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Fallout from HTM closing runs deep Home Team clients, employees wonder where money went By Kevin Kleps kkleps@crain.com @KevinKleps
and Indonesia as a way to make income for those lucky enough to have the right kind of land at the right elevation in the right temperate zone. “When you look at that pyramid, around 12 million are smallholder producers,” Ott said, “so you’re talking about less than 2 hectares (just under 5 acres) of land. So they’re very small.” Smucker might deal with nearly any of them and does deal with thousands each year, she said. Companies such as Smucker are taking steps to ensure that growers, many of them impoverished and with limited resources, can thrive. Ott has visited several. Before taking her current role in 2016, she spent 10 years trading coffee for Smucker and Procter & Gamble’s Folgers brand, which Smucker acquired in 2008 for a little less than $3 billion in mostly stock. With the sharp reduction in the number of growers, it’s little wonder Smucker spends a great deal of time, energy and resources securing the sustainability of its supply of beans, and Ott said the company's efforts are broad.
Erin Telisman only worked at Home Team Marketing for about a year. It didn’t take long for Telisman to realize the company — which shut down on Sept. 25 after 18 years in business — wasn’t being honest with its clients. “When there were check issues, I thought it was the person in the finance department,” said Telisman, who was an account manager at HTM’s Cleveland office. “But she was basically just following the lead of Steve (O’Neill, the CEO). It was always the same thing: ‘I sent it already. I’ll resubmit.’ “I’m thinking: Is she just setting these checks in a drawer and not doing anything with them?” That theme — clients, the majority of whom were schools and nonprofits, not getting what they were owed — was a common one at Home Team Marketing, according to more than 10 sources who spoke with Crain’s. The groups are holding out hope that they will be reimbursed, which is why some say they’re hesitant to speak on the record. Thus far, though, their calls have mostly gone unanswered, as HTM’s offices and website have shut down and O’Neill isn’t responding to messages. At its peak, Home Team Marketing — which connected brands with thousands of schools across the country (many in Northeast Ohio) and, via a partnership with Eventbrite, had a digital ticketing platform called TicketRoar — had more than 40 of its 50 employees based in Cleveland.
SEE SMUCKER, PAGE 7
SEE HOME TEAM, PAGE 19
MANUFACTURING
WITH A SUPPLY CHAIN LIKE SMUCKER’S ... J.M. Smucker Co. deals with about 15 million growers of coffee plants, like the ones seen here, around the globe. And because the Orville company wants its coffee business to thrive, it’s taking steps to help growers do the same. (Contributed photo)
In business of coffee, Orrville company must navigate complicated brew of suppliers By Dan Shingler dshingler@crain.com @DanShingler
If there was a contest to determine which company manages the most complex and difficult supply chain — or one that’s the most important to its future — the prize might go to J.M. Smucker Co. in Orrville. It’s not the berries and peanuts of the jams and peanut butter that are the greatest challenge; it’s the beans — as in the Arabica and robusta beans that go into Folgers and other
brands of coffee that Smucker owns. Because whereas there are relatively few major suppliers for peanuts and a manageable number for berries and most other U.S. food products, coffee comes from literally millions of individual farms that circle the world in a geographic band around the equator. “Around 15 million growers is sort of our best estimate these days,” said Rebecca Ott, Smucker’s director of sustainability and its point person for helping to keep as many of those growers and their businesses healthy as possible.
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She’s not joking or even exaggerating, either, casually adding that “that number had generally been 25 million” as she thinks back on 15 years in the industry. The vast number of suppliers exists because throughout much of the world, coffee is a cottage industry of sorts, grown on small plots in Africa or on hillsides in Central America
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Clinic, Mercy deal a sign of times in industry By Lydia Coutré lcoutre@crain.com @LydiaCoutre
Sisters of Charity Health System and Cleveland Clinic’s exploration of Mercy Medical Center joining the Clinic family follows a national trend of hospitals weighing opportunities to affiliate with other health systems and partners. As health care undergoes rapid, drastic changes in how it is regulated, paid for and delivered, independent hospitals and even smaller-sized health systems are looking to partnerships to gain economies of scale, access to capital, support in adopting the latest technology, efficiencies in supply chain and more. “I think more and more independent hospitals are doing a gut-check and saying, ‘What is our path forward?’ ” said Mike Abrams, president and CEO of the Ohio Hospital Association. “And more of them are looking at the big systems and saying, ‘A path forward that we did not find palatable 10 years ago is newly palatable, and that is we should consider being acquired by a large system.’ ” The Mercy Medical Center deal, announced in late September, is hardly an anomaly. Seven years ago, 48% of Ohio’s hospitals were owned by its 12 biggest systems. Today, 60% are, Abrams said. Cleveland Clinic last year acquired Union Hospital, a facility in Dover that marked a significant stretch south for the system. Mercy Medical Center is about equidistant between
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Mercy Medical Center in Canton is poised to become part of the Cleveland Clinic system as Sisters of Charity Health System and the Clinic work on an integration deal. (Contributed photo)
Union Hospital and Cleveland Clinic Akron General, which the system acquired in 2015. Just this summer, Summa Health System announced it would become a wholly owned subsidiary of Michigan-based Beaumont Health. “And you know, Summa is itself a sizable system,” Abrams said. “So I think you’re going to see continued acquisition activity not only of large systems acquiring independent hospitals, but of large systems acquiring other medium-size and other large systems. That’s true around the country and in our state.” Thomas Strauss, president and CEO of Sisters of Charity Health Sys-
tem and interim CEO of Mercy Medical Center, said the process to begin identifying potential partners for a clinical affiliation began almost a year and a half ago. After a lengthy, “very deliberate” process, Cleveland Clinic became the clear choice, he said. Affiliations and partnerships can take many forms, but a full integration was the right choice for Mercy, Strauss said. “There are certain things that you can and can’t do as a smaller system: invest in the IT requirements for future, looking at telemedicine and virtual health, which is some of the future directions,” he said. “So we
wanted to make sure that we fully integrated to become a full member of the Cleveland Clinic Health System … because they gain efficiencies and strength and quality and value and technology, etc., that we were unable to achieve on our own.” Cleveland Clinic has a growing network of hospitals that share the system’s vision for healthier communities, said Dr. Edmund Sabanegh Jr., the Clinic’s president of main campus and regional hospitals. “We saw the fit here as being ideal for both parties,” he said. “Mercy’s strong track record in taking care of Stark County and Canton, and our desire to be able to provide a clinically integrated network that could provide the highest quality of care in a seamless fashion for patients throughout the region. So we see that as a synergy that will benefit, ultimately, the patients in the area most of all.” It also makes sense geographically for the Clinic to expand to Canton, said Tom Campanella, director of the health care MBA program at Baldwin Wallace University. With Akron General to the north and Union Hospital to the south, the Clinic is potentially “in a position to be able to evaluate the services they’re providing, the market that the services are being provided in, seeing where they want to concentrate their investments,” he said. Sisters of Charity and the Clinic are beginning the due-diligence process to outline how they move forward. Though the timeline and further details of the transaction will be in-
formed by this process, as well as by regulatory and church requirements, Strauss said they hope to have a definitive agreement sometime in the first quarter of next year. What this deal could mean for Canton’s other major provider, Aultman Hospital, has yet to be seen. Abrams noted that Aultman has been an important provider of health services and an important member of the business community in Canton for many decades. “I suspect that both of them will continue to be healthy competitors and healthy providers,” he said. “But I think exactly what the implications are kind of remains to be seen.” Jason Clevenger, Aultman spokesman, noted that the hospital has “great respect” for Sisters of Charity, Mercy and the Clinic, all of which share the same goal as Aultman: “to provide high-quality health care to our communities.” Aultman is in the process of creating its strategic plan for the next three years, and the new relationship will be considered in this planning, he said. The goal is to continue expanding facilities and services to enable Aultman to achieve cost efficiencies while remaining locally owned and operated. “When it’s finalized, we know that Mercy’s proposed relationship with the Cleveland Clinic may create both changes and opportunities that will affect Aultman Health Foundation and the physicians in our community,” Clevenger said in a statement. SEE MERCY, PAGE 20
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Execs will gather to talk tech in manufacturing By Jay Miller jmiller@crain.com @millerjh
Uber owns no vehicles, Facebook owns no creative content, Airbnb owns no real estate. And someday, United Airlines may own no airplanes. Sound far-fetched? Well, if Case Western Reserve University professor Youngjin Yoo is right, it could happen. Yoo, who is a professor of information systems in the department of design and innovation at the Weatherhead School of Management, is the driving force behind the upcoming Digital Futures Conference. Yoo has been studying digital developments for years and said he believes a digital transformation is underway that will change the way many companies, in particular manufacturers, are organized and do business. “Technology is fundamentally transforming the way value is created and captured in the economy,” Yoo said. “Digital assets are the primary source of value creation.” That digital future will be explored in depth at the conference Oct. 14-16 at CWRU’s Tinkham Veale University Center. The event is co-hosted by the university and the Innovation Research Interchange, formerly the Industrial Research Institute, whose members include people from large global corporations, small specialty companies, government laboratories and other research organizations. Speakers will include chief information officers, research leaders and people with titles such as chief innovation officer and vice president of data science and analytics. Executives from Northeast Ohio companies including Eaton Corp., Goodyear Tire & Rubber Co., Lubrizol Corp. and Timken Co. will present at the three-day event. The university said it expects about 150 people to attend. “At Case Western Reserve, we have great strengths in innovation and technology, and we are continually looking for ways to use those assets to help our businesses and improve our economy,” said Ben Vinson III, provost and executive vice president, in an emailed statement. “Giving businesses the tools they need to compete
in the digital age will help them stay relevant and competitive, and that’s good for all of us.” Attendees will learn from leaders of industrial and other legacy comYoo panies that are undergoing digitalization about the tools available to coordinate digital innovation across their organizations. “Digital transformation, in general, is of high interest to the people who are the members of IRI,” said James Euchner, editor-in-chief of ResearchTechnology Management, the association’s bimonthly journal of technology innovation. “It affects everything. It affects, obviously, the products; it affects business processes that affect customer-facing strategies; and it affects business models, which I think is becoming more and more important, primarily to the industrial companies that are part of IRI.” The changes are being driven by fast-developing digital processes — such as artificial intelligence, the Internet of Things and predictive analytics — which use data mining, statistics and machine learning to make predictions about product maintenance and safety. The conference is designed to help companies make the transition from creating value by manufacturing goods to creating value through digital processes. Yoo said that Northeast Ohio, with its strong manufacturing base, can be fertile ground for digital innovation. Brandon Cornuke, vice president of startup services at MAGNET, the Cleveland nonprofit that helps manufacturers grow and manage their operations, agrees. He will be on a panel at the conference talking about the value of the Internet of Things for small businesses. He said he understands innovation on the large scale, but also sees applications on the shop floor of small manufacturers. “Talking about the future of manufacturing necessarily means talking about what tech can bring to the entire vertical and having a local conversation about it with some high-level
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thinking is super exciting,” said Cornuke. “Manufacturing in Northeast Ohio is so important to the economy that connecting to the kind of thinking this will elicit will be helpful.” Yoo said the conference, which he has been spearheading, is organized around the idea that Silicon Valley did the easy part of the digital transformation: creating the devices and software. Yoo added that businesses will now go from being the sum of their contracts with suppliers and customers to being “the sum of their algorithms.” Yoo cited General Electric Co., whose GE Aviation subsidiary makes jet engines, as an example. Advanced sensors on those engines have allowed airlines to measure the condition of the engine and to know when it needs maintenance. Now, however, General Electric can digitally monitor those engine sensors from afar and software can allow it to anticipate when the engine will need to come offline for service and what parts need to be ordered to complete that work. It then can schedule the service call. “They know the condition of the engine better than the users, so what they’re really selling is the data, they’re not actually (selling) the engine itself,” Yoo said. “They’re charging for the uptime and the service contract.” The company that makes the brake pads on the airplane can do the same thing, Yoo said, and could compete with a Chinese company that offers pads for half the price as the U.S. company. The pad maker wouldn’t sell the airline the brake pads; it would instead sell a service: monitoring the pad’s condition and providing whatever service or replacement is needed — charging per landing, perhaps. “So this company doesn’t have to convince its customers that its pads are twice as good as a Chinese competitor. Nobody is willing to pay twice the price, right?” Yoo said. “It only has to convince itself that its brake pads will last twice as long and, knowing that, it can offer the airline a price for pads and their service that will undercut the cost and maintenance expense of the competing pad.” The new technology may also offer small manufacturers more basic digital assistance, said Cornuke.
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Vaping injuries could sting marijuana biz By Jeremy Nobile jnobile@crain.com @JeremyNobile
There are concerns in the nascent marijuana industry that a recent rash of vaping-related illnesses (and some deaths) across the country — which at this time seem most closely related to e-cigarettes and black-market THC oil cartridges — may scare away some patients from legal, lab-tested products. Those worries are mounting in Ohio as a burgeoning marijuana industry is establishing a foothold in the medical market, which nationwide is projected to grow at a compound annual rate of 17% through 2025, to $13.1 billion, according to New Frontier Data. Some manufacturers and processors making THC oils for oral vaporizers, like Eastlake’s Buckeye Relief, have only recently introduced vaping oils to dispensary shelves. With more than 1,000 vaping-related injuries or illnesses reported nationwide as of last week, according to the Centers for Disease Control and Prevention, and up to 18 deaths, the timing of that rollout was unfortunately less than perfect for the business as consumers worry about whether even state-tested marijuana-derived vape products are safe. That has companies like Buckeye Relief, and the dispensaries selling its wares, distancing and distinguishing themselves from the e-cigs and black-market oils suspected of being at the root of the problem. Investigations in New York, for example, found illicit THC oil carts cut with vitamin E acetate — something more common in skincare products — which isn’t intended to be inhaled and can damage lungs. Ohio’s department of health has said the 17 confirmed illnesses in the state were largely tied to black-market THC
Marijuana vape oil cartridges are shown being filled at Buckeye Relief. (Contributed photo)
carts, though e-cigs were also used by people in those cases. However, neither the CDC, Food and Drug Administration or state agencies have definitively identified the exact cause of all those illnesses yet. “All of this is of great concern to us,” said Buckeye Relief CEO Andy Rayburn. “But it appears that the harmful products are illicit products. And there’s a big difference. All our products are tested for things that might make people sick. That makes us feel more secure about the products we are putting on the market.” There is some worry the situation could hurt sales in the long run at a time when those sales are already lagging here more than many anticipated by this point. The shortfall may be due to a variety of reasons, including high prices and still-limited access to dispensaries in parts of the state. According to Marijuana Business Daily, since the vaping crisis kicked up around the end of August, there has not yet been a dramatic impact on marijuana pricing or overall sales, which sources here back up. “We have not seen a decline in purchasing vapes in the dispensaries,” said Caroline Henry, spokeswoman for Greenleaf Apothecaries,
which runs several dispensaries in Ohio under The Botanist brand. “But we are trying to be cautious because the source of the issue has not been identified on a national scale by the CDC, so we are making sure we communicate that to patients.” That said, the Global Cannabis Stock Index, which tracks the publicly traded market for medical and adult-use marijuana sectors, fell to its lowest point since late 2018 at the end of September. The vaping crisis is one of many factors at play there, according to Forbes. Some states are outright banning vaping or related products as a precaution, which could hurt marijuana businesses. Massachusetts, for example, is looking to ban all vape products, whether related to marijuana or e-cigs, for four months. The state is being sued by The Vapor Technology Association trade group over that, though. Los Angeles city council is reportedly considering a similar ban. In Ohio, Gov. Mike DeWine has asked lawmakers to consider banning flavored e-cig products after determining he can’t pass his own ban through executive order. Could a similar ban be passed on marijuana vape items? That would require amending the law providing for Ohio’s medical marijuana control program. So while Ohio regulators can’t tell marijuana businesses to stop making or selling vape products, they probably would if they could. That’s a scenario that could still play out in the future. “The Ohio Department of Commerce and Medical Marijuana Control Program continue to work with the Ohio Department of Health and monitor CDC efforts to understand the causes of vaping illnesses,” said Greg McIlvaine, senior policy adviser with the department of commerce, in a letter sent to marijuana businesses Sept. 30. “We take these incidents very seriously and may make amendments to
MMCP protocols, including the prohibition of ingredients or products found to be toxic and unsafe for human consumption. Licensees may want to consider producing alternative medical marijuana products that would not be consumed through vaping.” Some suggest a ban could actually be counterproductive to stemming vape-related health issues. “I think any ban from the state on vaping products is an inherently bad idea,” said Tom Haren, a Frantz Ward attorney representing several Ohio marijuana companies. “To the extent marijuana products are causing what’s being reported, these are black-market products. So are we going to drive everyone to the black market by prohibiting these products from being sold in regulated markets? That makes no sense.” The whole situation has marijuana companies pivoting hard toward education to help alleviate possible patient concerns that could eat into sales for these young companies in a state that’s seen $29.7 million in sales through Sept. 29 and registered more than 57,000 pa-
tients (as of the end of August). And while marijuana growers and product manufacturers can’t outright claim their items are safe or healthy — product warning labels clearly state this — there’s a hope that explaining the rigorous testing that licensed companies go through could mitigate concerns among consumers. Processors and retailers are also trying to emphasize the suite of other products available besides flower (which is only legally allowed to be vaped in Ohio, though vaping flower is explicitly different from vaping oils), such as edibles, tinctures and purer concentrates like wax or shatter. Per Ohio law, marijuana vape oils can be no stronger than 70% THC. The other 30% comprises CBD oils and terpene compounds, something that’s effectively become the standard for Ohio manufacturers, according to Alex Thomas, executive director of the Ohio Medical Marijuana License Holders Coalition trade group. That’s how Buckeye Relief does it, as well as all members of the coalition at least, Thomas said.
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JobsOhio broadening investment efforts By Kim Palmer kpalmer@crain.com @kimfouroffive
Six months after new president and chief investment officer J.P. Nauseef took over at JobsOhio, the economic development organization presented an updated approach to attracting, growing and retaining business in Ohio. The new “Go Forward Strategy,” according to the former president of the Dayton Development coalition, is designed to “fill in the gaps and needs” in the state’s economy, enhancing some existing programs and adding new ones. Traditionally, JobsOhio has offered straightforward loan and grant
funding to specific companies with $1 million in revenue that have been in business at least three years. Now, the focus shifts to early investing in younger companies, building out industrial sites even without a target tenant, creating a skilled workforce beginning as early as K-12, and significant investments in broadband and airports to lure businesses away from cities in other states. Mark Barbash, who was the deputy director of finance under Gov. Dick Celeste and chief of economic development officer under Gov. Ted Strickland, said he likes the direction JobsOhio is taking. “I do not look at it as a change or a turn,” he said. “I look at it a little more of an evolution based upon their experience.”
“Ohio needs to take calculated risks to create better outcomes. We are going to have to broaden our risk profile, but we have to be smart about it.” — JobsOhio president J.P. Nauseef
In particular, Barbash likes the plan to create “innovation districts” throughout the state. These districts or job hubs will be distinct areas with robust and reliable technology, usually one anchor employer along with small-
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er innovative startup companies, and all supported by a skilled workforce. “Innovation districts are a great idea,” Barbash said. “You have greater job growth and more stable job growth when particularly technology-based businesses are located proximate to each other. You get a lot of intellectual exchange.” The new direction will mean doubling distributed funds to an estimated $300 million a year over the next five years. That shouldn’t be a problem since, according to 2019 financial statements, JobsOhio has $875 million in assets as of June 30, 2019. The private nonprofit’s unique funding model derives revenue from Ohio’s liquor sales, which last year totaled $1.3 billion. After operating costs and 4% paid to the state, that
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translated into more than $271 million for the organization. To help identify where the JobsOhio funds can be best used, the group intends to lean heavily on existing regional partners such as TeamNEO. The Northeast Ohio economic development organization, employing JobsOhio funds, last year helped businesses add $9.6 billion in capital investment and 27,071 new jobs to the area. Nauseef said there will also be a strong reliance on working with regional business groups to identify economic needs, as each region of Ohio is unique and there is no onesize-fits-all solution. With the help of those regional partners, the strategy now is to expand the types of investments JobsOhio makes. “We are looking at broadening the type of company we would invest in,” Nauseef said. “We are looking for an approach where we would be able to catalyze development in earlier-stage companies.” That will help with job creation, Barbash noted, since more job growth comes from new, young businesses. According to the Bureau of Labor Statistics, in 2017, 1.7 million jobs were created by startups alone. “Ohio needs to take calculated risks to create better outcomes. We are going to have to broaden our risk profile, but we have to be smart about it,” Nauseef said. Investments are only part of the equation, though. Ohio needs to expand and educate the state’s workforce. Workforce development was one of Gov. Mike DeWine’s priorities reflected in the recent state budget. “That is not something that is unique to Ohio, the workforce gap,” Nauseef pointed out. “What makes Ohio different is that the administration has allocated significant investment to combat it.” Organizations like Team NEO have worked to identify gaps in technical skills and education that cut across business sectors. Team NEO plans to work with colleges to foster more robust employment across different demographic groups. “Forty years ago, when you worked with the company, you basically had three people around the table,” Barbash said. “Now, you have to have the community college, you have to have the four-year college, you have to have the K-12 around the table.” JobsOhio has previously funded industrial site development in the final buildout stages, but Nauseef wants to broaden that to include funding site remediation and startto-finish development. “The change in their job-ready site program makes sense to get ahead of the curve and try to have sites available for business as they come into the community,” Barbash said. The organization will also determine what the government’s role should be in providing digital access across Ohio and look at how to improve air service. Both areas might require some sort of subsidy, Nauseef said, but they’re necessary to attract businesses that want to expand away from larger established markets. He added that subsidizing would be only an incremental tactic leading to a longer-term, sustainable solution. Then, Nauseef said, “we would look for a tipping point where the market factors start to take over.” In the end, said Barbash, longterm permanent job growth comes from private-sector investment: “The job of an economic developer is to allow that to occur in the areas where that is not taking place.”
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SMUCKER CONTINUED FROM PAGE 1
“Given the complexity of the coffee supply chain, we’ve had to look take a three-pronged strategy,” she said. Those prongs are: JJAddressing environmental issues JJSupporting small farmers JJSourcing coffee responsibly so that both growers and the coffee trees they need to survive are protected Ott said that means spending extra time to make sure the company buys coffee in ways and from places that will ensure environmental measures and local regulations are met or exceeded. That way, farmers are protected and areas in which they live aren’t destroyed. It also means working with farmers to breed varieties that will do well in their specific regions, helping them get information to combat pests and disease, and working locally and regionally on issues that will protect the environments that growers need. Coffee grows best, if at all, on biodiverse hillsides under the shade of other trees, not in a monocrop field under direct sunlight, like corn or soybeans. It’s not getting easier, though, Ott explained. Deforestation can make it difficult to grow coffee in affected regions and climate change is making diseases such as coffee rust more prevalent. To help farmers combat such challenges, Smucker performs research in-house that it shares with growers and others. It also is a major supporter of groups like World Coffee Research, a nonprofit that works to sup-
A United States Agency for International Development representative, left, works with a coffee farmer in the fields. Smucker, sometimes with the aid of USAID, works with its coffee suppliers on several fronts, including working to breed varieties that will do well in their specific region. (Contributed photo)
port coffee growers around the world. Smucker vice president of coffee research and development Jim Trout serves as WCR’s board secretary. If it all sounds like some vertically integrated network, it is to a degree. Smucker and its growers are on the same side, Ott said, and the more the company helps them, the more secure its supply chain is and the better its relationships become, hopefully with consumers as well as growers. Not that it’s entirely altruistic. Smucker has billions invested in cof-
fee, is spending more and is counting on billions in sales and profits from coffee in the years ahead. In its first fiscal-year quarter ended July 31, coffee accounted for $466 million of the company’s total sales of $1.78 billion and more than half of its operating profit of $258 million, according to Smucker’s financial reports. Annually, “it’s a little over $2 billion and makes up about 30% of sales for the company,” said Joe Stanziano, Smucker senior vice president and general manager of coffee. With brands that include not only Folgers, but also Dunkin’ Donuts,
Café Bustelo and the new 1850 premium coffee, among others, Smucker is the largest coffee roaster in the U.S. and the third-largest in the world. It’s a tricky business, though, with sometimes volatile pricing for beans and currency fluctuations adding business woes to the agricultural and environmental challenges Ott tries to address. Smucker took a hit when it announced those earnings for the first quarter, and coffee was part of the reason why. Falling prices for coffee affected sales, the company said. But long term, it’s not too worried
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about that, because coffee drinking is still on the rise, said Stanziano, who noted that the number of pounds of coffee the company sold in the first quarter was actually up. “It’s what everyone is facing in coffee,” he said. “People are drinking more coffee, but, over time, pricing fluctuates. … We know the price will go back up.” Research supports Stanziano’s assertion and Smucker’s willingness to invest so much in supporting growers and unveiling new brands. According to Packaged Facts, a Maryland research firm and sister company to Mayfield-based Freedonia Group, U.S. coffee drinkers guzzled 8.8 billion gallons of the stuff in 2018, part of a 10-year growth trend of 2.6% a year that it said far outstrips the U.S. population growth of less than 1% per year over the same period. Smucker will try to grow that pie and get a bigger slice of it, too, said Tina Meyer-Hawkes, vice president of marketing for Smucker’s coffee brands. That effort includes chasing ever-changing consumer tastes and new brewing methods. Toward that end, Smucker will roll out its first big national coffee advertising campaign this fall, Meyer-Hawkes said, focusing on Café Bustelo, Folgers, 1850 and its Dunkin’ brands. She declined to say what the spend will be on that campaign, but did note that it’s a big spend, even for a consumer-brands company like Smucker, with Publicis’ New York office as its partner. “The outlook is great: We still see growth in the category, there’s still a lot of momentum and retailers still give coffee a lot of space,” she said.
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Nurses at NEO health systems are advancing by degrees As the field continues to evolve, more are obtaining higher levels of education By Lydia Coutré
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Growth by Design
Northeast Ohio’s economic development engine at work
Save the Date – Nov. 22 In November of 2018, the Smart Manufacturing Cluster of Northeast Ohio released a roadmap with the goal of accelerating the adoption of the Industrial Internet of Things (IIoT). The roadmap identified barriers currently faced by manufacturers, and provided initiatives for advancing IIoT adoption, developing new IIoT products, and driving workforce development.
Be part of the inaugural one-day conference for a day of ideas, learning and networking with thought leaders in the industry. Visit SmartManufacturingConference.TeamNEO.org for updates.
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lcoutre@crain.com @LydiaCoutre
Health care systems in Northeast Ohio are encouraging more of their nurses to obtain higher levels of education. In 2010, a national report set a lofty goal to, by 2020, have 80% of the nursing workforce holding a bachelor’s degree in nursing or higher. The recommendation was laid out in “The Future of Nursing: Leading Change, Advancing Health,” issued by the Institute of Medicine, which has since been renamed the Health and Medicine Division of the National Academies of Sciences, Engineering and Medicine. MetroHealth just passed that threshold this year — a significant feat, given that the system was at 48% in 2012. University Hospitals Cleveland Medical Center is in the high 80s, while the rest of the system is still below the threshold. Cleveland Clinic’s rate varies by hospital, but its leadership is confident it will reach 80% across the system by the end of next year. “The literature and research that’s out there has indicated that nurses with a baccalaureate degree perform better and are safer in the clinical setting than an associate-degree nurse,” said Patricia Sharpnack, dean of the Breen School of Nursing at Ursuline College. Many systems require incoming nurses to have a bachelor’s of science in nursing (BSN) or commit to obtaining one within a set timeframe of their hire. Nurses are supported through tuition-reimbursement programs at the systems, as well as flexible work hours to accommodate finishing their degree. “Ideally, yes, we would love to hire all BSNs, but that’s not necessarily what’s always available,” said Holly Ma, system director of nursing education for UH. Throughout the region, a network of partnerships connects associate’s degree programs, four-year universities’ nursing schools and health care systems to help support nurses through the various steps in their education. Ma, who recently moved to the region to join UH, said she was impressed by the levels of connections and partnerships. “I don’t think it’s as robust in other places,” she said. The baccalaureate degree makes a difference, said Joan Kavanagh, associate chief nursing officer for nursing education and professional development at Cleveland Clinic. As health care continues to change, including the explosion of data and technology, the need for higher degrees and advanced preparation is becoming “more and more critical,” she noted. Kavanagh pointed to research by Peter Buerhaus, a researcher in nursing workforce, which found that in 2011, the number of baccalaureate nursing degrees eclipsed the number of associate-degree graduates. His research also showed that the number of master’s and doctoral nursing degrees awarded has quadrupled since the mid-2000s. As the number of BSN-educated nurses in the region climbs, some also are noticing more interest in higher levels of education: master’s
Ma
Kline
of science in nursing (MSN), doctorate of nursing practice (DNP) or Ph.Ds, a research degree. The Center for Health Affairs, a nonprofit advocate for Northeast Ohio hospitals, analyzed data from the Ohio Board of Nursing and looked at the highest degree attained by Northeast Ohio nurses. It found that in 2017, 41.9% of the area’s nurses had a bachelor’s degree in nursing, while 12.9% had a master’s degree in nursing as their highest obtained degree — up from 36.3% with a BSN
“The literature and research that’s out there has indicated that nurses with a baccalaureate degree perform better and are safer in the clinical setting than an associate-degree nurse.” — Patricia Sharpnack, dean of the Breen School of Nursing at Ursuline College
and 10.4% with an MSN in 2015. The center’s report, released last year, also projected a shortage of 2,850 registered nurses by 2020. Given that reality, hospitals continue to rely on hiring associate-degree nurses and then supporting them through their BSN. “So we still depend on the associate-degree nurse, who’s a great nurse,” said Marti Bauschka, chief nursing officer at Southwest General. “They’ve got everything we need to come in and provide great bedside care, but then we want them to advance in their profession as well.” At Southwest General, 45% of its nursing staff has a bachelor’s in nursing — up from 40% three years ago — and another 6% have master’s degrees. The complexity of health care is helping drive nurses to pursue master’s or doctorate degrees, both of which are “vital support” in the future of health care, Kavanagh said. Those higher levels open up new opportunities for nurses. Clinically, many master’s programs propel them into advanced practice roles,
such as nurse practitioners or nurse anesthetists. There are also master’s programs in nursing leadership and education. Master’s and doctoral degree programs in Northeast Ohio aren’t seeing universal growth, with some remaining relatively flat, but there are signs of growing interest. Ma said a “fair amount” of the nursing staff at UH are now pursuing master’s degrees in either leadership or education or to become a nurse practitioner. Right now, 11.6% of MetroHealth’s nursing staff is enrolled in a master’s program — double the percentage in 2012, said Melissa Kline, senior vice president of patient care services and chief nursing officer. This is driven in part by a shortage in primary care physicians; nurse practitioners can help fill that role. Also driving growth is the fact that there are new employment needs that simply didn’t exist a decade ago, such as data analytics and electronic medical records, Kline said. Nurses can get a master’s degree in nursing informatics. MetroHealth has a department of roughly 20 nursing staff in clinical informatics — an opportunity that didn’t exist 10 years ago. Plus, she said, the frontline staff has grown more educated, which helps push some of the nursing managers and leaders to go back to further their education. Kent State University’s nursing enrollment grew from 438 bachelor’s students and 456 master’s students in the 2016-17 academic year to 559 bachelor’s and 566 master’s students in the current academic year. “Every year, we have been trying to increase our enrollment to try to meet the demand,” said Tracey Motter, associate dean of undergraduate programs for the College of Nursing at Kent State. Latina Brooks, director of the MSN and DNP programs at Case Western Reserve University, said that, nationally, there hasn’t been a huge growth in terms of MSN programs, but DNP programs are growing. Cleveland State University this fall began its doctorate of nursing practice program, with two post-baccalaureate options of family nurse practitioner and psychiatric-mental health nurse practitioner, as well as a post-master’s option in health systems nursing leadership. The school’s master’s nursing program has 81 currently enrolled, more than double the number in 2016, said Timothy Gaspar, dean and professor in CSU’s school of nursing. “I think what you’re going to see is some leveling off of the master’s program and growth at the DNP level,” Gaspar said. And growth continues at the BSN level as hospitals tighten requirements for baccalaureate training. CWRU, for instance, two years ago increased the number of students it admits each academic year from 80 to 120. For the foreseeable future, Kline said she expects BSN to continue to be the ideal level of education for bedside nurses. At Ursuline, Sharpnack said the goal is not simply to recruit students and get them to the college for four years, “but also see that there is an increase in the number of BSNs in the workforce because our goal is to improve health care for our community.”
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Ferriot builds its business on reinvention By Don Loepp, Plastics News
If you geek out over cool, old plastic parts, Ferriot Inc. in Akron is worth a visit. The lobby display cases are packed with parts molded in the past seven decades, but they tell only a fraction of the story. Ferriot’s full history could fill a museum. Remember hobby horses on bouncing springs? Green army men? Early “Star Wars” toys? Ferriot molded — or made the tools for — all of them. Ferriot also molded big television cabinets back when TVs were real pieces of furniture. “Over the years, I think what’s really kept the company in the mainstream and relevant is the fact that it’s forced to reinvent itself every so often,” Craig Ferriot said. “We have continued to be innovative, and take the ideas of the past ownership and build on those, and take the original principles of our founding fathers, which was to develop relationships with customers, and how valuable that is,” he said. He’s the president of Ferriot, a family-owned injection molder. The company is 90 years old, but he’s just the third generation of Ferriots in the business. Craig Ferriot’s grandfather was one of the founders in 1929. By 1934, then known as Ferriot Bros. Inc., the company had patented a process for using beryllium copper to produce castings of microscopic detail and dimension. The company’s toy industry roots started in rubber. “We did things like rubber figurines for Walt Disney. The original Donald Duck and Mickey Mouse toys for Walt Disney,” Ferriot said. By 1940, the company was using the beryllium copper process to make tooling for plastic injection molders. Then the business was interrupted during World War II, when the company shifted to making gas masks and bullet casing molds for the government. After the war, the company jumped back into injection mold tooling. “We started in injection molding in about 1947,” he said. “We actually built our own injection molding machines for a short period of time. That was kind of unique.” Another big step came in 1965, when the company noticed that some customers needed value-added services like painting. So it added a finishing operation. “That led us to more customers. We developed relationships with some very large Fortune 500 and Fortune 1,000 companies, like IBM and Apple. We actually started with IBM in the mid-’70s and began development with them on a personal computer — the first personal computer,” Craig Ferriot said. Ferriot, 61, came back to the family business in 1986, after a six-year stint at injection press maker Van Dorn Co. in Strongsville. “And my first project at Ferriot was working with IBM Boca Raton and development of the personal computer,” he said. “I was thrown into the fire, so to speak, and developing tools for that marketplace, which is pretty interesting. I learned a lot.” When he joined the company, sales were split about 50-50 between toys and business machines. By 1994, Ferriot added a rapid prototyping division. That decision was part of the family’s strategy to be on the cutting edge of offering important valueadded services to customers. “And that’s really the basis of the company today. We want to sell ourselves as a one-stop shop where we
can manage the entire supply chain to the customer,” Ferriot said. The story of reinventing Ferriot Inc. continues today. In 2008, it introduced a proprietary injection molded product, an architectural shake-shingle siding for the construction industry. The company sells siding through a wholly owned subsidiary, American Original Building Products LLC. Siding now accounts for about 30% of Ferriot’s sales. “We thought, how do we sustain the business? How do we evolve? ... And that’s why we started the shingle business,” he said. The high-end shingles look like wood but are made from a durable polypropylene composite. Ferriot said the company is currently No. 4 in the U.S. shake and scallop siding market. “We are seeing growth, both in the
retaining and training staff, and taking care of customers, all while looking out for shareholders. “That’s probably the thing that keeps me up all night. You’ve got to work, really, in all aspects of that business. You cannot be complacent on any one aspect if you’re going to succeed in manufacturing,” he said. “I mean, we have a 90-year history. We’re responsible for it. And if you take your eye off the ball on one of the things, and it could screw it up, right?” Ferriot thinks of the company like a regional contract manufacturer — like Flextronics but on a smaller scale. “We offer a lot of the same services. We’re managing large supply chains, enabling our customer one point of contact to make it easier to do busi-
ness,” he said. “And we’re also building out our engineering department to try to become a solutions provider. So we’re looking for specific pain points within customers: How can we help them solve their problems, everyday problems? .... We’ve been fortunate in growing our engineering base. ... We probably have more resources at our disposal on the engineering side than most companies our size.” Ferriot currently has 22 injection molding machines in its 200,000square-foot plant. The company has more than 150 employees and estimated sales of $30 million. Loepp is editor of Plastics News, a sister publication of Crain’s Cleveland Business.
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United States and Canada. And that’s happening through a lot of different avenues, but primarily through private label,” making product for vinyl siding companies, he said. Today, Ferriot Inc. is owned by the descendants of the three brothers who started the company in 1929. There are about 20 shareholders. Four family members work at the company. “The advantages of being part of a family business are we’re building a culture of family and trust and longevity,” Ferriot said. “Sometimes, there are differences of opinions, in terms of the direction the business should go. But that’s the reason we have a board of directors, because you need a variety of opinions, because I think it brings out better ideas.” Current challenges are attracting,
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Opinion Personal View
A safer Cleveland should be a topic for NEO summit By James M. Trutko
Editorial
Get to work There’s new leadership, new energy and a new strategy at JobsOhio, the private economic development nonprofit created by the state in 2013. We like the outline of what the organization calls “JobsOhio 2.0,” a five-year strategy approved last week that will, among other things, enable JobsOhio to invest in younger, earlier-stage companies and to take equity stakes in businesses, or to make loans that eventually get converted into partial ownership shares. As J.P. Nauseef, who became president and chief investment officer of JobsOhio in March, noted in a meeting with Crain’s, “We are going to expand our risk profile ... to increase investments and create economic growth.” No doubt the state needs it. Ohio’s economy is ... fine. But it’s not spectacular in the context of what has been happening nationally. The state’s GDP growth rate, per JobsOhio data, is a more-thansolid 3.5%, and unemployment, though above the national average, is just 4.1%. But the state faces other “economic headwinds,” as JobsOhio describes them, that include a private job growth rate of just 0.1%, stagnant population growth in the 20-34 age demographic, and an industrial production growth rate of -2.2%. Those numbers reflect underlying weakness in the state’s economic infrastructure that require more than just a tweaking of the JobsOhio investment strategy. To their credit, JobsOhio officials have thought more broadly about the role the organization can play. JobsOhio is funded through profits on the state’s liquor-sales monopoly, and with those profits estimated to bring $271 million to the organization in fiscal 2019, JobsOhio is in a position to invest some of that money back in the state. The organization intends to put about $50 million per year into each of three areas: talent development, site preparation and encouraging innovation, primarily through the creation of Innovation Districts. On the talent front — which virtually every Ohio business owner identifies as a big challenge — Nauseef said JobsOhio will work to “seed” the development of knowledge workers in four-year degree programs and two-year certifications for
computer science degrees and related training programs. JobsOhio also intends to bolster investments in site-preparation and infrastructure grants, and to explore ways to improve the quality of air service at airports statewide. JobsOhio over the years hasn’t operated with sufficient transparency, which Nauseef and new board chair Robert C. Smith acknowledged and pledged to improve. Although the organization is private, and its negotiations with companies are cloaked from public view, JobsOhio board members are appointed by the governor. It owes a higher level of accountability to taxpayers. The organization has laid out a sensible strategy to help kick Ohio’s economy into a higher gear. The hard part of making that happen starts now.
Paying the price? “They certainly got out cheap. $20 million is chump change to them.” That’s how Richard Ausness, a University of Kentucky law professor, described a deal last week for Johnson & Johnson to pay $20.4 million to avoid a federal trial in which, as Bloomberg put it, the company “faced accusations of helping fuel the opioid epidemic by mishandling its painkillers.” J&J will pay Cuyahoga and Summit counties $10 million in cash and $5 million to cover their legal expenses, and it will make $5.4 million in charitable donations to groups fighting the opioid epidemic. The company didn’t admit any wrongdoing. J&J stock rose after the deal. As Bloomberg wrote in a separate analysis, “The markets are sending a message to drugmakers facing opioid litigation: Settle up.” It certainly makes sense from the companies’ perspective to pay and move on. The communities affected by the opioid crisis, in Ohio and beyond, should be prepared to fight aggressively for as large a settlement as possible to establish a meaningful treatment infrastructure that helps them recover from the epidemic. That’s only good business.
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Later this month, community leaders will convene the CLE Rising Summit, an event intended to develop a consensus on what is needed to move the area forward. The meeting’s agenda will hopefully include a discussion about reducing crime and violence to improve the area’s potential for growth in jobs and investment. In 2017, Cuyahoga County had about 7,100 violent crimes (murders, rapes, robberies and aggravated assaults), over 20% of the state’s total. The city of Cleveland alone accounted for about 6,000 violent crimes, 84% of the county’s total. In addition, Cuyahoga County had about 29,700 property crimes (burglaries, larcenies and motor vehicle thefts) and about 300 cases of arson. Cleveland isn’t one of the nation’s notoriously violent cities and the area hasn’t suffered from recent horrific mass shootings, but crime and violence nevertheless impose heavy tangible and intangible costs on the community. Direct costs include taxes to fund expenditures for safety services, courts and incarceration. The Quarterly Census of Employment and Wages shows justice, public order and safety activities account for about 11,600 of Cuyahoga County’s 20,000 public administration workers and about 63% of total wages. Other direct costs include losses to victims of crime, costs of insurance and crime prevention efforts, public services to families of criminals and rehabilitation services. The indirect costs of crime and violence are also significant, but harder to quantify. They involve the long-lasting aftereffects of crime, as well as what people can’t or don’t do because of real or perceived threats of harm. Among the indirect results of high crime and violence are the extensive geographical areas effectively rendered off-limits for investment, the resentments and racism fueled by crime, the lingering scars of crime victims, and the inability of rehabilitated felons to get real jobs and participate in society. These indirect costs of crime are an especially heavy burden on the poor who are unable to escape them. The participants of the CLE Rising Summit — and indeed all political and community leaders — should focus on reducing crime and violence and creating greater community safety because it is a precondition for achieving so many other community goals. Persistent levels of crime make it more difficult to increase economic opportunity and reduce poverty, and they compromise the delivery of educational and community services. Suppose, for example, the vision was to make Cleveland and Cuyahoga County one of the safest big cities in America by reducing violent crimes by 3% to 5% per year for five years. This simple goal would amount to a reduction of 1,000 to 1,600 violent crimes per year in Cuyahoga County by year five. Imagine the cost savings and community resources freed up to devote to other problems. A communitywide plan to reduce violent crime would start with a focused and coordinated effort by all local police forces, security personnel at local universities and hospitals, and the courts. It would also enlist community service institutions to develop alternatives for the most crime-prone populations and to provide more effective rehabilitation services. Finally, public involvement is crucial: Businesses and individual homeowners can take practical steps to harden targets of crime and to help police. The second element of a community effort to reduce violent crime is the adoption of what some experts call a Group Violence Reduction Strategy. SEE TRUTKO, PAGE 11
Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing ClevEdit@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes. Sound off: Send a Personal View for the opinion page to emcintyre@crain.com. Please include a telephone number for verification purposes.
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Personal View
Early learning investments of PRE4CLE are paying off By Patrick Pastore, Eric Gordon and Marcia Egbert
We believe in the unique potential of every Cleveland child. Today, more than ever before, Cleveland’s children have a pathway to educational success — and it begins with PRE4CLE. Five years ago, PRE4CLE launched with the support of foundations, corporate partners, the Cleveland Metropolitan School District (CMSD), and local and state government to expand high-quality preschool to all 3- and 4-year-olds in Cleveland and boost kindergarten readiness and school success. High-quality preschool programs play an important role in children’s development because they are safe and supportive learning environments with welltrained, professional staff and research-based curricula. Children emerge from a high-quality preschool better equipped for kindergarten and beyond because they have enhanced literacy and math skills, the ability to work with other children in the classroom and greater enthusiasm for learning. The potential that early childhood learning holds was recognized by The George Gund Foundation, PNC Foundation and CMSD, which were among the first organizations to be leaders of and cheerleaders for PRE4CLE five years ago. The investment is already paying dividends, as evidenced in the PRE4CLE 2018 annual report. In the past five years, 19,000 Cleveland children have attended a high-quality preschool program. When PRE4CLE started, 24% of preschool-aged Cleveland children were enrolled. That number has jumped to 43% today. That’s because it is now easier for Cleveland families to access a high-quality preschool for their children. There are 179 high-quality programs in the city today, compared to 77 programs five years ago. Most importantly, nearly 70% of Cleveland children who spend a year in a PRE4CLE classroom place in the top two tiers of Ohio’s Kindergarten Readiness Assessment, demonstrating that they have many of the skills they need to succeed as they start their school career. PRE4CLE’s work also helps children across Cuyahoga County. Its advocacy work at the state and local levels has resulted in more than $57 million in new
TRUTKO
CONTINUED FROM PAGE 10
Thomas Abt’s recent book, “Bleeding Out,” provides a good outline based on current research about the nature of violent crime. Abt points out that an effective response is possible because most violent crime in cities is not randomly distributed throughout population and the city. In every city, there are a few “hot” people that commit serious crimes and a few “hot spots” that account for the majority of violence. Most urban violence is carried out by young men with prior criminal backgrounds, and the guns used in violent criminal acts are often carried illegally by felons. Abt posits that long-term success must involve more than just making lots of citations and arrests, but that success doesn’t depend on dealing with the root causes of crime. He says the best approach is to focus on the illegal behavior of specific people in targeted areas. His method is designed to prevent violence in a fair and balanced way by altering the decisions of current and potential criminals through a carrot-andstick approach. He advises letting criminals know directly that law enforcement is aware of their activities, while simultaneously having community organizations offer them alternatives to a life of crime. In Cuyahoga County, a successful strategy must also include a realistic plan to reform the Justice Center.
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state funding for early learning programs across the county. These outcomes are good for everyone in Cleveland, but in particular for the business community. Decades of research show us that students who attend high-quality preschool are more likely to graduate from high school and 50% more likely to have consistent employment in their late 20s. In other words, when we give our children the strongest start possible in school, we build an educated, stable and reliable workforce for the region. These achievements are, in large part, because of the commitment of the city and county leadership and partnership among our business, philanthropic and education communities. We’ve all come together to ensure investing in our youngest citizens is a top priority, and we are seeing a great return on that investment in only five years. PRE4CLE’s work is far from over. The next five years are just as important as the first five as we look to increase the quality of all Cleveland preschool programs and reach even more children. We know high-quality preschool works. We need the collective Cleveland community to support highquality preschool so even more children can be ready for kindergarten, reading at grade level and, eventually, graduating from high school on time. This will better enable students to take advantage of the educational and job opportunities that await them after high school, which is the goal of the new Say Yes to Education program. Say Yes Cleveland launched in January to provide Cleveland’s public chool students, from preschool through 12th grade, with support services while in school and tuition scholarships after graduating from CMSD. High-quality preschool is where this journey begins. To grow a qualified workforce, we must continue to invest in our youngest students at all levels. We invite you to join us in laying the foundation for a stronger Cleveland.
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Pastore is Cleveland regional president for PNC Bank, Gordon is CEO of the Cleveland Metropolitan School District and Egbert is a senior program officer for the George Gund Foundation. Incompetent management of the Justice Center undermines the legitimacy of law enforcement and contributes to cynicism about police. The Cuyahoga County executive and county council need to develop a practical plan for the Justice Center that guarantees competent, safe, humane treatment of prisoners and includes real metrics about operating efficiency, such as prisoner cell nights and costs per prisoner. Finally, an independent organization is needed to monitor progress and ensure accountability. The organization should provide detailed analysis on when and where violent crimes occur, measure progress toward stated goals, and research best practices and applicable technologies. In addition to providing crime data in visual format, online and in real time, the organization should monitor the effectiveness of judges and courts by developing and disclosing metrics that measure how hard the judge is working and how well the judge manages a caseload. The goal is to improve public accountability and reduce the time and related cost from crime to sentencing. If participants in the CLE Rising Summit can prod political and community leaders to adopt a strategy to reduce violent crime by 3% to 5% per year, they will have strengthened the area’s potential for economic growth and improved the quality of life of its citizens. Trutko is a local economist and market research professional. He lives in Rocky River.
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MANUFACTURING
RENEWABLE ENERGY
RENEWS GROWTH
Mirrors at the Ivanpah Solar Electric Generating System are seen in the Mojave Desert in California near Primm, Nev. The 347,000 computer-controlled mirrors focus sunlight onto boilers on top of three towers, where water is heated to produce steam to power turbines providing power to more than 140,000 California homes. (Photo by Ethan Miller/Getty Images)
As the energy market continues to change and evolve, so do the suppliers that serve it By Rachel Abbey McCafferty rmccafferty@crain.com @ramccafferty
As the energy market continues to change and evolve, so, too, do the manufacturers that serve it. Whether adapting existing products or strategically entering new markets, a shift to renewable and alternative sources of energy can mean opportunity for many. Take Eaton for example. The Dublin-based company, which has its American headquarters in Beachwood, has long served the power distribution market. As that market has changed, so have Eaton’s offerings. Traditionally, energy was “singular direction,” said Michael Regelski, senior vice president and chief technology officer for Eaton’s electrical sector. It was generated in one place and distributed to users. But with the addition of renewable energy sources, energy can be generated at different sources — even at the user level, Regelski said. Eaton offers everything from grid-planning software used by utilities to backup power for
P012_013_CL_20191007.indd 12
Timiken entered the solar energy market with the acquisition of gear-drive maker Cone Drive in September 2018. Here, Cone Drive associates measure worm-thread thickness as part of the manufacturing process. (Timken)
data centers. “We really listen a lot to our customers, we look at the megatrends that are affecting our industries and then we think about how can we apply that technology to the solutions that we bring to market today to help serve customer needs,” Regelski said. For example, consider the uninterruptible power supply (UPS) devices used as backup power for data centers. Eaton now offers a product that allows the backup power to be returned to the grid when it’s not in use, providing customers security that they won’t be without power during an outage, but also giving them an extra source of revenue. That type of innovation is an ongoing process for Eaton, which Regelski said he views as a differentiator for the company. The approach has helped the company grow and gain market share over the years. “You have to continually evolve,” Regelski said. “You have to continually adapt and make sure that you’re bringing your customers along with you. You can’t just develop technology for technology’s sake.” Timken Co. in North Canton also views evolution as part of its history. The company got its start as a maker of bearings for horsedrawn car-
10/3/2019 1:28:31 PM
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riages and from there, moved into everything from automobiles to heavy industry to, now, renewable energy, said executive vice president and chief financial officer Philip Fracassa. “We’re really focused on taking our technology in new markets where we can obviously generate good returns for our shareholders but also solve problems for customers, like we’ve been doing throughout our 120-year history,” Fracassa said. The company looks for growth markets during its strategic planning processes and finds places where its capabilities could be a good fit. Once that’s determined, Fracassa said, leadership decides whether developing products internally or finding a strong acquisition is a better approach. The renewable energy markets in which Timken has made big pushes are wind and solar. Currently, Timken is primarily serving the wind and solar markets in Asia, Fracassa said. But he expects the global demand for renewable energy to continue to grow, outpacing what he called the “fossil markets.” Timken has been strong in coal, oil and gas in the past, but those markets are being replaced by natural gas or renewable energy sources. Most recently, the company entered the solar energy market with the acquisition of geardrive maker Cone Drive in September 2018. The market doesn’t require a lot of bearings, Fracassa noted, so entering through acquisition made sense. Timken entered the wind market a decade ago with its core bearing products, he said. At
Timken entered the wind market a decade ago with its core bearing products. Today, wind energy makes up about 5% of the company’s revenue. (Getty Images)
the time, it had essentially no sales in that market; today, he noted, wind energy makes up about 5% of the company’s revenue. The bulk of Timken’s wind energy business is still in bearings, Fracassa said, but moves like the acquisition of BEKA Lubrication will also help Timken expand in that market. The Ger-
man automatic lubrication company, which Timken is in the process of acquiring, serves a variety of markets, including wind energy. Adding additional products and services helps Timken present a more complete package of offerings to the industry, Fracassa said. Finding new uses for existing capabilities is
another common approach for manufacturers entering these new markets. Concord-based De Nora Tech, a subsidiary of Industrie De Nora in Italy, has been looking for new markets to enter in recent years, said business development manager Chuck Schultz. One area with a lot of growth potential in the electrochemical space the company serves is energy storage. For example, the company makes electrodes used in flow batteries and in processes that generate chemicals used to store and generate energy. Schultz said De Nora Tech today has about a dozen customers in the energy storage space, up from zero a few years ago. It’s not just large, global companies looking for ways to expand their market share in these growing industries. Talan Products Inc. in Cleveland serves the building products market. The metal stamping company, which employs about 80, got its start in commercial roofing. The company has historically gone after high-growth, disruptive industries, said CEO and founder Steve Peplin. The commercial roofing customers it serves were offering an alternative to tar and paper when Talan entered that market about 35 years ago. About 10 years ago, Talan made a strong push into the solar energy market, Peplin said. Today, Talan provides parts for solar energy in the residential, commercial and utility-scale markets. That’s paid off as solar energy has become lower-cost and more efficient. “It’s the fastest-growing segment of our business, for sure,” Peplin said.
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CRAIN’S CLEVELAND BUSINESS
MANUFACTURING
Adviser: David Cuppage
What you might expect from your business advisory firm
Noncompetes popular, but not always enforceable
What you can expect from Skoda Minotti
The days of workers retiring from the same company they started with seem to be gone. Today’s American workforce is more mobile, sometimes switching jobs every few years. As a result, there are more noncompetition, nonsolicitation and nondisclosure agreements or covenants (commonly referred to as noncompetes) being established and enforced than ever. Once reserved almost exclusively for high-level executives with access to trade secrets, noncompetes are commonplace today. While tech companies still account for the highest percentage of noncompetes in the market, according to a study by University of Michigan and University of Maryland researchers, nearly 20% of American workers are currently bound by some type of noncompete agreement. Not only do these agreements cause uncertainty for employees who have intentionally or unintentionally been separated from employment, but they also create challenges for those employees’ prospective new employers, who typically don’t want to become involved in litigation with the previous employer. Although Ohio courts generally look upon such covenants with skepticism and have cautiously considered and scrutinized them, they can be enforced. A noncompete that imposes unreasonable restrictions upon an employee, however, will be enforced only to the extent necessary to protect an employer’s legitimate business interests. The covenant is reasonable if the restraint is “no greater than is required for the protection of the employer, does not impose undue hardship on the employee and is not injurious to the public.” Many factors determine the enforceability of post-employment restrictive covenants, including: 1. The absence or presence of limitations as to time and space 2. Whether the employee represents the sole contact with the customer 3. Whether the employee possesses
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confidential information or trade secrets 4. Whether the covenant seeks to eliminate unfair competition or merely seeks to eliminate ordinary competition 5. Whether the covenant seeks to stifle the inherent skill and experience of the employee 6. Whether the benefit to the employer is disproportional to the detriment of the employee 7. Whether the covenant operates as a bar to the employee’s sole means of support 8. Whether the employee’s talent being suppressed was developed during the period of employment 9. Whether the forbidden employment is merely incidental to the main employment In noncompete cases, the future effects of the covenant must be considered. Ohio courts generally must consider whether real or long-term damage will result to the employer’s goodwill or to the employer’s future income because of the operation of the competing business. Paramount to enforcement of a noncompete is to prevent “unfair competition, not ordinary competition.” But what happens when enforcement, or attempted enforcement, of a noncompete prevents ordinary competition? What if a former employer, who has no legitimate basis to seek enforcement of a post-employment restrictive covenant, sends ceaseand-desist letters to an employee or to the employee’s current employer? What happens if a former employer, who has failed to pay an employee the consideration called for in the agreement containing the covenant, sends a cease-and-desist letter to the employee or the employer’s current employer? Is the employee without rights or remedies? Must the employee simply wait out the time period set forth in the covenant or engage in competition at the risk of being sued? Not necessarily. There are several situations in which Ohio courts have ruled against
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MANUFACTURING
Adviser: Adam Sonnhalter and Jack Mencini
ut
Cuppage is an employment attorney with Clevelandbased McCarthy, Lebit, Crystal & Liffman.
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noncompete agreements. One example is when an employer has ceased its business activity in a particular field and no longer has a legitimate interest in competing in that field. Another example is when an employer has failed to pay consideration called for in an employment agreement. Other situations may also cause the court to rule in the employee’s favor. In these types of cases, an employee may decide to go on the offense and seek declaratory and injunctive relief from a court to prevent the former employer from enforcing or attempting to enforce a noncompete. While irreparable harm must be demonstrated by the employee, courts have found that injury to an employee’s reputation, active opposition to an employee’s attempts at finding gainful employment, lost employment opportunities and the need for a severed employee to regain industry stature within a short period of time may constitute irreparable injury. This could then justify the issuance of a temporary restraining order and/or preliminary injunctive relief that prevents the enforcement or attempted enforcement of an invalid post-employment restrictive covenant.
What to do when you can’t find good employees Setting up an internal training program can work for a manufacturer or any other type of business. We just returned from a conference with a client in the professional services industry who recently set up a two-part management training program for current employees. The program is designed to teach some of the softer management skills to employees the company felt had what it takes to become good managers. It includes training on things like how to properly coach your team and hold them accountable in a positive way. But what if you’re having trouble finding good employees to bring in and train? It can be frustrating to the point where some business owners simply give up on trying to find good people. Heck, some smaller owners even give up and get out of the business altogether. At the very least, this lack of good available people stunts growth at many small businesses. What if you could set up your own recruiting and training program designed to keep a steady flow of new people coming on board? We have a client in the landscaping business who for years had depended on the H2B visa program to
hire quality seasonal employees for six to eight months of the year. But in recent years this program has been hard to count on. Some years, they’d get their request approved and other years they did not get approved. So instead of reacting and playing defense, our client decided to go on the offensive. To start, they laid out a plan to operate and grow their business without any workers from the H2B visa program. This required a huge shift in their mindset as, historically, this group of workers accounted for more than half of their team. What they decided to do instead was set up a training program designed to screen folks out by teaching them the skills necessary to perform the work. The plan involved knowing they’d lose about half of their recruits within a few weeks of hiring and then have to replace them with another round of recruits who could be trained. The company cast a broad net when looking to bring on new train-
tions (e.g., participate in job fairs, offer a class or workshop, become a part-time instructor, offer paid internships for students). JJTap into many of the channels you are already using to get the word out about your business including your website, social media presence, email lists and people who already know, like and trust you and are willing to help, including family, friends, customers and vendors. JJLook for ways to automate your business where you can utilize things like technology instead of people. JJTarget younger, less experienced people (for example, folks in high school — a big opportunity is being missed here as many kids aren’t discovering their aptitude for working with their hands because many of the classes that used to be in high schools have now shifted to trade and vocational schools). JJTry something totally different from what you’ve tried before, such as setting up your own training program. No matter what you do, it begins with having a plan in place. Be sure your plan includes a heaping serving of patience because these types of changes are longer-term solutions for your business. Keep in mind that changing behavior is tough, even when you’re having some success.
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ees. They attracted a combination of younger people and more seasoned folks from other industries who were looking for a change of pace. Their initial target through this process was to find 10 employees who they could develop and train. To date, they’ve netted nine new people through the program. It took about 30 candidates and a couple of rounds of hiring over a couple of months to get to those nine people. Even with this tremendous success the first time through, the owner was still getting a lot of pushback from the existing team. In fact, they continued to ask the owner why they couldn’t go back to the H2B visa program since it was “easier” than hiring and training local workers. Change can be difficult, even when it leads to positive results. We’re big fans of keeping things simple. If you’re struggling to find good people, here are several things to try to start (our landscaping client did many of these): JJTap into your current employees/ contractors for referrals. Make it worth their while in terms of cash and other incentives such as additional days off work. JJPartner up with local trade schools and other training organiza-
Mencini (left) and Sonnhalter are partners in the business coaching firm Maximum Value Partners.
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MANUFACTURING
Automotive takes shine to aluminum partsmaker Twinsburg’s General Die Casters is poised for growth as it hits the gas to produce specialty components for auto suppliers By Judy Stringer
automakers revealed that total aluminum content in vehicles would climb by 40%, from 397 to 565 pounds per vehicle, by 2028. Along with improving fuel efficiency among conventional gasolinepowered engines and hybrids, Ducker reported aluminum is expected to contribute more than half of the anticipated vehicle mass reduction demanded by electric-vehicle makers looking to extend EVs' range between charges.
clbfreelancer@crain.com
Hitting the gas pedal
outside the U.S. — but he anticipates growth nonetheless, mostly from the automotive market’s push into aluminum. “Because it’s strong and it’s lightweight, aluminum has become the material of choice for automakers, which can get better fuel efficiency out of the vehicle,” he explained. Over the next decade, in fact, automakers are expected to increase the adoption of aluminum in new car and truck construction at a faster pace than at any time in history, according to market-watcher Ducker Worldwide of Troy, Mich. In a July 2017 report, Ducker said a survey of
A General Die Casters employee loads aluminum raw material into a melting furnace. The company operates a die-cast plant and headquarters in Twinsburg. (Contributed photos)
square-foot die-casting plant on the same Twinsburg parcel as its headquarters. Lennon said the company spent the next four years relocating the bulk of the Peninsula personnel and machines to the Twinsburg site. During that time, he said, sales and marketing took a back seat while company leaders focused on “getting the new plant up and running and supporting our existing customers.” He added that “once the Twinsburg plant was fully operational, around the beginning of 2018, we knew it was time to really hit the gas pedal on
++ + +
++
Brian Lennon
General Die Casters opened its doors in 1957 in Peninsula. Nice as it was to work in the Cuyahoga Valley National Park, Lennon said, it was a terrible place to run a manufacturing business. “There was no public transportation, no public water or sewer,” he said. “We had to have tanker trucks bring in water every day to fill in cisterns.” In 2000, following a fire in the front office of its Peninsula plant, the company bought land off Highland Road in Twinsburg and built a 32,000square-foot headquarters there. It also used the space to integrate CNC machining into its casting capabilities. In 2014, General Die Casters constructed a separate, nearly 90,000-
+
After what he calls five flat “transitional years,” General Die Casters Inc. CEO Brian Lennon said the Twinsburg manufacturer now sees growth on the horizon. “We have three new customers, mainly automotive, that are going to begin production next year,” Lennon said. “So we expect to see about a 10% to 20% increase in sales over the next few years.” The 62-year-old company casts aluminum and zinc products for a range of industries. It makes aluminum gearbox cases and zinc ratchet levers for Cleveland-based Kirby Co.’s vacuums, for example, as well as aluminum components for Elyriabased Ridge Tool Co.’s wrenches and for oil and gas valves manufactured by Swagelok in Solon. More than 20% of its business, however, comes from automotive suppliers, where General Die Casters produces specialty parts like aluminum shift forks for manual transmissions and, a recent addition, a suspension assembly piece. Lennon said that, so far, he’s seen a negative impact from tariffs — billed by the White House as a device to help businesses like his compete against lower-cost manufacturers
+
sales and marketing and developing new business opportunities.” Today, the company employs about 200 people between its two Summit County locations. Lennon declined to provide revenue figures for the private company, but did say he is encouraged by a number of emerging business opportunities. General Die Casters, for example, differentiates itself from large-volume manufacturers and low-cost overseas competitors by producing customized high-integrity castings. Increasingly, automotive companies
+ + + ++ + +
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want to use aluminum castings for structural parts like dashboards, door panels and engine blocks, according to Lennon. “Parts that used to be made out of iron and steel are now being made of out very thin, yet high-integrity diecast aluminum,” he said, “and it’s really opening up a lot of new potential in our market.” He also sees aluminum as a rising competitor to plastics in products like lawn and garden equipment and medical devices. While aluminum is generally heavier than plastic, the metal’s inherent ability to maintain strength as it is drawn out results in thinner components that weigh less. “If you are making a plastic cover for your leaf-blower in the same ex-
act design in both aluminum and plastic, the aluminum piece will be lighter and more durable,” Lennon said. He added that he wants to explore energy markets, such as solar panels and LED lighting, as well. Because aluminum is nearly 100% recyclable, he said he believes the metal ultimately will find applications in a broad range of industries where companies and/or consumers are demanding more sustainable products. One thing Lennon is not enthusiastic about, however, are those tariffs. Although American companies are paying 20% more for their castings from China as a result of recently enacted tariffs, he has seen few indications those companies will make a switch to U.S. suppliers. “I just don’t think people believe the tariffs will last long enough to justify a long-term change in their supply chain,” Lennon said. Meanwhile, the company has lost two jobs by virtue of China’s trade retaliation, including a 40,000-partper-month contract with a Spanish customer for automobiles assembled in China. Lennon added that he worries manufacturers looking to offset the cost of tariffs might start to look at lower-cost options for things like die casting, “which is one of the easiest things to offshore," he noted.
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CRAIN’S CLEVELAND BUSINESS
THE LIST
Manufacturing Companies
Ranked by full-time equivalent local employees FTE EMPLOYEES
LOCAL MANUFACTURING FACILITIES
PRODUCTS MADE LOCALLY
TOP LOCAL EXECUTIVE(S)
6,116
Bedford Heights
Paint
John G. Morikis, chairman, CEO
4,272
4,329
Solon, Highland Heights, Strongsville
Tube fittings, valves, hoses, regulators, fluid systems components, assemblies
Arthur F. Anton, chairman, CEO
3,550 (1)
NA
Avon Lake, Brook Park
Medium duty trucks, Super Duty chassis cabs, E-Series cutaways, strip chassis, EcoBoost engines
Kevin Heck, plant manager, Cleveland Engine Plant; Jason Moore, plant manager, Ohio Assembly Plant
Lincoln Electric, Euclid 216-481-8100/lincolnelectric.com
3,096
3,096
Euclid, Mentor
Welding and cutting systems
Christopher L. Mapes, chairman, president, CEO
5
Nestle USA, Solon 440-349-5757/nestleusa.com
2,975
NA
Solon, Cleveland
Stouffer's, Lean Cuisine, Wildscape, Sweet Earth entrees; Minor’s products
Steve Presley, chairman and CEO, Nestle USA
6
Goodyear Tire & Rubber Co., Akron 330-796-2121/goodyear.com
2,805
3,044
Akron
Racing tires
Richard J. Kramer, chairman, president, CEO
7
TimkenSteel Corp., Canton 330-471-7000/timkensteel.com
2,628
2,720
Canton
Special bar quality (SBQ) steel and seamless mechanical tubing
Tim J. Timken Jr., chairman, president, CEO
8
Arconic Inc., Cleveland 216-641-3600/arconic.com
2,620
2,640
Cuyahoga Heights, Cleveland, Barberton, Canton, Niles
Lightweight aluminum, titanium aerospace structural components, commercial vehicle wheels, titanium ingot
Tolga Oal, president, Arconic Engineered Structures; Merrick Murphy, president, Arconic Wheel and Transportation Products
9
The Lubrizol Corp., Wickliffe 440-943-4200/lubrizol.com
2,194
2,267
Avon Lake, Painesville, Wickliffe
Lubricant additives for transport fluids; engineered polymers and advanced materials for multiple industries
Eric R. Schnur, chairman, president, CEO
10
The J.M. Smucker Co., Orrville 330-682-3000/jmsmucker.com
2,175
2,340
Orrville
Fruit spreads, ice cream toppings, syrups and foodservice items
Mark T. Smucker, president, CEO
11
ArcelorMittal, Cleveland 216-429-6000/usa.arcelormittal.com
2,094
3,010
Cleveland, Warren
Steel
Mike Madar, VP, general manager
12
Schaeffler Group USA, Wooster 330-264-4383/schaeffler.us
2,000
2,000
Wooster
Transmission systems and e-mobility components
Marc L. McGrath, president, Americas
RANK
COMPANY
LOCAL
1
Sherwin-Williams Co., Cleveland 216-566-2000/sherwin.com
4,933
2
Swagelok Co., Solon 440-248-4600/swagelok.com
3
Ford Motor Co., Dearborn 800-392-3673/ford.com
4
OHIO
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13
Rockwell Automation Inc., Mayfield Heights 440-646-5000/rockwellautomation.com
1,943
1,943
Twinsburg
Automation products
Frank Kulaszewicz, senior VP, Control Products & Solutions
14
Parker Hannifin Corp., Mayfield Heights 216-896-3000/parker.com
1,800
2,850
Akron, Avon, Elyria, Fairlawn, Kent, Mentor, Ravenna
Motion and control technologies
Thomas L. Williams, chairman, CEO
15
Avery Dennison, Mentor 440-534-6000/averydennison.com
1,581
NA
Painesville, Mentor, Concord, Painesville Township
Pressure-sensitive adhesive label, packaging and graphics materials; pressure-sensitive tapes; reflective sheeting
Nick Tucci, VP and general manager, Label and Graphic Materials North America
16
Eaton, Beachwood 440-523-5000/eaton.com
1,414
2,601
Brooklyn, Parma, Euclid
Aerospace, electrical and hydraulic products
Craig Arnold, chairman, CEO
17
The Scott Fetzer Co., Westlake 440-892-3000/scottfetzer.com
1,327
1,849
Avon Lake, Cleveland, Westlake, Wooster
Diversified manufacturer of products for the home, family and industry
Bob McBride, president, CEO
18
Bridgestone Americas Inc., Akron 330-379-7000/bridgestoneamericas.com
1,320
1,890
Akron
Racing tires
Nizar Trigui, chief technology officer, Bridgestone Americas; VP, Bridgestone Corp.
19
Shearer's Foods LLC, Massillon 330-834-4030/shearers.com
1,210
1,244
Brewster, Massillon
Snack foods: Potato chips, tortillas, extruded products (i.e. cheese curls)
Bill Nictakis, chairman, CEO
20
BWX Technologies Inc., Euclid 216-912-3000/bwxt.com
1,160
1,160
Barberton, Euclid
Pressure vessels, steam generators, electro-mechanical components
Chris Rhodes, GM, BWXT Nuclear Operations Group Euclid; Jim Bittner, GM, BWXT Nuclear Operations Group Barberton
21
PPG, Cleveland 412-434-3131/ppg.com
1,125
2,400
Cleveland, Strongsville, Barberton, Huron
Automotive OEM coatings
James Priddy, plant manager
22
The Timken Co., North Canton 234-262-3000/timken.com
1,101
1,522
Canton
Tapered roller bearings, alloy steel bars, seamless alloy steel tubes
Richard G. Kyle, president, CEO
23
General Motors Co., Detroit 313-556-5000/gm.com
1,076
5,500
Parma Metal Center
Vehicle parts
Mark L. Pervine, Parma plant director
24
RPM International Inc., Medina 330-273-5090/rpminc.com
1,062
1,310
Cleveland, Medina, Euclid, Twinsburg
Roofing materials, sealants, adhesives, concrete admixtures and coatings, fluorescent colorants
Frank C. Sullivan, chairman, CEO
25
Saint-Gobain Corp., Solon 440-836-6900/saint-gobainnorthamerica.com
1,056
1,062
NA
NA
Jean Angus, CEO, life sciences
26
Associated Materials Inc., Cuyahoga Falls 330-929-1811/associatedmaterials.com
1,021
NA
Cuyahoga Falls
Vinyl windows, replacement and new construction
Brian C. Strauss, president, CEO
27
Nordson Corp., Westlake 440-892-1580/nordson.com
938
938
Amherst, Austintown
Precision dispensing equipment for coatings and sealants; polymer processing equipment
Sundaram Nagarajan, president, CEO
28
Step2 Discovery, Streetsboro 330-656-0440/step2.com
815
NA
Streetsboro, Perrysville
Rotationally molded toys and home products
Anthony M. Ciepiel, CEO
29
PolyOne Corp., Avon Lake 440-930-1000/polyone.com
810
850
Avon Lake, Massillon, Norwalk, Berea, Barberton
Specialized polymer materials, services and solutions
Robert M. Patterson, chairman, president, CEO
30
Pepperidge Farm, Willard 419-933-2611/pepperidgefarm.com
700
NA
Willard
Biscuits and crackers, Milano and Goldfish brands
Jeremy Jones, director, human resources
RESEARCHED BY CHUCK SODER: CSODER@CRAIN.COM
Get 46 companies, contact info and more executives in Excel. Become a Data Member: CrainsCleveland.com/data Employee figures are as of June 30, 2019. Information is supplied by the companies unless footnoted. Send feedback to Chuck Soder: csoder@crain.com (1) Ford's 2019 employment figure is from Ford.com and represents total employees, not full-time equivalent employees; thus, the number is higher than it otherwise would have been.
P018_CL_20191007.indd 18
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CRAIN’S CLEVELAND BUSINESS
HOME TEAM
happened to those funds, since, in the words of Telisman, none of the customers “were getting paid.” Peter Fitzpatrick, who was fired as CEO 11 months after the new owners assumed control, said, “It’s become clear to me that Home Team Marketing never paid lots of money that was owed to schools, as I’ve heard directly from them, both through ticketing and sponsorships.” The Fitzpatrick-led group’s onethird share of HTM had been diluted over the past few years, and the Cleveland group, frustrated by the company’s actions, relinquished its seat on the board in 2018. “I find it deplorable, and hope those schools can somehow recoup any dollars owed to them,” Peter Fitzpatrick said. “Further, if there was any wrongdoing at HTM, I hope that those responsible are held accountable.”
chael Collins said. “It’s not like I can afford to take hits like these day after day. I also can’t stand the fact you’re trying to rip off these schools.” An athletic director at an out-ofstate high school told Crain’s that’s also been his experience in one year of working with HTM and TicketRoar. Missing ticket revenue “is a hard thing to explain to a public entity,” the AD said. “It’s a bad situation. Someone always has to take the blame for it, and they’re not.” Rusty Dowling, the executive director of the Texas High School Athletic Directors Association, told Crain’s that the Cleveland-launched HTM once had a significant presence in football-mad Texas. But once the new ownership group assumed control, that dissipated, Dowling said. HTM’s Dallas office closed, the company’s partnerships with Texas high schools dwindled, and Dowling has heard that several school districts in the state are owed a considerable amount of money from their TicketRoar deals. “The frustrating thing about it is there’s no one to call,” Dowling said. “There’s no one who can give them an answer or, more bluntly, give them their money.”
‘There’s no one to call’
‘They owe us all thousands’
The Ohio School Health Services Association used TicketRoar for an August event it hosted for school occupational and physical therapists. The Columbus nonprofit was owed more than $75,000 from digital ticket sales — a total Home Team Marketing hasn’t paid, said Ryan Collins, the general manager of the Michael Collins Group, an educational consulting firm that represents the OSHSA. Ryan Collins’ father, Michael, said his firm has 10 clients, and the “one that got ripped off ” by HTM is a nonprofit for which he also serves as executive director. “We’re the ones out $75,000,” Mi-
When Home Team Marketing announced its $5 million Lyrical investment in 2017, it said TicketRoar, its digital ticketing arm, was working with more than 5,000 schools. Eventbrite, which had been hosting the platform, recently informed its customers that TicketRoar was “exiting the ticketing business.” An email, which was obtained by Crain’s and attributed to Nicole Brambila, the general manager of Eventbrite North America, told customers that the San Francisco company would continue to serve their ticketing needs “without disruption.” Funds from tickets sold on the
CONTINUED FROM PAGE 1
But the company began to take a turn for the worse, according to multiple sources, once it was purchased by Home Team Holdings LLC, a group of individual investors that was led by O’Neill, a Florida resident who has spent most of his business career in New York. Home Team Holdings was incorporated in Delaware — a common practice because of the state’s business-friendly laws and policies — but was operated out of New York. Home Team Holdings purchased about two-thirds of Home Team Marketing from a group that included company co-founders Jake, Peter and Regan Fitzpatrick and friend Patrick Spear in December 2013. In 2015, Peter Fitzpatrick told Crain’s that the special purpose vehicle that purchased HTM had about 20 investors. O’Neill was the chairman of the group, which included individuals from Fenway Partners, a New York private equity firm. Richard Dresdale, a Fenway Partners co-founder and the firm’s former managing director, and Gregg Smart, Fenway Partners’ current managing director, are listed in the SEC filing that details Home Team Holdings’ $11.3 million purchase of HTM equity on Dec. 24, 2013. The new owners received a $5 million investment from an affiliate of Lyrical Partners, a New York investment firm with more than $10 billion in assets under management, in 2017. At the time, O’Neill celebrated the announcement by telling Crain’s that Eventbrite, which was powering HTM’s digital ticketing platform, was so enthused by the results and the seven-figure investment that it had extended its deal with HTM for seven years. Many clients, and quite a few former employees, are wondering what
O’Neill
Hagerty
platform “on or after” Aug. 22 — the date TicketRoar “stopped hosting tickets” — would be paid by Eventbrite, the email said. Clients who were waiting on money owed from ticket sales prior to Aug. 22 were urged to reach out to TicketRoar. That, not surprisingly, is easier said than done, since Home Team Marketing abruptly shut down and, according to numerous sources, hasn’t been responsive to inquiries about payments that were due. Other emails — messages coming from Prep Media LLC, which said it was “the senior secured creditor to Home Team Marketing” — also caught the attention of clients angered by HTM’s actions. Prep Media, which was being operated by Lyrical Partners as it attempts to recover some of the $7 million-plus in principal and unpaid interest that the firm said it’s owed by HTM, told the clients that HTM’s “only assets of value were its contracts and business relationships” with companies and schools. Prep Media had hoped it could fulfill those contracts, but responses from clients to the initial email on Sept. 27 made it “clear that there is no genuine opportunity to obtain any recovery on the assets, as the contracts and relationships appear to be irreparably harmed.” As a result, Lyrical Partners no longer intends to launch commercial operations for Prep Media, Lyrical chief financial officer Ted Gage told Crain’s on Oct. 3. “We are shutting the entity down and taking a complete loss,” Gage said. The Sept. 27 email, which was obtained by Crain’s and came from former Home Team Marketing senior vice president Pat Hagerty, said Prep Media was “comprised of a few experienced former HTM employees along with some talented new hires.” Crain’s asked Hagerty about the
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demise of HTM, and, via email, the former senior executive said, “I am not in a position to comment on behalf of HTM as it relates to their business. I would refer you to HTM and their senior management for questions regarding HTM.” Crain’s responded that he was a key part of that senior management team at HTM, but Hagerty didn’t reply. Nor did he return a phone call. O’Neill hasn’t responded to numerous requests for comment, and his LinkedIn profile no longer mentions his five-year stint as HTM’s chairman and CEO. Asked if Lyrical would be pursuing litigation, Gage said the firm “did not have a personal guarantee from Steve O’Neill, or anyone else for that matter.” At the time of its demise, HTM’s board comprised three people: O’Neill; Dennis Glazer, a retired New York attorney who is a member of the state’s gaming association; and Cathy Bryce, a former Texas school superintendent. Telisman, the former HTM account manager, said Hagerty promised her a $5,000 retention bonus if she showed the senior VP how to manage the company’s sponsorship platform. The employees who were let go when the company closed on Sept. 25 were only paid through that day, numerous former staffers said, and they didn’t receive any bonuses that were due. “They owe us all thousands of dollars,” said Telisman, a pregnant mother of three. Telisman said the former number for HTM’s office at the Caxton Building in downtown Cleveland is still connected to her cellphone. She said she gets calls “all day” from former clients who are wondering what’s going on with the company. “I don’t know what they’re doing,” she tells them.
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AKRON
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CLASSIFIEDS To place your listing in Crain’s Cleveland Classifieds, contact Suzanne Janik at 313-446-0455
By Dan Shingler
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billion or more in their U.S. plants over about the last year and a half. Fedor said he works with most of the big companies, which is why serving steel plants is still about 70% of Morgan’s business and why he’s investing in 30,000 square feet of new space that will replace the company's original headquarters, built in 1901. The old headquarters will be torn down and made into green space. Two new buildings will be about 15,000 square feet each, one for manufacturing and the other for offices, Fedor said. The $5 million investment also includes a new CNC lathe and robotic welding equipment, along with the actual construction and engineering of the new buildings, Fedor said. For things like that, Morgan often turns to local suppliers, many of whom also sell it equipment or components for its steel-mill equipment. He counts Horsburgh & Scott, a Cleveland maker of custom large gears, as well as Lincoln Electric and others, among his local suppliers. Fedor said he looks close to home for suppliers and subcontractors when he can, estimating he spends about $15 million a year with other businesses in Stark County and more than $30 million in Northeast Ohio. Having been in the steel business a long time, Fedor is no stranger to its cyclical nature, nor under any illu-
sions that it won’t continue to face boom and bust periods. Already, there are reports of a slowdown, but he said he’s preparing for that. In addition to expanding its footprint now, he said Morgan has been expanding its capabilities and product lines in recent years, adopting new technologies to reduce costs and speed up design work with automation. “It used to take us up to 5,000 man hours to design a machine, and we’ve got that down to three or four weeks now,” Fedor said. As for new products, Fedor said he’s applied the same technologies that go into making complex material-handling machines into kinetic structures, such as retractable roofs for stadiums and other public spaces. “We’re using the resources to fund markets we didn’t used to play in,” he said. “When the economy dips down again, I’ll have modern technology to do new things.” His aim, he added, is to have a countercyclical strategy. Mills slow down when steel prices are low, which is exactly when it’s cheapest to build steel retractable roofs and that business picks up. Morgan has already done some noteworthy work with kinetic structures, including supplying mechanisms that open the roof at Arthur Ashe Stadium in Queens, N.Y. For the moment, though, Morgan is busy with its own expansion. It’s ramped up employment at the company to 135 people and added 25 of those this year, Fedor said. He’s still looking for about 25 more workers. “It’s all facets: engineers, manufacturing workers and assembly workers — the whole gamut,” he said. Most of his workers are from the area, he noted. His customers are international, but at heart Morgan is still a local business. “About 80% of my guys farm on the weekends,” Fedor said. Morgan broke ground on its new buildings Sept. 18, and Fedor said they should both be open sometime in spring 2020.
sure where exactly they’ll be going. All I know is they have a proud history. And they have, in Tom Strauss, a real visionary in their leadership ranks there, and so we’ll see where that goes.” Strauss said the system is exploring “a whole host of components of transforming St. Vincent from where it is today.” He stressed the importance of the hospital’s work in behavioral and addiction medicine, as well as specialty surgery in orthopedics and bariatrics. Continuing and new partnerships will be key, he added. “It’s such an interesting market, because it’s the Central neighborhood, which is a very poor neighborhood, yet it’s right on the edge of the city, which is evolving,” Strauss said. “We’re exploring a whole host of outpatient services that would be enhanced.” As for enhancements at Mercy, the potential partnership could mean expanding high-quality services, expanding and improving technology, providing additional support and investment in addressing the community’s unmet needs, building physician synergies and increasing the ease of access to highly specialized services for patients in Stark County,
if and when needed. The Clinic hasn’t made any specific financial commitments at this point but will work to understand what the needs are through the due diligence “and develop a multiyear capital plan that best serves the patients in Stark and Canton,” Sabanegh said. Through sponsorship by the Sisters of Charity of St. Augustine, Mercy will maintain its Catholic identity, which Strauss said was one of the most important criteria in seeking a partner. “We felt very strongly that preserving the mission of the Catholic organization — the identity, the ethical and religious directives, the faith obligations, the charity care — was a requirement,” he said. Cleveland Clinic has experience integrating a religious hospital into its network. In 1995, Marymount Hospital, a Catholic hospital, became the first community hospital to become a member of the Clinic system. “We’re very proud of our history of having a Catholic hospital already in our system at Marymount in Northeast Ohio,” Sabanegh said. “We’re very excited to continue that tradition and legacy.”
dshingler@crain.com @DanShingler
Alliance’s Morgan Engineering is riding a recent wave of major capital investment at U.S. steel plants and, as a result, is expanding with its own new plant and headquarters on its current property in the city, owner Mark Fedor said. “It’s going like gangbusters. We have five new systems on order right now,” said Fedor, referring to the steel-coil handling systems, one of the newest products Morgan sells to mills and steel service centers. But that’s only one of the ways the stuff Morgan makes helps steelmakers move materials and product through their factories. And with the industry still in the midst of a major expansion that cranked up in 2018, Fedor said his entire plant’s been pretty busy. After all, he noted, just about everything that happens inside of a steel mill involves material handling, and he’s got a machine for just about every aspect of it. “We make machines that take raw scrap and put it in the bucket, machines that take the bucket to the furnace … and then machines that pick the coils up off the end. As I say, we’re scoops to nuts,” Fedor quipped. Fedor, who became CEO of Morgan in 2005 and bought the company in 2010, said he’s benefiting from policies such as tariffs and tax cuts that have spurred domestic steelmakers to invest in their plants. That’s been happening on a pretty broad scale among the national players, he added. It’s also evident from reports late last year that U.S. Steel and ArcelorMittal were investing $5.6 billion in their U.S. operations as part of their latest union agreement, followed by another announcement by U.S. Steel that it will invest $1.2 billion in its mills in Pennsylvania. Other companies, such as Nucor Corp., Steel Dynamics and JSW Steel USA, have announced investments of $1
LIST YOUR RETAIL SPACE HERE!
REAL ESTATE
REAL ESTATE AUCTION - THURS OCTOBER 17 @ 1 PM Attention Real Estate Developers! - Premier 4+ AC Land Site 3,500 sq ft Office Building - Montrose Bath Twp - OH
127-141 N. Cleveland Massilion Rd Akron, Ohio •Originally Listed @ 1.6 mil. •Sugg. Opening Bid ONLY 250k! •3,500+ SF Office Bldg w/Parking •10,000+ Cars/Day Traffic Count •Zoned B4 & R3- 265’ frontage •Ideal Office/Apt/Asst Living/Hotel •Next to Rest/Retail/Shop/Hwy On-Site Inspection Dates: 9/19 & 26 - 10/3 &10 (12-2 pm)
Call Jared Dutton @ 330-879-5000 or Email jdutton3@kw.com Visit www.montroselandauction.com for photos & complete terms.
Terms: $22,500 down day of sale in form of certified cash or certified check. Balance due @ closing on or before Nov. 25 2019. Buyers prem of 10% will be added to the high bid to establish the total purchase price. AUCTIONEER: Jared Dutton, AARE - Dutton Real Estate Auctions BROKER: Keller Williams-Legacy Group Realty
REAL ESTATE
REAL ESTATE AUCTION - THURS OCTOBER 24 @ 1 PM Premier 35+ AC Land Site - N Chillicothe Rd (306), Aurora, OH Attention Real Estate Developers -Trustee Directs Immediate Sale
Located just North of 82 & 306 Across from Barrington On-Site Inspect Dates: Sept 25, Oct 2, 9, 16 (12-2 pm ) •55+ Yr Family Ownership •35 Ac. Site – Selling in Entirety •Over 287’ Frontage •Zoned R-3 Residential •Wooded and Treed Site •All Utilities Available @ Street
MERCY
Call Jared Dutton @ 330-879-5000 or Email jdutton3@kw.com
CONTINUED FROM PAGE 3
Visit www.auroralandauction.com for Bidders Packet, Maps & Complete Terms.
Terms: $22,500 down day of sale in form of certified cash or certified check. Balance due @ closing on or before Nov. 30 2019. Buyers prem of 10% will be added to the high bid to establish the total purchase price. AUCTIONEER: Jared Dutton, AARE - Dutton Real Estate Auctions BROKER: Keller Williams-Legacy Group Realty
Crain’s Cleveland Business’ classifieds will help you fill that space. Contact Suzanne Janik at 313-446-0455 w w w. c r a i n c l e v e l a n d . c o m / c l a s s i f i e d s
P020_CL_20191007.indd 20
Morgan Engineering invests $5M in plant, HQ expansion
“We take our position as Stark County’s leading health care system seriously and are working hard to remain at the forefront of the transformation taking place in health care here and throughout the country,” he continued. In 2016, Sisters of Charity sold its Providence Hospital and Providence Orthopedic Hospital in Columbia, S.C., to LifePoint Health. If Mercy ultimately joins the Clinic, it will leave St. Vincent Charity Medical Center in Cleveland as Sisters of Charity’s sole hospital. Sisters of Charity has said that the Mercy news will have no effect on St. Vincent Charity Medical Center. Campanella said that being a one-hospital system will present challenges, but they wouldn’t be much different from the challenges of operating a two-hospital system. “I think St. Vincent has to evaluate where they’re going future-wise,” he said. “The fixed cost is going to be a challenge, but there’s ways that they could probably handle it. So I’m not
10/1/19 2:05 PM
Mark Fedor
10/4/2019 1:47:18 PM
CRAIN’S CLEVELAND BUSINESS
PEOPLE ON THE MOVE
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Advertising Section
To place your listing, visit www.crainscleveland.com/people-on-the-move or for more information, please call Debora Stein at (917) 226-5470 or email dstein@crain.com. HOSPITALITY & TOURISM
ACCOUNTING
ENGINEERING & CONSULTING
FINANCIAL SERVICES
HOSPITALITY & TOURISM
RSM US LLP
Hull & Associates, Inc.
Equity Trust Company
TravelCenters of America
TravelCenters of America
We are pleased to announce that Matt Garvey has been promoted to Partner. Matt has over 19 years of experience in public accounting providing auditing, accounting and management advisory services to a diverse base of clientele. Matt specializes in the healthcare and not-for-profit sector and is aligned with the audit practice in Ohio.
Jordan Rofkar, PhD has been promoted to Hull’s Ecology & Wetlands Practice Leader. He will manage Hull’s Ecology & Wetlands Focus Area including permitting, threatened and endangered species, coastal wetland development, ecological risk assessments and other services. Visit www.hullinc.com for further information on our six Ohio office locations and additional services.
Frank Flanagan has been named Chief Information Officer at Equity Trust Company. Bringing over 20 years of IT leadership experience from OfficeMax and JOANN Fabric and Craft Stores, Mr. Flanagan will lead the company’s information technology organization into the next phase of product innovation and company growth. His most recent role was Director, Enterprise Systems for Flynn Restaurant Group.
Mark Dansizen was named Senior Vice President, Fuel Supply for TravelCenters of America. He joined TA in 1995 and has held several leadership positions, most recently as Vice President, Fuel Supply. Mark leads a team that negotiates diesel and fuel supply contracts and manages fuel-hauling agreements and inventories. He works to ensure TA’s commercial fleet customers receive competitive pricing options at its more than 250 TA, Petro and TA Express locations across the nation and in Canada.
TravelCenters of America has promoted Brett Hecker to Vice President, Fuel Supply. Since joining TA in 2004, Brett has held many positions focusing on diesel, gasoline and renewable fuels. Brett manages TA’s branded gasoline initiative and its biodiesel and renewable diesel programs, striving to give customers the positive experience they expect when traveling. TA’s focus on renewable fuels helps reduce greenhouse gas emissions while reducing the company’s overall fuel costs.
CONSTRUCTION
Rudolph Libbe Group Craig Downs, of Chardon, has joined the Rudolph Libbe Group as electrical group manager and is responsible for leading and growing RLG’s electrical services in northeast Ohio. Previously Craig was senior project manager on the Charter Steel cut-to-length facility, which won the 2018 Craftsmanship of the Year award in the electrical work category for the Construction Employers Association. He has over 20 years of experience in the construction industry. CONSTRUCTION
The Chas. E. Phipps Company The Chas. E. Phipps Company is pleased to announce that on October 1, 2019 VP of Operations Benjamin R. Brown succeeds David S. Thomas as President of the Cleveland based construction products and equipment supplier. Brown will be the fourth generation family member to lead the company which began in 1921. Thomas remains as chief executive officer.
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P021_CL_20191007.indd 21
HOSPITALITY & TOURISM HOSPITALITY & TOURISM ENGINEERING & CONSULTING
TravelCenters of America K2M Design, Inc. Mark Wutz, PE, CEM, LEED AP, CPMP, CDSM, CPM, has joined K2M Design as the Director of Engineering, strengthening the teams engineering capacity and reach. Mark brings over 26 years’ experience in the Assessment, Design and Commissioning of Mechanical Systems, both as a Consulting Engineer and as a Contractor. Mark’s vast experience brings expertise to our project teams in the governmental, institutional, commercial, healthcare, and educational markets, for both small and large project sizes.
FINANCIAL SERVICES
Equity Trust Company Matt Gardner has been named Chief Financial Officer of Equity Trust Company. Prior to joining Equity Trust, he spent the last 23 years of his career at Key Bank, with roles of increasing responsibility in Finance, Corporate Treasury, and Investor Relations. His most recent role was Executive Vice President and Chief Financial Officer of Key’s Corporate Bank, a full-service corporate and investment bank focused principally on serving the needs of middle market clients in seven industry sectors.
TravelCenters of America is pleased to name Ross Altenburger, CPA, as Vice President, Controller. Ross will be responsible for establishing and enforcing financial policies, controls and reporting systems. He comes to TA from Shiloh Industries, Inc., serving as Associate Director, Corporate Accounting and EY where he was a Senior Manager in the Assurance practice. Ross proudly served our country for 11.5 years in the Ohio ANG, United States Air Force, leaving at the rank of Master Sergeant.
TGC Engineering TGC Engineering, a leading civil engineering/surveying firm, announces Jeremy Sack, PS, as a Partner with founder Travis G. Crane, PE. Sack is tasked with overseeing the success of its PM’s, expanding the firm’s outreach, enhancing employee development and driving growth. Sack’s 18-year career spans the public & private sectors with experience in infrastructure, municipal surveying, commercial & residential developments and expertise with utilities. Sack, a registered Professional Surveyor, earned a BS in surveying & mapping from the University of Akron.
HEALTH CARE
NOMS Healthcare NOMS Healthcare promotes Claudia Blackham to vice president of operations. With 25 years’ healthcare experience, her primary focus during her tenure at NOMS has been managing the merger or acquisition of many private practices into NOMS multi-specialty group. In her new role she will be part of the leadership team facilitating the expansion of NOMS Healthcare across Northern Ohio and beyond.
TravelCenters of America has named Tina Shaerban Arundel as Manager, Corporate Communications. Tina brings a strong background in media relations and strategic communications to TA, where she will work on the company’s communications strategies and PR efforts locally and nationally, as the company continues to expand its footprint across the country. She comes to TA from The MetroHealth System, where she served as Manager, Public and Media Relations. NONPROFITS
HOSPITALITY & TOURISM
The McGregor Foundation TravelCenters of America
ENGINEERING & CONSULTING
TravelCenters of America
TravelCenters of America is pleased to announce that Scott Roubic has joined the company as Vice President, Finance and Treasury. Scott brings to TA a strong background in finance, treasury, audit, asset protection, real estate and accounting. He is responsible for the company’s finance functions, including financial planning and analysis, treasury, accounts receivable, billing and credit. Scott joins TA from Jo-Ann Stores, where he was Vice President, Audit, Asset Protection & Real Estate.
The McGregor Foundation is proud to announce Ann M. Conn, currently McGregor’s Chief Operating Officer, as the organization’s next President & Chief Executive Officer, effective January 1, 2020. Ms. Conn has represented the organization for nearly fourteen years, first as Chief Financial Officer and then as COO. She has devoted her entire career to the senior services industry. She has shared in leading McGregor’s sustained growth since her arrival to include the acquisition and turnaround of Concordia Care [now known as “McGregor PACE”], the acquisition of the building that became McGregor at Overlook, the launching of McGregor Hospice and the construction of a new 90-unit McGregor assisted living facility opening later this year.
10/2/19 11:57 AM
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CRAIN’S CLEVELAND BUSINESS
Mark Vogel Senior managing director, Berkadia Capital Mortgage Since launching his own mortgage banking firm less than seven years ago, then called RiverCore Capital, lending expert Mark Vogel has played a part in arranging loans for many of the deals that have re-energized downtown Cleveland. It’s a list that includes the EY Tower and the Aloft hotel in Flats East Bank; The 9, which turned the former Ameritrust headquarters into Metropolitan, part of the Marriott AC Collection and apartments; and the sale of Key Center on Public Square. In 2016, Vogel sold the company to Berkadia, a joint venture of Berkshire Hathaway and Jefferies Financial Group. He now has offices at Key Tower, a fitting touch for someone so focused on downtown. Being successful at what Vogel does requires not only knowing lending and lenders but cultivating relationships with an array of area developers and property owners. He enjoys having his office on Public Square and loves following sports. Vogel lunches so often at REBoL on the square that the kitchen staff have committed his order to memory. — Stan Bullard
The Vogel file Where did you grow up? Beachwood
Kids? “I have two daughters, 13 and 15. We live in Shaker Heights.”
Guilty pleasure: “Sometimes I like to put down the phone for the day and go fly fishing.”
Ever live downtown? “From 1993 to 1999, I lived at The Hat Factory. I didn’t want to drive to work downtown.”
Lunch spot REBoL 101 W. Superior Ave., Cleveland 216-505-5898
The meal One had chimi chicken with rice and an order of pita and hummus. The other had topo chico with bone broth.
The vibe The sharply designed, cozy spot offers cutting-edge cuisine. It’s hopping at lunchtime. Being able to have a business lunch on Cleveland’s Public Square is still a new treat.
The bill $39.41 with tip
How did you become a mortgage banker? I started working for Merrill Lynch while I was a senior in college. I spent seven years with them. I wanted to do something more deal-focused. I wanted to be a part of a transaction from beginning to end. A client referred me into the commercial real estate finance business. I loved being part of the real estate process. You have to learn the values of real estate or a development and negotiate with the banks for loans. The negotiating is pure fun. My parents always said that as a kid I could negotiate anything. And I like to win. When I understand a deal, I can raise a couple million dollars with a few phone calls. Did you have a meaningful turning point along the way? At Ohio State University, I studied history and economics. I wanted to become a lawyer. However, I had a political science professor who told me that would be a mistake. He said I was a natural businessperson. Why did you go into business for yourself and then sell to Berkshire Hathaway’s Berkadia finance unit? I felt that downtown Cleveland had so much potential it was going to explode with real estate activity. I wanted to be a part of that and started the company so I could focus on financing development in downtown Cleveland. There are five of us now, including myself. The last five years, we have financed over $3 billion of transactions in Northeast Ohio. My background in history allows me to work a little differently. Going on my own allowed me to do that. When we joined Berkadia, we
decided it would be nice to be part of a national platform. They let me continue to run the office my way. People ask if I’ve met Warren Buffett. I had a group dinner with him. It was fantastic to listen to someone with one of the greatest minds in finance. Where is Cleveland at this point in the real estate cycle? It’s really just getting started. Hopefully, more people will come downtown. I hope we see more people selling their houses and moving downtown. Every time I think we are at the top of the cycle, interest rates go down. I don’t think more people living in apartments will go away. I don’t think the retail reconciliation is over. In the industrial real estate market, you have an asset class that’s subject to manufacturing. The real wild card here is the office component. We’ve been lucky we’ve had apartments absorbing a lot of the obsolete office space. Office vacancy would have been a lot higher. Overall, we’ve had more development in the last five years than in the last 25 years. In this period, capital has never felt more comfortable in Cleveland. We still have a growth spurt ahead of us. I always felt Cleveland would explode with real estate development and become a more vibrant city. What does Cleveland have to work on to keep improving? The city needs to work on connectivity. We have two large employment centers, and they’re not tied together. The HealthLine did wonders for University Circle. We also need more housing close to employment centers as people now
want to live near where they work. We need to get more New York-style, quality jobs here. That will offer people more vertical opportunity as opposed to just offering horizontal mobility at a company. People don’t want to move here and stay at the same company for 30 years. They want the option of having multiple opportunities available. What’s it like to get lenders to buy into these capital stacks for major Cleveland real estate projects that have funds from multiple sources? In other markets, where rents are more in line with construction costs, financing is simpler. A single lender will take most of a deal. Because of the gap in construction costs to rents, we have multiple levels of financing that other, larger cities typically don’t have. A lot of other cities also don’t use historic tax credits or other public funding sources. Believe it or not, that sort of structured finance takes a lot of explaining to potential lenders. How much of the activity that we’re seeing in real estate development is due to the low interest rate environment? A lot. Hopefully the benefit of low interest rates will pass through to tenants. What advice would you give someone who is just starting a career in business? Whatever you do, work as hard as you can. Don’t take any opportunity for granted: Work at all of them. In the end, you get paid what you are worth.
700 W. St. Clair Ave., Suite 310 Cleveland, OH 44113-1230 Phone: (216) 522-1383 www.crainscleveland.com Twitter: @CrainsCleveland Publisher/editor Elizabeth McIntyre Group publisher Mary Kramer Managing editor Scott Suttell Sections editor Michael von Glahn Creative director David Kordalski Web editor Damon Sims Associate editor/Akron Sue Walton Assistant editor Kevin Kleps Senior reporter Stan Bullard, Real estate/construction Reporters Jay Miller, Government Rachel McCafferty, Manufacturing/ energy/education Jeremy Nobile, Finance Kim Palmer, Government Dan Shingler, Energy/steel/auto/Akron Lydia Coutré, Health care/nonprofits Senior data editor Chuck Soder Cartoonist Rich Williams Local sales manager Megan Lemke Events manager Erin Bechler Integrated marketing manager Michelle Sustar Managing editor custom/special projects Amy Ann Stoessel Associate publisher/Director of advertising sales Lisa Rudy Senior account executives John Petty, Scott Carlson Account executives Laura Kulber Mintz, Loren Breen People on the Move manager Debora Stein Pre-press and digital production Craig L. Mackey Office coordinator Karen Friedman Media services manager Nicole Spell Billing YahNica Crawford Credit Thomas Hanovich 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 CFO Robert Recchia G.D. Crain Jr., Founder (1885-1973) Mrs. G.D. Crain Jr., Chairman (1911-1996) Reprints: Laura Picariello, 732-723-0569 or lpicariello@crain.com Customer service and subscriptions: 877-824-9373 Volume 40, Number 40 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for the last week of December, at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2019 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 877824-9373 (in the U.S. and Canada) or (313) 446-0450 (all other locations), or fax 313-446-6777.
THE WEEK By the numbers
campus. Part of Phase 2 of Summa’s facility plan, the $60 million investment will create a space for both inpatient and outpatient behavioral health, allowing for a partial hospitalization program and enhanced integration with outpatient services including psychiatry, addiction medicine and traumatic stress. The new facility will be on the site of the School of Nursing building, which was vacated a few years ago and is being demolished.
The Chapter 11 bankruptcy case of Akron’s FirstEnergy Solutions (FES) may have gotten more interesting. In an Oct. 2 filing, BDO USA said it resigned as FES’ accounting firm. Robert Littman, managing partner for BDO’s office in Akron, declined to comment on the nature of the disagreement with FES. FES said the disagreement was over a matter related to the 2007 sale-leaseback at the now-closed Bruce Mansfield Unit 1. The company reiterated that it expects to emerge from bankruptcy by the end of 2019.
Urge to merge?
On the grow Summa Health plans to construct a 60-bed inpatient and outpatient behavioral health facility on its Akron
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Cleveland-Cliffs Inc. has completed a 457-foot furnace tower for its $700 million plant in Toledo. (Cleveland-Cliffs)
Reuters reported that struggling Six Flags Entertainment Corp. approached Sandusky-based Cedar Fair with an offer to merge the big amusement park operators. The offer “shows how Six Flags, already the world’s largest regional
theme park operator, wants to expand its footprint so it can increase ticketing pricing power, even as CEO James Reid-Anderson is preparing to retire by the end of February,” according to Reuters. The news service reported that Cedar Fair “is considering Six Flags’ cash-and-stock offer,” the details of which “could not be learned.”
Towering achievement Iron ore mining company Cleveland-Cliffs Inc. completed a major step on its path to opening a $700 million hot briquetted iron operation in Toledo. Cliffs finished a 457-foot furnace reactor tower for the project. The tower was completed in 296 days. Cliffs CEO Lourenco Goncalves said the HBI project is “ahead of schedule,” and commercial production there should start in the first half of 2020.
10/4/2019 10:51:45 AM
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