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Vol. 34, No. 13

NE Ohio opens up to world

SPECIAL REPORT

Business leaders taking fresh approaches to make region more appealing to immigrants By JAY MILLER jmiller@crain.com

JASON MILLER

The $465 million convention center and medical mart project is nearing its completion.

THE IMPACT OF THE GLOBAL CENTER FOR HEALTH INNOVATION AND CONVENTION CENTER www.crainscleveland.com/medmart

■ Anticipation builds ■ Center as a selling point ■ Local impact ■ Maps and photos ■ Full coverage: PAGES S-1 to S-14

Housing market constructs hope here Area manufacturers benefit from a rebound in home sales, look to hire employees to keep pace By DAN SHINGLER dshingler@crain.com

0

NEWSPAPER

74470 83781

7

13

The U.S. housing market finally is bouncing back from its economy-busting crash of 2008, and experts credit it with benefits that range from boosting pickup truck sales to ringing the cash registers at countless diners, barber shops and other small businesses that serve construction

workers. But here in Northeast Ohio, where homebuilding is only starting to recover and certainly has not reached its pre-crash levels, manufacturers say they are still getting big gains from what is a national trend. Local companies that produce construction materials, fixtures and home repair products say they are benefiting from increases in both new home con-

struction and the rising sales of existing homes nationwide. “Just yesterday, I was in a client’s office and we were looking at the ABI, the Architectural Billings Index (a gauge of construction activity) Peplin and it was up nicely — there’s some good stuff going on out there,” said Steve Peplin, president of metal stamping company Talan Products in Cleveland. See CONSTRUCTS Page 29

Not waiting for Washington politicians to tell them where federal immigration policy is going on big-picture immigration subjects like border integrity citizenship issues, the business and civic leaders of Northeast Ohio are stepping up their efforts to make the region more attractive to immigrants and other newcomers. Among the initiatives: ■ This Tuesday, April 2, the Greater Cleveland Partnership will host a forum titled “U.S. Immigration Policy and the Midwest Economy.” Carol Caruso, senior vice president for government advocacy at the regional chamber of commerce, said about 80 business leaders are expected to discuss a report that analyzes the role of immigration in growing the Midwest economy, as well as the importance of federal immigration policy reform. See UNITING Page 29

Branches can’t bank on future As many brick-and-mortar locations close, new ways of doing business are a must By MICHELLE PARK mpark@crain.com

The two banks with the most Northeast Ohio deposits are shuttering dozens, even hundreds, of branches this year across their footprints, and some observers predict this is only the beginning for an industry that’s grappling with diminished customer traffic, higher costs due to increased regulation and the ever-present need to turn a profit. PNC Bank announced in early March that it will close about 200 branches this year in 19 states, including See BRANCHES Page 8


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A dividing line

COMING NEXT WEEK

Private-industry employers spent an average of $28.89 per hour worked for total employee compensation in December 2012, though the figure was a lot higher for people in management, professional and related fields. Wages and salaries averaged $20.32 per hour worked and accounted for 70.3% of the costs, according to the U.S. Bureau of Labor Statistics. Benefits averaged $8.57 per hour worked and accounted for the remaining 29.7%. Here’s how the numbers break down for cost per hour by occupational group:

Business of art Not all artists shun the idea of making money. People like Jackie Adamany (right) help them figure out how to do it. Read about that and more in next week’s Small Business section.

Occupation group JENNIFER KEIRN

REGULAR FEATURES Best of the Blogs ........31 Bright Spots ................13 Classified ....................30 Editorial ......................10 Going Places ...............14

APRIL 1 - 7, 2013

Letters ...................10-11 Publisher’s column.......10 Reporter’s Notebook ...31 Special Report: Convention center/med mart..S-1-S-14

Wages/salaries Benefits

Total compensation

Management/professional

$35.85

$15.18

$51.03

Average of all workers

$20.32

$8.57

$28.89

Sales and office

$16.13

$6.48

$22.61

Service

$10.67

$3.45

$14.12

SOURCE: U.S. BUREAU OF LABOR STATISTICS

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 (btucker@crain.com) Editor: Mark Dodosh (mdodosh@crain.com) Managing editor: Scott Suttell (ssuttell@crain.com) Sections editor: Amy Ann Stoessel (astoessel@crain.com) Assistant editor: Kevin Kleps (kkleps@crain.com) Sports Senior reporter: Stan Bullard (sbullard@crain.com) Real estate and construction Reporters: Jay Miller (jmiller@crain.com) Government Chuck Soder (csoder@crain.com) Technology Dan Shingler (dshingler@crain.com) Energy, steel and automotive Tim Magaw (tmagaw@crain.com) Health care and education Michelle Park (mpark@crain.com) Finance Rachel McCafferty (rmcafferty@crain.com) Manufacturing and energy Research editor: Deborah W. Hillyer (dhillyer@crain.com) Cartoonist/illustrator: Rich Williams Marketing director: Lori Yannucci Grim (lgrim@crain.com) Events Manager/Operations & Logistics: Christian Hendricks (chendricks@crain.com) Events Manager/Promotions & Sponsor Relations: Jessica Snyder (jdsnyder@crain.com) Advertising director: Nicole Mastrangelo (nmastrangelo@crain.com) Senior account executive: Adam Mandell (amandell@crain.com) Account executives: Dawn Donegan (ddonegan@crain.com) Andy Hollander (ahollander@crain.com) Lindsie Bowman (lbowman@crain.com) John Banks (jbanks@crain.com) Sales and marketing assistant: Michelle Sustar (msustar@crain.com) Office coordinator: Denise Donaldson (ddonaldson@crain.com) Digital strategy and development manager: Stephen Herron (sherron@crain.com) Web/Print production director: Craig L. Mackey (cmackey@crain.com) Production assistant/video editor: Steven Bennett (sbennett@crain.com) Graphic designer: Lauren M. Rafferty (lrafferty@crain.com) Billing: Susan Jaranowski, 313-446-6024 (sjaranowski@crain.com) Credit: Todd Masura, 313-446-6097 (tmasura@crain.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 Dave Kamis: Vice president/production & manufacturing Mary Kramer: Group publisher 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 customerservice@crainscleveland.com, 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


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Summa is shifting its approach Akron-based health system is emphasizing population health By TIMOTHY MAGAW tmagaw@crain.com

For Summa Health System president and CEO Thomas Strauss, the plan to sell roughly one-third of the $1.4 billion Akron-based enterprise he steers to a downstate health care behemoth isn’t only about buoying

the system’s finances in the short term, but also about giving Summa the financial wherewithal to transform the way it delivers care. Summa and its soon-to-be minority owner, the Cincinnati-based Catholic Health Partners, both are attempting to shift their care delivery and operating models toward

ones that focus on keeping people healthy and out of the hospital. Given that hospitals largely are paid for the volume of services they provide, that transition has been a slow march, but it’s one the federal government and health care observers insist systems must make if they intend to remain afloat.

The government and some commercial payers slowly are instituting new forms of payment that swap that fee-for-service model to Strauss ones intended to reward hospital systems for highquality care that focuses on keep-

INSIGHT

Technology Recovery Group is expanding, gets added boost from Cuyahoga County

Kent Displays amps up production of electronic writing tablet, which is produced almost 24/7

By JAY MILLER jmiller@crain.com

By CHUCK SODER csoder@crain.com

T

See BOARD Page 12

See SUMMA Page 30

They’re raising the bar

HYPE BUILDS OVER BOARD

wo years ago, Kent Displays Inc. sold the Boogie Board electronic writing tablet in about 300 stores. Now it’s a lot harder to keep track. “It’s in the many, many thousands,” said Albert Green, CEO of the company. “I can’t even tell you the store chains we’re in. … Every day there’s a new one.” Kent Displays today sells the Boogie Board — which works like a white board that lets you erase what you’ve written with the press of a button — through 32 retailers in North America, including 20 that sell it in stores, and several foreign distributors. Some huge retailers are selling the product line. Staples sells variations of the Boogie Board in all of its 1,500 stores. Bed Bath & Beyond also sells Boogie Boards in stores all over the country.

ing people healthy and out of the emergency rooms. Summa said it needed an outside partner — one it eventually found in CHP — to ease that transition with an infusion of cash. “Fundamentally, we believe to our core that the way we are practicing health care in our country isn’t sustainable,” Mr. Strauss said in an interview last week while seated

MCKINLEY WILEY

Kent Displays CEO Albert Green says the company’s Boogie Board is sold by 32 retailers in North America and has several foreign distributors.

It has taken Technology Recovery Group only 3½ years to outgrow the space it expected it to call home for a decade. So the Westlake firm is moving just a few blocks from its current Clemens Road home to make sure it can continue to grow. Cuyahoga County Council at its April 9 meeting is expected to approve a $1.28 million loan from its Western Reserve Fund to a Technology Recovery Group affiliate. The county loan would complete a $3.2 million financing package that will enable the company to buy and move into a bigger building at 31390 Viking Parkway in the western suburb. The 11-year-old company is in what’s called the automatic identification and data collection business. It sells and maintains the barcode and quick-response code hardware and software for retailers and manufacturers.. Bar codes are the ubiquitous series of bars on most everything sold at retail. QR codes are the checkerboard-like black-and-white squares that smart phones use to connect users with websites. See BAR Page 12

THE WEEK IN QUOTES “It (immigration reform) is becoming a higher agenda item both for the business and civic community here, and it’s had the effect of getting more organizations working together.”

“The fact that the residential sector has been on the uptick for about the last nine months, that bodes well for us. The overall trend is that there is momentum in the residential housing market.”

— Jose Feliciano, attorney and chairman of the Hispanic Roundtable. Page One

— Barry Slifstein, vice president of investor relations, RPM Inc. Page One

“Right now, our greatest competition is the lack of knowledge about our city. … If you haven’t been to Cleveland in the last six months and you’re a meeting planner, you haven’t been to Cleveland.” — Mike Burns, senior vice president of convention sales and services for Positively Cleveland. Page S-1

“I think it’s going to have a very positive impact on the hotel industry. … Cleveland hasn’t been in the convention market too much over the past 10 years, and this new facility should allow us to get more aggressively into that market. They’re certainly going to need hotel rooms.” — David Sangree, president of the Hotel & Leisure Advisors consultancy, Lakewood. Page S-6


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AVAILABLE

Steelyard Commons lining up financing for its second phase

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â&#x20AC;&#x2DC;Large anchorâ&#x20AC;&#x2122; tenants have been difficult to find for First Interstate Properties Inc. By STAN BULLARD sbullard@crain.com Visit

TerryCoyne.com Or Call Terry at

216.453.3001 1350 Euclid Ave, Ste. 300 Cleveland, Ohio 44115

First Interstate Properties Inc. is starting to pull together financing for a $24 million second phase of the Steelyard Commons shopping center near downtown Cleveland. The Lyndhurst-based developerâ&#x20AC;&#x2122;s original plan for a 200,000square-foot second phase has been altered considerably. First Interstate now plans to construct a 90,000-square-foot building this year and follow it later â&#x20AC;&#x201D; perhaps not for at least six years â&#x20AC;&#x201D; with a building of 107,000 square feet. Although Mitchell Schneider, First Interstate president, said multiple sources of financing will be needed to cobble together enough money to build the immediate addition to the big-box complex, the two-step expansion plan stems from a different constraint: retail demand. â&#x20AC;&#x153;The issue is that there are very few large anchor tenants adding stores around the country. Those that do are adding very few,â&#x20AC;? Mr. Schneider said, which means developers need to be more aggressive to swing deals. A Burlington Coat Factory is set to take 70,000 square feet of the 90,000 square feet in the current

project. An anchor large enough to swing the balance of the retail space will have to be landed later. At the same time, even the 90,000-square-foot building faced a $4 million gap between what lenders would provide and costs of developing the stores. Cleveland City Council helped First Interstate with that gap March 18 when it adopted legislation that authorizes the Jackson administration to recast the tax increment financing (TIF) for the project in two ways. In one case, the 19 acres that will go into the second phase was separated from the original TIF used by Steelyard Commons and will get a 30-year TIF. In the other piece, the remainder of the original 20-year TIF was extended by 10 years. In Steelyardâ&#x20AC;&#x2122;s case, the two measures would produce about $400,000 annually in revenue that will help finance the center. The Cleveland TIFs use the nonschool portion of property tax to generate revenue to help fund development projects. So now, Mr. Schneider said, â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re looking for the rest of the funding.â&#x20AC;? Other likely sources for financing will include a convention bank loan and new market tax credits, which are loans that allow investors to

receive federal income tax credits for investing in new businesses or job-creating economic development in qualifying urban areas. Mr. Schneider would not disclose other sources of funds before the financing package is closed. If all the financial pieces come together, First Interstate hopes to wrap up financing before the end of June to begin construction this summer. The company estimates Burlington will open in late spring 2014. Other tenants have also committed to this yearâ&#x20AC;&#x2122;s project, but Mr. Schneider declined to identify them. Do not look for the last major building project at Steelyard soon. First Interstate told the administration and Council that it wants to finish that one in 2019. â&#x20AC;&#x153;We had to give outside time framesâ&#x20AC;? to the cityâ&#x20AC;&#x2122;s economic development department for the balance of the second phase, Mr. Schneider said. â&#x20AC;&#x153;We are extremely conservative about it.â&#x20AC;? City documents supporting the TIF legislation estimate the current project will create 140 jobs, and the future phase will add 160. Steelyard added 700,000 square feet of retail space in the middle of the city when it opened in 2007, including Clevelandâ&#x20AC;&#x2122;s only Walmart Super Center. In the years since, the only additions through the recession were freestanding restaurants and fast food operations. â&#x2013;

Highland Heights plant is seeing clear growth by producing crystal By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com

A Highland Heights plant that grows crystals for use in laser manufacturing and telecommunications expanded its production in the past year, bringing jobs and new customers to the area. Gooch & Housego PLC, a UKbased optics and laser components manufacturer, began consolidating its Palo Alto, Calif., and Highland Heights plants about a year ago and recently received final customer approval for the relocation. Jon Fowler, senior vice president of acousto-optic and electro-optic products, said the company wanted to be more efficient in terms of engineering and management. Six of Gooch & Housegoâ&#x20AC;&#x2122;s eight manufacturing sites are in the United States. After the March 2011 acquisition of a unit of a company called Crystal Technology, Gooch & Housego decided to vacate some space and put the crystal growth productions on the same site, Mr. Fowler said. Crystal growth had already been taking place at the Highland Heights location for decades. The Palo Alto site remains open, but the

company no longer uses it for crystal growth. Some other, smaller Cleveland-area sites also were relocated to the Highland Heights location. Four employees moved from the California operations to the Highland Heights plant, and 10 more were hired here, said Mr. Fowler, the CEO of Crystal Technology before the acquisition. Before the relocation, the Highland Heights location primarily was producing KDP and BBO crystals, Mr. Fowler said. After the relocation, the plant added lithium niobate and tellurium dioxide â&#x20AC;&#x201D; two types of crystals with entirely different growth methods. The crystals are used by businesses in the industrial and medical laser manufacturing and telecommunications industries, as well as in scientific research, Mr. Fowler said. The telecommunications industry is new to the Highland Heights location because of the expanded products. Gooch & Housego had to get approval from its critical customers before it could truly move forward. Customers wanted to make sure that product quality would be the

same, Mr. Fowler said. Some wanted to see data or actual products from a few batches; others wanted to audit the plant themselves. About half of the plantâ&#x20AC;&#x2122;s customers made a trip to Highland Heights. According to a news release, the company added 30,000 square feet of manufacturing space in Highland Heights, bringing the grounds to nearly 90,000 square feet. There also were improvements to the heating, ventilation, air conditioning and electrical systems. All of the improvements cost Gooch & Housego about $3 million. Mr. Fowler said that the company hasnâ&#x20AC;&#x2122;t used all of the new space just yet, leaving room for future growth. Mr. Fowler said small acquisitions have been a part of the companyâ&#x20AC;&#x2122;s history, and that Gooch & Housego continues to look for additional opportunities to expand. This last acquisition allowed the company to be more self-reliant, as it uses some of the crystals internally. Gooch & Housegoâ&#x20AC;&#x2122;s companywide sales in 2012 were about $100 million. The company does not release sales figures for individual sites. â&#x2013;

Volume 34, Number 13 Crainâ&#x20AC;&#x2122;s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the fourth week of December and fifth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright Š 2013 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 Crainâ&#x20AC;&#x2122;s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373. REPRINT INFORMATION: 800-290-5460 Ext. 136


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COURTESY UNIVERSITY HOSPITALS

This $17 million rehabilitation hospital in Beachwood is a joint venture between University Hospitals and Nashville-based Centerre Healthcare Corp.

UH finds strong partner for freestanding rehab hospital Joint venture with Nashville-based group adds muscle By TIMOTHY MAGAW tmagaw@crain.com

The two-story, 53,000-squarefoot rehabilitation hospital that quietly opened its doors last week on Harvard Road in Beachwood is expected to add significant clinical muscle to University Hospitals’ enterprise without forcing the health care juggernaut to make a sizable financial investment. The $17 million facility, which sits just down the road from University Hospitals’ Ahuja Medical Center, is a joint venture between University Hospitals and Nashvillebased Centerre Healthcare Corp., a for-profit company that specializes in freestanding rehabilitation hospitals. Officials wouldn’t offer details on the financial arrangement of the joint venture, but Richard Hanson, president of University Hospitals’ community hospitals and ambulatory network, said it allows the system to grow its acute rehab services without shouldering the full cost. “We had to go out and get some-

one with that expertise,” said Richard Hanson, president of University Hospitals’ community hospitals and ambulatory network. “We didn’t have that expertise in house, and we wanted to make sure we got the best seasoned team.” As a result of the new hospital’s opening, University Hospitals will shutter its 20-bed inpatient rehab facility at UH Case Medical Center downtown, though plans haven’t yet been hatched for the space. Centerre Healthcare, meanwhile, operates several freestanding rehab hospitals throughout the country, all of which partner with larger health systems. Modern Healthcare, a sister publication of Crain’s Cleveland Business, last year named Centerre as one of the fastest-growing health care companies in the country; it has seen a staggering 388.1% growth in revenue between 2006 and 2011. A main reason for Centerre’s growth has been the growing need for acute rehab services, given the throng of aging baby boomers. Also, rehab services are also only a small piece of many health systems’ overall operations, and companies such as Centerre are helping fill that growing need. “In the end, we hope to have good patient outcomes and make a little bit of money,” said Anthony Felici, the new hospital’s controller.

“But we are patient centered and not just trying to make a buck.” Tonya Micheli, the new hospital’s director of business development, anticipates 75% of the hospital’s referrals will come from University Hospitals and its community hospitals. The remaining 25% would be from the region’s other hospitals. The hospital is one of the few freestanding rehab hospitals in Northeast Ohio and the only on Cleveland’s East Side. Summa Health System in Akron, for instance, maintains its own 60-bed freestanding rehab hospital — a $25 million joint venture with Pennsylvania-based Vibra Healthcare that opened last year. The MetroHealth System also opened a 67-bed rehabilitation facility at its Old Brooklyn campus last year. University Hospital and Centerre’s new rehab hospital offers brain injury units, stroke recovery programs and specialized gyms for brain injury patients. It also boasts specially designed bariatric rooms for morbidly obese patients as well as outdoor training and recreation areas. Many of these features, according to Ms. Micheli, could only be housed in a freestanding facility. “We can be bigger,” Ms. Micheli said. “We can do a lot more being freestanding.” ■

Precision Metalforming Association names board chair Bill Adler, president of Stripmatic ON THE WEB Story from Stripmatic’s growth strategy over the Products Inc. in Cuyahoga Heights, www.crainscleveland.com years. was named chairman of the board of “PMA has been such a big help to directors of the Precision Metalforming Association for our company,” Mr. Adler said. 2013. When Mr. Adler and his wife, Liz Adler, bought StripAs chairman, Mr. Adler wants to expand the group’s matic Products, he said he needed a “crash course” in networking and development opportunities and increase metal stamping, since his background was in steel. The its international focus. Precision Metalforming Association helped him find the The Precision Metalforming Association has nearly 900 best value for his investments, discover the newest member companies, including both manufacturers and technology and stay up to date on safety regulations, suppliers to the metalforming industry, according to a he said. news release. The organization serves companies across Mr. Adler said he wanted to give back to the associathe globe, but its headquarters are in Independence. tion after all of its help. He’ll serve as chairman for one Mr. Adler has been a member of the association for year after having served as second and first vice chair about 20 years. He joined after buying Stripmatic Prodfor the past two years. — Rachel Abbey McCafferty ucts in 1992 and said the association was “integral” to


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Cleveland software Startup’s search engine wins praise company is doubling in two key aspects By CHUCK SODER csoder@crain.com

UrbanCode’s sales soared in 2012, and it has twice as many employees as it did in ’11 By CHUCK SODER csoder@crain.com

“Half the company was hired in the last year.”

A threat to UrbanCode’s core business turned out to be good for the company — and for downtown Cleveland. The fast-growing software developer has signed a seven-year lease on a much bigger office closer to the heart of downtown. In a few months, UrbanCode’s 50-plus local employees will move into a 14,000-square-foot office in the Halle Building, which is in Cleveland’s Theater District. The new headquarters will be more than twice the size of the company’s existing, 6,000-square-foot office on the eastern edge of downtown. UrbanCode — which makes software used to automate and manage the software development process — desperately needs more space, said CEO Maciej Zawadzki. The company is hiring in every department but has almost nowhere to put new employees at its current Euclid Avenue headquarters, across from Cleveland State University, Mr. Zawadzki said. That’s because the size of UrbanCode’s staff almost doubled last year. The company, which has nearly 60 employees nationwide, employed 29 people at its headquarters at the start of 2012. And that’s up from 16 in January 2009, according to a list of the region’s largest software developers that Crain’s publishes annually. “Half the company was hired in the last year,” Mr. Zawadzki said, describing how desks at UrbanCode just keep getting smaller. The company’s sales doubled in 2011 and 2012, and they could do so again this year, he said, declining to release dollar figures. UrbanCode wanted to stay downtown to remain close to restaurants and other amenities — and to avoid scaring away employees who otherwise could’ve end up with a longer commute, said chief operating officer Cliff Utstein, whose position was created last August. “We can’t afford attrition right now. We just can’t,” he said.

– Maciej Zawadzki, CEO, UrbanCode

Building a better Anthill The growth has been fueled by some popular new products that were inspired by a threat to the company. Since 2001, UrbanCode has sold a product called AnthillPro, which is designed to help speed up the process of developing software. A few years ago, however, a serious threat to that product emerged: Free “open source” software tools designed to do many of the same things started cropping up online. AnthillPro was becoming a commodity, and UrbanCode knew it. Thus, the company started developing new products designed to help companies manage the operations side of the software development process: Whereas many of Anthill-

Pro’s features are meant to help developers create software piece by piece, UrbanCode’s new products help companies manage each of those pieces as they are tested and released. “It’s really bridging that gap between development and operations,” Mr. Zawadzki said. Demand for products that serve the so-called “DevOps” market is “insatiable,” especially at large companies that create and test lots of software housed on huge banks of computer servers, Mr. Utstein said. Many of UrbanCode’s customers are big, he said, noting that the company serves three of the four biggest banks in the United States. “The complexity grows based on the number of servers and the number of applications. And that’s where we come in,” he said. The free software that threatened AnthillPro not only pushed the company to create its DevOps products — it’s helping build demand for those products, Mr. Zawadzki said. The free software has made it easier for more companies to adopt “agile” software development practices, which are a group of techniques companies use to develop software faster, by writing and testing code in small chunks. But sometimes operations employees in the company data center aren’t ready for that constant stream of code. “So guess what? This (free software) actually helped create the problem that our next tool solves,” Mr. Zawadzki said.

Kevin Latchford makes no bones about it: He loves the website search engine developed by a tiny Cleveland startup called Queryly LLC. So do his colleagues at Aztek, a Cleveland web development firm. And some of his clients are excited to start using the search engine on their websites. The software puts a big emphasis on providing visually friendly search results, and it’s so fast that Mr. Latchford, Aztek’s chief operating officer, gets frustrated when he conducts searches on websites that don’t use the technology. “I’ll go looking for something, and it takes forever,” he said. The year-old company has found an ally in Aztek, which in January became the first reseller of Queryly’s software. Mr. Latchford expects to sell a lot of it: The software could become standard in “the overwhelming majority” of the websites Aztek builds, he said. “We believe in it. We’re drinking the Kool-Aid,” he said. To get a sense of how the software works, visit FamilyTravel.com, one of Queryly’s first customers. If you type the letters “col” in the search box, the software predicts that you’re looking for information about traveling to Colorado. Almost immediately, a drop-down box appears with links to blog posts about the state and photos of idyllic mountain vistas. Founder Xin Chen describes Queryly as a visual search engine for news sites, blogs and any company that has a large catalogue of

Fund. Last year, he received $15,000 from Bizdom. The accelerator owns an 8% stake in Queryly and provides Mr. Chen with a cubicle at its office in Tower City Center. Bizdom also connected Mr. Chen with mentors at Aztek, which is based just a few blocks away on West 9th Street. Queryly’s technology floored Mr. Latchford and his colleagues because it was so fast, he said. COURTESY QUERYLY LLC He has showed the software to A screenshot of Queryly’s search engine eight existing Aztek clients and expects four or five to become products on its website. Links are Queryly customers within the next displayed with photos whenever two months. possible, and customers can The software costs $99 per change the layout of the drop-down month for the first 100,000 searchbox to suit their style. able items on a website. Sites with “Nobody really wants to conmore searchable items will pay sume content when it looks like a more, but they’ll receive negotiated pile of text,” said Mr. Chen, who last volume discounts, Mr. Chen said. year moved from New York to He applied to Bizdom after readCleveland to join Bizdom Cleveing about it on the tech news webland, a business accelerator started site TechCrunch. Mr. Chen also apby billionaire Dan Gilbert. Queryly has landed five cusplied to other business accelerators, tomers and is running pilots with but he picked Bizdom because it about a dozen more, including the was the first to accept him. blog for Quicken Loans, which was “I wanted to find a reason to quit founded by Mr. Gilbert. my full-time job and get it started,” “When people look at it, they get he said. it. But how to get people to look at Paul Allen, who manages Bizit in the first place? That’s actually dom, said Mr. Chen has “tremenwhat I’m focused on more,” Mr. dous technical skills” and relevant Chen said. entrepreneurial experience: About The downtown Cleveland resieight years ago the Beijing native dent remains Queryly’s sole started another search company in employee, but he expects that to China. change soon. The company over Some big companies already the next three months aims to raise have sophisticated search engines up to $500,000 from investors, on their websites, but a lot of small which would allow Mr. Chen to hire and midsize companies don’t, Mr. some help. Allen said. In February, he raised $25,000 “At the lower end, there’s really from the Lorain County Communinobody who’s dominating,” he ty College Foundation’s Innovation said. ■

Bring morale up. About thirty stories.

New in 2013

Hot commodity UrbanCode is one of the few companies that understands the needs of employees on the operations side of software development, said Jim Duggan, a vice president of research at Gartner Inc. The Stamford, Conn.based technology research firm in 2011 named UrbanCode one of six “Cool Vendors” in the software release management space. Big companies that create DevOps software — such as IBM, HewlettPackard, BMC Software and CA Technologies — haven’t tailored their products to handle agile software development, Mr. Duggan said. So UrbanCode and companies like it could become acquisition targets, he said. “Many of those companies and products will be acquired,” he said. No one can be sure whether that actually will happen. But one thing is certain, according to Mr. Zawadzki: UrbanCode has to keep innovating, because one day there will be another threat that turns its new product line into a commodity. “That’s just the way the industry works now,” he said. “I get it.” ■

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Ohio, and the District of Columbia — nearly 7% of the 3,018 branches the bank operated as of March 27, according to SNL Financial, a provider of financial data and analysis. Pittsburgh-based PNC expects to open 40 to 50 branches in the same time period, which means 2013 should be the first year since 2010 that its number of branches drops. KeyBank, too, will record a net drop in 2013, predicted Lisa J. Oliver, president of the bank’s Greater Cleveland district. The Clevelandbased bank revealed in its annual report filed with the Securities and Exchange Commission that it will close 40 to 50 branches footprint-wide in 2013, most of them in the second quarter of the year. It closed 19 “underperforming branches” in 2012. “We really are in a fundamentally changing environment of what was to what is,” Ms. Oliver said. “We would be foolish as a bank to think about where banking has come from and where it’s going (and) continue to open branches at the pace we have historically.” Forty to 50 branches represent roughly 4% of the 1,099 locations KeyBank had as of March 27, according to SNL. A net decrease in 2013 would be the bank’s first yearover-year drop in half a decade, as SNL’s numbers show Key’s branch count has increased each year since at least 2008. Nationwide, the number of branches has fallen every year since 2010, from 98,802 as of June 30 of that year to 97,049 as of March 27, SNL reported. It’s not clear whether Northeast Ohio branches will be among those that go dark in either PNC or Key’s case. What is clear is that branch transactions are down as more people choose to bank almost exclusively via the Internet and smart phones. With the drop in transactions comes a drop in branch profitability and an onus on banks to maximize those in-branch interactions they do have and to get in front of customers in other ways. “We’re dealing as an industry with changing customer preferences,” Ms. Oliver said.

‘Dead’ or ‘Alive?’ But that’s been the case for years. Why now are the closures coming? A lot of challenges have come to a head in banking, says Bill Valerian, president and CEO of Liberty Bank in Beachwood. “There have been so many changes, and banks still are required to make a profit,” Mr. Valerian said. “If you can’t increase the revenue, you have to cut expenses.” Financial reform, particularly that which has squeezed overdraft and debit card swipe fee revenues, has made profitability tougher to achieve, Mr. Valerian said. Still, he noted that Liberty has no plans to close any of its three branches, even though he says they are unprofitable. KeyBank and Akron-based FirstMerit Corp., however, announced in 2012 large, cost-cutting initiatives. The viability of bank branches was debated during a session at the Consumer Bankers Association conference that Mr. Valerian attended in March in Phoenix. In a “Family Feud”-type session, the “Dead Family” argued branches aren’t needed as more people are “pumping their own gas,” and the “Alive Family” argued that personal contact is and

BRANCH AGGREGATES (AS OF MARCH 27) Bank 2007 2008 2009 2010 2011 2012 Current Huntington 426 666 651 658 696 733 765 KeyCorp 966 997 1,005 1,034 1,059 1,073 1,099 FirstMerit 160 159 158 209 209 208 414 PNC Financial 1,122 1,189 2,760 2,603 2,621 3,047 3,018 Fifth Third 1,218 1,356 1,359 1,363 1,370 1,369 1,369 U.S. total 97,592 99,527 99,868 98,802 98,431 97,605 97,049 ■ Current branch count represents the number of branches, adjusted for openings and closings and completed and announced mergers and acquisitions. (FirstMerit's, for example, includes the branches that would be added in the bank's announced acquisition of Citizens Republic Bancorp Inc.) ■ Total branches are based on the Federal Deposit Insurance Corp. Summary of Deposit survey compiled every June 30. SOURCE: SNL FINANCIAL will remain important in maintaining and gaining new relationships and product sales. One speaker, Brett King — author of “Bank 3.0” — reported that customers made an average 26.5 visits to a branch per year in 1995 and 3.2 in 2012, Mr. Valerian recalled. Mr. King also reportedly predicts that one-third of the country’s roughly 100,000 branches will close in the next few years. “There’s no way,” said Gary J. Young, CEO of Young & Associates Inc., of that prediction. His community bank consulting firm in Kent sells branch feasibility analysis and branch opening services, among others. “Things don’t happen that quickly. … Every prediction I’ve heard like that since I started in banking in 1967 has not come true,” Mr. Young said. Still, Mr. Young said current conditions — the need to increase capital, profitability and shareholder value — make it likely that “a lot” of branches will be closed and not as many new ones built, especially in urban areas. “Banks are flush with liquidity,” he said. “They’ve got more deposits than they can effectively lend. Even if they lose a bit of deposits (because they close a location), they basically lose nothing on the margin on those deposits.”

Increasing instead Huntington National Bank executives intend to buck the trend, at least this year. The Columbus-based bank, which as of Dec. 31 operated 77 branches in Northeast Ohio, including 26 in Giant Eagle stores, has plans to open more than two dozen in-store and traditional branches this year across its six-state footprint and about three dozen in 2014, spokeswoman Maureen Morrissey Brown wrote in an email. Although the bank didn’t reveal how many branches it will close in 2013 and 2014, Ms. Brown said executives expect a net gain in branches in 2013 and a net neutral position in 2014. Huntington posted record profits in 2012 while continuing to grow its branch network, noted Daniel Walsh, president of the bank’s Greater Cleveland region. “What customers continue to want is convenience and choice of products and channels,” he said. “An essential piece of that strategy is great branch coverage.” Community banks, too, won’t likely close lots of branches because they’re not in a position to leverage technology to build their franchise like larger competitors, Mr. Young said. “Big regionals … people know who they are,” he said. “(Small banks) are going to have to build a location and put some boots on the ground.

“This has happened in the past,” Mr. Young added. “We have gone through a period, maybe 15 years ago, when large financial institutions were closing branches … as a means of cost savings, as a means to improve earnings per share. In the public world, quarterly earnings per share are huge. Community banks can take a much longer view.”

Serve yourself Market demographics, branch foot traffic and loan volume, and a location’s proximity to other locations, all factor into which branches are closed, bank executives said. And alongside changes in branch number, banks also are right-sizing — or right-training — their branch staffs. FirstMerit last year laid off all of its assistant branch managers as part of its “efficiency initiative,” and KeyBank, too, this year is consolidating two teller positions into one with the intention of cross-training tellers and other staff to become “more multi-functional,” Ms. Oliver said. Hired in August by Cortland Banks, Danielle Cantrell is revamping the way Cortland bankers interact with people who come inside. The retail banking manager is training employees to ask open-ended questions to identify financial needs and offer solutions. Even though Ms. Cantrell says she herself wouldn’t step inside a bank if she didn’t work for one, she noted, “I still see that customers, when they really want to get down to the nitty-gritty of their financial business, they tend to go into a brick-and-mortar branch.” KeyBank’s Ms. Oliver agrees. “Branches won’t go away, not certainly in our lifetime,” she said. “There’s enough complexity in financial dialogues and financial relationships that you want to sit with somebody.” Plus, Ms. Oliver added, “Virtual banks (don’t) give people a lot of security. There are a lot of people who want to knock on a marble column and say, ‘Good. My bank is safe.’ ” While bankers aren’t forecasting the extinction of branches, they are predicting, and in many cases, already building, smaller bank branches with self-serve technology. In fact, electronic, self-serve teller kiosks already exist in 15 branches that pilot a smaller branch design for Cincinnati-based Fifth Third Bank. One such pilot branch is under construction in Slavic Village. When asked what he’s hearing of the branches of tomorrow, James Thurston, spokesman for the Ohio Bankers League, said that teller lines will be phased out in favor of more relaxed settings, and there will be more alignment with the electronic banking needs of the modern customer. “Think touch screen displays, Wi-Fi services and espresso machines,” he wrote. ■


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Browns finalize unique radio rights deal Team’s games will air on three Cleveland stations in 2013, including competitors WKNR-AM, 850 and WKRK-FM, 92.3 By KEVIN KLEPS kkleps@crain.com

The Cleveland Browns have brought the city’s two all-sports talk radio stations together for a long-term partnership that is believed to be the first of its kind in the NFL. The team on Thursday morning made it official that its games will be featured on three radio stations this season — WKNR-AM, 850; WKRK-FM, 92.3; and WNCX-FM 98.5. The latter two are CBS Radio affiliates, and WKRK, known as “The Fan,” is the chief rival of WKNR, an all-sports talk station owned by Beaver Dam, Wisc.based Good Karma Broadcasting. The Browns had been radio partners with Clear Channel since returning to the NFL in 1999, but the contract recently expired. When the team sent out feelers for its radio rights deal last fall, it was approached with a unique idea by a pair of competitors. “It was their idea to come together,” Browns president Alec Scheiner said of WKNR and The Fan. “They have been seamless and terrific partners. Since we didn’t push for this, we see no issues with this going forward.” The Fan debuted in Cleveland on Aug. 29, 2011, and immediately became a primary challenger to WKNR in sports talk. Nineteen months later, the rivals will be under the same umbrella on Browns game days, in addition to

ON THE WEB Story from www.crainscleveland.com select shows during the week. The new deal will result in more than 1,000 annual hours of team programming, an increase of at least 400 from 2012. WKNR will air an official fourhour Browns pregame show, and The Fan will take over for two hours following the game. “Cleveland Browns Daily,” hosted by Browns senior editor Vic Carucci, will remain on WKNR, but will expand from one to two hours each weekday. In addition, Browns coach Rob Chudzinski will host a weekly coach’s show that will air on both all-sports talk stations. Jim Donovan and Doug Dieken will continue in their play-by-play and analyst roles, respectively, and Jamir Howerton will return as the sideline reporter. In a phone interview with Crain’s, Mr. Scheiner said the composition of the pregame and postgame broadcast crews will be announced at a later date. The Browns will work with their new partners in deciding the on-air talent for both programs. “I’m really excited,” Good Karma Broadcasting president and CEO Craig Karmazin said in an interview with Crain’s. “It’s been a long time coming, so it’s really exciting that it will be a reality.” His FM competitor, and now partner, WKRK market manager

Herschel

Karmazin

Tom Herschel, has similar feelings. “We’re really, really happy about this,” Mr. Herschel said. The Browns circulated requests for proposals to “interested parties” for a radio deal last October. Clear Channel, which has radio rights for the Cleveland Indians and Cleveland Cavaliers, eventually dropped out of the running. The Browns, who were eager to expand their programming, received interest from the two Cleveland stations with nothing but time for sports on their airwaves. “We’re pretty excited about this,” Mr. Scheiner said. “I think it is very unique. I don’t know of any other teams that have a radio partnership with two all-sports stations in the same city. “There was a certain objective we wanted to achieve with the radio

Tucker Ellis continues to grow at rapid rate By MICHELLE PARK mpark@crain.com

Tucker Ellis LLP is marking its 10th year in business this year with a new Cleveland office and the promotion of two attorneys who now are tasked with steering growth in Ohio and California. Jeff Healy fills the newly created position of partner-in-charge for Ohio, where the law firm has offices in Cleveland and Columbus, and Bart Kessel is partner-in-charge for California, where it has offices in San Francisco and Los Angeles. “We have grown so much,” said Joe Morford, firm-wide managing partner. “They’re simply going to continue us on this path. I don’t think our growth is going to slow. In order for us to take advantage of the opportunities … we need more of our strong people out there helping to accomplish the things that need to get done.” Tucker Ellis since its founding in July 2003 has nearly doubled its number of attorneys in Ohio to roughly 120, according to firm executives. In addition, its Los Angeles office has grown to 29 lawyers from 11, and its San Francisco number stands at 14, up from 12 in 2003.

Mr. Healy, who also is now chair of the mass tort and product liability practice group, will oversee the firm’s impending move of its largest office in mid-June. Tucker Ellis is one of the anchor tenants of the new Flats East Bank office tower and will move some 250 employees there. Though its new square footage will equal roughly the 108,000 it occupies at the old Huntington building in downtown Cleveland, the firm is decreasing the size of its library, in favor of digital resources, and is building every office to be the same size, which will open up room for more attorney offices. That’s necessary because Tucker Ellis has outgrown its current space, said Mr. Morford, who declined to reveal the cost of the move. The firm’s summer associates will start their summer in cubicles, not offices, because space is so tight, Mr. Healy added. “We just don’t have anywhere to put them,” he said. Tucker Ellis also has an office in Denver that’s growing soon to seven lawyers from five, but that market is not large enough to necessitate a state partner-in-charge, Mr. Morford said. ■

rights deals. We wanted something that was progressive and expansive for our fans. We met with Clear Channel, ESPN and CBS, and Scheiner we were pretty clear about what we wanted to achieve.” The Browns believe they have that with this creative agreement. Their new partners, meanwhile, have landed their first huge Cleveland pro sports deal. Mr. Karmazin and ESPN Cleveland general manager Keith Williams likened the new agreement to the NCAA men’s basketball tournament, which has its games televised by CBS, TNT, TBS and truTV. “It is an extremely unique deal to radio,” Mr. Karmazin said. “With the NCAA tournament going on right now, it is easy to look at Turner and CBS working together, and realize what is possible. When I placed the call to CBS, I said, ‘If you guys and Turner can work together, we can definitely do something like this.’ ”

&

They did, and The Fan, like its top competition, believes there is plenty of interest in the Browns to go around. “Cleveland is an intense sports town,” Mr. Herschel said. “Airing the games allows us to super-serve those fans. When we launched The Fan a couple years ago, we were truly determined to be the voice of the fans in Cleveland. With all of the programming that the Browns can bring — a weekly coach’s show, a comprehensive draft show — we believe we are doing that with this deal.” Mr. Scheiner was hired by the Browns in December after eight years with the Dallas Cowboys — the last five as the team’s senior vice president and general counsel. He played an instrumental role in the fan experience aspect during the building of the state-of-the-art Cowboys Stadium. With his new team, he has brought some creativity to the radio contract. “Interest is always a good thing,” Mr. Scheiner said of the Browns’ fans. “We have to get good enough on the business side that we give them what they want. Now it’s our job to deliver.” ■

,

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PUBLISHER/EDITORIAL DIRECTOR:

Brian D. Tucker (btucker@crain.com) EDITOR:

Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:

Scott Suttell (ssuttell@crain.com)

OPINION

School daze

J

ohn Kasich never will be known as the education governor. If anything, he has done more to damage primary and secondary education in Ohio than any governor in recent memory. The pain Gov. Kasich has inflicted on school districts across Ohio began two years ago. That’s when he dealt with the $8 billion deficit the state faced in its next two-year general fund budget by shoving a big chunk of the problem down to the local level. The governor reduced the amount of money the state sent to local governments and school districts. Because of that tactic, he could proclaim that he didn’t raise taxes to pull off his magic act. But cities and schools statewide were sent scrambling to cut staffs, reduce services and/or raise taxes in order to fill holes created in their own budgets by the loss of state money. The second blow came when the governor and his colleagues in the Republican-controlled Legislature overreached in crafting Senate Bill 5 — their attempt at limiting the power of public employee unions in contract negotiations with their members’ school and government employers. Gov. Kasich touted the bill as a way to offset the damage caused by state budget cuts. He reasoned that putting caps on the benefits schools and cities could pay under their collective bargaining agreements would save them money. And he may have been right, though we’ll never know. That’s because Republicans in Columbus didn’t stop at focusing SB 5 on the benefits issue. Instead, it became an all-out assault on labor that needlessly got into such minutiae as workplace rules. Outraged unions revolted; so did voters, who decisively rejected SB 5 in a November 2011 referendum. The governor and Legislature have been afraid to take up the collective bargaining issue since, which has left schools and cities to fend for themselves in contract talks. But that’s not the worst of their inaction. Two years ago, we urged Gov. Kasich and lawmakers to follow the recommendaton of a valuable study released in 2010 by the Brookings Institution and the Greater Ohio Policy Center. The study, “Restoring Prosperity: Transforming Ohio’s Communities for the Next Economy,” said the governor and Legislature should appoint an education reorganization commission with two tasks: 1.) to study the current costs of K-through-12 administration and to propose ways individual districts can reduce those costs; and 2.) to develop a plan to reduce by at least one-third the number of school districts in Ohio from 611. Well, the idea has gone nowhere, with Ohio still awash in school districts. Meanwhile, tons of money that could be going into the classroom continues to cover administrative costs. Gov. Kasich’s contribution to education is a school financing plan that would cut state aid to nearly half the districts as he plows more money into charter schools. Great.

FROM THE PUBLISHER

Truth gets in way of fracking furor ter and that fracking waste has contamarry Goldwater rankled folks inated and ruined drinking water in when he uttered these words communities “all across the country.” when accepting the 1964 Because we are publishing a Republican nominamagazine, Shale, dedicated to tion to run for president: BRIAN this new energy industry in “Extremism in the defense of TUCKER Ohio, I’ve read a lot about this liberty is no vice. Moderation in topic. I know it’s controversial, the pursuit of justice is no and that accidents have hapvirtue.” pened — although in small proSometimes it seems we could portion to the amount of paraphrase those words to say drilling being done. I know that that deception in defense of safety is important to the one’s own notions is perfectly drillers, who have no interest in fine. Especially if it means causing any problems for them bringing in more donations. or their industry. There I was, driving to our offices last I also know that unbiased climate week and listening to “Potus,” the poliresearchers have found that the discovtics channel on satellite radio. The host ery of such cheap sources of natural gas was talking with a young woman who has helped reduce noxious levels in our identified herself as the executive direcatmosphere because so many electric tor of some clean energy group opposed utilities are shifting from coal to cleaner to hydraulic fracturing. gas as a power source. The host was ill prepared, and because of that allowed this woman to say some I know that the truth is that thousands outlandish things, like hydraulic fracturof new jobs are being created, in Ohio ing — often referred to as “fracking” — and other shale-rich states. This woman has been around only three or four years, claimed that only a few landowners were that the drilling goes down “three or four benefitting from this newfound energy hundred feet,” that fracturing wastesource. Not so, and she should be water is being dumped into drinking waridiculed for such erroneous claims.

B

I know that the truth is that thousands of new jobs are being created, in Ohio and other shale-rich states. Last month, a group of oil companies and environmental groups gathered in Pittsburgh and set 15 specific standards to protect the air and water, while shale oil and gas continues to be found, drilled and recovered. The certification standards go beyond what current regulations call for, and will apply to operations in Ohio, West Virginia and Pennsylvania, the areas of the Utica and Marcellus shales. It is a voluntary set of standards, and will put in place a certification process similar to that overseen by the Underwriters Laboratories (UL) for electrical appliances. Executives of Royal Dutch Shell, Chevron and Consol — all of whom were participants in the process along with environmental groups — applauded the unique “coming together” to help advance the economy while protecting the environmental assets of Appalachia. The next day, of course, the Sierra Club denounced the process because it is voluntary. I wonder how much that goosed donations. ■

LETTERS

Warehouse District will be looking up ■ I am writing on behalf of the Historic Warehouse District Development Corp. with regard to publisher Brian Tucker’s column in the March 18-24 edition of Crain’s Cleveland Business. At the end of the piece, Mr. Tucker wrote about the Warehouse District as a “marquee” neighborhood and the exciting momentum that downtown is experiencing. We agree wholeheartedly! We want to address the point that puzzled Mr. Tucker and bring to light that indeed the mess that is West Ninth Street today is a part of downtown’s progress. The City of Cleveland is in the midst of

WRITE TO US Send your letters to: Mark Dodosh, editor, Crain’s Cleveland Business, 700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1230 e-mail: editor@crainscleveland.com

investing approximately $2 million in roadway improvements to complement the investment in the Flats East Bank project. By early May, the bricks along Main Avenue will be completely refurbished, and West Ninth Street will be repaved from Front Street to Superior Avenue. Additionally, the Warehouse District’s sense of place will be further improved

this year through several initiatives, including a $650,000 streetscape on the north end of West Sixth Street to be completed by mid-July; public art that will tell the history of the Warehouse District; a new banner program; and more flowers. This is our way of rolling out the welcome mat to our new neighbors in the Ernst & Young Tower and the visitors to the Global Center for Health Innovation and Convention Center. David B. Hartt Board chair Historic Warehouse District Development Corp. See LETTERS Page 11


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THE BIG ISSUE How do you think the opening of the convention center and the Global Center for Health Innovation will affect downtown Cleveland?

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I hope it will bring more visitors here and maybe bring some business for the small retail businesses. I hope so.

I think itâ&#x20AC;&#x2122;s going to affect parking. (But) it will be good. â&#x20AC;Ś It will be good for the casino. Sometimes I wonder if thatâ&#x20AC;&#x2122;s why they put up the casino where they did.

I think itâ&#x20AC;&#x2122;s going to be a good idea, because we need that in Cleveland. â&#x20AC;Ś We have the Cleveland Clinic, which is one of the top 10 in the United States, and an idea like the medical mart and convention center is a very, very good idea for Cleveland and for the tourism in Cleveland.

Hinckley (a civil engineer for the Global Center for Health Innovation)

Accelerating success.

I lived in Chicago for seven years before I moved here. â&#x20AC;Ś It will make Cleveland a destination, similar to the Chicagos of the world.

â&#x17E;¤â&#x17E;¤ Watch more people weigh in by visiting the Multimedia section at www.CrainsCleveland.com.

Amerisafe and Safety Controls Technology continue to quarrel Amherst company sues Bedford Heights competitor over purchase of domain names By MICHELLE PARK mpark@crain.com

Amerisafe Services Inc. in Amherst has sued a Bedford Heights competitor, alleging that Safety Controls Technology Inc. bought 11 domain names that are â&#x20AC;&#x153;identical and confusingly similarâ&#x20AC;? to Amerisafeâ&#x20AC;&#x2122;s trade name and has plastered its own marketing materials on those websites to deceive consumers and to harm Amerisafeâ&#x20AC;&#x2122;s profitability and goodwill. This isnâ&#x20AC;&#x2122;t the first time one of the companies has sued the other. According to the lawsuit, filed March 21 in U.S. District Court in Cleveland, â&#x20AC;&#x153;Amerisafeâ&#x20AC;&#x2122;s relationship with (Safety Controls Technology) has been strained from the inception of Amerisafe, first culminating in a lawsuit filed by SCT against Amerisafe in January 2011 alleging that Amerisafe had â&#x20AC;&#x2DC;poachedâ&#x20AC;&#x2122; an SCT employee who was bound by a non-compete

agreement. â&#x20AC;&#x153;SCT was vexatious in its prosecution of the litigation, despite the fact that the subject-employee was a close relative of the principals of Amerisafe,â&#x20AC;? the lawsuit states. The parties, which both provide safety training and consulting services, ultimately settled. Then, upon researching additional domain names in anticipation of expanding and enhancing its online presence, Amerisafe this year discovered that Safety Controls Technology had purchased several internet domain addresses â&#x20AC;&#x201D; among them, amerisafeservices.com, amerisafeservices.net and amerisafe.biz â&#x20AC;&#x201D; on which SCT displayed its own marketing materials, the lawsuit says. â&#x20AC;&#x153;SCT does not redirect visitors to these sites to its own website, but rather compounds the confusion in the mind of the consumer by purporting to be related to Amerisafe in some fashion,â&#x20AC;? Amerisafe alleges.

â&#x20AC;&#x153;Words in many domain names can and do communicate information as to the source or sponsor of the website,â&#x20AC;? Amerisafe asserted in the lawsuit. â&#x20AC;&#x153;In fact, customers who do not know a domain name will often guess that the domain name is the same as the companyâ&#x20AC;&#x2122;s name or trademark. â&#x20AC;ŚSCT makes no attempt to disavow its relationship with Amerisafe, and intentionally seeks to lure consumers away from Amerisafe using the infringing domain names to obtain a competitive advantage, albeit unfairly.â&#x20AC;? In its suit, Amerisafe alleges trade name infringement, unfair competition and cyberpiracy, and seeks damages for economic loss it says it has suffered, as well as orders requiring SCT to transfer the infringing domain names to Amerisafe immediately and directing the company to immediately discontinue all unlawful infringement of Amerisafeâ&#x20AC;&#x2122;s trade name. Vince Ruffa, an attorney who represents Safety Controls Technology, said last Thursday, March 28, that he hadnâ&#x20AC;&#x2122;t yet seen the suit and therefore couldnâ&#x20AC;&#x2122;t respond. â&#x2013;

Letters: Petition is on White House website continued from PAGE 10

Solving Clevelandâ&#x20AC;&#x2122;s immigration problem â&#x2013; I wanted to comment on publisher Brian Tuckerâ&#x20AC;&#x2122;s March 25-31 column, â&#x20AC;&#x153;Mayor is behind the times on immigrationâ&#x20AC;? about recent comments by Cleveland Mayor Frank Jackson. Common sense tells me that Mr. Tucker is right on the money. My father, who came to New York City in the early 1980s, benefitted from President Ronald Reaganâ&#x20AC;&#x2122;s 1986

amnesty program. That, in turn, allowed my father to become a U.S. citizen, a condition that also benefitted me: I went from being a permanent resident in 1996 to becoming a U.S. citizen in 2002. As an Ohio resident, I applaud your bold and civic statements about immigration and the Global Cleveland initiative. In the spirit of generating common ground, I would refer readers to a March 10 article penned by Argeo Paul Cellucci and Stephen R. Kelly in The Wall Street Journal regarding immi-

gration. (Read the story here: tinyurl.com/a37zhoo) In short, Messrs. Cellucci and Kelly argue that updating the NAFTA to allow citizens of the United States, Canada and Mexico to work freely across borders would go a long way to solve our own immigration problems. I was so enthused with this idea that I created a petition in the White House website and invited others to do so: http://1.usa.gov/YoOSwx Mario ChĂĄvez Westlake

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Board: Sales have grown 40% per year continued from PAGE 3

Now Kent Displays is getting ready to make its first shipment to Walgreens, Dr. Green said. If the back-to-school season goes well, the chain could buy more for the holidays, which is a big deal, considering that Walgreens runs about 8,000 drugstores in the United States. That trial and several others in the works should go well, based on the product line’s past performance, Dr. Green said. If shoppers can see the product, many will pick it up, try it and buy it, he said. “We know the metrics. The product sells. It’s very difficult for me to point to a trial that was not successful,” he said. Now that Kent Displays has built relationships with so many retailers, Dr. Green said the company is preparing for a big 2013. Sales have grown an average of 40% per year since 2009, Dr. Green said. He would not provide revenue figures or say whether the company is profitable. However, in an August 2011 story by the Bloomberg news service, Dr. Green projected that sales for that year would reach $21 million, up from $9 million in 2010, when the Boogie Board first appeared in stores. To keep up with demand, the roll-to-roll machine that prints the product line’s flexible liquid crystal display runs nearly 24 hours a day. Kent Displays is about to expand that capacity. Over the next month or so, the company plans to install a second machine at its 40,000square-foot headquarters just south of Kent, Dr. Green said. That machine will be able to print four

times as many Boogie Board displays as the existing machine, and it could be tweaked to run even faster, he said. The plastic cases that house the displays are made in China. The new machine will help Kent Displays handle the peak holiday and back-to-school sales seasons. Now, to meet those peaks, the company has to make more Boogie Board displays in advance, which ties up cash, Dr. Green said. He added that the company — where employment increases from 100 to 125 as it prepares for the holidays — got some orders last fall that it could fill because it didn’t have enough Boogie Boards on hand. The new machine should help prevent that problem. “We definitely turned down business last year,” Dr. Green said.

Watch out, notebooks Another factor should help drive increased sales next year: Kent Displays in August plans to release a smaller Boogie Board that costs less than $20, which Dr. Green described as a “magic price point” where the product becomes an impulse buy. A month later, the company expects to release the $99 Boogie Board Sync, which allows you to save your work and wirelessly send it to a computer, a smart phone or a tablet. The Sync will replace the Rip, which had to be plugged into a computer to transfer saved files. That wireless capability, combined with the Sync’s larger display, will give it a broader range of uses than the original $30 Boogie Board, which typically is used for writing

short notes or drawing. “This is a tool now. It really is designed to replace your notebook,” Dr. Green said. The existing Boogie Boards are among the most popular items in the toy and technology segment at gift retailer Brookstone, said Pauline Collins, the chain’s public relations manager. Brookstone, which was the first chain to sell the Boogie Board in stores, also sells variations of the products through Staples. “Not many people can walk by a Boogie Board without drawing something,” she said via email.

A ‘conversation starter’ The growth of Kent Displays could have rippled effects in Northeast Ohio, said Byron Clayton, vice president of cluster acceleration at NorTech, a nonprofit that works to help local technology companies grow. One of Dr. Clayton’s tasks is to build a cluster of flexible electronics companies in the region. Kent Displays not only helps NorTech strategize, but the company also lends a hand when it can, he said. For instance, Kent Displays helped a Cleveland startup called LorkTech create a prototype of an electronic shelf display designed to give retailers an easier way to alter prices listed in their aisles. And Kent Displays’ reputation helps NorTech make connections in the flexible electronics industry, Dr. Clayton said. “It’s a conversation starter. It opens the door to talk about the other capabilities that we have here,” he said. ■

Bar: Company pledges to add workers continued from PAGE 3

The company also is moving into the more advanced radio frequency identification end of the business. Its customers run the gamut and include Fortune 100 and 500 companies, said company president Sean Kennedy. For instance, Technology Recovery Group provided Lord & Taylor — a department store chain with 49 stores largely in the northeast United States — with refurbished handheld barcode scanners for its distribution center. It also is providing maintenance and repair services for off-warranty scanners of Parker Hannifin Corp., a Cleveland-area manufacturer, extending the useful life of older technology from a variety of equipment manufacturers. “Anything that scans, reads or prints bar codes, or mobile devices that capture (information),” Mr. Kennedy said, describing the business in a nutshell. “We’re more into the industrial grade environment, warehousing, and now we’re getting into iPad- and iPhone (-based equipment).”

Mr. Kennedy told a county council committee last Tuesday, March 26, that the company has been experiencing growth at between 20% and 30% annually and has been hiring steadily for the last several years. The expansion is a response to the growth of automated inventory tracking, and particularly to customers who want to extend the useful life of their scanning equipment to seven to 10 years — well beyond the three to five years of their computer equipment. The company currently employs 55 people. Mr. Kennedy has pledged to the county as part of the loan agreement that the company will add 15 to 20 people a year for the next three years. Sales have more than tripled from $4.5 million in 2008. Most of the new hires will be repair technicians, but Mr. Kennedy said he also will hire account executives and warehouse workers. Mr. Kennedy said the jobs will pay $25,000 to $45,000 annually. With the new building, the company’s footprint will grow to 65,000 square feet from 25,000 square feet.

The company will freshen up and lease out its existing building. The council committee favorably recommended a loan with a 15-year term at a 2% interest rate. The primary lender on the expansion is Charter One Bank. The Western Reserve Fund is Cuyahoga County’s $100 million economic development pool that seeds 11 loan programs, from modest microloans to million-dollarplus capital expansion lending. Technology Recovery Group’s loan is called an accelerated-growth loan, designed for small and midsize businesses in targeted industries with high-growth potential. Larry Benders, the county’s director of development, said he wants growth-oriented businesses not to worry about the details of the fund but to come to his department and let his staff figure out the best way to help them. “The fund is the primary investment tool we have to get deals done,” Mr. Benders said. “Just tell us what you need. We have lots of tools.” ■

GET DAILY NEWS ALERTS FROM CRAIN’S ! Register for free e-mail alerts and receive: ■ The Morning Roundup: The day’s business news from Ohio’s daily papers ■ Breaking news alerts ■ Daily headlines: Crain’s-produced news and blog items from the day ■ Dealmaker alert: A weekly guide on M&A trends and recent transactions in Ohio. Published Wednesday.

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CRAINâ&#x20AC;&#x2122;S CLEVELAND BUSINESS

WWW.CRAINSCLEVELAND.COM

WHAT IGNITES YOU? E D U C AT I N G P H Y S I C I A N S , P H A R M A C I S T S A N D H E A LT H C A R E R E S E A R C H E R S

Nordson Corp. has provided $40,000 in scholarship support to the 2012-13 annual campaign of The Ohio Foundation of Independent Colleges. COURTESY NORDSON CORP.

n e o m e d . e d u

BRIGHT SPOTS Bright Spots is a period feature in Crainâ&#x20AC;&#x2122;s highlighting positive business developments in the region. To submit information, email Scott Suttell at ssuttell@crain.com. â&#x2013; Resilience Capital Partners of Cleveland was a winner in the seventh annual Turnaround Awards, sponsored by The M&A Advisor and given earlier last month in Palm Beach, Fla. The February 2012 acquisition of Vista Proâ&#x20AC;&#x2122;s Heavy Duty Division by Thermal Solutions Manufacturing, an affiliate of Resilience, was named a winner in two categories: â&#x20AC;&#x153;Divestiture Deal of the Yearâ&#x20AC;? and â&#x20AC;&#x153;Industrial Manufacturing and Distribution Deal of the Yearâ&#x20AC;? (between $10 million and $50 million. Resilience Capital was chosen from more than 120 nominations and more than 300 participating companies to receive the award, according to David Fergusson, senior managing director of The M&A Advisor. The awards event was held in conjunction with the 2013 Distressed Investing Symposium that featured more than 150 professionals participating in forums led by more than 40 turnaround, media, academic and political guests. â&#x2013;  National Interstate Insurance Corp. of Richfield, a provider of passenger transportation insurance, said it has partnered with Transit & Paratransit Co. of Hudson to offer its customers a comprehensive driver training course. Transit & Paratransit, known as TAPTCO, will offer the course to National Interstate customers at â&#x20AC;&#x153;preferred pricing,â&#x20AC;? the Richfield company said. TAPTCO developed the training program, which includes transit and paratransit operator development courses as well as a trainer certification process, to ensure that drivers â&#x20AC;&#x153;are fully prepared to provide the safest and most efficient services,â&#x20AC;? according to National Interstate. Since 2003, National Interstate has marketed insurance for public transit and paratransit operators through its Community & Medical Transportation unit in Mechanicsburg, Pa. â&#x2013;  Bloomfield Hills, Mich.-based

Ackerman Ackerman & Dynkowski, a condemnation and eminent domain law firm that represents landowners exclusively, is expanding into Ohio with the opening of an office in Cleveland. Darius Dynkowski, a partner with the firm, has become licensed to practice law in Ohio and will work from the Cleveland office. â&#x20AC;&#x153;Eminent domain has emerged as a prominent issue for business owners in Ohio, particularly gas storage properties and farm owners,â&#x20AC;? the firm said in a statement. â&#x20AC;&#x153;We made a strategic decision to open our Cleveland office, where we can serve as a resource to those facing eminent domain.â&#x20AC;? Ackermanâ&#x20AC;&#x2122;s new Cleveland office is located in the Fifth Third building at 600 E. Superior Ave., Suite 1300. â&#x2013; COSO Media, an Internet marketing, social media, web development and search engine optimization company in Hudson, said it has expanded by adding Artemis Creative Group, a print design and direct marketing agency. Terms of the combination were not disclosed. COSO Media said that in the past few years, its has received an increase in print design requests from existing clients. â&#x20AC;&#x153;We base this company off of the needs of our clients, and by not offering print design we werenâ&#x20AC;&#x2122;t fully meeting those needs,â&#x20AC;? said Matthew DeWees, president of COSO Media, in a statement. â&#x20AC;&#x153;So many of our current clients were requesting print materials that it did not make sense not to hire a full-time print designer.â&#x20AC;? The firm said it then approached Andrea Kiger, founder of Artemis. The addition of Artemis to COSO Media â&#x20AC;&#x153;was a no-brainer,â&#x20AC;? according to Mr. DeWees, because the companies already had a business relationship through collaboration on several projects. â&#x2013;  Kimberly Martinez, CEO of Bonitas International, a Geauga County company that produces and distributes fashion ID jewelry such as the BooJeeBeads brand of beaded lanyards and badge reels, was named â&#x20AC;&#x153;Ms. Mompreneur 2013,â&#x20AC;? a division of the Ms./Mrs.

Corporate America Pageant. The honor is given annually to a woman who excels in achieving a balance between raising a family and building a business. â&#x20AC;&#x153;Being named Ms. Mompreneur gives me the incredible opportunity to take the message to women across the country that they can follow their dreams while following their hearts,â&#x20AC;? Ms. Martinez said in a statement. She received the award at the Rosen Centre Hotel in Orlando, Fla. Bonitas International this year is celebrating its 10th year in business. â&#x2013; Nordson Corp. said it provided $40,000 in scholarship support to the 2012-2013 annual campaign of The Ohio Foundation of Independent Colleges. Cumulative giving to the OFIC by Nordson â&#x20AC;&#x201D; the Westlake-based maker of precision dispensing equipment for applying industrial liquid and powder coatings, adhesives and sealants during manufacturing operations â&#x20AC;&#x201D; now exceeds $800,000 during the past 25 years. The company has designated its support specifically to provide scholarships to students from northern Ohio majoring in math, science, engineering or a businessrelated area. It currently providing scholarships to 34 students enrolled in OFIC-member colleges and universities. OFIC is the primary corporate and foundation solicitation organization for 34 Ohio independent colleges and universities. â&#x2013;  Global Lighting Technologies, which makes products for LEDbased systems that illuminate flat panel displays, keyboards and other electric equipment, has retrofitted its North American sales and engineering headquarters in Brecksville with LED ceiling lights. The company said in a news release that in addition to providing its employees with more attractive lighting that has less glare, it is â&#x20AC;&#x153;starting to reap the energy-saving benefits that LED lighting provides.â&#x20AC;? Global Lighting Technologies said that on average, the new light fixtures â&#x20AC;&#x201D; which incorporate the companyâ&#x20AC;&#x2122;s edge-lit light guide technology â&#x20AC;&#x201D; use 65% less power than the units they have replaced, significantly reducing the power consumption of the entire facility. â&#x2013; 

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APRIL 1 - 7, 2013

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BOARDS ALS ASSOCIATION NORTHERN OHIO CHAPTER: K. James Zinkan (Zinkan Enterprises) to chairman; Wayne Mosley to vice chairman; Jeffrey Kerkay to treasurer; Matthew J. Slife to secretary. BENJAMIN ROSE INSTITUTE ON AGING: Nancy A. Adams to chairperson; Elizabeth F. Stueber to vice chairperson; Kathryn L. Kaesberg to past chairperson; Emily A. Drake to treasurer; Marcia J. Wexberg to secretary. CUYAHOGA COUNTY BOARD OF DEVELOPMENT DISABILITIES: Richard V. Mazzola (Things Remembered) to president; Ara A. Bagdasarian to vice president; Diane Roman Fusco to secretary. WELCOME HOUSE: Nicolas Alexander (UBS) to president; Mark A. McCaffrey to vice president; Shannon K. Patton to secretary. WEST HAVEN FOUNDATION: Todd Carmel (Raymond James Financial Services) to president; Robert C. Becker to secretary.

AWARDS GREATER AKRON CHAMBER: Donald Plusquellic (City of Akron) received the H. Peter Burg Economic Development Leadership Award.

Send information for Going Places to dhillyer@crain.com.


20130401-NEWS--15-NAT-CCI-CL_--

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1:30 PM

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SPECIAL REPORT THE IMPACT OF THE GLOBAL CENTER FOR HEALTH INNOVATION AND CONVENTION CENTER

JASON MILLER

The Global Center for Health Innovation, shown in the foreground, is expected to officially open Oct. 14, coinciding with the start of the 11th annual Cleveland Clinic Medical Innovation Summit.

An investment in Cleveland’s health Anticipation builds as $465 million project on city’s Mall nears completion By JAY MILLER jmiller@crain.com

L

ooking out the window of his office at City Hall, Cleveland Mayor Frank Jackson described the impact he hopes the new Cleveland Convention Center and adjacent Global Center for Health Innovation will have on his city’s downtown. “It will move people to the restaurants of the Warehouse District and East Fourth Street because people will be there,” he said pointing to the exhibit hall taking root under the sod on the

INSIDE: A look inside the Global Center for Health Innovation and the convention center. Pages S4-5; The potential impact on various types of local businesses. Pages S6-9; Are convention centers really economic drivers? Page S10 Mall. “And then, this is the key — the lakefront. “A developer will look at this here, and then you’ll see some retail and entertainment down there,” he said, referring to the undeveloped waterfront behind City Hall to the north. The convention center portion of the county sales-tax funded $465 million project is on

schedule to be ready in July for the 2013 National Senior Games, and the Global Center’s grand opening is slated to correspond with its hosting Oct. 14 to 16 of the 11th annual Cleveland Clinic Medical Innovation Summit. Years beyond the opening blitz of the facilities, though, it may be difficult to assess the tangible impact of the largely underground tradeshow complex and the accompanying Global Center. That’s because, like sports arenas, no hard and fast metrics exist to quantify their success. See HEALTH Page S-12

Center can be big selling point for city Leaders are spreading word about new kid on block By MICHELLE PARK mpark@crain.com

JASON MILLER

The convention center is slated to open in July. Signage already is starting to be installed.

T

hey’d toured the convention center, eaten lunch at The Greenhouse Tavern, indulged in baseball-sized dessert at Colossal Cupcakes and

seen some hotels. It was Mike Burns’ job to show Carrie Abernathy the city of Cleveland, and he was curious. “I said, ‘So, what do you think?’ ” Mr. Burns, the senior vice president of convention sales and services for Positively Cleveland, recalled of last year’s tour.

“And she just looked at me and said, ‘Cleveland — who knew?’ ” Exactly his point. As one of the people working to sell Cleveland to shows and conferences that haven’t had reason to consider the city for years, even before its old convention center closed, Mr. Burns is confident that the tallest hurdle the city must clear isn’t the need for See CENTER Page S-2

ON THE WEB: For expanded coverage, including photo slideshows, maps and video interviews, visit www.crainscleveland.com/medmart


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CRAIN’S CLEVELAND BUSINESS

SPECIAL REPORT

APRIL 1-7, 2013

Center: 76 conventions, trade shows and meetings are booked continued from PAGE S-1

more hotel rooms or its frigid winter weather. “Right now, our greatest competition is the lack of knowledge about our city,” he said. “If you haven’t been to Cleveland in the last six months and you’re a meeting planner, you haven’t been to Cleveland.” Following her tour, Ms. Abernathy, director of education, training and events for Practice Greenhealth, a Virginia nonprofit organization of hospitals and medical suppliers seeking to become more sustainable, booked Cleveland for the group’s 2014 CleanMed event. It will be the event’s 11th year and its first in Cleveland, and should draw roughly 1,000 attendees. “I was just so awestruck by the city,” Ms. Abernathy said. “It’s not known as a destination city, and it really is. It’s an experience, and it’s an experience that I wanted my attendees to have.” After years of being out of the running for events that draw hundreds and thousands of people to other cities annually, downtown Cleveland has a hand to play again, and the people leading tours through the city and its soon-to-open convention center believe it’s a strong one. “We’re finally in a position to compete,” said Craig Thompson, director of convention sales for the Cleveland Convention Center.

New kid on the block It’s predictable that people paid to sell the new convention center

ON THE WEB For smart phone users, scan this QR, or “quick response” code, with any QR code reader to view a video tour of the convention space and Global Center. would say Cleveland is in a position to pull business from competing cities, among them Columbus, Pittsburgh and Milwaukee. But other observers — including a man paid to promote another Midwestern city and event planners — say it, too. For one, this convention center is the new kid on the block. “The thing that meeting professionals ask us is, ‘What’s new? What is neat out there that we haven’t experienced before?’ ” said Dave Scypinski, senior vice president for ConferenceDirect, a Los Angelesbased firm that sources and plans meetings for some 1,200 corporations and associations. During a tour of the convention center in early March, against the soundtrack of whirring tools and beeping vehicles, center spokesman Dave Johnson delineated the amenities that might not pop out to the uninitiated. The exhibit hall, which measures 230,000 square feet, has ceilings that are high enough and columns separated by enough space to allow for sporting events such as volleyball. Tractor-trailers can turn around in and use 17 loading docks. There’s an on-site, state-of-the-art kitchen, a 32,000-

square-foot grand ballroom and 35 meeting rooms. “The hot trend in the convention industry right now is meeting rooms,” Mr. Johnson said. “Everyone wants breakout space.” With the convention center set to open in July for the National Senior Games, its sales team is touring the facility multiple times a week with prospective clients. As of midMarch, it had booked 76 conventions, trade shows and meetings. Beyond the convention center’s four walls, there are other, new selling points — a vibrant restaurant row on East 4th Street, the Horseshoe Casino Cleveland, the aquarium — plus the mainstays, including three major sports teams and PlayhouseSquare. The number of hotels and restaurants within walking distance of the center helped convince Ms. Abernathy to bring CleanMed 2014 to Cleveland, as did the city’s affordability. Kelly Collins also cited Cleveland’s affordability, plus accessibility (namely, the proximity of the airport), as reasons why the city is an attractive candidate for an event. Mr. Collins also is interested in the number of haunted houses in Northeast Ohio. As president of Columbus-based MidOhio Productions, he would be: The group hosts the annual Midwest Haunters Convention for thousands who own, operate or participate in haunted attractions. His organization in past years had considered and decided against the I-X Center, namely because of the lack of hotels within walking distance, he said.

“It’s hard to get in and out of the car when you have elaborate costumes on,” Mr. Collins said. “Now that Cleveland has a new facility that appears to meet a lot of our criteria, we’re interested,” he added.

Haves and have nots In the same conversation, Chris Gahl points out reasons why Cleveland’s new center cannot compete with the one he sells, and he identifies ways in which other centers cannot compete with Cleveland’s. For one, Cleveland doesn’t have the space for certain, larger shows that the Indiana Convention Center & Lucas Oil Stadium can host in its 566,000 square feet of contiguous exhibit space, said Mr. Gahl, spokesman for Visit Indy, the sales and marketing arm for Indianapolis. And no other convention center in the nation, he asserted, has more hotel rooms connected via climatecontrolled walkway. But, he noted, “building a LEEDcertified facility certainly will catch the eyes of meeting decision makers. “When you bring in a convention or meeting … you’re impacting a destination, and many meeting planners want to make sure their footprint is eco-friendly and carbon-neutral and sustainable,” he continued. The Indiana Convention Center is not LEED (Leadership in Energy and Environmental Design)-certified, nor actually is Cleveland’s, yet, though it’s pursuing LEED silver certification. Also setting Cleveland’s center

apart, Mr. Gahl said, is its adjoining Global Center for Health Innovation, which will cater to and attract the more lucrative subset of medical meetings and conventions. “Attendees tend to be doctors, physicians and surgeons, therefore (they) have a greater disposable income,” he said.

The inn thing When asked what they perceive their city to lack, Cleveland convention center and visitors bureau executives say there’s a need for a new, large hotel. The convention center’s Mr. Thompson also noted that one detractor for certain local events is limited parking. With roughly 4,000 hotel rooms between downtown and University Circle, the convention center usually can count on 1,500 to 1,800 rooms for its use, Positively Cleveland’s Mr. Burns said. The ideal new hotel, officials say, would be one that adds 800 or more rooms and is connected to the convention center. “The bigger the group is, the sooner they notice the lack of a large convention hotel,” Mr. Burns said. That’s why he and others have a keen eye trained on the pending sale of the Cleveland Metropolitan School District headquarters across from the convention center. Drury Hotels of St. Louis submitted the top bid for the property and has plans for a Drury Plaza Hotel there. The school board is expected to vote to accept or reject the company’s $4.8 million bid on April 9, a district spokeswoman said. ■


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THE KEY EVENTS

WHAT THEY’RE SAYING

Complex has been long in the making

TIM HAGAN

ON THE WEB

■ The former Cuyahoga County commissioner was involved in talks about a new convention center as early as 1982.

For smart phone users, scan these QR, or “quick response” codes, with any QR code reader to view video interviews with the following:

By JAY MILLER jmiller@crain.com

T

“In the ’80s there was a concern that in order to be a first-class city, a major league city, you had to have major league sports and major league convention facilities in order to compete.

MORE ONLINE

he idea for a showroom for medical technology, first called a medical merchandise mart, had been gestating for decades when in 2005 Cleveland Clinic CEO Toby Cosgrove put in a call to Chris Kennedy, then president of Merchandise Mart Properties Inc., the operator of Chicago’s Merchandise Mart, a massive building designed with permanent showrooms for vendors of furniture and home furnishings. Dr. Cosgrove had first heard the term “medical mart” when he was in Saudi Arabia more than four years earlier, though the idea had floated around Cleveland since the early 1980s. In Dubai, Dr. Cosgrove met a businessman who said he was considering a development in Dubai that would include a hotel attached to a building where he could show off his firm’s medical and health care products. But it wasn’t until 2004, when he was being interviewed for the job as the Clinic’s CEO, that Dr. Cosgrove gave the idea its first public exposure. “I suggested that one of the ways we could stimulate the economy of

TIM HAGAN

For a full timeline of major milestones in the project, go to: www.crainscleveland.com/timeline Northeast Ohio was with a mart that brought together the latest and greatest technology in health care,” he recalled recently. His call brought Mr. Kennedy to Cleveland twice in 2005 with Cuyahoga County Commissioner Tim Hagan, a friend of Mr. Kennedy’s very political family, joining the second meeting. “Tim Hagan really picked up the ball and ran with it,” Dr. Cosgrove said. At the time, one more study group, called the Convention Facilities Authority, was trying to find a way to build and finance a new convention center. Over the years, various mayors, county commissioners and independent panels proposed new convention centers at various places along the lakefront, behind Tower City Center and on the Mall site of the underground Cleveland Convention Center that had been built in 1964. The rest is history, so to speak, with these movements setting the stage for the eventual groundbreaking of the complex in 2011. ■

JIM BENNETT ■ Mr. Bennett signed on as MMPI’s senior vice president in April 2012 when the project was in a sort of turnaround. Now, he believes, the project is on the right track, though it may still lack a key component. “I think if we have a convention center hotel where the county administration now is we will have cured our principal product deficiency. That’ll be a very big step.”

JIM BENNETT

ED FITZGERALD ■ Mr. FitzGerald inherited the convention center project when he became Cuyahoga County’s first executive, taking over the reins of county government from Tim Hagan and his colleagues on the county commission.

ED FITZGERALD

“I believed that Cleveland did need a new convention center; I liked the idea that there was going to be a medically based facility because I thought that that played to our strengths in terms of the portion of our economy that was growing, which our medical sector certainly has been.”

DR. TOBY COSGROVE DR. TOBY COSGROVE

■ The CEO of the Cleveland Clinic was one of the early boosters of linking a health care focus to the project. “Building in health care right now is going on all over the world. The industry is in a state of constant building and refurbishing. So I think there is a big opportunity (for the Global Center) to begin to attract medical related industries.”

Innovation?

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A look inside the Convention Center and Global Center for Health Innovation Global Center for Health Innovation

Junior Ballroom

Grand Ballroom Concourse Meeting Rooms

Meeting Rooms Exhibit Hall C

Exhibit Hall A

Exhibit Hall B

A work in progress From lifting a portion of Lakeside Avenue nue by less 00-cubicthan half an inch to completing a 6,000-cubicdical mart yard concrete placement for the medical b ildi off over an almost 24-hour period, the building the Global Center and convention hall has been

For more construction images, scan this QR code.

n to make no easy task. Still, steps were taken d sure construction was completed le, in the most efficient way possible, deling, such as by using computer modeling, ling (BIM), or building information modeling

along the way, according to John DeWine of Turner Construction Company. Construction mpleted started January 2011, and it is slated to be completed by June 1 -- three months ahead of schedule.

Atrium & Global Center for Health Innovation

Convention Center All levels shown

Convention Center events

Exhibit Hall A 52,941 square feet Kitchen

Loading Dock

the center can be found at www.crainscleveland.com/convention.

Ballrooms

Exhibit Hall B 88,369 square feet

A 10,513 square feet

Exhibit Hall C

A detailed list of events planned at

B 10,958 square feet

84,618 square feet

C 10,722 square feet

As of last week, 76 events were booked at the new Cleveland Convention Center, which is slated to officially open with the start of the National Senior Games in July. The 750,000-square-foot convention center includes 225,000 gross square feet of Class A exhibit space, which means 90-foot spacing between columns and 30-foot ceilings. It is divisible into three exhibit halls, one measuring more than 50,000 square feet and two larger exhibit halls

All levels shown = Concourse Level Meeting Rooms = Public Restrooms

= Exhibit Level Meeting Rooms

= Ballroom Level Meeting Rooms

measuring more than 80,000 square feet apiece. = Prefunction area

It also features 17 truck bays and more than 30 meeting rooms.

Layout by Lauren Rafferty „ Photos by Jason Miller „ Space renderings courtesy Vocon Inc.


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Global Center for Health Innovation

Floor 2: Proposed GE Healthcare space (above, below) GE Healthcare plans to use its space at the Global Center to take visitors on a journey through the eyes of a patient. Displays will aim to show how technology affects patients across the care continuum.

Atrium (right) Each floor of the Global Center follows the same general layout (as seen below) with an open atrium space in the middle. The center’s windows look out to the Mall and convention center.

Floor 1: Proposed ‘Home of the Future’ (right) Officials hope to set up a ‘Home of the Future’ on the first For more

floor, featuring a

proposed

variety of vendors

renderings,

in settings such as a

scan this

bedroom, bathroom

QR code.

and kitchen.

Global Center tenants More detail on the tenants, along with their plans for the space, can be found at www.crainscleveland.com/tenants. Each floor of the 235,000-square-foot Global Center for Health Innovation has a specific theme: Health and Home, first floor; People, Patients and Caregivers, second floor; Clinical Spaces, third floor; and Health Care IT, fourth floor. As of last week, project spokesman Dave Johnson said the Global Center was 80% occupied. The announced spaceholders to date at the center are GE Healthcare, the Cleveland Clinic, Johnson Controls, Philips Healthcare and the Healthcare Information and Management Systems Society. Mr. Johnson referred to the Global Center during a recent tour as the ‘Epcot of health care,’ noting that ‘there will be something of interest for everyone to see.’


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LOCAL IMPACT

Many businesses may benefit HOTELS AND HOSPITALITY

JASON MILLER

The Cleveland Metropolitan School District headquarters could become a hotel after Drury Hotels was the winning bidder in a recent auction.

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By TIMOTHY MAGAW tmagaw@crain.com

ADDING IT UP ■ 17: Full-size truck bays that

W

service the convention center

ith the new convention center and medical mart slated to open their doors this year, Cleveland’s visitors will need more than just a place to rub elbows with their peers. They’ll need places to sleep and eat. Just ask said Dave Scypinski, senior vice president for ConferenceDirect, a Los Angelesbased firm that sources and plans meetings for some 1,200 corporations and associations. “A city is only as good as three things,” he said. First, a convention center of some size; second, supporting hotel rooms; and third, its attractions. “It’s a chicken and the egg kind of thing,” he said. “If the center is too small, the hotels don’t help because you can’t fit the group in, or if the center has enough (space) but you don’t have enough hotel rooms, you suffer the other way.”

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See HOSPITALITY Page S-9

AUDIO/VIDEO, LIGHTING AND EVENT SERVICES By CHUCK SODER csoder@crain.com

B

ob Leon had little time to talk when contacted for this story two weeks ago. That’s what can happen when your company is selected as a preferred vendor at Cleveland’s

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To that end, a throng of Cleveland-area institutions in the hospitality industry are hoping to take advantage of the surge in out-oftown traffic that will likely accompany the Global Center for Health Innovation and convention center complex. “I think it’s going to have a very positive impact on the hotel industry,” said David Sangree, president of the Hotel & Leisure Advisors consultancy in Lakewood. “Cleveland hasn’t been in the convention market too much over the past 10 years, and this new facility should allow us to get more aggressively into that market. They’re certainly going to need hotel rooms.” There are a handful of hotel construction projects already in the works, and Mr. Sangree said much of that activity is likely

fueled by the expectation of a need for rooms once the complex opens. The former Crowne Plaza hotel on St. Clair Avenue, for instance, is undergoing a $70 million conversion to a Westin and is slated to open in 2014. Also, the Cleveland Metropolitan School District headquarters building, which is a stone’s throw from the new convention center, stands to become a hotel after Drury Hotels of St. Louis was deemed the winning bidder in a recent $4.5 million auction for the building. Already-established downtown hotels also appear to be bracing for the convention center opening. The Ritz-Carlton has bolstered its staffing in anticipation of the convention center’s opening and the other development occurring in the city, though Lynn Coletto, the hotel’s director of sales and marketing, declined to provide a figure.

ADDING IT UP ■ 1,700: People who can dine at round tables in the ballroom new convention center complex. Colortone Staging and Rentals of Solon will be the complex’s preferred vendor for managing lighting and audio/visual equipment, making it one of many local service providers that will get a sales boost from the new facility. Winning the preferred vendor status will have “a tremendous impact” on Colortone, said Mr. Leon, who owns the company. “We are hiring. We are spending money,” he said before hopping onto another call. Other local businesses will reap benefits, too. The convention center complex is compiling lists of preferred vendors that the complex

will turn to when it needs a particular service, said Ron Willner, director of event services for the facility. He’s looking for good taxi drivers, limo drivers, valet services, security companies and general service contractors, who help oversee the management of events. A few vendors have exclusive contracts. Colortone will be the complex’s only preferred A/V vendor, though companies that hold events at the complex — which includes the Global Center for Health Innovation — may pick another company, Mr. Willner said. Three out-of-state companies that have exclusive contracts will hire full-time employees locally, he said. Levy Restaurants of Chicago will serve food; Edlen Electrical of Las Vegas will provide temporary utility services; and Aramark See SERVICES Page S-9


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LOCAL IMPACT

CRAIN’S CLEVELAND BUSINESS S-7

See Pages S-8 and S-9 for more businesses affected

MARKETING AND TOURISM By TIMOTHY MAGAW tmagaw@crain.com

W

hen the Global Center for Health Innovation and convention center complex opens for business, a number of local tourist destinations also are looking to take advantage of what they expect will be a hefty surge in out-of-town traffic. Positively Cleveland, the city’s convention and visitors bureau, is expected to lead the charge and serve as the liaison between the city’s guests and its anchor tourist institutions, including the Rock and Roll Hall of Fame and Museum, the Cleveland Indians, the Greater Cleveland Aquarium and its other destinations. The idea is to use Positively Cleveland to point Cleveland’s visitors to the city’s attractions. “We’re kind of viewing each other as partners,” said Positively Cleveland president and CEO David Gilbert. “At the end of the day, we are about advancing an industry. There are a lot of those folks who directly benefit by growing the travel and tourism industry. There’s very much a rising tide that raises all boats.” Rock Hall president and CEO Greg Harris had similar sentiments, noting that “between the Global Center for Health Innovation, the new convention center

“At the end of the day, we are about advancing an industry.” – David Gilbert president and CEO, Positively Cleveland and the other investments in downtown, we’re in a strong position to build on each other’s product and bring more visitors, more events and more economic impact to Cleveland.” Moreover, Positively Cleveland is growing its enterprise both in terms of staffing and its role in the city as it braces for the complex’s opening and the surge of other development already happening in the city. The organization, for one, is in the midst of a re-branding effort, which will be “geared to the potential traveler and getting them to Cleveland,” according to Mr. Gilbert. “It is just more than having a good experience at the convention center,” he said. The organization also has beefed up its sales staff focused on bringing major conventions and meetings to town. The new convention center, Mr. Gilbert said, gives Positively Cleveland an “enormous amount of ammunition” for its pitch.

ADDING IT UP ■ 76: Events booked at the convention center And here’s an opportunity for local entrepreneurs: The region has a lack of destination management companies, which help travelers get from one place to another and find things to do in the area, said Michele Clark, program manager for the Shlensky Institute for Event and Meeting Planning at Corporate College. “They’re coming to this conference, but they also want to go to the Rock Hall. They may also want to go horseback riding,” she said Lynde Vespoli recently launched Discover My Cleveland, which she bills as a “one-stop shop for event planners, meeting planners, group leaders that are bringing people to a city that they don’t know anything about.” In addition to tours, Ms. Vespoli helps with travel logistics. “I have the experience, and I have the contacts,” she said. “I have relationships with vendors and the attractions. I can get them the tickets they need. My goal is to bring people to Cleveland and when they’re here and show them how wonderful the city is.” ■ Chuck Soder contributed to this story.

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LOCAL IMPACT SMALL BUSINESSES

FACILITIES AND MEETING PLANNERS

By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com

ADDING IT UP ■ 58: First-time SBE subcontractors

By CHUCK SODER csoder@crain.com

W

working with prime contractors

ADDING IT UP ■ 4: Number of football fields that

I

would fit on the convention center floor

orking on the Global Center for Health Innovation helped Gertrudis (Trudy) Ramos and Jose L. Ramos Jr. get their company off the ground. In fact, after the Ramoses signed that first contract with Bedford Heights-based electrical and technology contracting company Zenith Systems LLC to provide temporary power and lighting to the center, they quit their full-time jobs and began to focus solely on Alternalite Electric Inc. About two years later, the North Olmsted business is going strong. They have three full-time employees, two part-time employees and a variety of opportunities in the works. “I don’t know how else we would have done it,” said Mrs. Ramos, president and chief executive officer. Alternalite is one of 169 small business enterprises that have worked on the medical mart and convention center project since its inception, an important statistic to Dave Johnson, the project’s director of public relations and marketing. Close to 32% of the companies that have worked on the complex are small business enterprises, well above the contracted goal of 25% between the county, the city and Merchandise Mart Properties, the Chicago firm that oversaw the project, Mr. Johnson said. Many of the businesses that qualify for Cuyahoga County’s small business distinction, which depends on the total number of employees a business has or the gross revenue it brings in each

SUBMITTED PHOTO

Jose L. Ramos Jr. is seen working at the Global Center. His business, Alternalite Electric got a boost from working on the project. year, are new, minority- or woman-owned or have been discriminated against in some way in the past, Mr. Johnson said. The businesses also must be located in Cuyahoga County and have been in existence for at least a year, according to the county’s website. About 34% of the project’s partnerships were the first between the prime contractors — the main company working on that part of the contract — and the subcontractors. Mr. Johnson said the prime contractors were encouraged to get out of their comfort zones and work with companies with which they had never partnered. This opened up more opportunities to the small businesses. “We’ve created so many new relationships,” Mr. Johnson said. Mrs. Ramos said that the different accreditations for minorityowned businesses and womenowned businesses help small companies like hers get their start.

“All we need is that one chance to show what we can do,” she said. Michael Ballard, president of RWJ Wiring Inc., said the project got his 3-year-old Euclid company “a lot of exposure.” After meeting with Zenith at a networking event designed to introduce prime contractors to prospective small businesses, Mr. Ballard received a $150,000 subcontract for exterior lighting. Since then, RWJ Wiring already has contracted with Zenith on two other unrelated projects. Arlene Anderson, president and chief executive officer of Minority Business Solutions Inc., said she was pleased to see so many new relationships come out of the project. Minority Business Solutions is one of two diversity consultant companies that partnered with Turner Construction Company and Merchandise Mart Properties to oversee the project. Along with North Coast Minority Media LLC, the group put together the events that connected small businesses and prime contractors. After the construction part of the project was set, Merchandise Mart Properties still turned to Minority Business Solutions for local referrals on other jobs, such as cleaning services. Ms. Anderson said that she thought getting small business owners involved in such a large project would create a sense of pride throughout the community. “You put a little bit of yourself in that project,” she said. ■

Independence Excavating, Inc. Proud Contributor of Cleveland’s Growth Since 1956. Cleveland Medical Mart & Convention Center Project 2011-2013

ndependent meeting planners might have reason to get excited about the opening of the new convention center complex this July, but owners of other local facilities that host events do not, according to some in the event planning industry. The complex — which includes the Global Center for Health Innovation — will replace a convention center that was eclipsed by facilities in other cities long ago. Being able to market a big new facility could lead to a 25% sales boost for GhostLight Productions LLC, said Deb Hermann, CEO of the event production company in Shaker Heights. She loves that the convention center will have “a big beautiful ballroom” that overlooks Lake Erie. Many of her clients are interested in having events in the center, she said. “Now we have a sexy, new, large space to sell to our clients,” she said. Other local meeting planners are excited about the complex, too, said Michele Clark, program manager for the Shlensky Institute for Event and Meeting Planning at Corporate College. “It’s what everyone is talking about,” she said. Experient Inc. of Twinsburg plans relatively few events in Northeast Ohio today, partly because of the city’s outdated convention center. That is likely to change once the convention center opens, said Ken Sien and Michael Guerriero of Experient. While the complex will benefit Experient, it likely will lure business away from other area facilities, Mr. Sien said. The John S. Knight Center in Akron could lose a few smaller events, but the I-X Center “is going to take a pretty hard hit,” he said. However, I-X Center president Brad Gentille says that the facilities serve different markets. The I-X Center focuses on trade shows and consumer events that come to the facility for its “sheer size,” he said.

In the same vein, Tony Prusak, senior director of convention sales at the new facility, said luring into town those groups that bring with them new out-of-town money is the aim, not cannibalizing shows from the nearby I-X Center. “They fly into our hub,” Mr. Prusak said. “They take a taxi or rent a car. They stay in a hotel. They eat and drink in our restaurants and our bars. They buy gifts for their kids. At the end of the day, it’s all about selling more cheeseburgers.”

“Now we have a sexy, new, large space to sell to our clients.” – Deb Hermann CEO, Ghost Light Productions LLC Convention centers in other nearby cities could lose business, too, said Dave Lutz, managing director of Velvet Chainsaw Consulting, an event consulting business in Aurora. He described how the Ohio Music Education Association will hold its annual conference at the complex in 2015, 2017 and 2019. Columbus and Cincinnati will host the group on the off years. Cleveland State University’s Wolstein Center, meanwhile, focuses more on sporting events and concerts, so it won’t often compete with the convention center, said Ron Willner, who managed the university’s event facilities before becoming event services director at the convention center complex in November. Older facilities might have trouble competing with the brand new convention center, Mr. Willner said. Cleveland State was “bombarded with calls” when its new student center opened in 2010, and the same thing is happening at the convention center now, he said. “Everyone wants to be a part of this facility. People flock to newness,” he said. ■ Michelle Park contributed to this story.

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HOSPITALITY: THANK YOU TO THE CONVENTION CENTER FOR OPENING THEIR DOORS TO CLEVELAND AND THE NATIONAL SENIOR GAMES.

Join us at the Convention Center this summer to be part of an event with more competitors than the Olympics!

CU YA

Sponsored by:

of Philadelphia will provide room conversion and cleaning services. The number of people they hire could be significant. For instance, Aramark plans to have about 50 employees on site when the complex opens, said spokesman David Freireich. Other event services companies will reap benefits even if they’re not on a preferred list. The complex will have at least “some impact” on EventWorks Inc., said owner Joel Solloway.

The Beachwood-based media production and staging business expects to help set up a permanent display for a tenant in the Global Center for Health Innovation. The display will include a hologram-style illusion based on the same technology used to make it look like the late Tupac Shakur was rapping on stage at last year’s Coachella music festival. “When people see what we did for this tenant, they’re going to want to know who did it,” Mr. Solloway said. ■

ON THE WEB For expanded online coverage, including photo slideshows, maps, video interviews, event schedules and a list of tenants, go to: www.crainscleveland.com/medmart

    

July 19 – August 1 Cleveland2013.com SeniorGames1 @SeniorGames1

CU YA

Michelle Park contributed to this story.

SERVICES: continued from PAGE S-6

COUNTY GA OF HO

IO OH

center’s launch. Jonathan Bennett, vice president and executive of Red Restaurant Group, the steakhouse’s parent company, said he was “hopeful that the medical mart will greatly contribute to business at our upcoming downtown location.” Unlike the Beachwood location, the downtown steakhouse will be open for lunch and dinner and will boast facilities for private meetings and luncheons. ■

IO OH

In addition, she said the hotel prides itself in being able to accommodate the international travelers who likely will frequent the medical mart portion of the complex given that its staff is fluent in about 20 languages. Restaurateurs also are poised to take advantage of the business traveler. Red, The Steakhouse, which already has locations in Beachwood and another two in Florida, plans to open a new downtown spot at East 4th Street and Prospect Avenue around the time of the convention

COUNTY GA OF HO

continued from PAGE S-6


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APRIL 1-7, 2013

Convention centers don’t always meet city’s needs

“ Rely on the

52 organizations, discounts totaling almost $569,000, with the average being 54% off the list price of (Raleigh Convention Center) rooms.” The practice is used, they note, because there is heavy competition in the convention center industry nationwide, and the center needs to offer the discounts to fill its space. The Raleigh center, the report found, thus highlights a central dilemma in the industry. “The glut of convention center space has forced each city to make a choice: provide even more taxpayer-funded discounts and subsidies to organizations to use its convention center or risk having an empty one,” Dr. Sanera and Mr. Munger conclude.

35% from 2000 to 2011 as new centers rose in cities including Hartford, Conn.; Pittsburgh; and Raleigh. At the same time, though, attendance at trade shows was down nearly 2%. (The time period does include two huge events — the Sept. 11, 2001, terrorist attacks and the 2008 economic collapse — that depressed business travel generally and might not necessarily be illustrative of long-term trade show trends.) Professor Sanders said that “virtually every city of any size builds and later expands convention centers, but the level of business they’re doing is” about the same as 20 years ago. In Charlotte, N.C., for example, which built a convention center in 1995, backers had forecast the center would produce more than 525,000 hotel-room bed nights a year. Yet a Charlotte Observer analysis found that in fiscal year 2011, it produced just 142,000 room nights, and its exhibition halls were used less than 40% of the time. Mr. Ducate said the business model for convention centers remains based on the facilities functioning as “loss leaders,” in which local government bonds are paid off primarily by hotel-occupancy taxes generated by higher room occupancy. That often can work for communities in the short term. But a recent Brookings Institution report noted that the overall convention marketplace is “declining in a manner that suggests that a recovery or turnaround is unlikely to yield much increased business for any given community.”

Start the competition

Changing times

Douglas L. Ducate, president and CEO of the Dallas-based Center for Exhibition Industry Research, said the convention business is “more competitive today” than at virtually any point since he entered the industry — more than four decades ago. Deborah Sexton, president and CEO of the Chicago-based Professional Convention Management Association, agreed that the competition is fierce, but cities that aren’t keeping up in the convention center game “find themselves losing big pieces of business that they miss when it leaves.” Cleveland — with a new center that is attracting attention in the industry and booking events at a fast clip — currently benefits from being fresh in convention bookers’ minds and from having up-to-theminute space conducive to the needs of modern trade shows. Ultimately, observers say, all convention centers face a challenge of supply and demand, in which the supply of new exhibit hall space in convention centers is outpacing the demand for such space. Heywood Sanders, a professor of public administration at the University of Texas at San Antonio, and a well-known skeptic about the economic value of convention centers, estimates that convention center exhibit hall space increased

Professor Sanders agreed that the challenge for the industry, and by extension for cities hoping to boost their economies with new convention centers, is that the field has “an uncertain future” due to technology and trends in business in which budget-conscious companies and associations aren’t holding as many conventions or sending as many employees or members to them. In a survey of nearly 400 corporate meeting planners last November, trade journal Successful Meetings found that “association meetings, trade shows (and) consumer/marketing events” all showed more companies planning reductions than increases in the number of events for 2013. For instance, 16.4% of respondents said they were planning more trade shows this year compared with 2012, but 22% said they were planning fewer such events, and 61.6% said there was no change. Similarly, 14.4% of respondents said they were planning more association meetings in 2013, while 20.5% were planning fewer and 65.1% reported no change. The big area of growth? Virtual meetings. Nearly 53% of meeting planners said they were planning more of those for this year, compared with just 8.4% who were planning fewer. ■

By SCOTT SUTTELL ssuttell@crain.com

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he opening of a new convention center in any city — let alone Cleveland, where the event has been a long time coming — is a big deal. But is it a good deal, economically speaking? The case isn’t completely clear. Cities build convention centers in large part because they offer opportunities for economic gain by attracting visitors to town to spend money in stores, hotels, restaurants, casinos and anywhere else that convention visitors choose to pass their time. Big shows provide an immediate economic return to businesses around the convention center. For instance, according to the Greater Raleigh (N.C.) Convention and Visitors Bureau, the organization estimates convention and trade show groups have provided at least a $30 million annual economic impact to Raleigh since the opening of that city’s center in 2008. The number is likely higher when factoring in non-convention or trade show attendees who use the center. But it’s not without a cost. In a report for the John Locke Foundation called “Raleigh Convention Center: Throwing Good Money after Bad,” co-authors Michael Sanera and Kevin Munger argued that, for instance, in a period from July to December 2011, the convention center “awarded discounts to 40 of

COURTESY GREATER RALEIGH CONVENTION AND VISITORS BUREAU

The convention center in Raleigh, N.C., has made an annual impact of at least $30 million, and likely more, since it opened in 2008.


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Moniker was changed in the name of innovation Global Center was convincing choice in survey sent to a variety of groups By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com

ADDING IT UP ■ 324: Windows on the medical

T

mart building

he Global Center for Health Innovation is more than just a name: It reflects the standards that its tenants are supposed to strive toward. Those at the center will have an “obligation” to stay fresh, to live up to its title, said Jim Bennett, senior vice president at Merchandise Mart Properties Inc. “Global” represents the reach the center’s work will have, and “innovation” describes what tenants will be doing. Each part of the name was the result of months of conversations, and each part was carefully thought out. “The name requires us to behave in a certain way and run the center in a certain way,” Mr. Bennett said. Mr. Bennett joined the project almost a year ago and quickly realized that the medical mart name didn’t capture the plans for

■ 515: Precast façade pieces on the medical mart exterior the center. It more brought the idea of a shopping center to mind, he said, than a collaborative health care space. The center wants its work to make a difference across the globe, and the medical community didn’t respond well to the “diminishing” or “commercial” medical mart name, he said. Merchandise Mart Properties, the Chicago-based property developer and management company behind the project, worked with Cleveland-based public relations firm Dix & Eaton to create and send out a detailed online survey about the name change, said Dave Johnson, spokesman for medical mart and convention center.

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“The name requires us to behave in a certain way and run the center in a certain way.” – Jim Bennett senior vice president, Merchandise Mart Properties Inc. About 600 survey requests were sent in February to a variety of groups, such as prospective tenants, Cleveland Clinic physicians and the Cuyahoga County advisory panel, which included the leaders of local health care systems, area civic leaders and county council members. More than one-third of the surveys came back, and the results were clear. The full name — Global Center for Health Innovation — received about 65% of the vote, Mr. Johnson said, and each word was the clear winner in each of its individual categories. There was no consensus on what the tagline should be, so that is still a work in progress. It will recognize the center’s location by including the word “Cleveland,” Mr. Johnson said. ■

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Health: Global Center a key part of project continued from PAGE S-1

Even so, the mayor is not the only person who is tying his or her hopes to the 1 million-square-foot complex taking shape on Clevelandâ&#x20AC;&#x2122;s Mall.

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The medical mart prescription Part of the reason for officialsâ&#x20AC;&#x2122; confidence in the overall project is the Global Center for Health Innovation â&#x20AC;&#x201D; which still often is referred to by its original name, the medical mart. The first of its kind, the facility is intended to serve as a magnet for health care professionals and meetings, ultimately helping to support its convention center neighbor. The Global Center itself is a four-story complex designed to display the future of health care through participating partners with global reach and reputation. The themes of each floor are: Health and Home (first); People, Patients and Caregivers (second); Clinical Spaces (third); and Healthcare IT (fourth). The largest of the announced tenants to date, in terms of space, is Chicago-based Healthcare Information and Management System Society, which initially will occupy 25,000 square feet on the buildingâ&#x20AC;&#x2122;s fourth floor.

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Locally, the Cleveland Clinic and University Hospitals also have publicly committed to space in the facility. As of last week, there were six announced Global Center tenants; officials report there are more than 80 other prospects, half of which are from outside Northeast Ohio. Many in Northeast Ohio believe the Global Center has the potential to impact the region far beyond even the most expansive economic development role usually attributed to convention centers. Dr. Toby Cosgrove, CEO of Cleveland Clinic and an experienced hand at building and outfitting hospital buildings, has been a driving force behind its creation. He believes that once the hightech hospital vendors â&#x20AC;&#x201D; like committed tenants GE Healthcare and Philips Healthcare â&#x20AC;&#x201D; invest in showcasing their products at the Global Center, it will become a magnet for professionals who design and build health care facilities. â&#x20AC;&#x153;I can imagine the day you could attract hospital architects around here,â&#x20AC;? he said. â&#x20AC;&#x153;You think about everything that goes into building a hospital, one-third of the cost is tables, chairs, filing cabinets, window treatments, sinks. â&#x20AC;&#x153;I would hope that someday, instead of doing what Iâ&#x20AC;&#x2122;ve had to do â&#x20AC;&#x201D; go to Germany to look at equipment, go to Alabama to look at equipment, go to Michigan to look at equipment â&#x20AC;&#x201D; that it would be in one location here and you could get a tremendous amount of stimulus around that,â&#x20AC;? he said.

A whole new ball game As for the convention center portion, David Gilbert of Positively Cleveland, the regional convention and visitorsâ&#x20AC;&#x2122; bureau, says the average conventioneer who flies into Cleveland will put $1,200 into the local economy during a threenight stay. MMPI Inc., the Chicago-based firm that will manage the complex, is predicting it will attract 300,000 visitors annually to 60 conventions and 100 smaller health care meetings a year, amounting to $330 million in spending. â&#x20AC;&#x153;For a decade and a half we have functionally been out of the large convention business,â&#x20AC;? Mr. Gilbert said. â&#x20AC;&#x153;It was largely small groups that could fit into a hotel. Now itâ&#x20AC;&#x2122;s a whole new ball game.â&#x20AC;? However, the overall value, its

local supporters will argue, goes beyond the building itself, to its positive impact on downtown and the community. The business people â&#x20AC;&#x201D; and doctors and hospital executives, if everything goes as planned â&#x20AC;&#x201D; who attend conventions and visit the Global Center will inject millions of dollars into the local economy by occupying hotel rooms, eating in restaurants and buying â&#x20AC;&#x153;made in Clevelandâ&#x20AC;? knickknacks for the folks back home. And itâ&#x20AC;&#x2122;s considered profitable because the community doesnâ&#x20AC;&#x2122;t have to use that money to build the streets where convention-goers live or educate their children. County Executive Ed FitzGerald said he will be looking for signs that the new convention center is bringing a burst of energy to downtown and the broader region. â&#x20AC;&#x153;Have you seen spinoff businesses develop around the convention center? Have you seen rental prices go up in any way as a result of this new project?â&#x20AC;? he asked rhetorically. â&#x20AC;&#x153;Is the number of individuals coming downtown and filling it up on a daily basis and on weekends growing?â&#x20AC;?

Not without critics There are hard-core critics nationally who question investments in convention centers, pointing to the viability of the overall meetings industry. They say with convention attendance down, price-cutting is common, making it impossible to meet financial projections. Still, other analysts put convention centers in a broader context and are more optimistic. Adam Jones, director of the hospitality and leisure practice of PricewaterhouseCoopers LLC, is one of those. He sees a generally positive result for a community if its convention center brings to town for a business meeting people who leave with a good impression of the city and might return for a family vacation or other reason. â&#x20AC;&#x153;Most communities choose to look at (their convention center) from a broader point of view,â&#x20AC;? he said. â&#x20AC;&#x153;What is the activity generating for greater community in terms of fiscal and economic impact on the tourism industry and what is it doing in terms of perception, for future leisure tourism or corporate travel and even corporate relocation?â&#x20AC;? â&#x2013;

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CRAIN’S CLEVELAND BUSINESS S-13

This aerial view looks south over the Mall. In the foreground is Mall C with Lakeside Avenue to the south. In the middle is Mall B, which is bordered by St. Clair Avenue to the south. Public Auditorium is to the east of Mall B, and the Global Center is to the west. A convention center entrance is at the north end of Mall B. The Cleveland Metropolitan School District HQ is to the east of Mall A. COURTESY TURNER CONSTRUCTION COMPANY

Mall location presented challenges, opportunities By STAN BULLARD sbullard@crain.com

ADDING IT UP ■ 12.5: Acres of Green space

vast green field has taken form in downtown Cleveland the past two years as the Global Center for Health Innovation and Cleveland Convention Center recast two-thirds of the city’s open-spaced Mall. First conceived in 1903 as part of the Group Plan spearheaded by Daniel Burnham, the Mall essentially is a long park running through the city’s core surrounded by public buildings. For Shannon Nichol, the founding partner of GGN of Seattle, which served as landscape architect for the project, “It was such a draw for us to have a second chance at this really important landscape to the city and the world.” The second chance part comes about because she saw it as a chance to fix what time had done to the property. “When I first went to Cleveland and asked how to get to the Mall, people said, ‘What mall? What shopping mall?’ I found people referred to it as Mall A or Mall B or Mall C,” Mrs. Nichol said. “It was a tragedy it was no longer seen as one mall because it had been so divided,” she said.

A

on Malls B & C

Uphill battle

Just the start

However, the complex pattern of marrying an enlarged convention center underneath Malls B and C forced an epic change in the middle of the Mall. Putting the main entrance to the convention center on Lakeside Avenue’s south side meant lifting the sloping Mall B 20 feet above street level. A substantial hill now stands on the north end of Mall B, certain to be a lightning rod catching civic controversy for years to come. Consider how it’s sized up by Carol Poh, a historic consultant whose straight-shooting critiques have led to changes in several major downtown projects over the years. “As seen from the south, the new convention center has despoiled the Mall with a Chinese wall — an insuperable barrier that obliterates once-expansive views. From the north (along Lakeside), seeing the project for the first time caused my heart to sink. That banal hodgepodge of ramps, glass and steel

In place of that clear middle view, Mrs. Nichol said the project used the new convention center roof — which really is an expanse of grass — to correct the way that East and West Mall drives had been chopped up over time. For example, a pedestrian connector had been built over East Mall Drive to reach Public Auditorium. Now, they provide clear views of the lake to the north and of the city to the south, and both streets are framed by rows of London plane trees. The idea is that the area now is more pedestrian friendly, and a location for activity and people to gather. “Then you go out on the field to enjoy a game of Frisbee,” she said. “Before, the crosswalk was in the middle of the block on St. Clair. Now two crosswalks will be aligned with the Mall drives.” Two concrete sidewalks crisscross grassy Mall B at angles, placed where planners believe

111: Trees on the promenade

protrudes where no building should be, and effectively usurps public space for private use.” Mark Reddington, a partner at LMN Architects of Seattle who led design on the project, said the result aims to marry the current project’s needs and technology with the public space. “The question of standing in the middle of the Mall and seeing the lake has been a problem since the (1903) plan was made,” Mr. Reddington said. To add the Lakeside entrance, builders erected a bridge-like span on Mall B’s north side, with grass atop it and glass walls below it to form the convention center’s main entry. “You get to connect the activity in the building and the public realm in a way which is better for everyone,” Mr. Reddington said. Robert Brown, Cleveland city planning director, said he had hoped children could sled on the new decline, but it’s not quite that steep. However, planners imagine youngsters enjoying a sideways roll down the hill.

people will cut across the Mall. “They’ll be able to cross the Mall without having to walk on wet turf,” Mrs. Nichol said. “We were brought in to format those big bones and the mall and decide how to integrate the pop up of the convention center to the Mall,” she added. “This is the first layer and the community can add to it over time.” Anthony Coyne, chairman of the Cleveland City Planning Commission and the newly-selected Group Plan Commission formed to improve the Mall and Public Square, salivates over that opportunity. “We have the base layer,” Mr. Coyne said. “It’s a starting point.” The city of Cleveland-formed Group Plan Commission hopes to soon form a nonprofit corporation to undertake fundraising from multiple sources for more than $90 million of improvements to the Mall, bridges connecting it to the lakefront and a more peoplefriendly Public Square. That will be the mechanism for enhancing the Mall with children’s playgrounds, volleyball and basketball courts and “urban rooms,” which will divide portions of the Mall avenues to make them friendlier. Piping was installed underneath the Mall to accommodate future additions, including a potential water feature on Mall C.

What would Burnham think? Mr. Coyne downplays the installation of the arch on Mall B, noting it was not criticized at public meetings. He looks forward to the Mall becoming a people place again. He believes the redo can be catalytic for the city’s economic development like similar parks in Chicago and New York City. Would Daniel Burnham, the world-renowned architect and city planner who helped craft the Group Plan, be proud of this redo? Ms. Poh said, “Daniel Burnham famously asserted, ‘A noble, logical plan will never die.’ He was mistaken. Did The Cleveland City Planning Commission really sign off on this?” Mr. Coyne disagrees. He believes Mr. Burnham, whose bust graces the window shelf of his 22nd-floor law office, would instead be smiling down on the new Mall. ■

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SPECIAL REPORT

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WHAT ABOUT ...

A LOOK BEHIND THE SCENES

JASON MILLER

JASON MILLER PHOTOS

Workers are shown in mid-March working at the convention center and medical mart complex. Plans call for the Global Center space to be turned over to tenants today, April 1.

■ A point of popular curiosity is the understated, box-like design of the four-story medical mart, erected on the northeast corner of Ontario Street and St. Clair Avenue next to Mall B. The structure is clad in precast concrete with a splash of windows on its southern and western sides. A vast wallsized glass arcade on its east side looks at the Mall. Mark Reddington, a partner at LMN Architects of Seattle, said the off-white precast is designed to fit with the sandstone on old public buildings surrounding the Mall. On the west side of the medical mart building, he said, the structural design limited the number of windows that could be installed, so windows went in only where interior uses required outside light. That meant the windows have a wave-like rather than the typical look of a straight line of windows. Shannon Nichol, the founding partner of GGN of Seattle, notes the area on the east side of the medical mart is designed to complement the adjoining Mall by serving as an open space for installing tents and holding receptions when the weather is suitable — further engaging visitors with the public space.

The main ballroom at the convention center is 32,000 square feet.

The convention center’s exhibit space, seen here, can be divided into three halls: one measuring more than 50,000 square feet; and two larger halls measuring more than 80,000 square feet apiece. COURTESY TURNER CONSTRUCTION

More than 324 windows were used for the Global Center.

ON THE WEB For smart phone users, scan this QR, or “quick response” code, with any QR code reader to view more current photos of the project. The convention center entrance rises at the north end of Mall B, on Lakeside Avenue.

■ One of the design’s most quizzical parts is a grove of black mirrored-glass obelisks near Public Hall. Mr. Reddington said those are designed to meet contemporary code requirements to provide fresh air from a location above potential car exhaust fumes that were not in place during the Mall’s last redo. The trapezoidal shapes are technically shrouds that cover shafts and ventilating equipment drawing fresh air into the convention center. The look is modern, but Robert Brown, Cleveland city planning director, notes they reflect the classical buildings forming the Group Plan. — Stan Bullard


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CRAIN’S CLEVELAND BUSINESS

WWW.CRAINSCLEVELAND.COM

29

Constructs: Remodeling Uniting: Area economy could get boost “It is becoming a higher work drives many sales agenda item both for the continued from PAGE 1

continued from PAGE 1

Mr. Peplin said his constructionrelated sales are up by more than 10% in the last six months due to increased construction activity. The vast majority of Talan’s products are linked to the construction market, Mr. Peplin said. That includes items such as brackets and other parts used in the actual construction of homes and commercial buildings, as well as parts for solar panels that are, more often than not, linked to a construction project. So when data show that construction in the United States is on the way up, that’s a good indicator that Mr. Peplin’s business also will be on the rise, he said. Lately, he has seen signs of strength from more than just the ABI. For instance, the U.S. Department of Commerce reported on March 19 that housing starts for February were at 917,000 nationally — up 10% from the month before and at their highest levels since the recession brought hammering to a halt.

Feeling good Jerry Zeitler, president of Cleveland’s Die-Matic Corp., another metal stamper, said he’s experiencing a similar uptick in his construction-related businesses. Like Talan, Die-Matic makes items that go directly into construction, as well as construction-affected products like parts for plumbing fixtures, garage door openers or other items that often find their way into new homes. “We’re definitely feeling it,” said Mr. Zeitler, who noted his sales have been up in recent months due to increased homebuilding across the country. Chris Connor, the CEO of Cleveland-based paint and coatings giant Sherwin-Williams Co., told analysts on March 8 that his company expects to book record profits this year, based in part on sales growth that “will come almost entirely from volume” increases, rather than price increases. “Clearly we’re most optimistic about the U.S. architectural market, and we do believe that residential will probably be the strongest driver of that market,” Mr. Connor said. Meanwhile, Sherwin-Williams spokesman Mike Conway said the professional paint contractors that the company works with are reporting that they are booking more jobs and hiring additional crew members to keep up with demand. Even companies that aren’t talking show signs of growth. Solon-based Erico International produces electrical boxes, fasteners, conduit and other products that go directly into construction projects. The company did not respond to calls seeking comment, but that might be because workers there are too busy to talk. Erico, which has about 500 employees, lists 10 job

openings for positions ranging from a manufacturing engineer to a financial controller. Likewise, North Olmsted-based Moen Inc. is hiring as well, though it also did not respond to requests to discuss the matter. Moen’s website lists 63 job openings, ranging from plant mangers and product engineers to positions in corporate administration. The big manufacturer of faucets and other plumbing fixtures also is highly dependent upon new home starts and other construction for much of its sales.

The fix is in Some companies, including Sherwin-Williams, don’t depend so much on home construction as on the health of the housing market generally, since remodeling work also drives their sales. Included in that group is Medina-based RPM Inc., whose subsidiaries make sealants, paints, primers, caulk and other products often used to repair existing homes. When homebuying activity is high, more people are sprucing up houses to sell or remodeling homes that they just purchased. Both of those activities drive sales for RPM, said Barry Slifstein, the company’s vice president of investor relations. That’s true no matter what’s happening in the home construction market, though construction and existing home sales often move together, he said. “The fact that the residential sector has been on the uptick for about the last nine months, that bodes well for us,” Mr. Slifstein said. He added that sales of residential consumer products are up by “double digits” compared with this time last year, on a percentage basis. “The overall trend is that there is momentum in the residential housing market,” he said.

■ Since the beginning of the year, Global Cleveland, a 2-year-old nonprofit created to attract immigrants and former residents to Northeast Ohio, has been adjusting its focus under new president Joy Roller. ■ Over the last several weeks, GCP officials have been meeting with elected members of Congress and their staffs in Washington to promote a pilot program that would demonstrate the boost a greater flow of immigrants can have on a regional economy. All of these groups are anticipating some kind of change on the federal level during this congressional session. They want the region prepared to react, in particular, to be more welcoming to immigrant entrepreneurs and young professionals and to new college graduates in high-tech fields. “It is becoming a higher agenda item both for the business and civic community here, and it’s had the effect of getting more organizations working together,” said attorney Jose Feliciano, who is chairman of the Hispanic Roundtable, a nonprofit promoting the role of Hispanics in the political and economic life of Northeast Ohio. Mr. Feliciano was a member of an independent task force that produced the report. The 53-member task force was formed under the umbrella of the Chicago Council on Global Affairs to unite metropolitan areas in the Midwest on immigration reform. Mr. Feliciano and Frank Douglas, president and CEO of the Austen BioInnovation Institute in Akron, represented Northeast Ohio on the task force. Mr. Feliciano will present the report’s findings to the business leaders at Tuesday’s meeting at GCP.

businesses and civic community here, and it’s had the effect of getting more organizations working together.” – Jose Feliciano, chairman, Hispanic Roundtable The task force report argues that immigrants are key to economic revitalization in the Midwest and it supports increasing the number of visas available as well as defining new paths to citizenship. He said the meeting will kick off an effort to get 500 business people to endorse the report’s conclusions.

Pushing the reset button Along with the Hispanic Roundtable and the Chicago Council on Global Affairs, Global Cleveland is a co-sponsor of that meeting and, at the same time, is repositioning its role in growing the region’s talent pool. Ms. Roller, who joined the group Jan. 1, said her organization is re-evaluating its role in attracting people to the region. The organization was launched in 2011 with a goal of attracting 100,000 new residents over a decade. At the heart of the organization’s programming was a downtown welcome center, which opened in February 2012. Its function was to be a place for immigrants and so-called “boomerangers” — former Clevelanders looking to return — to learn about the community and its neighborhoods, help skilled workers connect with employers and immigrants hook up with their cultural communities. But that role hasn’t worked —

and probably couldn’t work with a staff of only four full-time people. So the organization is evolving. “It’s a restart,” Ms. Roller said. Instead, the organization has found that people would rather connect online than come downtown so it will soon go live with a new, more robust online portal. It’s also connecting with locate organizations in fields like software and healthcare to put on virtual job fairs to attract people to the region. At the same time, GCP has been talking to politicians about an idea it has struggled to move forward for several years, something called a “high-skilled immigration zone.” “It’s just an idea that is out there as a start for some people who are not ready to embrace the broadbased and sweeping (immigration) reform measures,” Ms. Caruso said.

A shining example Last year, the U.S. House of Representatives considered, but did not pass, legislation that would have made thousands of visas available to highly skilled foreign-born graduates in science, technology, engineering and math. The legislation failed in part because it reduced visa quotas in other areas. What GCP is promoting, along with other chambers of commerce in the Great Lakes region is a pilot visa expansion program in metropolitan areas in the region. “It’s a way to increase the amount of visas in the zone and do some serious tracking of what jobs are created, what the retention is and what the economic impact is, so we’ll have a real opportunity to dispute the fears that this is not good for local job production,” Ms. Caruso said. She added, “It would be great if Cleveland could become the shining example, of ‘Look, it works!” ■

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Fingers crossed The uptick is welcome, but a question remains: Can it continue? Sales of existing homes were down slightly in February, according to government data, and while data for March is not yet available, it might be a softer month than February, some area manufacturers say. Mr. Peplin said he has seen some slowing in March. But he’s not worried, he said, in large part because March was a particularly bad month for weather, with about half of the nation still blanketed in snow as of March 25 and many construction projects either halted or slowed because of the conditions. “It sure seems to me like everything is coming back,” he said. “I think April will have pent-up demand. I sure hope it’s not like last year, when we had a good January and February and then March through October just (stalled). … But I’m optimistic that won’t be the case.” ■

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Summa: Clinic, UH have also made push continued from PAGE 3

next to his new business partner, CHP president and CEO Michael Connelly. “Our belief is that we’re going to be all in with this transformation of health care to population health,” Mr. Strauss added. “The investment they’re going to make in Summa will help us both by bridging the gap between these two Connelly worlds.” Most major health care systems are migrating toward this notion of population health management to varying degrees. In addition to Summa, the region’s other health care giants — the Cleveland Clinic and University Hospitals — have made investments in the arena. But while each system’s approach has been different, there appears to be broad agreement that population health is more than the latest buzzword.

The rise of the ACO A big component of the health systems’ play in the population health arena has been the launch of so-called accountable-care organizations, or ACOs — a still amorphous piece of health care reform designed to band together medical providers, such as primary care doctors and specialists, and to reward them with financial incentives for providing quality care for a defined group of people at a controlled cost. Bill Ryan, president of the Center for Health Affairs, an advocacy group for local hospitals, characterized the surge of ACOs as evidence that local health care systems are looking to position themselves at the front-end of payment reform, as the government and commercial payers transition from a fee-for-service model to one that rewards value. Moreover, ACOs also are designed to prevent patient leakages to other health systems, Mr. Ryan suggested.

“Even without any advantage on the payment side, the ACO approach begins to capture a patient base, and potentially retain it within that health system,” he said. “Even without health care reimbursement changes, it’s a market share play.” Summa’s initial ACO pilot program, which launched in early 2011, served about 12,000 patients enrolled in its insurance arm’s Medicare Advantage product, a benefits offering that permits Summa to coordinate the care of Medicare enrollees and thus better control costs. That Medicare Advantage product offered by SummaCare, the health system’s insurance arm, was particularly attractive to CHP, Mr. Connelly said, and it is looking to expand that product to markets where CHP has a presence. “Having a Medicare Advantage product that we can grow is a huge strategic advantage because it will promote population health,” he said. “It ties into a strategy around ACOs, and those sort of feed each other.” The idea, according to Messrs. Strauss and Connelly, is to take those models of care that have been honed under Summa’s and CHP’s ACOs — with the added muscle of the SummaCare insurance arm — to the region’s employers as they grapple with rising health care costs, particularly those that are self-insured. Both organizations also have ACOs encompassing their employees and their dependents. “Just think about the economic viability this would generate in each of our communities if employers could start having health care inflation be less than actual inflation,” Mr. Connelly said. “We think all these tools, skills and systems will make that happen.”

Too much, too soon? By making such a momentous shift toward population health, Mr. Connelly said Summa and CHP will have added influence as the federal government and

commercial payers reshape how health care is reimbursed. Asked whether there was risk in putting all its eggs in one basket, he said ignoring this pending transformation would be irresponsible. “If we don’t create more value in the delivery of health care, we’re in trouble,” Mr. Connelly said. “I don’t think population health is a fad. I think population health is essential to keeping our country competitive.” University Hospitals, meanwhile, has also launched a number of ACOs that, in all, encompass more than 130,000 individuals, according to Dr. Eric Bieber, the health system’s chief medical officer. Like Summa, University Hospitals was selected to participate in the Medicare Shared Savings program, an experimental program run by the federal government that will reward doctors and hospitals for providing quality, yet low-cost, care to Medicare patients. Dr. Bieber agreed that all the investments the system has made in terms of ACOs can be difficult to rationalize, given the constraints of the fee-for-service model on which the entire health care sector is built. Still, he noted, “We do believe the current situation isn’t sustainable, and we do think this is where the puck is going.” The Cleveland Clinic, however, has been more measured in its approach to ACOs, according to Dr. David Longworth, chairman of the Clinic’s medicine institute. The Clinic, for one, chose not to a take part in the Medicare Shared Savings program and instead rolled out miniature versions of ACOs and population management programs at three of its primary care practice sites. The idea, he said, is to learn “competencies around population health management” rather than “jump right in” like other health systems in the region. “Our caution has been around taking unnecessary risk before we could manage performance,” Dr. Longworth said. ■

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Story from www.crainscleveland.com

Local investments bring medical device company to region JumpStart Inc., the nonprofit venture development organization in Cleveland, has committed to invest $250,000 in a medical device company that just moved to Akron from Kentucky. The company receiving the money, OrthoData Inc., is developing a diagnostic system for spine surgeons. JumpStart said OrthoData’s implantable microelectronic spine fusion sensor, known as the IntelliRod system, enables surgeons to assess the success of spinal fusion procedures without exploratory surgery. Last Wednesday, March 27, the Akron Development Corp., through its Akron BioInvestment Funds LLC, announced that OrthoData was moving to Akron from Louisville, Ky. Akron BioInvestment Funds provided financing of an unspecified amount to OrthoData. A news release stated that the Akron BioInvestment funding “has enabled OrthoData to attract additional backing from various private sources throughout the country, totaling $1.1 million.” In return for the funding, the release stated, OrthoData moved to the White Pond Crossing Development in Akron. Ric Navarro, OrthoData’s president and CEO, said in a statement issued through JumpStart that up to 30% of post-operative spine patients experience continuing pain. He said the IntelliRod system “allows surgeons to track the outcome of the initial fusion surgery without invasive procedures and with less radiation exposure” to the patient. “OrthoData’s technology has the potential to transform the postoperative management of spine implant patients,” said Michael Lang, a JumpStart venture partner, in a statement. “By providing early indication if the spine is or is not fusing, surgeons can intervene with alternative therapies sooner.” The company will have four employees in Akron “but plans to expand as needed,” according to the Akron Development Corp. release. OrthoData was founded by spine surgeon Dr. Rolando M. Puno and professors from the University of Louisville. — Scott Suttell

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THEINSIDER

THEWEEK MARCH 25 - 31 The big story: Hyland Software Inc. is the new owner of the Five Seasons Family Sports Club property at 28105 Clemens Road in Westlake. Cuyahoga County land records show that Hyland paid $11.14 million for the luxury sports club building and acreage. The company plans to expand the existing club building on the 21acre property for a new technology center for its research and technology team. The project will replace a previously announced plan to add a 100,000-square-foot building next to Nordson Corp.’s former headquarters, which Hyland refers to as its building two. The sports club will close May 31.

Filling up: Add Northwestern Mutual to the list of tenants at Ernst & Young Tower in the Flats East Bank Neighborhood in downtown Cleveland. The national financial services firm announced it has leased 17,000 square feet in tower. That amounts to almost all of the new building’s sixth floor. Northwestern Mutual will relocate from the Ohio Savings Bank Building on East Ninth Street. The firm’s 100 financial advisers and staffers plan to occupy the new space in November.

Making history: The Cleveland Foundation awarded the Cleveland Orchestra a $10 million grant to support its ongoing efforts to cultivate new and broader audiences and to build a strong endowment. The grant was the largest to an arts organization in the foundation’s 99-year history. The orchestra already has launched several efforts aimed at renewing interest in the community, including its Center for Future Audiences, an effort to spur interest among younger people. That venture began in 2010 after receiving a $20 million commitment from the Milton and Tamar Maltz Family Foundation.

REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS

Work flows back home for maker of non-spill cups

Office building site ready for revival as apartments

■ A small Seven Hills company is bringing the “reshoring” movement close to home by moving production to North Royalton from China. Reflo Ltd., which produces non-spill cups and bills itself as an alternative to “sippy cups” for children, moved its overseas production to Cardinal Products Inc. in North Royalton at the end of January, said Reflo owner Pete Draganic, who also is an inventor and local politician . Mr. Draganic is a member of Seven Hills City Council; he has run for governor and Cuyahoga County Council in the past. He also owns Central Diversified Contracting, a construction company that works primarily on commercial projects. Reflo was created in late 2010, and Mr. Draganic said it produced about 30,000 units last year. The cups were made in Indiana and the inserts that control the flow of the liquid were made in China. Mr. Draganic said he wanted to have all of the production in the United States all along, but it was too expensive when he was getting started. Mr. Draganic declined to disclose the company’s revenues. — Rachel Abbey McCafferty

■ Look for construction workers to appear soon on the vast, empty southeast corner of Chagrin Boulevard and Green Road in Beachwood as Commerce Park Place apartments get cued up to go after more than a year of preparations. The project received a total of $64 million in mezzanine and mortgage debt through HCF Holdings LLC from Heitman Capital Management, a huge Chicago-based private equity and debt origination firm, according to records filed last Thursday, March 28, with Cuyahoga County. The same day, Commerce Park Place Holdings LLC — the name the NRP Group of Garfield Heights is using for the project — filed with the county a notice to contractors that it intends to start issuing contracts for the 348-unit building after today, April 1. Beachwood’s building department also is reviewing construction drawings, which have to be approved before the city issues building permits. Both J. David Heller, an NRP principal, and Diane Christy-Richey, its marketing director, were out of office last Friday and did not return a phone call and email to each of them by deadline. Alan Scott, the NRP principal who oversees construction, also was out of office Friday morning. The four-story building will rise on the site of the former Commerce Park I, II and III office buildings, which were demolished last year. A market-rate and affordable housing

WHAT’S NEW

BEST OF THE BLOGS Excerpts from recent blog entries on CrainsCleveland.com.

A solid foundation: Foundation Software nearly tripled its office space as it moved to Strongsville from Brunswick. The company, which makes software for construction businesses, moved into what used to be the headquarters of another software company. The 48,600-square-foot building on Foltz Industrial Parkway — which CSC Group built shortly before filing for bankruptcy — dwarfs Foundation Software’s previous 17,000-square-foot headquarters.

Wait ’til next year: The Cleveland Air Show for this summer was canceled, the result of sequestration. Because of the federal spending restraints, none of the military equipment that is normally a major draw to the Labor Day weekend event on the lakefront would have been available this year. The show has been a fixture on Cleveland’s lakefront since 1964.

Cash in hand: PolyOne Corp. agreed to sell its vinyl dispersion, blending and suspension resin assets to Mexichem S.A.B. of Mexico City for $250 million in cash. PolyOne’s resin assets are part of its Performance Products and Solutions business segment. They generated revenues of $147 million in 2012, PolyOne said. Little things mean a lot: A German chemical company is working with Case Western Reserve University to develop a way to make semiconductors that are smaller than any on the market today. Atotech Deutschland GmbH of Berlin will spend more than $1 million annually for at least the next five years to help researchers at Case Western Reserve study a new way of placing copper wire networks on semiconductors.

Downtowns are central to cities’ development plans COMPANY: Sifco Applied Surface Concepts, Independence PRODUCT: The Classic Power Packs Technology used in plating rectifiers, known as “power packs,” has improved significantly over the years, Sifco Applied Surface Concepts says. Its new line of economical power packs, which carries on that tradition of improvement, is known simply as “The Classic Series.” Sifco Applied Surface Concepts says the Classic Power Packs feature “rapid-adjustment dials for voltage and amperage changes, as well as a three position switch to change the polarity.” The lightweight, portable units are equipped with a digital display for quick and accurate control, according to the company. They are manufactured using high-quality components and have twoyear manufacturer’s warranty, Sifco Applied Surface Products says. Classic Power Packs are available in 15-, 30- and 60-amps models and either 115V or 230V configurations. Sifco Applied Surface Concepts provides products to improve part performance with surface enhancements. It also offers selective plating products and job-shop plating services on-site and at all of its locations worldwide. For information, visit www.sifcoasc.com. Send information about new products to managing editor Scott Suttell at ssuttell@crain.com.

■ Forbes.com included Cleveland in a feature/slideshow about 15 U.S. cities that are revitalizing their central business districts to lure young professionals. “Today, more than $3.5 billion is currently invested in furthering the area’s redevelopment,” the website said of downtown Cleveland. “The Global Center for Health Innovation and a 750,000 square foot convention center will open this summer, totaling $465 million.” (You can read all about that in our special section this week.) Downtown’s population “nearly doubled in the two decades ending in 2010, according to Census data, and the area welcomed the biggest percentage increase in population growth of any district in the greater city as a whole,” Forbes.com noted. The website added that from the fourth quarter of 2011 through the fourth quarter of 2012, the number of housing units grew about 13%, according to the Downtown Cleveland Alliance. An additional 715 units are expected to come online in 2013, the site stated.

We all could spend more time on budgeting ■ A new report from CardHub.com, cited in a Wall Street Journal story, says that more than 50% of U.S. consumers “don’t keep a budget — and more than one in five don’t have a good idea of their spending.” And Clevelanders are among the worst offenders. The Journal reported that CardHub ranked the 30 biggest metro areas based on six factors: credit scores; debt-to-income

developer, NRP has built more than 21,000 units across the country since its founding in 1993. — Stan Bullard

So far, so good in big Summa, CHP combination ■ At this point, the proposed deal by which Cincinnati-based Catholic Health Partners plans to purchase a minority stake of Summa Health System in Akron is nearly complete, with both organizations’ boards aiming to sign off on the deal by the end of June. “We pretty much have the main deal points done,” Summa president and CEO Thomas Strauss said in a recent interview with Crain’s Cleveland Business. “It’s just going through the due diligence — both sides going through the diligence — to make sure all the things we said were correct,” he said. CHP president and CEO Mike Connelly said his enterprise was looking to purchase a stake that represented “about a third” of Summa’s value, though he couldn’t provide an exact dollar figure. As part of the deal, CHP would have control of five of Summa’s 16 board seats. Catholic Health Partners, which employs more than 32,000, has a modest presence in northern Ohio, with community hospitals in Lorain, Lima, Toledo, Warren and Youngstown. Combined, Summa and CHP would boast the largest market share in Ohio. Summa announced last July that it was looking to sell a stake in itself to a “likeminded” nonprofit health system. — Timothy Magaw

ratios; amount of “revolving” (credit card) debt adjusted for cost of living; total debt-to-median home price ratio; combined bankruptcy and foreclosure rates; and nonhousing costs adjusted for cost of living, relative to average area incomes. The country’s best budgeters are in Boston. Cleveland was No. 5 on the ‘worst budgeters’ list, behind Orlando, Tampa, Cincinnati and Atlanta. According to CardHub, the best budgeters “make the most of what they have by adhering to a well-crafted spending plan that accounts for the unexpected while leaving little room for frivolity. The best budgeters know the difference between luxury and necessity.”

Bubba Baker has excelled at tackling a new career ■ USA Today rounded up what it considers the country’s 20 best athlete-owned restaurants, and one of them belongs to a former member of the Cleveland Browns. At No. 8 on the list was Bubba’s Q, the barbeque joint in Avon owned by Al “Bubba” Baker. After retiring from professional football in 1990, Mr. Baker, a defensive lineman, and his wife, Sabrina, opened a catering business featuring “Southern-style barbecue cuisine.” The story noted that Bubba’s Q “has since done pretty well,” earning honors from, among others, Cleveland Magazine for “Best Ribs” and “Best Barbecue Restaurant” from 2009 to 2011.


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