Crain's Cleveland Business

VOL. 40, NO. 3

JANUARY 21 - 27, 2019

Legal Affairs

Source Lunch

Law firms adopting AI, other tech Page 12

CLEVELAND BUSINESS

Former Akron deputy mayor and historian Dave Lieberth Page 39

GOVERNMENT

COULD DEWINE MEAN BUSINESS FOR CLEVELAND? Cities and programs watch for clues to new governor’s plans

By Jay Miller jmiller@crain.com @millerjh

N

ew programs that help cities and urban economies aren’t expected to be top priorities for new Gov. Mike DeWine, but observers in Northeast Ohio and Columbus are optimistic about the incoming administration’s development plans. ¶ That optimism, however, doesn’t extend to leaders of Northeast Ohio’s Hispanic business community.

They were disappointed that while the DeWine cabinet included women and African-Americans, no member of their community was named to a cabinet post. ¶ DeWine made clear in his inaugural address Jan. 14 that he would be focusing on the opioid crisis, early childhood development and protecting Lake Erie in the early months of his governorship. ¶ But the “Ohio Prosperity Plan” his campaign laid out last August said DeWine would “pursue bold policies and transform our state into a 21st-century economy.”

New programs to help cities and urban economies aren’t expected to be top priorities for new Gov. Mike DeWine, but observers in Northeast Ohio and Columbus are optimistic about his development plans.

(Kirk Irwin/Getty Images)

SEE DEWINE, PAGE 36

EDUCATION

Mentoring is key piece of Cleveland’s Say Yes plan

By Rachel Abbey McCafferty rmccafferty@crain.com @ramccafferty

In becoming the newest Say Yes to Education community, Cleveland is distinguishing itself by promising to match every scholarship recipient with a mentor who will help guide them through postsecondary education. This hasn’t been done at scale at Say Yes yet,

and it’s going to require a lot of buy-in from the community to make it work.

The program will be administered

by College Now Greater Cleveland, which has offered a mentorship program at a smaller scale since 2011.

The program has helped improve ontime graduation rates and given students access to internship and job opportunities, College Now Greater Cleveland CEO Lee Friedman said.

SEE MENTORING, PAGE 8

Entire contents © 2019 by Crain Communications Inc.

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Cleveland’s a Say Yes to Education community

City’s Say Yes executive director: Program is ‘game changer’ for many

On Jan. 18, Say Yes to Education officially named Cleveland as one of its communities, which means students will get access to support services aimed to get them to graduation and scholarships to help them continue their education after high school. The national organization provides a framework and some funding, but members of the Cleveland community had to come together to raise a significant portion of the scholarship fund and to create a plan for providing support services such as legal clinics and mentoring programs for students and their families.

rmccafferty@crain.com @ramccafferty

By Rachel Abbey McCafferty

Diane Downing worked on the campaign to bring the Browns back to Cleveland and oversaw the building of the stadium. She worked in the offices of two Cleveland mayors, George Voinovich and Michael White. She served as chief operating officer of the host committee for the Republican National Convention when it came to Cleveland in 2016.

And now, she’ll be leading Cleveland’s Say Yes to Education program as its executive director.

“I believe that Say Yes is a game changer for Cleveland, for Cleve-

land’s children, for their families and for the economic development of the city,” Downing said.

Downing believes Say Yes to Education will make a difference Downing in Cleveland’s economic future. So many jobs go unfilled in the city because companies don’t have the applicants to fill them. This program will give businesses the opportunity to fill those jobs and grow.

“Educational attainment is the key,” she said.

SEE DOWNING, PAGE 8

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CRAIN’S CLEVELAND BUSINESS

Bar associations team up to address diversity

By Jeremy Nobile jnobile@crain.com @JeremyNobile

Whether in Northeast Ohio or across the industry, it's hardly a secret that diverse representation in the business of law continues to be abysmal.

However, a new partnership between the Cleveland Metropolitan Bar Association and some minority bars is designed to help address that ongoing issue. Stakeholders hope that working together will not only beef up their ranks with practicing attorneys from diverse backgrounds, but encourage others to live and work in this market — and maybe even encourage other minorities to pursue a career in law.

Earlier this month, the CMBA and four local minority bars signed a memorandum of understanding that formalizes several initiatives that have been under discussion for some time.

The signatories are the Asian American Bar Association of Ohio, Norman S. Minor Bar Association, Ohio Hispanic Bar Association and South Asian American Bar Association of Ohio.

As part of the partnership, the CMBA will open its space to those organizations during regular business hours. That alone provides each minority bar with storage space, access to the CMBA’s records and, most importantly, a proper mailing address (the minority bars don’t have physical locations and rely on P.O. boxes).

The groups will also share access to one another’s membership bases to cross-promote events. The whole initiative was largely spearheaded by assistant U.S. attorney Marlon Primes, the first African-American president of the CMBA. Membership at the CMBA has trended down in recent years. It was

Leaders of the Cleveland Metropolitan Bar Association and local minority bars sign a memorandum of understanding formalizing a working partnership. (Contributed photo)

nearly 6,000 people in 2015, but stands membership, expanding the budget at roughly 5,200 today. Numbers are and ultimately improving the diversiexpectedly much smaller at the mi- ty pipeline are among the group’s top objectives. nority bars, often a few dozen at most.

“There are still very few lawyers or The Norman S. Minor Bar, while not the first African-American legal law students of color who participate in majority bars due organization in to lack of resourcCleveland, is the “We think increasing first true Afries (price of memdiversity in the bar bership/paying c a n -A m e r i c a n for more than one bar association ensures that the in the market. Its bar membership), ranks have hov- general public here lack of time (they ered between 60 has a legal community only have time to devote to one leto 80 members in recent years. which reflects its gal organization) Groups like it demographics.” and more freformed specifiquently a lack of comfort/feeling of cally to support — Neil Bhagat, president of the and address the Asian American Bar Association of isolation (they do not want to be the needs of lawyers Ohio and in-house counsel with only or one of a from minority Progressive Insurance handful in the backgrounds.

Current president Valissa Turner room at every event),” Turner said.

But while that overall mission isn’t Howard, first assistant deputy inspector general and chief diversity materially different from why the orofficer at Cuyahoga County's Agency ganization was created in 1980, Turnof Inspector General, said growing er indicated that such seemingly

straightforward goals become more challenging for a minority bar with few resources, no paid staff and no home base.

She also lamented how past presidents kept documents and other pieces of history at their homes or personal offices, leading to some of those materials being lost over the years.

“As a small organization with limited funding, the newly minted partnership with CMBA is just what we needed to fortify our infrastructure for the long term,” Turner said. “With the signing of this MOU, we now have a space where over 35 years of our history can be deposited for future leaders and members of NSMBA, and we have the limited assistance of CMBA staff for some administrative tasks.”

The Asian American Bar Association of Ohio has struggled to keep up its ranks, having a couple years of dormancy since it was established in 1992.

Yet, it serves a unique purpose in the market in terms of not just supporting Asian lawyers but also courting them to live and work in the market.

“We routinely interface with outof-state candidates thinking about moving to Northeast Ohio, and our presence can help a candidate know they can adapt to our community and succeed here,” said president Neil Bhagat, in-house counsel with Progressive Insurance. “We think increasing diversity in the bar ensures that the general public here has a legal community which reflects its demographics.”

“We do expect the MOU to help us increase our membership and, at the very least, increase our brand awareness to the local legal community,” he added. “That in turn should help us focus on our broader efforts to improve diversity in this market.”

Which is really the broader goal.

According to Crain’s analysis, law firms in Northeast Ohio reported that

just 4% of local firm partners were nonwhite in 2018, a figure that actually dipped slightly from 10 years prior. A survey of demographics by the CMBA a couple years prior — one that only a disappointingly low 20% of firms surveyed actually responded to (the largest, corporate law firms were most likely to reply) — had comparable findings.

Just 15% of the 1.3 million attorneys active in 2018 identified as minorities, according to the American Bar Association.

As the industry grapples with not just bringing more diverse people into its ranks but also promoting them up the corporate ladder to partners and positions of leadership, companies increasingly are interested in diverse attorneys as part of their own social justice missions as well.

Primes recalled a past CMBA diversity series event featuring an attorney from Abercrombie & Fitch Co., the struggling Ohio-based clothing company that was lambasted when its former CEO, Michael Jeffries, said in a news story: “A lot of people don't belong (in our clothes), and they can't belong. Are we exclusionary? Absolutely.”

According to Primes, that lawyer reported the company, which has been trying to restore its image since Jeffries’ infamous 2013 remarks, has been ditching law firms without diverse benches and taking its legal work to more broadly representative firms.

“It’s not just Abercrombie & Fitch doing this, but a cross-section of corporations, especially those with a diverse client base,” Primes said. “So it helps for law firms to become diverse to attract business from a wide variety of sources.

“And as we move more toward a minority country,” he added, “those pressures will be more acute as time goes on.”

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Sherwin-Williams sets $150 million property sale

By Stan Bullard sbullard@crain.com @CrainRltyWriter

If you think bricks-and-mortar stores are worth less in the age of online shopping, don’t tell that to Cleveland-based Sherwin-Williams Co. or Agree Realty Corp. of Bloomfield Hills, Mich.

Agree, a publicly traded real estate investment trust, is shelling out $150 million to buy more than 100 of the stores in a transaction that allows the paint and coatings maker to lease them back for undisclosed periods of time. Such sale-leaseback transactions are common for corporations, which don’t like to tie up cash in real estate.

Ironically, the $150 million sale is a sideline for the paintmaker as Sherwin-Williams says it leases 96% of the 4,300 stores it uses to sell paint and related supplies in the U.S. and overseas.

The deal made Sherwin-Williams the largest tenant for Agree Realty, which has a portfolio of 537 properties in 45 states. Agree Realty CEO Joey Realty called it a unique transaction when the company announced it Dec. 11.

Clay Thelen, Agree’s chief financial officer, said the transaction attracted his company for several reasons, including what he called “ecommerce resistance.”

“We see the paint stores as offering an experience,” Thelen said in a phone interview last Thursday, Jan. 17.

Agree also liked the Sherwin-Williams offering, Thelen said, because it is a prized, credit-worthy tenant, the stores are in good locations and are generally about 6,000 square feet in size, so they can flexibly serve several different types of retailers.

For Sherwin-Williams, which declined to discuss the sale, shedding the portfolio will bring those locations into the same status as most of its store network as it leases 96% of its stores. It has not disclosed how much it will net from the deal and did not refer to the transaction last Tuesday, Jan. 15, when it announced preliminary results for the fourth quarter and all of 2018.

In that announcement, Sherwin-Williams revised its consolidated net sales forecast for the fourth quarter to about 2% compared to the same quarter last year. Its prior guidance called for a mid-single digit percentage increase.

Just one transaction has been recorded in Cuyahoga County through mid-January.

Agree, through an affiliate its lawyers named Pachyderm Properties LLC, paid almost $1.4 million on Dec. 31, 2018, for the Sherwin-Williams store at 20611 Center Ridge Road in Fairview Park.

Sherwin-Williams bought the building for the store in 1984 for $265,000, according to Cuyahoga

Correction JJA Jan. 14, Page 16 story about Whiskertin Lighting included a photo caption that misidentified founders Aaron Novak and Glenn Miller.

Miller is on the left.

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“We see the paint stores as offering an experience.”

— Clay Thelen, Agree Realty Corp. chief financial officer

County land records. The county had appraised the building for tax purposes at $392,000 prior to the sale.

The free-standing store dates from 1955 and is on an access drive to Westgate Shopping Center.

Agree Realty Corp. recently paid Sherwin-Williams Co. $1.4 million for the paint store in Fairview Park as part of a $150 million acquisition of more than 100 stores. Sherwin-Williams leased back the stores to continue operating them. (Stan Bullard)

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CRAIN’S CLEVELAND BUSINESS

Teams, talent anxiously await new FSO, STO owner

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talks is happening at the league level, because the deal impacts half of the teams in MLB, the source said. (MLB kkleps@crain.com has been mentioned as a long-shot @KevinKleps candidate to acquire the RSNs.) The Cavs expressed similar sentiFox Sports’ 2012 acquisition of ments, with a team source acknowlSportsTime Ohio from the Cleveland edging that, depending on how the Indians turned out to be a very good deals play out, the future impact thing for golf pro Jimmy Hanlin.

The reach of his TV shows — “18 Hanlin could be significant.

Liberatore Holes” and “Swing Clinic” — was exFSO’s rights deal with the Cavs expanded to the majority of the 61 million out of the running, Sinclair Broadcast tends through at least the 2020-21 homes that encapsulate Fox Sports’ 22 Group was the sole bidder for all of season, at an annual rate of $35 milregional sports networks, and Hanlin’s the RSNs, CNBC’s David Faber re- lion to $38 million. The Indians are Tee It Up Productions later added two ported. Maryland-based Sinclair, receiving more than $40 million anmore programs (“Pin Shot” and “Links though, would need the help of pri- nually from STO, and the deal, a to the Game”) to its stable. vate equity to make such a deal, and source said, goes through 2027.

A little more than six years later, Faber reported that PE heavyweights The Blue Jackets, who agreed to a Hanlin again is wondering about the Apollo Global Management and The long-term extension with Fox Sports distribution of his shows. The 22 Blackstone Group had been hoping Ohio in 2011, also stress that it’s been RSNs — a group that includes Fox to partner with Fox on a deal. business as usual between the club Sports Ohio and SportsTime Ohio — With the second round of bids due and the network. The team’s agreeare part of a $71.3 billion package of by the end of January, and the clock ment with FSO isn’t running out any21st Century Fox assets that are being about to start ticking on Disney’s dead- time soon. sold to Disney.

“Our partnership continues for line to make a deal, many analysts are When the deal closes, possibly as wondering if the Mouse might be some time,” director of communicasoon as next month, Disney will have forced to sell the networks individually, tions Karen Davis said.

90 days to sell the RSNs, thus alleviat- rather than as one large group. (The The Reds, because of the timing of ing U.S. Department of Justice con- YES Network, the most successful of their contract, have the largest deal of cerns about the Mouse having too the RSNs, could return to the control of any team on the two Ohio RSNs. The the New York Yankees, since the Dis- Reds in 2016 signed a 15-year extenmuch sports programming clout. sion with FSO that includes “When it happened last time,” Hanlin said of Fox “For the reach and for the shows an ownership stake in the netSports’ $230 million purand represented what a to be distributed, it seems like a work team executive described as a chase of STO, “not everyone got good news and kept their much simpler thing when it is “nice” increase on its previjob. But at least now, there’s a ous deal, which was valued at little bit of a feeling of what one owner.” $30 million per year. could be happening. We’ve In a two-year span in 2015 — Jimmy Hanlin, golf pro and TV host been through this before.” and ’16, Fox Sports also Only this time, there’s a lot agreed to deals with the Arimore at stake. ney-Fox deal triggered a clause that zona Diamondbacks and St. Louis The 22 networks, which have rights would allow such a transaction.)

Cardinals that reportedly included deals with 32 of the 60 teams in the A bunch of smaller deals, sources ownership stakes in the respective NBA and Major League Baseball, said, could be more profitable for RSNs and were worth more than $1 plus a dozen NHL clubs, are sports Disney, but would be a much more billion each. And in 2018, the Tampa programming powerhouses. onerous process.

Bay Rays shocked many by agreeing to FSO has agreements with the Cavs, For Hanlin, a piecemeal sale of the a 15-year extension with Fox Sports Cincinnati Reds and Columbus Blue- RSNs would mean hoping that the Sun that the Sports Business Journal Jackets, and STO will air 160 Tribe new owners like his programming said was worth $82 million annually.

Those deals hammer home the broadcasts in 2019. Combined, the and are willing to give it air time.

Hanlin’s shows are owned by Fox, value of live, local sports programtwo networks reach more than 5 million homes in Ohio, Kentucky, Indi- but he said the advertising inventory ming that often tops the prime-time ana, western Pennsylvania, western is split between the network and his ratings and commands the largest or Tee It Up Productions. The Northeast second-largest subscriber fees in the New York and West Virginia.

Guggenheim Securities valued the Ohio golf staple is responsible for majority of the RSN markets. AT&T 22 RSNs at $22.4 billion in 2018. Dis- producing the content, and he has and DirecTV, for example, charge Northeast Ohio subscribers a monthney, though, is struggling to find a his own sales team.

All told, Hanlin said Tee It Up em- ly regional sports fee of $7.49. buyer who can take on such a massive investment, and could have to ploys at least 15 to 20 independent The rising costs, combined with offload the networks for a price that contractors. His four shows produce cord cutting, are why many analysts is much lower. a combined 30 episodes per year for believe Disney won’t get close to the Complicating matters is that Fox, in the networks, which can show them price it paid for the RSNs. Still, Liberatore, who oversees an 8-K filing with the U.S. Securities as often as they want. and Exchange Commission on Jan. “For the reach and for the shows to be Outdoor Sportsman Group’s three 11, said it didn’t “intend to bid” on the distributed, it seems like a much sim- networks, 15 magazines and 19 webRSNs. Fox had been considered the pler thing when it is one owner,” Hanlin sites, remains a big believer in the favorite to buy back the RSNs, and its said. “That’s how my opportunity came RSN model. unwillingness to make an offer “is a with Fox. But I have great relationships “Cord cutting is a consumer decipretty damning signal to all other pro- with a lot of the regional networks now. sion, but I just think local sports are alspective buyers,” BTIG analyst Rich- YES (with which Hanlin had a deal prior ways going to bring in value and think to Fox Sports’ purchase of STO) is one of someone will step up and pay,” he said. ard Greenfield wrote on Jan. 14.

An industry source, however, told my biggest success stories.”

The value is magnified in sportsmad Northeast Ohio, the former STO Crain’s that Fox, should the price drop president said. to a point at which the offer would be ‘There’s huge value in that’ The Cavs finished second in the too good to ignore, could re-emerge as a sales partner for Disney.

Like Hanlin, the Cavs and Indians NBA in local TV ratings in each of the Jim Liberatore, who played a key eagerly await word on the future previous four years, and are still prorole in the Indians’ launch of STO as owner of FSO and STO. ducing solid, though dramatically rethe network’s president and CEO from The networks are also looking for a duced, numbers during another 2006-13, said he wouldn’t be sur- general manager to replace Francois dreadful post-LeBron James season.

McGillicuddy, who is now the presi- The Indians, meanwhile, have ranked prised if Fox got back in the running.

“Obviously, everybody is going to dent of the Big Ten Network. McGil- in the top five in the MLB local ratings say, ‘I don’t know if I’m interested,’ ” licuddy is currently doing double race in four of the last five years, insaid Liberatore, who is now the pres- duty (Fox has a majority stake in the cluding a first-place showing in 2017.

“There’s this expression that conident and CEO of Outdoor Sports- Big Ten Network), and is expected to man Group. “I think Amazon is a wild remain involved with FSO and STO tent is king,” Liberatore said. “I think card, too, which is really interesting until his successor is selected. that’s changed. Excellent, popular An Indians source said it was busi- content is king. Having the Cleveland because they make a couple of dolness as usual between the club and Indians and Cleveland Cavs, there’s lars every year.”

As of Jan. 11, when Fox said it was STO. Any involvement in the RSN huge value in that.”

1/18/19 2:02 PM

CRAIN’S CLEVELAND BUSINESS

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ICP expands Solon holdings with $3.5M deal

By Stan Bullard sbullard@crain.com @CrainRltyWriter

Industrial Commercial Properties (ICP), a Solon-based property owner with a portfolio extending from Detroit to Pittsburgh, often searches far for acquisitions.

But its latest deal was across the street from its home base.

Through 6680 Parkland Solon LLC, ICP in December paid $3.5 million for the 82,000-square-foot building at that address on Parkland Boulevard, according to Cuyahoga County property records.

The building was sold through an offering by a Cuyahoga County Common Pleas Court receiver after falling into foreclosure because it was empty. However, it won’t stay empty much longer.

Austin Semarjian, an ICP acquisition and leasing associate, said he had watched the building sit unused and pursued it for two years because it has an exceptional amount of office space as well as attached warehouse space that could be leased to industrial tenants.

The building, which dates from 1988, joins two other buildings that ICP affiliates own on Parkland, including the multitenant building that also houses its headquarters at 6675 Parkland.

Chris Semarjian, ICP owner, said the company had not intended to

Industrial Commercial Properties paid $3.5 million to buy the building at 6680 Parkland Blvd. in Solon through a Cuyahoga County receivership’s sale. (CoStar)

“I hope it’s the first of many acquisitions,” the younger Semarjian said.

The property had landed in Cuyahoga County Common Pleas Court last Feb. 15 after the prior owner, Atlantic Development LLC of Boca Raton, Fla., was unable to replace a 10-year, $3.75 million mortgage when it became due Dec. 11, 2017 because the building was empty, according to court records.

Judge Joseph Russo approved the foreclosure on April 24, 2018.

LNR Partners, a Miami Beach special servicer overseeing the loan, and lawyers for Atlantic, agreed to sell the building through receivership rather than go through a Cuyahoga County Sheriff’s sale, to save time, a motion the court approved last Oct. 31.

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“Once brokers found out we were in control of the structure, they started bringing us prospects.”

buy so much of the business park but “it just worked out that way.”

Moreover, ICP has leased up the newest building to two businesses expanding in Solon.

The 38,000-square-foot office area has been leased by Loan Protector LLC, which provides property insurance for lenders and operates a system that tracks for lenders if the companies they are providing mortgages are current on their insurance.

King Nut, the famous Solon-based snack provider, leased the 44,000-square-foot warehouse portion of the structure.

“Once brokers found out we were in control of the structure, they started bringing us prospects,” Austin Semarjian said.

Steve Voinovich, a CBRE first vice president, represented Loan Protector, while Matt Beesley, a principal of Cushman & Wakefield |Cresco of Independence, represented King Nut. David Stover, an executive managing director of Hanna Commercial, worked with ICP on the building’s acquisition.

Angee Shaker, the city of Solon’s business development director, said the city is glad that ICP plans to upgrade the property and it went back on the market at a time that allowed the suburb to retain Loan Protector, and accommodate King Nut’s needs.

The deal also represented a rite of passage for Austin Semarjian, the son of Chris Semarjian. The purchase was his first acquisition for the company after handling leasing requirements the past two years.

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Pictured L to R: Tarah Flanagan & Eva Rose Scholz-Carlson / Photo by Roger Mastroianni

— Austin Semarjian, ICP acquisition and leasing associate

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Mentoring is a key component to the success of the Say Yes to Education program. (Contributed photo)

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MENTORING CONTINUED FROM PAGE 1

For the 2018-2019 school year, College Now has about 1,100 mentor-mentee pairs, Elizabeth Day, senior director of marketing and communications, said in an email. It has typically recruited about 400 new mentors each year. Next year, with the increased demand due to Say Yes to Education, she said it expects to need to recruit about 900.

Cleveland Metropolitan School District CEO Eric S. Gordon doesn’t think that will be a problem.

“This is the city that will deliver that,” Gordon said.

He pointed to the success of the True2U mentoring program for the district’s eighth graders, which has attracted enough volunteers to be implemented across the entire district, and other mentorship programs at other grades. He believes the business community will step up to meet this new demand, as it has in the past.

“So while it will be a heavy lift, it’s not something I’m afraid of in this community,” Gordon said.

The College Now program sets a baseline for mentors and mentees, asking them to communicate through an online platform and meet occasionally, but once the pairs have gotten to know one another, they can communicate less formally, like through texting, if they choose.

Gordon is a mentor himself to Brinden Harvey, a sophomore acting student at Baldwin Wallace University and a graduate of the John Hay Cleveland School of Science and Medicine.

“I don’t know what I would have done without him,” Harvey said. “I don’t know how my college experience would have been if I did not have lunch with him once a month.”

Harvey said that, while he’s not the first in his family to go to college, no

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Downing will join Say Yes to Education from Huntington Bank, where she has been serving as senior vice president and director of corporate affairs. She has been on the College Now Greater Cleveland board since 2011, where the Say Yes to Education efforts have been a focus in recent years.

Downing will begin working at Say Yes to Education Cleveland full-time Feb. 11. And she plans to draw on her varied experiences in the city’s different sectors as she does so. Not only has she worked in a variety of sectors, Downing has had firsthand experience watching those sectors work together toward a common goal.

“Well, I think Cleveland is at its

Say Yes Cleveland: By the numbers

one else pursued a performance career like his. He’s had to figure a lot out on his own, and he credits Gordon for helping him figure out how to structure that path.

“You can try to do it yourself, but let’s be honest, college is not a oneman job,” Harvey said.

A lot of the lessons he’s learned from Gordon has been by example, he said. He’s seen Gordon make time for him after running from meeting to meeting all day or after an out-oftown trip. He’s shown him what it means to work hard, overcome challenges and be a leader.

Sean Sovacool, a St. Ignatius graduate and a senior accounting major in Miami University’s combined bachelor’s and master’s degree program, also said he’s learned a lot from his College Now mentor. But if you had asked him if he wanted a mentor when he started college, his answer would have been different. When he learned it was a requirement for him to receive a College Now scholarship, he was “annoyed,” he said.

“I thought, here’s this person that’s going to be just looking over my

shoulder, always nagging me, trying to get me to spend time with them or on me about grades, which I don’t think they need to worry about,” Sovacool said. “Like I just thought it would be a big waste of time.”

His opinion changed when he was matched with Mark Ross, managing partner for PwC in Northeast Ohio.

Getting career and academic advice from Ross and getting early exposure to PwC has been helpful to Sovacool as he progressed in his education. After he graduates this year, Sovacool will be joining PwC as a tax associate in the fall, and he hopes to become a mentor himself.

“As critical and as helpful as it has been to my success as a student, I would really like to be that to someone else,” Sovacool said.

For Ross, who is also chair of the College Now board, the experience of being a mentor has been rewarding on a personal level, but there’s also a benefit to the community. The Cleveland area needs to improve its graduation rate and the education levels of individuals in Northeast Ohio, he said.

“If we’re all helping one person, that will bring up the whole community,” Ross said.

Jean Triner, president of executive coaching firm Triner Associates Inc., also said serving as a mentor has been a rewarding experience. She’s offered her mentee support, texting encouragement when she’s busy with classes and tests, and they’ve visited the theater and the art museum together. But Triner actually thinks she’s gotten more out of the mentorship program than her mentee.

“To have that contact with the people who are going to be our future was very encouraging, and makes you think there’s a really bright future ahead with these young people, with their talents and their dedication and their determination to get through college,” Triner said. “It’s very uplifting.”

best when all of the different sectors of the community come together and unite behind an important mission,” she said.

Downing said she saw the power that collaboration can have as part of the host committee to bring the convention to Cleveland and as part of the campaign that brought the Browns back to the city (she later worked for the team). And she saw it when she was working in Voinovich’s mayoral office, after the city had gone into default. He brought the sectors of the community together to pull the city out of default and start to make a comeback, she said.

Downing grew up in New York and came to Cleveland after attending Vassar College. After spending some time here, she knew she wanted to stay in Cleveland. She said she liked that it’s a “big small town” that al-

lowed her to get involved as a young adult. And get involved she did.

“Diane has been involved in helping Cleveland reach significant milestones and achievements over the last two decades,” said Gene Chasin, president and chief operating officer of the national Say Yes to Education organization, in a news release.

“From her work with the Cleveland Browns to her civic engagement and her ability to work with leaders from both sides of the political aisle, Diane is a proven leader — one who is well positioned to help Cleveland’s Say Yes chapter hit the ground running.”

Volunteers from various sectors have already been putting in the work to get Cleveland named a Say Yes to Education community, Downing said. Now, the city gets to take the next step of actually implementing the program.

Almost $90 million: Amount raised for scholarships so far 

$125 million: The total Say Yes Cleveland wants to raise in order to provide scholarships for 25 years 

$15 million: How much the national Say Yes to Education organization will invest to help Cleveland scale its support systems in the coming years 

2019: First graduating class that will get to take advantage of the Say Yes to Education scholarship program in Cleveland 

Source: Information from Say Yes to Education news releases

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At the Table

Chef Dante Boccuzzi aims to fill local void at Pinecrest As the procession of new restaurants have unfurled their marquees at the Pinecrest lifestyle center in Orange Village — virtually all of them chains, so far — diners kept asking, “So where are the locals?”

Turns out, Cleveland star Joe chef Dante Boccuzzi is that Crea big “get.” While fans of the much-anticipated Red The Steakhouse await its opening (originally slated for last November), the owner of Dante, Gingko, Coda and other Tremont destinations (and others in Strongsville and Akron) has signed on.

This summer, Boccuzzi will open Goma by Dante, a Japanese fusion spot at 54 Park Ave., that will spotlight sushi, shareable plates and an extensive selection of sake for pairings.

But the highly accomplished chef, who began cooking at 14 and has since worked in some of the world’s foremost kitchens, is emphatic on one point.

“It’s NOT going to be a sushi bar.

I’m purposely avoiding that kind of label,” Boccuzzi said during a call from Los Angeles, where he’s doing a bit of research to shape the kind of place he plans to open this summer.

The restaurateur reiterates a concern he has often expressed in the past. As the popularity of sushi artistry explodes, so grows the demand for skilled “itamae,” the highly trained chefs who take years, even lifetimes to fully master the intricacies of proper cutting and arrangement of raw fish.

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“It’s really hard to find those sushi chefs with 25 years of experience,” Boccuzzi said. “And for a place this size — like, 6,000 square feet — it would take three or four sushi chefs to do everything to order. If you build your entire business around that approach, you’re really kind of held hostage.

“So this will be a sushi restaurant without an actual sushi bar,” he continued. “I’m still working out the menu, but you won’t be ordering rolls made to order. Everything will be produced behind the scenes, in the kitchen, though there may be a window wall where people can watch.”

He concedes that he may stage an occasional pop-up night or two where sushi chefs from Ginko could offer Goma’s guests to-order creations.

Boccuzzi will lean on the experience he garnered while working with one of the culinary world’s pre-eminent masters: Nobu Matsuhisa, whose acclaimed Nobu restaurants are widely considered temples of gastronomy. As a young chef, Boccuzzi worked under Matsuhisa, eventually rising to the position of executive chef for Nobu Milan, in Italy.

“Nobu was a huge mentor to me, and I’ll take what I learned and teach it and train the staff at Goma,” Boccuzzi said.

“There’s a whole world of Japanese cuisine, techniques and recipes. That’s where the fusion part comes in. What I want is a totally unique experience.”

Meaning, he added, a mashup of options. In addition to a menu of sushi

This summer, chef Dante Boccuzzi will add Goma by Dante, a Japanese fusion spot, to his extensive restaurant portfolio.

Goma will be the first local restaurant at Pinecrest.

(Contributed photo)

rolls, there will be hot dishes — including classic shabu-shabu, the so-called “hot pot” dishes where guests gather around simmering pots of broth and plunge in skewers of meat, seafood and vegetables to cook to taste.

“I’ve always felt the best dining experience is communal, where you share everything,” Boccuzzi said.

Sake, the classic Japanese rice wine, will play a starring role in the mix. In addition to formal food-sake pairings, the chef intends to train staff to help guide guests through the complexities of the beverage. A selection of sushi-friendly cocktails, beers and western wines will also be offered, Boccuzzi added.

Although work on Goma’s design is still underway, he envisions roughly 120 seats occupying his slot at Pinecrest. An expansive beverage bar, outdoor patio and available space for private events are part of the plan.

“The goal will be to experience this pretty accurate and true Japanese experience,” Boccuzzi said.

“I want to bring in lots of things that don’t exist here in town,” he added. “The drink menu, the food, the decor … this is a whole new platform.

Red Cedar move underway Red Cedar Coffee is finally moving forward with plans for its new location in Berea. Though it took a while, owner Larry Denton has closed an agreement to purchase a two-lot parcel at 1185 Bagley Road, which will result in the construction of a pair of buildings.

His primary move is a shift from his current operation at 711 W. Bagley Road, an all-but-anonymous spot that houses the company’s growing wholesale operation set behind a tiny showroom.

“About 25% of our revenue comes

from retail, but the real majority of our business is in wholesale sales,” Denton said.

Though primarily focusing on Cuyahoga, Lorain and Medina counties, he and his partner, daughter Anne Denton, have accounts as far west as Wyoming. The new building, which will include a tasting room and cafe, outdoor seating, display space and meeting rooms, also promises more sophisticated roasting and distribution facilities. Together, they’ll enable Red Cedar to grow nationally while capturing nearby customers.

As for the additional land, the Dentons decided to include a separate second structure, rather than alter the plans they commissioned with the architectural firm of Makovich and Pusti, based in Berea.

“Area businesses have been hungry for new places to lease — 1,000to 1,500-square-foot spaces — so in addition to our new roastery and cafe, we’re putting up a second building,” Denton said.

Meanwhile, three existing structures on the property must be razed.

Bids have gone out for demolition contracts, with a goal of cleared land by late spring. Red Cedar aims to open the new facilities early in 2020.

“With I-71 and I-480 nearby and Cleveland Hopkins (International Airport) just down the road, we’re in an ideal location to grow,” Denton said.

“We really could have moved anywhere, but this community has been wonderfully supportive, and the city of Berea has worked closely with us.”

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Opinion Personal View

King’s impact is still being felt

By Brandon E. Chrostowski

Editorial

Yes to opportunity It took a huge amount of work over more than two years, by many people, to get to the point where Cleveland last week became the country’s fourth Say Yes to Education communitywide chapter.

Now, a new phase of work is about to begin in an initiative to increase the education levels of Cleveland residents, improve college access and, over the long term, bolster the quality of the workforce to help bring about more economic growth.

The Say Yes designation is a significant achievement for a city that has begun the hard work of improving its educational system, most prominently through implementation of the Cleveland Metropolitan School District’s Cleveland Plan. That effort, launched in 2012, has helped improve graduation rates and test scores, among other measures of success, though much work remains to be done for the district to get to where it wants to go for its nearly 39,000 students.

Joining the Say Yes project is an important milestone along that journey. The value of the “public-private partnership” has become a cliché in Cleveland, but in this case, the efforts of partners including CMSD, the city of Cleveland, Cuyahoga County, the Cleveland Foundation, College Now Greater Cleveland and the United Way of Greater Cleveland, as well as more than 40 initial funders for the Say Yes Cleveland Scholarship Fund, have made a major contribution to the community’s fortunes. The hiring of Diane Downing, a can-do presence in Cleveland’s business and nonprofit communities, as executive director of Say Yes Cleveland gives us confidence that the organizational structure and follow-through will be a match for the program’s ambitions.

The headline number from the Say Yes announcement is this: $90 million.

That’s how much has been raised locally in the first phase of the effort to provide scholarships to any public university, college or Pell-eligible certificate program in Ohio for the Cleveland students who meet residency and other eligibility requirements. Big as the $90 million number is, there’s still work to do,

as the fund begins a public campaign to reach a goal of $125 million — enough to provide scholarships to students for 25 years.

It’s true that college isn’t necessarily the right destination for every student. But this also is true: Every student who is qualified and wants to go to college deserves the opportunity to do so and shouldn’t be denied the chance because of family income. Too often in this country, and particularly in our community, students don’t even consider going to college because they believe they can’t afford it. That’s a damn shame. The scholarship component of Say Yes will go a long way toward righting that wrong.

There’s great community value in broadening the pool of students able to go to college. Ohio is a laggard in educational attainment, with a below-average percentage of residents holding a certificate or degree beyond high school, and the status quo won’t cut it in a tech-driven future economy.

But Say Yes isn’t just a scholarship guarantee program. The program’s framework calls for “all entities serving the community’s children to share their data to better address students’ individual needs and connect them to additional support services, academic and non-academic, from pre-K through postsecondary graduation.” The national Say Yes program is providing $15 million in seed money to help Cleveland roll out features such as family support specialists in schools, after-school and summer programs, and mental health services.

Say Yes works best when the private sector is involved, too. If you’ve ever found yourself saying some variation of “Cleveland will never thrive unless its schools get better,” here’s your chance to be part of the turnaround. The effort here seeks a few thousand mentors to help guide young scholars through the transition from high school to college.

That’s not an easy time in life. You can make a tangible difference to a young person with a modest investment of your time but a major contribution of your experience, wisdom and compassion.

Publisher and Editor: Elizabeth McIntyre (emcintyre@crain.com)

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Scott Suttell (ssuttell@crain.com)

Contact Crain’s:

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Dr. Martin Luther King Jr. would have been 90 years old last Tuesday, Jan. 15. From Cleveland to Cookeville, Tenn., and beyond, we are turning our thoughts again to the good preacher.

When I think about Dr. King, I believe he would rather have been viewed as a man than a legend; a man who really wanted all of us to delve into some critical thinking that leads to tangible acts of social justice.

The Talmud states: “You are not required to complete the work, but neither are you permitted to abstain from it.” The work was that of the people, and King spoke about and yearned for a “Beloved Community.” In the aftermath of his brief but historic life, many Clevelanders Chrostowski have chosen to continue the work.

Sanctified parts of the modern Cleveland legacy are the imprints of so many rousing heroes who have emerged from the African-American community. There was Rev. Otis Moss Jr., former pastor of Olivet Institutional Baptist Church, who walked with Dr. King and was a key adviser and confidant. And the late Louise Stokes (for whom the Shaker Heights Post Office is named), who gave birth to two iconic sons: Carl B. Stokes, the first black mayor of a major American city; and Louis Stokes, an exemplary and beloved leader of the U.S. Congress for 15 consecutive terms, representing the east side of the city. These are just a few examples.

Dr. King’s impact on our community is long-standing. He came to Cleveland in 1967 to help Carl Stokes pull off his momentous electoral win. Louis Stokes interacted with MLK often — all in favor of human rights and dignity. Dr. King also accomplished a great deal to forge Cleveland’s prominent role in the civil rights campaign.

But while we’ve made important contributions over the years, do we truly have a “Beloved Community” in Northeast Ohio? Not yet. But there is a significant amount of essential and healing work being done, nudging us in the right direction. I’m personally very comfortable being aligned with those who will not give up. This remains the mission of EDWINS Leadership & Restaurant Institute.

The butcher shop we recently opened, adjacent to our campus, is used and enjoyed by an eclectic and interactive community. The table is set for everyone. The Buckeye neighborhood, along with Shaker Heights, have interracially embraced not only meats, spices and beverages but a collective belief in second chances and equality.

African-American Clevelanders have never held any illusions about debasement or disenfranchisement. Yet, proudly, our community always displays great bravery and perseverance. They have learned bitterly from blood and sorrow. But they have never shunned an opportunity to join hands with other Americans, of all creeds, in order to repair the world.

Buckeye Road is the right setting for our new butcher shop. It appears to be a catalyst of inclusive and healthy interaction. People eat, chat, share ideas and discover that the person across from or next to them is real and approachable. It’s harder to hate someone when you know them. And while our visitors mingle — and people laugh and connect with one another — typecasting, suspicion and ignorance lose their taste. This is an easier pill to swallow than redlining, apathy, myths and government overreach. Our guests each choose from their own menus, and nobody is judging.

We must continue to remind ourselves of the importance of community and our ideas, for there is power in collaborative thinking.

Let us break bread together. If we wish to honor MLK’s life, we need to study what’s going on in Cleveland. And we must not abstain from the work he left behind for us.

Chrostowski is founder, president and CEO of EDWINS Leadership & Restaurant Institute.

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing ClevEdit@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.

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1/17/19 3:49 PM

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Connected Gourmet & Baskets by Maury Teaming up in Cleveland to bring you a Basket or a Box of fabulous gourmet treats for the holidays!

This year celebrate Cleveland’s culturally diverse & fancy food scene.

Personal View

We’re a liile bit fancy!

Feds playing pivotal role in our incomplete economic expansion

By David McClough

The U.S. Federal Reserve raised interest rates four times in 2018 and anticipates raising the federal funds rate twice in 2019.

This Fed decision reflects an expectation that the economy can manage on its own. Some forecasts are less confident, but forecasts suggest the economic expansion that began in the third quarter of 2009 is likely to limp along for another year or two. Despite a lengthy duration, the current expansion remains incomplete because Fed policy has imposed anemic growth on an economy reeling from a financial crisis and subsequent recession. Despite massive government spending, the Fed maintained tight reins on the economy that crept along quarter after quarter. Imagine what could have been, if growth was permitted to flourish?

During the current 91-month expansion, the unemployment rate has declined from 10% to 3.7%. While an appreciable reduction, the decline of the unemployment rate reveals only a narrow glimpse at the economy generally, and labor market conditions more specifically. For November 2018, the Bureau of Labor Statistics reports that 6 million workers remain unemployed, 4.8 million work part-time despite a preference to work full-time, and an additional 1.7 million prospective workers, including nearly 600,000 who believe that jobs are unavailable, have not submitted an application in the past month. When combined, the “effective” unemployment rate is 7.6%, which is more than twice the more familiar and monthly reported unemployment rate.

The U.S. Congressional Budget Office has forecast the natural rate of employment through August 2028.

According to the CBO estimate, the current natural rate is 4.61%. So, while the unemployment rate suggests the economy might be on the verge of overheating, the “effective” unemployment rate suggests there may still be room for continued economic growth with no substantive adverse impact on the price level — that is, low inflation.

Further evidence of an incomplete recovery is the contraction of the labor force participation rate, which stood at 66.1% at the onset of the recession but now has leveled off at 62.9%. If the labor market is as tight as the unemployment rate implies, workers would experience real wage growth. The combination of wage growth, more workers and workers working more hours is needed to propel economic growth and the missing inflation. Alas, millions of adults have yet to participate in one of the longest expansions in U.S. economic history. What gives?

To be fair, there is (some) inflation. Consumer prices have risen 2% and wholesale prices have increased 2.5%. Unsurprisingly, therefore, the Fed targets a 2% inflation rate. With unemployment low and inflation at the target rate, the Fed has initiated a series of interest rate increases. The rate increases reveal that the Fed has determined the monetary policy has achieved the “full employment” mandate. That is, the Fed has determined that the economy can continue its slow growth with low unemployment but without inflationary pressure. While unemployment is below the natural rate estimate of the CBO, millions remain uninvited to the expansion. My questions are quite simple: Where is the economic growth that would create demand for workers? Why are 10 million workers still out of work nearly 10 years into expansion? Why are millions of workers no longer in the labor market? Where are the wage increases that motivate workers to return to the labor force?

Again, in fairness, wages have increased 3%, on average. Indeed, increasing income inequality implies the income growth accrues to those already earning the most. Moreover, “on average” means that many workers have experienced lower or, perhaps, no wage growth, so for these workers purchasing power has declined.

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Innovative Legal Counsel for Today’s Business Client PRACTICE AREAS Jerome Powell, chairman of the U.S. Federal Reserve, says the central bank can be patient as it assesses risks to the U.S. economy.

(Elijah Nouvelage/Bloomberg)

To explain how these data can coexist, one must recall the dual mandate of the Fed. While the Fed monitors unemployment, it also is vigilant in its suppression of inflation. Suppose that Congress and the president determine that 10 million unemployed workers are simply too many, and suppose Congress votes to increase government expenditures with the expectation of creating demand for finished goods and the inputs, including labor, needed to produce the goods. While Congress might be willing to accept an inflation rate greater than 2%, the Fed likely is not, so the Fed will slow the money supply growth rate to curtail an acceleration of inflation beyond the low single-digit target rate.

Historically, the independent central bank, the Fed, has served as a “check” against the inflationary policies of democratically elected representatives. Research reveals that central bank independence is “good” and that countries with independent central banks outperform those countries practicing an alternative arrangement that has coordinated fiscal and monetary policy managed by an elected legislature, for example. In contrast, there is no compelling body of research demonstrating that a low single-digit inflation target is “good.”

While “we” celebrate the independence of the Fed from the incursion of populist policy inherent in a democratically elected legislature, we ignore that the Fed is comprised of bankers and, thus, represents the interest of bankers. In short, the Fed is not quite as independent as popularly believed. The long-run focus intended to serve the interest of the economy first serves banks. In this case, banks are served at the expense of millions of unemployed, underemployed and discouraged workers. While inflation threatens the profitability of banks, a slightly more inflationary economy might very well instigate the labor demand required to create employment opportunities for the most vulnerable workers in the modern economy.

Only when qualified labor is scarce are firms willing to invest to train marginal or unskilled workers. Only when semi-skilled and unskilled labor are scarce will firms raise wages and enhance benefits packages to attract and retain workers. Lastly, only when wages rise and economic confidence expands broadly can consumption support the economic growth necessary to invite all willing and able workers to a lasting and complete recovery.

Real Estate Hotel & Hospitality Business & Corporate Banking & Finance General Counsel

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M.B.A.

McClough is assistant professor of economics at Ohio Northern University.

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Focus LEGAL AFFAIRS

Blind justice no more: Law firms embrace AI, other emerging tech

Illustration by Pitiphothivichit/Getty images

To stay ahead of the disruptive curve, the legal industry sheds its traditional reluctance about new technologies.

By Jeremy Nobile

Competitive edge

jnobile@crain.com @JeremyNobile

AI generally boils down to the collection and deciphering of data through some kind of automated process. The related software can help with tasks ranging from the laborious scouring of legal documents — in Baker’s bankruptcy practice, ROSS has been used to study and track case law — to predicting case results.

At Dinsmore & Shohl, Cleveland managing partner James Dimitrijevs does just that in his international trademark practice through analysis of Excel spreadsheets, a process ripe for improvement by AI. “More automated analysis through the use of AI would allow us to assess exponentially more data and more thoroughly and accurately predict the outcomes of potential future disputes,” Dimitrijevs said.

The rise of AI in law — and the varying interest or reluctance associated with it — is not unlike other revolutions in the legal services industry spurred by new technology or other factors.

Many lawyers didn’t want to ditch their typewriters as personal computers hit the market. When LexisNexis and Westlaw research surfaced

When Cleveland-based BakerHostetler agreed to a partnership between its bankruptcy practice and IBM’s ROSS Intelligence, a legal research tool powered by artificial intelligence, some observers characterized that as the dawn of the legal apocalypse, in which robots replace human lawyers.

So far, AI certainly hasn’t replaced any attorneys at Baker — the firm reports 970 lawyers today versus a headcount of 905 in 2016 — but it has dispensed with some of the more mundane and tedious tasks that used to occupy them.

While there’s often a reluctance in the legal services industry to adopt new technologies, as well as some concern that the coming wave of AI could displace flesh-and-blood attorneys, there’s a sense of urgency today among lawyers and firms to embrace artificial intelligence or risk being left behind.

“Yes, there is some anxiety. But we have to look at the cause and effect,” said Bob Craig, Baker’s chief information officer. “These technologies are all intertwined, including how

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“There will be not be robots that replace lawyers, but that doesn’t mean there won’t be disruption.”

— Bob Craig, BakerHostetler’s chief information officer

clients manage legal work differently.

There will not be robots that replace lawyers, but that doesn’t mean there won’t be disruption. We are trying to stay ahead of that disruptive curve so it’s not disrupting to us, but empowering to us.”

decades ago, a good few attorneys clung to rooting through their firms' libraries for years to come; now, both those platforms are synonymous with the practice of law.

The advent of AI and other emerging tech, such as blockchain, will drive the next revolution in legal services.

“AI is a disruptive technology that is definitely going to have a huge impact on the legal service industry,” said Michael Scharf, a co-dean at Case Western University School of Law. “It’s not yet at the point where AI is writing briefs. But, conceivably within the next 10 years, AI will be able to produce briefs that are indiscernible from human-produced products.”

The notion that a computer program could replace a person and usher in mass unemployment is where the doomsday fears pop up, Scharf said.

“I’m personally not afraid this is going to replace lawyers or put firms out of business,” Scharf said, "but it will change the law. Law is evolutionary and it seems to absorb these disruptive elements and move on. But you’ve got to be smart about it.”

Firms like Baker have been hailed

as forward-thinking as they implement new technology and AI specifically. The firm continues this approach through its research-­anddevelopment arm — internally known as “incuBaker” — which is engaged in various partnerships with tech companies that can test their products and services within the law firm itself. Baker prefers to keep most of those efforts close to its vest, though. The ROSS news only made headlines because IBM promoted the partnership.

Baker, like other firms, touts the benefits of technology in delivering services. If any automated process can increase efficiency or better meet client demands, most firms say it should be sought out and embraced.

“There is, or should be, a sense of urgency to understanding technology and deploying it in a way that benefits clients and lets us provide better legal services,” Craig said. “In the legal industry, there are going to be winners and losers in this race. We will see legal industry consolidation and people will trust fewer law firms with their data and info. So there is absolutely a competitive dynamic at play here.”

SEE LAW TECH, PAGE 13

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LEGAL AFFAIRS

CSU incubator helps solo lawyers take wing

By Jeremy Nobile jnobile@crain.com @JeremyNobile

Cleveland-Marshall College of Law launched its solo practice incubator in February 2014 to provide another employment option for new grads looking for work in a job market that was very tight in the aftermath of the Great Recession.

Five years later, the incubator program at Cleveland State University’s law school has evolved from those early days and found its identity.

Today, the program is viewed as both an avenue for empowering lawyers who opt to hang up their shingles instead of joining a firm and as a catalyst for promoting change in the delivery of legal services, something that has become increasingly cost-prohibitive for average Americans.

“In the beginning, my intent in being part of this was to deal with an employment problem,” said Cleveland-Marshall professor Chris Sagers, the original faculty director for the incubator program. “But we figured out that an incubator shouldn’t exist as a last resort. It’s something for people who want to do it. And there is a subset of students who really are into this and want to do it.”

Lawyers working solo, or in small offices of two to nine lawyers, comprise the majority of the U.S. legal profession and have for some time, according to stats from the American Bar Association.

Contrary to the long-promoted industry belief that the best work in law is found within the walls of large firms that offer high salaries in exchange for exhaustively long hours — and that going solo is the route for lawyers who couldn’t cut it in a more corporate setting — younger and newly minted lawyers in particular are increasingly interested in solo practice.

“There used to be this long tradition in law schools that the prestigious jobs are at big firms, and anything less is not that great,” Sagers said. “I went to the big firms, and it didn’t feel like a success to me. I was pretty unhappy.”

Millennials, as has been well-documented, have different wants than the previous generations, valuing time, freedom and social issues over the

number of zeroes in their salaries.

As a result, more aspiring lawyers seem to be adopting perspectives similar to Sagers’ before leaping into the job market, choosing to build a business in their own way and creating a new class of attorneys going solo at the start of their careers.

“People think you go through school and go to a big firm, but more and more people are realizing, after going those routes, that isn’t what they want,” said Clarissa Smith, a former incubator tenant who moved her solo practice into an office in downtown’s Rockefeller Building last fall. “I know some people who went to big firms right out of law school who are thinking about leaving. After one year, people are burnt out and don’t want to live their lives like this.”

And that’s where solo incubators have staked out their role in the legal market.

More than just space When it opened in early 2014, the Cleveland-Marshall incubator was one of only about 30 in the country. The concept was pushed to fruition by former law school dean Craig Boise, who first pitched the idea years earlier in the heart of the economic downturn as a way to address waning job opportunities for an ever-growing crowd of at-

CONTINUED FROM PAGE 12

To AI and beyond

P013_CL_20190121.indd 13

torneys while teaching lawyers how to run a business — a topic not usually covered in law schools.

Today, there are more than 60 incubators, including a few others in Ohio, such as one in Summit County sponsored by the Akron Bar Association that launched in September 2015.

Cleveland-Marshall’s, however, remains the only solo incubator program in Ohio supported by a university.

Located in the law school’s library, the incubator offices include 10 spaces that, last summer, were filled, with other potential tenants sitting on a waiting list.

Users get not just the space — which is rented to them for $200 the first year and $250 the second, offering what’s surely the most inexpensive office space in downtown Cleveland — but access to legal databases and nearby colleagues who are also trying to start up their own small businesses.

Starting one’s own firm fresh out of law school “would be very daunting without all that at your disposal,” said incubator tenant Jesse Gannon.

For folks like Smith, who now mostly focuses on criminal defense, being a solo attorney is simply more appealing than joining a massive firm. She wanted a better quality of life plus the perks and freedom of being her own boss.

Allan Immonen, a former incuba-

“We want to make everybody in the community at least aware this is going to change the legal landscape.”

LAW TECH According to the American Bar Association’s 2018 Legal Technology Survey Report, just 10% of lawyers polled reported using some kind of AI-based tool for work last year.

So while some firms are increasingly open to tech, not everyone is on board.

That's where Cleveland Metropolitan Bar Association president Marlon Primes comes in. Primes and the CMBA recently created the Law 2040 Task Force.

“The whole ideas with 2040 is we don’t want a technological gap,” Primes said. “If you look at some capabilities of AI, if we are not careful, we get back to the gap that occurred in the ’80s and ’90s.”

The gap Primes cited followed the advent of Westlaw and LexisNexis

Program coordinator Ashley Jones said young attorneys with goals of establishing their own business and creative ways of developing their practices are the ones most likely to

be selected for the program as that’s what it’s best suited to.

Incubator tenants aren’t selected just to fill space. There have been periods when offices were available but applicants were turned away because they weren’t deemed a good fit.

Jones takes exception to the old stigma — which seems to be fading — that only lawyers who can’t cut it at big firms turn to solo practice.

“I built a six-figure legal practice in three years,” she noted. “I don’t consider myself a failure.”

It’s “degrading and ridiculous to think we’re only doing this” to help people who can’t find jobs today, she added. The point, she said, is to support the growing cadre of entrepreneurial attorneys.

As far as what comes next at Cleveland-Marshall, there could be opportunities to expand the program in the future, particularly if interest remains high.

“The fastest change is happening with younger people,” said current faculty adviser Pamela Daiker-Middaugh. “I think in five years we will see things we don’t even recognize happening (in the practice of law) and this is going to be at the forefront of that change.”

Rather than putting in less effort than their counterparts at large firms, incubator lawyers have to wear more hats as business owners. And the pay isn’t awful either. According to the 2018 attorney compensation report from Martindale-Hubbell, solo and small-firm lawyers take home an average of $198,000 annually.

For those increasingly flocking to solo practice, even if their pay doesn’t reach the heights of a senior partner at Jones Day, many expect they’ll be happier on their own.

“You are lucky if you break even the first year. You want to start out making $50,000, $60,000 or $70,000 a year,” said former incubator tenant Larry Booth, who recently moved his Social Security disability practice to Willoughby Hills. “You have to come in knowing that’s not going to happen right away. But when you look at the long-term picture, even five years from now, when I look at how I’ll stack up with someone at a law firm, I like my outlook a lot better. I see myself on the golf course more often than someone slaving away at a law firm trying to make partner.”

their curricula. It’s starting with educating faculty, though there are plans to roll out some sort of concentration tied to AI, perhaps a certificate.

But because the adoption of AI is expected to be gradual, the school is rolling all that out incrementally as well so there’s a place for those skills in the future.

“Within a couple of years, the market will be ready for lawyers welltrained in how to work with and program AI,” Scharf predicted. “At that point, we want our students to be among the leaders in the field.”

While the legal community braces for AI, some are simultaneously engaged in other emerging technologies.

Baker and both Case and Cleveland–Marshall law schools are involved with the region’s innovative Blockland initiative to explore how blockchain could be used in the delivery of legal services. Involvement in the blockchain initiative is also designed to help lawyers better understand uses of that technology for clients and how

that intersects with the law itself.

“On the law side, there may be blockchain applications, places where a secure distributed ledger will be useful, and potential blockchain problems that will require lawyers knowledgeable about the technology,” said Case co-dean Jessica Berg, who, along with Cleveland-Marshall dean Lee Fisher, chairs the “legal node” for the Blockland iniative. “Applications include smart contracts or government databases — titles, for example. But it is too early to say whether this one technology will be revolutionary. There are a number of limitations still to be worked out.”

AI still appears to be at the front of the line to be the industry’s next great disruptor.

The strongest advice is to engage with it now lest a firm get left in the technological dust.

“It’s only disruption if you’re not paying attention,” Baker's Craig said.

“If you’re paying attention, it’s innovation.”

Clarissa Smith, Allan Immonen and Larry Booth all recently moved out of the solo practice incubator at the Cleveland-Marshall College of Law to hang their shingles at various locations across Northeast Ohio.

(Contributed photo)

— Marlon Primes, Cleveland Metropolitan Bar Association president

and how firms that didn’t get aboard with those research platforms became less competitive in the legal market.

“We want to make everybody in the community at least aware this is going to change the legal landscape,” he said. “This is where tech is going and you need to plan accordingly so you don’t miss out on the opportunity.”

While still in its early stages, the 2040 group includes a committee with eight members from a variety of firms working in Greater Cleve-

land. That includes Dinsmore’s Dimitrijevs.

"Some lawyers may be concerned that AI will replace lawyers in the near future,” he said. “More technologically savvy lawyers may realize that the input of experienced lawyers interacting with programmers to provide valuable data to be assessed by AI will be extremely valuable for the use of AI in the practice of law.”

Meanwhile, law schools such as Case are looking at building relevant courses and other programming into

tor tenant and transactional lawyer who has set up shop in Hudson, was also motivated by social issues in setting up his solo practice. While at the incubator, Immonen was able to charge significantly less than he would’ve at a big firm. And while his rates have gone up since leaving there, he said he keeps them flexible in order to reach more clients.

Working through different methods like that to provide affordable legal help to clients is a luxury lawyers in traditional firms don’t quite have.

“I think there is a lot of pent-up demand on the lower end of the market that, if we were in a traditional firm, paying full rent, we couldn’t meet,” Immonen said. “I’ve taken on a lot of clients who probably never could’ve hired a lawyer because my overhead is so low, and all I really need to do is pay my bills.”

According to the ABA, hourly rates for solo incubator attorneys tend to run between $50-$200/hour, but many regularly adapt pricing based on a client’s ability to pay.

Happier on their own

1/17/19 11:39 AM

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CRAIN’S CLEVELAND BUSINESS

LEGAL AFFAIRS

Adviser: Thomas J. Coyne

EPA letter to IRS on Opportunity Zones merits attention The Tax Cuts and Jobs Act of 2017 introduced the concept of Opportunity Zones (OZs) to promote longterm investment in qualifying areas.

Since the law was passed, the IRS has designated some 8,700 Qualified Opportunity Zones (QOZs) across the United States, including many in key parts of the city of Cleveland.

The OZ program has garnered significant attention in the real estate community, both locally and nationwide, as it essentially allows for a) deferral of capital gains, upon reinvestment of gains in QOZ areas, until the earlier of the sale of the asset or Dec. 31, 2026; b) a partial exclusion (up to 15%) of original capital gains deferred, based on the term of ownership of the asset through 2026; and c) a 100% exclusion of capital gains through 2047 on further appreciation of qualified assets held for at least 10 years — sometimes referred to in the industry as the “juice.” The juice provides enormous potential for tax savings of appreciated property.

The Treasury Department issued initial OZ program regulations on Oct. 19, 2018. The regulations provide a variety of parameters to qualify for favored tax treatment under the law, including deadlines for reinvestment of capital gains and deployment of funds. Among other things, the regulations and accompanying revenue ruling state, in effect, that as to real estate investments, either a) the investor must “substantially improve” the real estate, which may be done by doubling the tax basis of the building only, without regard to the value of the land; or b) the “original

Coyne is practice group leader of the National Real Estate Practice Group of Thompson Hine LLP.

“The OZ program has garnered significant attention in the real estate community, as it essentially allows for a) deferral of capital gains; b) a partial exclusion of original capital gains deferred; and c) a 100% exclusion of capital gains through 2047.”

use” of the subject property must “commence” with the applicable investment.

In the context of “substantial improvements” to property, the land value is not counted. Based on the foregoing, the cost of environmental remediation of land would likely not be taken into account and the funds applied to remediation would not qualify for special treatment under the OZ program.

The “substantial improvement test and the “original use” test have garnered much comment and attention from industry and lobbying groups, as well as from inside the administration, in order to allow investors more direction and leeway in qualifying under the program.

Of perhaps greater interest, on Dec. 18, 2018, the U.S. EPA, through its Office of Brownfields and Land Revitalization (OBLR), issued a letter to the IRS asking for clarification of the above tests, primarily in the context of brownfields remediation. The purpose of the OBLR request is to spur redevelopment of brownfield and other underutilized sites by expanding the breadth and impact of the OZ program.

Specifically, the EPA submitted the following requests: 1. Allow remediation costs to be counted toward substantial improvements. The OBLR recommended that final IRS guidance should clarify that funds applied to environmental remediation (including assessment, cleanup and other site preparation costs) should qualify under the program and should be considered

when evaluating the “substantial improvement” test under the regulations.

2. Allow deployment of funds over time. The OBLR asked the IRS to take into account the extended time period necessary for remediation projects and to allow for deployment of funds during the entire period of cleanup. Specifically, the EPA suggested the “stacking” of a 30-month window for cleanup, in addition to the 30-month window for vertical construction in the existing regulations.

3. Allow carryover of gains. The OBLR asked the IRS to enable gains realized from the sale of remediated property to be carried over into other QOZ property. This would allow an investor to complete remediation, sell the remediated property to a vertical developer and reap the ongoing benefits of the OZ program.

4. Allow brownfields cleanup to constitute “original use.” The OBLR also asked that the term “original use” be defined so it automatically applies to properties that are characterized as brownfield sites under the CERCLA. This would go a long way toward simplifying the analysis for investors as to whether the OZ program applies to a project.

5. Allow reuse of vacant, underutilized or land bank property to constitute “original use.” Beyond brownfields, the OBLR also recommended that the definition of “original use” should include property that is un-

If you bought your racking somewhere else, you probably paid too much.

2019 Business Executive of the Year Carl J. Grassi

derutilized or vacant for a period of one year or more and property foreclosed upon and held by a local government or land bank. OBLR further suggested that the underutilized test may apply to the entire property or to “a portion thereof … which is used only at irregular periods or intermittently.” This would provide flexibility as to qualified redevelopment of partially shutdown facilities.

These recommendations, if adopted, would have important implications for real estate investors. For example, an investor could qualify under the program, under the original-use test, based on “underutilization” of the asset for at least one year. Also, an investor who purchases impacted properties and performs remediation and site preparation could take advantage of the program without conducting their own vertical or other redevelopment. Rather, the investor could complete sufficient remediation activities, sell the remediated property and reinvest the proceeds in other QOZ property, with a carryover of tax advantages. In addition, a redeveloper who performs both remediation and vertical development could count the remediation costs toward satisfying the “substantial improvement” test.

At this time, the real estate community awaits further IRS guidance, which has been delayed by the partial government shutdown. Many other important issues concerning the regulations persist. The final regulations will significantly alter the financial analysis of investment in sites located within OZ areas.

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CRAIN’S CLEVELAND BUSINESS

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J A N U A RY 21 - 2 7, 2 019

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PA G E 15

LEGAL AFFAIRS

Cleaning up the web, one comment at a time

By Jeremy Nobile jnobile@crain.com @JeremyNobile

Aaron Minc could barely find work out of law school — at least, not the kind of work he really wanted.

The tight job market he faced in 2010, on the heels of the Great Recession, saw many law firms tightening budgets and freezing new hires, particularly of young grads fresh out of college.

Today, the 34-year-old attorney, who could barely find a job as a freshly minted lawyer, aspires to build Minc Law into a global firm in the niche practice area of internet defamation and online content removal.

“I was desperate, looking for work and trying to support myself and my family at the time after incurring all the debt out of law school,” Minc recalled. “I just ran with this. And it’s worked out fantastic.”

Minc said he always envisioned himself as a corporate attorney in a large, national firm, but at the time had virtually no chance of getting his foot in the door at a Jones Day or BakerHostetler.

In those early days, he bounced around a lot, taking a temp job at a small litigation boutique, then moving on to construction firm Donley’s Inc., where he mostly reviewed contracts.

When he became the first attorney hired at boutique firm Sennett Fisher (joining its two founders), Minc looked everywhere to scrape up clients, including Craigslist. That led him to a “feisty” Mentor business owner who was hunting for a lawyer to help him deal with negative comments left on RipoffReport.com by an investor who'd lost some money.

(The business, which Minc declined to identify, ultimately failed.)

Minc took the job, marking his entry into internet defamation law, a specialized area to which large firms rarely devote much attention.

He ultimately won what amounted to his first litigation case, successfully getting the negative report removed.

“A light bulb kind of went off,” Minc said. “What I realized was, wow, there are millions of people on this website and a lot of people probably need help. I really wanted to help more people and (felt like) I’m one of the few people who can.”

Minc was blogging at the time, but usually wrote about business litigation. When he posted about Rip­ OffReport.com and the case he'd just resolved, “magically, the phone started ringing.”

He became increasingly interested in this area of law, discovering there

Aaron Minc and his Minc Law team help both businesses and private citizens battle online defamation. (Contributed photos)

he built his practice.

“After six or nine months, I realized I was getting overloaded,” he said.

“The activity was through the roof.”

Minc was last with Meyers, Roman Friedberg & Lewis, where he was working of counsel, before he branched off to start his own firm, Minc Law, in January 2018.

Since then, his practice has grown significantly. Minc has already moved into his own space at the new Pinecrest development, where he now has a staff of six other attorneys.

The firm has grown almost entirely through web marketing and his blog, which draws in clients from across the country. He never planned to build a business like this, but saw an opportunity and ran with it.

“We are very fortuitous in that there is a great need for the types of services we supply in the market and very few people who provide them,” Minc said.

His cases rarely go to trial. A letter to a website hosting defamatory comments is often enough to get the

“A light bulb kind of went off. What I realized was, wow, there are millions of people on this website and a lot of people probably need help.”

— Aaron Minc

wasn’t much competition. He worked other matters, but also took on additional clients facing similar issues with defamation.

While many of his clients were similar to that first business owner, there were also private citizens who wanted help getting private photos or other remarks scrubbed from the internet, leading Minc to deal with sites

ranging from ShesAHomewrecker. com to TheDirty.com. Other clients wanted help to persuade publications to take down damaging information, which usually only happens when such material is deemed unnecessary, outdated or inaccurate.

From then on, Minc joined a couple of lower-midsized firms, sticking around for a couple years at each as Internet defamation and online content removal may be niche practice areas, but Minc sees potential for his law firm to go global.

comments pulled down. And there isn’t necessarily a legal case in each project he takes on, such as when he’s trying to convince a newspaper to remove a story that keeps someone from getting a job. He cited Cleveland.com’s right-to-be-forgotten experiment as evidence some outlets will work with him.

“Most cases aren’t about money, just content removal,” he explained.

“You don’t need a payoff to win, you just need the damage to stop.”

Minc bills his firm as one of a kind, though that’s hard to prove. An online search shows some other firms with internet defamation practices, including a few boutique shops with areas of focus similar to his. But none seem to have a bench like Minc does.

He said his firm, which logged $2.3 million in revenue in 2018, now fields 20-30 inquires a day.

“We get to pick our clients and cases. We set our own market rates,” he said. “If people don’t want to retain us, that’s OK. The phone will ring again tomorrow.”

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n order to achieve high-performing results, portfolio companies of venture capital and private equity firms need well-functioning boards that afford room for individuality, debate and discussion. Theranos, the now largely discredited Silicon Valley startup that initially gained a lot of buzz for its revolutionary blood-testing technology, serves as a cautionary tale about how a dysfunc- hewitt tional board destroys value. The company recently announced that it is closing its doors, and investors have lost significant capital.

According to the account in “Bad Blood: Secrets and Lies in a Silicon Valley Startup” by John Carreyrou, not long after Avie Tevanian, an executive who previously worked closely with Steve Jobs at NEXT and Apple, joined the board of Theranos, he started to have concerns about the company. Founder Elizabeth Holmes allegedly would present optimistic revenue projections based upon deals

with pharmaceutical companies in the pipeline, but the revenue would never materialize. Tevanian asked questions about the deals and requested copies of contracts, but Holmes dodged and weaved. He also asked about repeated delays in the rollout of the company’s products, which were being touted as ready for commercialization, but never received any answers.

Tevanian then objected to a corporate governance move that would increase Holmes’s voting stake in the company Juvan because he didn’t believe it was in line with corporate governance best practices.

Carreyrou reports that another Theranos board member expressed Holmes’s dissatisfaction with Tevanian’s questioning and asked him if he wanted to resign. After additional confrontations, Tevanian decided to step down, in part because the documents provided by the company had “irreconcilable discrepancies.” He believed the issues could be fixed, but action needed to be taken.

About a decade later, the events at Theranos have vindicated Tevanian’s

concerns. In part because of Carreyrou’s investigative reporting, Theranos, once a darling of Silicon Valley, has come under enormous criticism that its proprietary technology did not work as claimed. Recently, Holmes and former president and chief operating officer Sunny Balwani have been charged with fraud, though both vehemently deny the allegations against them.

It is possible that the Theranos story would have had a much happier ending had Tevanian’s questions been taken seriously. Presumably, Tevanian raised these issues before Theranos began rolling out its technology nationwide.

If Holmes and the board had engaged with Tevanian and addressed his concerns, perhaps they could have put a more reasonable timetable in place to perfect the technology before actually deploying it for patient use.

The following are a few lessons from the Theranos situation for boards of venture capital or private equitybacked companies:

The ImporTance of havIng a well-funcTIonIng board cannoT be oversTaTed. Most corporate laws require the

business and affairs of a corporation to be managed by or under the direction of a corporation’s board of directors.

The board is responsible for overseeing the corporation’s strategy and ensuring compliance with an array of often overwhelming laws and regulations.

Given that boards have enormous responsibilities, they should develop strong processes in an effort to ensure they are well-functioning and behave in a manner that enhances the value of the enterprise.

board composITIon should ensure dIversITy of ThoughT. Many boards are appropriately characterized as “clubby.” When recruiting board members, it is easy to gravitate toward individuals who are friendly, who will go with the flow and who will take the path of least resistance. Opening up a closed club and recruiting accomplished individuals who do not have deepseated relationships with others will help to avoid a culture of groupthink.

IndIvIdual dIrecTors should have The abIlITy To express conTrary

vIewpoInTs wIThouT fear of reTalIaTIon. The board should adopt a shared philosophy that affords individual directors the ability to express honest viewpoints and debate matters. Other board members and shareholders should not pressure directors to refrain from asking questions or challenging decisions. Diversity of thought can help to minimize the number of blind spots the board has and may lead to better decisions that help to bring about more favorable outcomes.

Boards should take care to ensure that politicking does not occur behind the scenes and that the real work of the board occurs in actual board meetings, not in “meetings outside of meetings.” Corporations are stronger when directors are empowered to debate issues, and directors should be able to perform their duties without fear of retaliation.

Christopher J. Hewitt and Jayne E. Juvan are partners and co-leaders of the M&A practice at Tucker Ellis.

Contact him at 216-696-2691 or christopher.hewitt@tuckerellis.com.

Contact her at 216-696-5677 or jayne.juvan@tuckerellis.com.

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January 21, 2019 S7

M&A commercial property considerations Acquiring real estate requires comprehensive deal analysis

By DIaNa C. whISeNaNt

A

s real estate asset managers, our clients often ask us to describe some of the most important things to consider when acquiring real estate in an M&A transaction.

What it essentially comes down to is having complete and accurate data, documentation and some background information on the physical space and costs. Once this is in hand, you can effectively plan whisenant for a well-strategized implementation.

The first step to understanding the proposed acquisition is to obtain the property documentation. Both parties would ideally have a central database where leases, lease amendments, property deeds, boundary surveys, environmental reports, title reports, building plans, photographs and more are stored. These are critical documents to collect because they will help

provide an understanding of the overall portfolio and its associated costs.

It is easy to set up a user-friendly property database. Most allow multiple users and edit rights, as well as the ability to store data and documents, run reports and set up critical date notifications. With this type of system in place, data and documents can easily be extracted and distributed or accessed through a passcodeprotected system. It’s critical to have someone with a real estate background abstracting and interpreting the agreements to maintain the accuracy of the data. Once this is complete, you can best determine how to integrate the properties into the existing portfolio.

There are some important factors to consider when reviewing property information of owned assets that might help with integration, cost savings and profitability. A good maintenance record of the facility is key, along with historical operating costs. To be thorough in your due diligence process, a property

inspection should be performed to determine any deferred maintenance and potential future capital that will be required to operate your business in the space. An investigation into any prior environmental studies, such as phase I, phase II, soil studies or wetlands studies would also uncover any unforeseen costs and liabilities.

A few opportunities to monetize the owned asset may also exist. Is there excess land that could be sold off? Is the location a critical one for this business? If it is, perhaps making an investment into the facility would make sense, but also look for local government incentives for capital improvement projects and/or job retention. If the location is not wellsuited for the future business growth or if certain operations could be consolidated, how much value is tied up in the real estate? Is the market and timing ripe to sell and relocate?

Finally, what is a fair market value for the property?

Commercial real estate leases

present their own nuances that need to be explored. How long is the lease commitment, and what are the future costs? Much like owned property, can historical operating expenses be obtained to make more accurate projections of increases over the term? If applicable, determine if rent costs are in line with the market.

Sometimes the rent initially seems high, but there may be a reason behind that, such as tenant improvement costs that have been added to the base rent and amortized over the term.

It’s important to understand what work has been performed at what cost, so the actual base rent can be determined, if not explicitly stated in the lease. By determining this, the rent can be readjusted after the improvement costs have been paid for over the committed term.

Some leases provide options to renew beyond the current term. If they do not, the company should start planning and talking with the landlord at least 18 to 24 months before the lease expires if the desire is to stay.

This will also provide enough time

Through 30 and almost

to negotiate the rent and ask for any building improvements that may be required to effectively operate your business in the space. If you find that time is running out with an expiring lease, it’s important to note what the holdover provision says in the lease.

Tenants can sometimes be required to pay an overhold rent up to 200% of the last month’s rent in the lease term.

Having an overall view of what is owned and leased, what the current and future costs may be and any capital required is critical to understand before merging with or buying a company.

Again, the hope would be that the portfolio is well-organized, and data and documents are readily accessible.

If that is not the case, this should be one of the first items in the due diligence process to be prepared to fully integrate the facilities into the existing portfolio.

Diana C. Whisenant is executive managing director at Hanna Commercial. Contact her at 216-861-5398 or dianawhisenant@HannaCRE.com.

Years

600 Investments, we’re proud to call Cleveland home!

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To learn more about Riverside’s strategies to invest in companies ranging from breakeven profitability up to $400 million in enterprise value, contact:

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S8 January 21, 2019

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Articulating your company’s growth story to investors requires detailed preparation By aNDrew p. MaLe

bridge requires signifi

confirmatory due diligence. A com pany’s ability to confidently present and defend a “bottom-up” financial fore

Male

specific industry and business model

a materially different risk profile

Securing investments and enhancing returns Aon helps protect our clients’ investments from unknown risks through representations and warranties insurance and can help ring-fence potential tax risks through tax insurance. We can also help mitigate exposure to known issues and pending litigation through a suite of contingent liability solutions.

CONTiNuED ON NExT PAgE

To learn more about our deal protection offerings, contact Jay Moroscak (216.623.4143 | jay.moroscak@aon.com) or visit aon.com/transactionliability

or secure financial partners

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January 21, 2019 S9

Understanding the capital stack in an M&a transaction

By MIChaeL D. MaKoFSKY and JoShUa G. BerGGrUN

I

n any M&A deal, it is imperative that both sellers and buyers understand the different layers of financing, or capital stack, that can go into funding an acquisition.

There are a number of ways to structure a deal, whether through equity financing, debt financing, cash or a combination of financing vehicles.

One strategy to consider is equity financing, which involves investors contributing cash to the buyer’s capital in exchange for percentage ownership of the target business. Although equity financing carries an expectation of higher rates of return, it provides flexibility that is not available with debt financing, such as no mandatory interest and principal repayments.

Rollover equity is a method of seller financing, in which a seller contributes, or rolls over, equity from the divested entity into the acquirer. This reduces the buyer’s up-front capital investment and results in certain post-transaction ownership by the seller. This strategy can be particularly attractive to buyers eager to retain a seller’s key management employees after the acquisition.

An alternative or supplement strategy to equity financing is debt

financing, in which the buyer obtains a loan to fund an acquisition. Lenders often require a buyer to contribute a significant amount of Makofsky its own capital before making any loan. However, buyers and target businesses that convey financial strength and sufficient collateralization

Buyers realize major benefits from debt financing, such as ownership retention and tax advantages from writing off interest payments.

As sellers and buyers evaluate potential deals, they must be mindful of the available financing strategies and the implications on post-transaction ownership.

Michael D. Makofsky is a principal in

McCarthy Lebit’s Mergers & acquisitions, Banking & finance, and Business & Corporate practice areas.

Contact him at 216-696-1422 or mdm@mccarthylebit.com. Joshua g.

Berggrun is an associate in the Business & Corporate, Mergers & acquisitions, and Real Estate practice areas.

Contact him at 216-696-1422 or jgb@ mccarthylebit.com.

CONNECT with

CONTiNuED fROM PREviOuS PagE

Invest In proper systems and staff. Your sales team needs a CRM system that can segment customers by various characteristics, a robust pipeline reporting tool and management dashboards to summarize the results. Your CFO needs a detailed financial reporting system and to begin building projection model templates based on “bottom-up” assumptions and predictive modeling.

InstIll a culture of realIstIc and dIscIplIned reportIng. You get no credit for “sandbagging” in M&A and meaningful misses have valuation implications. Incentivize and instruct your team to develop and hit realistic targets. turn case studIes Into folklore. Tout customer success stories that exemplify winning new business, expansion with an existing customer and entering new product or geographic markets. Similarly, understand why lost customers exited and what control your team has to minimize those risks.

With these tools, your team can master the challenges of building a detailed revenue bridge and convey your company’s growth potential to investors.

And then, what awaits you on the other side of the revenue bridge? The EBITDA bridge, but that’s another story.

500 local and 14,000 global

DEAL MAKERS

Association for Corporate Growth Driving Middle-Market Growth

www.ACGcleveland.com

andrew Male is a director of Western Reserve Partners, a division of Citizens Capital Markets inc.

Contact him at 216-574-2104 or andrew.male@citizensbank.com.

ACG_Crains_Dec 2015.indd 1

P016_P035_CL_20190121.indd 25

could be in a position to take advantage of debt financing. This strategy involves a senior lender making certain secured loans to the buyer in the Berggrun form of term loans or revolving lines of credit. There may also be mezzanine capital to bridge any shortfall in the capital stack.

12/9/15 6:20 PM

1/17/19 10:03 AM

S10 January 21, 2019

Corporate Growth&M&a

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Differentiate your company in a sell-side process

By SCott MCrILL

have the confidence that the business

buyer will likely hold back a significant

Mcrill

significant erosion of transaction value

experts can significantly help you get

in place. Hold highly sensitive, confiden If you follow these five steps, you’re

Follow these five steps to help your

financials and insurance policies) The first step is to do some flow potential of the business. It even many sellers neglect this first step,

shop floor. It may sound silly, but you making sure it was clean first. This

Scott McRill is a shareholder at Clark Schaefer Hackett. Contact him at 216-526-8125 or slmcrill@cshco.com.

Involve leaders, organization to help execute successful transition

By Matt SteNCIL

Stencil

Matt Stencil is a senior client partner at Korn Ferry. Contact him at 312-5260525 or Matt.Stencil@KornFerry.com.

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1

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2:13 PM

2018 ACG DEAL OF THE YEAR C

M

SIGNET CAPITAL ADVISORS, LLC CONGRATULATES MEDIQUANT,

Y

CM

MY

INC. ON WINNING THE ACG CLEVELAND – 2018 DEAL OF THE YEAR AWARD IN THE BUYOUT VENTURE CAPITAL CATEGORY.

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CONGRATULATIONS ALSO TO SILVERSMITH CAPITAL PARTNERS, MEDIQUANT’S NEW EQUITY PARTNER. SIGNET CAPITAL ADVISORS IS PROUD TO HAVE SERVED AS SELL-SIDE ADVISOR TO THE SHAREHOLDERS OF MEDIQUANT.

A B O U T S I G N E T. Signet Capital A visors, LLC provi es sophisticate investment banking services to select owners of mi le market companies throughout the U.S. Signet services inclu e SELL-SIDE ADVISORY (selling all or part of your business); BUY-SIDE ADVISORY (helping sharehol ers grow their company ebt). through acquisition); an , CAPITAL RAISING (equity, junior capital an T O L E A R N M O R E , P L E A S E C O N TA C T MICHAEL PAPARELLA Managing Director

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P016_P035_CL_20190121.indd 27

200 Public Square Suite 3270 Cleveland, Ohio 44114

216-658-2590 signetcapadvisors.com

1/17/19 10:03 AM

Corporate Growth&M&a

S12 January 21, 2019

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should streamline the process by only to make a decision without burdening

n

porate scorecard and financial model

By MIChaeL Shaw find, evaluate and close deals efficiently. All

Maintaining a refined M&A playbook

out the buy-side process should be well defined.

fit, industry reputation and strength of management team. The financial Shaw

update and utilize on a regular basis as part of a buy-side playbook include: n

acquisition strategy. A buy-side playbook

include: (1) research and identification

n

ments such as an acquirer profile, intro

Strategies to help finalize purchase price agreement

By BeNJaMIN M. CooKe uyers and sellers value busi nesses differently, but most businesses are valued on a cash-free, debt-free basis prior to any

of earnings/EBITDA, a multiple of

negotiations. When buyers and sellers cannot find middle ground, conditional

problem

growth through M&A. Michael Shaw is partner and managing director at Copper Run. Contact him at 614-888-1786 or mshaw@copperruncap.com.

other milestones, the buyer may agree to increase the purchase price based on

A structured ear ation

business is worth what a willing buyer parties can arrive at the purchase based

a specific tolerance depending on the

lack of a well-defined playbook. Investing time and resources into a playbook that can be executed consistently will be

by

Cooke

the business performs beyond historical averages or achieves

performance of the seller’s business CONTiNuED ON NExT PagE

Calfee congratulates Align Capital Partners as the 2019 ACG Cleveland Deal Maker Award Recipient in the Private Equity category.

Calfee also celebrates the accomplishments of Robert G. McCreary III, Managing Director and Founder of CapitalWorks, LLC, the 2019 Lifetime Achievement Award Recipient.

Calfee is honored to represent many private equity funds such as Align and CapitalWorks that partner with owners and management to drive success in the middle market and generate wealth in our region and beyond.

We’re also grateful for the opportunity to work alongside Robert G. McCreary III who has achieved the highest level of sustained success, personally and professionally, over a lifetime of deal making.

Cleveland | Columbus | Cincinnati | Washington, D.C. | Calfee.com

©2019 Calfee, Halter & Griswold LLP. All Rights Reserved.

1405 East Sixth Street, Cleveland, OH 44114

Congratulations to all 2019 ACG Cleveland Deal Maker Award nominees and honorees!

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January 21, 2019 S13

Why I loathe materiality scrapes (unless I’m representing the buyer)

By DoMINIC a. DIpUCCIo

B

uyers’ lawyers increasingly are getting more successful in adding so-called “materiality scrape” provisions to acquisition agreements.

As seller’s counsel, this trend frustrates me. I find them awkward and risky.

I push hard to resist them — not on philosophical grounds, but on grounds of improper agreement construction.

Here’s why.

As far as acquisition agreements go, what’s “market” is constantly evolving. Understanding the history of materiality scrapes is important to a proper Dipuccio understanding of these provisions.

Fundamentally, every acquisition agreement allocates risks between buyers and sellers. Starting with the general premise that we don’t live in a perfect world, it is well-accepted that buyers must assume some level of risk when it comes to unknown, unanticipated and immaterial matters that arise after an acquisition.

Appreciating this, sell-side lawyers push hard to qualify seller’s representations by concepts of materiality and to secure sizeable indemnity baskets that limit post-closing indemnification to amounts in excess of agreed-to thresholds. Most sophisticated acquisition agreements contain elements of both of these concepts.

Somewhere along the line, an astute buyer’s counsel observed the unfairness of the outcome when both concepts are present. Since a seller representation qualified by materiality is not breached unless it crosses the materiality threshold and there is no indemnification for such breach unless it exceeds the agreed-to indemnity basket, it is tantamount to double materiality. Thus, the materiality scrape was invented.

These provisions generally provide that for purposes of determining

CONTiNuED fROM PREviOuS PAGE

as operated by the buyer post-closing.

There are any number of milestones that would trigger the buyer’s obligation to pay the purchase price as an earnout, such as a patent or other intellectual property application that is granted, a key customer contract is signed or a key government approval is awarded.

Earnouts can be structured off a percentage of revenue, a percentage of EBITDA or some other operational formula. Additionally, earnouts can be structured with a limitation — such as the buyer pays the seller a percentage

P016_P035_CL_20190121.indd 29

post-closing indemnifiable losses, concepts of materiality embedded in representations will be ignored.

Double materiality scrapes provide that concepts of materiality also will be ignored in determining whether a representation has been breached in the first instance. These provisions are the ultimate in take-backs.

While sympathetic to a buyer’s objection to a double materiality standard, the materiality scrape seeks to resolve the issue in a clumsy way. It has unintended consequences (certain representations need to be carefully carved out from the effect of the materiality scrape); leads to unnecessary extra legal work (sellers are advised to over-disclose immaterial items that the buyer isn’t interested in in the first place); and potentially adds confusion to already highly complex documents.

The issue the materiality scrape seeks to resolve is purely economic. Its essence lies in determining sellers’ postclosing indemnification obligations.

Artificially creating breaches when they don’t exist to fill an indemnity basket is not good form. Unraveling the hard work to tighten and limit representations and warranties in one swoop of the pen is counterintuitive and risky from a drafting point of view.

More elegant resolutions are available through the indemnification baskets (amount or type) and mini-baskets.

Sellers, if you must agree to a materiality scrape, fight hard to resist the double scrape, increase the size of the indemnity basket and any minibaskets, and be sure to exclude certain representations. Then, be ready to address the next new buyer-friendly provision proffered in response.

Any leader knows the inevitable ebb and flow of the business. For North American Dental Group, that might mean closing multiple deals in some quarters and carrying on “business as usual” in others. Ken relies on Benesch throughout the cycle, dialing up when matters are pressing— acquisitions, employment matters, regulatory requirements, tax matters—and dialing back when his in-house team is taking the lead. It’s a flexible relationship that puts the needs of the business first.

“I like that Benesch will dial up or dial down their services as we need them. They accommodate our business seamlessly.”

KENNETH COOPER CEO & Founding Partner North American Dental Group

To learn more about our relationship with North American Dental Group, visit beneschlaw.com/myteam

www.beneschlaw.com

MY BENESCH MY TEAM Benesch’s North American Dental Group Team IRA C. KAPLAN

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Dominic A. DiPuccio, Esq., is partner and chair of the Mergers and Acquisitions Group at Taft Stettinius & Hollister LLP. Contact him at 216-241-2838 or DDiPuccio@taftlaw.com.

or a maximum dollar amount (whichever comes first) or the earnout can be limited based on time without any dollar cap. All of these structures are available to protect buyers and shift some of the risk of acquisition back on the seller.

That said, buyers should consider the oversight that sellers will require into the buyer’s business, particularly its accounting books and records, postclosing.

Benjamin M. Cooke, Esq., is an attorney at Wickens Herzer Panza.

Contact him at 440-695-8060 or BCooke@WickensLaw.com.

1/17/19 10:03 AM

Corporate Growth&M&a

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January 21, 2019 S15

Protecting interests in a heated market Insurance services, products evolve to minimize risk

By JEFFREY J. SCHWAB

F

ollowing on the heels of 2017’s record-setting financials, mergers and acquisition activity has continued to accelerate in 2018, all while competition for deals continues to be very intense.

Given the current environment of deal velocity and heightened deal competition, the danger of losing a deal to another buyer immediately when the period of exclusivity expires will continue.

Seasoned advisory teams, working together to address the financial, legal and insurance elements, help buyers success- Schwab fully get deals off the starting blocks and over the finish line.

Due diligence can make or break a deal. Too many buyers find themselves inheriting unfortunate surprises, such as an uninsured seven-figure cyber claim, a safety and health violation from a self-insured or captive insurance company, extraordinary health care premium increases and claims, or issues within a company’s retirement plans.

The relentless pursuit to uncover the gaps in coverage, inappropriate/ inadequate policies and noncompliance issues that can severely slow or even derail a transaction is paramount in the due diligence phase, be it assessment of insurance coverages, employee benefits, 401(k) plans and more. Once the gaps are identified, placing the right protections can reduce future uncertainty while saving time, and in the long run, costs.

Higher volumes and faster pace

mean that managing and allocating risk during the transaction period is more important than ever. As a result, and for good reasons, the use of representations and warranties insurance (RWI), while not new, continues to increase as a means to transfer risk during buy/sell.

As RWI continues to gain traction, more insurers enter the market, creating

a more competitive environment. This increased competition has led to RWI policies with improved terms, including reduced premiums and deductibles.

Buyers are also more frequently recognizing the value of other services and products, such as tax liability protection and contingent liabilities.

Unique types of protections, such as cyber liability or environmental

liability, are used more frequently. We expect this risk reduction specialization to continue.

Additionally, technology advancements overall continue to lessen the time and costs of completing deals, with digital technologies and analytics tools providing quicker and more detailed intelligence at all phases of the transaction.

Brent M. Pietrafese and Lydia E. Warkentin are attorneys practicing in the Corporate and Capital Markets Practice Group at Calfee, Halter & Griswold LLP. Contact him at 216-622-8623 or bpietrafese@calfee. com. Contact her at 216-622-8453 or lwarkentin@calfee.com.

P016_P035_CL_20190121.indd 31

Jeffrey J. Schwab is senior vice president of Private Equity Services at Oswald Cos. Contact him at 216-658-5208 or jschwab@oswaldcompanies.com.

Deal Counsel Who Understand the Language of Business We take a creative approach when advising our clients on transactions to arrive at customized solutions that drive better business results.

CONTiNuED fROM PREviOuS PaGE

well as information about the seller’s management and employees, and, depending on the sensitivity of the information, major customers and contracts. Before distributing the CIM to any prospective buyer, the seller should be sure the buyer executes a confidentiality agreement.

While selling a business can be complicated and time-consuming, sellers who take the above steps early in the process will mitigate the risk of problems down the road.

Time and execution clearly matter when it comes to deals of today; the strength and synchronization of the full advisory teams, working to make each minute, and dollar, count, will help buyers toward a successful closing and on a path to a more valuable transaction.

Christopher J. Hewitt

Jayne E. Juvan

christopher.hewitt@tuckerellis.com

jayne.juvan@tuckerellis.com

Chris and Jayne are co-leaders of the M&A practice at Tucker Ellis.

tuckerellis.com

tuckerellis.com/lingua-negoti-blog @linguanegoti

Visit our blog “Lingua Negoti,” which means “the language of business” and is dedicated to transforming the practice of corporate law so legal issues do not interfere with achieving high performance.

1/17/19 10:04 AM

Corporate Growth&M&a

S16 January 21, 2019

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Transaction advisors can help buyer identify terms, debt obligations NWC is commonly defined as

By SteVe SwaNN

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Steve Swann is partner within BMF’s Transaction Advisory Services Group.

Contact him at 330-255-2417 or sswann@bmfcpa.com.

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escrowed clawback

funds, indemnifications, provisions and other

Along with tax insurance, litigation n

n Representations and warranties insurance (RWI) allows a buyer in an M&A deal to recover from the insurer

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insurers’ risk appetite has expanded to include a willingness Whatever the overall pace of M&A

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also be flexibly used as a corporate risk management tool outside of M&A.

embarking on an acquisition need to assess risks they might encounter and take the necessary steps to address them.

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WE ARE

MORE THAN STRATEGIC ADVISORS

pending or potential litigation risk or

M&A goals, while providing benefits to

substantial escrow requirements and allows buyers to ringfence the cost of

Jay Moroscak is a senior vice president in the Cleveland office of Aon. Contact him at 216-272-2155 or jay.moroscak@aon.com.

Celebrating Two Decades 1999-2019 2018 Year in Review CapitalWorks Portfolio Company

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A trusted partner in investing in and improving middle market businesses.

For investing and acquisitions, contact Kellie Work at kwork@capitalworks.net.

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January 21, 2019 S17

Take for instance the film industry, tokenization,

By BrIaN KeLLY and BraD thoMpSoNÂ

filmmakers

could

where investors often evaluate firms

Asia-Pacific will be successful. Others right to cash or other financial assets project a company undertakes, firms can apply project finance to a wider

alternative ways to secure financing, it with greater confi

Kelly

thompson

to feel confident that regulations are

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Corporate Growth&M&a

S18 January 21, 2019

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Stepping into mom and dad’s shoes

Succession planning for family-owned companies businesses take pride in establishing a legacy in their family’s name. Because having a family-owned business means so much to the family that established the business, it comes as no surprise that eventually the inevitable question on everyone’s mind becomes: “Who is going to take over?”

By ChrIStopher p. reUSCher and LINDSIe a. eVerett

C

losely-held, family-owned businesses have qualities and histories that are unique and can be attributed to the dynamics of each family. The owner(s) of these

It is no secret that these types of businesses are encouraged to think about succession planning early and often. Deciding on a succession plan for your family-owned business begins with identifying what the ownership structure will look like after the transition has taken place.

Commonly, the first considered option is a transfer within the family.

Company ownership can be transferred cleanly through a trust to children or other family members who would like to inherit the business. One consideration with this option is whether family members will have active or passive ownership, and whether the percentage of ownership interests should be equal.

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Another option is to sell the business to one or more experienced and committed employees. Here, owners may choose to enter into a buy-sell agreement or employee stock ownership plan with the employee(s), where the employee(s) buy the company outright, or over time, after a predetermined date or reuscher triggering event takes place.

A third option is selling the company to a private equity group.

With this option, family members could be relieved of the finan- everett cial pressures of owning a company but still reap the benefits of maintaining management responsibilities or some ongoing ownership in the company postsale.

Finally, if there are no identifiable family members or employees who are willing or able to own and/or manage the company, the best option may be to sell the company outright. While this option may not be ideal for familyowned companies, it still provides family members with a liquidity benefit.

Christopher P. Reuscher is a shareholder at Roetzel. Contact him at 330-762-7994 or creuscher@ralaw. com. Lindsie A. Everett is an associate at Roetzel. Contact her at 330-8496611 or leverett@ralaw.com.

Patrick Berry, Co-Chair

Christal Contini, Co-Chair Todd Baumgartner

Richard Cooper

Maria Carr

Carl Grassi CONTiNuED fROM PREviOuS PAgE

A pAth towArd wider Adoption

Christopher Hawley

Michael Kaczka

Michael Meaney

Jason Klein

Scott Opincar

Lisa Lauer

Ilirjan Pipa

Morgan Mackovjak

Sean Malloy

Amy Wojnarwsky

Frank Wardega

mcdonaldhopkins.com Chicago

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Cleveland

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Columbus

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Detroit

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Blockchain is still in its infancy, and it is evolving. It needs more players and stakeholders, including governments and businesses willing to coordinate and define how the platform is designed, verified, implemented and enforced.

Building trust in the ecosystem will be key. According to a PwC survey, the top barriers to blockchain adoption include regulatory uncertainty and lack of trust among users. In terms of regulatory uncertainty, regulators remain unsettled. Many are still familiarizing themselves with blockchain and developing rules around the technology.

Companies will need to develop rules and standards for blockchain; they can’t just leave it up to regulators.

Dealmakers have an opportunity to make investing easier, less costly and more profitable. This will challenge dealmakers to think of investing in new ways.

Brian Kelly is a deals partner at PwC. Contact him at 216-875-3121 or brian.kelly@pwc.com. Brad Thompson is an M&A tax partner at PwC. Contact him at 216-875-3062 or bradley.c.thompson@pwc.com.

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CRAIN’S CLEVELAND BUSINESS

what he has in mind for the Third Frontier.”

In a report released last July, the Ohio Chamber of Commerce recommended ways to spend that money — principally to create four hubs of innovation in cities around the state. Each would focus on a specific area: data analytics, health, next-generation manufacturing and smart infrastructure. The chamber also recommended that voters be asked to renew the bond fund to keep the program, which was not a favorite of Kasich, alive.

“They’ve given local government leaders reason to be optimistic,” said Keary McCarthy, executive director of the Ohio Mayors Alliance, a bipartisan coalition of 25 mayors in Ohio’s largest cities and suburbs, except for Cleveland Mayor Frank Jackson.

“The polar opposite of the Kasich administration. It’s been a rough eight years for cities.”

McCarthy said that when DeWine and his lieutenant governor, Jon Husted, met with members of the Mayors Alliance in December, it was clear to him they understand that cities are where economic growth will happen.

“Two things stood out to me,” he recalled. “DeWine said Ohio is a local-government state, and I know he understands the importance of working with local elected leaders, as he has done on crime as attorney general. The other thing, that Husted said, and these are not his exact words, was that as we look to the future, cities are where a lot of the economic development action is going to be, and we have to work together to make sure that growth is capitalized on.”

Marty McGann, senior vice president of advocacy at the Greater

CONTINUED FROM PAGE 1

That plan focuses on preparing Ohioans for in-demand jobs in growing industries, bolstering investment in research and development and expanding former Gov. John Kasich’s push to streamline regulations on business.

The new governor may also have a substantial impact on JobsOhio, the nonprofit that leads the state’s economic development efforts. John Minor, who has been JobsOhio’s president and chief investment officer since July 2012, announced last summer that he will be leaving the job, though he has been vague about a specific departure date. While replacing Minor is the job of the organization’s board of directors, terms of five of the nine directors expire in July and DeWine will choose their replacements.

DeWine also may face a decision on the Third Frontier Program. The program, created in 2002 to seed technology research and attract private investment, most recently was funded by a $700 million bond issue approved by voters in 2010.

That legislation was supposed to support the program for five years, but about $200 million remains unspent.

“I think DeWine is not going to rock the boat too much on economic development,” said Matthew Cox, an attorney and former executive director of the Cuyahoga County Republican Party who is now president of Capitol Partners, a lobbying firm with offices in Cleveland and Columbus. “I will be interested to see

Cleveland Partnership (GCP), said he, too, is encouraged by what he’s seen and heard from DeWine and Husted. GCP is the regional chamber of commerce. McGann said his organization would like to see a closer relationship between JobsOhio and the Third Frontier.

“There was also talk (in the last year) about creating a tool that would enhance or build upon the federal Opportunity Zone program,” he said.

“That’s something we’re interested in.”

“John Kasich had a rule from Day 1: no new tax credits. And it was very difficult to get support on growing current tax credits. If DeWine takes a different approach, you’re going to see a lot of activity, particularly for Cleveland.”

— Matthew Cox, president of Capitol Partners

Cox also will be interested in how DeWine views tax credits.

“John Kasich had a rule from Day 1: no new tax credits,” he said. “And it was very difficult to get support on growing current tax credits. If DeWine takes a different approach, you’re going to see a lot of activity, particularly for Cleveland.”

Upcoming Special Section

MEETING AND EVENT PLANNER

Several pieces of legislation were introduced in the Ohio House of Representatives that would have expanded tax credits for movie productions and other construction programs died there when the legislative session ended in December.

McGann also sees value in the InnovateOhio program DeWine is creating that will operate under Husted to improve the use of technology by state agencies and promote job training for in-demand industries.

“Their focus on workforce is noteworthy,” he said. “We’ll be talking to them about the model we have for industry-sector partnerships in Northeast Ohio and maybe that’s something the state should consider exploring as well.”

GCP is partnering with the workforce programs of the city of Cleveland and Cuyahoga County, and a group of nonprofits, to identify and train people who can be employed in three keys industries: information technology, health care and manufacturing.

The plan for InnovateOhio includes a proposal to change Ohio law so researchers at state universities can share financially in the research they create. DeWine has said he believes this will make the state more attractive to innovative research and private research investment.

In an emailed statement, Jerzy Sawicki, vice president for research at Cleveland State University, did not reject the idea, but said it “appears to be novel and innovative, but several challenges would need to be addressed.”

He noted the university already adheres to the guidelines of the

American Association of University Professors on how profits generated from intellectual property are shared between the creator and the university and that requirements already exist on federally funded research.

DeWine’s cabinet choices have drawn a mixed reaction.

McCarthy said he was encouraged by the appointment of Findlay Mayor Lydia Mihalik to head the Development Services Agency, which administers many state economic development programs. He pointed out that while Findlay is not among the state’s largest cities, it has a population of 41,500 and is home to two Fortune 1000 companies, Marathon Petroleum Corp. and Cooper Tire & Rubber Co. DeWine also won some praise across the state for the diversity of his cabinet. DeWine’s 22 cabinet appointments include 13 women and five African-Americans.

But Gus Hoyas, an insurance broker who serves as president of the Hispanic Contractors Association of Northeast Ohio, had a different reaction when he saw that no Hispanics were among the DeWine team.

“I supported him financially,” Hoyas said of DeWine. “We’re working our way at sitting at the table and looking for opportunities, and we get slapped like this.”

Jose Feliciano, chair of the Hispanic Roundtable, said he also was disappointed: “You can’t find one Hispanic in the state of Ohio to fill a job? It’s just so important to create one job and the implication that that has for our (community) is extraordinary — with getting involved in the political system, just everything.”

As the popularity of Cleveland continues to rise, so does the competition for venues and conference centers. STAND OUT AMONG THE COMPETITION! Spotlight your organization through this unique marketing opportunity – in print and online.

LIST: Conference Centers

VOL. 39, NO. 37

SEPTEMBER 10 - 16, 2018

Source Lunch

Akron LeafFilter grows into diverse Kaulig Companies. Page 20

CLEVELAND BUSINESS

Finance chair Kevin Jacques, Baldwin Wallace University Page 23

The List Northeast Ohio’s largest caterers Page 19 MEDICAL MARIJUANA

Legal, but no medical marijuana to buy

By JEREMY NOBILE jnobile@crain.com @JeremyNobile

MEETINGS AND EVENTS

A CUTTING EDGE TEAM-BUILDING EXPERIENCE Cleveland Axe Throwing general manager Matt Dixon demonstrates the proper technique of tossing a steel blade. (Ken Blaze for Crain’s)

Ax throwing allows employees to build trust while bonding over a new skill

By DOUGLAS J. GUTH clbfreelancer@crain.com

Corporate team-building experiences are a mainstay for most organizations, engaging employees in an activity that ideally creates bonds between individuals and departments

alike. Rather than the usual lunch or happy hour event, however, a growing number of Cleveland companies are letting staff toss a sharpened length of wood and metal in the spirit of good-natured, camaraderie-building competition.

Businesses with an ax to grind are realizing their lumberjack dreams at

Entire contents © 2018 by Crain Communications Inc.

P036_CL_20190121.indd 36

Cleveland Axe Throwing, located in an office building in Valley View down the road from the Cinemark movie theater.

Since opening in March 2017, Cleveland Axe Throwing has hosted 90 area companies — including repeat customers Swagelok, Cintas and Hyland Software — for corporate outings. Recently, Phoenix Coffee brought in 40 guests who chucked axes at wooden targets set up at the range’s six chainedoff throwing lanes.

SEE AXE, PAGE 21

On paper, Ohio’s medical marijuana control program began Saturday, Sept. 8, but there won’t be a single bud, tincture or edible sold for at least a few months.

Business owners in the surrounding marijuana industry have been expecting and planning for delays. Other states, like Maryland, have seen setbacks in their own programs for various reasons. Meanwhile, Ohio’s system for licensing cultivators, processors, dispensaries, doctors and testing labs is one of the most rigorous and heavily regulated in the United States and has faced its own setbacks since HB 523, the law establishing the program, was passed in fall 2016.

Cultivation licenses were slow to roll out in 2017. And some aspiring marijuana growers denied licenses have sued the state over its process for scoring applications. All that began pushing back building timelines for grow ops and the licensing of the other operations. Potrepreneurs reading the tea leaves sensed at that time the industry and its supply chain would come together slower than originally anticipated.

“Most of these business owners are sympathetic and have factored those delays into their budgets,” said Kevin Patrick Murphy, a Walter | Haverfield attorney working with several local marijuana enterprises. “In any state that you have ever seen this, you have delays. No one has ever had a process that has adhered to the timeline.”

“But obviously, folks who’ve invested tens of millions of dollars into selling these products are working to make things happen as fast as possible,” said Thomas Rosenberger, executive director of the National Cannabis Industry Association of Ohio.

ISSUE DATE: March 4 | AD CLOSE: Feb. 21 For more information, contact Lisa Rudy at lrudy@crain.com

SEE MARIJUANA, PAGE 6

Focus: Meetings and events << Event

pros are in demand, but the job isn’t for the faint of heart. Page 12

Unique is key in event planning. Page 14 Q&A: I-X Center executive vice president Lisa Vo Page 16

1/18/19 3:42 PM

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Welty grows beyond a building company Several business units help bolster firm’s main mission

By Dan Shingler dshingler@crain.com @DanShingler

Fairlawn’s Welty Building Co. has become more than a construction firm.

“There are not a lot of people in the world that do horizontal integration.

They do vertical integration, but we do horizontal integration, or at least that’s what I’m calling it,” said president and CEO Don Taylor.

He’s been the driver behind the addition of eight new offices and business units, including five subsidiaries. All of them have been formed since Taylor took the helm of the Taylor company from partner Jerry Welty in 1998, with many formed in the past 10 years.

The company has added Welty Facility Services Group to manage buildings and assets for property owners; inSITE Advisory Group to work with clients on grants, public-private projects and business attraction; Environments 4 Business, which provides office furniture and space design; and Virtual Design Construction, which offers clients technology such as drones, laser scanners and virtual reality.

That’s on top of expanding into Cleveland, Columbus and Houston with traditional construction services, and an Energy & Infrastructure subsidiary it launched in 2018, mostly to work with FirstEnergy of Akron, Taylor said.

Privately held Welty’s does not disclose its overall revenue, but Taylor said most of the subsidiaries’ direct impact on Welty’s top line is still small when compared to a construction company that does multimillion-dollar projects and participates in projects involving hundreds of millions of dollars of construction work, such as the Pro Football Hall of Fame Village in Canton.

That’s especially true for the smaller units that aren’t in the construction industry.

For example, inSITE, which only has a staff of three full-time professionals, has revenue of just more than $1 million a year, Taylor said.

Environments 4 Business, also known as E4B, has revenue of about $12 million and 15 employees, he said.

“For their industries, they’re nice businesses. Compared to the behemoth that Welty Building Co. is, they’re small. But we tend to look at them based on importance to our customers,” Taylor said.

Their real value might lie in their ability to help Welty secure and keep clients, and to identify and bid on new projects. That’s especially the case with inSITE, Taylor said, because it enables clients such as small municipalities to complete projects they otherwise could not and to work on economic development efforts

P037_CL_20190121.indd 37

Capital Fund, which he announced last year. That will provide financing for projects that need help with the “last mile” of their capital stack, he said.

The fund quietly made its first investment last year when it put $1.3 million into Akron’s Bowery Project to outside C R A I N ’ S C L E V E L A N D B U S I N E S S | Sbut E P Tsoon E M B Ewill R 3 open - 9 , 2 018 | PA invesGE 40 tors. Hopes are the fund will gather $20 million to $30 million in capital to invest, Taylor said.

That fund will be focused on Akron, but Welty eventually hopes to form about 10 such funds, each focused on an individual community, Taylor said. The goal is to have each fund make short-term loans for projects, get paid back, and then do it all over again.

“Our intention is to allow more projects to get started, get built and To place your listing in Crain’s Cleveland Classifieds then we would be taken out when the project is sustainable and can be refiContact Kate Rozek at 216-771-5276 / email CLBClassified@crain.com nanced,” Taylor said.

Copy Deadline: Wednesdays @ 2:00pm -- All Ads Pre-Paid: Check or Credit Card So far, Taylor said he’s been happy with the performance of Welty’s business units, or at least about as happy as he gets about that sort of thing.

“I’m very happy with the way they’ve served customers. Being an entrepreneur, you can never grow fast enough. And if you talk to them, they’ll tell you, ‘Don is always saying Welty Building Co. subsidiary Environments 4 Business provides office furniture and design for clients, as grow faster,’ ” Taylor said. seen here. The Allsteel furniture dealer has about $12 million in revenues. (Contributed photo) But he has a bigger plan: to lift his they could not handle with their own InSITE is the tip of the spear that can ed high-profile entities such as own boat by raising the water level in small staffs. identify opportunities early for Wel- Cleveland’s Playhouse Square and the communities in which Welty It’s active in places such as south- ty,” Syx said.

Canton’s Tom Benson Hall of Fame works. If the client communities and corporations that Welty serves grow As for E4B, it has grown to become Football Stadium, Chaney said. ern Summit County, where the small Next, he hopes to expand geo- faster, so will Welty, Taylor reasons. city of New Franklin has used inSITE one of the 15 largest Allsteel furniture “We’ve always gotten our fair dealers in the country, said president graphically if he can get a larger terrisince 2014.

“Last night, coincidentally, the Fred Chaney. It offers design ser- tory, bring in new furniture lines and share. So, if we can make the pie bigcouncil just approved the contract vices, too, but office furnishing sales architectural products, and hire ger, we will grow just because there’s with inSITE for another year,” said generate most of its revenue, which more people. more success to share in,” he said.

Mayor Paul Adamson in a Jan. 17 in- Taylor said were growing at more “We’re right now looking for anBut he might be done creating new than 10% a year. terview. other project designer to home base businesses, at least for now.

“I do have a design studio and it’s in Fairlawn, because of the growth of That’s because he recently brought The city uses inSITE to help it manage public projects, such as Summit used to support a project that we may the business. And I’m always looking aboard a new chief financial officer: County’s plan to extend sewer ser- be doing with a design firm, but we for sales people, always,” Chaney his wife, former Ohio Lt. Gov. Mary Taylor, who also previously served as vice into New Franklin and to devel- don’t bill our hours or compete with said.

E4B, like inSITE and other subsid- state auditor. She’ll likely be a source op water lines to specific business the design community for work,” sites. The city also uses the company Chaney said. iaries, gets accounting and other of new discipline, according to TayAdvertising The business has an exclusive ter- shared back-office services to work with existing businesses to lor. from Section keep them in town and to help re- ritory for its furniture lines that ex- Welty’sTo “I think corporate headquarters. place your listing, contact Kate Rozek at part of the reason my wife As for Welty, Taylor has a little is CFO at Welty is to kind of pump the cruit new ones, Adamson said. tends from Cleveland to Mansfield 313-446-0485 or email krozek@crain.com The sprawling town, much of and from past Youngstown to just more in the works. He’s still working brakes and make sure I stay focused,” www.clevelandbusiness.com/classifieds Catalytic Community Taylor said with a chuckle. which used to be a township, is east of Toledo. Its clients have includ- on Welty’s spread over 25 square miles (Akron only has 62) and has a population of about 15,000 — all of which it must manage with a $12 million annual budget and a full-time administrative staff of five people, according to Adamson.

“They basically serve as our ecoINDUSTRIAL BUSINESS nomic development department,” Adamson said of inSITE. “That’s the PROPERTY FOR SALE best way I could summarize it. We outsource our economic development. We just don’t have the staff that For Sale or Lease can handle that in house.”

150,000 SF Industrial InSITE’s governmental work is focused in Summit and Portage counContact Kate Rozek: ties, said president Jennifer Syx. But the business works in the private sector with companies nationwide from 216-771-5276 or its offices in Cleveland and Akron, she said, helping them with things such as site selection, workforce asemail CLBClassified@crain.com sessments and financing projects.

8820 East Avenue,Mentor, OH 44060 Both the public- and private-secSale Price: $5,250,000 tor work bring in fees from clients • 150,000 +/- SF on 7.8 acres • 14’-22’ Clear Heights that generate revenue, but Syx said • Multiple Loading Docks and Drive-in Doors her unit often learns of projects first Copy Deadline: • Large Parking Area because of the work it does in the • Rail Access Contact planning stages of development. And • City of Mentor Incentives Available Wednesdays @ 2:00pm that’s good for Welty.

Kate Rozek at RICK OSBORNE JR. O: 440.299.5190 “Our revenue is derived from the C: 216.219.0290 216-771-5276 All Ads Pre-Paid: Check or Credit Card client side, but also there’s the opporrickosbornejr@kw.com OH #2010001710 tunity for horizontal integration.

CLASSIFIEDS

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Crain’s Cleveland Classifieds

LIST YOUR AD HERE

1/18/19 12:49 PM

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Advertising Section

PEOPLE ON THE MOVE

To place your listing, visit www.crainscleveland.com/people-on-the-move or for more information, please call Debora Stein at (917) 226-5470 or email dstein@crain.com.

ACCOUNTING

ACCOUNTING

BANKING

FINANCIAL SERVICES

FINANCIAL SERVICES

Sikich LLP

Sikich LLP

S&T Bank

Cooperative Business Services

Sikich LLP is pleased to announce the promotion of Paula Harmon to Director from her previous role of Senior Manager.

Paula has been serving clients with the firm for nearly 30 years; currently with a focus on entrepreneurial services. Having previous experience in the field of audit and assurance services, Paula delivers subject matter expertise in more areas than one and plays a key role in the growth and success of her team and clients.

Sikich LLP is pleased to announce Dana Howell’s promotion to Director from her previous role as Senior Manager. Dana is a leader on the firm’s ERISA team, providing her clients with an advanced understanding of complex tax laws, compliance issues and employee benefits plans. She has over 15 years of experience in audit and assurance services.

Steve Hendricks has been promoted to executive vice president, market president for the northeast Ohio region.

Steve played an integral role in the opening of the S&T LPO in Fairlawn in 2012 and the Independence LPO in 2018. He will continue to support the momentous growth into northeast Ohio through the opening of the Cuyahoga Falls branch early this year. Steve serves on the Akron Area YMCA Board of Trustees and is a committee member for the American Red Cross.

Legacy Strategic Asset Management of Wells Fargo Advisors

LEGAL

LEGAL

Taft Stettinius & Hollister LLP

Taft Stettinius & Hollister LLP

Taft is pleased to announce that Brandi N. Weekley has been elected to the firm’s partnership. Brandi focuses her practice on mergers and acquisitions, private equity and venture capital transactions. She counsels private equity funds, venture capital funds and emerging growth companies on all aspects of acquisitions, dispositions, capital formation and private placements. She received her B.A. from Ohio Wesleyan University and her J.D. from Cleveland-Marshall College of Law.

Mark F. Fazio has joined the Cleveland office of Taft as a partner in the Mergers and Acquisitions and Private Equity groups.

Mark has significant experience representing public and private companies on a wide array of matters, including mergers, acquisitions and divestitures, business formation and growth strategies, and private debt and equity financings. He received his undergraduate degree in accounting from the University of Notre Dame and his J.D. from Duke University School of Law.

LAW

NONPROFIT

Calfee, Halter & Griswold LLP

Make-A-Wish Ohio, Kentucky & Indiana

P038_CL_20190121.indd 38

The Make-A-Wish® Ohio, Kentucky & Indiana team is excited to welcome Lori McCleese as their new Regional Director of Development based in the chapter’s Cleveland office. Lori found her calling in philanthropy after a successful career in banking. She comes to Make-AWish OKI after serving as the first President of the Hudson Community Foundation. Before that, she spent six years with the Alzheimer’s Association Greater East Ohio Area Chapter. Lori is a University of Cincinnati graduate.

LAW

LAW

LAW

Benesch

Benesch

Benesch

Joel R. Pentz has been named Partner at Benesch. Joel’s practice is centered around all aspects of corporate real estate and he has extensive experience leading, planning, structuring, negotiating, managing and executing real estate acquisition, divestiture, leasing, financing, development and joint venture transactions with particular focus on corporate headquarter, office, warehouse, distribution, logistics, industrial and healthcare facility assets.

Corey Clay has joined Benesch as Of Counsel in the firm’s Labor & Employment Practice Group. He represents and counsels employers in a broad range of employment and labor relations matters. His litigation experience ranges from single plaintiff discrimination cases to large class actions brought under state and federal law.

Jonathan R. Todd has been named Partner at Benesch. He advises clients on transportation, logistics, warehousing, import compliance, export controls and economic sanctions, and related supply chain management issues.

Jonathan leads those transactional and regulatory matters for manufacturers, distributors, retailers, third party logistics providers, brokers, forwarders, intermediaries, and carriers of all modes.

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Calfee, Halter & Griswold LLP is pleased to announce that Gwen Gillespie Herman has been elected Partner. Gwen practices with Calfee’s Corporate and Capital Markets group in the areas of mergers and acquisitions, divestitures and sales, and public company M&A counseling. She counsels private and public company clients on general corporate, business, and governance matters, new business formation, mergers, acquisitions, divestitures and reorganizations.

Legacy Strategic Asset Management proudly welcomes Dave Wohlabaugh, CFS® as a Financial Consultant. Dave specializes in retirement planning, college funding, estate planning strategies and assisting businesses with the management of their 401(k) retirement plans. Prior to the financial services industry, Dave spent nine years in the NFL as a player with the New England Patriots, Cleveland Browns and St. Louis Rams. Wells Fargo Advisors is a trade name used

by Wells Fargo Clearing Services, LLC.

The credit unions would like to congratulate Jonathan A. Mokri for his promotion to Executive Vice President. For the past 8 years Jonathan has run the Northeast Ohio commercial loan office for Cooperative Business Services, placing him in charge of the commercial loan origination for 10 Northeast Ohio credit unions that are supplemented by another 100+ credit unions throughout eleven states. Of Cooperative Business Services’ eleven commercial loan production offices, across seven states, Jonathan’s office has been the top producer for the past 5 out of 6 years and Jonathan has been the top originator.

Laura Picariello Reprints Sales Manager lpicariello@crain.com (732) 723-0569

1/18/19 10:38 AM

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Dave Lieberth Former Akron deputy mayor and historian For Dave Lieberth, one career just wasn’t enough, and he’s not done yet. After spending a decade in the broadcast news business, Lieberth was a practicing family lawyer and then mediator before taking on what was likely his most notable role, from 2002 to 2012, as deputy mayor of Akron and right-hand man to then-Mayor Don Plusquellic. “When he asked me to come on to the city, he told me that he was going to run for president for the U.S. Conference of Mayors, and that he wanted me along for that ride. I thought about it and I thought, ‘In 2004, he’s going to be the president of the U.S. Conference of Mayors. It’s a presidential election year. This ought to be fun,’ ” Lieberth said. Known for starting work in the wee hours and finishing late, Lieberth was a significant player in downtown Akron’s rebirth. While he may have cut his work hours some, he’s still as involved as ever, including being part of the Bowery Development Group partnership, which is bringing the $42 million mixed-use project to downtown Akron. He’s also in demand as a consultant, speaker, city historian and writer. — Sue Walton

The Lieberth file Music man Lieberth started at the University of Akron as a music major.

It was his phrase first Lieberth said Akron’s current chief of staff, James Hardy, got the “getting shit done” phrase from him. “He won’t deny it, because I gave it to him with permission to reuse it.”

Favorite historical fact to share Despite the city’s rubber claim to fame, Akron’s first manufactured product was whiskey.

Lunch spot New Era Restaurant 10 Massillon Road, Akron 330-784-0087

The meal Combined, we had chicken paprikash, chef’s salad, cheese strudel, apple strudel, Diet Coke and coffee.

The vibe New Era has been an Akron mainstay since 1937 with its Old World comfort food. Its longtime, 91-year-old immigrant cook still makes the strudel fresh daily.

The bill $26.79, plus tip

Where did you grow up?

Barberton. I went to elementary school at St. Augustine’s. For high school, I went to St. Vincent-St. Mary.

That’s when my early days started because I rode the bus to Akron every day.

a circle that’s a 45-minute drive, you get 3 million fish. This is a prime entertainment market, and I saw that I could make a difference.

Downtown Akron, which did not have any residential housing, needed to have people.

Did you enjoy your practicing law?

I stayed in news a year after I got my law degree. So I wasn’t in a hurry to leave news. I liked news up until the last day I did it. And that’s kind of a recurring theme in my life. ... I discovered that I was very lucky that in every case my motto became, “It’s better to leave a year too soon than a day too late.” And I was very lucky to leave every job at exactly the right time.

So what did you do?

I immediately started representing the mayor on the convention and visitors bureau, on the Downtown Akron Partnership board, on the zoo board, and figured that we were going to make a difference downtown.

I organized a group of city employees called the Downtown Operations Group, and we met every week for seven or eight years.

What attracted you to taking the job with the city?

In terms of Don asking me to come to City Hall, I said there were two conditions: One, that I needed to take care of (my longtime secretary), and second, I wanted to be in charge of downtown. He said OK. Because nobody was in charge of downtown at that point, because everyone was in charge of downtown.

Why was downtown so important to you?

I’d been aware for years that cities were going to rise and fall on the strength of their central city. But I also knew if you drive a stake at the corner of Main and Market streets in downtown Akron and circumscribe a circle that’s roughly a 45-minute drive, there are roughly 3 million people who live within that circle. If you drive a stake in the ground at Ninth and Euclid and you circumscribe

What were the results?

Downtown really prospered during those years for a couple of reasons: One, Don Plusquellic’s vision for downtown. Secondly, the operations, the work of this group to really make it an organized effort.

How does Lock 3 Park play into this?

It was coincidental that the same month I came to the city was the same month that they had finished the work at Lock 3. And so they had this big piece of ground with some paved sidewalks, but nothing to put there. So I bought the stage, I bought the saddleback canopy, entered into an agreement with the Akron Civic Theatre and E.J. Thomas Hall to help manage the talent. And then I ran Lock 3 after that relationship wilted a little bit. ... We brought the national hamburger festival to downtown, we brought the Italian festival.

Do you think that was the catalyst for downtown?

The real catalyst was Plusquellic’s decision to put the ballpark on Main Street. He gets all the credit for that.

What do you think about what’s happening in downtown now?

Don Plusquellic will tell you that one of his biggest mistakes is not getting housing earlier. You see what’s happening in Cleveland.

You see what’s happening in Akron now …

The first olive out of the jar is the Bowery. If we can get that done … We know there are younger people today who do not want to buy a house, and there are in fact older people who don’t want to buy a house. … So things are coming together in ways we only imagined 20 years ago, 50 years ago.

Is there the demand for the downtown housing?

Absolutely. I feel certain. We have a lot of younger people who are now living in downtown Cleveland who work at FirstEnergy, GOJO, Children’s Hospital, Summa. They want that living situation, but it’s not available here. If we make it available, will we be able to draw them back? I certainly think so.

How do you think history will view Akron?

I think there are a couple of constants. One of the constants is that our size is our advantage. … The second thing is the progress of innovation. We’re truly an inventive community.

CLEVELAND BUSINESS 700 W. St. Clair Ave., Suite 310 Cleveland, OH 44113-1230 Phone: (216) 522-1383 www.crainscleveland.com Twitter: @CrainsCleveland Publisher/editor Elizabeth McIntyre Group publisher Mary Kramer Managing editor Scott Suttell Sections editor Michael von Glahn Creative director David Kordalski Web editor Damon Sims Associate editor/Akron Sue Walton Assistant editor Kevin Kleps Senior reporter Stan Bullard, Real estate/construction Reporters Jay Miller, Government Dan Shingler, Energy/steel/auto/Akron Rachel McCafferty, Manufacturing/ energy/education Jeremy Nobile, Finance Lydia Coutré, Health care/nonprofits Senior data editor Chuck Soder Cartoonist Rich Williams Events manager Ashley Ramsey Marketing coordinator Megan Lemke Integrated marketing manager Michelle Sustar Managing editor custom/special projects Amy Ann Stoessel Associate publisher Lisa Rudy Senior account executive Dawn Donegan Account executives Laura Kulber Mintz, Loren Breen Office coordinator Denise Donaldson Pre-press and digital production Craig L. Mackey Media services manager Nicole Spell Billing Peter Iseppi Credit Rod Warmsby Crain’s Cleveland Business is published by Crain Communications Inc.

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THE WEEK Downtown deal

alties to settle charges by the U.S. Consumer Financial Protection Bureau and the state of New York that the company enrolled customers in credit programs without their consent.

Sterling will pay $10 million to the CFPB and $1 million to New York.

The jewelry giant — which operates more than 1,500 stores nationwide under names such as Kay Jewelers, Jared the Galleria of Jewelry and Zales — neither admitted nor denied wrongdoing.

A site for a long-planned for-sale housing development in downtown Cleveland changed hands as Zaremba Homes sold remaining acreage at the townhouse phase of Avenue District to another builder in a $1.88 million transaction. The new owner of the parcels is B.R. Knez Homes, a Concord Township-based homebuilder, which is ready to roll on 12 townhouses on part of the site. Knez has 10 buyers ready to buy the units costing about $400,000 each. Knez bought the 1-acre site on Friday, Jan. 11, according to Cuyahoga County land records.

Reducing rent

Paying up Fairlawn-based Sterling Jewelers Inc., a subsidiary of Signet Jewelers Ltd., agreed to pay $11 million in pen-

P039_CL_20190121.indd 39

Knez Homes said it has prospective buyers for 10 of the 12 townhouse units that it plans to construct in the Avenue District in downtown Cleveland. (Contributed rendering)

Westlake-based TravelCenters of America agreed to buy 20 travel centers from Newton, Mass.-based Hospitality Properties Trust, its principal landlord, for $308.2 million.

The purchases are being made in three parts and are expected to be

completed by the end of January.

TravelCenters operates all the sites it’s buying, which are in 15 states.

With the deals, TravelCenters said its aggregate minimum annual rent due to Hospitality Properties will fall by $43.1 million.

Gift from the heart With a $5 million gift from Angela and James Hambrick, University Hospitals is establishing a center for cardiac recovery to improve heart care in Northeast Ohio and beyond.

The new Center of Excellence — the Hambrick Center for Cardiac Recovery at UH Harrington Heart & Vascular Institute — will serve as a national model for employing coordinated care to improve medical outcomes for patients suffering from cardiogenic shock.

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