age 67,” while deer hunting participation “drop(s) off precipitously” around age 70 for males. “The North American Model of wildlife management was constructed to govern the public ownership of wildlife and serve traditional consumptive users who bore the responsibility of funding state agencies through hunting, fishing, and trapping license fees,” Michigan Tech and DNR researchers wrote in their 2016 report. “However, societal changes throughout the 21st century have altered the social context under which most citizens live, consequently leading to decreasing participation in hunting, fishing, and many outdoor recreational activities. “The response by many state agencies has been to focus resources on recruitment and retention efforts to try and boost participation rates. Our research suggests that it is unlikely

CONTINUED ON PAGE 18 MiBiz / FEBRUARY 3, 2020

MIBIZ DEEP DIVE /

OUTDOOR RECREATION

MICHIGAN’S HUNTING AND FISHING INDUSTRY, BY THE NUMBERS

FIRST OF A 3-PART SERIES

CONTINUED FROM PAGE 17 these efforts will make up for the projected declines in hunter numbers during the next 20 years.”

Shifting mix While the overall ranks of people participating in outdoor recreation continues to grow, participants in the non-consumptive sports lack direct and indirect funding mechanisms to support nature conservation. Unlike hunters and anglers, hikers and bird watchers pay no license fee to participate in their pursuits. That’s why participants in many forms of outdoor recreation, including the non-consumptive activities that are growing in popularity among Michigan residents, could feel the effects if sportsmen-related funding continues to dwindle. While fewer people hunt or fish, 63 percent of the state’s residents participate annually in outdoor recreation, higher than the national average of 50 percent for people age 6 and older, according to the Outdoor Industry Association. In the 2018 Michigan Statewide Comprehensive Outdoor Recreation Plan prepared for the DNR, Public Sector Consultants determined participation to be highest for passive activities such as relaxing outdoors or walking outdoors, which about threequarters of residents said they enjoyed. Among more active types of participation, 67 percent of respondents said they visited parks and playgrounds; 36 percent participated in wildlife viewing and/or photography, including bird watching; 34 percent went hiking or backpacking; and 32 percent went canoeing, kayaking, stand-up paddle boarding, or windsurfing. Research on trends in outdoor recreation suggests that

non-consumptive “nature-based” activities will continue to grow in popularity for the next several decades, as traditional fishing and hunting stays flat on a per capita basis or declines. In a seminal 2012 report by scientists at the U.S. Forest Service that projected outdoor recreation trends out to the year 2060, researchers noted a changing mix of preferences shifting toward growth in observational activities, “especially viewing, photographing and otherwise appreciating nature.” Scientist H. Ken Cordell wrote in the Forest Service report: “What people now choose to do for outdoor recreation is very noticeably different from choices made by and available to previous generations of Americans. The mix of outdoor activities and their relative popularity are different now than at any time in the past. For example, fishing and hunting are often thought of as widely popular, ‘traditional’ outdoor activities. While still somewhat popular, participation in these activities generally has been declining, and they are being replaced by other activities, such as wildlife or bird watching and photography.”

User fee model Despite the changing landscape in outdoor recreation, hunters and anglers still contributed an estimated $11.2 billion in economic activity in Michigan and account for 171,000 jobs, according to a 2019 study that researchers at the Michigan State University Eli Broad College of Business compiled for MUCC. A sprawling 20-county region in south-central Michigan that includes Kent, Newaygo, Ionia, Mecosta, Montcalm and Barry counties derived $3.2 billion in economic activity from hunting and fishing, while the economic impact in a five-county region along Lake Michigan from Muskegon

Michigan hunting license sales

COURTESY PHOTO: MICHIGAN DNR

$11.2 billion

$1 million

SOURCE: MSU ELI BROAD COLLEGE OF BUSINESS STUDY FOR MUCC

to the border with Indiana reached $1 billion, the study’s authors wrote. While their numbers have declined, hunters and anglers continue to be a major revenue source for the Department of Natural Resources, the agency charged with overseeing the management of the state’s fisheries, wildlife, parks, trails and other programs. DNR Public Information Officer Ed Golder provided various agency data and research for this report, but did not return multiple messages requesting an interview with department executives and with Director Daniel Eichinger. For the 2020 fiscal year, the largest single revenue source in the DNR’s budget came from hunting and fishing licenses, which amount to about 20 percent of the agency’s overall funding. Federal excise taxes related to the sale of hunting and fishing equipment

$30 MILLION $25 MILLION

$15 MILLION $10 MILLION $5 MILLION $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

FEBRUARY 3, 2020 / MiBiz

$15 MILLION

$12 MILLION

$9 MILLION

$6 MILLION

$3 MILLION

$0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

account for another 7 percent of the agency’s $438.7 million budget. Just 11 percent of the budget comes from state General Fund/General Purpose dollars. Sportsmen’s license fees are the primary source of revenue for the Game and Fish Protection Fund, a restricted fund that pays for wildlife and fisheries management — ensuring game and non-game populations are healthy and in-check — and the enforcement of fish and game laws. Without new funding mechanisms, fewer hunters and anglers will translate into a declining budget for the DNR at a time when nature-based recreational activities are projected to become increasingly popular over the next generation. Trotter of MUCC also expressed concern that one day the state will not generate enough money from license fees to meet the matching funds required to get its full allocation of federal funding. For every dollar that Michigan raises, it receives $3 in federal conservation funds, including those derived from excise taxes on hunting, fishing and boating equipment, up to the maximum allocation. “If license dollars continue to decline, there may be a day when we leave money on the table — not that the federal government will chop it, but we can’t raise the state share to receive all the federal dollars we qualify for,” Trotter said. “We’re not there yet, but those years could be approaching. … Someday that might be a reality we face.”

Filling the funnel TOTAL (INCLUDES SEQUESTERED FUNDS)

TOTAL (INCLUDES SEQUESTERED FUNDS)

$20 MILLION

DINGELL-JOHNSON SPORT FISH RESTORATION ACT The Dingell-Johnson Sport Fish Restoration Act of 1950 collects excise taxes and import duties on sport fishing tackle, fish finders, electric trolling motors and boats, as well as motorboat and small engine fuel taxes. The federal funds go back to states for fish habitat, fish stocking, fisheries research, fish population studies, and public boating access infrastructure. Here’s a look at the funding the Michigan DNR received under the act in the past decade. SOURCE: U.S. FISH AND WILDLIFE SERVICE

jobs

Every spent on hunting and fishing creates nearly 20 jobs, more than in any other Great Lakes state.

PITTMAN-ROBERTSON WILDLIFE RESTORATION ACT FUNDING The Pittman-Robertson Wildlife Restoration Act of 1937 collects excise taxes on various firearms, ammunition, bows and archery equipment. The federal funds are distributed to states for wildlife restoration and hunter education and hunter safety activities. Here’s a look at the funding the Michigan DNR received under the act in the past decade. SOURCE: U.S. FISH AND WILDLIFE SERVICE

171,000

economic activity ($8.9 billion from hunting, $2.3 billion from fishing)

How to fix that broken funding model remains an open question for advocates, as well as scientists and natural resource managers who help ensure the quality of outdoor recreation experiences for the state’s residents. For their part, hunting and angling groups are grappling with the need to broaden the base of payers who provide funding for fisheries and wildlife conservation. “My members are really still struggling with how to engage the nonconsumptive, quiet sports,” Trotter said. “Part of our pride in paying for

2013

783,672

2014

732,163

2015

719,552

2016

699,233

2017

680,254

2018

658,391

SOURCE: MICHIGAN DNR

Michigan fishing license sales 2013

1,163,476

2014

1,105,708

2015

1,116,469

2016

1,127,651

2017

1,134,421

2018

1,105,345

SOURCE: MICHIGAN DNR

(conservation) is also the ability to have a strong voice in how things are managed. When you invite more people to the table, your voice may or may not be as strong. We’re still struggling with that. I don’t think any ideas are off the table.” The DNR is unlikely to raise sufficient future revenues on the backs of sportsmen and women through license fee increases, which have been a tough sell with the state Legislature. The most recent fee increase took place in 2013 after a protracted legislative battle and brought in about $20 million in new revenue, according to reports at that time. Before that, the most recent license fee adjustment took place in 1997. Trotter said hunters could be willing to pay more, and are unlikely to be dissuaded from participating by higher license fees. “When you look at traditional economic trends, usually a higher price means lower demand, but pretty much if you’re a hunter, you’re a hunter,” she said. “You’re going to continue to do that as long as you’re able.” For now, MUCC has focused on filling the top of the funnel with new participants, particularly new hunters. Along those lines, the group worked with the DNR to expand opportunities for children to get involved in the sport. The Mentored Youth Hunting Program offers a $7.50 package license that allows children under the age of 10 to hunt for turkey, deer and small game; trap furbearers; and fish for any species. Participants must hunt with a parent or another adult and do not need to have completed a hunter safety course. Meanwhile, the Apprentice Hunting Program pairs youths age 10 or older with an accompanying adult. “The idea there is to give them the bug while they’re young and hopefully get them hooked on participating,” Trotter said. “We’ve made lots of changes over the years, and it will be interesting to see long term how those pan out.” Another area of focus for MUCC is on diversifying the existing hunting and fishing community by finding ways to “make a fisherman a hunter,” for example. “Maybe you’re not getting more people, but they’re more diversified in their activities,” Trotter said. “From a Visit www.mibiz.com

UPPER PENINSULA

$681 MILLION

NORTH CENTRAL

$960 MILLION

ECONOMIC IMPACT OF HUNTING & FISHING

NORTHEAST

$451 MILLION

NORTHWEST

$440 MILLION

SOUTHEAST

SOUTHWEST

$3.7 BILLION

$1 BILLION

opportunities to get more general public support and tax dollars for management issues of greatest concern, such as disease and invasive species. About 10 percent of the DNR’s 2020 budget comes from the state General Fund, including a $2.3 million appropriation for the wildlife division to support chronic wasting disease (CWD) research in deer and an annual $5 million appropriation for invasive species prevention and control. “There’s not a person in Michigan that doesn’t get pretty excited about seeing deer,” Trotter said. “A disease like chronic wasting disease or tuberculosis that can impact the population — we believe the management of those diseases, the surveillance, the research should be borne by everybody, not just hunters. As well as for invasive species. … Those are things we believe society should be helping pay for.”

SOUTH CENTRAL

$3.2 BILLION

funding standpoint, one person buying two licenses or two people buying one license, it’s pretty much the same revenue. I think you’ll see, in the future, a lot more of that cross marketing and encouraging people to try different things rather than specialize in just one activity.” Even so, Trotter recognizes that tactic coupled with attracting and retaining youth hunters is unlikely to provide enough new participants to make up for the Baby Boomers aging out of the sport. “At the end of the day, there’s going to eventually be a new normal. The Boomer population is that bubble that we’re seeing age out,” Trotter said. “There will eventually be a new normal reset.”

New models Policy watchers say broadening the state’s Recreation Passport or adopting a similar model for other forms of recreation could provide sustainable funding to support resource conservation and management for the increasingly popular “nature-based” activities like birding, wildlife photography or just observing nature. The Recreation Passport gives drivers access to state parks and boating access sites by paying an additional fee on their vehicle registrations. GVSU’s Steinman said expanding the model to support additional forms of outdoor recreation could make sense, but he questions whether Lansing has the political will to consider new revenue options. “When you’re looking at the funding streams, in order to maintain these kinds of recreational activities

SOURCE: MUCC

— on which a lot of Michigan’s outdoors has historically been based — we’re going to need to be more creative than we’ve been in the past,” Steinman said. The move to broaden the base of outdoor recreation participants who pay for conservation could make sense: Taken as a whole, the outdoor recreation industry in Michigan generates $26.6 billion in consumer spending annually and $7.5 billion in wages and salaries, contributing to 232,000 direct jobs, according to the Outdoor Industry Association. Leveraging that economic power formed the basis of the Office of Outdoor Recreation Industry’s creation last year within the DNR and in partnership with the Michigan Economic Development Corp. (MEDC). Aside from establishing new funding models, driving awareness about the industry in Michigan and the outdoor recreation opportunities that can be found in the state could help fill the void from Baby Boomers aging out of hunting and fishing, said Brad Garmon, the director of the Office of Outdoor Recreation Industry. “There’s a ton of hand-wringing about declining hunting and fishing numbers and there’s a lot of concern about that,” Garmon said. “(But) there is no shortage of people going outside to recreate. In fact, there are a lot of places where it’s growing so fast that we can’t keep up with it and use pressure is incredible. We’re wringing our hands on one end, and I think the trick is, we’re not grasping and taking advantage of the opportunities that those changing numbers also present.” For her part, Trotter at MUCC cited

Finding partners Trotter also believes that partnerships with various nonprofits or the private sector will play a more important role in funding conservation and management efforts in the years ahead. “The DNR can’t be the only one working on habitat. They’re going to have to do more things to rely on partner groups, whether it’s some of the species-specific groups like Pheasants Forever or Ducks Unlimited, or whether it’s groups with a lot of members like MUCC,” she said. Those partnerships could include programs such as MUCC’s lauded “On The Ground” initiative that leverages grant funding from the DNR and the club’s access to member volunteers. Through the initiative, MUCC partners with various sportsmen’s groups, media and businesses for volunteers who work directly on habitat programs. In the current fiscal year, the projects have included native wildlife and pollinator habitat improvement at the Waterloo Recreation Area in Chelsea, native shrub planting in the Traverse City State Forest and invasive species removal at Rose Lake State Game Area in East Lansing. “These are partnership models where we’re co-funding staff and a program to accomplish the same goals that maybe used to be accomplished by the agency itself,” Trotter said. “I think we’re going to see a lot more collaborations in those efforts going into the future. It’s just a different model of conservation. “For our members, they’re not open to all partnerships, but certainly where there’s the focus on the resource and habitat, that’s the area we can all get together and work together.”

THE DEEP DIVE: Outdoor Recreation Michigan is the Great Lakes State, a Water Wonderland, the Midwest’s playground. This three-part report will explore the importance of the outdoor recreation industry to Michigan, emerging threats and the opportunities that abound for communities and companies.

n PART 2: FEB. 17 The state of Michigan is working with the private sector to recognize the important role outdoor recreation plays in economic development, including talent and business attraction, placemaking and quality of life.

n PART 1: FEB. 3 A massive demographic shift and the declining popularity of hunting and fishing threaten to undermine the economic model that for generations has supported fisheries and wildlife conservation in Michigan.

n PART 3: MARCH 2 A wide variety of companies spanning a range of diverse industry sectors make up Michigan’s $26.6 billion outdoor recreation industry.

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Although it now highlights more urban destinations, the Pure Michigan campaign has been important for drawing attention and awareness to Michigan’s outdoor recreation industry. COURTESY IMAGES

Pure Michigan drives awareness of Michigan’s outdoor rec opportunities By MARK SANCHEZ | MiBiz msanchez@mibiz.com

utdoor recreation has been a staple of the Pure Michigan campaign that began more than a decade ago to promote the state as a travel destination. Picturesque images of majestic sand dunes, sparkling beaches and trout streams, and of hiking, biking, fishing and other outdoor activities have been commonplace among the Pure Michigan ads that touted the state in markets across the country. They remain a large element of the campaign today, although the state agency responsible for promoting Michigan’s $4.2 billion tourism industry has made pivots in recent years and broadened the Pure Michigan campaign. Travel Michigan, an arm of the Michigan Economic Development Corp., of late has put more emphasis on promoting urban destinations, particularly Detroit and Grand Rapids, and attractions in cities such as culinary experiences, craft breweries and distilleries, museums and art galleries, performing arts, and festivals. Those urban flavors now mix with the outdoor recreation amenities that Pure Michigan largely focused on in its early years. “We envisioned this as a challenge and goal way back when we were developing the Pure Michigan brand, that we have these tremendous natural resources,” said Da v i d L o re n z , vice president of LORENZ Travel Michigan. “We need to use them as a lure to get people to do things and to be here, and even then to our in-state residents to get out and do things. “It’s only been in recent years that we’ve put an emphasis on urban experiences as well. Initially, Pure Michigan was almost entirely nature-based and encouraged people to experience the outdoors. Then at some point, we started to realize we need to become a little more sophisticated and we needed to serve the entire state more than what we were, and because the state was changing in ways where we could start promoting places like Detroit. Then we started to mix the message and provide this more holistic outdoor and urban message.” In making that change, Travel Michigan’s intent was not to de-emphasize

outdoor recreation and destinations, but to promote the state’s urban centers as travel destinations, as well. “We realized that there were areas we weren’t serving. Our job is to serve the entire state.We needed to present the true diversity that Michigan offers and that’s what we’ve been trying to do,” Lorenz said. “Now that our cities and many of our urban areas are really rebounding and providing these really great experiences, we’ve been able to focus on the urban experience. The shopping, the dining, the culture and the overall atmosphere — all of those things.” Even with those changes in recent years, outdoors and recreation and promoting the state as a haven for outdoor enthusiasts and sportsmen will remain a lynchpin of Pure Michigan. The 2018 Michigan Statewide Comprehensive Outdoor Recreation Plan prepared for the Michigan Department of Natural Resources by Public Sector Consultants noted the role that outdoor recreation has in placemaking and in ensuring communities across the state are “desirable places to live and visit.” The report also found that 29 percent of residents use Pure Michigan information or websites to plan their outdoor recreational activities. Along those lines, one of the plan’s recommendations for the DNR included strengthening the marketing of the state’s outdoor recreation resources through the Pure Michigan campaign. As well, studies show the Pure Michigan message has proven effective in helping drive awareness around the outdoor recreation the state has to offer. An annual analysis of Pure Michigan’s effectiveness from 2018 found that the state’s “beautiful scenery,” its “excellent outdoor recreational activities,” its status as “great for boating, canoeing, kayaking, water sports,” and the “excellent fishing” were the four highest-rated aspects of the branding campaign in terms of ad awareness. “Michigan is so nature-based,” Lorenz said. “We have something for everybody, unless you’re looking for saltwater or sharks.” A separate analysis to gauge the return on investment of Pure Michigan credited the campaign with driving more than $935 million in spending on recreation by visitors in 2018. The Pure Michigan campaign has been on hold since October after Gov. Gretchen Whitmer used the line-item veto to cut funding for the 2020 fiscal year. Pending legislation in Lansing seeks to restore the $37.5 million in funding. MiBiz / FEBRUARY 3, 2020

MIBIZ DEEP DIVE /

OUTDOOR RECREATION

FIRST OF A 3-PART SERIES

Dingell: RAWA important for conservation Congresswoman Debbie Dingell, whose district includes Ann Arbor and Dearborn, has sponsored the Restoring America’s Wildlife Act to provide $1.3 billion to states and $97.5 million to tribes for dedicated conservation funding. The bill, which has bipartisan support from the Michigan congressional delegation, passed the House Natural Resources Committee 26-6 in December.

Why is the Restoring America’s Wildlife Act important to you? Every state is having a problem, and they have to create their own conservation plans. The example I use is (protecting) the monarch butterfly. We’ve brought the (Kirtland’s) warbler back in Michigan. We’ve had three billion birds disappear. Every state has its own crisis that is losing species. States know better than we do about what they need to do in their state. This (bill) empowers states to do their conservation plans and then gives them money to implement them. In committee, we lost only six Republican votes — we need to protect our natural resources.

When do you expect RAWA to move in the House, and are you optimistic about a vote in the Senate? I’m working on it — working with a number of Republicans to consider introducing it. I talked to (House Majority Leader) Steny Hoyer (D-Maryland) today about when we’d do it on the House floor. I don’t give up (on the Senate). We need to protect our natural resources. It’s good for a lot of members in their states and districts. You build a coalition to get the votes to get it done. Interview conducted and condensed by Andy Balaskovitz.

FEBRUARY 3, 2020 / MiBiz

License fees and excise taxes collected on sportsmen’s equipment currently funds the bulk of conservation programs for state fish and game agencies. A new federal bill would create a dedicated funding stream to boost money flowing into state wildlife programs. Above, Steve Hutchins holds up a Chinook salmon caught on the Manistee River last fall while Chris Schnell looks on. PHOTO: JOE BOOMGAARD

Federal bill could transform state conservation programs By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com

or decades Michigan has relied on a pair of federal laws to provide millions of dollars for wildlife and sport fishing conservation. But as declining sales of hunting and fishing licenses in Michigan and other states have sent conservation agencies scrambling to find new revenue, a bill working its way through Congress would significantly boost funding for state wildlife action plans. The Recovering America’s Wildlife Act (RAWA), sponsored by U.S. Rep. Debbie Dingell of Michigan, would be transformative by dedicating new funding for thousands of at-risk species. “With RAWA, there would be a much more significant funding source for those species of greatest conservation need that don’t have these game and fish funds to support them,” said Amy Trotter, executive director of the Michigan United Conservation Clubs. “That would be tremendous.” RAWA has 168 co-sponsors in the House, including 43 Republicans and 10 members of Michigan’s congressional delegation. It passed the House Natural Resources Committee 26-6 in December. “The Michigan delegation has been great. They’ve been very supportive of this potential new revenue source,” Trotter said. “It’s just trying to get some of those other states on board and keep pushing the ball forward on that.” The bill has garnered support from both political parties and from conservation and business groups alike. In October, Gov. Gretchen Whitmer co-signed a letter with five other Great Lakes governors urging Congress to pass RAWA. “This legislation provides a solution for one of America’s greatest threats — the decline of our fish and wildlife and their natural habitats, and what this means for people and our economy,” the governors wrote. “This groundbreaking legislation will help ensure that future generations can enjoy the same abundant fish, wildlife, and outdoor recreation opportunities that we have today.”

Historical funding For more than a half century, two federal laws in particular have provided dedicated funding for fish

and wildlife conservation. The Pittman-Robertson Wildlife Restoration Act of 1937 collects excise taxes on various firearms, ammunition, and archery equipment, while the Dingell-Johnson Sport Fish Restoration Act (named after former Michigan Congressman John Dingell, Sr.) of 1950 collects taxes on fishing and boating equipment. Revenues for hunter safety and restoration programs are distributed to states based on land area and the number of licensed hunters and anglers they have. For fiscal year 2019, Michigan received $20.2 million from Pittman-Robertson and $10.5 million from Dingell-Johnson, comprising 41 percent of the federal funds in the Michigan Department of Natural Resources’ budget. Federal revenue makes up 17 percent of the DNR’s budget, while 81 percent comes from state restricted and general funds. Michigan ranks seventh in the U.S. for the amount it receives from Dingell-Johnson, according to the DNR, landing more than $255 million since 1950 for sport fish restoration and management, public access for boating and aquatic education. Over the past five years, the law has supported habitat restoration along the Au Sable River and the experimental rearing of Atlantic Salmon in the Platte River State Fish Hatchery in Beulah. Sean Saville, campaign manager for the Alliance for America’s Fish and Wildlife, said the two federal laws are among “a ton of noteworthy federal programs” that support states, such as the 30-year-old North American Wetlands Conservation Act and the State Wildlife Grants program of 2000.

‘Game-changer’ While funding from Dingell-Johnson and PittmanRobertson can fluctuate (excise tax revenues from guns and ammunition increased during the Obama administration, for example), RAWA would significantly increase the amount of federal conservation funding directed to states and cover all non-game species. RAWA would direct $1.3 billion to states and $97.5 million to tribes for wildlife management. An August 2018 report in Audubon Magazine said the Michigan DNR’s budget for its wildlife action plan would grow from $2 million to about $31 million under RAWA.

“It would be a huge impact,” Saville said. “It would go a long way in protecting and conserving those 12,000 species of greatest conservation needs that states have identified in wildlife action plans.” In 2016, the Blue Ribbon Panel on Sustaining America’s Wildlife comprising conservation and industry members concluded that a new national funding model was needed to address declining wildlife populations in the U.S. Essentially: State and federal funding programs — a significant portion of which is based on hunting and fishing license sales and excise taxes on equipment — don’t generate nearly enough revenue to tackle states’ wildlife action plans. Funding for RAWA was previously proposed to use revenue from federal energy and mineral leases. The bill making its way through the House would come from the Treasury Department’s General Fund. A key feature of RAWA is creating a proactive approach to conservation, advocates say. Saville said some federal programs — while successful — direct funding to certain species. “It points to other needs like RAWA, which would create a dedicated, mandatory source of funding that over time could really pull the most imperiled, at-risk species out of the brink of extinction,” he said, adding that existing conservation programs address only about 5 percent of “what’s needed on the ground. That’s why RAWA is so important and such a game-changer for the conservation world.” Saville said RAWA would be complementary to Dingell-Johnson and Pittman-Robertson, which primarily fund game species programs. While funding species that haven’t had sustainable revenue sources, RAWA also would support habitat restoration that would in turn benefit game species. “It’s the rising tide raises all boats here,” Saville said. “It’s one of those once-in-a-generation, gamechanger pieces of legislation that has strong bipartisan support in Congress. It certainly has raised the profile and visibility of the need for wildlife conservation in the country.” MiBiz Editor Joe Boomgaard contributed to this report. Visit www.mibiz.com

NONPROFIT ORGANIZATIONS

More West Michigan nonprofits consolidate to drive efficiencies By JESSICA YOUNG | MiBiz jyoung@mibiz.com

flood of mergers has hit the West Michigan nonprofit sector in recent months and the trend is expected to continue as more organizations of all sizes seek efficiencies through consolidation. Last month, Grand Rapids-based organizations Heartside Ministry and Mel Trotter Ministries formally merged after a two year “shared services agreement” that combined operational functions including human resources, facilities management and information technology. “This was a very friendly merger,” Gregory Randall, executive director of Heartside Ministry, told MiBiz. “We serve the same population and the services complement each other very well.” Both organizations are located in the Heartside neighborhood of downtown Grand Rapids. The district is a developing area in the city, Sponsored by: home to hotels, museums, parks, GRAND RAPIDS the Van Andel Arena, the Grand COMMUNITY Rapids Downtown Market and FOUNDATION the new $160 million Studio Park development. Yet, the neighborhood had long experienced considerable urban decay and still has a disproportionate presence of people who are experiencing homelessness. Heartside Ministry and Mel Trotter Ministries both have missions centered around religion, housing and homelessness. The merger between the two neighborhood organizations is part of a growing trend among nonprofits to consolidate and collaborate to increase resources and efficiencies. Since 2017, Heartside Ministry — the smaller of the two organizations — has hired Mel Trotter Ministries to provide facilities and administrative help, according to Randall. “That was really a good way to get to know that the organizations, at many levels, partnered well,” he said. It became apparent that the idea of further collaboration resonated with donors and key stakeholders, he said. In December, boards of both organizations agreed that Heartside Ministry would become a division of Mel Trotter Ministries. Reducing costs, eliminating potential duplication of services and creating a greater effect for the people the agencies serve were the driving forces for the merger, Randall said. “The message from the donors has been to collaborate as much as you can,” he said. “This is a really clear signal to the donors Randall that by combining forces here, we’re going to be very efficient and we’re going to have a bigger impact in terms of helping the folks in the Heartside neighborhood.” While Randall would not disclose terms of the deal, he did say he expects Heartside Ministry to have access to greater resources as a division of Mel Trotter Ministries.

NONPROFIT SECTOR NEWS

Mel Trotter Ministries claimed more than $10 million in revenue in 2018, according to tax filings from the organization. Heartside Ministry was not previously required to file an annual return with the IRS because of its designation as a church. “When you combine resources like we’re doing here, and we have a vision that is very similar for the people we serve, I think that is only going to open up more possibilities for the kind of services we can provide,” Randall said.

More deals ahead?

Mel Trotter Ministries acquired Heartside Ministry to help Mergers were one of the top 10 nonprofit industry trends for improve efficiencies between the two nonprofits, which largely 2019, according to a July report from accounting firm BDO USA serve the same mission in Grand Rapids’ Heartside neighborLLP, which cited program expansion as a key driver of nonprofit hood. COURTESY PHOTO mergers. According to the report, 40 percent of nonprofits surveyed were nonprofit transparency — was a major development in the field. considering the possibility of entering a strategic partnership with To fund the costs of creating the new venture, called Candid, another nonprofit organization, while one in four said they might the organization raised nearly $27 million from the Bill & Melinda enter into a joint partnership with a for-profit business. Gates Foundation, Charles Stewart Mott Foundation, and William In addition to the merger of Heartside Ministry with Mel Trotter and Flora Hewlett Foundation, among others. Ministries, the last couple of months has brought a barrage of “That was such big news in the field that it prompted us to look similar deals in the region. They include: Niles, Mich.-based Big at the larger incidences of that kind of merger,” said Tori Martin, Brothers Big Sisters of Lower West Michigan merging with South director of communications and engagement for the Dorothy Bend, Ind.-based Big Brothers Big Sisters of St. Joseph County; Johnson Center for Philanthropy at Grand Valley State University. The Association for the Blind and Visually Impaired merging The Johnson Center recently released a report that included with and becoming an independent subsidiary of Mary Free Bed philanthropic collaboration and consolidation as an important Rehabilitation Hospital; and Muskegon-based industrial history trend in philanthropy in 2020. center The Heritage Museum being acquired by the larger, multiWhile the benefits to consolidation may seem many, there are site Lakeshore Museum Center. also potential pitfalls in the shifting landscape. Mergers and acquiEarlier last year, the merger of Porter Hills Presbyterian sitions may result in “fewer resources and thinkers” available to Village Inc. in Grand Rapids and Chelsea-based United Methodist solve community-wide issues, according to the report. Retirement Communities Inc. brought together the strengths of two prominent senior living nonprofits Concerns arise in the region. The combined organizaJust as in the for-profit sector, nonprofit tions serve more than 6,700 senior citilabor constraints clearly seem to be a zens annually in 22 counties across the factor in consolidation. Lower Peninsula and generate $120 milIn a 2017 report from Worldwide lion to $150 million in annual revenue. Initiatives for Grantmaker Support, a “(The merger) is really two very likenetwork of philanthropy associations sized organizations choosing intentionand support organizations, 65 percent ally to come together, not out of a dire of respondents said staffing was a chalneed, but of a desire to strengthen our lenge for their organization. ability to serve those that live with us or However, consolidation seems to be receive our services,” United Methodist an increasingly popular way for nonRetirement Communities President profits to right-size their operations and CEO Steve Fetyko told MiBiz in without endangering the programOctober. He said the merger was a way ming and services that remain central to strengthen the new collective organito their missions and the purpose of zation in order to remain independent their existence. from “larger health systems.” “It’s still a question of funding, but On an even greater scale, the it’s also a question of why have several February 2019 merger of New York City-based Foundation Center and — GREGORY RANDALL organizations doing the same thing when we could have one organization Williamsburg, Va.-based GuideStar — Executive Director of Heartside Ministry that can be more than the sum of its two giants with missions centered on parts,” Martin said. public information in philanthropy and

“We want to invest in true systemic change that gets at the root causes of inequities — the things holding people back from having a fair shot.” Carrie and Mike Kolehouse

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“The message from the donors has been to collaborate as much as you can. This is a really clear signal to the donors that by combining forces here, we’re going to be very efficient and we’re going to have a bigger impact in terms of helping the folks in the Heartside neighborhood.”

Meet our One Hundred New Philanthropists As community leaders, business owners and parents, the Kolehouses bring many perspectives to their philanthropy. They trust Grand Rapids Community Foundation to meet our region’s most pressing challenges with bold, impact-driven solutions. Learn more about how you can make an impact through philanthropy by contacting Jenine Torres at 616.454.1751 or jtorres@grfoundation.org. MiBiz / FEBRUARY 3, 2020

Q&A David Brophy Director, Center for Venture Capital and Private Equity Finance at University of Michigan Michigan’s venture capital industry made further progress in 2019 as investors put a record $771.6 million into 115 deals with state-based companies, according to Pitchbook and the National Venture Capital Association. Despite the industry’s growth, David Brophy says a lot more needs to happen to further build venture capital in Michigan to seed and grow more startups and attract more investors, particularly large institutional investors who can put money into Michiganbased funds. Brophy serves as director of the Center for Venture Capital and Private Equity Finance at the University of Michigan and is founder of the annual Midwest Growth Capital Symposium. He spoke with MiBiz about the status of venture capital in Michigan.

How do you assess the state of venture capital in Michigan today? It’s improving, but we’re still having difficulty getting institutional investments into our funds and therefore we’re still kind of limited on how far our funds go in building companies. That can be a critical point if Michigan loses the company where they have to go somewhere else to get money.

Why are some of the large investors reluctant to put money into Michigan VC funds? There might be a fear of failure and the political aspects of it. It might be that they don’t trust the quality of what’s here. It might be that we just aren’t attractive enough for them, that they think companies generated and developed in other parts of the country, notably the West Coast and so on, are better and that’s where they put the money. The defense they all have, in being fair about it, in the case of pension funds is they have pensioners, and in the case of endowments they have their own university to worry about.

Are we seeing progress on that front and in drawing in outside capital? The patterns have been changing over time. In the data, in Silicon Valley the market share (of venture capital deployed nationally) is declining. It just means other parts of the country are not only coming up with money but the requirement to move to the West Coast or to Boston or to New York is not being pressed nearly as much. The economics of starting and running a business in Ann Arbor or Grand Rapids has vastly improved relative to doing it in California, Massachusetts or any other hot spot. That should be an advantage for us.

The companies competing for those funds are not standing still. How is the competition changing? You’re playing in the big leagues. Every state in the union is trying to do the same thing and the people who are leading the league are not slowing down. But we look around and Ohio’s coming on, and Indiana’s coming on. Everybody else is doing the same thing. We started this a long, long time ago and to a certain extent, we’re losing our lead. That would be a shame if that happened.

What’s something you suggest to further grow access to venture capital in the state? Better companies, more connectivity between those companies and what’s going on in the rest of the country and the world, and set-aside funds that institutions can (partner with) so they don’t have to necessarily carry the risk on their own balance sheet, but rather dedicate some funds and put it under management.

What does a state like Michigan have going in its favor? We have great living conditions. California is turning into some kind of a swamp, depending on who you talk to, and Boston is getting jammed and New York is getting jammed, and so on. We have some of the greatest universities. Wayne State, Lawrence Tech, Michigan Tech, Western: These are not trivial educational centers. And, of course, (there’s) the University of Michigan and Michigan State. We’re pumping out smart people and pumping out very, very good technology, important technology. We’re just not capturing it. Graduation sees a race to the border, in most cases, and we should be competing hard for those people and giving them a reason to stay.

Given your long exposure to this industry, what’s something that just simply annoys you about how venture capital operates that you would like to see change? The biggest thing, and I’m sure this is human nature, is a focus on trying to turn them into rock stars and Hollywood stars, and of course the rock stars and Hollywood stars are showing up as venture capitalists now. It’s developed a cachet and a glamor that is off-putting to a lot of people because you’re supposed to be the financial partner and equity partner to the entrepreneur, and when people in general see that it’s only about money, they get turned off a little bit. It’s always hard to get public opinion on the side of the venture capitalist or the private equity person, so a greater emphasis on what we build — let me call it the rationality that we bring to valuation and venture planning and the like — I would love to see much more of that. I would love to see a little bit of humility in the venture capital community and private equity around the country and around the world.

Interview conducted and condensed by Mark Sanchez. COURTESY PHOTO

FEBRUARY 3, 2020 / MiBiz

IN THE NEWS M&A

n Easy Ice LLC, a Marquette-based commercial ice machine rental and servicing company, has been acquired by private equity firm Freeman Spogli & Co. of Los Angeles, Calif. Co-founders Mark Hangen and John Mahlmeister and the Easy Ice management team will continue to operate the company. Terms of the deal were not disclosed. Easy Ice was advised in the deal by Los Angeles-based FocalPoint Securities LLC and Austin, Texas-based law firm Queen, Saenz + Schutz PLLC. Varagon Capital Partners and Madison Capital provided debt financing. Freeman Spogli was advised by Philadelphia, Pa.-based Morgan, Lewis and Bockius LLP. Previously, Easy Ice was a portfolio company of New York-based Saratoga Investment Corp., which invested in the company in 2014 and recapitalized it in 2017. n Lowell-based eMotion Controls Co., an automation controls system integrator and software company, was acquired by Mt. Washington, Ky.based Material Handling Systems Inc., a provider of automation systems to the material handling industry. As part of the deal, eMotion Controls will become part of the Lifecycle Performance Services unit at Material Handling Systems. Terms of the deal were not disclosed. Material Handling Systems was advised on the deal by PricewaterhouseCoopers and the law firm Kirkland & Ellis LLP. n Grand Haven-based Light Corp. has acquired Most Modest, a lifestyle and accessory brand based in Stockton, Calif. The deal adds products that will help Light Corp. better compete with the increasingly residential design trends in the contract furniture industry, according to a statement. Light Corp. President Marc Langeland said the acquisition poses “a major growth opportunity” for the company as it looks to break into the residential and direct-to-consumer market. Terms of the deal were not disclosed. n Wayne, Pa.-based private equity firm Guardian Capital Partners has partnered with the executive management team at Belding-based Flat River Group LLC to acquire the company. Flat River Group, an e-commerce products distributor, offers product sourcing, inventory management and high volume direct-to-consumer drop-shipping. Flat River Group’s financial adviser was Houston-based Gulfstar Group, while Cleveland-based Jones Day acted as legal adviser. Guardian was advised on the deal by the law firm Morgan, Lewis & Bockius LLP of Philadelphia. CIBC Bank USA provided senior financing in the acquisition, while Centerfield Capital Partners provided additional financing and minority equity. n Atwater Brewery, a Detroit-based brewery with a satellite taproom in Grand Rapids, has been acquired by Chicago-based Molson Coors Beverage Co. (NYSE: TAP). As part of the deal, Atwater will join Tenth and Blake Beer Co. division of Molson Coors, which owns and operates a range of craft breweries across the country. Terms of the deal, which requires various regulatory approvals, were not disclosed. Atwater was advised on the deal by Arlington Capital Advisors. n Parchment-based Advia Credit Union will pick up nearly 3,500 members with the planned merger involving a small credit union in Southeastern Michigan. The deal between Advia Credit Union and Riverview Community Credit Union in Saint Clair could close in the second quarter. The deal is pending approvals from regulators and Riverview Community members, who will vote on the proposal this month. Riverview Community Credit Union has a single office in Saint Clair with 3,479 members and $30.3 million in total assets as of Sept. 30, 2019, according to its most recent quarterly financial report to federal regulators.

EXPANSION

n Cologne, Germany-based TÜV Rheinland Group plans to open a new 3,000-square-foot furniture testing facility at 3650 Broadmoor Ave. in Kentwood. The company, which offers testing, inspection and certification services, made the “strategic decision” to locate the facility in West Michigan because of the proximity to the Business and Institutional Furniture Manufacturers Association. TÜV

Rheinland expects to open the testing lab on March 5. n Shelby-based Peterson Farms Inc., a family-owned fruit processor, is investing $22 million in an expansion it expects could result in the creation of 54 jobs, according to a statement. The expansion will include an additional 35,536 square feet of production space, which will enable the company to process more than 115 million additional pounds of fruit, according to a statement from Peterson Farms CEO Aaron Peterson. The Michigan Economic Development Corp. and the Michigan Department of Agriculture and Rural Development, along with Michigan Community Capital and PNC Bank, are supporting the expansion with more than $4.2 million combined via grants, awards and tax credits. n Grand R apids-based Mary Free Bed Rehabilitation Hospital began managing operations at Beacon Health System’s Elkhart General Hospital in Elkhart, Ind., and Memorial Hospital in South Bend on Jan. 1. Mary Free Bed added Beacon Health to a rehab network that already included eight health systems and more than 30 Michigan hospitals with a combined 350 inpatient rehabilitation beds, plus a number of outpatient units. n Kids’ Food Basket, a Grand Rapids-based nonprofit that distributes meals for children, is expanding its efforts in Ottawa and Allegan counties with a new location in Holland. The expansion comes after a fundraising effort that raised $2.5 million. Kids’ Food Basket acquired property for the expansion in July 2019, purchasing a facility at 652 Hastings Ave. in Holland for $479,000. The nonprofit is working with Hollandbased Lakewood Construction on renovations to the facility.

VENTURE CAPITAL

n Grand Rapids-based Grand Ventures co-led a $5 million seed capital round for Tealbook Inc., a Toronto, Ontario-based producer of procurement software that uses artificial intelligence. Grand Ventures Fund I LP, which closed last fall on a $28 million fundraising round, invested in Tealbook with Cincinnati, Ohio-based Refinery Ventures, Workday Ventures in San Francisco, Calif., and Stand Up Ventures and BDC Capital’s Women in Technology Fund, both based in Toronto. Tealbook plans to use the capital for product innovation and sales and marketing initiatives.

HEALTH CARE

n Bill Manns returns to West Michigan this spring when he becomes the new president and CEO at Bronson Healthcare in Kalamazoo. The 52-yearold Manns joins Bronson on March 30, succeeding long-time Bronson CEO Frank Sardone, who retired at the end of 2019. Manns presently serves as president of St. Joseph Mercy Ann Arbor, a 537-bed tertiary care and academic medical center, and St. Joseph Mercy Livingston, a 136-bed community hospital in Howell. Both hospitals are part of Trinity Health Michigan. He previously served as president of Trinity-owned Mercy Health Saint Mary’s in Grand Rapids from 2013 to October 2018.

REAL ESTATE

n The Kent County Road Commission board has approved a one-year option for the city of Grand Rapids to purchase its Central Complex located on the west bank of the Grand River. Under the terms of the agreement, which still requires approval of the Grand Rapids City Commission, the city will have the option to buy the 14.2-acre site for a negotiated price of $7.75 million. The city will have 12 months to perform due diligence on the property and must close on the deal no later than September 2022, according to a statement. The Central Complex property is located at 1500 Scribner Ave., adjacent to U.S. 131 along the west bank of the Grand River north of downtown Grand Rapids. The property includes more than 130,000 square feet of buildings. Visit www.mibiz.com

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