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WEEKLY FOCUS: 50 YEARS LATER: A RIVER AND ECONOMY REBORN

Page 10

VOL. 40, NO. 16

APRIL 22 - 28, 2019

Source Lunch

Akron City’s hope to become innovation hub gets lift from new firm. Page 17

Adam Snyder, Magnet’s manufacturing sector partnership Page 19

CLEVELAND BUSINESS

The List Private equity, venture capital firms Page 16 FINANCE

Ancora gets its activism together

By Jeremy Nobile jnobile@crain.com @JeremyNobile

REFLECTIONS ON A SUCCESS STORY 50 years after the notorious 1969 Cuyahoga River fire, Northeast Ohio’s economy and environment are both better off.

SPECIAL REPORT BEGINS ON PAGE 10 Page 10: A burning river fired up environmentalism Page 12: Keys to the Cuyahoga’s turnaround Page 13: Development momentum flows from the river’s mouth crainscleveland.com: Cleveland Foundation projects celebrate the art of rebirth

As Ancora Advisors grows, so has its appetite for shareholder activism.

With the firm continuing to gain size, and pressure from activist investors surging across the U.S. — a record 935 public companies were subject to activist demands in 2018 globally, according to Activist Insight, compared to 609 in 2013 — that aggression is more likely to build than fizzle out.

For Ancora in particular, the activist strategy largely is spurred by growing levels of capital being put to work.

“We have gone up the food chain because we have more assets to deploy,” said Ancora chairman and CEO Fred DiSanto. “And we’re looking at names where clearly there has been some egregious intermingling of both board and management teams.”

SEE ANCORA, PAGE 18

REAL ESSTATE

Downtown hotel growth takes its toll

By Stan Bullard sbullard@crain.com @CrainRltywriter

Entire contents © 2019 by Crain Communications Inc.

When the Brecksville Dam, the last remaining dam in Cuyahoga County, is removed this year, the river will flow the length of the Cuyahoga Valley National Park unobstructed. (David Kordalski)

Two big hotels, one on the West Side and the other in Beachwood, are weathering financial wrangles. The two older properties are running into lender woes after a rapid run-up in new hotels regionally, particularly six hotels that have been built downtown in the past decade.

The Cleveland Airport Marriott, 4277 W. 150th St., is listed for sale online by the Dallas-based HFF brokerage and financial services firm after Bethesda, Md.-based loan services firm CW Capital Asset Management LLC secured ownership of the 372-unit hotel March 14 after a foreclosure sale by the Cuyahoga County Sheriff.

With a nine-story wing towering over I-71 at West 150th, the Airport Marriott has been a high-profile part of the region’s hotel market since 1970.

SEE HOTELS, PAGE 18

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CRAIN’S CLEVELAND BUSINESS

Corridor properties battling ODOT over prices Opportunity Corridor

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With construction on the third and final phase of the $306 million Opportunity Corridor roadway underway and headed for completion before the end of 2021, the Ohio Department of Transportation (ODOT) has only one — possibly expensive — outlay left on the 90-plus acres of land it is purchasing for the project.

What’s left to resolve is payment for a piece of land at East 79th Street and Grand Avenue that used to be home to the Van Dorn Co., once a major local manufacturer. Pieces of the Van Dorn site are controlled by two owners.

ODOT had offered the owners of land on what was the five-building Van Dorn Co. headquarters and manufacturing complex $563,850, but the property owners may be seeking 10 times that amount.

Payment to two other property owners, who own land along the path of the roadway and adjacent to the Van Dorn property, also are unresolved and are in mediation.

The Opportunity Corridor is a 3.5mile boulevard running from the eastern stub of Interstate 490 on the west to University Circle on the east.

In between is the “Forgotten Triangle,” a section of Cleveland’s East Side that is home to deserted and crumbling industrial buildings, abandoned homes and vacant land.

The road is seen as a way to make it easier to get to University Circle from the west and to create sites for either

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commercial and industrial buildings or new residential development in a neglected section of the city.

The law of eminent domain allows governments to take ownership of property needed for a public purpose by paying fair market value. The haggling over what constitutes fair market value doesn’t hold up construction of the roadway. Ohio law gives ODOT a right called “quick take,” which allows the agency to stay on its construction timetable. It just has to appraise the property and make the owner a fair market value offer. That can become complicated when ODOT seeks only a part of a parcel, as is often the case.

The property owner can dispute ODOT’s appraised value, which can include moving expenses and other costs. If the owner balks, negotiations on fair compensation, or mediation or even court actions, can take months

or even years to run their course.

“Once they get an appraisal done, they have to give the property owner what they call a good-faith offer and notice of intent to acquire,” said Stephen Jones, a Columbus-based partner with the Roetzel and Andress law firm who specializes in real estate and eminent domain law. “And then the property owner has 30 days within which to either accept or reject the offer. Regardless of whether (the ODOT) appraisal stands up later in a jury trial, it still gets to deposit that amount of money (with a court) and then they have the right of immediate possession.”

The former Van Dorn property comprises 32 parcels the manufacturer acquired and consolidated over more than 100 years, until its plant closed in 1991. The parcels now are in the hands of two owners, Opal Industrial Group LLC and Seventh Generation Development Inc. Opal

provides demolition and metal recycling services, while Seventh Generation is a real estate developer. It is their claims that could cost ODOT millions of dollars.

David Cuppage, a principal with the McCarthy, Lebit, Crystal & Liffman law firm, is the attorney for the two property owners. In a telephone interview, he said Opal and Seventh Generation purchased the properties in the last decade, and Opal took down the Van Dorn buildings and spent $5 million on environmental remediation of the property. County land records show Opal paid $147,165 for the property in 2012.

Seventh Generation, according to county records, paid $121,027 for its parcels in 2014.

ODOT offered the two companies $251,550 for the full and partial parcels it sought for the roadway.

Cuppage said the companies intended to use the property to process and sell recycled metals and other waste and mulch. But the Opportunity Corridor roadway will bisect their consolidated properties, which they claim will make their business venture unsustainable.

“Opal took down all of these buildings and now ODOT doesn’t want to pay for it,” Cuppage said.

In an email last Thursday, April 18, ODOT press secretary Matt Bruning wrote that the transportation agency does not comment on pending or potentially pending litigation.

The properties adjacent to the Van Dorn site that are in mediation are owned by McTech Corp. and the Perk Co., two closely aligned Cleveland con-

tracting firms. McTech paid $345,000 in 2005 for a block of six parcels, while Perk paid $46,250 for 11 parcels in 2014. ODOT offered McTech $117,800 for seven full or partial parcels, and it offered Perk $194,500 for the full and partial parcels it sought.

Separately, McTech and Perk operated a joint venture that was awarded a $21 million contract to oversee construction of Section 1 of the Opportunity Corridor.

Their compensation suits, independent of their contracting joint venture, are in mediation with ODOT. In an earlier email, Bruning said ODOT budgeted $41 million to purchase the corridor’s right of way. He said that, not counting the properties outstanding, ODOT has spent $27.1 million on everything from appraisals to land purchases to relocation costs.

Construction of the Opportunity Corridor began in 2015 at the east end with Section 1, the widening of East 105th Street. That section opened in the fall of 2017. By that time, work had already begun on Section 2, which extended the roadway from East 105th to East 93rd Street. That section opened in November 2018. Work on Section 3, the longest, most complicated section, began earlier this year with completion expected in late 2021.

There are still a handful of other property purchases outstanding, but most of those are for properties where ownership is either hard to determine or owners are hard to find. In some cases, owners have walked away or the descendants of deceased property owners have been difficult to locate.

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Initiative would reinforce public policy successes

By Lydia Coutré lcoutre@crain.com @LydiaCoutre

Ohio treasurer Robert Sprague wants to establish a new fund to help the state finance programs successfully solving public policy issues.

Typically, the legislature funds pilot projects through grants. In Sprague’s funding mechanism, agencies, such as nonprofits, would apply to the state program with funding already secured from another entity, such as a foundation or private financer.

If the program successfully makes measurable improvements to a public policy issue — such as addiction, infant mortality or criminal justice — the state would pay back those financers with interest, and then Ohio has a proven program to implement.

If the pilot program doesn’t meet its marks, the state pays back nothing.

“What we’re trying to do is really eliminate the guesswork out of launching new government programs,” Sprague said.

This “pay for success” model is a relatively new approach to funding with limited data around its effectiveness, but a handful of entities, including Cuyahoga County, have used it.

“The jury’s out on whether this can be a successful model or not,” said Claudia Y.W. Herrold, interim president and CEO as well as senior vice president for communications and public policy at Philanthropy Ohio, the state association for foundations and other public charity grantmakers.

Two Republican legislators — state Rep. Don Manning and state Sen. Steve Wilson — have introduced bills in the statehouse and senate to establish this financing mechanism, which Sprague has dubbed the ResultsOHIO program.

If approved and funded by the governor’s office and legislature, Sprague said he envisions agencies receiving initial funding from foundations.

But some in the philanthropic sector question if foundations alone can bear the initial costs of such programs.

Philanthropy will have to figure out where it fits into these types of models, said Teleange’ Thomas, director of Candid Midwest, which works to strengthen the social sector by advancing knowledge about philanthropy. “But to say that philanthropy can shoulder that burden alone, I think, is a pretty optimistic statement.”

Herrold noted the vast majority (82%) of the more than 3,600 foundations in the state have assets under $5 million. Only 2% have assets greater than $50 million, making the target group of philanthropic organizations that could potentially make these investments a pretty small group.

Sprague’s proposal lays out a range of challenges to be addressed with ResultsOHIO, including addiction, water quality, infant mortality, workforce training, long-term care, early childhood education preparedness and foster care — any public policy issue with measurable outcomes.

Sprague doesn’t have an estimate of how much money he’d want in the fund — it’s up to the governor and general assembly to determine appropriate funding levels, he said.

Cuyahoga County model Cuyahoga was the first county in the nation to implement a pay-for-success funding model, said David Merriman, assistant director of health and human services for Cuyahoga County, who’s been engaged with the treasurer’s office as they try to implement a state-

P003_CL_20190422.indd 3

wide pay-for-success model.

The county is currently running a randomized control trial to determine whether certain interventions — including wraparound services and more targeted, trauma-informed care — can reduce out-of-home placement days for children, such as foster care or waiting for adoption.

For the program, which began implementation in early 2015, the county partnered with FrontLine Service as the service provider. The George Gund Foundation, Cleveland Foundation and Sisters of Charity Foundation of Cleveland and two national investors — the Reinvestment Fund and Nonprofit Finance Fund — put up a total of about $4.2 million.

Case Western Reserve University is the third-party evaluator that will ul-

timately determine whether the program was successful early next year.

If the results are positive, the county will pay back those funders with a small return on investment.

To work, the pay-for-success model must look beyond philanthropic dollars for funding (i.e., banks, private investors and community development finance institutions), said Marcia Egbert, George Gund Foundation senior program officer. “If there’s a 100% reliance on purely philanthropic funds, I think that would be challenging.”

The biggest opportunity the model presents is a more collective conversation around what communities need, Thomas said. Stakeholder diversity could help get solutions quicker.

But on the other hand, Thomas wor-

ries that smaller, “scrappy” organizations might not have the infrastructure to be able to quantify their narrative, might not have a history working at the systems level or might not have the connections to get to the same table as some of the major stakeholders.

“You’re not necessarily inviting or creating an environment where a lot of innovation could potentially be cultivated because of some of those barriers to entry,” she said, but noted there are still many ways it could foster innovation, given that cross-sector collaboration lends itself to thinking about a challenge differently.

Herrold said the pay-for-success model is worth exploring, but questions remain around the scalability and the size of the investment. Pointing to the Cuyahoga example, she said

that such a multimillion-dollar investment may not be feasible for many foundations in the state. Plus, with so many donor-advised funds, they have a limited amount of unrestricted funds.

The programs would also have to hit the foundation’s “sweet spot” of its area of focus and internal grant guidelines.

The issues the model addresses are “tenacious, wicked problems” requiring significant dollars as well as evidence-driven project models that take time to develop, test, adapt and implement.

“So it’s a really long-term process that I think if folks understand sort of all of those different aspects, they’d be worth thinking about and talking about and seeing what might work and where the particular niches in Ohio are,” Herrold said.

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Rocio Restrepo — one of the biggest names on the Professional Women’s Bowling Association tour — drives more than 30 miles from her home in Louisville, Ohio, to practice in Akron each day.

There, she works with her coach, former Team USA boss Fred Borden, who owns Stonehedge Family Fun Center.

This week, Restrepo happily will make another trek — this time to Yorktown Lanes in Parma Heights, which will host Northeast Ohio’s first PWBA event since 1978.

The Nationwide PWBA Greater Cleveland Open will take over Yorktown Lanes for four days, beginning on Thursday, April 25. One hundred bowlers will compete for the top prize of $10,000.

Fourteen of them have ties to the Buckeye State, including Restrepo, a 31-year-old Colombian who moved to Northeast Ohio after meeting her husband, Canton native Joseph Hostetler, in 2011.

Restrepo — who has bowled for Team Colombia since 2003, when at 15 she became the youngest bowler to win a medal at the World Championships — has finished in the top 11 on the PWBA money list in each year since the tour relaunched in 2015.

That doesn’t mean she and her fellow pros are getting rich, since the PWBA money leader has pocketed between $60,200 and $92,700 in that four-season span.

“Since it’s been back, people love to watch us bowl,” Restrepo said. “I hope we get more sponsors and more support from the private companies so we can make a lot more money.

But female bowling is growing. NCAA bowling is growing.”

The PWBA, which had formed 43 years earlier, ceased operations in 2003. At the time, Tennelle Milligan, a United States Bowling Congress Hall of Famer, was in her fourth year as a pro.

Now, Milligan sees “a different side” as the PWBA’s director of operations.

The tour, which is jointly funded by the USBC and the Bowling Proprietors’ Association of America (both based in Arlington, Texas), has grown from 11 events in 2015 to its current 14. The Greater Cleveland Open serves as the kickoff of the 2019 season, which runs until the PWBA Tour Championship in September.

“I see it as an administrator now,” said Milligan, who has been in her role since 2016. “Hey, let’s go in, you do your job as an athlete. Don’t worry about this side of the business. I’ll keep reassuring you that we’re doing OK, and if we’re not, I’m not going to lie to you. The beautiful thing is, we’re doing great.”

Membership — which, along with sponsorships (Nationwide and Pepsi are the tour’s biggies), covers the PWBA’s expenses — is on the rise, Milligan said. Events — which, depending on the size of the venue, can draw 80 to 264 bowlers and hundreds of spectators — regularly sell well.

Members such as Restrepo pay

$300 to enter an event. Nonmembers, who account for six of the seven Greater Cleveland Open bowlers with Northeast Ohio ties, are charged $400.

Standard events, such as the Greater Cleveland Open, have a purse of $60,000. The PWBA’s four major events, meanwhile, pay out $20,000 to the winner and $10,000 to

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CRAIN’S CLEVELAND BUSINESS Louisville resident Rocio Restrepo has won four PWBA titles. She finished third in the 2018 Nationwide Columbus Open.

(Photographs

by Gregg Ellman)

USBC Hall of Famer Liz Johnson has won 24 PWBA championships, including the 2018 Nationwide Columbus Open. She’s part of the field for the Greater Cleveland Open at Yorktown Lanes.

the runner-up.

Ticket revenue, along with the money made from concessions and other sales at the tournaments, goes to the venues, since the locations are allowing the usage of their facilities for four-plus days, Milligan said.

Jeremy Cottrell, whose family has owned Yorktown Lanes since it debuted 60 years ago, said interest in

PWBA Greater Cleveland Open When: Thursday, April 25 to Sunday, April 27 Where: Yorktown Lanes, Parma Heights Schedule of events: Thursday — practice session, 4 p.m.; Bowl with the Pros, 7 p.m. (must register with Yorktown Lanes); Friday — first round, 9 a.m.; second round, 5 p.m.; Saturday — round of 32, 9 a.m.; round of 12, 2 p.m.; stepladder finals, 5:30 p.m. (live on BowlTV.com); Sunday — regional tournament for bowlers who aren’t in elite field, 9 a.m.

Tickets: The prices are $5 for the practice session, $15 for Friday and each of the two Saturday sessions, and $40 for a weekend pass. Tickets can be purchased at pwba.com and yorktownlanes.com.

the Greater Cleveland Open has been “pretty solid,” though his experience in the industry has taught him that customers tend to wait until the event gets closer to purchase tickets.

Yorktown Lanes, which underwent a $3 million renovation after a devastating 2011 fire, has hosted three Professional Bowlers Association tournaments, the last being the 1993 Cleveland Open. The PBA’s Northeast Ohio lineage is quite extensive and includes its Tournament of Champions — a major event that has been held at AMF Riviera Lanes in Fairlawn in each of the last two years.

But the women’s tour, prior to this week, has made only one Ohio stop — last year’s Columbus Open — since its relaunch. Restrepo finished third in that event, at which she had plenty of family and friends cheering her on.

“I usually don’t get the opportunity to bowl close to home,” she said.

“It’s awesome to be able to perform in front of people who know me and have supported my career.”

Restrepo, unlike many of her coun-

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Old building slated for self-storage conversion

By Stan Bullard sbullard@crain.com @CrainRltyWriter

A four-story building on the northeast corner of East 30th Street and Chester Avenue in Cleveland will be converted to a self-storage operation after an Indianapolis-based real estate developer bought it for $1.9 million.

Robert “Mack” McCormack, president of Midwest Storage Development LLC, said his company plans to spend “several million” converting the property at 3005 Chester to self-storage use, including cleaning and repairing its ornate terracotta exterior.

“It’s a majestic building, and we want to retain that,” McCormack said in an April 12 phone interview, adding that the investment is his firm’s first in Northeast Ohio. He was attracted to the location by the volume of traffic at the intersection and its proximity to the growing downtown apartment market and Cleveland State University.

An Indianapolis real estate developer has acquired the building at 3105 Chester Ave. and will convert it to a self-storage center. (Stan Bullard)

McCormack said his research shows the mini-warehouse market within a 3-mile radius of downtown has growth potential.

When the self-storage center opens in 2020, he said, it will be operated by Salt Lake City-based Extra Space Storage Inc., a publicly traded company, and will employ two people full-time and three part-timers.

The Cleveland property will be his company’s seventh overall.

The seller of the 100,000-square-foot building was Chester 3133 Properties LLC, which had owned it since 2014.

The property has a market value of $1.08 million for property tax purposes.

Previously, the structure was home to the apparel-printing unit of Jakprints that moved to Eastlake. Jak-

prints continues to operate its headquarters and other operations in a building next door at 3133 Chester.

Jeff Epstein, executive director of the MidTown Cleveland Inc. development corporation that serves that area, said he had hoped the building’s next user would bring more jobs to increase the dynamism of the area, but improvements in the structure’s appearance will be a plus.

Cleveland Councilman Basher Jones, who represents Ward 7, said he is pleased to see a business frequently found in the suburbs locate in his ward.

The Extra Space operation will enter the downtown market four years after Cleveland-based Compass Self Storage opened a center at 1549 Superior Ave. Todd Amsdell, president of Compass, said its operation had leased up slower than expected and tenants have leased fewer than the typical amount nationally of 4 to 7 square feet.

“It does not seem the best place for an expansion, but every operator’s sources of capital and expectations are different,” Amsdell said. “Howev-

er, more businesses and apartment tenants are moving into the area, so it is not a stagnant market.”

Tom Gustafson, the Cleveland-based national director of self storage for Colliers International, estimates the 3-mile area around the building could accommodate 140,000 square feet of additional self-storage space. However, he added, there is some risk in the project, because the area’s median household income is $30,000 annually, while developers typically target areas with median household incomes of $60,000 annually.

Gustafson said self-storage operations nationally have been enjoying a growth spurt. Even with lower returns due to oversaturation in some cities, he said, self-storage operations generally are seeing revenues increase 6% on a year-over-year basis and returns on investment of 4% to 6% annually.

The 3105 Chester building dates from 1920, according to county tax records. Its exterior still sports several Cadillac logos made from tile, relics of one of its several past uses.

Bank of America is planning to branch into Ohio

By Jeremy Nobile jnobile@crain.com @JeremyNobile

With a legacy wealth management service in Merrill Lynch that’s been in Ohio for more than a century, commercial and business banking, the only lines Bank of America is missing in Ohio are a retail network and private banking.

An expansion plan by the North Carolina-based company — which, at nearly $1.8 trillion in assets, is already one of the largest financial institutions in the country — aims to fix that.

Plans call for new branches to hit Cleveland beginning in 2020. The locations haven’t been finalized yet.

“We have to get to that high-touch piece, which means financial centers in some of these key markets,” said Jeneen Marziani, Ohio president for BofA since Marziani 2009. “And Ohio is one of them.”

In 2018, BofA announced plans to establish 500 new financial centers — or modern branches — nationwide over the coming years. It already had added about 150 at the time.

Then, in February, the company said that 500 figure will be met over the next four years as new locations pop up across the Midwest in particular, including several across Ohio that will cluster around Cincinnati, Columbus and Cleveland. Ohio is a featured part of that overall expansion, which is expected to create 5,400 jobs companywide, Marziani said.

It’s also one of the few states the bank has not really been competing in on the retail front, which has been expanding in Denver, Minneapolis and

values vision impact

Indianapolis. The Pittsburgh market also will see new branches soon.

First up in Ohio are Cincinnati and Columbus, which will see approximately 30 branches. Marziani said those will start popping up this year.

Another dozen branches are slated for Greater Cleveland. Those will likely materialize beginning in 2020.

Expansion plans will add some additional ATMs as well. BofA has been adding those quietly in recent years in anticipation of a retail push. It had only two in the Ohio market just three years ago, but counts more than 60 today, Marziani said. There are no plans to buy existing branches or deposits; the expan-

Growth by Design

sion will represent organic growth.

With a strong presence in business and commercial banking and wealth management services, the sense is BofA already has a promising customer base here.

“BofA is obviously a formidable national player with substantial resources to devote to marketing, technology, etc. There are already a lot of consumers in Ohio with BofA credit cards, large corporations with BofA borrowings,” said Charlie Crowley, a managing director in Cleveland with investment bank Boenning & Scattergood.

SEE BANK, PAGE 19

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Customization helps Combi find ‘sweet spot’

By Rachel Abbey McCafferty rmccafferty@crain.com @ramccafferty

Combi Packaging Systems LLC has seen significant sales growth in recent years.

President and CEO John Fisher said he thinks that’s because Combi’s equipment is in the “sweet spot” of what people need: machinery to automate work where they struggle to find full-time employees.

Combi makes equipment to automate the folding and sealing of cardboard boxes, such as case erectors and case sealers. The company also makes equipment such as case packers, which can put the customers’ products into cardboard packages for shipping.

Folding, sealing and packing boxes is repetitive work, Fisher said. Combi’s equipment automates those tasks so companies can deploy employees elsewhere in a plant.

Today, Combi’s annual revenue is between $40 million and $55 million, Fisher said. The company recently doubled its space by moving into a new building.

Combi doesn’t manufacture offthe-shelf equipment; everything it produces is custom-made for the individual customer, said marketing director Sue Lewis. Some may require fewer customizations than others, but it’s still made just for them.

And customers can combine the different types of equipment to make a streamlined solution for their plants.

Most of the parts, aside from the Fanuc robots it uses in some of its products, are made on-site in North Canton.

That kind of customization helps to differentiate the company from competitors.

“We don’t have anything premade sitting there waiting just to ship,” Lewis said. “Every single machine is engineered custom for that customer.”

Combi does sell 3M products, such as semiautomatic case sealers, that are standard rather than custommade. Combi is a joint venture of 3M and the Maillis Group, the latter making the 3M products that Combi sells.

About half of Combi’s sales are to the food industry, Lewis said. But the company can serve any industry that uses cardboard box packaging, so it has a broad customer base.

Combi has seen “unprecedented growth” in recent years, Lewis said.

There are several reasons for that.

Aside from the automation factor, when manufacturers grow and innovate it’s good for Combi.

The company targets its marketing campaigns toward growth markets, showing customers how its equipment could support their needs. For example, Lewis said the company currently has a big focus on e-commerce. Companies that may have been packing multiples products in one box might now be looking to pack just one product at a time in smaller boxes. That means they probably need new equipment if they want to automate that process.

Last summer, Combi moved from a complex in Canton to a newly updated building in North Canton to accommodate its growth. The old space had been built out over time, which meant Combi eventually was spread out over six or seven buildings, Lewis said. The new space, at 6299 Dressler Road NW, lets the company put its entire business under one roof. The building, which Combi is leasing, is about 165,000

P007_CL_20190422.indd 7

Combi Packaging Systems LLC makes equipment that helps automate the process of folding, sealing and packing cardboard boxes. (Joe Smithberger)

square feet. Ultimately, the move about doubled the space Combi had available, Fisher noted.

Combi invested about $2 million in the assembly area, Lewis said, updating the electricity, air and infrastructure. She added that the move gave Combi about an additional 20,000 square feet for its assembly.

The company also had to invest to add some modular office space in the building, and the larger structure gave it room to offer separate Combi and 3M training centers, instead of sharing that space.

In addition, it will soon have an equipment showroom. The company has a buyback program in which it purchases and refurbishes Combi machines.

Combi got its start 40 years ago as a

small company rebuilding equipment. Its growth into being part of a global industrial company is part of what brought Fisher to Combi in 2000.

“We started out a family company, and we’re still just a bigger family,” Fisher said.

The company employs about 160 people. Last year, it hired about 70.

Though not all of those were new positions, most were, Lewis said.

But the company has not been exempt from the challenges manufacturers face in finding talent. Combi has made a concentrated effort to reach out to local colleges and technical schools, Lewis said. And it’s hosting an open house on May 2 and 3 for people to see the new building and learn more about the company.

®

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CRAIN’S CLEVELAND BUSINESS

Opinion Personal View

Why are Ohioans footing the bill for FirstEnergy?

By Richard Miniter

Editorial

Smoother waters A report last week from American Rivers, an organization focused on protecting the nation’s waterways, caught our attention because the group named the comeback Cuyahoga its “River of the Year,” with president and CEO Bob Irvin saying, “May other communities draw inspiration from Cleveland’s story, and may we all work together to spark an urban river renaissance nationwide.”

How times have changed. Decades ago, it would have been absurd to think the Cuyahoga would provide an example of a clean, vibrant river teeming with leisure and industrial life.

Now, as American Rivers says, it’s “a national success story” that serves as a model for troubled waterways. The first 23 pages of the 26-page American Rivers report highlight America’s 10 most endangered rivers.

A package of Crain’s stories this week looks back, to examine how the river turned the corner from the dark days of a 1969 fire that made Cleveland a symbol of environmental decay, and forward, to explore how the river helps to boost commerce throughout the region and keeps the city an attractive place to live and play.

Many parties had a hand in the river’s revival, starting with former Cleveland Mayor Carl Stokes and his brother, Rep. Louis Stokes, who testified before Congress in support of legislation to clean up both the Cuyahoga River and Lake Erie, which helped to create momentum to pass the Clean Water Act. The work of government organizations, including the Northeast Ohio Regional Sewer District, the Ohio Environmental Protection Agency and the Cleveland-Cuyahoga County Port Authority, has been critical, as have efforts of advocacy groups like Share the River, which has helped find common ground for industrial users of the river with those who swim, boat and fish on it. There are many others that had a hand in the river’s comeback; this was a true group effort.

The result, as one of this week’s stories points out, is a river that is sufficiently clean and attractive to make possible big office/entertainment developments like the Flats East Bank

Neighborhood, as well as new homes, and plans for more, at various river-adjacent sites.

It’s worth asking, in the current political environment, whether the Cuyahoga River’s transformation could take place today.

Too often, as U.S. Sen. Sherrod Brown pointed out in a Yahoo story last week, we’re fed a false narrative that “you either have good environment policy or good jobs policy.” The Trump administration, in particular, “has moved to cancel or delay many of the environmental regulations that it believes hamper growth in the extractive industries and heavy manufacturing,” Yahoo noted. “Those are many of the same regulations that have kept river fires from becoming a normal occurrence of American life.”

The renaissance of the Cuyahoga River — still a work in progress — shows that smart regulation and dedication from conscientious actors in the public and private sector can benefit both our economy and our way of life.

Patience

Another important transformation is underway in the city, one that’s not taking 50 years, but is rolling out methodically.

The MetroHealth System on April 15 broke ground for an 11-floor, 270-bed hospital that’s the centerpiece of a nearly $1 billion transformation plan to its West 25th Street main campus. The new hospital is expected to be completed by 2022, with the first patients arriving in 2023. (MetroHealth’s campus transformation began in 2015 with the demolition of the Northcoast Behavioral Health Care Facility.) Still to come: MetroHealth’s creation of a “hospital in a park” through the conversion to green space of some existing buildings on the 52-acre campus.

Over the project’s full timeline, a Cleveland State report estimated, the plan will support more than 5,000 jobs and result in nearly $900 million in total economic benefit for Cuyahoga County. It’s the proverbial case of good things coming to those who wait, both for MetroHealth patients and the neighborhood.

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

CLEVELAND BUSINESS

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Scott Suttell (ssuttell@crain.com)

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Are you ready to pay more for heat and light? In March, FirstEnergy Solutions submitted a bankruptcy restructuring agreement to shake off debt obligations while leaving federal agencies and taxpayers hoodwinked.

Thankfully, a judge rejected the plan earlier this month following concerns from the Securities and Exchange Commission (SEC), Federal Energy Regulatory Commission and others who feel the arrangement leaves the parent organization — FirstEnergy Corp. — nonliable for costs associated with retiring power plants and environmental site cleanup required of energy companies. The SEC even suggested the plan may be in breach of the law and FirstEnergy Solutions’ push to expedite the agreement before intensive re- Miniter view doesn’t reflect well, either.

To think these are the folks Ohio lawmakers are willing to trust with their constituents’ tax dollars is ridiculous. Ohio Speaker Larry Householder recently announced a new energy plan that asks Buckeye State electricity users to pay to keep two of FirstEnergy Solution’s uncompetitive nuclear power plants open. Overall, the vaguely written legislation would bring in about $300 million from ratepayers for companies that generate “reduced emissions” electricity, of which FirstEnergy Solutions would be eligible for about $169 million of the $300 million Ohio expects to collect.

But the company is in bankruptcy because of outstanding debt obligations, including $2.8 billion to its creditors and another $1.7 billion to its parent company. In short, Ohioans will now pay for FirstEnergy’s shortsighted management practices and inability to compete in the open market.

These new subsidies will also come on top of billions that FirstEnergy and its affiliates have received since 1999. Apparently, when subsidies don’t work, the solution is … more subsidies.

But do you think the free-market oriented Republicans in Columbus will declare this subsidy program “dead on arrival”? Don’t bet on that. As former Ohio secretary of state Ken Blackwell pointed out, some of them are just fine with corporate welfare.

The Ohio speaker and dozens of his party colleagues received campaign contributions from FirstEnergy’s executives and allies. In the last election cycle, $565,000 was given to the Republican Governors Association and another $102,000 to the Democratic Governors Association, according to the Energy and Policy Institute. Corporate donors like giving to the governors’ associations because these contributions are not subject to Federal Election Commission limits. Clearly, FirstEnergy expects some kind of return on its investments in Ohio. The Ohio legislature recently announced the creation of a new committee focused on power generation, and the members of that committee were likely chosen with FirstEnergy’s interests in mind.

Other government bailouts — at taxpayer expense — are also on the horizon. In January, the U.S. Department of Energy announced a $38 million fund to help uncompetitive coal and nuclear plants and language in a report recently released by Council of Economic Advisors indicates that the administration is trying to come up with new justifications to keep retiring plants operational. Their original plan that cited “national security” justifications was reportedly shelved last year due to concerns from key administration officials.

SEE MINITER, PAGE 9

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.

Sound off: Send a Personal View for the opinion page to emcintyre@crain.com.

Please include a telephone number for verification purposes.

4/18/19 4:37 PM

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Personal View

Restoring opportunity to cities ‘of modern methods’

By Rick Stockburger and Sara Daugherty

For the last 52 years, the General Motors assembly line in Lordstown was part of the fabric of Trumbull County, providing good jobs for hard-working people.

But in March 2019, General Motors idled the Lordstown plant, delivering yet another blow to the Mahoning Valley.

This trajectory is part of an all-too-familiar story in the industrial Midwest, large portions of which remain mired in economic stagnation or decline. Since the mid-1990s, Trumbull has lost 16% of businesses and 21% of jobs on net, according to the U.S. Census Bureau. Here in Warren, we have a Stockburger proud legacy of innovation and industrial dynamism dating back to our first city slogan, “the city of modern methods.”

But like so many other communities, Warren no longer seems to be living up to its slogan. It has been hit hard by a changing economy. Manufacturing jobs have disappeared and local employment has yet to reDaugherty turn to pre-recession levels. As opportunities have become harder to come by, people left this once-bustling community for jobs elsewhere, and there’s been little private investment to the scale of similar places to replace this loss of human capital.

We cannot afford to attach our future to the fate of one industry or a handful of factories. But there’s reasons for optimism. In the past, our leaders have lacked policy tools to encourage sustainable, bottom-up economic growth. But we’re working to change that through our work at the Tech Belt Energy Innovation Center (TBEIC).

Today in Warren, our strategy is rooted in building the businesses and jobs of tomorrow. Thanks to a new federal policy called Opportunity Zones, which incentivize private investment in the kind of bottom-up economic growth our community needs, we’re beginning to re-establish Warren as a city of modern methods.

Opportunity Zones encourage those with capital to reinvest in struggling communities by supporting local startups, helping small businesses expand and revitalizing the built environment through new housing and commercial space. They do not reward big firms for relocating to our community by hollowing out the local tax base. Importantly, the incentive rewards patient investors willing to make long-term bets on communities like ours. We believe we’re a bet worth making.

Warren has begun to revitalize Main Street and build the infrastructure needed to attract to the region the

MINITER

CONTINUED FROM PAGE 8

Let’s look at the bigger picture: Does it make sense to bail out underperforming businesses? Isn’t capitalism not just about the freedom to succeed — and reap its sweet rewards — but also about the freedom to fail and learn its bitter lessons? Should we let executives and investors prosper when they succeed and reward them with tax dollars when they don’t? Is “heads-Iwin and tails-you-lose” a good principle for society as a whole? How is that fair?

The best way to test whether a political principle makes any sense is to apply it to other things. Should we bail out every corner store laid low by Amazon.com or Walmart? What about newspapers facing headwinds from the internet? There is no obvious limiting principle that makes bailing out FirstEnergy different

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next generation of good jobs for hard-working people.

With TBEIC, the city is home to the only energy incubator in all of Ohio. We foster startups that focus on energy storage, drones and the Internet of Things. According to a recent report, there are nearly 5,000 cleantech jobs in the Mahoning Valley, and we foresee that number growing exponentially. Businesses have returned to our downtown — so, too, have restaurants, coffee shops and Modern Methods Brewery.

Excitement about the potential for Opportunity Zones in Warren is palpable, but there are many unknowns. Chief among them is the rulemaking process led by the U.S. Treasury Department. Now that we have a tool that can be tailored to our needs, we need clarity on how to put it to use. If implemented well, it could allow us to leverage investment for scalable businesses that grow from one or two employees to tens, hundreds or even thousands.

Opportunity Zones won’t fix all of our problems, and they won’t put a new car on the assembly line in Lordstown. But our Opportunity Zone designation has made it possible to accelerate our efforts and build on the progress we have made. When 75% of venture capital is concentrated in places like California, New York and Boston, Opportunity Zones can put places like Warren on the radar of investors that otherwise wouldn’t look beyond their own backyards.

Policymakers often wonder what they can do for communities like Warren. Our answer is provide us with the tools to rebuild our future. Opportunity Zones are the best shot the federal government has given us in a long time, and we intend to use it to prove that overlooked communities like ours still have the capacity to thrive. Let’s build a new generation of cities of modern methods for our time.

Stockburger and Daugherty comprise the leadership team for the Tech Belt Energy Innovation Center in Warren. from supporting any other business facing tough competition. So it comes down to this question: Do we just help out the firms that have the best lobbyists and buckets of campaign cash? Political favoritism doesn’t sound like much of an effective market principle.

What happens when the newest round of subsidies fails just like the earlier ones? Does FirstEnergy get yet another round of taxpayer-funded life support? And another? When does it end?

These are the questions that state lawmakers should ask themselves.

Oh, there is one more question: When they are up for re-election, how will they explain to voters that they have to pay more to heat their homes, run their refrigerators and light their living rooms because FirstEnergy had to find a way out of bankruptcy court?

Miniter, a New York Times bestselling author, is CEO of the nonprofit American Media Institute.

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CRAIN’S CLEVELAND BUSINESS

Focus

50 YEARS LATER: A RIVER AND ECONOMY REBORN

How a burning river fired up environmentalism

By Michael von Glahn mvonglahn@crain.com

F

or much of Cleveland’s history, the river that divides the city into East Side and West Side was viewed in purely utilitarian terms. There was actually a time when plumes of oxide-red factory discharge and the rainbow sheen of oil coating the water were hailed as evidence of thriving industry.

Over the years, the city and its corporations in various places and at various times widened, straightened and constrained the Cuyahoga for their own uses. Urban waste and silt dredged from the river’s channel were used as fill to create tracts of flat lakeside land.

“In other words, industrial capitalism didn’t just manufacture widgets in Cleveland; it manufactured Cleveland,” wrote David and Richard Stradling in their book, “Where the River Burned.”

The riverbank was dominated by steel mills, oil refineries — at least 20 in the 1860s, before John D. Rockefeller’s Standard Oil Co. began absorbing competitors — paint factories, chemical works and slaughterhouses, all of which used it to carry away their refuse and byproducts, some highly combustible.

According to data compiled in a 1944 study of industrial waste in the Flats, 28 major firms within Cleveland city limits were dumping directly into the river, to the tune of 170 million gallons per day — and those figures didn’t include two major plants — one aluminum, the other steel — just beyond the city limits in Cuyahoga Heights, which contributed their share as well.

The results shouldn’t have surprised anyone.

Around noon on June 22, 1969, oil-soaked debris snagged in the piers beneath a pair of wooden railway trestles across the river near Campbell Road hill, southeast of Cleveland, was ignited, probably by sparks from the braking of a passing train. Flames leaped five stories high, but a city fireboat and three battalions of firemen on land had the fire under control in just 20 to 30 minutes — too quickly for any local reporters to get there in time to get photos or footage of the actual blaze.

The Plain Dealer noted the fire on its front page, but devoted only five paragraphs to it deep inside the paper. The rival Cleveland Press

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Burn on, big river, burn on 1969 wasn’t the Cuyahoga’s first flare-up or even its biggest. It was preceded by 13 other documented fires, some vastly more damaging, and there may have been countless smaller blazes that were never recorded: 1868: The Cuyahoga’s first documented blaze occurred in August, when a spark from a tugboat’s funnel ignited an oil slick.

1883: A fire burned for three days in February while the river was at flood stage from rain and snowmelt. Nine oil, gasoline and kerosene storage tanks and 30 stills at the Standard Oil refinery exploded one after another, with Standard and other riverfront companies ultimately suffering $800,000 in losses.

1887: No details available.

1912: A spark from a tugboat ignited oil leaking from a barge at the Standard Oil cargo slip, causing a fast-moving conflagration that killed five workers at the Great Lakes Towing Co. drydock.

1914: This fire posed a danger to downtown itself until the wind shifted to drive the flames in another direction.

1922: Another fire occurred in the same area as the 1912 blaze.

1930: No details available.

1936: In February, a worker’s torch sparked a fire under the Erie Railroad bridge and left the Cuyahoga burning for five straight days until it could be extinguished.

1941: A blaze on the river did $7,500 in damage to an ore carrier.

1948: Included in the $100,000 damage it caused, this fire burned the Republic Steel wharf and buckled part of the Clark Avenue Bridge.

1949: Another fire damaged at least one of the railroad bridges over the river.

1951: In March, oil leaking from cargo slips in the Flats burned.

1952: Coated by a 2-inch-thick sheen of oil leaking from the Standard Oil complex, the river again caught fire near the Great Lakes Towing Co. shipyard in early November, causing damage estimated at up to $1.5 million, including three tugboats, three riverfront buildings and the Jefferson Avenue Bridge.

Firefighters battle the 1952 Cuyahoga River fire. (Bettmann Archive)

The aftermath of the 1969 Cuyahoga River fire included stumps of a burnt train trestle — and a host of new environmental regulations. (Getty Images/National Geographic Creative)

gave part of its front page to a photo of the fireboat hosing down hot spots after the fire was out. The story was too insignificant to be picked up by the national news.

The double-track Norfolk & Western bridge was wrecked by the fire, sustaining $45,000 in damage, while the single-track Newburgh & South Shore trestle took $5,000 in damage.

What little subsequent local coverage there was concentrated on wrangling between N&W and the city over payment for the ruined trestle, not what the fire said about the state of the Cuyahoga. After all, fires on the river were nothing new (see box), and this one ranked pretty low in terms of damage and duration.

Two months later, though, Time Magazine ran an essay on polluted rivers around the U.S., lavishing special attention on the “fire hazard” Cuyahoga. For added drama, it ran a photo of firehoses arcing water onto a blazing tugboat as a huge column of black smoke boiled from the surface of the burning river.

One problem was that the image wasn’t from the 1969 fire — which was out before photographers arrived, remember — but actually depicted a much larger fire on the Cuyahoga in 1952.

Another issue was that river fires weren’t unique to Cleveland. The Buffalo River in upstate New York, Detroit’s Rouge River, the Chicago River and Philadelphia’s Schuylkill River all caught fire as well, some of them more than once.

More to the point, Cleveland was well aware of pollution in the Cuyahoga and Lake Erie and had been taking action well before the ’69 fire.

As early (or late, depending on one’s perspective) as 1963 the city had set up a Cuyahoga River Basin Water Quality Committee. More recently Cleveland had also established a Clean Water Task Force. Unfortunately, the latter’s efforts, including work on three treatment plants, had been stalled by a lack of state and federal matching funds.

In fact, quite a few of the city’s difficulties flowed “downstream” from Columbus and Washington. Congress had authorized money for cleaning up Lake Erie, but didn’t actually appropriate the funds. And it was the state’s Ohio Water Pollution Control Board that issued permits to companies to allow them to discharge waste into the Cuyahoga.

SEE CUYAHOGA, PAGE 15

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50 YEARS LATER: A RIVER AND ECONOMY REBORN

The Cuyahoga: a phoenix among rivers

By Dan Shingler dshingler@crain.com @DanShingler

Over the last 50 years, the Cuyahoga River has gone from being a flaming national joke to become not only a symbol of how a river can rebound, but an asset treasured by nearly every community along its more than 100-mile route.

Those who manage, safeguard and use the river today say it’s in the best shape they’ve ever seen, though there’s still room left for improvements they hope to see ahead.

In recent years, the river has done better and better on its water-test results.

“They all show an upward climb,” said Kyle Dreyfuss-Wells, CEO of the Northeast Ohio Regional Sewer District.

She watches the river’s water quality perhaps as closely as anyone, because her organization has a big impact on it and since 1972 has spent more than $5 billion on its treatment plants, in part to protect the river and therefore Lake Erie.

“Our southerly wastewater treatment plant, which is the largest treatment plant in the state of Ohio, discharges into the Cuyahoga River,” Dreyfuss-Wells explained.

She said that since the famous fire of 1969 — which spurred the creation of the U.S. Environmental Protection Agency and the Clean Water Act — the river has become largely

Removal of Akron’s Gorge Dam in 2023 will give Summit Metro Parks 3,500 feet of unobstructed river. (Shane Wynn for Crain’s)

free of what’s known as “point sources” of pollution. Those were primarily industrial and included, if you go back a few decades, plants and factories from Akron to Cleveland that dumped their waste into the Cuyahoga or its tributaries. They generally got few complaints from local residents.

“A polluted river was a sign of economic prosperity: ‘We’re making stuff!’ It’s perverse, but it was a different mindset then,” observed Jim Ridge, who founded the recreation and advocacy group Share the River in Cleveland in 2015.

People have since learned to think differently, and the Cuyahoga has helped them do it, he said.

“When the ’69 fire happened, public opinion started to change,” Ridge said. “It’s now a false choice to say that good business means you have to allow pollution. What we’ve seen with Cleveland, and Akron as well, is that as the river and its tributaries have cleaned up, people want to live by them, work by them, play by them and play on them.”

The big old industrial polluters either cleaned up their act to comply with new state and federal regula-

tions or closed their doors and stopped polluting altogether.

Without a continual supply of those industrial pollutants, the river did a lot to repair itself. Fish now swim the length of the river, including the mouth, where Time Magazine once said the water “oozes rather than flows.”

Ships that use the lake have also cleaned up their act, according to Dreyfuss-Wells: They leak less oil and also no longer dump bilgewater into the river and lake. They’ve also come to accept, if not outright embrace, the recreational use that has cropped up on their waterways as a result, Ridge said.

They’ll have to be especially accommodating in June, when the same section of the river that caught fire in 1969 will host an event known as Blazing Paddles. It’s the second year for the annual event, organized

by Ridge. This year’s Blazing Paddles is expected to draw 500 participants for the 5.7-mile and 2-mile paddleboard races and to fill the river with other races and parades of kayaks and canoes. Thousands more will watch them from the shore, nearby buildings and on TV for what Ridge said will be the “ultimate photo op” for the river’s rebirth.

To be sure, such events, along with shells being sculled up and down the river by members of the Cleveland Rowing Foundation and others, are as much a sign that the river has come back as the sight of bald eagles, which have also returned to the Cuyahoga.

~

A work in progress But that’s not to say that the Crooked River is as clean as it should be, or as clean as its advocates would like.

While point-source pollution is under control, new threats have risen, Dreyfuss-Wells said, and others agree. Some is the result of urban sprawl, which leads to more pavement in the form of roads and parking lots. That creates run-off problems because rainwater that can’t sink into the ground floods local streams, and then washes oil, fertilizer and whatever else the floodwater picks up into the river.

That’s starting to be addressed, Dreyfuss-Wells said, and some forward-thinking local companies, such as University Hospitals, have begun to do things like build permeable parking lots or lots with green zones to catch run-off. But it’s still a challenge and more needs to be done, she added.

That will take time. Meanwhile, other projects are underway to further the Cuyahoga’s comeback.

For one thing, Akron has been working on a $1.4 billion renovation of its sewer system, which would mean sewage would no longer flow into the river or its tributaries after heavy rains. That’s far from done, but is already having a positive impact on the river’s water, said Summit Metro Parks executive director Lisa King.

SEE COMEBACK, PAGE 14

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50 YEARS LATER: A RIVER AND ECONOMY REBORN

The river again is reshaping the land

By Stan Bullard

ter in the old Powerhouse, an apartment building and a pair of waterfront commercial buildings repurposed as Shooter’s on the Water and, most recently, the Music Box Supper Club.

Where Flats East Bank brought bigleague development from downtown to the river in the 21st century, Nautica on the west bank in the late 20th brought crowds of suburbanites to its long boardwalk, then a novelty on the river. All along, the river itself went through a slow regeneration as local, state and federal authorities and businesses took steps to clean it up.

sbullard@crain.com @CrainRltyWriter

An old storage building at 1970 Carter Road may be repurposed as an office building under a proposal by J Roc Development of Cleveland. The building could be part of Thunderbird, a large development the group proposes for its land on Scranton Peninsula. (Contributed rendering)

The new-to-market building, as J Roc’s broker, Conor Coakley of CBRE, terms it, is in search of office tenants who want exposed bricks and mushroom-style beams in an alternative to downtown’s nearby skyscrapers. Remaining land is seen as residential development sites for other developers. Thunderbird also adjoins the proposed Great Lakes Brewery complex on Scranton Peninsula land the craft brewer bought from J Roc. Development on the river slowly steps from one peninsula to the next, with these latest proposals on Scranton Peninsula next up as momentum heads south from Lake Erie. More than $1 billion in commercial construction has gone into this 2-mile stretch in just over three decades.

The biggest of those projects is the Flats East Bank Neighborhood’s 23story Ernst & Young office tower, the Aloft Cleveland Downtown hotel and

++ ++ +

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Crooked River turns around

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Like the sparks from a passing train that set oil, chemicals and crud afire in 1969 to make the Cuyahoga River a symbol of the nation’s pollution, signs of potential real estate redevelopment are flaring from the city’s birthplace at the river’s mouth on Lake Erie.

A dozen sites costing upward of $175,000 apiece for custom homes went on the market earlier this year on Carter Road near Columbus Road. Their view will take in the river, the Columbus Road Peninsula, Cleveland Metroparks Rivergate Park and downtown.

David Sharkey of Progressive Urban Real Estate has sold one site and fielded dozens of inquiries for others. He is handling the for-sale residential project produced by PURE president Keith Brown’s Lake Link LLC, which owns the land, and build-to-suit homes by builder David Fragapane. The final designs have yet to clear Cleveland City Planning Commission, but the result may be $750,000 or more single-family homes near the Cleveland Foundation Centennial Trail.

Follow the river from there east to 1970 Carter Road. That’s where plans just surfaced to repurpose a nearly century-old building as offices. Dubbed Avian, the renovated building could be the first new project at Thunderbird, a 25-acre land development on Scranton Peninsula by J Roc Development of Cleveland. The group led by developer Fred Geis in 2017 bought the massive riverfront site and is now launching its plans. The group would retain ownership of the rebuilt structure but otherwise serve as a master developer, peddling other parcels to others.

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300-suite Flats at East Bank above retail space north of Main Avenue. All told, it’s a $750 million project.

On the opposite side of the river sits the Nautica Entertainment District, which dates from the mid-1980s on 20 acres of the Main Avenue Peninsula.

That project incorporates the Great Lakes Aquarium and a banquet cen-

Frank Samsel, whose middle-aged children now run Samsel Supply, 1235 Old River Road, has watched the river and the Flats change since the 1950s. His family-owned outfit used to supply some ships by boat.

“The river stank so bad no one wanted to be near it,” Samsel said. “There was a film of oil on the river all the time.

There was so much sewage it was like a septic tank. When the weather warmed up, the water would bubble.”

Fast-forward to 2019. The river was recently declared safe for fishing and

people are already dropping lines in the river from Settler’s Landing Park.

The turnaround surprises Samsel.

“The river had been filthy all my life,” he said. “However, industry first (with much government prodding) cleaned up its act. Now, the sewer district is doing its part. I never thought it would get this clean this fast.”

Doug Price, CEO of Willoughbybased K&D Group, which owns apartments in the Flats and downtown, recalled that as a kid, when his father took him downtown from Chesterland, “We kept the windows up in the car because the air smelled so bad.”

In the 1990s, the company led by Price and his ex-wife, Karen Paganini, transformed a big swath of the Main Avenue Peninsula on the north side of the Center Street Swing Bridge with Stonebridge, a group of four buildings with apartments and condos, plus two office buildings in properties K&D has sold.

“Everything down there is affected by the water,” Price said. “We used the river views as a selling point for Stonebridge. There has been a ton of development along the river, and in many ways the table is being set for more.”

SEE DEVELOP, PAGE 14

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50 YEARS LATER: A RIVER AND ECONOMY REBORN

COMEBACK CONTINUED FROM PAGE 12

Also, and perhaps most notably, the Army Corps of Engineers will be removing dams on the river. Officials said the Brecksville Dam will be removed this year, which will result in the river traveling the length of the Cuyahoga Valley National Park unobstructed for the first time. Meantime, the Corps of Engineers, which will remove the dam, is also planning $10 million worth of floodplain restoration upstream from the dam, which will restore wetlands and bring back more wildlife, said Metro Parks officials.

The big Gorge Dam in Akron’s Gorge Metro Park is slated to be taken out in 2023. That’s a bit later than some had hoped, but many river advocates are

happy to see the dams come out at all.

When that happens, Summit Metro Parks will have about 3,500 feet of unobstructed river to work with, King said. Her organization is making the most of it, too. It recently planted more than 120,000 nuts at the site of the former Valley View Golf Course, which the park system purchased in 2016 and is turning back into a natural area that will connect the Cascade Valley, Sand Run and Gorge Metro Parks along the river’s route in Akron.

Summit Metro Parks even takes old tributaries that farmers long ago turned into straight channels and puts “meanders” back into them so they can look and behave like natural streams again. Often, they quickly attract otters and other wildlife, noted park officials.

It’s all music to the ears of folks like

Andrea Irland, a National Parks Service outdoor recreation planner based at CVNP who is working to get the entire length of the Cuyahoga designated as a national “water trail.”

That means finding and marking access points along the river, as well as providing information on water conditions, how to navigate certain sections of the river and warning of hazards that paddlers need to know about or avoid, she said.

She’ll unveil the trail on the 50th anniversary of the 1969 fire in June, then working to get state and federal designations for the trail.

“It is happening, the end is in sight, it really is,” she said, after showing various public officials her plans in April.

Her work demonstrates the support behind the Cuyahoga. The idea for the water trail came from local ad-

vocates for the river, and Irland said there are now about 25 different organizations working to make it a reality. She’s so far received 90 letters and 20 resolutions of support from local communities along the river.

“We have not heard any opposition, either through social media, our website, our email or through public meetings,” she added.

The river definitely has support from CVNP itself, which superintendent Craig Henkel said has transformed from “from a terrestrial operation to a land and river operation” because of the Cuyahoga’s growing popularity.

He said that until recently, even the park largely ignored the river. It didn’t patrol it or even give visitors much information on how to use it — but that’s changing quickly, he said.

DEVELOP

CONTINUED FROM PAGE 13

At the same time, Price and others note how the city benefits from a working river plied by ore carriers serving ArcelorMittal, the town’s sole surviving steel mill, as well as barges loaded with stone or cement.

Rick Foran, a real estate developer active in the Ohio City neighborhood, had an office in 1971 above the old Pirate’s Cove nightclub on Old River Road, since demolished for Flats East Bank. He recalls watching tugboats pushing ore carriers around the east end of Scranton Peninsula, known as Collision Bend, before new boats with bow thrusters to navigate the tight spots were produced.

“It was like watching a ballet of brute strength,” he said. “The longshoremen and tugboat captains ruled the river.”

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Redevelopment of the riverfront has had to contend with the detritus of more than 200 years of use.

Scott Wolstein, chairman of Cleveland-based Wolstein Group, who developed Flats East Bank with his mother, Iris Wolstein, said early studies found chemicals from the river had leached into soil near the water’s edge. Buried petroleum tanks and an ancient coal gasification plant also had to go.

“It required major remediation,” Wolstein said. “We got some government help, but it really increased the cost of our project substantially.” He put that cost at more than $10 million.

However, razing the old commercial buildings on both sides of Old River Road north of Main Avenue for the megaproject also gave the city a public waterfront promenade, more views of the river and room for additional new buildings. A 12-story office and apartment complex and more waterfront restaurants are in the works.

Across the river, on the west bank, in the mid-1980s, real estate developer Jeff Jacobs launched what would become the 20-acre Nautica Entertainment District on another strip of the Main Avenue Peninsula.

“Jeff was attracted by all the activity on the river,” said David Grunenwald, the Cleveland-based vice president of development at Jacobs Investments, Nautica’s owner. “The cleanup of the air and the water spawned it all. He knew the working river would bring back the people.”

Grunenwald said Jacobs is updating its 3-year-old Nautica master plan for its next go.

“Say ‘burning river’ to my kids,” Grunenwald noted, “and they think of beer. We’re now at least two generations away from that. Today, young professionals don’t have to deal with that baggage the way we (baby boomers) did.”

Among the relative newcomers in the Flats is Joel Scheer, a Chagrin Falls architect turned real estate owner and developer. He heads an investor group that spent more than $5 million in 2016 to transform the former Sammy’s Restaurant, 1040 W. 10th St., into a building for office tenants who like modern technology in an old wrapper.

“We don’t hear anyone talk about the river burning now,” Scheer said. He and fellow investors in 2018 bought 8 acres on the next tongue of land south of Scranton Peninsula. Their holdings incorporate multiple buildings and parking lots near Stone’s Levee Drive near West Third Street.

“We see this as a major development site,” Scheer said. “We’ll be patient to develop it. We may even develop a new neighborhood. Nothing goes fast down here, except the passage of time.”

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50 YEARS LATER: A RIVER AND ECONOMY REBORN

CUYAHOGA CONTINUED FROM PAGE 10

In November 1968, Cleveland voters had, by a wide margin, passed a $100 million bond issue for cleanup and protection of their river (that same year, the federal government spent just $180 million toward improving pollution control and water quality nationwide). It was hoped the bond’s passage would help Cleveland nudge or shame the state and feds into ponying up their share.

Because one thing the burning river did make clear was that pollution was a problem everyone needed to own and nothing could be accomplished in isolation.

“The Cuyahoga can be cleaned up in Cleveland,” said then-Mayor Carl Stokes, “but as long as other cities keep dumping wastes upriver, it will remain exactly what it is today: an open sewer filling Lake Erie with scummy wavelets, sullen reminders that even a great lake can die.”

Cleveland became the butt of jokes for its river having caught fire, but it was quickly understood that the city was really a microcosm for the entire country, and even those laughing loudest often faced situations just as dire, if not worse.

However misleading, the imagery and mythology around the burning river energized and focused the nascent American environmental movement. National outrage also spurred the federal government into activity, including a grand jury investigation into water pollution allegedly caused by a dozen Northeast Ohio

Recreational users of the revived Cuyahoga are now so plentiful that they have to learn to coexist with ore boats. (David Kordalski)

companies.

The first Earth Day was held in April 1970, and the Environmental Protection Agency opened its doors that same year. The Clean Water Act (actually a complete amendment of the vintage-1948 Federal Water Pollution Control Act) was enacted in 1972 as the country’s first modern environmental legislation and one of the most influential laws in that sphere.

While much of politicians’ early discussion of the environment framed it in economic rather than ecological terms — undoubtedly to make the necessary changes and regulations more palatable to the affected industries — it gradually came to be understood and accepted at all levels — although there is currently some backsliding in Washington —

that for our long-term success and survival, our rivers, lakes and wetlands need to be protected and preserved; that our air needs to be free of contaminants; and that human activities have consequences.

Since then, we’ve seen that we can apply ourselves just as impactfully to restoration as we once did to desecration. A river that was totally lifeless now sports 60 species of fish again. The once-shunned waterway is today so active with rowing shells, kayaks, paddleboards, Jet Skis and pleasure craft that digital signs may be erected this summer to keep their users alert to freighter traffic.

The river still isn’t perfect, but it’s made an amazing recovery.

Every year for almost 35 years, the Washington, D.C.-based conservation group American Rivers has named 10 endangered U.S. rivers.

The Cuyahoga has never been on that list, but this year, the organization named it “River of the Year” to salute its restoration and its role in spurring the modern environmental movement — a story that cities whose rivers are imperiled today can draw upon for inspiration and hope.

“Our nation is at a crossroads,” said Christopher Williams, American Rivers’ senior vice president, conservation. “If we continue to degrade and abuse our rivers, we will compromise our ability to deal with increasingly severe droughts and floods. But if we protect and restore our rivers in thoughtful and equitable ways that do not perpetuate the mistakes of the past, we can strengthen our communities and create a more secure future.”

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CRAIN’S CLEVELAND BUSINESS

THE LIST

Private Equity and Venture Capital Firms FIRM NAME

INVESTMENT: MINIMUM/ PREFERRED (THOUSANDS)

CAPITAL UNDER MGMT GEOGRAPHY (MILLIONS) PREFERENCES

2018 DEALS INDUSTRY PREFERENCES

N.E. OUT OF OHIO AREA PORTFOLIO COMPANIES

TOP EXECUTIVE

Align Capital Partners, Beachwood (216) 505-6463/aligncp.com

$10,000 $25,000

$326.0

U.S., Canada

B2B manufacturing, distribution, business services

2

2

Alliance Source Testing, Protegis, Barrow-Agee Laboratories, SEAM Group

Steve Dyke, Chris Jones, managing partners

Blue Point Capital Partners, Cleveland (216) 535-4700/bluepointcapital.com

$20,000 $40,000

$1,500.0

U.S., Canada

Manufacturing, business services, distribution

1

9

Area Wide Protective, Consolidated Precision Products, Next Level, Vetta

Chip Chaikin, John LeMay Sean Ward, partners

Canal Holdings LLC, Twinsburg (330) 425-1225/canalcapital.com

$2,000 $2,000-7,000

$75.0

Ohio, eastern half of U.S.

Services (business/health care), manufacturing, distribution

0

0

American Heritage, VSI Global, Speedgrip Chuck, Micorp Custom Auto & Truck

Kevin Coyne, founder, CEO

CapitalWorks LLC, Cleveland (216) 781-3233/capitalworks.net

$3,000 $5,000-12,000

NA

East of the Rocky Mountains

Manufacturing, business services, value added distribution

1

1

GEMCITY Engineering and Manufacturing, C&M Conveyor, Chemtron, Paradigm

Richard Hollington III, managing director, CEO

$3,000 $10,000

$150.0

Ohio, western Pennsylvania

Real estate (commercial, health care, education)

1

0

Westin Hotel, Crocker Park, The Edison at Gordon Square, One University Circle

Stephen Strnisha, CEO

$50 $100

NA

Midwest

Software and software-enabled devices

1

1

Path Robotics, Exit 7C

Scott Shane, managing director

Coventry League Capital Partners, Cleveland (415) 570-2057/coventryleague.com

$250 $1,500

NA

U.S., Canada

Tech-enabled, niche manufacturing, food/beverages, branded consumer

0

1

NA

Joseph Kane, principal

Cyprium Investment Partners LLC, Cleveland (216) 453-4500/cyprium.com

$10,000 $10,000-40,000

$875.0

U.S., Canada

Manufacturing, service, distribution, food and beverage

0

2

Paper Machinery Corp., FH Equipment LLC, Backyard Products LLC, Weaber Inc.

John Sinnenberg, partner

$25 $250

$25.0

National

Software (analytics, SaaS, B2B, finance)

2

10

Scout, Astronomer, Lob, CompanionLabs

Morris Wheeler, founder, president

Edgewater Capital Partners, Independence (216) 292-3838/edgewatercapital.com

$1,000 $10,000

NA

U.S.

Specialty chemicals, pharmaceuticals, engineered components, materials

0

2

Tri-Tec Seal, FMI, Callery, DanChem

Christopher Childres, Ryan Meany, managing partners

Evolution Capital Partners LLC, Beachwood (216) 593-0402/evolutioncapitalpartners.com

$3,000 $4,000-8,000

NA

U.S., Canada

Small businesses; training, techenabled business services

0

2

Heavy Equipment Training, Renascent Salvage, Federos Software, Cap City Dental

Jeffrey Kadlic, founding partner; Brendan Anderson, managing partner

Flashstarts, Cleveland (216) 220-0200/flashstarts.com

$25 $25-50

$4.1

Ohio, Midwest, U.S., international

IT, sensors, electronics, advanced manufacturing, blockchain

4

2

Complion, Remesh, We Can Code IT, Vlipsy

Charles Stack, cofounder, CEO

JumpStart Inc., Cleveland (216) 363-3400/jumpstartinc.org

$250 $250-500

$67.0

Ohio

Information technology, health care IT, medical devices

4

6

Complion, EmployStream, ReadySet Surgical, 7Signal

Raymond Leach, CEO

$2,000 $5,000

NA

Great Lakes region

B2B, process and manufacturing sectors

0

0

WH Smith Company, EnviroScience Inc., Allegheny Performance Plastics

Marc Walinsky, managing director

$1,000 $2,000-10,000

$75.0

U.S., Canada

Manufacturing, business services, distribution

0

0

Form Tech, EnviroScience

Thomas Littman, CEO

$15,000 $20,000-35,000

$500.0

North America

Industrial, business services, consumer products, health care

0

1

Happy Floors, Home Helpers, Signature Systems, RANDYS

Frank Linsalata, chairman; Stephen Perry, Eric Bacon, copresidents

MavenHill Capital, Chagrin Falls (646) 598-6740/mavenhillcapital.com

$2,000 $3,000-15,000

NA

North America

Consumer, business services and industrial

0

2

Connecticut Coining, Universal Screen Arts, Gasser & Sons

Rhodes McKee, Jay Studdard, managing partners

Max-Ventures LLC, Pepper Pike (440) 729-1345/None

$1,000 $3,000-10,000

NA

United States

Retail, consumer products, service providers to retail, online concepts

1

1

Did not disclose

Michael Feuer, CEO, senior managing director

$5,000 $5,000-8,000

$125.0

North America

Manufacturers selling to OEMs; distribution

0

1

Torsion Group, Performance Plastics, RMB Products, Andover Corp.

Mark Mansour, senior managing partner

$10,000 $10,000-50,000

NA

North America

High-value manufacturing, industrial services

0

0

dlhBOWLES Inc., Plastic Components Inc., DreamLine, Bettcher Industries

Peter Taft, partner

Mutual Capital Partners, Westlake (216) 527-7386/mutualcapitalpartners.com

$1,000 $3,000-15,000

$98.5

U.S., except NYC/ Silicon Valley north

Technology, health care

1

0

7signal, CheckPoint Surgical, enosiX, RevLocal

Bill Trainor, Wayne Wallace, general partners

North Coast Angel Fund, Cleveland (216) 262-0478/northcoastangelfund.com

$250 $250

$24.0

Ohio

SaaS, life sciences, instruments, controls

4

1

StreamLink, Remesh, Complion, TPA Stream

Todd Federman, Clay Rankin, managing directors

North Coast Venture Fund, Cleveland (216) 262-0478/northcoastangelfund.com

$250 $500

$15.0

Ohio

Software, life sciences

3

1

StreamLink, Remesh, Neuros Medical, GenomOncology

Todd Federman, managing director

$2,000 $25,000

$1,000.0

None

Communication and other infrastructure

0

10

TowerCo, Quantum Wireless, Omega Wireless, APC Towers

F. Howard Mandel Ryan Lepene, co-presidents

$100 $100

NA

Global

Tech

2

200 (1)

Remesh, S4 Medical, Medpilot, TPA Stream

Saeed Amidi, CEO; Chantel Moody, platform director, Cleveland

$5,000 $5,000-40,000

$1,000.0

United States

None

0

8

Listing on website

Edward Pentecost, managing director, president

$15,000 $25,000-50,000

$1,016.8

U.S., Canada

Tech-enabled services, software, health care

0

4

SkillSurvey, Payspan, EnableComp, Netchex

Phillip Molner II, managing partner

$5,000 $15,000

$685.0

Eastern half of U.S. and Canada

Special situations, divestitures, industrial, aerospace, industrial tech

2

4

Flight Options/Flex Jet, Lux Label, Simcom, Systron Donner

Bassem Mansour Steven Rosen, co-CEOs

$1,000 $1,000-400,000

$8,000.0

N. America, Europe, Australasia region

Generalists with seven formal industry specializations

1

81

Shaker, Parker Products, Area Wide Protective

Stewart Kohl Bela Szigethy, co-CEOs

$2,000 $3,000-10,000

NA

North America

Aerospace, defense, health care, process control

0

2

BJG Electronics, Impact Plastics, Ibis Tek, Lifeway Mobility

Brett Keith, managing partner

$1,000 +$7,500

NA

Driving distance from Cleveland

Training, business services and others

0

1

Budco Financial

Brendan Anderson, founder

$2,500 $5,000-50,000

$380.0

Midwest, Southeast, global

Commercial real estate, new technologies, manufacturing

1

4

Creative Polymer Solutions, Blue Grass Chemicals, IWP, Signet Real Estate Group

Anthony Manna, chairman

Squire Ridge Company LLC, Beachwood (216) 839-5123 /squireridgecompany.com

$750 $1,500

NA

Midwest

Performance plastics and materials, home decor, environmental services

1

1

Allegheny Performance Plastics, EnviroScience Inc.

Steven Ross, president

Valley Growth Ventures, Youngstown (708) 557-2113/valleygrowthventures.com

$200 $250

NA

Mahoning Valley, NE Ohio, Ohio

Software, energy, materials, health care, additive manufacturing

3

0

S4 Medical, MedaSync, MedPilot, DAtAnchor

Ernie Knight, managing director

Watervale Equity Partners, Beachwood (216) 233-8855/watervalepartners.com

$10,000 $25,000

NA

North America

Manufacturers/distributors of engineered industrial/consumer products

1

0

EMX Industries

Mike Faremouth, Jim Guddy, Eric Bacon, managing directors

Weinberg Capital Group, Independence (216) 503-8307/weinbergcap.com

$5,000 $15,000

NA

Midwest

Manufacturing, business services, value-add distribution

1

0

Hoodmart, Convenience Valet, Channel Products, Alex N. Sill Company

Ronald (Chip) Weinberg Jr., managing director, principal

$50 $100-500

NA

NE Ohio, Midwest, East Coast

Tech (SaaS, media, elder care, sales/ marketing)

0

0

Futuri, GenomOncology, Groupmatics, Ads in Motion

Lee Zapis, president Rich Bongorno, CFO

Cleveland International Fund Ltd., Cleveland (216) 245-0606/clevelandinternationalfund.com Comeback Capital, Shaker Heights NA/comeback.vc

Drummond Road Capital, Beachwood (216) 910-1702/None

JWI Capital LLC, Twinsburg (440) 823-5109/jwicapital.com Kirtland Capital Partners, Beachwood (216) 593-0100/kirtlandcapital.com Linsalata Capital Partners, Mayfield Heights (440) 684-1400/linsalatacapital.com

MCM Capital Partners, Beachwood (216) 514-1840/mcmcapital.com Morgenthaler Private Equity, Cleveland (216) 416-7500/mpepartners.com

Peppertree Capital Management, Chagrin Falls (440) 528-0333/peppertreecapital.com Plug and Play Cleveland, Cleveland (216) 534-8771/plugandplaytechcenter.com PNC Erieview Capital, Cleveland (216) 222-2491/pncerieview.com Primus Capital Partners, Woodmere (440) 684-7300/primuscapital.com Resilience Capital Partners, Beachwood (216) 292-0200/resiliencecapital.com The Riverside Co., Cleveland (216) 344-1040/riversidecompany.com Rockwood Equity Partners LLC, Beachwood (216) 342-1790/rockwoodequity.com ScaleCo LLC, Beachwood (216) 288-5647/scalecommunity.com Signet LLC, Akron (330) 762-9102/signetllc.com

Zapis Capital Group LLC, Westlake (440) 871-1300/zapiscapital.com

RESEARCHED BY CHUCK SODER (CSODER@CRAIN.COM)

Get the Excel version of this list — and every other Crain's list. Become a Data Member: CrainsCleveland.com/data Information is supplied by the companies. Deal numbers exclude follow-on investments in existing portfolio companies. (1) The vast majority of these investments were led by other Plug and Play offices.

P016_CL_20190422.indd 16

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PA G E 17

AKRON

New medical company plans to land in Akron

By Dan Shingler

By Dan Shingler

dshingler@crain.com @DanShingler

Two veterans of the local medical device industry have teamed up to form a new company they hope will develop a new and better bandage, and they intend to set up in Akron.

Bill Fuller, co-founder of Sotera Medical, now known as S4 Medical, and Dr. David Kay have formed a company called OKAPI Medical, Fuller said.

Kay is an orthopedic surgeon who in 1995 founded OrthoHelix, a company that developed implants and instruments used in reconstructive foot and ankle surgery. That company was sold in 2012 for $155 million in what local investors say was the biggest takeout to be seen in Akron in recent memory.

S4 Medical makes devices used to move and protect the esophagus during cardiac surgery to treat atrial fibrillation. The company was formed in 2012 by Fuller and Dr. Emile Daoud in Cleveland. It’s listed as a portfolio company by both JumpStart and BioEnterprise.

The new company, OKAPI, just got funding from the city’s Akron Bioinvestments Fund II and, along with some capital from other investors, has raised more than $500,000, Fuller said.

He added that it will use that money to develop a new type of bandage, using technology from University of Akron polymer researchers, that will enable surgeons to better close wounds.

“It’s a pretty significant advancement with regard to how wound closing is typically handled,” Fuller explained. “It’s an adhesive. It actually uses very similar chemistry to what’s now commercially used. It’s just an advancement with some new polymer chemistry that’s added to an existing adhesive material.”

Unlike current adhesives, which become stiff or outright rigid once they dry on a patient’s skin, this new adhesive remains flexible. That leads to less tearing of the skin from a bandage when a patient moves, and the bandage feels better when worn, he said.

The product is not yet in production and still is in development about a year after Fuller and Kay licensed the technology from the university, Fuller said.

Once it is ready for the market, he’s hoping the Food and Drug Administration will quickly clear it for use, because nearly all of the materials used in the adhesive are known to and already have been approved by federal regulators.

For Akron, it’s another mark of progress as it seeks to develop a medical device corridor downtown — a more than 10-year effort so far that has produced mixed results. New companies such as OKAPI and BioFlightVR, which makes virtual reality training tools for hospitals, have been drawn to town. But the city had less-than-complete success at filling up the Austen BioInnovation Institute downtown with new startups and transplants, though the arrival of BioFlight did help that situation.

Akron Mayor Dan Horrigan welcomed OKAPI and said it will help

P017_CL_20190422.indd 17

Metisentry starts to make a push into investments dshingler@crain.com @DanShingler

Bill Fuller

the city establish itself as an innovation hub.

“We have made entrepreneurship and innovation a cornerstone of our economic development in Akron,” Horrigan said in a statement. “The ability of companies like OKAPI Medical to raise capital and thrive is critical to the long-term success of our city and our region.”

Other companies are popping up elsewhere, too, including at the Bounce Innovation Hub, the city’s downtown business incubator.

It recently got a new tenant, coincidentally in the form of another startup aimed at medical adhesive technology, PolyLux. Its co-founder, Dr. Abraham Joy, reported he’s now established a lab at Bounce and is working to develop his product.

PolyLux is developing a bandage adhesive that will release when exposed to UV light, which will make it better for use on elderly and infant patients who have fragile skin but might have bandages that need to be repeatedly reapplied for procedures.

OKAPI, on the other hand, is going after the surgical incision market, where it could market its product directly to surgeons and hospitals that use a lot of bandages. Later, it might go after other markets, such as emergency responders or others who have to deal with traumatic injuries in the field, Fuller said.

But if it can conquer the surgical market, OKAPI might have a disruptive technology, Fuller contended, because it might be able to replace sutures in many surgical situations.

“You’ve got millions and millions of procedures annually in the U.S. that require incisions,” he said, noting that they almost all currently rely on sutures, a technology that hasn’t changed much in hundreds of years.

First, OKAPI has to conduct more studies and do more product development and testing, he said. Much of that work is being done at the Northeast Ohio Medical University in Rootstown.

OKAPI also has to find a home, as Kay and Fuller currently do most of the work off-site.

It might end up being a neighbor of PolyLux. “We’re talking with Bounce right now, but we haven’t signed a lease,” Fuller said. “But we are looking to be somewhere in Akron. … We want to be close to the research there and not too far from NEOMED.”

Akron-based Metisentry is getting into a new business: investing in early stage software companies, especially local firms doing work in the growing software-as-a-service sector.

It’s not unfamiliar territory to the firm or its founder, Marling Engle.

Metisentry is a software firm that writes and develops applications for others on a contract basis. A good chunk of its business already is working with software-as-a-service (SaaS) for other companies that seek to develop products in that arena.

“It’s where we’re seeing a lot of action because of all the groups here,” Engle said.

Akron companies such as Wastebits, which plays matchmaker and logistics manager for trash haulers and landfills, or Bezlio, which provides cloud-based mobile applications for business management software, are among a growing list that have developed and are selling subscription-based software. Another startup, Fontus Blue, is developing applications to help water treatment plants manage their regimens and plans to offer them via online subscription.

Engle said he figures that because he hears about so many of these companies when they are young and in need of capital — and knows their industry and product offerings — he’s in a good position to find and evaluate investments.

“The thing they have in common isn’t the product. It’s the business model,” Engle said.

He’s starting with two deals he said came together more quickly than expected in April and is still working to build a network of local investors.

Metisentry has invested about $300,000 in two local companies, but along with follow-on investments, it has helped raise a total of about $1 million for the companies, Engle said.

He declined to name one without the blessing of the company itself.

The other is a company called Pinpoint, being developed by Nick Began. He’s president and founder of Stoneworks, a North Carolina company that was formerly in Bedford Heights. It provides countertops and other materials to builders. Began could not be reached before this story went to press, but Pinpoint offers an online software service that helps businesses and customers track deliveries, according to Engle and Pinpoint’s website.

Many SaaS offerings are developed because someone in an industry sees a need for an online service to deliver information or connect companies to their customers, contractors or providers. That’s how former landfill manager Dan Collins said he got the idea for his company, Wastebits.

Not coincidentally, that’s sort of how Engle is approaching investing: not as a professional financier but as someone who knows a targeted industry well enough to see investment opportunities where others might not.

The fact that Engle, at only 32, is already concerned with investing his

profits and not just making them, might say something about his success. Metisentry has definitely gotten noticed, not only by those in Akron’s software sector Engle but among its investment community as well.

“I’ve heard nothing but good things about them and would love to find more ways to work together,” said Bill Manby, founder and managing partner of Acquire Investments, an Akron investment firm that also specializes in young companies.

Manby, who has not invested with Engle, welcomes some competition into a market he said could use more sources of organized investment.

“We should have about 50 guys like that in town right now,” Manby said.

He added that Engle’s expertise in the industry into which he’s investing could be an advantage both for Metisentry and the companies seeking investment. Manby also uses technical people to help him evaluate investments. It means Engle might be better able to gauge a company’s chances for success and give them valuable guidance. It also could be good for the local economy, Manby contended.

“Yes, that’s all helpful. The other thing that’s helpful is the more young leaders and entrepreneurs we can develop soon, the better,” he said.

Engle will need to be cautious, though, because he sells to the same companies in which he’s investing.

He’ll have to balance what’s best for the company with Metisentry’s desire to sell its own services, but that’s

not an unmanageable position, Manby said.

Engle said that arrangement also aligns Metisentry with such customers. After all, it wants the companies in which it invests to succeed. It also might keep companies from burning through their capital too quickly by helping them keep down development costs, he noted.

Not all SaaS companies will be appropriate investments, either, Engle said. Metisentry is not seeking to fund idea-stage companies that haven’t done development work yet. But it is looking for companies just past that stage, ones that might need help finishing their development or in launching their services.

That doesn’t mean others in his network of investors might not want to invest in those early companies, though, Engle said.

“There are companies that are too early for us to invest in, but they fit with others well … and there are companies that are too big for us to invest in, and we’ll help them connect with traditional VC firms,” Engle said.

For now, Engle is looking for more deals and building his network of co-investors, which includes existing area angels and businesspeople such as Began.

The arrangement likely will stay informal. Metisentry isn’t seeking to raise a fund and then manage it for other investors, nor is it committing a defined amount of money toward investments, Engle said. How much it invests and with whom will be determined on a case-by-case basis and likely will change over time, he explained.

“If people are interested, we’re definitely open. It’s not a closed group or anything,” he said.

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PA G E 18

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A P R I L 2 2 - 2 8 , 2 019 |

ANCORA

CONTINUED FROM PAGE 1

Ancora is part of an investor group that owns 5% of retailer Bed Bath & Beyond Inc. As of late March, Ancora and fellow activists have been pushing for the company to replace its 12-person board and a CEO who has been in place since 2003. Ancora has offered up 16 candidates for those dozen board seats. The chain’s stock shot up after news of that campaign spread.

“We just took a position and said we are going to be aggressive,” DiSanto said.

The week after those filings for a proxy contest hit the Securities and Exchange Commission, Ancora sent a letter to restaurant group J. Alexander’s Holdings Inc., where it has an 8.6% stake, offering to take the company private by acquiring it for $11.75 per share in cash, or $186 million. It’s the first time Ancora has pursued a public-to-private deal.

J. Alexander’s rejected that bid, arguing the offer greatly undervalues the company. The deal features pershare prices 12% lower than the company’s 52-week trading high and nearly 22% lower than the prevailing equity analyst price target (which is reportedly $15 a share), the company said in its reply.

DiSanto, who thinks J. Alexander’s should be taken private and sold, re-

HOTELS

CONTINUED FROM PAGE 1

CW Capital became its owner after Judge Cassandra Collier-Williams of the Cuyahoga County Court of Common Pleas authorized the sale to collect on the $18 million remaining balance of a mortgage that hotel owner Big River Real Estate LLC had secured June 7, 2013. Big River, a private equity firm incorporated in Wilmington, Del., had owned the property since 2009.

Big River did not contest the proceeding, which CW Capital filed Feb.

CRAIN’S CLEVELAND BUSINESS

sponded by saying the company’s board “remains deeply conflicted in representing the best interests of outside shareholders.” He criticized the board for “inane capital allocation decisions.”

“The issue we have here is it’s clearly underperforming as it relates to valuation metrics versus competitors,” DiSanto said, suggesting that a footprint of 48 restaurants is too small for a company to remain public.

Among other issues, DiSanto also highlighted what he feels are conflicts of interest between board members there and a consulting firm, Black Knight Advisory Services, which was paid annually for services and collected $4.56 million when that deal was terminated, something that prompted DiSanto to write that management “continue to skim more value for themselves at the expense of shareholders.”

In the letter, he also said Black Knight made more than $7 million off its relationship with the restaurant group.

“Here’s a company with a very good brand and good restaurants,” DiSanto said. “They just need to be private.”

With those two campaigns, DiSanto pointed to situations where share prices are deteriorating while compensation for management has stayed the same.

“And I would say there has been a lack of willingness to talk with us and engage us in a number of situations,” he said, referencing Ancora’s recent activist campaigns.

“If we go the proxy route, we mean it and prove it,” added Jim Chadwick, Ancora’s director of alternative investments.

The Mayfield Heights investment firm has increasingly acquired stakes in larger companies with the buildup of its assets under management, or AUM. Ancora has about $6.5 billion AUM today, about 225% more than what it had heading into 2014, which is when the firm launched its activist hedge fund.

In years past, Ancora, the fourthlargest money manager in Cleveland, according to Crain’s research, was better known for its involvement in the banking sector. It was heavily weighted in community banks just a decade ago, with Ancora representatives sitting on a variety of boards.

As consolidation picked up in the banking industry, investors collected as acquisitions went through. But otherwise, “there was not much opportunity there,” DiSanto said.

Come 2014, Chadwick joined the team with the express purpose of launching an activist-centered strategy through a new fund, which is called Catalyst, according to filings.

Several others joined the firm after that as Ancora beefed up its team sourcing investments at companies that are often distressed but primed for turnarounds.

Chadwick described the strategy as “constructivist” at the start. The activist angle materializes when company boards aren’t receptive to changes, he said.

The firm has engaged in a variety of activism since then. Not every event has made headlines as much as the more recent and high-profile campaigns that feature large, wellknown public companies.

In 2016, Ancora pushed for a shakeup at image publisher Shutterfly, making the case for new directors who would pursue a sale of the company.

The campaign resulted in board changes without the firm pursuing a proxy contest. The stock increased and in 2018, Ancora exited its position.

“It was a big win for us,” DiSanto said.

A criticism of activist shareholders is how some tend to push for immediate changes at a company and then quickly sell out.

But Chadwick rejects the notion Ancora is just in it for the short-term gains.

He highlighted Ancora’s stake in Canadian trucking company Element Fleet Management Corp., for example, which the firm bought into following a failed sales process in February 2018. What followed were disappointing earnings and an inevitable stock sell-off, all of which spurred Ancora to team up with other shareholders to refresh the board and name a new chief executive.

Since then, the stock price has gone on to improve by about 60%. Ancora still holds a 2.5% stake in the company.

“I would not view us as short-term trader trying to effect change and then getting out of the stock,” DiSanto said. “That’s not our game.”

Angela Rodenhauser, a senior vice president with Dix & Eaton’s investor relations practice, said many activist shareholder campaigns will never become known publicly because they target smaller companies that won’t draw the media attention of something like Bed Bath & Beyond.

And not every campaign will boil over into a proxy contest.

And as activism kicks up to new heights, many campaigns aren’t just about money, but about public image and efforts tied to environmental, social and governance (ESG) factors.

While activists like Ancora would prefer to work with boards to enact changes without going a more contentious route — such as a proxy fight or takeover — there’s often resistance for any number of reasons.

“Shareholder activism does make people fret only because of the outcomes in many situations,” Rodenhauser said. “But it’s not always a bad thing.

Sometimes they bring forth ideas management was already thinking about.

But companies do need to be prepared for when an activist strikes.”

As far as Ancora is concerned, there’s likely more activism in store.

13, 2018. In its original filing, CW said Big River had stopped making monthly payments of $97,000 in October 2017, and failed to pay second-half property taxes of almost $320,000 for the last half of the year.

That tax bill and a nearly $32,000 delinquency fee have since been paid.

Across town, the 404-room Doubletree Beachwood, 3663 Park East Drive, has a $26 million loan that was sent to special servicing, according to Trepp of New York City, a reporting service that follows securitized mortgages. Despite the borrower being current on the loan, the status change was made because revenue had fall-

en below debt coverage ratios as occupancy was at 47% the year prior to Sept. 30, 2017, Trepp said. The hotel had told the lender handling the loan, referred to as Comm2014CR20, that it had “lost a major account to a downtown hotel” and was working to replace it.

In an email to Crain’s, Satish Duggal, managing member of hotel owner Cleveland Beachwood Hospitality LLC, wrote that the “hotel is doing fine. The Beachwood area is very demanding from the hotel point of view! We continue to be committed to maintaining an excellent hotel in this market.” He added that the own-

ership is regularly renovating additional parts of the 1977-vintage property “as long as the economy holds up.”

Cuyahoga County property taxes are current, according to online records.

The foreclosure and loan status reports are the first, but not unexpected, down notes in the region’s hotel scene. Some fiscal pressure had been expected for years as the region’s hotel business entered a growth spurt, much of it connected to construction of the new Huntington Convention Center of Cleveland.

Laurel Keller, a Cleveland-based

senior vice president in Newmark Knight Frank’s hospitality, gaming and leisure market, said that although the hotel market has been growing, and new hotels may attract additional customers to the market, profitability could fall at older properties.

Both are also full-service hotels that must compete with the continuing deluge of business-oriented hotels that don’t have the expenses associated with offering food service.

“Although demand has been up year over year since 2016, obviously,” she said, not all of the properties are enjoying the expansion.

Activist strategy

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CRAIN’S CLEVELAND BUSINESS

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PA G E 19

SOURCE LUNCH

Adam Snyder Managing director,

CLEVELAND BUSINESS

manufacturing sector partnership at Magnet Manufacturers are problem-solvers. In recent years, they’ve taken on global competition, pricing pressures and changing technology. ¶ “And all of these things have been thrown at Northeast Ohio manufacturers, and these executives have facilitated their teams solving these problems really effectively in a lot of cases,” Adam Snyder said. “So why wouldn’t we have confidence that if we can pull these folks together and frame it and focus it, that we should be able to blow this out of the water?” ¶ Magnet and the Greater Cleveland Partnership are co-leading the manufacturing portion of workforce development initiative Workforce Connect. ¶ In the first phase, Workforce Connect is bringing together about 12 to 15 high-level manufacturing executives from companies of all sizes across the region. Later, the group will open up the process to the wider community. Snyder sat down with Crain’s to talk about his work so far. This conversation has been edited for clarity and length. — Rachel Abbey McCafferty

The Snyder file How he spends weekends At his sons’ sporting events

Best place to relax On the treadmill with Netflix

Netflix recommendations “Sherlock” or “Peaky Blinders”

Where he takes visitors He checks the concert listings.

Favorite venues Nautica, the Agora and the Odeon

Lunch spot Presti’s Bakery 12101 Mayfield Road, Cleveland 216-421-3060

The meal A slice of cheese pizza with Diet Coke and a piece of vegetable stromboli with water.

The vibe This bustling bakery in Little Italy is a good place to stop for a morning pastry, a quick lunch or a special treat.

The bill $10.58 with tip

BANK

CONTINUED FROM PAGE 6

“BofA is of a size that they really can’t do bank acquisitions anymore, so a retail expansion strategy in attractive markets like ours makes sense,” Crowley said.

BofA’s plans for Ohio stand out, given that while Ohio is an attractive market, banks tend to be more bullish on other areas.

“A lot of banks are not that keen on adding bricks and mortar these days, given the costs involved and the high interest in digital banking and other technology-based ways to conduct banking,” said Patricia Oliver, a banking consultant with Cleveland-based Tucker Ellis. “Also, unlike other areas of the country, like the Southeast, the Midwest is not generally viewed as a high-growth area.”

BofA must view things differently.

“Ohio is a complete growth market

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What are some of your initial goals?

The primary objective in this first part is to get the sector partnership process stood up. So, initially, that’s the recruitment of the manufacturing leadership team that will steer the process, the engagement of the workforce development and education and community partners that will be critical to the solutions and priorities that the manufacturers select, and, for me, given my background and Debbi’s background (Debbi Perkul, the executive director of workforce partnership), a lot of it for me was learning the intricacies of the workforce and technical education system.

Why is this something you think is important? Why does the region need this?

As someone who’s been in manufacturing for my whole career, and in manufacturing leadership roles for a good portion of it, I’ve jumped through a bunch of different verticals and technologies and types of manufacturing, and the common thread the whole way through is this constant need to acquire and retain and develop and train talent.

Do you think there are some common solutions that manufacturers can draw on here?

Part of what we’ve been doing these first couple of months is best-practice identification in the region: Where are great things happening that might be learned from or scaled or replicated?

And one of the first statements from the funders group is there’s a lot of good things happening, and it’s all disparate and not well-aligned. So

for us,” Marziani said. She also dismissed any notion of concerns with pushing into a competitive market.

The bank did trim its branch network by 600 locations by the end of 2017 as it focused on digital and mobile banking services in response to changing consumer habits, which involve visiting brick-and-mortar locations less often.

However, Marziani indicated that customer feedback has encouraged the bank to add new consumer locations to serve clients.

“We clearly believe in getting closer with our retail space. As we look around our 92 market presidents, we clearly wanted to make a significant investment here to be more localized and closer to our clients,” Marziani said. “We’ve been able to show growth, and we clearly know there’s a tremendous amount of opportunity in the state of Ohio in terms of the businesses that are here, people that are here and a community that needs

there’s some component of we can solve some of this problem, most likely, just by being better aligned, understanding what different organizations’ capabilities are, and capacities and scope, and creating effective dialogue between the manufacturers and those agencies.

Some of it, we’ve been engaging experts in other sector partnerships from around Ohio and other places in the United States.

One big question is: What’s the danger if the region doesn’t take on these types of initiatives?

So we’re seeing a statistical majority of manufacturers’ growth is hampered by the talent issues that they’re seeing: attracting and skilling their workforce. So the danger would be, if we as a community can’t solve this problem, those manufacturers start to have to go to other places in order to capture the demand that they’re seeing from their customers. The flip side of that is, from a business standpoint, Northeast Ohio wants to be attracting businesses. That talent gap is a big red flag for anybody who’s looking to either increase their capacity or drop a new site here.

Something I’ve heard a lot as I’ve been covering the skills gap is there’s not a skills gap, there’s an awareness gap or a wage gap.

What’s your take on that?

If you choose that to be your problem statement, then you have all of these subproblems of: Are students and adults aware those career paths exist, is the community aware that this skills gap is viable, how is it being addressed now through staffing agencies and temp

Bank of America’s Ohio presence: By the numbers 61: ATMs 1,500: Employees 26: Merrill Lynch offices $3.7 billion: Commercial business loans $282 million: Small business loans $191 million: Home loans $53 billion: Global wealth investment management client balances

our assistance.”

More than 30 banks compete in the Cleveland MSA alone, which features big names ranging from Cleveland’s KeyBank to Huntington Bank, PNC Bank, Fifth Third Bank, Citizens Bank and U.S. Bank (which has the greatest retail market share in Ohio), all of which claim the biggest chunks

agencies and OMJ (Ohio Means Jobs) and all of these organizations doing very similar things? Now, could you flip that and say we have an awareness issue that’s causing a skills gap? You could go chicken and the egg to some extent.

It seems like a very complex problem.

What we’re working on presenting to all of the stakeholders right now is, when you say awareness gap, people typically jump to the one that jumps right out: Graduating high school seniors and their parents and the guidance counselors aren’t aware of these opportunities. That’s where everybody goes because that’s what’s been talked about. And that problem is still not holistically solved.

Or is solved in pockets or with certain individuals and certain relationships between high schools and companies.

One of the things that we’re seeing is the other way you can talk about awareness gap is, are the manufacturers aware of the barriers in the populations that they could be drawing from? Or, even higher level than that, are the manufacturers aware of populations that are being undertapped for manufacturing, and why is that? There’s pockets of communities and people that aren’t working in manufacturing, and if you look at it on a map, there isn’t manufacturing around them. And then the complexity of this problem comes out really quickly, because along with transportation comes child care or elder care or financial literacy and all of the things that play into how these people get to work or how do they communicate with their employer about those things.

of Cleveland’s almost $70 billion in deposits.

As could be said across its footprint, BofA’s presence in Ohio, and in the Cleveland market, has ebbed and flowed through the years. In 2013, for example, in the wake of the economic downturn, the bank shut down three mortgage offices across Ohio, including one in Beachwood where 1,000 employees were laid off. The retail element has always been missing, though.

Almost every new branch, or financial center, has a newer, modernized setup, often compared to the layout of an Apple store. Instead of traditional tellers there are open spaces with “universal bankers.”

There will also be some “advanced” centers in store as well, which are the most high-tech versions of branches.

Some banks have referred to those as “tellerless” branches — KeyBank has been testing those out in markets like Colorado — which is a bit of a misno-

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mer in that the locations still have people there, but they rely more on technology. A person might have a web conference with a banker or adviser at one of those locations.

About eight people tend to work at typical financial centers, Marziani said, though staffing depends on the location. The higher-tech offices may have just a couple of people.

BofA’s retail plans undoubtedly will be on the radar of competitors, but in a fragmented market, it may not be a major cause of concern.

“There are 32 banks with a presence in the Cleveland market, so the addition of one more, even as large and powerful as BofA, won’t dramatically change the competitive landscape,” Crowley said. “BofA can be successful with chipping away at a modest amount of that $70 billion market, but it won’t necessarily cause a change in strategy by any of the banks currently serving customers in the region.”

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