$2.00/MARCH 5 - 11, 2012
Spire contractors awaiting unpaid millions With no takers on financing, sports complex runs short on cash By JOEL HAMMOND email@example.com
Just as Spire Institute gains traction as a top-flight destination for bigname athletic events, the sprawling athletic complex just off Interstate 90 in Harpersfield Township has run into significant cash flow issues. Six mechanic’s liens against Spire were on file in the Ashtabula County Recorder’s Office as of last Tuesday, Feb. 28. The liens range from $71,161
owed to Air Control Products Inc. of Broadview Heights to an $8.57 million lien filed by Hughes-Roller Building Co. of Ashtabula. Hughes-Roller boasts prominently on its website that it’s “proud to be design/build general contractors for Project GaReat,” the acronym for the Geneva area Recreational, Educational and Athletic Trust, the nonprofit that has adopted the Spire identity. The liens, filed by contractors
involved with the 160-acre sports complex, total $11 million. Contractors generally file mechanic’s liens to protect their interests in a project. The disruption in payments to contractors is a recent occurrence, with each lien filed since December. The most recent lien, for $1.03 million, was filed last Monday, Feb. 27, by HAVE Inc., an Ashtabula mechanical contractor. See SPIRE Page 10
FILE PHOTO/MARC GOLUB
The 5,500-seat football stadium and outdoor track at Spire, where contractors collectively are owed millions.
Ohio City group will replicate ‘ambassadors’
Osborne’s legal woes deepening
Property owners recognize value of ‘clean and safe’ program downtown
By STAN BULLARD firstname.lastname@example.org
Oil and gas bankruptcies, real estate suits weigh on well-known investor
A decline in natural gas prices and a sagging real estate market have entangled companies formed by high-profile stock investor, real estate developer and oiland-gas man Richard M. Osborne in court proceedings. Three of Mr. Osborne’s companies in the oil-and-gas business — Oz Group, Great Lakes Exploration and publicly traded John D. Oil and Gas Co. — filed for Chapter 11 reorganization Jan. 11 in U.S. Bankruptcy Court in Erie, Pa. In the most detailed court filing, Osborne John D. Oil and Gas said it has debts of $11 million and assets of $8.2 million. The three bankruptcies, which borrowers have asked the court to administer jointly, are related to two loans totaling $30
By JAY MILLER email@example.com
Ohio City Inc., the nonprofit community development group that supports its namesake neighborhood, is partnering with the Downtown Cleveland Alliance to clone the latter’s successful “Clean & Safe” program as the West Side neighborhood prepares itself for a landmark year and a blossoming of the retail business district along West 25th Street and Lorain Avenue. Neighborhood property owners in Ohio City last year agreed to create a special improvement district, or SID, and assess themselves a fee to pay for a higher level of security and maintenance than the city of Cleveland provides. Ohio City Inc. will oversee the SID and contract with Downtown Cleveland Alliance to provide the kind of street cleanup, graffiti removal and visible security presence that has improved the image of downtown. “With the level of services they provide downtown, (the decision) was a no-brainer,” said Jeffrey Verespej, director of operations and advocacy at the Ohio City group. Services will begin in April after
See AMBASSADORS Page 11
See OSBORNE Page 21
WOMEN OF NOTE Crain’s seeks nominations
PHOTO PROVIDED BY DOWNTOWN CLEVELAND ALLIANCE
Armond Hill, a special projects ambassador in downtown Cleveland, uses a power washer on East Fourth Street.
Crain’s Cleveland Business is seeking nominations for the women it will profile in its annual Women of Note section, which is scheduled for the July 23 issue. Nominations can be submitted through CrainsCleveland .com by clicking on Women of Note under the Features tab of the toolbar. Nominations also can be sent via email to editor Mark Dodosh at firstname.lastname@example.org, or via regular mail at 700 W. St. Clair Ave., suite 310, Cleveland 44113. The deadline for submissions is Monday, March 19.
Crain’s profiles some of the area’s most promising technologies in its annual NorTech Innovation Awards ■ Pages 15-18
Entire contents © 2012 by Crain Communications Inc. Vol. 33, No. 10
MARCH 5 - 11, 2012
CRAIN’S CLEVELAND BUSINESS
Landowners dig in, sue over shale leases
Chesapeake Energy under fire from group alleging deceptive tactics in negotiations By DAN SHINGLER email@example.com
Chesapeake Energy Corp. has nabbed a tidy sum from selling just a portion of the oil and gas leases it owns in Ohio’s shale fields. But the leases also are causing legal pain for Chesapeake, which is the object of a lawsuit by angry landowners who maintain the energy company enriched itself by failing to compensate them properly for the rights they signed away to the natural resources under their property. Thirty-three landowners in Columbiana County who have leases with Chesapeake are suing the company. In a single lawsuit, they claim they got less than 1% of what they should
have received in up-front bonus payments when they signed their leases, and that the true value of their holdings were hidden from them. In addition, the suit alleges the landowners were not fully informed of the disruptions that would take place on their property, and so did not seek protection from them in their leases. According to the suit, filed last Monday, Feb. 27, in Columbiana County Common Pleas Court, those landowners signed leases with an agent for Chesapeake, Denver-based Anschutz Energy Corp., between 2008 and 2010, before the value of Utica shale resources widely was known. See LEASES Page 8
CRAIN’S FILE PHOTOS
The Huntington Building (left) and Eaton Center are two of a dwindling list of options for a new Cuyahoga County headquarters site, a move County Executive Ed FitzGerald wants completed in two years.
BUYandSELL County’s search for new headquarters, plan to shed other properties will influence Cleveland’s office market going forward By STAN BULLARD and JAY MILLER firstname.lastname@example.org, email@example.com
he 800-pound gorilla in Cuyahoga County’s real estate market over the next few years is likely to be Cuyahoga County’s government. The county stands to impact the market both as a tenant and as a seller of space. In the case of the former, it still is looking to house many of its offices in a headquarters of as much as 300,000 square feet. As the latter, it plans to sell various buildings it now occupies as it proceeds with a consolidation of its space needs. The county will put up for sale
as many as a dozen buildings in what still is a soft market for office space in Cleveland. Prime among them are the county administration building at Lakeside Avenue and Ontario Street, the old Juvenile Court complex on East 22nd Street, the controversial Ameritrust Building at East Ninth Street and Euclid Avenue, and Courthouse Square at West Third Street and Lakeside, which it bought in 2004. County officials are reviewing five bids for a consultant to manage the consolidation of the county’s real estate portfolio. Bidding closed last Thursday, March 1. The winning bidder will represent the See COUNTY Page 7
Hospitals upgrade inpatient rehab as patient pools age UH, Summa become latest to expand capacity By TIMOTHY MAGAW firstname.lastname@example.org
Northeast Ohio’s health care systems are investing millions of dollars to beef up their inpatient rehabilitation units as each organization tries to get its share of a growing revenue stream. Many of the hospitals say their current inpatient rehab facilities, which largely serve orthopedic, stroke or brain injury patients, are at or near capacity. And as people age, the demand for those services should continue to balloon and put further pressure on their bustling units. In the United States, the population over 65 years old has increased by about 15% from roughly 35 million in 2000 to about 40 million, according to data from the Administration on Aging, a division of the U.S. Depart-
THE WEEK IN QUOTES “We have been flatly turned down by all major financial institutions. They’ve said, ‘It’s speculative, a startup, real estate. Our bank’s policy is that we can’t do this kind of a deal.’” — Stuart Cordell, a partner in Warren and Young PLL of Ashtabula and the lawyer for Ron Clutter, the driving force behind Spire Institute. Page One
“The general attitude (of property owners) is there is going to be a return on investment — not necessarily cash on cash, but the investment is going to be more intrinsic.” — Darrel Young, whose Darrel A. Young Enterprises owns a shopping center across Lorain Avenue from the West Side Market. Page One
ment of Health & Human Services. By 2020, that number is expected to grow to 55 million. “You’re still seeing growth in rehabilitation services nationally, and it’s also true locally,” said Paul Tait, University Hospitals’ chief strategic planning officer. “There’s that whole bubble in the population moving into Medicare status, and they tend to have more strokes and neurological conditions.” University Hospitals operates about 20 inpatient rehabilitation beds at Case Medical Center. But, given the growing need for such services, UH opted to invest — with the support of a for-profit company — in a 40-bed, $17 million inpatient rehabilitation hospital expected to open in Beachwood early next year. “We may lose business occasionally See REHAB Page 19
FEATURES “This practice of not being straight about the depth of our highway funding problem is coming to an end. We have to honestly face up to the problem if we’re ever going to fix it.”
“I liked the company so much I bought it. The Thomases are terrific, so they became my partners. They had the contracts with the buildings, but I also wanted them.”
— From a Personal View by Jerry Wray, director of the Ohio Department of Transportation. Page 5
— Bernie Moreno, owner of Collection Auto Group. Page 14
Classified ..................20 Editorial ......................4 Going Places ............14 List: Investment banks..19 Tax Liens......................12
CORRECTION A Feb. 27, Page One story on covering the cost of upkeep at Cleveland Browns Stadium misstated the structure of a $5 million loan for stadium repairs. The Cleveland Browns will make the loan to the city of Cleveland, which will repay the loan from future proceeds of a sin tax on tobacco and alcohol sales in Cuyahoga County.
CRAIN’S CLEVELAND BUSINESS
MARCH 5 - 11, 2012
Brian D. Tucker (email@example.com) EDITOR:
Mark Dodosh (firstname.lastname@example.org) MANAGING EDITOR:
Scott Suttell (email@example.com)
ed Celeste, Mike Duffey, Frank LaRose and Tom Sawyer are giving their colleagues in the Legislature the chance to prevent a repeat of the joke that Republican officials made last year of the congressional redistricting process in Ohio. The four lawmakers have crafted an excellent framework for a proposed constitutional amendment that promises to bring greater fairness to the job every 10 years of redrawing districts for the U.S. House and the Ohio House and Senate. In a world of polarized politics at all levels of government, it’s heartening to see the bipartisan hands behind this proposal. State Rep. Celeste and State Sen. Sawyer are Democrats, and State Rep. Duffey and State Sen. LaRose are Republicans, but all four have put the public ahead of their party affiliations with a plan that strives to take political advantage out of the redistricting process. Under the current redistricting system, Republicans who control the governor’s office and both chambers of the Legislature essentially were able to shove down the throats of minority Democrats the congressional and legislative maps they redrew following the receipt of data from the 2010 Census. The result was gerrymandered congressional districts that gave Republicans the advantage in most races for U.S. House seats. The plan introduced by the four lawmakers incorporates various checks and balances that make such lopsided redistricting far less likely to achieve. For starters, the Ohio redistricting commission would consist of seven members: the governor, state auditor, secretary of state, Senate president and House speaker, as well as the two legislative leaders from the opposite party of the president and speaker. Any action by the commission would require a “yes” vote of five members, at least two of whom must be members of the political party in the minority on the commission. As an incentive for its members to reach a consensus on congressional and legislative maps, the commission would be given a set amount of time to do its job. If it couldn’t agree on a congressional plan, or legislative plan, or both, the approval process would be taken out of the commission’s hands. Voters in the next general election would get to choose from among three plans — a Democratic plan, a Republican plan and a publicly submitted plan. But the penalty to both parties for the commission failing to do its job wouldn’t end there. In every primary election during the 10-year period preceding the next redistricting, the names of candidates would appear on ballots without reference to party affiliation, and only the two candidates receiving the most votes in the primary would appear on the ballot in the general election, even if those candidates are from the same party. As a big plus for voters, the proposed amendment also contains language geared toward the creation of competitive districts, so that the winning party in a race isn’t determined before a ballot is ever cast. Ohio lawmakers can redeem themselves for the recent redistricting farce by putting their four colleagues’ proposal on the legislative fast track.
FROM THE PUBLISHER
Litigation hits an oil field of dreams
ell, it didn’t take long for plaintiffs claim the leases would pay the litigation to start in them less than 1% of the fair market value Ohio’s oil fields. of the lease bonuses now being paid in Let’s not even get into the county. how weird it is to write the phrase This will be an interesting one to “Ohio’s oil fields.” But we all know how watch because of their claims they were much money is being spent as energy misled. Might it be that they’re just companies buy up drilling rights along unhappy that later buyers are getting the state’s eastern spine, hoping more for their mineral rights? to tap into the gas and oil reserves **** BRIAN trapped in the Marcellus and ONE VERY THOUGHTFUL TUCKER Utica shales. READER, Paul Klodor, writes to Land offices in every county us this week, lamenting that seat in that part of Ohio have our issue last Monday, on the been mobbed by folks researching very day of the tragic shootings land records so the negotiations at Chardon High School, had a can begin. Apparently, 33 front-page feature story on a landowners in Columbiana Burton man who has built a very County now are regretting that successful gun auction busithey did their deals early in this ness out of his tiny storefront. game. In my response to his email, I wrote According to The Business Journal, that I could certainly understand his which covers the Youngstown/Warren feelings, given what sadness had engulfed area, the group filed suit last week the town of Chardon. “And the truth is against Chesapeake Exploration LLC, there are costs and dangers associated asking a common pleas court there to with a multitude of businesses, but we throw out the leases they signed three or still write about them,” I wrote, adding so years ago. In court documents, the that gun ownership is one of those hot-
button issues, regardless of stories like school shootings. To which, he thanked me, and extolled the work of our editorial staff. In turn, I thanked him and said that journalists rarely hear from readers who say they’re doing a good job. **** CONGRATS TO BRANDMUSCLE and The Riverside Co. for doing last week’s deal that should help both Clevelandarea concerns. Riverside, perhaps our region’s most prolific private equity investor, buys one of our growing and innovative marketing firms, enabling it to grow even faster. Riverside is located in the Terminal Tower downtown. BrandMuscle is looking for new digs to ensure its future growth. Wouldn’t it be great to have it land in downtown Cleveland, perhaps one of the hippest “new” places to hang a shingle? Having a couple hundred, mostly young, creative marketing types joining those already living and working in the city would be a great story. Here’s hoping. ... ■
THE BIG ISSUE What do you think could be done to prevent school shootings such as the one in Chardon?
DR. MELVIN SHAFRON
Education on bullying. There are so many different types of bullying out there nowadays, whether it comes to technology, Facebook (or) texting. And just kind of educating our children and giving them the proper outlets to deal with those situations.
I think there needs to be greater education among the student population about identifying the signs — identifying these sorts of things and knowing what the proper steps are in terms of contacting authorities who can do something about it.
I think communication, open communication between the community, between the students, between parents and the educators. And I think everything that came out of Chardon was a big win. ... Everyone knew what to do, where to go. First responders were right on key.
If this was an at-risk child ... the schools should have been more involved with the behavioral issues that were presented. … They live in a rural area and guns are, I’m sure, in everybody’s home out there. This always bothers me. … I’m for better gun control.
MARCH 5 - 11, 2012
CRAIN’S CLEVELAND BUSINESS
Fixing highway funding critical to state economy By JERRY WRAY
hio’s highways are essential to keeping and creating new jobs. Our state’s economy — especially our agriculture and manufacturing businesses, and the logistics operations that support them — depend on the ability to quickly and efficiently ship raw materials and finished goods throughout Ohio, the country and the world, and our state’s transportation system makes it possible. This critical economic engine risks running out of gas. Funding for our highways is drying up and is
Mr. Wray is the director of the Ohio Department of Transportation. not projected to keep up with our needs. In fact, the state’s highway budget faces a $1.6 billion shortfall, which will force high-priority projects to face serious completion delays. While the news of the $1.6 billion highway budget shortfall came as a shock to some, it has been expected for several years by those in the transportation community. Unfortunately, little was done about it, assuming the funds would be found before the projected problem became
reality. Well, here we stand today, and we are facing a massive shortfall. This practice of not being straight about the depth of our highway funding problem is coming to an end. We have to honestly face up to the problem if we’re ever going to fix it and protect the job-creating tool that is our highway system. The cause of the problem is simple: The recent economic decline, combined with more fuel-efficient vehicles that use less gas, inflation and a federal stalemate over a longterm, national transportation funding plan has left Ohio — and every other
state — in a precarious position. The federal and state motor fuel taxes — Ohio’s primary highway funding source — are not raising as much money as they once did and are unable keep up with the rising costs of construction materials. Just as Ohio did when we came together last year to close our state’s $8 billion state budget deficit, Ohio must come together to close our highway deficit. The basic reason is simple: We cannot pay highway construction workers with dollars that don’t exist. The bigger reason is, of course, unless we keep See VIEW Page 6
700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1230 Phone: (216) 522-1383 Fax: (216) 694-4264 www.crainscleveland.com Publisher/editorial director: Brian D. Tucker (firstname.lastname@example.org) Editor: Mark Dodosh (email@example.com) Managing editor: Scott Suttell (firstname.lastname@example.org) Sections editor: Amy Ann Stoessel (email@example.com) Assistant editors: Joel Hammond (firstname.lastname@example.org) Sports Kathy Carr (email@example.com) Marketing and food Senior reporter: Stan Bullard (firstname.lastname@example.org) Real estate and construction Reporters: Jay Miller (email@example.com) Government Chuck Soder (firstname.lastname@example.org) Technology Dan Shingler (email@example.com) Manufacturing Tim Magaw (firstname.lastname@example.org) Health care & education Michelle Park (email@example.com) Finance Research editor: Deborah W. Hillyer (firstname.lastname@example.org) Cartoonist/illustrator: Rich Williams Marketing director: Lori Grim (email@example.com) Marketing/Events manager: Christian Hendricks (firstname.lastname@example.org) Marketing/Events coordinator: Jessica Snyder (email@example.com) Advertising sales manager: Nicole Mastrangelo (firstname.lastname@example.org) Senior account executive: Adam Mandell (email@example.com) Account executives: Dawn Donegan (firstname.lastname@example.org) Andy Hollander (email@example.com) Office coordinator: Toni Coleman (firstname.lastname@example.org) Digital strategy and development manager: Stephen Herron (email@example.com) Web/Print production director: Craig L. Mackey (firstname.lastname@example.org) Production assistant/video editor: Steven Bennett (email@example.com) Graphic designer: Lauren M. Rafferty (firstname.lastname@example.org) Billing: Susan Jaranowski, 313-446-6024 (email@example.com) Credit: Todd Masura, 313-446-6097 (firstname.lastname@example.org) Audience development manager: Erin Miller (email@example.com)
Crain Communications Inc. Keith E. Crain: Chairman Rance Crain: President Merrilee Crain: Secretary Mary Kay Crain: Treasurer William A. Morrow: Executive vice president/operations Brian D. Tucker: Vice president Robert C. Adams: Group vice president technology, circulation, manufacturing Paul Dalpiaz: Chief Information Officer Dave Kamis: Vice president/production & manufacturing G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Subscriptions: In Ohio: 1 year - $64, 2 year - $110. Outside Ohio: 1 year - $110, 2 year - $195. Single copy, $2.00. Allow 4 weeks for change of address. For subscription information and delivery concerns send correspondence to Audience Development Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, Michigan, 48207-2912, or email to firstname.lastname@example.org, or call 877-812-1588 (in the U.S. and Canada) or (313) 446-0450 (all other locations), or fax 313-446-6777. Reprints: Call 1-800-290-5460 Ext. 125 Audit Bureau of Circulation
CRAIN’S CLEVELAND BUSINESS
MARCH 5 - 11, 2012
Consumer still hungry for daily deals By KUNUR PATEL Advertising Age
Are consumers over daily deals? The answer appears to be no. Consumers still are showing an appetite for them. U.S. spending on deals, including daily deals, instant deals and flash sales, will hit nearly $2 billion this year and should be more than $4.1 billion by 2015, according to media advisory firm BIA/Kelsey. A Rice University study from the second half of 2011 found U.S. consumers still are excited about daily deals, defined as an email or mobile notification for a discounted local service or product. Groupon, which popularized deals, lost its darling status when its initial public offering revealed no earnings. Still, the company had more than 33 million active users at the end of last
year, nearly triple the 2010 number. The business is headed toward lifestyle companies, said Peter Krasilovsky, a vice president at BIA/ Kelsey. The trend is toward verticaldeal categories rather than scattershot offerings of everything from bikini waxes to skydiving lessons. For example, both Groupon and LivingSocial have dedicated travel categories. Travel site Expedia recently added a tab for Groupon Getaways after the companies launched those deals last summer. LivingSocial has expanded its “Gourmet” category for high-end restaurant deals, and Groupon has tested grocery deals in partnership with a New England supermarket chain. Even though daily deals started with local merchants, the category no longer is for small businesses alone. There’s also a mix of national
and international advertisers using the service to target locally. Among them is KFC, which ran a deal with Groupon Hong Kong for 50% off chicken and egg tarts leading up to Christmas. Last year, Groupon ran deals with packaged-goods marketers General Mills and Unilever, too. Trying to cash in on Groupon’s success with local advertisers, many media companies set up their own daily-deal services and taught their sales teams to market deals. Newspapers, cable companies and radio stations sell deals along with their own ad inventory. That’s exactly where new entrants may find an opening, said Mr. Krasilovsky at BIA/Kelsey. “Deals are about customer acquisition, but the question is whether they also extend to loyalty and engagement,” he said. ■
Gun profits only continue violent cycle ■ Perhaps it was just a case of bad timing with the breaking news last Monday of the shootings at Chardon High School, but when I received my copy of Crain’s in the mail that day and on the front cover was a gun dealer smiling and holding a .44 Magnum, I felt obligated to voice my disgust. As long as big profits are to be made dealing weapons, we’ll continue to have a never-ending cycle of violence and shootings. I’m ready for the usual comments from the gun lovers — “guns don’t kill, people do,” etc. — but the truth is, fewer guns mean fewer opportunities for these tragedies to occur. How about an article examining the real cost of the proliferation of
guns in our community, not just the glory of the profits to be made? Paul Klodor Shaker Heights
Up with Cleveland ■ As a reader of Crain’s, I wanted to reach out regarding Brian Tucker’s Feb. 27 commentary, “Cleveland is poised for a major push.” I have been observing the positive changes in Cleveland and sharing such with my friends and colleagues, many of whom act surprised. But when you add it all up, I think that we are on the right track, and I, too, give a lot of credit Cuyahoga County Executive Ed FitzGerald and Cleveland Mayor Frank Jackson. Mark H. Nolan Lakewood
Congratulations Marc Byrnes our Chairman and CEO, for being named
United Way of Greater Cleveland 2011 Volunteer of the Year
We are proud of your commitment to the Community and your dedication to living our mission.
Up with Cleveland II ■ I read Brian Tucker’s Feb. 27
commentary, “Cleveland is poised for a major push,” with great interest. As Mr. Tucker indicated, this is a positive and constructive moment for the city and our region. I appreciated his acknowledgment of our current political leadership that is focused on the community instead of their own political fortunes. My wife and I have three great daughters who currently live and work in New York and Chicago. Whether or not they return to Cleveland remains to be seen, but I hope that is not the case for other people’s children. Perhaps in the near future, Cleveland becomes the destination of choice for our educated young people because this is where it is happening. Now, that would be something. Stuart I. Garson Seaman Garson LLC Chairman Cuyahoga County Democratic Party
View: Stakeholders explore new strategies for funding continued from PAGE 5
our roads in good shape and build new projects that boost job creation — as well as safety and congestion relief — we won’t foster the jobsfriendly climate Ohio so desperately needs to get back on track. The shortfall Ohio is facing now is very frustrating, and I’m sure we share the same frustration that every local mayor, county official, legislator, business leader and driver feels. These problems aren’t insurmountable, not by a long shot. We can move forward and find the funds to keep Ohio moving if we have the courage to think in new ways. A natural place to start is with the Ohio Department of Transportation’s own costs. We’re taking every conceivable step to reduce them. We’ve reduced our overhead and are using new ways to more efficiently and effectively build major projects faster than ever before. Most important, however, is that we’re exploring entirely new strategies for building highways that break
with the status quo and reflect a new way of thinking. We’re looking at ideas to utilize money from the private sector. We’re studying the potential of the Ohio Turnpike, and looking at all of the options from moving the operations under ODOT, to bonding against the turnpike’s revenue to a potential lease. No matter what happens, there will be contractual guidelines on tolls and maintenance that will keep the road as strong as we know it today — or better. I welcome the coming debate and want to engage in long-overdue conversations with policy-makers at the federal, state and local levels. Gone is pretending we don’t have a problem. We must take this opportunity to bring leaders to the table and work together to solve this problem. Without a good transportation system we lose jobs and Ohio fades. By applying the same creative spirit for which Ohio is known, we can solve this problem and keep Ohio moving in the right direction. ■
MARCH 5 - 11, 2012
CRAIN’S CLEVELAND BUSINESS
County: Existing portfolio includes intriguing properties continued from PAGE 3
county during its search for new headquarters space and will help dispose of county-owned properties that no longer will be needed after the consolidation. Bonnie Teeuwen, the county’s director of public works, told Crain’s last Thursday that she expects the bid review probably will be completed by March 13, and that she hopes to seek bids for new leased space for the county’s headquarters by the end of April. The bidders, who could be identified only by the names on the sealed bids, are Allegro Realty Advisors, CB Richard Ellis, DLZ Ohio, McKelvey Partners and Vocon Inc. How quickly the county properties might sell and how much the county might net from any sales is hard to gauge. Brokers, however, note that buyers can be found for properties that are what the industry calls “priced right,” which means priced low enough to compete in a market where rents are declining or that enable a property owner to invest in improvements or conversion to another use.
The cast of characters The county values the dozen properties it hopes to sell at more than $30 million, though that figure may be high given current market conditions. Still, the county is offering a few intriguing properties from its portfolio.
The biggest-ticket item is still the Ameritrust Building, which the county values at less than $17 million. Ms. Teeuwen said Cuyahoga County Executive Ed FitzGerald has talked recently with officials of development firm K&D Group about the 29-story tower. In 2008, a $35 million bid submitted by K&D with the county won it the right to redevelop the former bank headquarters into a hotel and residential complex. That deal fell through as the real estate market soured. Perhaps the most attractive property in the county’s portfolio, however, might be the administration building. The four-story building that dates to 1957 is adjacent to the under-construction Cleveland Medical Mart & Convention Center and is considered an attractive site for a hotel that could be linked to the convention center. The county also believes Courthouse Square could be attractive to a developer who could convert it into condos or apartments, Ms. Teeuwen said. Other buildings on the for-sale list are the Whitlatch Building at 1910 Carnegie Ave. and the auto title building at 1261 Superior Ave. Ms. Teeuwen said the county also is putting up for sale the Loew’s Building, a part of the PlayhouseSquare complex the county purchased in the 1970s.
Small buildings hold potential Joseph Martanovic, senior vice
president and director of industrial brokerage at Ostendorf-Morris Co., said he does not believe it’s possible to make a sweeping judgment about the effect on the market of the county properties. “More so than ever before, each building is its own market,” depending on where it is located, Mr. Martanovic said. He said buildings near Euclid Avenue and in the city’s MidTown and University Circle neighborhoods would have more demand than similar structures in other neighborhoods or on the fringes of downtown. Terry Coyne, executive vice president of Grubb & Ellis Co., was more optimistic. “I don’t see it as a glut,” he said. “I don’t think it will be as negative as you might think it would be.” Mr. Coyne notes that a handful of small buildings are available near downtown and it is “hard to find little good buildings to buy. “I could see (business tenants) staying in Cleveland because they can buy some of these buildings,” he said. Some of the county’s downtown office buildings also might end up as residential properties. “We cannot have all these buildings continue to be office buildings,” said David Browning, managing director of the Cleveland office of CB Richard Ellis, talking broadly about the older, smaller office buildings in downtown. “We need some rental apartments, con-
dominiums, some retail spaces and hotels.” The county also will move some employees from space it leases. That, too, will have an impact on a downtown office market that already has a 23.4% vacancy rate in Class B office space, which includes all the county’s leased properties. For example, the county leases space in Reserve Square on East 12th Street for its development and senior and adult services departments. The space, in a building that mainly is apartments and a hotel, is unlikely ever to be used for office space again, said Bob Nosal, managing director of Grubb & Ellis Co.’s Cleveland office.
As for the next HQ … With respect to the county’s prospects for a new headquarters, the field appears narrow. A search of available contiguous office space through the online real estate data provider CoStar shows just two potential headquarters sites have more than 300,000 square feet of existing office space. The former May Co. department store, most recently marketed as the Public Square Tech Center, has the most space: 665,000 square feet. The Huntington Building, 900 Euclid Ave., has the second-largest volume, with about 600,000 square feet in its main building and an attached annex. Should the county reduce the scope of its space needs to around
200,000 square feet, the options rise. After global manufacturer Eaton Corp. vacates Eaton Center, 1111 Superior Ave., later this year for a new headquarters in Beachwood, more than 270,000 square feet will be available in that structure. Another less-visible prospect would be the former Ohio Bell headquarters building at 45 Erieview Plaza, which has more than 210,000 square feet of contiguous space. And do not underestimate the ability of building owners to produce options to the county for a sweet deal, Mr. Nosal said. For example, Mr. Nosal noted that Forest City Enterprises Inc., owner of the Halle Building, 1228 Euclid, might be able to cobble together empty space by relocating tenants. CoStar shows more than 200,000 square feet of space is available in the building, but only 40,000 is contiguous. The field of potential headquarters properties may be small, but the county still might be able to extract a good lease for itself just the same, according to Mr. Browning of CB Richard Ellis. “All you need to have a good horse race is two or three horses,” Mr. Browning said. “It is a far different landscape in the office market than the last time the county went to the market,” he said. “Yet I’m certain the county and developers will create a competition. The market is still soft.” ■
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MARCH 5 - 11, 2012
Leases: Royalty payments usually far outstrip upfront deals continued from PAGE 3
Land agents “concealed and/or actively misrepresented and/or failed to disclose the much greater surface, subsurface, and operational disruption as well as dramatically greater profit potential and value of oil and gas drilling rights that Columbiana County landowners owned,” the suit states. The landowners are suing several employees of Anschutz, along with Oklahoma-based Chesapeake. In a separate lawsuit, filed Jan. 25 in U.S. District Court in Akron, Chesapeake is suing 95 other Ohio landowners for attempting to get out of their leases and sell them to another bidder. Chesapeake declined to comment on the lawsuit against the company, and an Anschutz spokesman did not return a telephone call to discuss the case. However, Chesapeake did say it risks its own money in finding and proving underground reserves. “The bonus payment should not be viewed as equal to the value of the commodity that exists within the acreage,” Chesapeake director of corporate development Keith Fuller in a Feb. 27 email to Crain’s Cleveland Business. “Remember,
the financial risk of drilling remains solely with the operator as the reserves are still unproven. The landowner, while assuming no financial risk, retrieves monetary gain.” Chesapeake hasn’t been shy about bragging about the deal it got on its Ohio leases, though — at least not to the investment community.
An ‘exceptional’ return In speaking to analysts and investors about its 2011 results in a Feb. 22 conference call, Chesapeake CEO Aubrey McClendon said his company had paid about $2.2 billion for leases in Ohio’s Utica Shale. It then sold a 20% interest in those same leases to outside investors in order to raise capital for drilling and production, and got more than five times what it paid for them initially, Mr. McClendon said. It sold a 20% interest in its Ohio leases, mostly to foreign investors, for $2.3 billion, he reported. “We recovered 105% of our costs to date and yet still have 80% of our acreage left,” Mr. McClendon said. “That’s exceptional under any circumstances, but especially when you consider that Chesapeake’s average holding period on its Utica leases was only about one year.”
The fat return could be taken to mean the big energy company got a great deal on the leases it signed with farmers and other rural landowners — and it did, say those who work with such landowners — but they also say that’s par for the course these days in Ohio’s red hot shale market. Those leases, which are essentially the rights to underground minerals, oil and gas, generally involve upfront bonus payments to landowners, but they can be sold by leaseholders just like securities, said Dale Arnold, director of energy services for the Ohio Farm Bureau Federation and the man many rural landowners turn to for information on how to evaluate and manage the resources beneath their properties. In the last five years, Mr. Arnold said, the price of those leases has skyrocketed, in a trend that began in the eastern fringes of the state, where the Marcellus Shale overlaps the Utica, and rapidly is advancing westward across Ohio.
Seller beware “Farmers were being offered, and were signing into leases, at around $50 per acre” five years ago, Mr.
“They regret it until they get their first royalty checks. (A client) got a check in July and that first monthly check was for $178,000. You very quickly forget it.” – Brad Hillyer, a minerals lease expert and managing partner at Connolly, Hillyer, Lindsay & Ong Arnold said. “Now, depending on the resources under the ground, you’re seeing leases go for around $6,000 to $6,500 an acre.” That’s in the eastern half of the state, Mr. Arnold said, where the Utica shale is the thickest and holds the most gas and oil. But prices are climbing to the west, too. For example, Mr. Arnold said, in the Mansfield area, leases have shot up in value, just not as much. There, he said, leases that sold for $50 an acre or less five years ago today are fetching $2,000 to $2,500 an acre. Landowners must be careful not to sell their leases too cheaply, and many have wised up and have begun demanding higher prices for the drilling rights to their property, especially if they have large holdings, Mr. Arnold said. It’s a bit of a dog-eat-dog market. For instance, the state of Ohio does not get involved with lease negotiations, said Ohio Department of Natural Resources spokeswoman Heidi Hetzel-Evans. Nor would it take sides, unless possibly there was fraud or some sort of wrongdoing involved in a transaction, she said. “Those are private contracts between two private entities,” Ms. Hetzel-Evans said. But landowners, especially farmers, understand that the value of the leases fluctuate wildly — after all, they’ve been dealing with commodity trading most of their careers, notes Mr. Arnold. More important, though, the amount of money involved in selling a lease is small potatoes to most farmers, compared to what they’ll receive in ongoing royalty payments, said attorney Brad Hillyer, a minerals lease expert.
Love those royalty checks A gas, oil and minerals lease usually provides two forms of payment to the landowner — the upfront bonus for signing the lease, then a royalty payment based on percentage of the revenues that are produced from drilling or other activity. The bonus payments have gotten the headlines so far, but it’s the royalty payments that will make landowners rich, Mr. Hillyer said. Mr. Hillyer, managing partner of
the Uhrichsville law firm Connolly, Hillyer, Lindsay & Ong, has been working on gas and oil leases for more than 30 years on behalf of area landowners. He’s never seen anything like what’s going on today — and the royalty payments that are beginning to trickle in portend and even bigger boom than almost any rural landowner imagined, he said. Mr. Hillyer said he has one client who signed his lease four years ago, for about $35 an acre for hundreds of acres of property near New Philadelphia. Is he upset because he could have sold those same leases for thousands more per acre today? He might have been, but he’s not any more, said Mr. Hillyer — because the wells on his property are producing. “They regret it until they get their first royalty checks,” Mr. Hillyer said. “He got a check in July and that first monthly check was for $178,000. You very quickly forget it.” Mr. Hillyer said that landowner has not received a monthly check for less than $90,000 since production on his property began last summer. Ohio landowners are faring better than their Pennsylvania counterparts did, so far, because they have more valuable gas and liquids beneath their property, Mr. Hillyer said. Not only are Ohio’s shale deposits thicker, but they contain oil and other liquids, which have gone up in value while the price of natural gas has plummeted. “Those (Pennsylvania gas) wells have been averaging, for the landowner, about $5,000 per acre in royalties,” Mr. Hillyer said. “In Ohio, 14 of these wells have now been finished and nine of them are in production. In Ohio, that number is closer to $15,000 per acre.” In other words, he said, a farmer with 100 acres — not even a particularly large farm in many parts of Ohio affected by drilling — could earn $1.5 million just from royalty payments, Mr. Arnold said. And many are getting more, because they demanded a higher percentage of revenues, he said. But hang on, say he and other observers — the boom is just beginning. ■
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Ron Clutter, the founder of the Geneva area Recreational, Educational Athletic Trust, the nonprofit of which Spire Institute is a part
Spire: Contractors protect interests
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Those contractors with liens against Spire and who spoke with Crainâ€™s said up until the past five or six months theyâ€™ve never had trouble with collecting payment from Spire for their work. But theyâ€™re concerned enough now to file liens. Among that group is Mike Greene, president of Air Control Products, a subcontractor for HAVE. â€œThere are times in the construction industry when monies freeze up, but things get worked out in a relatively easy fashion. This one is not,â€? said Mr. Greene, whose lawyer, David Croft of Cleveland-based Nicola, Gudbranson & Cooper, in January filed Air Controlâ€™s $71,161 lien against Spire. Mr. Greene said his company actually is owed about $200,000. â€œAnd Iâ€™m small potatoes,â€? he said. â€œTimes right now arenâ€™t really good for anybody. Thereâ€™s not a lot of cash floating around in contractorsâ€™ pockets. Everyone needs their money. This is putting a lot of people in duress.â€?
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Stuart Cordell, a partner in Warren and Young PLL of Ashtabula and the lawyer for Ron Clutter, an Ashtabula native and businessman and the driving force behind Spire, said the money available for construction of the complexâ€™s latest installment â€” a 300,000-square-foot aquatics center â€” fell short of covering its costs. For the last seven months, Mr. Cordell said he has been in pursuit of private financing to pay off the construction debt and to continue development of the complex, but lenders have been hesitant. Up to this point, the project has been financed privately, with Mr. Clutter providing an undisclosed major investment. â€œWe have been flatly turned down by all major financial institutions,â€? Mr. Cordell said. â€œTheyâ€™ve said, â€˜Itâ€™s speculative, a startup, real estate. Our bankâ€™s policy is that we canâ€™t do this kind of a deal.â€™â€? Mr. Cordell said Mr. Clutterâ€™s group is talking with potential institutional investors, but that there are no proposals on the table yet.
Contractorsâ€™ dilemma Each contractor Crainâ€™s spoke to for this story was hesitant to criticize the project, because they said it has
â€œThereâ€™s not a lot of cash floating around in contractorsâ€™ pockets. Everyone needs their money. This is putting a lot of people in duress.â€? â€“ Mike Greene, president, Air Control Products Inc. brought visitors to Ashtabula County â€” Mr. Cordell estimated Spireâ€™s February traffic at 20,000 visitors, either athletes or spectators â€” and has had a positive impact on the community. When asked if heâ€™s confident his company will recoup the money itâ€™s owed, Greg Detrick of Detrick Industrial Piping of Ashtabula said, â€œI have to be.â€? Mr. Detrickâ€™s company is owed $850,982, according to its lien. But a source familiar with the contracting business in Ashtabula County said that while Spire has used many local contractors on the project â€” Mr. Clutter boasts of his Ashtabula roots and his commitment to the community â€” those companies end up hurt more by non-payments than a big contractor would be. Smaller contractors â€œare not capitalized well enough to do a project of that size,â€? said the source, who requested anonymity. â€œIf money starts to slow down, it can reach up and bite you really fast. Their suppliers may take action, and once you get cut off on one job, others arenâ€™t far behind.â€? Another contractor with a lien against Spire, but who did not want to be identified, said the company viewed its lien as a kind of last effort to protect itself. â€œOur concern, and the major discussion from our end, is that once you fire the bullet, is there ever really a chance to get paid?â€? the contractor said. â€œIf it gets to the court system, your chances go down dramatically. Thereâ€™s an exposure there.â€?
Aspiring to great things Construction at the Spire complex, then known as GaREAT, began in 2008. It opened in 2010 with a 215,000-square-foot building split up into soccer fields and volleyball/basketball courts; a 250,000square-foot indoor track/football building; and a 5,500-seat football stadium and outdoor track. The latest project, the aquatics center, is open but is not complete. Spire officials also hope to build dormitories for the instituteâ€™s planned high school and post-grad-
uate academies, students in which for now will be housed at nearby Andrews Osborne Academy. The dorm projects are on hold until new financing can be lined up, Mr. Cordell said. The institute has landed its share of big-name events. Spire last May announced that 400-meter world record holder Michael Johnson would open his second performance training center at the complex. Meanwhile, the Big Ten will bring its indoor track and field championships there in 2013, while the Horizon League indoor track and field championship meet was held there in February 2011. The Mid-American Conference staged its 2011 volleyball tournament there and will do the same this fall, and last month Spire played host to a national college track meet with some of the countryâ€™s top performers.
â€˜We hate doing thisâ€™ Mr. Clutter in August 2010 placed cost estimates for Spire at $60 million, but that estimate eventually grew to $100 million. Mr. Cordell said private financing was always a part of the plan for Spire â€œeventually,â€? and that he isnâ€™t worried that the inaccessibility to financing will continue. â€œOur plan is to get financing, pay off everyone and move forward,â€? Mr. Cordell said. He said the private investors with whom Spire is talking â€œare asking for more information. Itâ€™s a unique project, not a cookie-cutter. â€œWe hate doing this,â€? Mr. Cordell said of Spireâ€™s failure to pay various contractors. â€œWe know there are an awful lot of local contractors squeaking by.â€? Mr. Clutter bought Geneva-based Nordic Air, which made air conditioning units for extreme environments, in 1998; it in turn was bought in February 2010 by HDT Engineered Technologies of Solon. Mr. Clutter last July left HDT to focus on Spire full time. â– Research editor Deborah Hillyer contributed to this story.
MARCH 5 - 11, 2012
CRAIN’S CLEVELAND BUSINESS
Ambassadors: Extra hands help with retail growth continued from PAGE 1
Easter and the Cleveland Indians’ home opener. It’s the downtown group’s first expansion of what it considers a successful customer service program for downtown workers, residents and tourists. Joe Marinucci, president of the Downtown Cleveland Alliance, said the extension is a win-win for his group and Ohio City, as it spreads his overhead costs over a broader territory and gives the Ohio City retail district a level of service it might not be able to afford otherwise. “We can use some of our existing equipment,” Mr. Marinucci said. “And we can get staff from our (downtown) operations center to Ohio City effectively.” The alliance contracts with a Louisville, Ky., company, Block by Block, that hires and manages a staff of more than 50 yellow-shirted Ambassadors to patrol the streets, water plants on public lampposts, and power spray grime and chewing gum off sidewalks. “This is the single most important advance in the neighborhood,” said Cleveland City Councilman Joe Cimperman, whose ward includes downtown. “It changes the perception of the district.” Darrel Young, whose Darrel A. Young Enterprises owns a shopping center across Lorain from the West Side Market, said he believes property owners saw the value of the SID, even though the assessment would be cash out of their pocket. “The general attitude (of property owners) is there is going to be a return on investment — not necessarily cash on cash, but the investment is going to be more intrinsic,” said Mr. Young, who is president of the nonprofit Market District Improvement Corp., which is the formal operator of the special improvement district. “The cleanliness and those kinds of things and the general improvements it brings psychologically to people who use the market district will be the return that we’ll see ultimately,” he said.
Primping for a big event Ohio City has been transforming its residential areas for decades. But it’s only recently that the retail strips radiating out from the West Side Market have been transformed. “It’s an overnight success that’s been growing for 40 years,” said Eric Wobser, executive director of the Ohio City group. This is a big year for Ohio City, because 2012 marks the 100th anniversary of the opening of the West Side Market. The celebration of that milestone will be kicked off June 2, an event that also will mark the reopening of Market Square Park, a vest-pocket park across Lorain from the market. Plans also include a street festival on Oct. 7 and a formal gala Nov. 3. In addition, Cleveland and the West Side Market will host Sept. 21-23 the 8th International Public Markets Conference, a gathering of urban planners, architects, market operators and local food advocates. The last conference was held in San Francisco in 2009. Mr. Wobser said his “clean and safe” budget of about $125,000 is too small for a direct contract with Block by Block. But bidding for the contract attracted seven proposals, and the one from Downtown Cleveland Alliance was the best. The Ohio City group, which until
last year was called Ohio City Near West Development Corp., had offered some neighborhood services to the broad Ohio City neighborhood. But the growing retail environment adjacent to the West Side Market needed special attention, and the group’s foundation and public block grant money couldn’t be used to focus on a small part of the neighborhood — especially when not all the commercial property owners were paying members of the Ohio City group. The old program, Mr. Wobser said, “had too many free riders.” Mr. Verespej said the Ohio City retail district has 86 storefronts and, with 25 new businesses since 2009, only four are vacant. Mr. Wobser
said even though the district includes the nine-story United Bank Building with more than 100,000 square feet of office space, there is almost no office vacancy in the district. He said the district has many small accounting, law and design firms occupying upper-floor space.
Broad neighborhood support Special improvement districts are attractive to neighborhoods in urban areas that have seen some redevelopment investment, where new restaurants and shops are gravitating, and where property owners see the value of keeping trash cans emptied and a visible security presence. In addition to downtown and Ohio City, Cleveland’s Detroit Shoreway
neighborhood has one and Cleveland Heights has three. Other areas, including Lakewood and Cleveland’s Kamm’s Corners neighborhood, have been looking into SIDs. Mr. Marinucci said he’s talked to several neighborhoods about spreading DCA’s Clean & Safe program to other areas, but so far, none have gotten petitions signed. Plans for the Ohio City special improvement district got rolling last year. The Ohio City group was required to file a petition with Cleveland City Council indicating that property owners who control 60% of the frontage within the boundaries chosen for the SID supported the creation of the district. Mr. Verespej
said the group presented City Council with a petition signed by owners of 75% of the frontage. Council passed legislation that would allow the special assessment to be added to property tax bills. The boundaries of the Ohio City SID are Jay Avenue on the north, Chatham Avenue on the south, West 24th Street to the east and West 28th Street to the west. It does not include St. Ignatius High School and Lutheran Medical Center, though those nonprofit organizations have been supportive of the effort and have made financial contributions to the program. Many of the neighborhood’s largest property owners helped get the SID effort under way, including Great Lakes Brewing Co., Dave’s Supermarket and MRN Ltd., the developer that owns the United Bank Building at West 25th and Lorain. ■
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CRAIN’S CLEVELAND BUSINESS
Date filed: Jan. 18, 2012 Type: Employer’s withholding, unemployment Amount: $53,712
TAX LIENS The Internal Revenue Service filed tax liens against the following businesses in the Cuyahoga County Recorder’s Office. The IRS files a tax lien to protect the interests of the federal government. The lien is a public notice to creditors that the government has a claim against a company’s property. Liens reported here are $5,000 and higher. Dates listed are the dates the documents were filed in the Recorder’s Office.
LIENS FILED J R Hudak Inc. 6465 Pebblecreek Drive, Independence ID: 34-1675388 Date filed: Jan. 24, 2012 Type: Employer’s withholding Amount: $186,850 Accounting Services 2 1285 W. Ninth St., Cleveland ID: 26-3550329 Date filed: Jan. 31, 2012 Type: Employer’s withholding, unemployment Amount: $92,889
Amount: $88,297 SJT Enterprises Inc. 28045 Ranney Parkway, Suite L, Westlake ID: 34-1638133 Date filed: Jan. 18, 2012 Type: Employer’s withholding Amount: $87,596
Protem Homecare LLC 3530 Warrensville Center Road, Suite 200, Shaker Heights ID: 20-3836346 Date filed: Jan. 20, 2012 Type: Employer’s withholding, unemployment, corporate income Amount: $40,101
Bencin Material Hauling Inc. 2636 Brecksville Road, Richfield ID: 61-1426951 Date filed: Jan. 31, 2012 Type: Employer’s withholding Amount: $71,692 NETeam AVI LLC % Zenith Systems LLC 5060 Corbin Drive, Bedford Heights ID: 52-2405579 Date filed: Jan. 24, 2012 Type: Civil penalty assessment Amount: $69,832 Custom Health Care Professionals Inc. 5001 Mayfield Road, Lyndhurst ID: 34-1875479 Date filed: Jan. 20, 2012 Type: Employer’s withholding, failure to file complete return Amount: $60,537
TDE Group Inc. 28850 Aurora Road, Solon ID: 34-1968692 Date filed: Jan. 4, 2012 Type: Employer’s withholding, corporate income
Accounting Services 2 1285 W. Ninth St., Cleveland ID: 26-3550329
Green Road Auto Body Shop Inc. 650 S. Green Road, South Euclid ID: 34-1137363 Date filed: Jan. 31, 2012 Type: Employer’s withholding, unemployment Amount: $35,001 Northeast Contracting LLC 25446 Bryden Road, Beachwood ID: 20-4369728 Date filed: Jan. 20, 2012 Type: Employer’s withholding, unemployment Amount: $33,460 Gill Paramjit LLC 54 Vista Ridge Circle, Hinckley
ID: 86-1138748 Date filed: Jan. 31, 2012 Type: Employer’s withholding, unemployment Amount: $33,340
Type: Employer’s withholding Amount: $21,956
Rybak & Associates Inc. 21821 Libby Road, Suite 102, Bedford ID: 03-0514289 Date filed: Jan. 18, 2012 Type: Employer’s withholding Amount: $31,719 Masters Sivinski & Marcis LLC 4807 Rockside Road, Suite 260, Independence ID: 34-1723555 Date filed: Jan. 10, 2012 Type: Civil penalty assessment Amount: $30,616
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Westlake Pizza Inc. 24533 Center Ridge Road, Westlake ID: 20-8706195 Date filed: Jan. 10, 2012 Type: Failure to file complete return Amount: $19,968 Dentz Painting Inc. 5181 W. 61st St., Brook Park ID: 34-1927120 Date filed: Jan. 18, 2012 Type: Employer’s withholding Amount: $18,418 Adelphia Painting Inc. 2709 North Ave., Cleveland ID: 22-3970555 Date filed: Jan. 18, 2012 Type: Employer’s withholding Amount: $18,399
Sherall Hardy LLC 9804 Easton Ave., Cleveland ID: 04-3788598 Date filed: Jan. 10, 2012 Type: Employer’s withholding Amount: $28,896
Patton Painting Inc. 871 Canterbury Road, Suite J, Westlake ID: 42-1580088 Date filed: Jan. 20, 2012 Type: Employer’s withholding Amount: $18,217
Metal-Mation Inc. 2391 W. 38th St., Cleveland ID: 34-1534696 Date filed: Jan. 20, 2012 Type: Employer’s withholding Amount: $26,567 Passport Project Inc. 12803 Buckeye Road, Cleveland ID: 34-1941840 Date filed: Jan. 4, 2012 Type: Employer’s withholding, failure to file complete return Amount: $24,442 AAA Municipal Services LLC 7277 Bessemer Ave., Cleveland ID: 86-1070006 Date filed: Jan. 10, 2012 Type: Unemployment Amount: $23,905
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Lakewood Pizza Inc. 16210 Detroit Ave., Lakewood ID: 20-1130641 Date filed: Jan. 20, 2012 Type: Employer’s withholding, failure to file complete return Amount: $35,494
MARCH 5 - 11, 2012
Patton Painting Inc. 871 Canterbury Road, Suite J, Westlake ID: 42-1580088 Date filed: Jan. 10, 2012 Type: Employer’s withholding Amount: $17,282 Ensign Products Co. P.O. Box 27167, Cleveland ID: 34-1105142 Date filed: Jan. 4, 2012 Type: Employer’s withholding, unemployment Amount: $15,212 J R Hudak Inc. 6465 Pebblecreek Drive, Independence ID: 34-1675388 Date filed: Jan. 24, 2012 Type: Unemployment Amount: $13,510
Protem Homecare LLC 3530 Warrensville Center Road, Suite 200, Shaker Heights ID: 20-3836346 Date filed: Jan. 20, 2012
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CRAIN’S CLEVELAND BUSINESS
Auto dealer adds downtown pickups Collection expands with 11 sites in city By STAN BULLARD email@example.com
Collection Auto Group, which operates car dealerships in suburbs from North Olmsted to the west and Beachwood to the east, has filled a hole in its market coverage through a joint venture that effectively adds 11 downtown drop-off locations for its customers. Bernie Moreno, owner of Collection Auto Group, said he acquired Detail Masters from founders and owners Sharri and Anthony Thomas and formed a joint venture auto detailing business with the duo called “Collection Auto Care.” “I liked the company so much I bought it,” Mr. Moreno quipped. “The Thomases are terrific, so they became my partners. They had the contracts with the buildings, but I also wanted them.” Mr. Moreno said the Thomases own 30% of the succeeding venture and he owns the rest, though specific terms of the acquisition of the 17employee company were not disclosed. The business has locations in parking
CHECKING THE LIST A list of downtown drop-off locations for Collection Auto Group: 200 Public Square 55 Public Square Fifth Third Center PNC Center One Cleveland Center Tower at Erieview (Galleria) Memorial Garage (127 Public Square) Diamond Bldg. (1100 Superior Ave.) Penton Bldg. Eaton Center Case Western Reserve University garages serving buildings such as Key Tower and 200 Public Square in downtown Cleveland, as well as a site at University Circle. “This is where we get the slogan ‘Located where you are,’” Mr. Moreno said. “You can drop off your car at one of the Collection Auto Care locations and have it washed and detailed while you work. If you need service at one of our dealerships, you can drop it off in the morning and get a loaner car in your parking space if you need one.” The Thomases approached Mr. Moreno about plans to hold an auto show highlighting their services, per-
haps at their Erieview Tower parking garage site, according to Sharri Thomas, but the joint venture resulted. “It has been part of our vision since we started to partner with a dealership,” Mrs. Thomas said. “We have a niche that Mr. Moreno did not have access to, as well as a large customer base and well-known brand that will allow us to expand.” The couple launched Detail Masters as a part-time venture in 2005, but it became a full-time endeavor in 2006 after they landed the car wash operation at 200 Public Square. The two saw the opportunity as more of a venue for services than simply a car wash, Mrs. Thomas said. Mr. Moreno said the venture allows him to provide easier service for his customers who work downtown. “We understand that the thing that people who buy luxury cars from us care most about is time,” Mr. Moreno said. “With a reservation, this makes detailing or repairs a few seconds out of your day.” The arrangement also provides a route to make contact with people who bought their cars elsewhere, Mr. Moreno said, in order to start relationships for possible future purchases. Collection Auto Group sells car brands that include Acura, Buick, Infiniti, Mercedes-Benz, Porsche and Spyker. ■
MARCH 5 - 11, 2012
GOING PLACES JOB CHANGES DISTRIBUTION JENNE INC.: Rick Coan to senior vice president, finance.
FINANCIAL SERVICE BCG & CO.: Doug Mathey, Rick Kavenagh, Ray Dunkle, Don Snyder and Ray Lampner to shareholders; Tracy Reed and Jason Tuma to directors.
BRUNER-COX LLP: Melissa A. Sidebotham to marketing assistant. COHEN & CO.: Adam Hill and Angelina Milo to partners; Scott Lichtenstein, Josh Messina and Raymond Polantz to principals; Joseph Damore and Michael McGivney to senior managers; Adam Timblin to manager; Adam Schultz, Josh Swander and Brandon Coates to senior staff accountants; Jim Strobe to chief financial officer; Gretchen Jancsura to controller; Samantha Guzik, Amber Rose, Robert Towne, Michael DeVries, Brian Korsberg, Lauren Lippert, Dana Raponi, Arthur Rice, Jonathan Williamson and Jason Sabine to staff accountants; Felicia Luangraj and Nicoletta Gallo to office services assistants; Angel Wells to health care consultant; Kathleen Lawry to marketing specialist. COHEN FUND AUDIT SERVICES: Robert Velotta to partner; Brett Eichenberger to senior manager; Bob Cross, Adam Magana and Stacey Rodgers to managers; Alex Hocking and Mike Maimone to senior staff accountants; Jeffrey Hensien, Nathan Zellers, Tabitha Zukoski to staff accountants. CORRIGAN KRAUSE: Margaret K. Kuchling to supervisor; Aaron C. Apathy to senior associate. GALLOVIC, GRANITO & CO.: Sam Calic to manager; Beverly Petersen to supervisor; Lisa Hrvatin to senior accountant. SKODA MINOTTI: Gina Teresi and Tiffany Burke to paraprofessionals, Small Business Services Group.
FOOD SERVICE TRIMARK USA: Mark Fishman to corporate vice president.
GOVERNMENT NASA GLENN RESEARCH CENTER: Gene L. Stygles to chief and Renee D. Palyo to deputy chief, Facilities Division, Facilities and Test Directorate.
HEALTH CARE INSIGHT LEARNING AND WELLNESS CENTER INC.: Kareen Caputo to clinical counselor and marital therapist.
LEGAL OGLETREE, DEAKINS, NASH, SMOAK & STEWART PC: John Gerak to co-managing shareholder, Cleveland. OTT & ASSOCIATES CO. LPA: Amanda L. Aquino to associate.
MANUFACTURING GRAFTECH INTERNATIONAL HOLDINGS INC.: Lionel Batty to
president, Graphite Electrodes; Julian Norley to vice president, corporate research and development.
MARKETING KNOTICE: Eric Kinaitis to senior account executive.
NONPROFIT CLEVELAND ORCHESTRA: Jon Limbacher to chief development officer. MOBILE MEALS: Lorie Travaglino to president, CEO.
REAL ESTATE RUSSELL REALTORS: James Hanslik, Peter Kamples, Michael Lewis and Sally Sochacki to sales associates.
SERVICE EXPERIENT: Elizabeth Linn to strategic sales executive. INCEPT: Sam Falletta to president, CEO. PRICE FOR PROFIT: Jay Yellen to director; Cedric Crucke to associate. SKODA MINOTTI STAFFING: Jasmin Denholm to senior recruiter, Professional Staffing Group. TRANSPORT SERVICES: Adam Therrien to president.
TECHNOLOGY BRITESKIES: Matt Pokopac to delivery director. MCPC INC.: Richard Williams to network engineer; Tom Atkinson to director, business operations, branch focus; George Hoover to solution consultant; Mikala Peterson to talent acquisition specialist; Nick Parker to solution architect. ONOSYS: Scott Svoboda and Kelly Fergus to menu engineers. PARTSSOURCE: Jeff Dalton to chief operating officer.
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ebecca O. Bagley, NorTech president and CEO, said the variety of industries represented in this year’s more than 40 NorTech Innovation Awards nominations — which range in concentration from advanced energy and flexible electronics to bioscience — proves the depth and diversity of technological innovation taking place in the region. The annual NorTech Innovation Awards program highlights breakthroughs that have or demonstrate the ability to positively impact industries, markets and the local economy through job creation, attraction of capital investment and overall business growth. In addition to the 14 finalists selected, Stephen Spoonamore, CEO of Wooster-based ABSMaterials Inc., is the 2012 Regional Impact Award recipient and keynote speaker. Mr. Spoonamore has Spoonamore founded and co-founded a number of technology companies in diverse sectors, such as mining, digital image sorting, compression systems, cyber-crime detection, renewable energy, pipeline controls and complex signal transmissions. Under Mr. Spoonamore’s, leadership the company was named the 2011 Recipient of the Ohio Chamber of Commerce Excellence in Entrepreneurship Award. The company’s signature product, Osorb glass technology, was named a Top 10 Breakthrough innovation by Popular Mechanics. Winners of this year’s NorTech Innovation Awards will be announced at an award reception from 5:30 to 8:30 p.m. March 22 at LaCentre Conference and Banquet Facility in Westlake. Tickets can be purchased online at www.CrainsCleveland.com/niatix or by calling Jessica Snyder at 216-771-5388. Ticket sales close at noon March 20.
FOR MORE ON THE FINALISTS ...
ABOUT THE JUDGES
... turn to Pages 16-18 for detailed explanations of this year’s 14 finalists and their innovations:
■ Dennis Cocco, co-director, GLIDE (The Great Lakes Innovation and Development Enterprise)
■ BrainMaster Technologies Inc. ■ eQED LLC ■ GrafTech International Holdings Inc. ■ Kent Displays ■ LineStream Technologies ■ MesoCoat Inc. ■ NASA Glenn Research Center, Shape Memory Alloy Team ■ NASA Glenn Research Center/ Ohio Aerospace Institute/Sest Inc. ■ NuVention Solutions ■ Polyflow ■ Powdermet Inc.
A list of judges for this year’s NorTech Innovation Awards:
■ Sarah Coffin, most recently CEO of Aspen Growth Strategies, a family investment firm, and former executive vice president and president of Hexion Specialty Chemicals (now Momentive Specialty Chemicals) ■ Malcolm Cooke, associate professor, Department of Mechanical and Aerospace Engineering, Case Western Reserve University ■ Brian Davis, vice president, Medical Device Development Center, Austen BioInnovation Institute in Akron ■ John Gannon, president and CEO, Blue Spark Technologies ■ Mike Hripko, director, STEM Research and Technologybased Economic Development, Youngstown State University ■ Jim Jaffe, president and CEO, National Association of Seed and Venture Funds
■ Spectre Sensors Inc.
■ Ajay Mahajan, associate dean for research/professor, mechanical engineering, University of Akron
■ Tesla NanoCoatings Ltd. ■ Thermalin Diabetes
■ Grant McGimpsey, vice president for research and sponsored programs, Kent State University
CRAIN’S CLEVELAND BUSINESS
BRAINMASTER TECHNOLOGIES INC. Bedford
BrainAvatar brain imaging and biofeedback system
aster. Less costly. Higher resolution. Those are the advantages Bedford-based BrainMaster Technologies Inc. says its BrainAvatar brain imaging system offers over more traditional functional magnetic resonance imaging. BrainMaster’s electroencephalographic system has a resolution of 5 millimeters, as opposed to a typical functional MRI’s resolution of 2 mm. It has a response time of 30 milliseconds, as opposed to a response of up to 10 seconds of MRI systems. The technology behind BrainAvatar allows BrainMaster to measure in real time actual brain
eQED LLC Mayfield Village
250-watt HIKARI 01 Next Generation Solar Microinverter
cientists at eQED LLC are using innovations in electrical system design to advance the development of advanced energy. The company is a sibling of Quality Electrodynamics, a fast-growing medical imaging firm. Its technology was built on the foundation of Quality Electrodynamics’ strengths in manufacturing, electrical engineering, product development and quality systems management. The centerpiece of eQED is the 250-watt HIKARI 01, a solar microinverter that, according to the nomination, “converts direct current into alternating current at a modular level.” The product “offers a cost-effective renewable energy system design that maximized energy harvest, enhances reliability, decreases installation time and lowers maintenance costs.” In more traditional technology, solar inverters convert Direct Current (DC) from solar modules
GRAFTECH INTERNATIONAL HOLDINGS INC. Parma
rafTech International Holdings Inc. reports that with the SS1500, it has developed and commercialized the world’s thinnest graphite heat spreaders to provide cooling and shielding in ultraslim consumer electronic devices, such as smart phones. By providing effective cooling in the smallest possible form, consumer electronic device manufacturers can offer sleek, lightweight designs that still provide the performance demanded by consumers for 3G and 4G data streaming.
electrical activity, whereas other imaging techniques offer only structural or metabolic images. In turn, the system “has significant new value for neurology, psychiatry, mental health assessment and treatment, consumer research, sports, art, peak performance and optimal functioning.” Currently, the system most often is used by psychologists to examine, assess and treat patients, said BrainMaster president Tom Collura. BrainMaster employs 12 and sells the system for about $10,000, in comparison to the functional MRI system, which generally costs millions of dollars, according to the nomination. It’s sold 40 BrainAvatar systems since being introduced to the market in September. “We see this invention opening new markets and uses, and changing the face of mental health care due to its extraordinary speed and accuracy, economy and potential importance,” the nomination said.
into Alternating Current (AC). Those inverters use electronic sensing circuits and software to maximize power produced by individual modules and, as a result, the entire photovoltaic (PV) system. However, the nomination notes, “shading of a single panel causes the entire PV system to operate inefficiently.” By contrast, microinverters are smaller, component-level devices that attach to individual solar modules. “They receive modulelevel voltage and current and apply the converted AC power through a parallel connection to the grid, eliminating a single point of system failure,” the nomination stated. As a result, “with each microinverter operating at a low power level, the system demonstrates a low failure rate.” Among eQED’s partners in development of the HIKARI 01 microinverter are Kyocera Solar, a large PV panel manufacturer, and Case Western Reserve University. The nomination stated that Forest City Enterprises Inc. “has expressed interest in purchasing HIKARI 01 units.”
The SS1500 has 2½ times the thermal conductivity at onequarter of the thickness of its earlier generation heat spreaders. Additionally, the graphite sheets are delivered to customers in a continuous sheet-to-roll manufacturing process, which is ideal for high-volume, low-cost rotary die-cutting operations capable of making the millions of die-cut parts needed for the high-volume smart phone market. Full-scale manufacturing operations have been established in Lakewood, with 63 full-time jobs created or retained to meet demand, which includes for use in smart phones produced by Apple, Motorola, Nokia, Samsung and
MARCH 5 - 11, 2012
KENT DISPLAYS Kent Boogie Board Rip LCD Writing Tablet
he Boogie Board Rip LCD Writing Tablet could be considered the electronic alternative to paper. The Rip tablet (Rip stands for record, image and preserve) combines a paper-like writing experience with the ability to record written and drawn images and save them as PDF files. The files can then be transferred to a computer for editing, organizing, archiving or sharing. The Boogie Board Rip LCD Writing Tablet was introduced to the mass market in November by
LINESTREAM TECHNOLOGIES INC. Cleveland Advanced controls software
ineStream Technologies believes its software will improve control over the automated processes underlying everything from household appliances to state-of-the-art manufacturing facilities. According to its nomination, the current industry standard requires extensive initial calibration, and it reacts slowly to errors. That’s where LineStream’s innovation comes in — its software has a reduced setup time and fewer system errors. LineStream Technologies’ innovation consists of a software suite aimed at fundamentally altering
MESOCOAT INC. Euclid
esoCoat’s CermaClad system provides a new, faster way of coating, or cladding, steel to hike rust resistance compared to the industry’s standard systems that use welds or lasers for pipes, plates and other steel structures. Instead, CermaClad uses a highdensity infrared heating lamp to clad such materials with a variety of powders, such as nickel-based alloys, metallic glass, polymers and other materials.
HTC. The project first was initiated in 2007 through the Ohio Department of Development’s Third Frontier Research Commercialization Project. GrafTech was the lead on the project; local collaborators included Case Western Reserve University, the Ohio Aerospace Institute and the University of Akron. “The devices being produced by consumer electronic manufacturers are becoming ever thinner and lighter to save on raw materials and prolong battery life,” the nomination said. “GrafTech’s SS1500 material enables this weight and size reduction by managing the heat in a much smaller package.”
Improv Electronics, the consumer product subsidiary of Kent Displays. It is the newest model of e-writers from Improv Electronics that utilizes Kent Displays’ Reflex No Power LCDs. “The Boogie Board Rip tablet’s ability to record and save notes and images makes it the ideal paperless replacement for paper notebooks, legal pads, and sketch books,” according to the nomination. The device includes the following features: internal memory for 200 typical images; high-resolution, vector PDF format (nearly infinite scalability and editable in Adobe Illustrator/Photoshop and most other popular illustration and image editing programs); 9.5inch writing surface (measured diagonally); micro USB port; thin,
durable and lightweight construction; and rechargeable batteries with one week between charges under typical use. Improv Electronics also has designed free, optional downloadable software to be used in conjunction with the Boogie Board Rip tablet. “The Boogie Board Rip tablet’s paper-saving and productivity benefits will have the most pronounced impact in education and workplace environments, where note-taking activities are most prominent,” the nomination said. “It will replace wire-bound notebooks, loose-leaf paper, workbooks, essay books, composition books and sketch pads. Like other Boogie Board tablets, it is also an excellent replacement for memo pads, sticky notes and smelly dry erase boards in both schools and offices.”
the manner in which the behavior of automated processes is managed, a standard that’s been in place more than 50 years. The new software employs an advanced algorithm based on a decade’s worth of research done by Zhiqiang Gao, director of the Center for Advanced Control Technologies at Cleveland State University, which spun the technology out into the startup now known as LineStream. LineStream’s flagship products, InTac (Industrial Tuning and Control) and SpinTac (Spin Tuning and Control) have demonstrated commercial and technical merit. Parker Hannifin Corp., for one, partnered with LineStream for a test implementation of InTac in a hose extrusion facility, according
to the nomination. Not only did performance improve by 30%, but energy consumption dropped by more than 50%; the system no longer resided in a state of perpetual self-correction. Parker Hannifin immediately licensed InTac — which is aimed at managing industrial processes — for plantwide use, the nomination said. Texas Instruments, meanwhile, has worked closely with LineStream to investigate SpinTac, which is aimed at the motor control market. That technology withstood scrutiny from the firm and outperformed Texas Instruments’ standard in every key metric. In July, Texas Instruments signed a licensing agreement for the technology, revealing a degree of commercial validation enjoyed by few startups.
The company says the process can produce stronger, pinhole-free coatings more uniformly and faster than other methods. Currently, metal cladding with corrosion and wear-resistant materials is considered to be the best cost-effective option for corrosion and wear protection, but the process can lead to huge lead times, costs that are four or five times that of carbon steel and undesirable properties that have limited its application in the industry. According to the nomination, CermaClad is 15 to 100 times faster, 20% cheaper and it offers
better corrosion and wear resistance. MesoCoat is the only company globally to commercialize this technology because it has an exclusive license to it from the Oak Ridge National Lab and has filed three U.S. patents of its own. The process can have an impact in a huge industry, for MesoCoat estimates the worldwide paint and coating business is a $100 billion industry annually and metal coatings alone is a $28 billion industry. CermaClad also can help protect the environment by reducing the call for steel products to replace corroded steel and is particularly suited to serving the oil and gas industry’s offshore drilling efforts.
2011 NORTECH HONOREES
FILE PHOTO/JASON MILLER
A group of award winners and finalists gather after last year’s ceremony.
CRAINâ€™S CLEVELAND BUSINESS
MARCH 5 - 11, 2012
NASA GLENN RESEARCH CENTER, SHAPE MEMORY ALLOY TEAM
NASA GLENN RESEARCH CENTER/OHIO AEROSPACE INSTITUTE/SEST INC.
Cleveland Advanced high-temperature shape memory alloys
Large tapered crystal to achieve nearly perfect silicon carbide
ne day, you may fly on a plane, drive a car or stand in a shower that uses shape-shifting metals developed by NASA Glenn Research Center. The center is working with a broad group of researchers and companies to commercialize a lineup of metals that change shape at temperatures between 200 and 600 degrees Fahrenheit and then revert to their original shape when they cool down. These â€œshape memory alloysâ€? could be used in a wide variety of industries. For instance, they could be used to create a part for jet engines that could reduce noise during takeoff and change shape as the plane reaches cruising altitude, allowing it to save fuel. In cars, the metals could be used as part of a system that would turn waste heat from engines into electricity. In the home, they could be used to shut off faucets when water reaches dangerously high temperatures. These are just a few examples of how manufacturers could use NASA Glennâ€™s shape memory alloys, which could serve as actuators in a variety of products that today use electric motors and other devices to trigger certain actions. Shape memory alloys would be lighter, smaller and easier to maintain because they have fewer moving parts. The only similar alloys on the market change shape at about 120 degrees Fahrenheit, making them unsuitable for many applications, according to the nomination form. NASA Glennâ€™s shape memory alloy team not only developed the materials, but it also designed the process for melting and casting the alloys. The center, however, is not working alone. Since 2005, the shape memory alloy team has worked with two other NASA centers, 12 universities and several vendors, small businesses and major corporations. Some of the bigger partners include General Electric, Boeing, General Motors and the Cleveland Clinic, which could help NASA Glenn develop ways to use shape memory alloys in medical products.
inally, something better than the silicon chip might be coming along. OK, that might not mean much to most folks, but scientists have known for some time that, while silicon makes a workable semiconductor, they could get even better results if they used high-quality silicon carbide, at
least in some applications. It works better, saves power and its high thermal conductivity helps it work in highpowered devices. Some, including the folks above, believe it could revolutionize the power transmission industry, while also providing big gains to automotive, aerospace, communication and other industries. But, until now at least, getting a near perfect wafer of silicon carbide, or SiC, was a tough thing. We
wonâ€™t get too technical here, but suffice it to say that most of the stuff is grown by a process that begins with a â€œlarge-area highly defective hexagonal polytype seed crystal.â€? The folks at NASA, along with the Ohio Aerospace Institute and Sest, have come up with a better way to produce this important raw material. They did it by inventing a whole new process for growing this crystal material, basically by starting out with a smaller,
more perfect seed, but finding a way to grow it faster. It could do for semiconductors what LED lights are doing for lighting â€” and, coincidentally, LED lights also rely on silicon carbide. The result of the groupâ€™s work is a process that makes a material with far fewer flaws than what can be produced by other methods. The process is good enough that the group won a patent for it. And if theyâ€™re right about its potential, it might also be good enough to bring a few industries into the 21st century a little quicker.
POLYFLOW Akron Waste-to-energy conversion technology utilizing unrecyclable plastic and rubber waste
NUVENTION SOLUTIONS INC. Valley View
Accelerating the commercialization of a novel bio resource resin (BR2)
his innovation puts animal waste to work. Valley View-based NuVention Solutions is working to commercialize a new technology that converts manure solids into bio oil, which then is converted into a variety of bio resource resin (BR2) products, including asphalt binders, roofing materials and fertilizer coatings. In addition, the company cleans resulting liquid effluent using an algae bioreactor, making its manure management approach unique in that itâ€™s developing technologies to handle every component, solid and liquid, the nomination said. The technology is â€œgamechangingâ€? for a list of reasons, including its creation of a new revenue stream for farmers, the solution it provides for manure management and watershed protection, and how it lowers costs for pavement binding and fertilizer coating. â€œNot only does NVS technology help solve the critical problems created by (animal) waste, but it also uses this waste to produce sound value-added products that can compete favorably in the marketplace,â€? the nomination said. Bio resource resin imparts properties that either mimic or enhance those of existing materials at a lower overall cost. Patent applications have been filed for BR2-based
fertilizer coatings and asphalt paving, roofing and sealant products. The technology has been reviewed by a variety of end users and funding agencies, most recently the Ohio Third Frontier program. In total, NuVention Solutions has received more than $3.6 million in funds and in-kind services to develop the project. The first test strip of pavement containing a BR2-based binder was laid in May 2010 in Eureka, Mo., and was found to outperform the control. Now, NuVention Solutions is working with the Ohio Department of Transportation to lay test strips of pavement made from BR2-based binder this summer. NuVention Solutions also will commence by the second quarter of this year large-scale trials for both bio oil and its algae production on a hog farm in Jeromesville, Ohio.
ater bottles, yogurt containers, bubble wrap, paint buckets and clothes hangers â€” for Polyflow in Akron, this isnâ€™t garbage but rather a few of the ingredients the company can use to produce new fossil fuels. To create fuel, the Polyflow process relies on the availability of mixed-polymer waste, of which thereâ€™s no shortage. The United States produces about 41 million tons of mixed polymer waste each year, according to the nomination. â€œThe Polyflow technology ensures price and supply stability to petroleum and petrochemical manufacturers as its production is not dependent on traditional sources of crude oil or natural gas to produce end products,â€? the nomination said. â€œSimply stated, Polyflow utilizes a low-cost raw material and produces a high-value end product.â€?
The fuels produced through the Polyflow process have the same properties as conventional fuels. They can be blended with traditional gasoline and diesel to create transportation fuels that would lower dependence on foreign oil sources. Polyflow also suggests its technology could alleviate the pressure facing the nationâ€™s landfills. For example, 93% of all plastic and rubber ends up in landfills. Also, the company suggests that using 100% of the nationâ€™s available polymer waste through the Polyflow process could reduce U.S. dependence on foreign oil up to 13%. â€œAt a time when there is an increasing concern over the negative environmental effects of landfilling or incinerating plastic waste, Polyflow removes the recycling industryâ€™s tallest hurdle while offering a consistent, stable and profitable source of energy for the economy,â€? the nomination said.
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POWDERMET INC. Euclid
MComP micro/nanocomposite metals
ith its latest innovation, Euclid-based Powdermet Inc. has its eye fixed on, among other things, the EPA and National Transportation Safety Boardâ€™s joint effort to drastically increase fuel efficiency in cars by 2025. In technical terms, the company says its MComP metals â€œoffer high-strength-to-weight materials
SPECTRE SENSORS INC. Elyria Commercial silicon carbide MEMS pressure sensor
pectre Sensors Inc. is commercializing a pressure sensor that aims to offer no less than better long-term performance, higher temperature tolerance and better chemical resistance in harsh environments than existing sensors. No pressure there. The Elyria company is using
MARCH 5 - 11, 2012
for lightweighting a wide variety of applications where weight reduction is critical and volumetric properties cannot be sacrificed.â€? In other words, the companyâ€™s aluminum and magnesium alloys maintain the strength of steel but offer up to a 70% weight savings. Swap those alloys into automotive and aerospace applications, and you get significant reductions in energy costs. The company is working with
Case Western Reserve University, the National Science Foundation and the Army on early production methods and demonstrations, including for use in automotive connecting rod, wheel and braking applications. Those uses, Powdermet says, will help auto manufacturers meet new corporate average fuel economy standards of 54.5 miles per gallon by 2025. The automotive market is Powdermetâ€™s main target, but it lists other potential markets as military
armored vehicles, sporting equipment and computer housings. Replacing the steel chassis and flywheel â€” a part that helps transfer power from a carâ€™s engine to its transmission â€” with MComP metals would reduce the weight of a midsize vehicle 22%, according to Powdermet. The company says overall transition to MComP metals can help reduce global fuel consumption by 1.25 trillion gallons per year, while potentially reducing carbon emissions by 24.5 billion pounds in a vehicle.
silicon carbide MEMS (microelectromechanical systems) technology to develop the sensor, which will be compatible with housing and fitting used in Spectreâ€™s current product lines of industrial and aerospace pressure transducers. Its partners in the MEMS sensor are the NASA Glenn Research Center and the Richard Desich SMART Commercialization Center for Microsystems at Lorain County Community College. Spectre has applied to license the silicon carbide (SiC) sensor
technology from NASA Glenn. The company says silicon carbideâ€™s inherent hardness â€” close to that of a diamond â€” and strength â€œgive it unparalleled long-term performance and ability to perform in high-temperature settings.â€? High thermal conductivity and low thermal expansion â€œgive this material exceptional thermal shock-resistance qualities,â€? the nomination said. Indeed, the company notes in its nomination that in tests at NASA Glenn, the SiC pressure sensors maintained
their strength at very high temperatures. As Spectre executives see it, those qualities mean their sensor technology â€œcan dramatically improve and expand the pressure measurement market and become the preferred choice in virtually any petrochemical, chemical, food, pharmaceutical, military, space or nuclear applications.â€? Spectre says it plans to introduce the technology to its existing customers â€œand selectively expand into new markets with strategic partners.â€?
the coating particles and the base metal. Since the coating includes zinc and other cathodic materials, the metal is protected even if the coating is pierced. If that happens, the zinc and other sacrificial materials in the coating give up their electrons to protect the base metal â€” the
same way anodes are used to protect bridges and other structures. The U.S. Government Accounting Office estimates that corrosion costs the U.S. $400 billion a year, and the U.S. market for corrosioncontrol coatings is about $50 billion a year. So thereâ€™s money to be made â€” and the industry has not seen any groundbreaking new technologies in more than 50 years, says Tesla. The Army already has been testing the coating for six years â€” and is recommending that it be used to replace the coatings now in use by the military on steel structures.
TESLA NANOCOATINGS LTD. Massillon
Teslan Carbon Nanocoating
ust never sleeps, but Tesla NanoCoatings hopes to at least give it a rest. The company, working with the U.S. Army Engineer Research and Development Center, has come up with a new coating that goes on metal like paint, but protects the metal like paint and galvanizing combined â€” if not better.
Using nanotechnology, Tesla has figured out how to engineer a coating filled with microscopic carbon nanotubes. The tubes act like little ropes to bind and strengthen the coating itself, but they also serve as little strands of wire able to conduct electricity within the coating and between
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Dan Hill Lie to Me! â€“ Emotional Management of Your Marketing Will Invite Trust, Not Contempt Julie Savarino Mastering the Sales Process for Litigators and Transactional Lawyers
FILE PHOTO/JASON MILLER
Hiroyuki Fujita, of Quality Electrodynamics, speaks at last yearâ€™s NorTech Innovation Awards.
THERMALIN DIABETES Cleveland Portfolio of insulin analogues
hermalin Diabetes is out to change the way that the worldâ€™s diabetics manage their conditions. The Cleveland company aims to commercialize four new types of insulin. The first product expected to hit the market could solve several problems with existing insulin formulas. For one, it is designed to be absorbed by the body almost immediately. Existing insulin formulas typically take about 15 minutes to start working. Thermalinâ€™s product also would help keep patientsâ€™ blood sugar levels from dropping too low after meals, which can drive patients to eat more and gain weight. And unlike other insulin formulas, Thermalinâ€™s first product doesnâ€™t need to be refrigerated, which would allow the company to distribute it by mail or sell it in Third World countries. It also could be a better form of insulin for patients with insulin pumps: Not only could the fastacting formula help patients with glucose monitoring systems regulate their blood sugar levels in real time, but it also is six times more concentrated than traditional insulin. Thus, it would allow manufacturers to build smaller pumps, which would be particularly important if implantable pumps take off. The new formulas were developed by Dr. Michael Weiss, who is both chair of the biochemistry department at Case Western Reserve University Medical School and Thermalinâ€™s chief scientific officer. The company is targeting a large market: About 366 million people in the world have diabetes, and that number is projected to grow rapidly over the next few decades. Several large pharmaceutical companies are shopping for better insulins, partly because in a few years some existing formulas no longer will have patent protection. Thermalin has had early stage conversations with pharmaceutical companies with which the startup hopes one day it could form partnerships. Thermalin aims to begin testing its first product in clinical trials in early 2013.
Note: Check our website for a complete listing of all presenters.
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2011 WINNERS Last yearâ€™s nine honorees: â– VasoStar Inc.: Vibrational guide-wire system for crossing chronic lesions â– Kent Displays Inc.: Boogie Board LCD Writing Tablet â– Echogen Power Systems Inc.: Advanced energy recycling using a CO2-based power cycle â– Ashlawn Energy LLC: Vanadium Redox Flow Batteries for energy storage solutions â– RTI International Metals Inc.: Continuous casting method for making
titanium ingots â– The University of Akron: Ultrasonic rubber devulcanization extruder and technology â– AeroClay Inc.: AeroClay, a clay-based aerogel, a lightweight porous material that can have a variety of mechanical properties â– MAR Systems Inc.: Sorbster, which extracts heavy metals from water â– AllTech Medical Systems America Inc.: High-performance, low-cost total MRI system
MARCH 5 - 11, 2012
CRAIN’S CLEVELAND BUSINESS
NORTHEAST OHIO INVESTMENT BANKS LISTED ALPHABETICALLY(1)
Company Address Phone/Website
# of local investment bankers
BellMark Partners LLC 635 W. Lakeside Ave., Suite 606, Cleveland 44113 (216) 575-1000/www.bellmarkpartners.com
Brown Gibbons Lang & Co. LLC 1111 Superior Ave., Suite 900, Cleveland 44114 (216) 241-2800/www.bglco.com
Top local executive Title
Chief investment banker(s)
Merger advisory services, restructuring, valuations and Dave Gesmondi fairness opinions, strategic alternative reviews managing director
Dave Gesmondi managing director
Michael E Gibbons Merger advisory services, restructuring, capital raising senior managing director, principal
Michael E. Gibbons senior managing director, principal
Bruml Capital Corp. 1801 E. Ninth St., Suite 1620, Cleveland 44114 (216) 771-6660/www.brumlcapital.com
Merger advisory services, sell-side and buy-side transaction advisory services, raising private capital, valuation and fairness opinions
Robert W. Bruml president
Candlewood Partners LLC 10 1/2 E. Washington St., Chagrin Falls 44022 (440) 247-2800/www.candlewoodpartners.com
Michael F. Paparella, Glenn C. Domestic and international advisory services regarding Pollack, William W. mergers, acquisitions, divestitures, restructurings and Vogelgesang, managing capital raises directors; Christopher S. Wagner, director
Michael F. Paparella managing director
Carleton McKenna & Co. 1801 E. Ninth St., Suite 1425, Cleveland 44114 (216) 523-1962/www.carletonmckenna.com
Buy-side and sell-side M&A advisory services, equity and debt capital raising, valuation and fairness opinions
Paul H. Carleton, managing partner; Christopher J. McKenna, managing director
Paul H. Carleton, managing partner; Christopher J. McKenna, managing director
CastleOak Securities LP 1707 Terminal Tower, 50 Public Square, Cleveland 44113 (212) 610-2413/www.castleoaklp.com
New York, NY
Sales and trading, capital markets and financial advisory services; primary and secondary market transactions; mergers, acquisitions
Chautauqua Consulting 8365 King Memorial Road, Kirtland Hills 44060 (440) 520-5864/www.chtaqua.com
Manufacturing, distribution, service, sale-leasebacks, real estate, truck equipment
Rick Sippola president
Rick Sippola president
Cohen Capital Advisors(2) 1350 Euclid Ave., Suite 800, Cleveland 44115 (216) 774-1100/www.cohenca.com
M&A advisory services - manufacturing, electrical equipment, telecommunications, metals, business services, health care
James Lisy Mike Boeckman managing directors
EdgePoint Capital Advisors 3700 Park East Drive, Beachwood 44122 (216) 831-2430/www.edgepoint.com
Manufacturing, distribution, technology, chemicals, transportation, industrial products, health care
Thomas Zucker, president; Dan Thomas Zucker Weinmann, John Herubin, Russ president Warren, sr. vice presidents
Evarts Capital LLC 20600 Chagrin Boulevard, Suite 495, Cleveland 44122 (216) 991-1201/www.evartscapital.com
Merger and acquisition advisory services, sell-side and G. William Evarts buy-side transaction advisory services, capital Todd Peter placement and financial restructurings managing partners
G. William Evarts Todd Peter managing partners
Harris Williams & Co. 1900 E. Ninth St., 20th floor, Cleveland 44114 (216) 689-2400/www.harriswilliams.com
Sell-side and acquisition advisory, restructuring advisory, board advisory, private placements and capital markets advisory services
Geoffrey Frankel, managing director, head of restructuring advisory services
William P. Watkins, managing director, head of business development
Holmes Hollister & Co. 1111 Superior Ave. E., Suite 1400, Cleveland 44114 (216) 937-2320/NA
General industrial, transportation, specialty materials, Internet, for-profit education
John B. Hollister III Douglas Q. Holmes partners
John B. Hollister III partner
KeyBanc Capital Markets 127 Public Square, Cleveland 44114 (216) 689-3000/www.key.com/html/keybanc-capitalmarkets.html
Consumer, energy, financial sponsors, industrial, real estate
Randy Paine, exec. vp, head of corporate and investment banking; Doug Preiser, COO
Laux & Co. 672 W. Liberty St., Medina 44256 (330) 721-0100/www.lauxco.com
Middle-market investment banking firm, merger and acquisition advisory, recapitalizations, financial restructurings, turnarounds
William J. Laux president
William J. Laux president
League Park Advisors 25101 Chagrin Blvd., Suite 210 , Cleveland 44122 (216) 455-9985/www.leaguepark.com
Mergers and acquisitions, refinancing, capital raising, strategic advisory
Sean Dorsey founder, managing director
Sean Dorsey founder, managing director
MelCap Partners LLC 1684 Medina Road, Suite 102, Medina 44256 (330) 239-1990/www.melcap.co
Middle-market investment banking firm focusing on M&A advisory, private placement of debt and equity capital, and general advisory services
Albert D. Melchiorre, president; Albert D. Melchiorre Sean T. Demlow, senior vice president president
Merkel & Associates Inc. 29325 Chagrin Blvd., Suite 101, Pepper Pike 44122 (216) 831-1440/www.merkelandassociates.com
Manufacturing, distribution, business services
Nicholas B. Merkel president
ParaCap Group LLC 6150 Parkland Blvd., Suite 250, Mayfield Heights 44124 (440) 869-2100/www.paracapgroup.com
Insurance, financial institutions, waste management, industrial, mezzanine investing
Will Areklett, Jeff Boyle, Charlie Crowley, Mike Voinovich, Jason Wolfe, managing directors
Will Areklett, Jeff Boyle, Charlie Crowley, Mike Voinovich, Jason Wolfe, managing directors
Red Hawk Associates Ltd. 30539 Pinetree Road, Suite 228, Pepper Pike 44124 (216) 464-8714/www.redhawkassociates.com
Mergers and acquisitions, corporate finance, restructuring and turnarounds
David Brown managing director
David Brown managing director
Vetus Partners 1300 E. Ninth St., Suite 600, Cleveland 44114 (216) 333-1840/www.vetuspartners.com
Distribution and logistics, engineered products, Jay K. Greyson automation, controls and electrical products, specialty managing director, materials, corporate carve-outs and divestitures principal
Jay K. Greyson managing director, principal
Western Reserve Partners LLC 200 Public Square, Suite 3750, Cleveland 44114 (216) 589-0900/www.wesrespartners.com
Mergers & acquisitions, capital raising, real estate, restructuring and bankruptcy, financial opinions and valuation services
Ralph M. Della Ratta managing partner
Robert W. Bruml, president; Andrew S. Gelfand, sr. vp; Eric W. Starr, vp
Source: Information is supplied by the companies unless footnoted. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. Individual lists and The Book of Lists are available to purchase at www.crainscleveland.com. (1) Numbers as of Jan. 1, 2012. (2) Formerly Raintree Capital Partners.
Rehab: Services bolster hospitals’ bottom lines continued from PAGE 3
when the unit downtown is completely full, and these patients may go to other rehab providers.” Mr. Tait said. “We felt it was time to add rehab capacity for potential growth in rehab services.” University Hospitals is partnering with Nashville-based Centerre Healthcare Corp., which will own a majority stake in the new venture.
Summa favors freestanding Summa Health System in Akron took a similar approach when it partnered with Pennsylvania-based Vibra Healthcare on a $25 million acute rehabilitation hospital that
opened on the Akron City Hospital campus this year. “We economize when we work together,” said Cheryl Henthorn, CEO of the new 60-bed Summa Rehab Hospital. “We gain that immediate level of expertise, and there are efficiencies in moving the project forward.” Also, freestanding facilities carry more cachet than a traditional rehab unit embedded in a hospital. “When you move to a freestanding facility, you provide a service that is recognized in the community,” Centerre CEO Pat Foster said. “You attract patients from various settings, not just within walls of the hospital.”
The MetroHealth System currently has a 35-room unit devoted to inpatient rehab in about 31,500 square feet at its main campus off West 25th Street in Cleveland. While the space is embedded in MetroHealth’s main hospital, Dr. James Begley, the system’s director for inpatient rehabilitation, said MetroHealth has been able to maintain the “character of a freestanding hospital” because of its exhaustive roster of services. Still, MetroHealth soon will move its entire inpatient rehab department to its Old Brooklyn campus, the site of the old Deaconess Hospital on Pearl Road. The move will expand the system’s inpatient rehab unit to
44 rooms in nearly 35,000 square feet. “This is a service that MetroHealth intends to invest in and grow because we feel we are the best at it in the community,” said Sherry Aronson, the system’s vice president of inpatient operations.
Avoiding a trapdoor Rehab space, in general, always has been a revenue generator, said Dr. Frederick Frost, executive director of rehabilitation and sports therapy at the Cleveland Clinic. While it isn’t a huge moneymaker at the Clinic, Dr. Frost said rehabilitation is “not a drain on a hospital system but positively contributes to the finances regardless of setting.” By contrast, Akron General Health System has touted its Edwin Shaw
RESEARCHED BY Deborah W. Hillyer
Rehabilitation Institute, which moved to renovated space in Cuyahoga Falls in late 2009, as one of its hallmark programs. Without sharing specifics, Kim Strubel, vice president at the institute, said Edwin Shaw’s contribution to the health system’s financial health was “substantial.” The Clinic’s Dr. Frost noted that a robust rehabilitation program could offset costly readmissions. For one, the federal government has threatened to siphon Medicare dollars from institutions with high readmission rates for patients with certain chronic conditions. “We are attacking that trapdoor and we can’t ensure good quality outcomes unless we have some influence over the post acute-space,” he said. ■
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Contact: Phone: Fax: E-mail:
MARCH 5 - 11, 2012
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REAL ESTATE AUCTION / MARCH 29 4 MOBILE HOME PARKS IN NE OHIO Trumbull County Court of Common Pleas Orders the Immediate Sale Pursuant to Case No. 2010CV03145 ALL MOBILE HOME PARKS TO BE OFFERED REGARDLESS OF PRICE BY COURT ORDER!
OUT-OF-STATE OWNER ORDERS IMMEDIATE SALE DEACONESS PROFESSIONAL CENTER OFFICE BUILDING
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OFFERED WITH A PUBLISHED RESERVE PRICE OF $52,500/ACRE WITH BIDDING TO COMMENCE AT $27,500/ACRE
OFFERED ABSOLUTE, REGARDLESS OF PRICE
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4269 Pearl Rd., Cleveland, OH 44109 - Four-story medical/ofﬁce building consisting of 41,153 SF on approx 0.6 Acres. Built in 1983 of steel-frame and concrete construction with brick exterior. Currently 27% occupied with $174,227 in annual rent. Incredible upside potential! On-Site Inspections: Thursdays, March 8, 15, & 22 from 1:00P.M. to 3:00P.M.
Broadview Heights, OH
54.25 Acres on Rt 91 (Darrow Rd), with visibility from I-480. Just south of New Cleveland Clinic Hospital and GE plant. Surrounded by quality ofﬁce & industrial buildings with potential for showroom or service uses on the Rt. 91 frontage. Currently zoned R-2 with opportunity to Re-Zone to I-2.
6250 Broadview Rd. 4.73 Acres on the SE side of Broadview Rd. near SR-82. Less than 1-mile west of I-77/SR-82 interchange (location of new major retail development). Immediately North of Broadview Hts City Complex & Recreation Center at intersection of Broadview Rd and SR-82. Zoned C-4.
OFFERED WITH A PUBLISHED RESERVE OF $325,000 WITH BIDDING TO COMMENCE AT $225,000
OFFERED ABSOLUTE, REGARDLESS OF PRICE! SUGGESTED OPENING BID: $10,000
Off-Site Due Diligence Seminar: Tuesday, March 20th, 2:00P.M. to 4:00P.M. Chartwell Group Headquarters, 1301 E. 9th St., #2210, Cleveland, OH 44114
AARDVARK-LLC.COM 440-605-0555 • Fax 440-605-0666
• Lower Your Current Overhead • Property Management & Maintenance • Collections • Accounting & Payroll • Business Consultation
Broadway & E. 65th St. 2 Parcels next to Walgreens • 0.49 Acres and 0.31 Acres
1 Parcel next to Home Depot • 1.5 Acres
OFFERED WITH A PUBLISHED RESERVE PRICE OF $60,444/ACRE WITH BIDDING TO COMMENCE AT $30,000/ACRE
CHARTWELL GROUP, LLC / Gordon Greene, OH R.E. Broker and Auctioneer
Chartwell Group, LLC/Chartwell Auctions, LLC Michael Berland, Court Appointed Auctioneer • www.ChartwellAuctions.com
Real Estate Consulting
For Additional Information, Brochure and Terms of Sale, Call Mac Biggar at 216-360-0009
For Additional Information, Brochure and Terms of Sale, Call Mark Abood, OH RE Salesperson, 216-360-0009
CF CAPITAL ASSETS LLC
3 Parcels next to Walmart, off Rt. 87 1.6 Acres, 1.3 Acres, and 1.8 Acres OFFERED WITH PUBLISHED RESERVE PRICES STARTING AT $50,000/ACRE WITH BIDDING TO COMMENCE AT $27,500/ACRE
OFFERED WITH PUBLISHED RESERVE PRICES STARTING AT $50,000/ACRE WITH BIDDING TO COMMENCE AT $27,500/ACRE
REAL ESTATE SERVICES
SUGG OPENING BID: $75,000
STRATEGIC LAND DEVELOPMENT SITES
1 Parcel next to Midway Mall • 11.4 Acres
Luxury Living West bank of Cuyahoga across from new Horseshoe Casino – property is designed for 170 deluxe apartments including penthouse suites.
Call George 216-469-1541
Just off I-90 this few years young 3 story brick colonial is For Sale at ½ the original sale. A one-ofa-kind home featuring 15 distinctive rooms including 9 bedrooms.
Now is a great time to promote your Luxury Properties to high-end prospects AND receive reduced rates on your advertising.
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OFFICE SPACE Downtown Loft Office Space Available! 2,000 sq ft * Great location * Attached parking
BEREA OFFICES 800 SF TO 15,000 SF $7 SF Clint Williams Owner/ Broker
LEGAL NOTICE PUBLIC NOTICE
VILLAGE OF NEWBURGH HEIGHTS SALE OF PROPERTY The Village of Newburgh Heights is accepting sealed bids for the sale of Permanent Parcel Number 511-14-001. Bids should be submitted in writing, sealed and mailed via certified mail or hand delivered to Newburgh Heights Village Hall, 4000 Washington Park Boulevard, Newburgh Heights, OH 44105. No bid will be accepted after 4pm on Friday, March 23rd, 2012. All bids will be opened at a public hearing on Friday, March 23, 2012 at 4:45 PM. The public bid opening shall be held at Newburgh Heights Village Hall, 4000 Washington Park Boulevard, Newburgh Heights, OH 44105. The Village of Newburgh Heights reserves the right to reject all bids. For additional information please contact the Mayor’s Office at 216-641-4650.
COMMERCIAL PROPERTY Rocky River
Prime Medical Retail 440 331-7250 For daily on-line updates, sign up @ CrainsCleveland.com/Daily
Former AutoNation sites available for sale by auction. Rare opportunity to purchase large land tracts with highway visibility and access in established markets on Cleveland’s east and west sides. Visit www.autonationsites.com for more information and to submit offers. Bids due by March 23, 2012
CLASSIFIED BUSINESS FOR SALE
Crain’s Executive Recruiter
Medical Technology Company For Sale Provide computer based solutions to medical practices. Products include Patient Accounting, Electronic Medical Records, associated electronic services and computer hardware. Turnkey operations include the purchase and installation of computer systems, training and support designed to automate patient accounting functions. Provide consultation in the areas of automation, productivity and billing operations. Business is strong with high profit margins and large client base. Substantial commissions and reoccurring revenue. Many clients are on contracts for electronic services. Company is highly ranked in the industry. Growth potential unlimited. Established 1989.
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MARCH 5 - 11, 2012
Osborne: Natural gas price drop damages properties continued from PAGE 1
million from RBS Citizens N.A., better known locally as Charter One Bank. The bank maintains the loans are in default, though Mr. Osborne’s lawyers dispute the claim. With many individuals and companies rushing to develop shale resources in Ohio through horizontal drilling, Mr. Osborne’s gas experience offers a cautionary tale. In a Bankruptcy Court filing for the cases, Donald Whiteman, the controller for Oz and Great Lakes Exploration, said the debtors’ financial difficulties “are the direct result of the drop in the price of natural gas. “In 2007 and 2008, the price of natural gas was approximately $11 to $12” per thousand cubic feet, Mr. Whiteman wrote. “In 2009, the price dropped dramatically to approximately $8 per MCF. The price of natural gas has since further declined and the average price (is) currently in the range of $4 to $3.20 per MCF.” The decline “has had a snowball effect on the companies and their ability to manage their respective debts,” he wrote. Falling natural gas prices put the companies in noncompliance with a provision of the RBS loans that the loans not exceed 60% of the value of the companies’ natural gas reserves. Although the companies tried to secure bank approval to reorganize and refinance, RBS last Oct. 3 sued to foreclose. The suit was filed in U.S. District Court in Cleveland. Mr. Whiteman said in a court filing that the companies could operate profitably at lower natural gas prices if it weren’t for the RBS loans because they have slashed expenses, may sell some equipment and may provide drilling services to other companies in the region. The bankruptcy proceedings are far from the only legal matters demanding Mr. Osborne’s attention. In January, Mr. Osborne sued Home Savings and Loan Co. of Youngstown over a foreclosure proceeding initiated by the bank. The foreclosure was related to a $4 million loan secured by Great Lakes Shopping Center, a small strip center in Mentor owned by one of Mr. Osborne’s companies. Also, a total of $5 million in judgments against several of Mr. Osborne’s real estate partnerships, Mr. Osborne himself and the Richard M. Osborne Trust have been recorded in both Lake County and Cuyahoga County courts by Citizens Bank and First Federal of Lakewood as they have sought to recoup loans owed them.
Between friends Mr. Osborne and his friend Steven Calabrese — owner of the CRM Real Estate Services appraisal services firm and a real estate owner and developer in his own right — also are suing each other over disputes related to two different joint real estate ventures. Mr. Calabrese said in a phone interview last Wednesday, Feb. 29, that Mr. Osborne “is not paying on a lot of things, including some things that we have been involved in for many, many years. I have taken action to clarify things for my interests and other investors.” In a case filed last October in Lake County Court of Common Pleas, Mr. Calabrese’s lawyers maintain
that, without Mr. Calabrese’s approval, Mr. Osborne transferred to himself one of five vacant parcels the two men owned jointly in Madison Township. Mr. Osborne last Nov. 22 sued Mr. Calabrese in Cuyahoga County Court of Common Pleas for allegedly violating his fiduciary duty and breaking a contract over a large piece of land at 27981 Euclid Ave. in Euclid. In court filings, attorneys for Mr. Osborne claim Mr. Calabrese damaged the value of the parcel by including an $840,000 loan on the property in a separate, $15 million loan he had obtained on multiple properties. Mr. Calabrese said last Wednesday that Mr. Osborne had agreed to the move because Mr. Calabrese was able to renew the smaller loan, which was expiring soon, and trim its interest rate by packaging it with other properties. Lawyers for Mr. Osborne also make multiple references to Mr. Calabrese’s contact with executives of Home Savings in a countersuit to the foreclosure Home Savings filed last summer on a nearly $7 million loan related to 300 acres the men own on the Willoughby-Mentor border. They were unable to develop the property because the U.S. Army Corps of Engineers decided more than 30% of the acreage was wetlands. Mr. Osborne’s lawyers say in court filings that Mr. Calabrese fomented the foreclosure on Mr. Osborne thanks to Mr. Calabrese’s relationship with Home Savings executives; the lawyers say that relationship also kept Mr. Calabrese from being named a party to the foreclosure.
CRAIN’S CLEVELAND BUSINESS
BRIGHT SPOTS Bright Spots is a periodic feature in Crain’s highlighting positive business developments in Northeast Ohio. To submit information, email Scott Suttell at email@example.com ■ Corporate law firm Brennan, Manna & Diamond plans to open an office in Shanghai in April — the Akron-based firm’s fourth location and first beyond U.S. borders. John Tang, a Shanghai native who has worked in the firm’s Akron location since 2007, will lead the new office as managing partner. Veronica Jiajia Xu, an associate at the firm, will work with Mr. Tang on litigation and corporate matters that arise in China in addition to taking over his role in the business, corporate and litigation practice groups in Akron. “We’re all aware of China’s role in the global marketplace, and we felt we could not service our clients correctly without a presence in that market,” said Anthony Manna, the firm’s founding member and chairman, in a statement. “Shanghai is the financial center for mainland China, and we will be based in the center of the financial district.” Mr. Tang said he will “facilitate cross-border transactions, guide and protect my clients’ U.S. investments in China and bring Chinese investments to Northeast Ohio.” ■ KeyBank said it has reached a goal set in 2009 to make $3 billion in
loans to women-owned businesses, and it did it three months ahead of target. The intent was to make the $3 billion in loans by April 2012; Key said it reached that level by the end of December 2011. The loans went to businesses of all sizes, though many of them are small firms. “Through our Key4Women program, we deliver on our commitment to women-owned businesses,” said Maria Coyne, a Key executive vice president and founder of Key4Women, a program that provides women in business access to capital, customized financial products, and educational and networking opportunities. “They’re helping to drive economic growth; they’re investing in their companies and their employees,” she said. Key last fall committed to lending $5 billion overall to small businesses in the next three years. ■ Excellence Industries of Tampa, Fla., which provides commercial refrigeration services for the food and food service industries, announced that is has opened a 55,000-square foot-warehouse in Brook Park. The Brook Park warehouse, which became operational in January, lifts the company’s total warehousing capacity to more than 200,000 square feet nationwide. In addition to Cleveland, Excellence Industries has operations in Florida, Tennessee and Nevada. Brook Park was selected because
of its central location, Excellence Industries said. “The new facility allows us to provide substantial freight savings to our national customers and drastically reduce lead time for deliveries to the Northeast and Midwest,” said Dell Dahl, the company’s president, in a statement. “It’s a huge advantage for us to ship from four different facilities strategically spread across the country. It also optimizes our inbound containers being shipped from around the globe.” ■ Fast casual Asian restaurant chain Mama Fu’s of Austin, Texas, said it has signed a three-store development agreement in Northeast Ohio. “It’s an exciting time for Mama Fu’s as we continue to build on the success of the brand and increase momentum towards our national expansion goals which include entering into strong, new markets like Cleveland,” said Randy Murphy, president and CEO of Mama Fu’s. The deal is with Shaw Concepts LLC, led by husband-and-wife business and franchise partners, Mark and Lisa Shaw. Mama Fu’s said Mr. and Mrs. Shaw successfully have opened and operated two Melting Pot franchises in Michigan. “The quick-service Asian market is rapidly catching fire, and there are a growing number of chains currently carving out a new fast casual Asian niche,” Mark Shaw said in a statement. “We couldn’t be more excited about bringing the concept to Cleveland.” Locations should be announced later this year.
The best defense … In their countersuit against Home Savings, Mr. Osborne’s lawyers maintain the borrower was treated unfairly. They said Mr. Osborne was current on payments and had been in negotiations to renew the loan up to the time Home Savings foreclosed. The Osborne side also maintains Home Savings was trying to get the loan off its books to satisfy a ceaseand-desist order from the Office of Thrift Supervision to reduce its real estate exposure. Home Savings has not filed an answer to Mr. Osborne’s Lake County countersuit. Jude Nohra, Home Savings’ general counsel, declined comment. Mr. Calabrese said the charges by Mr. Osborne against Mr. Calabrese and Home Savings amount to “Richard being Richard and filing suits against a lot of people.” Through all the proceedings, Mr. Osborne is taking the tack that a good offense is the best defense. That strategy already may have netted him some positive results. Mr. Osborne and one of his real estate partnerships, HeisleyHopkins Inc., sued PNC Bank Jan. 26 in Lake County for damages from PNC’s allegedly last-minute decision not to renew a $3 million loan that came due last Dec. 1. PNC lawyers Feb. 3 moved the case to U.S. District Court in Cleveland from Lake County court in Painesville. Court records show the parties reached an out-of-court settlement Feb. 15. ■
Volume 33, Number 10 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the fourth week of May and fifth week of May, the fourth week of June and first week of July, the third week of December and fourth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2012 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-8249373. REPRINT INFORMATION: 800-290-5460 Ext. 136
CRAIN’S CLEVELAND BUSINESS
MARCH 5 - 11, 2012
THEWEEK FEBRUARY 27 - MARCH 4 The big story: University Hospitals officially launched a $250 million effort aimed at bolstering the development of new drugs. Anchored by a $50 million donation — the largest in the health system’s nearly 150-year history — from local philanthropist Ron Harrington and his family, the initiative’s structure is expected to help entrepreneurial physicians advance their discoveries to clinical trials, rather than let the ideas founder in their early stages due to a lack of money.
Committed to Canton area: Timken Co. will invest $42 million to build a two-story office complex connected to its global technology center near Akron-Canton Airport. The Cantonbased maker of bearings and steel said the 160,000-square-foot building will bring together personnel from its Bearings and Power Transmission headquarters, now located in leased offices in downtown Canton, with their colleagues at the technology center. Construction will begin as early as April to accommodate a combined team of nearly 1,000 employees.
Muscling up: Busy Cleveland private equity firm The Riverside Co. bought Beachwoodbased BrandMuscle Inc., a marketing technology specialist. BrandMuscle, founded in 2000, employs 154 locally, according to Crain’s research. Riverside will add BrandMuscle to its Centiv Services platform, which develops and executes localized marketing campaigns. An eye to buy: Cleveland Clinic president and CEO Delos “Toby” Cosgrove told employees that the health system’s financials have “never been stronger,” but the organization must look seriously at acquiring other health care institutions if it plans to grow. “We’ve had a number of people from around the country approach us about some sort of merger and acquisition,” Dr. Cosgrove said at his annual “State of the Clinic” address. The system’s operating revenue for 2011 hovered at about $6.2 billion, but Dr. Cosgrove said a number of efforts to increase revenue in recent years haven’t added a “great deal” to its revenue stream.
REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS
Another nail in the newspaper coffin ■ A website launched by the state has newspaper executives expecting another blow to revenues. The site, which went fully functional Feb. 3, enables the free posting of government public notices. Its development was motivated by local governments and schools asking for relief from the cost of publishing public notices, state officials said. Andrew R. Dix, president of the Internet division of Dix Communications, called the anticipated impact to revenues another concerning challenge. Dix Communications publishes several newspapers in Ohio, including The Record-Courier in Ravenna. “The newspaper industry has been under duress now for a number of years,” Mr. Dix said, citing the economy and the digital evolution. “This is another area that doesn’t help us out.” Public notices that only are required to be published once are not affected. However, Ohio entities may reduce their costs with notices that must be posted more than once, as the subsequent notices may be summarized and refer people to the new website. The impact will vary a lot, but the Ohio Newspaper Association’s rough estimate is that a newspaper could experience a revenue decline of 20% to 40% in public notices, depending on what government advertisers decide to do and the types of
Crack problem: The FirstEnergy Nuclear Operating Co. unit of FirstEnergy Corp. blamed the absence of an exterior weatherproofing coating for cracks in the Shield Building of its DavisBesse Nuclear Power Plant near Toledo. A 119-page report indicates that the absence of a weatherproof coating on the Shield Building allowed moisture associated with the blizzard of January 1978 to migrate into the concrete, freeze and expand, causing subsurface cracks in portions of the building. Tech wizards: OverDrive Inc. in Valley View will use the magic of digital technology to bring Harry Potter to a new generation of library readers. Pottermore, the London website that is the home of J.K. Rowling’s “Harry Potter” e-books in partnership with Sony, entered into an exclusive worldwide e-book and digital audiobook distribution agreement with OverDrive. The seven books in the “Harry Potter” series will be available in digital formats for the first time for lending from public and school libraries.
A presidential endorsement ■ Once again, President Barack Obama is giving the Cleveland Clinic high marks. During a gala late last month honoring the 70th birthday of Muhammad Ali, President Obama used a short, pre-taped message to laud the famed boxer — and the Northeast Ohio health care juggernaut — for inspiring so many during his fight against Parkinson’s disease. “Now it’s helped you’ve had some incredible folks in your corner,” President Obama said in the short message. “That’s why we’re also celebrating the men and women of the Cleveland Clinic. The work you’re doing is critical, and your country needs you.” The gala raised funds for the Cleveland Clinic’s Lou Ruvo Center for Brain Health in Las Vegas, which saw a lofty 76% increase in patient visits in 2011. Also, the center recently launched a study examining the
State of the unions is in decline in Ohio
COMPANY: Vendors Exchange International Inc., Cleveland PRODUCT: MIND (Make Informed Nutritional Decisions) touch screen You can snack a little healthier if you just put your MIND to it. Vendors Exchange International has introduced an improved version of the Display Builder software that it says makes the MIND touch screen easier to program and provides a more engaging interactive experience for the user. The touch screen offers nutrition information on vending machine products in hospitals, universities, and other health-conscious locations before a selection has been made by the consumer. Vendors Exchange International says the software works with the website Nutritional Database.org, where screen shots for vending products are stored on a secure database. In addition, the software for the MIND touch screen now can show more than just nutrition information. For instance, vending operators can use it to add slide shows, advertising, promotions and public service announcements such as tips for healthy eating. The flexibility of the MIND touch screen “has improved to benefit the operator and the consumer,” Vendors Exchange International says. To find out more about the touch screen, visit the company’s website at www.veii.com.
long-term brain health of professional fighters. In 2009, President Obama visited the Cleveland Clinic’s main campus in Cleveland to showcase the health system as a model for health care delivery in the future. — Timothy Magaw
One strike and you’re out ■ Let’s hope the Cleveland Indians don’t follow Jeff Stocker’s lead this season. Mr. Stocker, an Indians season-ticket account executive and the team’s representative on MLB Network’s “Baseball IQ” trivia show, bowed out in the first round of the bracketed tournament, to Craig Nordquist of the Minnesota Twins. Answering list-based questions — i.e., name the men who have managed the California/ Anaheim Angels — the duo went deep on a couple questions, but Mr. Nordquist “was just one answer ahead of me for Stocker most of the game,” Mr. Stocker said. Mr. Stocker said he did little promotion of his appearance after his loss, but said he felt better after watching other contestants and felt he could have advanced with a different early matchup. The show, filmed in Secaucus, N.J., also allowed Mr. Stocker — a Canton native and North Canton resident — the opportunity to see New York City for the first time. — Joel Hammond
BEST OF THE BLOGS Excerpts from recent blog entries on CrainsCleveland.com.
Ready to boogie: Kent Displays plans to install a second roll-to-roll production line at its company headquarters in Kent. The company said the new production line will manufacture flexible Reflex No Power LCDs used in the popular Boogie Board e-writers sold by Improv Electronics, the consumer products subsidiary of Kent Displays. When the new line is fully operational in the second half of 2012, it will triple the company’s production capacity for flexible Reflex LCDs.
notices involved, said Dennis R. Hetzel, the association’s executive director. Revenues from public postings are a fairly small percentage of the Record-Courier’s overall advertising revenue, but still are important, Mr. Dix said. Newspapers are an important, independent vehicle for delivering public notices, Mr. Dix said. He compared government entities posting public notices on a government website to “kind of like the fox guarding the henhouse here.” — Michelle Park
■ Unions draw a lot of attention in political campaigns, but in Ohio, their membership ranks continue to decline. Ohio in 2011 had 647,000 residents who were members of unions, down 1.2% from 655,000 in 2010, according to a Dayton Daily News story based on data from the U.S. Bureau of Labor Statistics. Union members “accounted for 13.4% of the state’s work force in 2011, down from 13.7% in 2010 and 14.2% in 2009,” the newspaper reported. A decade ago, 17.6% of Ohio workers were in unions. The meaning of these numbers depends to some extent on your political orientation. Kevin Holtsberry, president of the conservative Buckeye Institute for Public Policy Solutions, told the newspaper that the decrease in union membership shows the modern economy requires higher skill sets and education levels, and unions provide “an outmoded, inflexible system” that arose during a different work landscape. Union supporters, though, say the declines “simply show that employers are choosing to outsource high-paying jobs to cut labor costs and maximize profits,” according to the Daily News.
Justice Scalia fondly recalls his Cleveland days ■ He has a job for life, but if Antonin Scalia is looking for a post-Supreme Court career, maybe Cleveland can enlist him as a pitchman. Speaking to law students recently at the University of Chicago, where he once
taught, Justice Scalia “urged the future lawyers to look to join firms with a more relaxed attitude, especially those in out of the way locales,” according to The Washington Post. Justice Scalia had this to say: “Try to find a practice that enables you to maintain a human existence, time for your family, your church or synagogue, community … Boy Scouts, Little League.” He went on to note that he began his career at Jones Day in Cleveland, where he worked from 1961 to 1967. “You should look for a place like that. I’m sure they’re still out there. Maybe you have to go to Cleveland.” Or California, where his son joined a firm. “Any big firm has the basic ethos of its head office and if the head office is in La La land, it’s gonna be a little laid back,” Justice Scalia said.
Cleveland film festival keeps it short and sweet ■ Influential film website Indiewire heaped praise on the coming Cleveland International Film Festival, highlighting in particular the festival’s lineup of short films. “Among their selections are some of my favourite short films from this and last year — including a film which I predict will (or at least should) be nominated for Best Live Action Short Film at next year’s Academy Awards: ‘Curfew,’” wrote blogger Brad Horvath. The post included links to clips from many of the best shorts at Cleveland’s festival. Mr. Horvath concluded by writing that the festival, which runs March 22 to April 1, “is one of my favorite film festivals in the U.S. I had the privilege of attending as a member of their documentary jury a few years ago and … was struck by the festival’s impeccable programming and by their lovely, committed and enthusiastic audiences.”
March 5 - 11, 2012 issue