Sports business: The cost of a potential Indians name change. PAGE 4
FOCUS | MIDDLE MARKET
Emerging technology drives innovation. PAGE 10
CRAINSCLEVELAND.COM I JULY 13, 2020
AMAZON’S ‘SCRAPPY SOLUTIONS’ TO COMBAT COVID-19
A walk through the North Randall fulfillment center shows how the retail giant has addressed worker concerns BY MICHELLE JARBOE
Mark Huber holds a voice amplifier in front of his mask and speaks into the microphone to be heard over the whir of conveyor belts in a warehouse the size of nearly 15 football fields. Above him, cameras track the movement of hundreds of employees at Amazon’s North Randall fulfillment center on Emery Road. Images from those cameras flow through an artificial intelligence system that flags possible breaches of social-distancing guidelines. Huber and his fellow operations directors at Amazon distribution sites nationwide pore through that data daily to see how many violations the cameras identify — and what approaches they ought to take to keep workers apart. See AMAZON on Page 18
Valerie Lindstrom stands inside a Plexiglas pod that Amazon uses for training and other activities where workers can’t stand at least six feet apart. | MICHELLE JARBOE/CRAIN’S
COPING WITH COVID-19
BANKING
Yesterday and today: NEO companies claim 41% of state’s PPP loans How two pandemics compare Figures show that funding helped retain nearly 772,000 jobs in this region BY RACHEL ABBEY MCCAFFERTY
The closed movie theaters and museums. The discouraged crowds. The encouraged, but not mandated, face masks. It’s tough not to think that we’re in a repeat of history. But there are some major differences between the 1918 flu pandemic and the COVID-19 pandemic of today. The viruses behaved a bit differently, with younger adults at a greater risk of death in 1918. With
BY JEREMY NOBILE
more jobs concentrated in fields like mining, remote work wasn’t even a possibility. And World War I loomed large in the public consciousness, often pushing the pandemic aside. In Northeast Ohio, a number of companies and institutions that made it through that pandemic in 1918 and 1919 are still here today. At Crain’s, we surveyed organizations founded before 1918 and collected those responses in this story. See 1918 on Page 22
NEWSPAPER
VOL. 41, NO. 25 l COPYRIGHT 2020 CRAIN COMMUNICATIONS INC. l ALL RIGHTS RESERVED
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The Paycheck Protection Program funded 140,277 Ohio businesses with a combined $18.3 billion in potentially forgiven government loans during its three-month lifespan between April and June, according to U.S. Small Business Administration figures. Designed primarily to protect small business and nonprofit payrolls amid the economic struggles of the COVID-19 outbreak, and despite an imperfect rollout, that money reportedly financed the retention of more than 1.8 million jobs statewide. Ohio businesses claimed 2.9% of all U.S PPP loans made (nearly 4.9 million) and 3.5% of all dollars lent — which at $521.1 billion is more than 18 times what the SBA allocated in all of fiscal year 2019 — but hosted 5.8% of all jobs retained countrywide (51.1 million), according to a Crain’s analysis of
Top Paycheck Protection Program lenders
The banks that made the highest number of PPP loans since the program began. Rank
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Lender
JPMorgan Chase Bank Bank of America Truist Bank PNC Bank Wells Fargo Bank TD Bank KeyBank U.S. Bank Zions Bank M&T Bank Huntington Bank Fifth Third Bank Cross River Bank Citizens Bank BMO Harris Bank
Loan count
269,424 334,761 78,669 72,908 185,598 82,773 41,487 101,377 46,707 34,680 37,122 38,197 134,472 49,670 21,362
Net dollars
$29 billion $25.2 billion $13.1 billion $13 billion $10.5 billion $8.5 billion $8.1 billion $7.5 billion $6.9 billion $6.8 billion $6.5 billion $5.4 billion $5.4 billion $5 billion $4.8 billion
Average loan size
% of total authority
$107,882 $75,287 $166,215 $178,833 $56,414 $102,311 $196,177 $73,438 $148,623 $195,825 $175,854 $142,271 $39,871 $100,806 $225,425
4.4% 3.8% 2.0% 2.0% 1.6% 1.3% 1.2% 1.1% 1.1% 1.0% 1.0% 0.8% 0.8% 0.8% 0.7%
NOTE: THE TOP FIVE BANKS ORIGINATED 17% OF TOTAL LOAN DOLLARS. APPROVALS THROUGH 06/30/2020 SOURCE: U.S. SMALL BUSINESS ASSOCIATION CRAIN’S CLEVELAND BUSINESS GRAPHIC
SBA data released July 6. Northeast Ohio companies claimed a sizable share of the state’s PPP activity. In the region, 57,953 businesses
received funding supporting 771,915 jobs, or 41.3% and 42.6% of state totals, respectively. See PPP on Page 21
7/10/2020 3:58:15 PM
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REAL ESTATE
Rockefeller Building, long pursued but not officially for sale, is under contract Buyers hope to transform the 17-story downtown office building BY MICHELLE JARBOE
The Rockefeller Building, a downtown Cleveland landmark that’s been the object of developers’ unsated lust for years, is under contract to buyers who hope to transform the 17-story structure into 436 apartments, with offices and retail on the lower floors. None of the players will discuss the deal. But investment documents circulating in the real estate community shed light on a transaction that everyone’s trying to keep under wraps. An investment summary prepared by Avant Capital Partners, a New York-based provider of short-term loans, names the buyers as Akron-area entrepreneur Agostino Pintus and Kenny Wolfe, his Texas-based business partner. The pair focuses on syndicated deals, in which they put apartment buildings under contract and then line up investors to provide the actual cash. They’ve agreed to pay $13.35 million for Rockefeller, which was built in the early 1900s by industrialist John D. Rockefeller and has languished even as developers have remade historic office buildings across the central business district as housing and hotels. Located at West Sixth Street and Superior Avenue, the property contains roughly 220,000 square feet of offices, which are 60% vacant. Most of the tenants, including a bevy of law firms, are on month-to-month leases, according to the Avant investment summary. “It has never gone through a comprehensive historic restoration,” said Tom Yablonsky, executive director of the nonprofit Historic Warehouse District Development Corp. “So it’s one of the biggest prizes out there, from that standpoint. People have tried for at least a decade to purchase it.” Citing a nondisclosure agreement, Pintus wouldn’t discuss the project. “I want to tell you everything about it, but I can’t,” he said during a brief phone conversation. Wolfe didn’t respond to a request for comment. And a representative for Benjamin Cappadora, the building’s longtime owner and manager, denied that any deal is in place. “There is no pending sale,” said Therese Manos, the office manager at Rockefeller. “We have tons of people looking,” she added. “We get phone calls at least three times a week about possibilities. We have nothing in motion at this point.” The building wasn’t formally listed for sale. Public records show that Cappadora acquired Rockefeller in 1967. For decades, he co-owned and operated the property with friend and business partner Michael Miller. Miller died in 2008, and a trust bearing his name still holds a 50% stake in companies that own and manage the building, according to court filings. Since 2016, Cappadora and Diana Miller, the trustee for her late father’s trust, have been fighting in Cuyahoga County Common Pleas Court. Miller claims that Cappadora has not passed along any profits from the property in years and, meanwhile, has neglected the building and resisted efforts to put it on the market. In legal filings, Cappadora disputes
The Rockefeller Building is particularly notable due to the ornate cast-iron detailing on its lower facade. | PHOTOS BY MICHELLE JARBOE/CRAIN’S CLEVELAND BUSINESS
the allegations. The slow-moving litigation is stalled. In October, the parties asked for a stay, halting the proceedings. Court records don’t include a reason for their request. An attorney for Diana Miller declined to comment. So did Joseph Jerome, the attorney representing Rockefeller Building Associates, the
“TO SAY THE ROCKEFELLER HAS ‘GREAT BONES’ IS AN UNDERSTATEMENT.” — Conor Coakley, a first vice president at the CBRE Group Inc.
troubled ownership group. The Avant document, and a separate, 62-page information package aimed at investors, describes an ambitious redevelopment plan with a potential price tag of $110 million. The Geis Cos. of Streetsboro would play the role of developer, for a fee, and handle design, construction and leasing. Conrad Geis, a director and managing partner at Geis, wouldn’t talk about the project. Preliminary plans for the apartments show nearly 300 micro-units, ranging from 235 to 333 square feet. The remainder would be studios and
The Rockefeller Building stands at Superior Avenue and West Sixth Street in downtown Cleveland.
one- and two-bedroom units, topping out at 726 square feet. Monthly rents could range from just over $900 to just shy of $1,400. The redevelopment also would include 30,000 square feet of offices and 15,000 square feet of retail space. The investor documents note that the property includes 176 parking spaces in surface lots. An adjacent garage, which is in rough shape and isn’t being used, could be demolished to create a site for eventual ground-up development. The buyers and developer expect to use federal historic preservation tax credits to help finance the project, since Rockefeller has been listed on the National Register of Historic Places since 1973. They also plan to seek state historic tax credits, though it’s difficult to secure those credits, which are competitive, for a building that is partially occupied. Real estate brokers who aren’t involved in the deal said there’s tremendous potential at Rockefeller, which became an even more attractive investment after the Sherwin-Williams Co.’s February announcement that it plans to build its new headquarters on parking lots immediately to the east, between Superior and St. Clair avenues and West Third and West Sixth streets. “To say the Rockefeller has ‘great bones’ is an understatement,” said Conor Coakley, a first vice president at the CBRE Group Inc. brokerage whose clients have made unsolicited, and unsuccessful, offers for the property. But the coronavirus pandemic is making it tougher to consummate real estate deals — and prompting some developers to question whether there’s still room in the market for more apartments. And $13.35 million is a higher price than other suitors have been willing to pay. “I know that building is going to take a lot of money to get repositioned the right way,” said Rico Pietro, a principal at Cushman & Wakefield/Cresco Real Estate. “That’s the question: Can you make that number work when you have to put so much money into the property?”
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If the Cleveland Indians decide to change the name they’ve held for 105 years, they’ll be undertaking a task that’s taller than a Francisco Lindor moonshot and more complex than any advanced statistic. “The process goes so deep and so beyond just making something that’s pretty,” said Todd Radom, a New York-based graphic designer who specializes in branding for professional sports franchises and events. A new name can bring potential trademark issues, the creation of logos, uniform and signage changes, and a switch in fonts. Major League Baseball, apparel companies, consulting firms and focus groups would be involved, and the changes would extend from the obvious (think the monstrous “Indians” sign above the scoreboard at Progressive Field) to the seemingly trivial (such as ballpark napkin holders and stationery). The cost to rebrand a stadium, arena or ballpark after a change in naming rights often exceeds $1 million, said Eric Smallwood, the president of St. Clair, Mich.-based Apex Marketing Group. Going from the Indians to the Spiders, Guardians or another moniker would be much more extensive. “It’s a beast,” Radom said. Still, it’s not as if the Indians would be the first franchise to change names without moving, and they likely will be following the Washington Redskins, who are poised to finally cave after pressure was applied by the likes of FedEx, Nike and PepsiCo. The Redskins, who, like the Indians, have drawn the ire of Native American groups for decades, announced that they were undergoing a “thorough review of the team’s name” on July 3. Within eight hours, the Tribe made its own announcement, saying the club would “determine the best path forward with regard to our team name.” The Indians, a club source said, are “just having a conversation.” The Tribe, following the killing of George Floyd, acknowledged their “long, yet imperfect history” of uniting and inspiring. “We want to be part of change, and we want to be open and transparent,” the Indians source said. Examining the name, a process that follows the removal of Chief Wahoo from uniforms and signage after the 2018 season, is the right thing to do, the club believes, but there is no guarantee that it will result in a change. It seems unlikely, however, that the Indians would make such a pronouncement then say they are going to retain the name they’ve held since 1915. Manager Terry Francona, one of the most influential members of the organization, has already said “it’s time to move forward.” “You’ve really teed this up,” said Thom Fladung, the managing partner at Hennes Communications in Cleveland. “It’s a decades-long debate. They’ve now entered it in the most meaningful way ever, and I don’t know how you would explain that you decided to do nothing.” Doing something would mean a lot, whether it’s in reference to the aforementioned procedural issues or
A gigantic Indians logo above the scoreboard is a staple at Progressive Field. The cost to rebrand a ballpark after a name change is extensive. | JASON MILLER/GETTY IMAGES
the more prominent social issues that have risen to the forefront since Floyd was killed by Minneapolis police officer Derek Chauvin more than two months into a pandemic that has devastated livelihoods and industries. “I will be confident that they are committed when the change actually occurs,” said Sundance (he goes by one name), a longtime critic of the Indians’ name and former logo who serves as the executive director of the Cleveland American Indian Movement. “But I think commitment is a strong word even then. They’ve spent 105 years telling the world basically that everything was OK.”
‘Dehumanizing’ Sundance, who is part of the Muscogee tribe, said many Native Americans don’t view the Indians’ name as the tribute its proponents like to say it is. “Being tokenized in any fashion, but especially in this fashion, a commercial fashion, is dehumanizing,” he said. Yes, some Native Americans aren’t bothered by the name, he added, but “there are segments of any population that are OK with being colonized.” The Cleveland AIM leader said depictions of Native Americans by sports teams cause way more harm than good, and that can be especially hurtful to a group with extreme health disparities, plus poverty and suicide rates that are well above the national averages. Fladung, the Hennes Communications managing partner, said criticizing the Indians for not doing something sooner is valid. But what has transpired after Floyd’s death is one of the most glaring examples of how quickly things can transform. “You have to be able to respond to societal change, and I think that’s what the Indians organization is doing,” Fladung said.
Something to ‘endure’ The Tribe’s removal of Chief Wahoo from uniforms and branding materials drew significant backlash from fans who were attached to a logo that had been associated with Cleveland’s baseball team for more than seven decades. At the time, a source told Crain’s that a large share of the complaints that the Indians received via email were from
addresses that weren’t linked to a Tribe account, which signaled to the club that they hadn’t purchased tickets on the Indians’ website. A name change, because of the current social climate and judging by the early reactions, seems unlikely to get as heated as the Wahoo arguments, though that wouldn’t be the case if the Indians pick a name that proves to be wildly unpopular. Radom, who oversaw all of the branding when Ice Cube’s Big3 basketball league launched in 2017, thinks the Indians should use their current situation as an opportunity to do something fun with their name and logos. “When you’re embarking on something like this, you can’t think five years out. You can’t think 10 years out,” he said. “You want to build something that is strong enough to endure a period of time.” One of the first orders of business can be the most onerous. Securing trademarks is complex, because names that have been discussed might have already been secured. The same goes for website URLs. “There are all of these retail categories that you need to cover, and odds are that somebody is squatting on a domain name if nothing else for every one of the names that might be under consideration,” Radom said. Mark Avsec, a partner and vice chair of the innovations, information technology and intellectual property practice group at Benesch, said he expects the Indians, should they change their name, will maintain trademarks for their former moniker to prevent another party from assuming control of the name and using it how it sees fits. “Whatever the Cleveland Indians do or do not do, I would expect decisions will be thoughtful and informed, and I expect all of this is going to take time,” Avsec said. A club source told Crain’s that even if the Tribe soon decides a name change in order, it’s unlikely everything would be in place for the 2021 season. In this case, a one-season difference doesn’t seem nearly as significant as what would transpire if the organization chooses to stand pat. “Once you issue a statement and put that out there, there’s kind of no putting the toothpaste back in the tube,” Radom said. Kevin Kleps: kkleps@crain.com, (216) 771-5256, @KevinKleps
4 | CRAIN’S CLEVELAND BUSINESS | JULY 13, 2020
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TECHNOLOGY
Companies, nonprofits join push to bridge the ‘digital divide’ DigitalC, others working to bring high-speed internet service to low-, moderate-income residents BBY JAY MILLER
It’s called “the digital divide,” and the coronavirus pandemic has made bridging it more important. The divide is the lack of access some businesses and households have to high-speed internet service. In some cases, it’s a cost-of-service issue; in others, it’s a missing onramp to the internet highway. Eventually, government offices, bank branches, doctors’ offices and other workplaces will fully reopen and everyone will be comfortable entering them. However, online engagement, importantly including telehealth visits, will become a more attractive or desirable way for both sides of the transaction — consumers and service providers — to meet. Even before the pandemic, DigitalC, a Cleveland nonprofit, began working on a program it calls EmpowerCLE to bring high-quality digital service to low- and moderate-income households in the city. DigitalC is in the midst of a $36 million fundraising campaign to bring the internet to 27,000 Cleveland households that lack high-speed access, meaning they may have only cell phones or slow, old-style dial-up service that can’t receive videos or live streaming. The goal is to reach 16,000 of those homes by May 2022. The program has chiefly been responding to the need of Cleveland Metropolitan School District students to have home access to homework and other school projects. Beyond the schools, and beyond Cleveland’s borders, closing the gaps in digital service is important to the broader regional and state economy. Howev-
“THE LACK OF BASIC CONNECTIVITY IS LIMITING OPPORTUNITIES FOR SOME BUSINESSES AND RESIDENTS. INCOMPLETE BROADBAND CONNECTIVITY IS PUTTING OHIO AT A COMPETITIVE DISADVANTAGE.” ——Gov. Mike DeWine
er, areas of Ohio, including parts of Northeast Ohio, don’t have adequate connections to the digital world. “The lack of basic connectivity is limiting opportunities for some businesses and residents,” Ohio Gov. Mike DeWine said in December, announcing plans for a statewide broadband strategy. “Incomplete broadband connectivity is putting Ohio at a competitive disadvantage.” A December report from InnovateOhio, the governor’s office leading the effort, found that “Ohio communities with limited or no access to high-speed internet now clearly suffer from a competitive disadvantage in today’s technology-infused and global economy.” For example, Dollar Bank, which has 29 offices in Northeast Ohio, is partnering with the MetroHealth System, which wants its clients to have digital access to the hospital and its staff, and DigitalC to bring high-speed internet connections to homes around the bank branch on West 25th Street. The bank has pledged $600,000 over the next five years to support MetroHealth’s efforts to bring lowcost internet access to low- and moderate-income households in the Clark-Fulton neighborhood. Carol Neyland, the bank’s senior vice president for community devel-
opment, said in a telephone interview that the bank, which is headquartered in Pittsburgh, joined the effort to better serve its customers, in particular its low- to moderate-income customers. She said the bank wants its customers to have access from home to banking services that can now be conducted online, but it also wants to expand the reach of its financial literacy programs, which it believes can lead to more business for the bank. “We were blown away by (MetroHealth’s) story of bringing access to health care to everyone,” she said. She added that bringing the bank’s financial literacy program to low- to moderate-income customers helps them see how they can afford a home
and a mortgage. “It can be game-changing,” she said. The West Side program is part of DigitalC’s strategy to bring broadband access to lower income households in Cleveland, East Cleveland and Warrensville Heights for no more than $20 a month, depending on ability to pay. DigitalC has technicians who bring existing high-speed fiber connections into homes or link homes to wireless antennas it has installed in buildings around the city. Students who need the access for schoolwork are the first priority, but Dorothy Baunach, DigitalC’s CEO, said her organization has three kinds of households it is targeting. She calls them “scholars, seniors and strivers.” “There are the scholars, that’s what we call the students; then the seniors, who need the service primarily because of social isolation and the telehealth piece. But then there are what we call the middle generation, the strivers. They’re in the middle, of the working age. They are probably a caregiver for a scholar or a senior, or both,” she said. “And we’re also the
‘pre-job trainer,’ — if you don’t have an internet connection at your home, you can’t even apply for a job.” A 2017 Ohio State University study found that 1 million Ohioans, 11.7% of the population, lacked access to the level of broadband internet service needed for full access by businesses and schools. Another study— by Connect Your Community, a Cleveland nonprofit working to expand digital access in the city — found that in 2018, more than 47,000 Cleveland households, 27.4% of the city’s households, still lacked home broadband internet subscriptions of any type. Those numbers, Connect Your Community reported, mean Clevelanders have the fourth-worst percentage of households with highspeed access among the 80 U.S. cities that have 100,000 households or more. Lorain, the study found, is also underconnected, while Akron is only modestly better off. In addition, 31% of the population in Ohio’s rural areas lack access to the best broadband service. See INTERNET on Page 21
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July 13, 2020 | CRAIN’S CLEVELAND BUSINESS | 5
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PERSONAL VIEW
Create an inclusive culture to help us come together
RICH WILLIAMS FOR CRAIN’S CLEVELAND BUSINESS
BBY BRIAN HALL
EDITORIAL
Fight the fatigue F
our months. We’re one-third of a full year into our pandemic life, and if you thought things would be significantly better about now, well, the optimist’s view of the world isn’t always right. Officials across the United States reported more than 59,880 COVID-19 cases last Thursday, July 9, which, according to The New York Times, set a single-day record for the sixth time in 10 days. The surge has been driven largely by states in the South and the West “that were among the first to ease restrictions established during the virus’s initial wave in the spring,” the Times reported. In our state, with cases also on the rise again, the Ohio Department of Health released a revised map of the state’s tiered coronavirus risk levels for each county, adding four counties to the ranks of those (now numbering 12) at red Level 3, where residents are required to wear masks in most public places. Lorain and Summit counties joined Cuyahoga and Trumbull as Northeast Ohio counties at that level, which denotes “very high exposure and spread” of coronavirus. IT’S CLEAR THAT SOME Cuyahoga County is drawSORT OF FATIGUE HAS ing close to Level 4, marking “severe exposure and SET IN AS PEOPLE GET spread.” RESTLESS AT THE It’s clear that some sort of fatigue has set in as people FOUR-MONTH MARK get restless at the fourOF PANDEMIC LIFE. month mark of pandemic life. On some level, that’s understandable. The things we’re all being asked to do — at work, at home, with our kids — aren’t easy. Staying home most of the time, interacting with a small circle of people, is exhausting. (And don’t get us started on all the Zoom calls at work.) But we have no choice but to fight that fatigue and work together to bring case numbers back down so we can avoid another shutdown of businesses that would have devastating effects on the economy. Gov. Mike DeWine, after having been steady and direct early in the crisis, now seems less authoritative and clear. The
threat map is somewhat confusing and a moving target; DeWine would have been better just to issue a statewide mask requirement and work to depoliticize the issue of wearing masks. As of now, it’s not clear how — or whether — the order will be enforced if people disobey it. But let’s be clear: Don’t be the person who’s defying the mask requirement. We’ve all seen videos of people screaming at a retail worker, or a dental receptionist, about how wearing a mask is an unacceptable infringement of their rights. Yelling at employees, or just defying the rules businesses have set to try to protect workers during the pandemic, doesn’t make you a patriot. It means you’re selfish, and that you’re not doing your part to get this virus under control. Wearing a mask should be the easy part. Much tougher are the decisions being made soon by 600-plus school districts across the state to set parameters for a safe return to classrooms this fall for about 1.7 million students. The terms under which schools start again are critical for the development of students (especially those in grades K-8) who already missed valuable in-classroom time during the last school year, and for parents, whose work schedules and childcare needs depend on what happens with schools. In a perfect world, kids would be back to a normal, Monday-to-Friday schedule this fall, but the coronavirus case trends make that increasingly unlikely. DeWine earlier this month rolled out five safety guidelines created by the Ohio Department of Education, but he left the bulk of how and when to return up to individual school districts. We have little doubt that having children in school buildings is important for their social, mental and academic development. However, the safety concerns for students, teachers and other school workers, all in confined spaces for six to eight hours per day, are significant. DeWine, to his credit, has promised CARES Act funding to districts to help pay the costs associated with dealing with the coronavirus. School administrators won’t make anyone completely happy with their return-to-school plans, but they should announce their decisions as soon as possible to help parents make necessary adjustments.
Publisher and Editor: Elizabeth McIntyre (emcintyre@crain.com) Managing Editor: Scott Suttell (ssuttell@crain.com) Contact Crain’s: 216-522-1383 Read Crain’s online: crainscleveland.com
An inclusive workplace culture is always crucial, a fact that the pandemic and recent protests for racial justice demonstrate. Diversity and inclusion (D&I) should not fall by the wayside due to the shift in priorities. Inclusion drives profitability, loyalty and productivity within teams and organizations. Externally, the degree to which brands indicate active Hall, senior vice leadership on racial justice strongly in- president of the fluences their standing with consumers. Greater There are numerous ways to be an in- Cleveland clusive leader, create D&I that thrives, Partnership, and leverage conscious communication wrote this on to be an ally for communities of color behalf of GCP’s during the time of COVID-19 and rising Equity & Inclusion Team. calls for social justice. On April 20, Harvard Business Review ran an article titled “How to be an Inclusive Leader Through a Crisis,” in which the author Ruchika Tulshyan notes that it’s not abnormal for even the best leaders to experience bouts of exclusion and bias when faced with a crisis. “Research shows that when we’re stressed, we often default to heuristics and gut instincts, rather than making deliberate and goal-oriented decisions,” Tulshyan writes. WITHOUT INCLUSION, The article and an array of supporting evidence demon- ORGANIZATIONS strate the importance of includ- WILL LOSE ing a diverse group of employees in the decision- INNOVATIVE IDEAS making process. Without inclu- AND THE VALUE OF sion, organizations will lose innovative ideas and the value of CONTRIBUTIONS. contributions from team members from under-represented groups less likely to speak up. Tulshyan provides six action steps to help leaders focus on D&I even during times of stress: 1. Ensure that all employees have equal access to technology for remote work. 2. Make virtual meetings equitable by turning on closed captioning, sending documents and collecting input in advance. 3. Begin meetings with acknowledging everyone in the room, not just those with high status or privilege. 4. Understand how gender bias may show up: Women, especially those that are socially marginalized, are bearing a disproportionate responsibility for their household’s crucial activities. Ensure that your company accounts for how this dynamic results in perceptions of productivity or reliability. 5. Check in with employees who may be disproportionately impacted by this crisis. 6. Above all, show compassion.
Creating D&I that thrives Each of these recommendations represents business imperatives. Unfortunately, many D&I initiatives will not survive the next several months: Some had little organizational backing, while others were driven simply by the need for recognition.
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.
See HALL on Page 7
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6 | CRAIN’S CLEVELAND BUSINESS |JULY 13, 2020
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OPINION
PERSONAL VIEW
Fighting racism in a suit and pearls BY RACHEL TALTON
My white, professional friends have been calling me a lot lately for advice. Before I answer in my typical cheery voice, I wipe away my tears and steel myself to talk about what they often want to discuss: the death of George Floyd and the nationwide pain, protests and outrage that have ensued since. “I don’t know what to do; tell me what to do,” my friends and colleagues say earnestly. As difficult as these calls can be, I’m grateful for them because they give me hope that people realize that the systemic racism that exists in America is not just a Black problem. This is America’s problem, and we will be navigating the original sin of slavery until we truly create a social, economic, educational, justice, political and health care system that is equitable and inclusive. George Floyd’s death was a horrifying reminder of this, and something broke inside of me when I watched for almost nine minutes the video of Minneapolis police officer Derek Chauvin hold his knee on the Floyd’s neck while bystanders begged him to let Floyd up, to let the man breathe. Floyd himself said he couldn’t breathe and desperately called for his mother. Chauvin ignored them all. All of the officers at the scene ignored the calls, and we watched a man’s life taken from him before our very eyes. To me and Black people everywhere, this sends a heart-wrenching message: You … mean … nothing. The symbolism of Chauvin with his knee on Floyd’s neck made the pain all the more palpable. It’s like I could viscerally feel my entire race being held down. I can hardly articulate how painful the feeling of being devalued in this way is. It took me back to a similar feeling I experienced when I was 11 years old and at a white friend’s home after school. We were students at a wealthy, private all-girls school in suburban Cleveland, which I attended on scholarship. We were at her 10,000-plus-square-foot home, and her mom was making us a snack in the kitchen. Her mom made some disparaging remark about “These Black people …’’ while I was sitting nearby. I said, “I’m Black.” She said, “Well, you’re not really Black.” I said, “No, I am Black. My parents are Black and so am I.” And she said, “No, not really.” I felt so small, so discounted. She took away my Blackness, while not inviting me into her whiteness. I literally just disappeared. This hollow feeling swelled up in me again watching George Floyd’s murder and witnessing the treatment of
Talton is the CEO of Synergy Marketing and Strategy Inc. in Akron and the chief transformative officer of Flourish Conference for Women in Leadership.
Ahmaud Arbery and Christian Cooper and Breonna Taylor and, sadly, so many others who have been discounted because of the color of their skin. I’m grieving. And I need my time to grieve. We all do. But I also want to rise above this and partner with my friends, Black and white, to help our country rise and make real, lasting, sustainable change in how we treat Black people and all people of color in America. So if you’re wondering what you can you do to help, here are my suggestions:
1. LISTEN to your Black colleagues, friends, family members … and if you have none of those, educate yourself and then have some difficult conversations around race. 2. EDUCATE yourself: There are so many incredible books on how to better understand race and find a path to real, sustainable change. 3. EMPATHIZE with your Black colleagues and friends. You may not understand their Black pain, but please, acknowledge it. Take some time to just imagine yourself in their shoes. 4. EVALUATE yourself. Take a racial identity assessment. 5. ANALYZE and create a plan, milestones and a tool for evaluating where you’ve done well and where you’ve fallen short. And be transparent about your boards and businesses. 6. PURCHASE from Black-owned businesses. Spend your money with us. Political and social power follow economic power. 7. VOTE and hold every lawmaker — locally and nationally — responsible through calls, emails, community engagement, and, yes, protests when necessary. 8. SUSTAIN this energy. Remain engaged after the protests have stopped. It has taken 400 years to create the kind of systemic racism that has infected our communities and our souls. It will take time, patience and grace on all sides to undo it. 9. CELEBRATE the richness of Black history and all of our present-day achievements The goal is to become an anti-racist. According to Angela Y. Davis, “Being anti-racist is believing that racism is everyone’s problem, and we all have a role to play in stopping it.” It’s going to take all of us to speak up, to stand up, to do the right thing to make this country live up to its credo.
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SHE TOOK AWAY MY BLACKNESS, WHILE NOT INVITING ME INTO HER WHITENESS. I LITERALLY JUST DISAPPEARED.
HALL
From Page 6
“We know that in many businesses, minorities are often the last to be hired and the first to be let go,” Stephen Frost writes in Management Today. “In addition to bias and other factors, this is often due to networks and loyalties. To avoid this ‘last in, first out’ situation, apply the considerable diversity recruitment expertise that has been gathered in recent years to learn how redundancies are handled. KPMG developed a tool to ensure that they offer promotions in proportion to the talent available. Companies must also analyze the diversity of any redundancies or furloughed workers. Frost informs his readers that a
good D&I program will survive and thrive, but only if the program is linked to the organization’s overall business goals, is evidence-based and positively impacts decision-making. Demonstrating the value of inclusion during a crisis, Frost explains, will win over skeptics for easier times.
Talking About COVID-19 Especially after the death of George Floyd, consciously changing our language in the pandemic era is a huge part of being an ally for communities of color. In “Talking About COVID-19: A Call for Racial, Economic, and Health Equity,” Elizabeth Johnson cautions against the “othering” mindset that often accompanies public health crises. Given the xenophobia the pandem-
Ca u l e y Fe r ra r i o f D e t ro i t 7 0 7 0 O rc h a rd L a k e R d. �e � t � l o o m � e l d� � � 4 8 3 2 2 Te l e p h o n e : 2 4 8 . 5 3 8 . 9 6 0 0 w w w. Ca u l e y Fe r ra r i . co m
ic has provoked against Asian communities and racist perceptions of a lack of cleanliness in the Black community, Johnson offers the following tips for leaders. 1. Call out messaging based in fear and misinformation. 2. Work together in collaborative conversation to make sure that communities and populations most at risk are receiving the attention and services they deserve — and are not being stigmatized when those services are provided. 3. Remember to always use language that is based in justice and equity. “The solutions for getting through this pandemic lie in unity and community,” she says. “We must uplift these values together and remind others to do the same.” JULY 13, 2020 | CRAIN’S CLEVELAND BUSINESS | 7
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HEALTH CARE
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Primary care providers offer options for outpatient care, expand locations
Increasingly competitive sector sees more players entering Northeast Ohio BY LYDIA COUTRÉ
Miami-based primary care provider ChenMed, which is opening its first of three Cleveland locations this month, • Advisory & Planning • Facility Management is just the latest example of players tap• Business Relocation • Transaction Management ping into the area’s outpatient market. • Project Management • Portfolio Management For years, the gap between hospitals’ outpatient and inpatient revenue streams has been narrowing as the industry works to focus on preventive care and keeping people healthy outside of the walls of hospitals. Call one of our Specialists today Given that trend, and the expense of building new inpatient facilities, health care providers that have entered the Cleveland market in recent 330.239.0176 | 216.831.3310 | 330.535.2661 years are focused on outpatient care. “The key to outpatient, which is the big growing area in health care, is it www.naipvc.com lends itself to a more competitive market,” said Tom Campanella, health care executive in residence, professor of health economics emeriti at Baldwin Wallace University. “It’s hard to build a new inpatient facility to compete against existing players within a geographic area. But to add outpatient services in different forms, it’s much easier and much more cost-effective. So you could have local, regional and national players getting into that.” ChenMed’s entrance into Cleveland is part of its national expansion plan, which includes opening 15 new locations (including all three Cleveland faMinimum cilities) by mid-November, all of which focus on serving low-income seniors. Delivery: Oak Street Health — a Chica1 Pallet go-based primary care network serving seniors that established three locations in recent years in Cleveland — announced plans for a fourth local center earlier this year, citing the success it has seen in its initial endeavor. Denver-based Paladina Health began offering its employer-sponsored MEDINA, OH direct primary care model in Northeast Ohio several years ago. Locally, 1-800-547-1538 it has seven health centers and plans Salt Distributors Since 1966 to add two sites in 2021. NOMS Healthcare, based on Sanwww.saltdistributormedinaoh.com dusky, has expanded significantly in recent years in part by establishing a stronger Northeast Ohio presence. Plus, Campanella noted, insurers (such as UnitedHealth Group, which provides benefits through UnitedHealthcare and health services through Optum) are getting into the care-delivery space, as are others (like Walgreens and Walmart). Following a successful trial, Walgreens Boots Alliance announced this month that in collaboration with Chicago-based primary care provider VillageMD, Walgreens will offer full-service doctor’s offices co-located at its stores. Walmart is also dipping its toe into providing health care, most Grimm spring mix 05-04-20.indd 1 4/28/2020 1:25:01 PM recently with its announcement that it is bringing a health center to Arkansas, following success with such centers in Georgia. “I think the bottom line when you cut through it all: All the players recognize the importance of primary care, including the integrated sysHilton Head Outperform your dreams. tems,” Campanella said. “So the valMonthly: Beaufort, South Carolina’s hidden gem: ue of the primary care doctor is really “TOP 25 GOLF Golf, tennis, boating, home! growing in all the market places, inCOMMUNITY” cluding Northeast Ohio.” As others enter the primary care and outpatient space, health systems must re-evaluate their care and busi(843) 838-3838 Learn more at Dataw.com ness models to keep up, he said.
Dr. Gaurov Dayal, ChenMed president, new markets, and chief growth officer, thinks “there clearly is a consensus that the demand for primary care will only increase in the future.” | CALVIN
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Consumers, employers and government payers all increasingly demand value in the outpatient arena — a payment structure that incentivizes keeping people healthy rather than the traditional fee-for-service model. Paladina bills all its services under a value-based model. The flexibility to do so comes in large part from being a new business model starting in the value-based space rather than having to shift from a fee-for-service structure, said Kirk Rosin, chief revenue officer for Paladina. “We had the luxury of starting anew and really determining which financial model aligned not only with how our doctors could practice medicine, but also what was in the best interest of the patient,” Rosin said. Though in a broad sense the opening of some of these additional primary care options does represent added competition, Dr. Adam Myers, Cleveland Clinic’s chief of population health and director of Cleveland Clinic Community Care, said he focuses on the needs of patients. It’s too early to know what the full impact of these new entrants will be in the region, he said, but he hopes they can have a “tremendous impact” on the lives of those they serve. Many of the new entrants focus on narrowed populations (such as ChenMed’s and Oak Street Health’s focus on seniors or Paladina’s efforts with employers), but Myers argues the Clinic’s strength is in its “more comprehensive approach” and ability to seamlessly connect patients to specialists within the system when needed. The Clinic is shifting more of its primary care work into value-based payment arrangements, with 58% having some sort of value-based payment associated with it. A decade ago, that was almost zero, said Myers, who estimates it will reach 80% or 90% in the next five years. The Clinic is working to move further “upstream” to promote health rather than treat diseases, he said, but that shift takes time. “That need for specialty care will never go away,” Myers said. “However, its emphasis as the one and only focus for the health care system in the United States will need to diminish secondary to the need for a more sustainable approach, and it’s a better service to our population in the United States as well.” University Hospitals declined an interview request but in a statement highlighted its commitment to improving health for patients across the region. “University Hospitals shares a common interest in delivering care to seniors in our urban communities
and to other vulnerable populations that require intensive ambulatory and community care,” the statement read. “There are new organizations that focus on these populations, and we have collaborated with several of them that have entered the region.” In addition to a fight for outpatient dollars, these various primary care providers are also poised to be in a battle for physicians. Recently released data from the Association of American Medical Colleges project a primary care physician shortage of between 21,400 and 55,200 physicians by 2033. According to the Medscape Physician Compensation 2020 Report, primary care providers earn an average salary of $243,000, compared with specialists, who averaged $346,000. Making the job of a primary care physician more attractive is critical for bringing in more medical students and residents. ChenMed’s model, including its significantly lower patient panels for doctors, “reinvigorated my spirit as a physician,” with an opportunity to create meaningful, long-lasting relationships with patients, said Dr. Jonathan Wynbrandt, associate chief medical officer for ChenMed’s Dedicated Senior Medical Centers in Cleveland. ChenMed has been able to mitigate COVID-19 in the populations it serves by focusing on preventive measures, including frequent calls from doctors checking in on patients and reminding them to stay home. “With COVID, what we are seeing is an abject failure of public health in this country,” said Dr. Gaurov Dayal, ChenMed president, new markets, and chief growth officer. “It’s a shame to find ourselves where we’re at. It’s a tragedy for these seniors who are dying unnecessarily, frankly, which is magnified in communities of color and low-income communities. ... I think that this is an inflection point for the U.S. health care system.” COVID-19 is likely to push an increased focus on value-based care as all parties who ultimately finance health care (consumers, employers, and federal and state governments) struggle during the pandemic, Campanella said. While COVID-19 has presented financial challenges, it’s also dramatically highlighted the importance of primary care. “It’s a little choppy right now, but I think there clearly is a consensus that the demand for primary care will only increase in the future,” he said. “So all the players are trying to line up to be able to make sure that they have access to capital in different ways.” Lydia Coutré: lcoutre@crain.com, (216) 771-5479, @LydiaCoutre
8 | CRAIN’S CLEVELAND BUSINESS | JULY 13, 2020
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MIDDLE MARKET
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EMERGING TECH’S SUPER POWER
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Advances such as virtual reality and blockchain help drive innovation among NEO companies BY DOUGLAS J. GUTH
Emerging technology continues to drive midmarket growth in the U.S. economy. Nearly 90% of participants in a 2019 Deloitte survey said technologies — including the Internet of Things (IoT), virtual reality (VR) and augmented reality (AR) — play a vital role in their business development strategy. Middle market companies in Northeast Ohio are investing in this ever-evolving tech, reflecting industry trends where IT is improving interaction with products and services while becoming less of an administrative or support function. Hyland Software, Westlake-based creator of the OnBase content management system, is exploring VR, AR, IoT and artificial intelligence applications through its Hyland Labs research center. A particular focus is blockchain, a digitized ledger that advocates say is virtually hackproof despite its availability to large groups of people or organizations. Built as an accounting system for the Bitcoin virtual currency, blockchain has the utility to thrive in numerous market segments, its proponents maintain.
In February, Hyland acquired Learning Machine, a producer of blockchain-anchored digital credentialing for diplomas, transcripts and other documents. Hyland products already support blockchain in terms of sharing and delivering authenticated content, said Scott Caesar, director of cloud research and development at Hyland. In the case of Learning Machine, Hyland added the company’s electronic credentialing solutions to its content services platform, enabling customers to share and manage sensitive documentation. “We’re one of the leaders in transactional-based content services, and blockchain networks have a problem where you can’t store all of your information on those networks,” Cae-
sar said. “Our system is very accessible from an integration standpoint.”
Multimarket applications A Hyland partnership with Case Western Reserve University’s Interactive Commons is applying augmented reality into markets, including health care. Using the MicroSoft HoloLens — a heads-up display where virtual objects enter the real world in mixed reality — medical students might view a fully mapped holographic image of the human body. Doctors scrubbing in for surgery, meanwhile, can visualize information minutes before a procedure. In manufacturing, a foreman utilizing AR may make real-time modifications to a 3D blueprint, or train employees on a complex piece of machinery
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t l h
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SLOW RECOVERY ANTICIPATED Survey: Businesses likely will need six months to recover from pandemic. PAGE 14
through the power of virtual reality. “This technology will extend our product, just with different visualization devices,” Caesar said. “In health care, you can visualize MRI data, or help a doctor describe a procedure to a patient without using X-rays.” Cloud computing has laid the foundation for an accelerated wave of emerging technology adoption at KeyBank, according to chief information officer Brenda Kirk. For Key, the cloud is a building block for digital assistant capabilities such as conversational AI and chatbots. The company has also partnered with Google to bring new hybrid cloud technologies to market. “This allows us to develop solutions, receive feedback and continue to iterate at speeds we couldn’t imagine a few years ago,” Kirk said in an email statement. “Using the example of conversational AI, we are now able to provide frequently answered questions to our customers.” Key customers and personnel are reaping the benefits of the company’s digital-assistant technology, Kirk added. Key develops customer-facing technologies based on employee interaction with AI-based FAQs, with reduced calls to internal help desks the result of iteration within the cloud.
Into the future At the start of the coronavirus pandemic, Key’s Paycheck Protection Program operation ran on cloud-native technology, permitting the bank to meet high demand.
Nicholas
Hyland Software is working with Case Western Reserve University’s Interactive Commons to bring augmented reality into markets like health care. Here, Hyland intern Austin Wilson assists with one of the company’s projects. | CONTRIBUTED
“We also leveraged digital assistants to help with common questions related to government stimulus and other pandemic programs,” Kirk said. “These technologies provided us with an ability to meet the surge in demand very quickly, especially in support of our Paycheck clients.” Through June 30, Key ranked seventh on the list of the nation’s top PPP lenders, with over 41,000 loans, according to Small Business Administration data. Relationships with tech behemoths Google and Cisco keep Key abreast of technological advances, an effort buttressed by internal tech forums that have become a fount of knowledge and best practices. Onboarding new innovations will always be a challenge, though company-sponsored
hackathons help speed adoption of new technologies and practices. “There needs to be a methodology on when to bring something in or upgrade, otherwise you will always be
Kirk
chasing a moving target,” Kirk said. “Allowing our teams to experiment and understand the technology while still providing support in their day-today activities is a balancing act.” The Deloitte survey notes that investment into emerging technology is prioritizing information security, the adoption of 5G technology and business innovation. John Nicholas, a professor of business and information technology at University of Akron, said disruptive technologies carry unlimited potential for all industries. For example, a repair
company could utilize the IoT — a system of physical devices accessed through the internet that identify themselves to other online devices — to remotely fix a refrigerator. “Every company has to start looking as far into the future as they can,” Nicholas said. “They should be going to conferences outside of their industry to see if an idea can be used for Product X. It may become possible for someone in Australia to have a part built by a manufacturer in Strongsville. They can send a 3D photo, then have the file loaded into whatever machine is making the part.” Caesar said cutting-edge tech is an “innovation driver” for Hyland as well as an essential facet of its growth strategy. “We’re paying attention to the challenge of these emerging technologies and what they mean to the world,” he said. “We’re very interested in it.” Contact Douglas J. Guth: clbfreelancer@crain.com
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As the coronavirus pandemic unfolds, well-meaning businesses are reaching out to wary consumers with August 22, 2020 messages of care and empathy. Probate Avoidance However, for midlevel companies 2:00 p.m. Zoom Webinar on your computer, lacking the marketing spend of naSeptember 12, 2020 smartphone or tablet. tional brands, it will take more than a Business Succession refrain of “In times like these…” to Call 216-765-0123 to RSVP or visit Planning succeed in the COVID-19 economy, ssandplaw.com/events to register. 2:00 p.m. said Casey Newmeyer, assistant professor of marketing at Case Western Estate Planning Probate & Trust Elder Law Business Law Reserve University. “There has to be sincerity, not just 216-765-0123 putting a statement out there as lip SSandPlaw.com service,” Newmeyer said. “A message of safety, transparency, and new products and services related to coronavirus has to fit in with what you’re currently doing. If a company’s not doing that, they will look terrible.” While some companies are cutting back on marketing during the crisis, others are finding innovative ways to engage their audiences, even turning to new products to meet the demands Industrial Business Consulting of a drastically changing marketplace. Newmeyer points to distilleries nationwide producing hand sanitizers in Construction / Acquisitions the fight against the virus. Manufacturing / Financing “It doesn’t matter the size of the business — it could be middle marIndustrial / Consumer Goods ket or smaller,” Newmeyer said. “Ask what you can do to pivot your busiGlobal Distribution / Exporting ness to fill a pressing need that didn’t International Corporate Partnerships exist in February. Every company needs to take stock.” Banks / Manufacturers / Builders Midmarket companies seeking consumer closeness in an age of social distancing can’t just deliver a C. W. Jennings Global Corporate Office hopeful missive as seen from an Apple or Coca-Cola. Economic uncer400 Renaissance Center, Suite 2600 tainty requires direct communicaDetroit, Michigan 48243 tion with specific customer segments, whether sent via email, mailer or a (216) 505 - 5049 / (855) 707 - 1944 targeted social media post, experts say. A B2B customer reordering products online, for instance, can be C. W. Jennings Global Consulting Since 1973 met with plain-spoken messaging on how their supplier is keeping them safe. “If your employees are customer-facing, they’ll have to be trained to be consistent in messaging and pracLAND FOR SALE: Beacon West, Westlake tice,” Newmeyer said. “Your message has to be strong and consistent, or yourPM customers will be upset.” 6/4/2020else 12:14:00 CE
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Rolling with the changes Marketing executives must be proactive in monitoring changes to customer behaviors in the months and years ahead, said Scott Hackman, vice president of strategy, business insights and brand marketing operations at Vitamix. The Olmsted Falls company, which makes blending equipment for home and commercial use, is seeing an enormous uptick in home cooking among its consumer base, an obvious side effect of the restaurant industry’s decline during the pandemic. Additionally, Vitamix’s call center has been deluged by customers asking how to best use their newly purchased blender. “It’s not just the number of calls, but the duration of those calls,” Hackman said. “They’re going two minutes more than we’d expect. That’s caused us to hire more people into our customer contact center. This is a
Vitamix is connecting directly to its customers, offering tips and ideas to help people navigate stay-at-home orders, through its customer contact center and its social media channels. A post from the company’s Instagram account is seen here. | VITAMIX
Newmeyer
Hackman
relationship brand, so we want to make sure people are getting the most out of their Vitamix.” As propagating a healthy lifestyle is the company’s raison d’être, Vitamix continues to keep a close watch on market trends. With breadmaker sales growing amid stay-at-home orders, the company streams live video of Vitamix machines grinding wholegrain flour and kneading dough. U.S. organic fresh produce sales jumped 22% in March, resulting in more experimental food preparation instruction from Vitamix’s marketing team. “People might have two-dozen bananas at home, so we gave tips about throwing bananas into the freezer, then making a frozen banana smoothie,” Hackman said. “We know this is a difficult situation. We’re very much focused on helping make sure people have healthy alternatives, whether it’s recipes of making food in general.” Vitamix gives to pandemic-related causes — among them helping the Smoothie King franchise donate $1 million worth of smoothies to frontline workers — and shares those messages across customer communications. The company also donates to World Central Kitchen, a not-forprofit providing meals to survivors of natural disasters.
Staying strong in a crisis Michael Canty, president of Alloy Bellows & Precision Welding Inc. in Highland Heights, said marketing during the pandemic means ensuring customers know that he’s still in business. “Our big customers wonder if
we’re going to survive this, or will this disrupt our orders,” Canty said. “Will we shut down if we have a coronavirus case, or is the governor going to shut us down? Everyone is always checking.” Deemed an essential business for its work in the aerospace, medical and petrochemical industries, Alloy Bellows is aggressively pursuing market share in a fluctuating economy. Canty and his team engage potential vendors — mostly in power generation, oil and gas and semi-conductors — with news about new hires and company investment in the latest equipment and Internet of Things (IoT) technologies. “They know we’re strong, that we’re going to stay strong, and we’ll come out of this in ways that others may not be able to,” Canty said. “We’re calling customers on a regular basis so they know what we’re doing and how we’re doing it.” While person-to-person engagement is vital for all companies, the architecture industry in particular thrives on collaboration, networking and relationships, said Jack Bialosky Jr., senior principal of the Bialosky Cleveland design firm. But far from paring back marketing, the firm has ramped up efforts in competing for projects. “This is a time to be creative in creating relative content as online consumption is higher than preCOVID-19,” Bialosky said in an email statement. “Architecture firms are uniquely well-suited to help businesses navigate issues around managing their workplace requirements and safely determine their new normal.” Bialosky thinks the pandemic will change the way businesses across all industries deliver their unique stories. “Companies are determining what is truly essential,” he said. “Coming out the other side, clients will likely have higher expectations to hear companies’ authentic voices in their message and marketing.” Contact Douglas J. Guth: clbfreelancer@crain.com
12 | CRAIN’S CLEVELAND BUSINESS | JULY 13, 2020
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M&A players must adjust their mindsets in the COVID-19 era BY MICHAEL D. MAKOFSKY
COVID-19 has directly or indirectly impacted everyone in all walks of life, and merger and acquisition activity is no exception. During the crisis, several large transactions were called off as companies had to cope with the coronavirus pandemic. Xerox abandoned its hostile bid for HP, and Sycamore Partners terminated its deal to acquire Victoria’s Secret. Overall, M&A activity significantly decreased in the first quarter of 2020 compared with last year. As the economy starts to reopen, buyers and sellers must deal with a changed landscape and the impact it may have on deal activity. Prior to the crisis, company valuations were at all-time highs. Going forward, though, it may be difficult to value companies. In the wake of COVID-19, companies must come to grips with the impact that the pandemic has had on their business — not only in the short term, but also the long-term ramifications. Depending on the industry, some companies struggled mightily while others thrived. Was that a short-term blip or a systemic change? A company that has been negatively affected may face a lower valuation for its business. Buyers and sellers are likely to face a longer due diligence and negotiation process. Physical limitations due to social distancing may delay in-person visits and management presentations. There also will be a greater emphasis on virtual data rooms and video conferences. Buyers may require additional time to reconcile how the crisis affected a company and its customers and vendors, and may have several rounds of questions to fully understand a target’s viability and prognosis. An important aspect of any
business and the effect of transaction are consents the coronavirus. Sellers required for closing. frequently try to qualify a These may include landrepresentation as to matelords, customers, governrial adverse effect (or mental authorities and/or MAE), but that could reregulators. However, real ceive greater scrutiny as to estate owners and other what constitutes a MAE. transactional support Purchase price itself may businesses also are dealbe affected with a buyer ing with coronavirus and Makofsky is an offering a smaller cash the virus’s aftermath. Fur- attorney at the ther, many government McCarthy, Lebit, payment at closing with additional consideration, offices were closed or op- Crystal & erating with skeleton Liffman law firm such as an earnout based on the company’s achievecrews. As they slowly re- in Cleveland. ment of certain criteria. open, there will be a steep There may be more embacklog. As a result, obtaining required approvals will be phasis on purchase price adjustments and other claw-backs for delayed. COVID-19 created much uncer- negative events that occur after tainty in debt markets as well. Banks closing. As a result of these factors, buyand other lenders may need to retrench and critically analyze their ers and sellers may need to shift current lending portfolios. The their mindset to the new realities of question remains whether this will the M&A environment. Would-be slow down or hinder the ability to sellers must look at their business obtain financing for an M&A trans- through a buyer’s eyes and be able action. In underwriting an acquisi- to support a desired valuation. tion, lenders require financial infor- They must also be prepared to answer difficult questions about the COVID-19 impact and be able to deliver and support financial statements and projections. Sellers should also look to solidify client and vendor relationships and shore up any potential loopholes or weaknesses as much as possible. This mation such as year-end and can help present a company in the interim financial statements, tax re- best light possible. Potential buyers should recogturns for several years, and projections. Not only could there be delays nize that, in these uncertain times, in delivering this information, but certainty of closing is very importcredit analysts likely will scrutinize ant. Even in the letter-of-intent the information even closer. With stage, buyers should clearly state such uncertainty, lenders also may due diligence requirements, fundencounter challenges constructing ing sources and a path to closing. financial covenants in loan agree- This can help alleviate a seller’s ments that are appropriate and re- concerns that their efforts will reflective of the business. We may see sult in a closed transaction. Once expectations are level-set a shift in deal structure until markets are stabilized. Buyers may insist and lines of communication are on additional representations and clear, buyers and sellers can still warranties from a seller as to their achieve their desired results.
BUYERS AND SELLERS ARE LIKELY TO FACE A LONGER DUE DILIGENCE AND NEGOTIATION PROCESS. PHYSICAL LIMITATIONS DUE TO SOCIAL DISTANCING MAY DELAY IN-PERSON VISITS AND MANAGEMENT PRESENTATIONS.
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FOCUS | MIDDLE MARKET
Ac
COVID-19 recovery could be long road for middle market
Report: Execs expect it to take more than six months for businesses to return to full capacity BY RACHEL ABBEY MCCAFFERTY
Executives at middle market companies think it’s going to take time to get back to normal after the disruption of the COVID-19 pandemic. On average, executives expect it to take about 6.4 months for businesses to get back to full capacity. That’s one of the findings of a new report from the National Center for the Middle Market in Columbus. The center, a collaboration between the Ohio State University Fisher College of Business and insurance company Chubb, surveyed 1,000 executives at middle market companies for its next Middle Market Indicator survey. That survey, which covers the second quarter of 2020, is expected to be released later in July. But as part of a new report, the center compared the results from the June survey to a “COVID-19 pulse survey” of 260 companies it conducted in March. While the two surveys aren’t a direct comparison, they do offer some interesting insights. Overall, the new report found that fewer executives were expecting a “catastrophic hit from the pandemic” in June, compared with March. The questions the surveys had asked were slightly different: In March, the center asked executives to think about the impact to the next
three months. In June, it asked about the next six. In March, 25% of executives thought the impact would be catastrophic, said Thomas A. Stewart, executive director for the center. Under the longer time frame asked about in June, 13% thought it would be. Stewart “The good news is, that’s half as many,” Stewart said. “The bad news is, that’s one out of eight. And they’ve had some time to think about it.” That’s pretty “grim,” he said. And back in March, executives thought the recovery would be faster. At that time, 19% of respondents thought recovery would take more than six months. In June? Forty percent of respondents thought that. As of early June, respondents to the survey were operating at 67% capacity. This varied by industry; the report gave the example of construction, which was operating at 80% capacity, versus retail, which was at 56%. “Ongoing uncertainty” was reported by 76% of respondents as one of the top three challenges to running a business back in March. Sixty-six percent still thought that in June. And the challenges of maintaining employee communication and engagement and customer relations and engagement were also top concerns.
Operational continuity was also listed as a top-three challenge for more than half of respondents, but one that lost share from March to June. The most significant impact executives are expecting is on projected 2020 revenue, though fears have lessened in recent months. In March, 43% of executives surveyed were expecting a significant, negative, long-term impact to 2020 projected revenue. In June, 23% of respondents were. Expectations had also been tempered in areas like potential changes to employment, hours worked and growth initiatives from the March survey to the June one. When the lens is cast back to the end of 2019, the impact of the pandemic becomes apparent. In December 2019, respondents to the Middle Market Indicator survey projected a 12-month revenue growth rate of 4.9%. By June, that fell to 2%. Expected employment growth rate for the same time period dropped from 3.5% in December to -0.2% in June. Fewer respondents reported plans to enter new markets or build new facilities as of June as well. It wasn’t in the report, but Stewart said one area that companies did not
MARCH
19%
Mo tha mo
46%
Tw to s mo
38%
Les tha mo
SOURCE: NATIONAL CENTER FOR THE MIDDLE MARKET NOTE: MARCH RESULTS TOTAL MORE THAN 100% DUE TO ROUNDING.
intend to cut back on was digital transformation. That includes everything from online sales to automation. “It does suggest that we’re not going to come back to normal,” he said.
“We’re going to come back to new.” That’s going to include approaches to safety and productivity, as well as “omnichannel” capabilities, he said. Another piece of data the report
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P014_P015_CL_20200713.indd 14
The at 67 Ther at 56 the p The to ge
7/9/2020 1:55:46 PM
didn com to m chan and
A complicated journey The disruption of the pandemic had middle market companies overall operating at 67% of capacity as of early June 2020. But the road wasn’t the same for all. There were significant variations by industry: Construction was at 80%, and retail at 56%, for example. And executives’ timeline for returning to full capacity once the pandemic comes under control has lengthened significantly since March. The numbers below show how long surveyed executives expect their businesses to get to full capacity. Companies were surveyed in March and again in June. JUNE
More than six months
The average time executives expect to be at full capacity rose from 4.0 months in March to 6.4 months in June.
Two to six months
37% Less than one month
23%
DING.
w.” ches ll as aid. port
40%
CRAIN’S CLEVELAND BUSINESS GRAPHIC
didn’t delve into in depth is whether companies thought they would have to make “significant and long-lasting changes” in terms of employee safety and customer interactions, Stewart
said. Most thought they would. It’s tough to compare this moment to the past, but Stewart offered an “imprecise” analogy to a previous report from the center.
That report looked at how middle market companies have responded to different kinds of risks. That includes strategic risks, such as acquisitions, cyber risks and operational risks. That last category includes difficult-to-predict events, such as natural disasters like hurricanes and wildfires. The report found that strategic risks were the toughest to prepare for and to recover from, he said. The cyber and operational risks were more sudden, but companies could bounce back from them faster. The pandemic is a different kind of risk altogether, but there still might be some lessons to be learned. “It is hurricane-like in that it’s a big storm and it comes from outside, and you can see it coming, but you don’t have too much warning from it. But it’s like a hurricane that won’t go away,” he said. “And so it has both that immediate impact but also that long tail that strategic risk has.” The question is still how many of the changes that companies are facing are long but temporary, and how many are permanent. And, of course, how the strategic changes companies are making now — and the risks those changes carry — could affect them going forward remains to be seen.
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JULY 13, 2020 | CRAIN’S CLEVELAND BUSINESS | 15
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THE LIST
Investment Advisers
Ranked by regulatory assets under local management ASSETS UNDER LOCAL MGMT (MILLIONS) 12-31-2019 % CHANGE FROM 2018
ADV WITH ASSETS DISCRETION (MILLIONS)
1
CAPTRUST 222 S. Main St., Suite 220, Akron 330-535-4550/captrust.com
$9,418 (1) 12.3%
$1,428
2
Legacy Strategic Asset Management of Wells Fargo Advisors 1891 Georgetown Road, Hudson 330-655-7065/legacystrategicassetmgmt.com
$7,800 9.9%
3
Sequoia Financial Group LLC 3500 Embassy Parkway, Suite 100, Akron 330-375-9480/sequoia-financial.com
4
RANK
COMPANY LOCAL ADDRESS
HEAD OF INVESTING
COMPENSATION
PRIMARY LOCAL ADVISORY SERVICES
$389,151
Fee only, percent of AUM
Portfolio management for businesses and institutional clients, financial planning, pension consulting, seminars/workshops
Kevin Barry
Mario Giganti, senior VP, financial advisor; Steve Wilt, principal, financial advisor
TOP LOCAL EXECUTIVE
$0
$1,400,000
Percent of AUM
Financial planning, portfolio management for individuals, businesses and institutional clients, pension consulting services
Darrell Cronk
Doug Krapf; Matt Shannon; James Barsella, managing directors
$3,171 17.1%
$2,116
$4,618
Percent of AUM, hourly rates, fixed fees
Financial planning and portfolio management for individuals and small businesses
Chris Creahan
Tom Haught, president, CEO
CM Wealth Advisors 2000 Auburn Drive, Suite 400, Beachwood 216-831-9667/cmwealthadvisors.com
$2,938 11.2%
$2,628
$2,938
Percent of AUM, fixed fees
Financial planning, portfolio management for individuals, businesses and institutional clients
Cynthia Koury
James Wert, CEO, managing member
5
Fairport Wealth 1350 Euclid Ave., Suite 400, Cleveland 216-431-3000/fairportwealth.com
$2,560 51.5%
$2,008
$57,000 (2)
Fee only
Financial planning (wealth management), portfolio management for individuals/small businesses, seminars/workshops
John Silvis
Kenneth Coleman; Heather Ettinger, managing partners
6
Cerity Partners LLC 50 Public Square, Cleveland 216-464-6266/ceritypartners.com
$2,200 15.3%
$2,200
$24,683
Fee only and percent AUM
Financial planning, portfolio management, retirement plan consulting, tax planning and preparation
Benjamin Pace
Robert Smith, partner, Cleveland market leader
7
Fairway Wealth Management LLC 6055 Rockside Woods Blvd., Suite 330, Independence 216-573-7200/fairwaywealth.com
$1,617 17.6%
$3
$1,617
Fee only based on assets and/or services
Financial planning/wealth management, portfolio/investment management, retirement planning, family office services
Mark Weiskind
Daniel Gaugler, managing director, CEO
8
Cedar Brook Group 5885 Landerbrook Drive, Suite 200, Mayfield Heights 440-683-9200/cedarbrookfinancial.com
$1,343 38.6%
$1,259
$1,405
Negotiated
Financial planning, wealth management, risk management
Azim Nakhooda
William Glubiak, CEO
9
Prosperity Capital Advisors 30400 Detroit Road, Suite 201, Westlake 888-240-0064/prosperitycapitaladvisors.com
$1,224 30.6%
$1,224
$1,224
Fee only, percent of AUM
Financial planning; portfolio management for individuals, businesses and institutional clients; seminars
Clint Pelfrey Jerry Herman
Jason Smith, CEO
10
NCA Financial Planners 6095 Parkland Blvd., Suite 210, Mayfield Heights 440-473-1115/ncafinancial.com
$1,037 3.5%
$1,036
$1,037
Percent of AUM
Portolio management for individuals and small businesses
Leslie Globits
Kevin Myeroff, president, CEO
11
McDonald Partners LLC 1301 E. 9th St., Suite 3700, Cleveland 216-912-0567/mcdonald-partners.com
$1,025 15.0%
$625
$1,218
Fee and commission
Portfolio management for individuals, businesses and institutional clients, financial planning, pension consulting
Thomas Yako Bill Hegarty
Thomas McDonald, chairman, CEO
12
Marcum Wealth (3) 6685 Beta Drive, Mayfield Village 440-605-1900/marcumwealth.com
$1,006 41.9%
$1,001
$1,006
Fee only
Financial planning, investment management, 401(k) plan consulting, business consulting
Michael McKeown
Eric Wulff, CEO
13
MGO Investment Advisors Inc. 24400 Chagrin Blvd., Suite 310, Beachwood 216-771-4242/mgo-inc.com
$842 21.1%
$429
$842
Percent of AUM
Portfolio management for individuals/small businesses
Michael Moskal
Ronald Gross, president
14
Capital Advisors Ltd. 20600 Chagrin Blvd., Shaker Heights 216-295-7900/capitaladvisorsltd.com
$770 9.7%
$761
$770
Percent of AUM
Financial planning, portfolio management, adviser consensus building, retirement modeling
Rob Holub Zachary Abrams
Neil Waxman; Mark Ciulla, managing directors
15
St. Clair Advisors LLC 6120 Parkland Blvd., Suite 306, Mayfield Heights 216-925-5670/saintclairllc.com
$682 22.9%
$682
$682
Fee only, fixed or based on AUM
Wealth planning, investment advisory, tax planning and compliance services
David Sommer
Ronald Bates, chairman
16
Landing Point Financial Group 36350 Detroit Road, Avon 440-934-7100/landingpointfinancialgroup.com
$559 7.8%
$144
$559
Fee and commission
Portfolio management for individuals/ businesses, financial planning, pension consulting
Matt O'Bryon
Joe Flinner, president, CEO
17
Scott Snow (financial advisors) LLC 1991 Crocker Road, Suite 210, Westlake 440-871-7669/s2fa.com
$493 15.6%
$0
$493
Fee only, percent of AUM
Porfolio management for individuals
Scott Snow
Scott Snow, managing director
18
Vantage Financial Group Inc. 6200 Rockside Road, Independence 216-642-7878/vanfin.com
$459 (4) -6.5%
$359
$572
AUM fees, consulting and planning fees (flat or hourly)
Portfolio management for individuals/small businesses, pension consulting, financial planning and consulting
—
William McCormick, president, CEO
19
Financial Management Strategies Inc. 6200 Rockside Road, Independence 216-642-7878/fmstrategies.biz
$448 (4) 26.2%
$356
$448
Fee only, percentage of AUM
Portfolio management, retirement plan consulting services, financial planning
Charles Elliott
Jeffrey Knox, president, CEO
20
Demming Financial Services Corp. 13 New Hudson Road, Aurora 330-562-2122/demmingfinancial.com
$430 9.1%
$430
$430
Fee based on AUM
Financial planning
David Demming Jr.
David Demming Sr., president
21
W.A. Smith Financial Group 5070 Waterford Drive, Sheffield Village 440-934-8691/wasmithfinancial.com
$410 41.0%
$377
$410
Percent of AUM, financial planning fees
Financial planning, portfolio management for individuals, seminars/workshops/webinars
William Smith
William Smith, founder, CEO
22
Lineweaver Wealth Advisors 9035 Sweet Valley Drive, Valley View 216-520-1711/lineweaver.net
$405 (5) 32.3%
$405
$405
Fees, percent of AUM
Wealth management for private/corporate clients, retirement plans for corporate clients, tax strategy planning and risk management strategy
Jim Lineweaver
Jim Lineweaver, president, founder
23
Jentner Wealth Management 3677 Embassy Parkway, Akron 330-668-1000/jentner.com
$401 16.2%
$401
$401
Fee only, percent of AUM
Financial planning and investment management
Seth Jentner
Bruce Jentner, president
24
Peak Wealth Solutions 29225 Chagrin Blvd., Suite 100, Pepper Pike 216-370-7887/retirepeak.com
$388 21.3%
$310
$388
Percent of AUM
Financial planning, portfolio management for individuals, education seminars, pension consulting
Greg Gromek
David Kocsis; Greg Gromek, managing principals
25
Dakota Wealth Management (6) 275 Springside Drive, Suite 250, Akron 330-598-2208/dakotawm.com
$306 18.6%
$302
$1,145
Fee only
Portfolio management for individuals, businesses and institutional clients, financial planning, seminars/workshops
Patrick Hahn
Carina Diamond, chief experience officer
RESEARCHED BY CHUCK SODER: CSODER@CRAIN.COM
Get all 35 investment advisers and many more executives. Become a Data Member: CrainsCleveland.com/data
This list of registered investment advisers excludes companies that invest most of the assets they locally manage directly into stocks and bonds; those RIAs appear on the Money Managers list. AUM stands for "assets under management." ADV assets represents total regulatory assets under management as of Dec. 31, 2019. Data is supplied by the companies. Send feedback to Chuck Soder: csoder@crain.com. (1) CAPTRUST announced in June 2019 that it had acquired Cornerstone Capital Advisors of Uniontown, which had $520 million in regulatory assets under management as of May 2019. (2) Fairport Wealth began rolling its assets into the ADV of its Chicago-based parent company, HighTower Advisors, on May 1, 2019. (3) Marcum Wealth acquired a minority stake in Aurum Wealth Management in March 2020 and is in the process of rebranding as Marcum Wealth. (4) Vantage Financial in May 2019 announced the acquisition of Plancorp Inc. of Valley View. Plancorp subsidiary Financial Management Strategies now shares an office with Vantage but they report numbers separately. (5) Lineweaver's figures are as of April 1, 2020. (6) Dakota Wealth of Palm Beach Gardens, Fla., acquired Springside Partners of Akron in July 2019. 16 | CRAIN’S CLEVELAND BUSINESS | July 13, 2020
P016_CL_20200713.indd 16
7/9/2020 4:13:51 PM
THE LIST
Money Managers
Ranked by regulatory assets under local management ASSETS UNDER LOCAL MGMT (MILLIONS)
RANK
COMPANY LOCAL ADDRESS
12-31-2019 % CHANGE FROM 2018
WITH DISCRETION
ADV ASSETS (MILLIONS)
COMPENSATION
PRIMARY LOCAL ADVISORY SERVICES
HEAD OF INVESTING
TOP LOCAL EXECUTIVE
1
Boyd Watterson Asset Management LLC 1301 E. 9th St., Suite 2900, Cleveland 216-771-3450/boydwatterson.com
$11,098 30.8%
$10,503
$11,098
Fee only, percent of AUM
Portfolio management
Brian Gevry
Brian Gevry, CEO, CIO; Timothy Hyland, president; Brian Convery, Michael Bee, executive VPs
2
Victory Capital Management Inc. 4900 Tiedeman Road, 4th Floor, Brooklyn 216-898-2400/vcm.com
$8,591 (1) -21.9%
$8,439
$157,608
Percent of AUM
Portfolio management
CIO at franchise level
David Brown, chairman, CEO
3
Ancora 6060 Parkland Blvd., Suite 200, Mayfield Heights 216-825-4000/ancora.net
$7,977 25.6%
$4,809
$7,977
Percent of AUM
Portfolio management, financial planning, retirement plans
John Micklitsch
Fred DiSanto, chairman, CEO
4
AB Bernstein 127 Public Square, 50th floor, Cleveland 216-263-8090/bernstein.com
$6,519 4.2%
$6,519
$585,963
Performance based or percent of AUM
Portfolio management for individuals, businesses and institutional clients; financial planning
Alexander Chaloff Beata Kirr
Kara Lewis, managing director
5
MAI Capital Management LLC 1360 E. 9th St., Suite 1100, Cleveland 216-920-4800/mai.capital
$6,513 (2) 46.0%
$6,054
$7,166
AUM-based fee; set fees for noninvestment services
Financial planning, portfolio management for individuals, selection of other advisers
John Zaller
Richard Buoncore, managing partner
6
Carnegie Investment Counsel 30300 Chagrin Blvd., Pepper Pike 216-367-4114/carnegieinvest.com
$2,445 33.0%
$2,393
$2,445
Fee only, percent of AUM
Investment research, portfolio management, wealth management
Richard Alt
Gary Wagner; Richard Alt; Arthur Merriman III, principals
7
Oak Associates Ltd. 3875 Embassy Pkwy., Suite 250, Akron 330-668-1234/oakltd.com
$1,859 20.4%
$1,859
$1,859
Percent of AUM
Portfolio management for business/ institutional clients and investment companies
James Oelschlager Robert Stimpson
Robert Stimpson, co-chief investment officer and portfolio manager
8
Beese Fulmer Private Wealth Management 220 Market Ave. S., Suite 1150, Canton 330-454-6555/beesefulmer.com
$1,012 (3) 73.3%
$1,012
$1,012
Percent of AUM, fee only
Portfolio management for businesses, institutional clients and individuals
Ryan Fulmer
Ryan Fulmer, president, principal
9
North Point Portfolio Managers Corp. 100 Park Ave., Suite 200, Orange Village 440-720-1100/nppmcorp.com
$779 22.6%
$777
$779
Percent of AUM
Portfolio management for individuals, businesses, nonprofits and retirement plans
Diane Stack
Ronald Lang, president, secretary
Van Cleef Asset Management Inc. 3201 Enterprise Pkwy., Suite 140, Beachwood 216-464-0253/vancleefinc.com
$645 21.7%
$627
$645
Percent of AUM
Portfolio management for individuals and institutional clients
Lino Sergo
Geoffrey Hauck; Martin Burke Jr., principals
10
RESEARCHED BY CHUCK SODER: CSODER@CRAIN.COM This list consists of registered investment advisers that invest at least half of the assets they manage locally directly into stocks and bonds. Information is provided by the companies. (1) A local Victory Capital investment team moved when Victory relocated its headquarters to San Antonio, causing this drop. (2) MAI’s local figures exclude assets managed by J.M. Hartwell of New York, which MAI acquired on Dec. 31, 2019. They include all other MAI offices, which report to MAI’s Cleveland investment team. (3) Beese Fulmer acquired MacNealy Hoover Investment Management of Canton in October 2019.
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LIST ANALYSIS
Merger mania reshapes investment adviser lists Due to M&A, some firms grew, others vanished BBY CHUCK SODER
2019 was a record-setting year for mergers and acquisitions involving registered investment advisers nationwide — a trend that is having a big impact on our Money Managers and Investment Advisers lists. Several firms on the two lists — which rank different types of RIAs by assets under local management — bought other companies in 2019. Others got acquired, some disappearing from the lists as a result. For instance, MacNealy Hoover Investment Management was No. 18 on the Money Managers list in 2019. It got acquired by a company on the same street in Canton: Beese Fulmer Private Wealth Management. Its assets under local management jumped 73% in 2019. Likewise, Cornerstone Capital Advisors of Uniontown, No. 14 on last year’s Investment Advisers list, got bought by Raleigh, N.C.-based CAPTRUST, which is No. 1 on that list. Last year’s No. 1, CBIZ, did not submit this year. Wasmer Schroeder, No. 6 company on 2019’s Money Managers list, also did not submit, citing a deal to be acquired by Charles
Schwab Corp. that closed on July 1. Other relevant deals are described in footnotes on the lists. (By the way, the Money Managers list includes firms that mainly pick stocks and bonds, while Investment Advisers includes firms that allocate most assets to mutual funds and other vehicles.) Nationwide, the number of RIA M&A deals rose 12% in 2019 after years of increases, according to Echelon Partners, an investment banking firm focused on RIAs. They expect the trend to continue, despite a second-quarter slowdown caused by the COVID crisis and the resulting economic fallout. Speaking of the economy: Most companies on these lists saw their assets grow along with the stock market in 2019, but don’t assume their portfolios are in bad shape today. When markets closed on July 8, the Russell 3000 Index — which climbed by 28.5% in 2019, partly because prices were particularly low at the end of 2018 — was down just 3.2% from its closing price on Dec. 31, 2019. Chuck Soder: csoder@crain.com, (216) 771-5374, @ChuckSoder
AMAZON
From Page 1
The photo-analysis system, called Proxemics, is one of many measures — from high-tech to decidedly makeshift — that the e-commerce titan has implemented to combat contagion of the novel coronavirus. Since mid-March, the pandemic has forced Amazon to confront worker allegations that the company isn’t doing enough about safety, even as the online retailer tries to meet seemingly insatiable demand from customers who largely are stuck at home. Amazon says it has made dozens of changes, from quadrupling cleaning of doorknobs and bathrooms to defogging buildings between shifts. The Seattle-based company has distributed almost 48 million ounces of hand sanitizer and more than 100 million disposable masks to employees over the last four months. In North Randall, associates have their temperature taken at the start of each shift by a thermal camera that scans them from 10 to 15 feet away. Anyone with a temperature of 100.4 degrees Fahrenheit or higher is sent home. Workers with confirmed or probable cases of COVID-19, the illness caused by the coronavirus, are eligible for up to two weeks of paid time off. On a Friday in late June, Donna Shaw manned the screening station, where she watched employees’ temperatures pop up over their faces on a monitor. Boxes of masks sat next to her, available for workers who didn’t bring their own face coverings.
Behind her, corridors built from stacks of yellow storage totes — the same bins that ferry gadgets, books and household goods on a winding path through the building — channeled one-way, single-file traffic. A checkerboard of tape on the floor showed the path employees should follow when approaching the time clocks. Now, instead of physically punching in, most workers check in on their phones. Amazon started allowing phones onto the floor on March 15, in a departure from its long-running rule that employees had to stash their belongings in lockers. The North Randall locker room, where the aisles are strewn with forgotten winter coats and boots, has been cordoned off for months. “The building wasn’t engineered, obviously, for social distancing. No building is,” Huber said of the fulfillment hub, which opened in fall 2018 and employs more than 2,500 people. “We’ve done our best to physically engineer the building in such a way that associates cannot be within 6 feet of one another,” he said, adding that “some of those solutions have been a little bit scrappy.” Amazon won’t say how many local employees have tested positive for COVID-19. The company, with a rapidly growing footprint in Northeast Ohio, also has fulfillment center in Euclid and smaller sorting and delivery facilities scattered across the region. In late May, Amazon confirmed that an employee in North Randall died after testing positive for the virus. In Minnesota and Pennsylvania, fulfillment centers have been linked
The locker room at Amazon’s North Randall fulfillment center has been cordoned off for months. The building’s managers determined that it’s the only space that can’t be reconfigured for social distancing. Arrows on the floor direct one-way traffic between the break room and the distribution areas. | PHOTOS BY MICHELLE JARBOE/CRAIN’S CLEVELAND BUSINESS
to clusters of cases. Ohio doesn’t release business-specific case information, aside from reports on nursing homes and other long-term care facilities.
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CLOSE DATE: July 17 | ISSUE DATE: Aug. 17 18 | CRAIN’S CLEVELAND BUSINESS | July 13, 2020
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Si Cou 18 c ties Nor wer A fe limi ees den A tion at th para
g’s ly ocial
om
t remasing e fa-
Mark Huber, director of operations at Amazon’s North Randall fulfillment center, holds up portable voice amplifier he uses while speaking in the noisy building. The device ensures that he’s audible, even through a mask, from six feet away.
Since late March, the Cuyahoga County Board of Health has received 18 complaints about Amazon facilities — half from Euclid and half from North Randall. Most of the complaints were about a lack of social distancing. A few related to insufficient cleaning, limited mask usage and sick employees at work. The board didn’t find evidence to support the claims. An Amazon spokesman said infection and quarantine rates for workers at the company’s buildings are comparable to or lower than rates in the
surrounding communities. “I don’t find that information to be really relevant to what we’re trying to do, because our mission here has been clear from the very beginning,” Huber said of the statistics. “We’re trying to provide a safe environment for people to come in tough times to work, and to work safely. … We just don’t find the information to be helpful.” Over the last few months, Amazon has ramped up hiring, adding 175,000 jobs across the country and taking in workers furloughed or laid
off from hotels, restaurants and the travel industry. In Ohio, the company has hired 6,500 people since midMarch, including 2,000 full-time employees in Northeast Ohio. Many part-time jobs are turning into fulltime positions. Attendance and the pace of activity at the North Randall facility dropped for about a month, from mid-March to mid-April, as business closures cascaded across the state and families struggled with health concerns and childcare challenges. But the fulfillment center never shut its doors. Instead, Amazon staggered start
times and breaks. The company began requiring masks April 8, after a hectic two-week period when Huber’s team oversaw the logistics of distributing masks to 140 Amazon buildings, ranging from other fulfillment centers to Whole Foods Market stores. And Amazon created a new job, the social distancing ambassador, focused on education and enforcement. In North Randall, more than 15 ambassadors are on hand during every shift. In the break room, each table is equipped with a single chair and a bottle of hand sanitizer. On the main
floor, the human resources staff sits out in the open, at high tables, and talks to workers from a distance using voice amplifiers and two-way radios. Those are the relatively low-tech tweaks. Then there are programs like Proxemics and Distance Assistant, which is still rolling out to Amazon warehouses nationwide. Using the same network of cameras, monitors throughout the building will show workers with ample distance around them standing in green circles. As employees edge together, their circles will turn red. Such coronavirus surveillance is raising concerns for privacy advocates, who worry that companies will find applications beyond the current crisis. Amazon, which has a robust robotics arm and is exploring other ways to use technology for social distancing, has said these tracking programs are specific to warding off COVID-19. “I think Amazon’s made it really clear what the priority is, and it’s the health and safety of people in the buildings. … Anything that’s going to happen in the future would probably be conjecture on my part,” Huber said. “But I don’t expect any of our social distancing, any of our personal protective equipment, any of the 150 process changes that we’ve put in place, I don’t expect any of that to change at any time until, really, the Centers for Disease Control (and Prevention) helps Amazon to establish what the best practices are.” Michelle Jarboe: michelle.jarboe@ crain.com, (216) 771-5437, @mjarboe
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JULY 13, 2020 | CRAIN’S CLEVELAND BUSINESS | 19
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AKRON REAL ESTATE
Akron’s office market is holding steady but faces uncertainty BY DAN SHINGLER
The market for office space in Akron is holding firm, thanks in part to some big lease deals that were already underway when the COVID-19 crisis hit, according to recent analysis of the market by the real estate firm JLL. That’s the case so far, though real estate experts said it will be months before the impact of the pandemic and economic downturn fully shows itself. But, for now, they’re optimistic. “The market remained very healthy and strong through the spring months,” said Andrew Batson, vice president and director of research for JLL in Cleveland. Batson’s office puts out a report on the Akron market twice a year and shared an advance copy of this summer's edition with Crain's. He said deals such as FirstEnergy’s renewal of a 10-year lease on Main Street downtown and the company’s former subsidiary, Energy Harbor, taking 60,000 square feet of space on East Market Street, have affected the market. So has the completed renovation of the 307,000-square-foot Bounce Innovation Hub, which also got new tenants downtown. Vacancies are up a bit from the end of 2019, when the citywide vacancy rate was 16.6%. It’s now 17.4%, JLL found. But that increase is largely due to new space coming online, while big leases by local corporations have continued to buoy the market overall, Batson said. “Tenant activity remains robust, particularly with FirstEnergy renewing and Energy Harbor," he said.
Energy Harbor, formerly FirstEnergy Solutions, leases space in the former Akron Post Office Building on East Market Street. | WIKIMEDIA COMMONS
"Those are significant employers and a large part of the business community, so those are wins for Akron overall.” Other moves created more available space, he said, including the Akron Beacon Journal’s downsizing from its historic headquarters on Exchange Street to the nearby AES building, where it took 16,000 square feet of space. It left behind a 230,000-square-foot space that remains vacant and for sale, JLL noted in its report. However, after the report was written, the Beacon reported on Thursday, July 9, that Michael Mouron, founder of Capstone Development Co. in Birmingham, Ala., and his wife, Kathy, purchased the building and intend to covert the property
into downtown offices. JLL found the vacancy rate improved in downtown Akron, to a rate of 14.4%, compared with 18.1% at the end of 2019. Some new projects, including Main Street’s Bowery District, which has yet to lease any of its approximately 40,000 square feet of retail space, and the Law Building’s mixed-use development, are not yet included in JLL’s analysis, Batson said. Not including downtown, the city’s vacancy rate for office space was higher, at 28.7%, compared with 20.1% at the end of 2019, but Batson said that was not yet a concern. “We added a few buildings over the last year or so. That’s very typical,” he said of the increase in the vacancy rate. “If you think about it from the investor perspective, the vacancies are
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because we’re tracking more office space. We’re seeing landlords invest and add more space to the market, like with East End,” Batson said, referring to developer Stu Lichter’s expanding development at Goodyear’s former headquarters site on Akron’s east side. In the suburbs, performance was spotty, but healthy overall, Batson said. Green, which is short on Class A space, and Fairlawn, which remains a hot market, fared best. Both had an overall vacancy rate of about 12.5%, JLL reported. In Green, the vacancy rate for Class A office space was effectively zero, though it does have some Class B space vacant, Batson said. Hudson, Stow and Richfield were a bit more challenged, with vacancy rates in those suburbs hovering around 18%, JLL found. Looking ahead, things are uncertain. No one knows how the office space market is going to be affected over the long term. Jerry Fiume, managing director of Summit Commercial Real Estate Group in Fairlawn, thinks it will take time to see how the current crisis affects the market for office space. “I think the office market has hit the pause button. That’s the way I’m looking at it. Organizations are trying to decide if they need more space or less space,” Fiume said. Fiume thinks corporations and others will still need office space but may use it differently. They may want more space per employee for social distancing, for instance, or they may choose smaller suburban office buildings where they have control or might be the sole tenant. “There’s no doubt in my mind the suburban market is going to be stronger. … You can control your environment better,” Fiume said. Batson said his firm has been polling local businesses, and while it expects changes, it does not expect to see a wholesale abandonment of the traditional office. “We’ve conducted some surveys, both internally and externally … and the way we use office space will change,” Batson said. “Now that we’ve learned people can be productive at home, the office space use will change. People will use the office more to conduct meetings or to inter-
act with associates … but they’ll still need office space,” Batson said. In fact, he said, some employers may start using more square feet per employee for social distancing. But it will likely be months before we see the pandemic’s real impact on real estate, in Akron or elsewhere, Batson said, because real estate is usually a lagging indicator of economic activity. “In the last two recessions, it really took a couple of quarters before we saw it affect real estate fundamentals,” Batson said. “The average deal-cycle for corporate office space is 12 months or more. So, decision makers are starting to think about future decisions, but a lot of those are a year away,” he added. Fiume said that’s true, but in the meantime he thinks the subleasing market will pick up. Some companies will find they don’t need or can’t afford as much space as they currently have, so rather than try to get out of their lease, they’ll seek to lease it to someone else. “The sublease market is going to expand drastically. We just picked up a listing agreement for 26,000 square feet of office space where the tenant has eight years left on their term,” Fiume said. Elsewhere in the commercial real estate market, industrial space is doing very well. Fiume and other real estate executives have long said that Northeast Ohio, and Akron in particular, has a shortage of industrial space. That seems to still be the case. The vacancy rate for industrial space in Akron is around 3.5% now, said Robert Wetzel, vice president of Cushman & Wakefield |Cresco Real Estate in Cleveland. The vacancy rate is higher in Cleveland and other parts of the region but still below 5% in most cases, he said. It’s not likely to go up either, as Amazon and others keep gobbling up space, Wetzel said. “The industrial market is really tight in all these areas. It’s been getting tighter and tighter,” he said. So far, that part of the market has been immune to COVID-19 issues, too. “In industrial, I haven’t seen the fallout yet,” Wetzel said. Dan Shingler: dshingler@crain.com, (216) 771-5290, @DanShingler
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PPP
From Page 1
The SBA released PPP information in two batches — one each for loans more and less than $150,000. Companies that received the larger loans were identified by name, but their respective loan values were classified among one of five categories ranging from $150,000-$350,000 to $5 million-$10 million. You can find a searchable chart of all Ohio recipients of PPP loans of $150,000 or more at the bottom of this story. Businesses in Northeast Ohio that received the largest loans of $5 million to $10 million include the following: law firms Benesch, Tucker Ellis and several others.; accounting firms Cohen & Co. and Rea & Associates; Invacare Corp.; American Bread Co. (whose properties include Don’s Lighthouse Grille and Don’s Pomeroy House); Jergens Inc.; Marous Bros. Construction Inc.; Schwebel Baking Co.; The Musical Arts Association (the nonprofit that operates The Cleveland Orchestra); staffing company The Reserves Network; The Smithers Group Inc.; The Original Mattress Factory Inc.; and USA Millwork. Crain Communications, the Detroit-based parent company of Crain’s Cleveland Business, also received a PPP loan in the $5 million-$10 million range. With President Donald Trump signing a law July 4 extending the application deadline for the PPP from June 30 to Aug. 8, most banks continue to take new loan requests. Ohio Bankers League spokesman James Thurston said new applications continued to be filed through the past week and that anyone still interested in the loans should talk to their bankers. Those with loans funded from here on out have through the end of the year to spend the money due to the PPP Flexibility Act (PPPFA) passed in June.
Most-funded NEO industries by loan volume Among 20 industry classifications (defined by North American Industry Classification System codes), the top-three funded business sectors in Northeast Ohio by volume for PPP loans large and small combined comprise: professional, scientific and technical services (6,916 loans), which includes firms providing legal, accounting, architectural, design, consulting and advertising services; other services, excluding public administration (6,340 loans), which range from mechanic, barber and salon shops to dry cleaning and funeral services to school groups; and construction services (5,862 loans). PPP funding enabled those sectors
INTERNET
From Page 5
House Bill 13, legislation that would help fund the expansion of broadband access across Ohio, has passed the House and moved on to the Senate, where it waits for committee hearings. The bill establishes a grant program to fund the construction of broadband projects in unserved areas of the state. In the House, Scott R. Williams, CEO of Ohio Realtors, the state’s largest organization of real estate brokers, submitted a statement supporting passage.
Paycheck Protection Program targets high percentage of small business jobs The PPP supports 51.1 million jobs across the nation — or 84% of the country’s 59.9 million small business employees. Here is a breakdown of the total small business jobs in each state as defined by the U.S. Census. Washington 0.9M Oregon 0.6M
Montana 0.2M
North Dakota 0.2M
Idaho 0.3M Wyoming 0.1M
Nevada 0.5M
Utah 0.8M
California 6.5M
Colorado 0.9M
Arizona 1.0M
New Mexico 0.2M
Alaska 0.1M
Key
>6M
2-3M
4-5M
1-2M
3-4M
<1M
Minnesota 1.1M
Maine 0.2M Vermont 0.1M New Hampshire 0.2M Massachussetts 1.1M Rhode Island 0.2M Connecticut 0.6M New Jersey 1.5M Delaware 0.1M Maryland 0.9M
Wisconsin 1.0M
New York 3.2M Michigan 1.6M Pennsylvania Iowa Ohio Nebraska 1.8M 0.5M Illinois Indiana 1.9M 0.3M 2.2M 1.0M W. Va 0.2M Virginia Kansas Missouri Kentucky 1.0M 0.5M 0.9M 0.6M North Carolina Oklahoma 1.2M Tennessee 0.9M Arkansas 0.6M 0.4M South Carolina 0.7M Mississippi 0.4M Alabama Georgia 1.5M 0.7M Texas 4.5M Florida 3.2M
South Dakota 0.2M
Louisiana 0.8M
Hawaii 0.2M
© HERE/MAPS4NEWS CRAIN’S CLEVELAND BUSINESS GRAPHIC
SOURCE: U.S. SMALL BUSINESS ADMINISTRATON
PPP approval in each state as percentage of small business payroll Across all 50 states, 72% to 96% of estimated small business payroll was covered by Paycheck Protection Program loans. The state PPP jobs numbers are based on borrower reported numbers from their PPP applications. Washington 74% Oregon 77%
California 77%
>95% 90%-95% 81%-90%
Montana 82%
North Dakota 90%
Idaho 91% Wyoming 79%
Nevada 86%
Key
Utah 93%
Arizona 85%
Colorado 0.9M
New Mexico 0.2M
Alaska 73% Hawaii 96%
Minnesota 87% Wisconsin 84%
71%-80%
Maine 79% Vermont 79% New Hampshire 77% Massachussetts 73% Rhode Island 83% Connecticut 76% New Jersey 81% Delaware 74% Maryland 75%
New York 75% Michigan 84% Pennsylvania Iowa Ohio Nebraska 82% 85% Illinois Indiana 90% 92% 81% 85% W. Va 83% Virginia Kansas Missouri Kentucky 72% 90% 85% 86% North Carolina Oklahoma 80% Tennessee 82% Arkansas 85% 78% South Carolina 81% Mississippi 86% Alabama Georgia 86% 82% Texas 82% Florida 96%
South Dakota 93%
Louisiana 84% © HERE/MAPS4NEWS CRAIN’S CLEVELAND BUSINESS GRAPHIC
SOURCE: U.S. SMALL BUSINESS ADMINISTRATON
to retain 57,409, 50,722 and 62,060 jobs, respectively. While the SBA data show how many loans were funded and how many jobs the borrowers claimed to retain with them, there’s no guarantee that all those businesses have used their money or hired all employees back. Some companies may still return their loans, or unused portions of them, or come up short in using them as reported on qualified expenses (which following the PPPFA requires at least 60% be spent on payroll). Using those loans properly is necessary to qualify for 100% loan forgiveness. The professional, scientific and technical services industries drew the most loans of $150,000 and less (5,994 loans). Manufacturing ranks sixth in Northeast Ohio by total loan volume
(4,792 loans) but featured the most loans of $150,000 or more (1,904) in the market. That sector also reported the most retained jobs with its PPP funds compared with all other sectors in the market, at 123,765.
“By expanding access to highspeed internet across our state, the ability for real estate professionals to offer their clients the most current technological tools when purchasing either a residential or commercial property would greatly improve,” he wrote. “Additionally, it goes without saying that a home that is ‘on the grid’ is more desirable than a home that cannot get access to today’s technology, especially as the COVID-19 pandemic has forever changed how we work.” Bethany Dentler, executive director of the Medina County Economic Development Corp. , said in an email
“IT GOES WITHOUT SAYING THAT A HOME THAT IS ‘ON THE GRID’ IS MORE DESIRABLE THAN A HOME THAT CANNOT GET ACCESS TO TODAY’S TECHNOLOGY, ESPECIALLY AS THE COVID-19 PANDEMIC HAS FOREVER CHANGED HOW WE WORK.”
‘Those days in April were very hectic’ Professional service firms, heavily populated by law and accounting firms, have generally seen a downtick in demand for work, despite being busy helping clients with PPP. Many firms sought the money early on in anticipating of a further downturn amid the economic uncertainty. Some firms have described not pursuing potentially free money as business management malpractice. Other law firms that took PPP loans between $5 million and $10
——Scott R. Williams, CEO of Ohio Realtors
More PPP on crainscleveland.com: PPP loans among the top-50 largest law firms in Northeast Ohio, listed with the loans they received and the number of jobs their funding reportedly supports.
million include McDonald Hopkins, Roetzel & Andress, Ulmer & Berne and Reminger Co. “For those who applied and got it, there is no question that getting those monies in the door enabled them to avoid significant layoffs and furloughs,” said Rebecca Ruppert McMahon, CEO of the Cleveland Metropolitan Bar Association. “Everyone who considered applying considered two things: the uncertainty of the pandemic, and, second, the protection of their employees.” That sentiment applies to everyone seeking the government stimulus money established under the that there are still portions of that growing county, mostly in the western area, that lack high-speed internet access. “I have heard from people in those areas who are forced to use cellular options to obtain internet access because hard-wire cable or telephone-line options are insufficient,” she said. “This impacts not only residents, but farms, businesses and school districts.” Similarly, Brittany Lovett, marketing and communications officer of the Community Foundation of Lorain County, said her organization is putting together a digital inclusion
Coronavirus Aid, Relief and Economic Security (CARES) Act that created the PPP. The demand for loans in the other services industry sector points to the financial instability for the smallest of small businesses in a category that ranges from mechanics to salons. While ranking second overall in total loan volume in Northeast Ohio, 92% of the sector’s loans (5,846) were for $150,000 and less. The only company in Northeast Ohio in the other services industry to receive a loan of $5 million-$10 million was Conrad’s Tire Service. Others provided loans in the $2 million-$5 million range include Christian Healthcare Ministries Inc. of Barberton, Rubber City Arches of Akron and the Jewish Federation of Cleveland. Unlike some other states, the construction industry was never forced to stop operating in Ohio amid state-imposed business closures. But many projects did, said Tim Linville, CEO for the Construction Employers Association trade group. Many of the loans in that sector were provided early in the PPP in April, such as Marous Bros. Construction Inc. of Wickliffe, which was provided a $5 million-$10 million loan. “Those days in April were very hectic,” Linville said. “For our business owners, things were very tenuous. Some jobs were canceled. Some were put on hold. Some never started. And early on, we were wondering if the government would allow us to keep operating or would we shut down?” He said contractors were encouraged to pursue loans to avoid layoffs of staff that could be hard to replace, considering field workers — known as journeyman — tendencies’ to not only jump between jobs, but employers, too. Losing staff could make it difficult to stay up on projects that do move forward. “When we are truly free of the virus, what I have been hearing from many contractors is the flood gates will open and we will have a serious shortage of people to do the work,” Linville said. Firms engaged in pre-construction work, for example, were incurring costs while income slowed as projects stalled. The PPP loans are helping many of those companies bridge financial gaps until clients are paying bills. Linville said many businesses that would expect payment in 30 days have been drawing that out to 60 and 90 days because of cash crunches. However, because some firms haven’t slowed as much as was once feared, Linville said he expects several construction companies will return PPP funds. “I know a lot of people who will be sending that money back,” he said. Jeremy Nobile: jnobile@crain.com, (216) 771-5362, @JeremyNobile coalition — including the county’s libraries, the Educational Service Center of Lorain County, Goodwill Industries and an organization called PCs for People — to help close the digital divide. It started with collecting 30 computers that will be refurbished for students in Lorain County. “All of these small efforts can move the needle,” said Bill Callahan, president of Connect Your Community. “All the things people are doing adds up to something real,” he said. “If they grow they can be very significant.” Jay Miller: jmiller@crain.com, (216) 771-5362, @millerjh July 13, 2020 | CRAIN’S CLEVELAND BUSINESS | 21
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The Billow Co. funeral parlor on Ash Street in Akron is seen here. During the 1918 flu pandemic, the company not only conducted funerals, but also drove sick patients to hospitals and infirmaries. |
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PEOPLE ON THE MOVE
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BANKING
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Sutter O’ Connell Sutter O’Connell welcomes Andrew Hickman to our Tennessee office as an associate. Drew brings his experience and expertise to the firm’s Commercial Litigation, Premises and Products Liability Defense, and Trucking and Transportation practice areas. He has previously served as Staff Counsel for one of the country’s largest automobile insurers and has successfully defended many clients in bench and jury trials in multiple jurisdictions.
WHAT’S YOUR COMPANY’S NEXT MOVE?
BANKING
Civista Bank Timothy Naftzger has been promoted to Vice President, Commercial Lending. He is based out of Civista’s Akron office, located at 529 N. Cleveland Massillon Road, Akron, OH 44333. With over 15 years of experience in the banking industry, Naftzger is committed to providing each client with individualized attention to help them reach their business banking goals. He is a graduate of Northwood University and a member of the Lodi Rotary Club. Naftzger currently resides in Homerville, OH.
LAW
Frantz Ward LLP Kalynne N. Proctor joins Frantz Ward as an Associate in the Construction Practice Group. She has represented clients in construction litigation and alternative dispute resolution proceedings related to disputes involving defects and workmanship issues, delay and other schedule-related claims, payment disputes, as well as the perfection and foreclosure of mechanic’s liens. She earned her J.D. from Cleveland-Marshall College of Law and her B.S. from The Ohio State University.
Create your own business headlines with Companies on the Move For more information, contact Debora Stein at 917.226.5470 / dstein@crain.com CrainsCleveland.com/ CompanyMoves
CONTRIBUTED
1918
From Page 1
At that time, the city of Cleveland temporarily closed public spaces where people were likely to gather, such as churches, dance halls and bowling alleys. Schools, art museums and public libraries were also closed. Stores and factories weren’t, but they were asked to keep employees from gathering in groups. Though changes were made to businesses because of the flu, war production was still the priority, said John J. Grabowski, associate professor of history at Case Western Reserve University and senior vice president of research and publications at the Western Reserve Historical Society. Even without a complete shutdown, companies in Cleveland still lost about $1.25 million, Grabowski said. He estimated that was the equivalent of about $21 million today. That was mostly due to the loss of theater and entertainment revenue. Most of the companies that responded to the Crain’s survey had just small stories to share from their history from the 1918 pandemic. The Cleveland Indians shared that some players got sick in early April and that the team had to use utility players. Community Solutions said its predecessor, the Welfare Federation, cared for “flu orphans,” noting that it was probably a member organization that did the actual work as the federation typically raised and allocated funds. Kent State University’s class of 1919 yearbook makes mention of the flu, referring to three “flu vacations” in October, November and December — and commemorates two students who died. The Cleveland Museum of Art was still new in 1918, having opened its doors in June 1916. Leslie Cade, director of archives, said that despite the museum’s closure during the pandemic, she couldn’t find any lasting effect on the then-fledgling institution or its programming moving forward. But even though there were no restrictions when the museum reopened in 1918, attendance still dropped for a time. In 1917, 273,853 people visited the museum. In 1918, 231,828 people did. Attendance rebounded the following year, reaching 277,545 people. Some companies saw their operations change dramatically, at least for a time. Billow Funeral Homes & Crematory in Fairlawn saw the number of families it served increase by two to three times in the fall of 1918 and the spring of 1919. It buried almost 300 people that fall, most of whom died from the flu or from complications, such as pneumonia. Billow also noted that it had one of the only ambulance services in the Akron area during the 1918 pandemic, so, in addition to its funeral-related services, it was responsible for driving “the sick to the hospitals and infirmaries.” University Hospitals wrote that one of its predecessors, Lakeside Hospital, shifted its operations be-
cause of both the pandemic and to World War I, “adapting various wards and floors to meet the needs of the pandemic and reflect any staffing shortages due to the war,” the hospital system wrote. “An entire floor of one pavilion was changed into an isolation ward, another ward was converted to solely treating influenza cases among women, and several other wards were taken over for influenza cases and remained filled through the end of 1918,” the system continued. Lakeside Hospital also set aside specific rooms for treating influenza cases among the medical staff, especially nurses. And the Lakeside Hospital Training School for Nurses temporarily shortened its eight-month curriculum to four months during the pandemic to fill the demand for nurses. While many business changes were temporary, the Western Reserve Historical Society saw its very future shaped by the events of 1918. In the pandemic’s wake, the society switched its focus from events to collecting. And the war offered a lot of opportunities for that kind of documentation. Kelly Falcone-Hall, president and CEO of the Western Reserve Historical Society, said that change was “telling” for what the society became. The society grew, even through the Depression that soon followed, and moved from its location at East 107 Street and Euclid Avenue to University Circle, its current home, a few decades later. The Western Reserve Historical Society was founded two years after the end of the Civil War, in part to capture that history. And the organization was able to endure through subsequent wars and the Depression, Falcone-Hall said. When the COVID pandemic hit, society officials recognized from the organization’s past that the society would need to make changes, but that it could survive. “Agility” and “openness” have been key, she said. A little more than one-third of the society’s approximately $5 million budget is typically from earned revenue, things like admissions, services and events, Falcone-Hall said. The society is now focused on reopening and recovering some of that revenue. It’s also continued to raise funds, which typically makes up another third of its budget. But maintaining its mission has been of utmost importance. To that end, the society has launched new campaigns to collect documents and experiences related to the current moments in history, COVID-19 and to activism. It’s also been working to make more of its collections accessible online, opening virtual exhibits. Falcone-Hall is aware that she and other leaders are making today will impact the future of the city’s institutions, much like the decisions of leaders of the past did during the 1918 pandemic. Rachel Abbey McCafferty: (216) 771-5379, rmccafferty@crain.com
22 | CRAIN’S CLEVELAND BUSINESS | JULY 13, 2020
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CRAIN’S CLEVELAND LOOK BACK | 1986-2020
City living’s revival came step by step An outsider might drive by the typical 1980s-era garden apartment style and find it big, but bland. However, the 277 units in 17 buildings at Lexington Village, 7820 Lexington Ave. in Cleveland, is actually a bricks-and-mortar monument. Carnage cleared most of its 3-acre site during the July 1966 Hough riots. When Lexington Village began rising 20 years later, it was the first new market-rate housing in the predominately Black neighborhood in 50 years. The project, a key undertaking of the late Steve Minter as president and CEO of the Cleveland Foundation, shaped the way funders and others organized and tackled the challenge of ending the long hiatus of home-building in the city. —Stan Bullard
``THE HISTORY Although $500,000 townhouses and pricey homes are increasingly found on what used to be the Near West Side and new apartments recently opened from Ohio City to University Circle, city housing construction had become negligible by the 1980s. A combination of forces decimated neighborhoods after World War II, from highway construction and suburbanization to insurance redlining and failing schools. Home builders found land, and an easier sell, in suburbs, then outlying counties. Documenting population movement from Cleveland since the 1970s earned Tom Bier, now a senior fellow at Cleveland State University, the name Dr. Doom. “It’s natural for people to move,” Bier said. “I said people are always going to move out of Cleveland, the same way they move out of Avon. You have to get people to replace them. I always knew that new housing would do it.” However, even vacant city land proved more costly than greenfields. Building materials from demolished homes used to be buried on site and needed removal. One solution became full property tax abatement for new housing. “For a conservative Republican like (late Cleveland Mayor, and Ohio Gov. and Sen.) George Voinovich to offer tax abatement, he had to realize people had to have an incentive to buy in the city. Then (Mayor Michael) White put it on steroids.” The other factor stemmed from Minter’s perseverance putting together Lexington Village. He convinced his foundation board to invest $700,000 in principal, and it became part of $13 million to build the first phase with support from 27 public and private partners. Neighborhood developments around the city would follow similar steps. Builders, led by the late Nathan Zaremba, responded. Residential subdivisions such as Beacon Place in Fairfax and others became homes to hundreds.
REPORTERS
Construction crews have just set to work on the $20 million 121 Larchmere project at East 121st Street and Larchmere Boulevard in Cleveland. The project and others, such as high-end townhouses in the Detroit-Shoreway area, are all heirs to things government and nonprofits learned in 1986 developing Lexington Village, below, in the Hough neighborhood. | CONTRIBUTED RENDERING
``WHY IT MATTERS TODAY New city housing has been seen since the early 1980s as the answer, perhaps the easy answer, to decades of population loss. While Cleveland’s status as the nation’s sixth-largest city is long gone, population shrinkage has been profound, dropping 55% to 390,584 by 2015 from 876,050 in 1960. However, housing demolition
COSTAR
still surpasses construction. Cleveland also has benefited broadly from the record-low interest rates since 2011 when bank lending finally recovered from the national housing collapse and 2008’s Great Recession. High-rise and mid-rise apartments in University Circle, downtown and Ohio City have shot up at a pace not seen since the 1950s.
``IN THEIR OWN WORDS “The late 1980s was a critical time. A lot of people think the big housing move in Cleveland started downtown. I don’t. In many ways, housing in the neighborhoods was really ahead of the Warehouse District and downtown generally.” ——Joe Roman, president and CEO, Greater Cleveland Partnership. In the 1980s he worked in housing and neighborhood development for Cleveland Tomorrow.
MAKE ROOMS: A long-discussed addition for Spire Institute and Academy is expected to become a reality in
“We don’t want to just develop buildings but to develop people. I loved (late Cleveland Councilwoman) Fannie Lewis, who embraced the vision and really pushed for Lexington Village. Although I welcome outsiders, I am excited that there are companies led by Ethiopians, Asians and women looking to build in Ward 7.” ——Basheer Jones, Cleveland City Council, Ward 7
“I think it’s interesting that the real estate developer for Lexington Village (McCormack Baron Salazar of St. Louis) was from outside of Cleveland. The scale and location of Lexington Village are what made it important.” ——Tom Bier, senior fellow, Cleveland State University, who followed the city’s housing and population decline for decades as an academic
agement company is in the final stages of securing financing for the project. Spire hopes to debut the Marriott-branded hotel in the first quarter of 2022.
An 89-unit TownePlace Suites by Marriott could debut at Spire Institute and Academy in Geneva as early as the first quarter of 2022. | CONTRIBUTED RENDERING
the next couple of years. Spire’s new owners said the group hopes to break ground later this year on an 89-unit TownePlace Suites hotel on
Stan Bullard, senior reporter, Real estate/ construction. (216) 771-5228 or sbullard@crain.com Lydia Coutré, Health care/nonprofits. (216) 771-5479 or lcoutre@crain.com Michelle Jarboe, Enterprise reporter. (216) 771-5437 or michelle.jarboe@crain.com Rachel Abbey McCafferty, Manufacturing/energy/ education. (216) 771-5379 or rmccafferty@crain.com Jay Miller, Government. (216) 771-5362 or jmiller@crain.com Jeremy Nobile, Finance/legal/beer/cannabis. (216) 771-5255 or jnobile@crain.com Kim Palmer, Government. (216) 771-5384 or kpalmer@crain.com Dan Shingler, Energy/steel/auto/Akron. (216) 771-5290 or dshingler@crain.com ADVERTISING
THE WEEK PUBLIC PLAN: Mortgage giant Quicken Loans filed paperwork to go public under the name Rocket Companies Inc. The S-1 filing did not offer a date for the IPO or provide a price-pershare. The company applied to trade under the symbol of “RKT” on the New York Stock Exchange. The deal would allow Dan Gilbert, majority owner of the Cleveland Cavaliers, to retain control of the company with a multiple-class share structure under his Rock Holdings Inc. Rock Holdings and Gilbert would control 79% of the combined voting power of the company’s common stock, with multiple classes of stock with different voting and economic rights.
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the campus of the 177-acre property in Geneva. Blue Ocean president and CEO Jonathan Ehrenfeld said the Baltimore-based property man-
WAIT ‘TIL NEXT YEAR: There will not be an in-person induction ceremony for the Rock & Roll Hall of Fame’s class of 2020. The Rock Hall announced that due to the ongoing COVID-19 pandemic, it has canceled the live ceremony that was to have taken place Nov. 7 at Cleveland’s Public Auditorium. (That date was a postponement from the initial date of May 2.) Instead, the Rock Hall said a special honoring the 2020 inductees will air Nov. 7 on HBO and HBO Max. Meanwhile, the 2021 induction ceremony “will move to the fall” and will be in Cleveland.
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Crain’s Cleveland Business is published by Crain Communications Inc. Chairman Keith E. Crain Vice chairman Mary Kay Crain President KC Crain Senior executive VP Chris Crain Secretary Lexie Crain Armstrong Chief Financial Officer Robert Recchia G.D. Crain Jr., Founder (1885-1973) Mrs. G.D. Crain Jr., Chairman (1911-1996) Editorial & Business Offices 700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1230 (216) 522-1383 Volume 41, Number 25 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for the first issue in January, July and September, the last issue in May and the fourth issue in November, at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2020 by Crain Communications Inc. Periodicals postage paid at Cleveland, OH, and at additional mailing offices. Price per copy: $2.00. Postmaster: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, MI 48207-2912. 1 (877) 824-9373. Subscriptions: In Ohio: 1 year - $64, 2 year - $110. Outside Ohio: 1 year - $110, 2 year - $195. Single copy, $2.00. Allow 4 weeks for change of address. For subscription information and delivery concerns send correspondence to Audience Development Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, MI, 48207-9911, or email to customerservice@crainscleveland.com, or call (877) 824-9373 (in the U.S. and Canada) or (313) 446-0450 (all other locations), or fax (313) 446-6777.
July 13, 2020 | CRAIN’S CLEVELAND BUSINESS | 23
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This event is a tribute to Northeast Ohio’s leading human resources professionals who are building companies with the best people, talent, development and culture.
Join us virtually on August 19 as we celebrate the 2020 Excellence in HR finalists and winners.
Congratulations TO THE 2020 FINALISTS AND WINNERS! OVERALL EXCELLENCE, INDIVIDUAL, NONPROFIT/GOVERNMENT FINALISTS Jason Welsh Director, Human Resources Cleveland Clinic Rehabilitation Hospital, Edwin Shaw
OVERALL EXCELLENCE, INDIVIDUAL, SMALL PRIVATE WINNER Christine Peters Director of People Operations Willory
Monica K. Brown Vice President, Human Resources & Administration Cleveland Foundation
OVERALL EXCELLENCE, TEAM, NONPROFIT/GOVERNMENT FINALISTS Federal Reserve Bank of Cleveland, People and Culture Department
Tamatha Belton Sr. Director of Human Resources Cleveland Institute of Music OVERALL EXCELLENCE, INDIVIDUAL, MEDIUM-LARGE PRIVATE FINALISTS Mary E. Miles Chief People Officer Brennan, Manna & Diamond Lesa Evans Chief Human Resources Officer MAI Capital Management
Cuyahoga Metropolitan Housing Authority (CMHA) Human Resources Department The MetroHealth System OVERALL EXCELLENCE, TEAM, PUBLIC, WINNER TravelCenters of America HR Team
Mike Nikolaus Chief Human Resources Officer Cleveland Browns
EMPLOYEE ADVOCACY, INDIVIDUAL, WINNER Robert L. Smith, Ph.D. Director, Medical Staff Assistance Programs The MetroHealth System EMPLOYEE ADVOCACY, TEAM WINNER Earnest Machine Culture and Talent Development Department RISING STAR, WINNER Hailee Houston Business Partner, Human Resources The MetroHealth System ACCIDENTAL HR, NONPROFIT WINNER Diana Rosa Chief Quality Officer Koinonia ACCIDENTAL HR, PRIVATE WINNER Evelyn Bruce Chief Innovation Officer Bonnie Speed Delivery, Inc.
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REGISTER TODAY: CrainsCleveland.com/crains-events
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