Crain's Cleveland Business

FOCUS | SMALL BUSINESS: COVID-19’s one-two punch to independent retailers. PAGE 10

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RTA’s HealthLine opening and impact PAGE 19

Davide Cotagno, owner of Executive Tailors, is steering his business through a pandemic pivot.

CRAINSCLEVELAND.COM I NOVEMBER 30, 2020

THE BOR WAR Lawsuits cast a cloud over board of revision tax-foreclosure process that targets vacant and abandoned properties New tax foreclosure filings in Cuyahoga County, 2009-2020

Ohio counties can pursue tax foreclosures through the courts or, in the case of vacant and abandoned properties, follow a more streamlined process through Elliott Feltner’s former buildings are board now home to a usedIn carCuyahoga dealership.County, The Cuyahoga Landover Bankthat tooksecond possession of the property after tax foreclosure and ultimately transferred the real estate to a neighboring automotive business. the local of revision. litigation approach first slowed, then stalled, the pipeline of so-called administrative BY MICHELLE JARBOE | A legal battle that began on Cleveland’s East Side, with foreclosures in recent years.

New tax foreclosure filings in Cuyahoga County, 2009-2020

SOURCE: CUYAHOGA COUNTY PROSECUTOR’S OFFICE

Cases per year

Ohio counties can pursue tax foreclosures through the courts or, in the case of vacant and abandoned properties, follow a more streamlined process through the local board of revision. In Cuyahoga County, litigation over that second approach first slowed, then stalled, the pipeline of so-called administrative foreclosures in recent years.

3,000

Judicial cases Board of Revision cases

2,676

2,538

2,500 2,000 1,500 1,000

570

500

1 0

’09

’10

’11

’12

’13

’14

’15

’16

’17

’18

’19

MICHELLE JARBOE/CRAIN’S CLEVELAND BUSINESS

REAL ESTATE

two unassuming brick buildings in the South Collinwood neighborhood, has escalated to the threshold of the nation’s highest court — where lawyers hope to challenge Ohio laws meant to help communities fight blight.

Attorneys for Elliott Feltner, a Euclid man who lost those buildings to tax foreclosure in 2017, have asked the U.S. Supreme Court to consider their argument that what happened to their 74-year-old client amounted to an unconstitutional taking. In a petition filed in October, they assert that Feltner deserves to be paid for any equity he had in the real estate when it passed through a special foreclosure process that targets vacant and abandoned properties.

The Supreme Court has set the case for conference, a private discussion, on Dec. 4.

’20

See BOR on Page 16

SOURCE: CUYAHOGA COUNTY PROSECUTOR’S OFFICE

MANUFACTURING

Technology, growth opportunities driving manufacturing M&A Pandemic slowed — but didn’t stop — deals in the industry this year, but activity is picking up in Northeast Ohio

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BY RACHEL ABBEY MCCAFFERTY

Though the pandemic temporarily put a lot of deals on pause, mergers and acquisition activity has picked up in recent months for the manufacturing sector.

In Northeast Ohio, notable deals have been announced or completed by Cleveland-Cliffs Inc., Team Wendy LLC and TransDigm Group Inc. Cleveland-Cliffs intends to

purchase ArcelorMittal USA for about $1.4 billion, after acquiring AK Steel back in March. TransDigm has agreed to buy United Kingdom-based Cobham Aerospace Connectivity for about $965 million. And Team Wendy was bought

by Avon Rubber PLC in the U.K. for $130 million. That’s all just from the last two months.

This year has been “a little bit of a tale of two cities,” said Andrew Wil-

son, partner in M&A services at Deloitte & Touche LLP. The pandemic put many deals on pause, but activity picked up after the “initial shock” of March, April and May passed, he said. But different state-by-state and industry-by-industry COVID-related restrictions meant companies faced different types and degrees of business slowdowns.

See M&A on Page 17

11/25/2020 2:29:24 PM

HEALTH CARE

Hospitals had healthy profit margins before pandemic hit Analysis of Ohio market shows region had a strong 2019, but COVID-19 has taken a huge toll

BY LYDIA COUTRÉ

Before COVID-19 strained hospital finances, health systems across Ohio enjoyed stronger profitability and pursued growth through acquisition and construction in 2019, according to a new report analyzing Ohio’s health care insurance and provider markets.

The Ohio Health Market Review 2020 offers a snapshot of where hospitals in the state stood before the pandemic, as well as a glimpse into how health insurers fared in the first half of 2020. Hospital profitability increased last year in the Cleveland/Akron, Columbus and Cincinnati/Dayton areas, according to the review, which is the 15th report from Allan Baumgarten, a Minnesota-based independent heath care analyst who publishes reports on the markets in Ohio and a few other states.

That starting point — along with relief from the CARES Act and other supports — has helped blunt the impact of the pandemic, Baumgarten said.

“Bottom line, I think some of them might have some losses for the 12-month period, but it’s not been the disaster that it might have looked like a few months ago,” said Baumgarten, who conducts market research for a range of clients.

The combined net income of hospitals in the Cleveland/Akron region last year was $1.94 billion, or 12.7% of

Baumgarten

Palmer

net patient revenues, according to the report, which uses data from annual Medicare costs reports. This is more than triple the year prior for Cleveland and Akron, which Baumgarten attributes in part to a poorer financial performance in 2018. Revenue from non-hospital locations within a system (such as urgent care centers, family health centers or other outpatient settings) are not included in the data.

“Net income of that amount really gave them the ability to sock it away in their reserves as a cushion against these kinds of downturns both in revenues and also the increased expenses that they’ve incurred in responding to COVID,” Baumgarten said.

Hospital profitability in the Columbus area increased by 31% last year, posting a combined net income of almost $1.6 billion. In the Cincinnati/Dayton/Northern Kentucky region, hospitals’ net incomes grew

substantially, almost doubling to $1.3 billion in 2019.

Still, the pandemic has taken a significant toll on hospital finances. Between March 9, when the public health emergency was declared, and May 1, when some postponed elective procedures were allowed to restart, Ohio hospitals suffered a combined hit of $2.38 billion — including lost revenues and unanticipated emergency expenses — and have since continued to lose an estimated $6 million in revenue each day, according to the Ohio Hospital Association. OHA estimates that the financial impact on Ohio hospitals to date is $4.28 billion.

CARES Act funding from the provider relief fund, delayed cuts to Medicaid disproportionate share funding and dollars from the state’s portion of CARES Act funds have helped to cushion that blow, but hospitals are still left with a $1.84 billion funding gap, according to calculations from OHA. That could continue to grow without additional financial relief, especially as COVID-19 cases are rising at an unprecedented clip.

“Even with the CARES Act funding, there are still some hospitals out there that are struggling,” said OHA spokesman John Palmer.

Wage and labor costs have been a leading force in added costs for hospitals as they experience a surge in

COVID-19 patients, requiring overtime and a full capacity staffing response, he said. Plus the costs of personal protective equipment (PPE), medical supplies and equipment also have driven up hospital expenses.

Meanwhile, in the first half of 2020, Ohio’s health insurers saw improved profits alongside a sharp drop in claims, the result of postponed nonessential procedures and consumers delaying care out of fear, Baumgarten said. Five HMOs contracting with the state for Medicaid reported a net income of $334 million in the first half of 2020, compared with a loss of $48 million during the like period in 2019, according to the report.

Some insurers are looking at premium discounts or other ways to hold onto individual customers and in particular, employer groups that may be thinking of dropping their coverage, Baumgarten said. The drop in claims also could mean insurers will have to issue rebates if their spending on claims dipped below a threshold established as a percentage of their premium costs.

In addition to the profitability hospitals saw before the pandemic, the trend of consolidation also generally put many in a good position at the start of 2019 to be able to weather the financial hit they took throughout this year, Baumgarten said. Large health

systems in the region, state and country have for years been acquiring community and independent hospitals, moves that offered economies of scale for purchasing power, negotiating strength with insurers, administrative efficiencies and other benefits that help them save.

“I would say that the consolidation plus the years of generally strong profits have put them in, at the beginning of 2020, I think they were in a very strong position,” he said.

The sustainability of continued financial losses at hospitals is “on the forefront of almost every hospital administrator and leadership, as well as their boards of governance,” Palmer said.

Even beyond the pandemic, hospitals face a lot of uncertainty with the Affordable Care Act case in front of the Supreme Court, a new administration in the White House and a new state budget. All of the dynamics that could be changing going forward are “very volatile,” Palmer said.

“It is going to take some time to get reoriented with everything and establish where hospitals need to be going,” he said, “because the impact of this pandemic is going to be felt for a long time.”

Lydia Coutré: lcoutre@crain.com, (216) 771-5479, @LydiaCoutre

Lake Erie is Ohio’s Most Precious Resource But the of fshore wind turbine project known as Icebreaker is threatening to alter Lake Erie forever.

Visually Disruptive

Environmentally Damaging

Financially Excessive

A potential 1,500 wind turbine field would take up 75 square miles of space

The lasting impact on f ish and migratory birds may forever change nature’s balance

This project includes excessive construction and long-term costs to consumers

We’re not against harnessing the power of wind energy, we’re just against wind turbines being built in our great lake.

Learn more about Icebreaker and how to help at LakeErieFoundation.org/icebreaker 2 | CRAIN’S CLEVELAND BUSINESS | NOVEMBER 30, 2020

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11/25/2020 12:58:03 PM

REAL ESTATE

Latest Brickhaus project will get a neighborhood feel

Townhouses at corner of Clifton and West boulevards will match single-family homes nearby

BY STAN BULLARD

Best known for a simple, modernist style, real estate developer Andrew Brickman of Warrensville Heights-based Brickhaus Partners plans a traditional residential design for his next project.

Brickman said in an interview that the company’s proposed Bighaus project on the southwest corner of Clifton and West boulevards in Cleveland is designed to contextually match the big, single-family homes nearby, even though the project will consist of five townhouses costing upward of $400,000 apiece.

“We’re not abandoning the modern style,” Brickman said. “We’re also not a one-trick pony.”

However, necessity also shaped the design. Cleveland Councilman Brian Mooney, whose Ward 11 includes the site, said the final design differed dramatically from Brickhaus’ original proposal. It evolved from the more typical townhouse designs cropping up in Cleveland to reflect the look of area houses to fit the neighborhood.

Mooney said neighbors closest to the project disliked the density of the proposed development but warmed up to the final design. He said he supported the project because the site has been empty for

The design of the proposed Cleveland project looks like two big residential-style buildings but actually contains five townhouses. | CONTRIBUTED

decades and Brickhaus’ plan may go where other single-family and duplex plans by other developers failed to proceed.

Although the site had defied several prior developers, it was not cheap.

Through Bighaus Development LLC, Brickhaus paid $200,000 on Oct. 7 for the half-acre site, according to Cuyahoga County land records. That’s the same price parcels

of similar size command in Westlake. In the final plan, two townhouses will face Clifton, two will face West Boulevard and one will face an interior courtyard. The structures will be two or three stories high and consist of more than 1,800 square feet of living space.

For his part, Brickman said that kind of collaboration with neighbors and the city cleared the way for the plan to get unanimous approval from

city planners. He said Brickhaus has used more traditional designs in the past, depending on the location, including its Derbyshire project in Cleveland Heights and a planned project in Chagrin Falls with five houses and a duplex costing upward of $700,000.

The Bighaus name might be offensive to some — recalling the “Big House,” or plantation house of a slave owner in the Antebellum South — but Brickman said the company went with it because it plays on its Brickhaus name and the Chagrin Falls project is called Riverhaus.

“It also fits the design of the project,” Brickman said. “It looks like a big house. Political correctness is getting overbearing in this country.”

Brickhaus recently dropped plans for a residential project in Richmond, Va. Through an affiliate, Brickhaus sold for $4 million a 2-acre site in southern Richmond it bought for $2 million in 2019.

“I got an unsolicited offer,” Brickman said of the U-turn. “You can’t lose money if you make a profit, I’ve been told.”

The funds will come in handy as Brickhaus is pursuing other out-oftown projects, one in south Columbus and another in St. Helena, Calif.

The Bighaus site caught Brickman’s attention because he lives

GREAT PLACE TO WORK?

BRAG ABOUT IT.

nearby at one of his other developments, and he saw it daily.

“It’s a beautiful street with terrific setbacks,” he said of West Boulevard.

Brickman acknowledged part of his motivation for pursuing Bighaus is that there are prospective buyers left over from other projects nearby on Lake Avenue and at West 117th Street.

One prospective buyer is also looking at Bighaus to relocate from Clifton Pointe, a Brickman townhouse project in western Lakewood.

Debbie Berry, vice president of community development at University Circle Inc., said she and her husband, Patrick, have been reviewing designs for a Bighaus unit with Brickman and Dimit Architects.

“We want to move back to the city and support it and continue to own our home,” Berry said. “It’s a central location, close to Edgewater Beach, and we know the area well. My husband rented a third-floor apartment in a house across West Boulevard before we were married.”

Brickman said he also took on the project because he viewed the tiny site as both a challenge and opportunity.

“It’s like a smile with a big tooth missing,” he said.

Stan Bullard: sbullard@crain.com, (216) 771-5228, @CrainRltywriter

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EDUCATION

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International college students in Ohio contributed an estimated $1.2 billion to the state’s economy and supported more than 12,600 jobs in 2019.

But their enrollments are declining. The drop may threaten a lucrative income stream for institutions in Ohio and beyond during a time when budgets are already stretched thin due to the coronavirus pandemic. International students tend to pay the full sticker price for tuition, along with room and board.

Kent State University and Case Western Reserve University are two local institutions reporting double-digit percentage drops in total international enrollment this fall, mirroring a national trend in which international enrollment nationwide dropped 16%, according to a recent survey of more than 700 colleges and universities done by the Institute of International Education.

The number of new students fell 43%.

“Our international student population is a major source of revenue for the university,” said Marcello Fantoni, the associate provost at Kent State University’s Office of Global Education.

This fall, Kent State saw about a 16% drop in enrollment compared to the same time last year, bringing its total amount of international undergraduate and graduate students to 1,309. One of the contributing factors was the pandemic and its impact, Fantoni said.

“The number of applications that came in and the number of visa letters that we issued were still very high,” he said. “But unfortunately, with COVID, most of the consulates around the world were closed. So the students, even if they would have liked to come, they are not able to come.”

Fantoni pointed out that other roadblocks contributed to the drop, too. He said the United States is losing a share of its market to other countries as international students chose to enroll instead in places like Canada, Australia and New Zealand.

Jill Allen Murray, deputy executive director of public policy at NAFSA: Association of International Educators, echoed Fantoni’s point in a separate interview.

“We’ve lost market share of international students and scholars,” she said. “It’s down 7% since 2001, and that’s at the same time while other countries are actually proactively establishing national policies and even marketing strategies in order to attract these talented individuals.”

President Donald Trump and his administration overhauled the country’s immigration policies over

“WE’VE LOST MARKET SHARE OF INTERNATIONAL STUDENTS AND SCHOLARS. IT’S DOWN 7% SINCE 2001, AND THAT’S AT THE SAME TIME WHILE OTHER COUNTRIES ARE ACTUALLY PROACTIVELY ESTABLISHING NATIONAL POLICIES AND EVEN MARKETING STRATEGIES IN ORDER TO ATTRACT THESE TALENTED INDIVIDUALS.” — Jill Allen Murray, deputy executive director of public policy at NAFSA: Association of International Educators

the past four years. A 2019 USA Today analysis found that the president frequently used words like “invasion” and “predator” while discussing immigration at his campaign rallies.

“The lack of predictability in the U.S. immigration system can damage our ability to attract and retain the most talented people,” Allen Murray said.

At Cleveland’s Case Western Reserve University, international graduate enrollment saw a 17% decline, bringing that population enrollment down to 1,235 students this semes-

ter. Its undergrad population saw a slight uptick, rising from 746 students in 2019 to 751 in 2020.

Like the estimated 20% of international students who are enrolled in U.S. institutions but are taking classes remotely abroad, some of CWRU’s global population is physically far away from University Circle this fall. The university formed a partnership with Xi’an Jiaotong University in China, where CWRU international students could live on campus and take their remote courses together. Nearly 200 students participated.

“It provides an opportunity for them to learn, to socialize, to engage in extracurricular activities that they wouldn’t be able to do if they were living at home with their families,” said Rick Bischoff, vice president for enrollment management at CWRU. Bischoff emphasizes that international students bring a range of benefits to a campus and its community well beyond revenue. He said the university invests “very significantly” in students from around the world. He said there’s already an uptick of applications for fall 2021.

“We’ve continued to work very hard to make sure that we’re getting Case Western Reserve in front of students, in front of parents,” he said.

“We have more than a decade of doing very strong work around the world, building relationships so that schools, counselors, families, they know us.”

Building those relationships looks different post-pandemic.

Kent State’s Fantoni, who had previously spent about 120 days a year traveling for the university, calls it “armchair recruitment” since high school visits or fairs have all moved online. Even when travel restrictions ease, he thinks some digital offerings will remain.

“I will still travel. The staff will still travel,” he said. “But I don’t think it will be necessary to travel as much as we used to, because we have learned to do otherwise.”

Amy Morona: amy.morona@crain. com, (216) 771-5229, @AmyMorona

4 | CRAIN’S CLEVELAND BUSINESS | NOVEMBER 30, 2020

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FINANCE

TurnCap records first close on its debut investment fund

Principals see opportunity in pockets of commercial real estate

BY JEREMY NOBILE

close deals as quickly as appropriate, possibly within a week or less — hence the “turn” part of the TurnIn retrospect, launching a real esCap name. tate investment company in the beThe firm launched in partnership ginning of March — days before the with Cleveland-based mortgage spread of COVID-19 spurred the banking outfit Bellwether Enterfirst lockdowns — doesn’t feel like prise. Its management team inideal timing for Beachwood’s Turncludes co-founders Pinney, BellCap. wether president Ned Huffman and With work from home becoming a Doyle Huffman Jim Doyle, a Bellwether principal. common standard in today’s enviAt TurnCap’s disposal is Bellwethronment as the pandemic lingers, The companies have different apthe broader commercial real estate proaches for their respective busi- er’s national origination platform and expertise managing a $32 bilmarket is getting hammered as nesses, though.

In November, TurnCap marked lion portfolio. Huffman said Bellscores of companies revisit their spatial needs and back rent piles up. the first close on its inaugural fund wether originates $11 billion in perLarge office spaces and retail cen- at $25 million, which was collected manent loans annually.

He added that while the commerters are facing some trouble amid from management and four total today’s focus on remote work and investors. TurnCap has been target- cial real estate sector has become a online shopping. In the law firm ing $50 million for its first fund, bit choppier in today’s economy, the world, for example, opulent corner which includes a maximum offer- TurnCap philosophy has not materioffices may be falling out of style as ing of $100 million, according to ally changed.

“We have seen rent collection companies look to trim costs in an public filings.

The expectation is TurnCap will pressure with retail and other comuncertain economy.

Yet TurnCap co-managing part- raise the remainder of funds to hit mercial real estate. However, our ner Jon Pinney, pointing to pockets its target size in the coming days. So first fund is focused primarily on the of commercial real estate still hold- far, the company has committed multifamily market, which continmore than $20 million in capital to ues to perform well,” Huffman said. ing up well, isn’t overly concerned.

“Certain segments of the com- five projects that are anticipated to “Our first fund will provide senior bridge debt solutions with a focus mercial real estate markets have and close before year-end.

Pinney, managing partner for on multifamily properties where we will experience disruption due to are confident a the pandemic, ermanent but several sec“CERTAIN SEGMENTS OF THE COMMERCIAL ploan takeout tors continue to will be availoutperform, REAL ESTATE MARKETS HAVE AND WILL able after 24 to such as industriEXPERIENCE DISRUPTION DUE TO THE 36 months. al, storage and Th is allows us m u l t i f a m i l y ,” PANDEMIC, BUT SEVERAL SECTORS to underwrite Pinney said. “All CONTINUE TO OUTPERFORM, SUCH AS each transacmarkets are cytion using the clical, and TurnINDUSTRIAL, STORAGE AND MULTIFAMILY.” permanent Cap’s diversified loan takeout fund strategy al- — Jon Pinney, TurnCap co-managing partner outlets Belllows it to target performing segments within the Kohrman Jackson & Krantz, has ex- wether provides through its extenbroader commercial real estate mar- plained that TurnCap is targeting a sive agency and life company correket and also find value-add oppor- variety of debt and equity invest- spondent network.” ments but with a focus on less conDespite the turbulent economy, tunities within all segments.”

One of the larger commercial real ventional deals such as bridge and the pandemic has created capital estate segments still performing rel- mezzanine loans, preferred equity markets disruption that has opened atively well is multifamily housing, investments, note purchases, debt up other opportunities for TurnCap, something that’s been a focus of an- buybacks and acquisitions out of Pinney said. other Cleveland private equity real foreclosure. Its strategy for standing estate investment fund run by City- out in a crowded real estate invest- Jeremy Nobile: jnobile@crain.com, mark Capital that’s performing well. ment market flush with capital is to (216) 771-5362, @JeremyNobile

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ECONOMIC DEVELOPMENT

Team NEO: Region poised for strong economic development Despite COVID-related disruptions, many companies learned to engage strategic pivots BBY KIM PALMER

Business development organization Team NEO has some standout numbers so far in a difficult year, having assisted with $2.5 billion in new capital investment from 44 economic development projects estimated to generate more than 4,200 jobs and $225.8 million in annual payroll.

And the organization’s CEO, Bill Koehler, is optimistic about the region’s economic landscape for next year and beyond.

“We expected there to be some very significant disruption in the economy, which has happened for a lot of companies,” Koehler said in an interview.

“But what is interesting is that some of that disruption transformed into very significant strategic pivots on the part of a number of companies that found ways to use it to grow.”

In its role as a regional economic development driver, Team NEO works with public and private partners to “accelerate business growth and job creation throughout the 18 counties of Northeast Ohio,” which includes helping companies expand or relocate here.

That work is represented by capital investment, jobs and payroll growth in the region, and, before the final 2020 wrap-up, Koehler said the numbers might see a surge that could ex-

ceed what Team NEO saw in 2019.

He said the organization has 146 projects in the pipeline, which is “larger than normal, and (with) a larger number of jobs associated Koehler with those projects.”

These pipeline projects are not made public until Team NEO announces them or, in many cases, tax credits or loans associated with the projects are announced by the state.

Koehler said some of the pipeline projects include out-of-state companies expanding in or moving to Northeast Ohio.

“Many of these projects demonstrate and validate the importance of manufacturing to our regional economy,” Koehler said.

He said he’s aware there are many businesses and industries in the region that are struggling. Nonetheless, “We have a number of manufacturing companies that have done very well because they are associated with essential businesses or have been successful making PPE, or they have been successful in finding the right way to pivot in a challenging environment,” he said.

Even with challenges from COVID-19, construction moves forward on commercial glass-wall producer Infinium’s new 130,000-square-foot headquarters in Strongsville.

The company expects construction to be completed by mid-summer 2021. | CONTRIBUTED

Some of the region’s businesses discovered new ways to leverage on shoring opportunities, Koehler said, pointing to Akron-based GOJO Industries, which ramped up production of hand sanitizer to meet pandemic demand but needed help acquiring caps and pumps that had been produced overseas.

Team NEO connected GOJO with

resources and using a JobsOhio grant brought that production in-house.

JobsOhio, the state fiscal partner of Team NEO, announced in March that it would invest more than $250 million in new programs “designed to soften the impact of COVID-19 on Ohio’s small businesses and workers.”

“A few of the success stories involve companies that felt they needed to

bring products they were making elsewhere back to the region, to be produced here or find a supplier to fill a gap so that they have ready access to that component,” Koehler said.

Team NEO also announced in June that Carvana, an online used car retailer based in Arizona, had committed to build a $23 million, 200,000-square-foot facility in Lorain County.

The Carvana project is one of three facilitated by Team NEO this year, representing a total of 1 million square feet of new and renovated space, that employed the state’s Ohio Site Inventory program. The site program was launched by JobsOhio this year and offers resources that include grants and low-interest loans for site and building development. (Two other projects using that program are expected to be announced before the end of the year.)

Infinium, a commercial glass-wall producer based in Strongsville, represents another growth story helped

by Team NEO. Working with local government and state partners, Team NEO helped coordinate the infrastructure for the 17-year-old company’s new, 130,000-square-foot office, research and production space that’s slated to be completed in the summer.

See TEAM NEO on Page 16

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6 | CRAIN’S CLEVELAND BUSINESS | November 30, 2020

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AKRON MANUFACTURING

Increased demand prompts ShotStop to think expansion Stow body armor company eyes a move to Akron BBY DAN SHINGLER

Stow’s ShotStop Ballistics has been improving upon its bulletproof armor technology and increasing its sales, especially to a national law enforcement sector that has faced unrest and riots this year.

The company is now on the cusp of attaining profitability and ready to expand, which will likely entail a move to Akron and into a much larger facility, said ShotStop founder and owner Vall Iliev.

“We’re approaching $3 million (in sales) this year and should be in the black by the end of December. That will be a big relief,” Iliev said.

The company employs 20 people, up from 12 four years ago, but not as many as it projected hiring back then. That’s largely because ShotStop found that using outside dealers — most of whom already had connections with various law enforcement agencies — as its sales force proved better than having a large sales force in house, Iliev said.

To date, the company has rented space and machinery from other manufacturers in the area to make its materials, with ShotStop’s own people handling the production, Iliev said.

That’s worked so far, but it won’t be enough for the company to grow the way Iliev wants if demand from law enforcement continues to increase, or if the company wants to handle larger military contracts, as he hopes.

The law enforcement side of the business took off this year as many urban police departments around the country faced riots and sought better, lighter forms of protection, Iliev said.

“As soon as the riots started, we got busy. We’ve been so busy we can’t even turn around,” he said.

To keep up and eventually expand further, Iliev thinks he’ll need more than 100,000 square feet of space, most of it devoted to manufacturing.

That’s far more than the 20,000 square feet the company now has.

He said he has identified three sites in Akron that could work, including some existing manufacturing facilities near Gilchrist Road and another that would require more buildout.

To expand, ShotStop will need more capital and is beginning to look for a private equity investor to provide it, said Iliev and Regina Larkin, the company’s director of business development.

To date, the company has been funded with less than $10 million, mostly raised from friends, family and people involved with law enforcement and familiar with its products, Larkin said. It’s now preparing to approach larger investment firms for the first time, she said.

“We’re looking to do another several-million-dollar deal. We anticipate over the next 18 months our fundraising won’t exceed double digits ($10 million),” Larkin said.

Larkin continued, “We are hoping to sell a minority stake at this time, but that depends on the discussions. … We want them to invest enough to

have some skin in the game.”

Iliev thinks he has what it takes to attract investors — a novel technology that meets a proven demand and a cadre of users who swear by his product, some of whom are investors themselves.

That includes Michael Titus, a lieutenant with the Stow Police Depart-

ment who has 26 years of law enforcement experience. Titus said he got involved with the company when a former Stow police chief asked if he’d help ShotStop test some of its ballistic materials by shooting at them.

See SHOTSTOP on Page 15

ShotStop founder Vall Iliev hopes to move into defense work while continuing to build his business with law enforcement agencies. | SHOTSTOP

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November 30, 2020 | CRAIN’S CLEVELAND BUSINESS | 7

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PERSONAL VIEW

Build diversity, equity with sustainable opportunities

RICH WILLIAMS FOR CRAIN’S CLEVELAND BUSINESS

BBY GLEN SHUMATE

EDITORIAL

Artful T

here are many things we miss during this socially distanced holiday season of 2020. Near the top of the list: a favorite play or concert, performed in an intimate setting and providing a shared experience for audiences looking for something thoughtful and fun.

While a lot of the economy has returned to something approximating a normal state, at least before this latest surge of COVID-19 cases, arts and cultural organizations remain in a tough spot, since their operations usually rely on bringing together large numbers of people in crowded indoor spaces.

Museums that reopened after numbers started looking better have closed again in the recent spike. Theaters, orchestras, dance companies, independent concert venues and more have been unable to restart traditional operations, though many are filling the gap a bit by offering digital programming.

A vaccine might be just around the corner, which would be great news for everyone. But how long might it be before arts organizations can put audiences back in seats in large numbers — or audience members are comfortable doing WE KNOW THAT so? That might still be quite IN ADDITION TO a ways off, and the economic toll for these organizaMAKING LIFE MORE and for the Northeast INTERESTING, THE ARTS tions, Ohio economy, keeps rising.

ARE AN IMPORTANT We know that in addition DRIVER OF ECONOMIC to making life more interesting, the arts are an imACTIVITY. portant driver of economic activity. In normal times, people plan weekends around arts activities. Entertainment and cultural organizations help bring people to town, fill hotels and restaurants and raise Cleveland’s profile.

Cleveland.com recently called attention to a new report, published by Rust Belt Analytica and the Urban Theory and Analytics Program at Cleveland State University, that documents job losses in the pandemic. Among the findings: The arts, entertainment and hospitality sector accounted for

28.6% of year-over-year job losses in Cleveland in 2020, while consumer spending in arts, entertainment and recreation in Cleveland fell 59% between January and September.

Those numbers won’t get better in what’s shaping up as a difficult winter. The pandemic thus threatens the survival of a valuable business sector that happens to give Cleveland a big part of its identity.

There have been important efforts to help.

Cuyahoga County in October directed $4 million in Coronavirus Aid, Relief and Economic Security Act (CARES) money to help cultural nonprofits, individual artists and for-profit concert bars and music clubs. County Executive Armond Budish noted that the arts produce a $9 billion economic impact annually in the county and support about 60,000 jobs at nonprofit and for-profit organizations. Importantly, the county’s action was driven by an alliance of four organizations: Cuyahoga Arts and Culture, a government agency that distributes about $12 million a year in county cigarette tax money to cultural nonprofits; the nonprofit Arts and Cultural Action Committee; Arts Cleveland, a nonprofit education and advocacy organization; and the Northeast Ohio Chapter of the National Independent Venue Association, representing concert bars and music clubs.

In November, the Ohio Arts Council awarded $20 million in CARES Act funds to cultural nonprofits, with nearly $5.8 million going to 69 organizations in Cuyahoga County.

There’s also an early-stage proposal, driven by the four-organization alliance, for state legislation that would enable county voters to replace existing per-unit excise taxes on cigarettes with an 8% tax on the wholesale price of all tobacco products, including vaping devices. It might be a heavy lift to get a Republican Legislature to go along with putting such a measure on the ballot, but it’s clear efforts like this need to be considered if Ohio communities are to preserve their cultural assets.

One final thing: As you think about year-end donations to causes that mean a lot to you, keep arts organizations — and not just the big ones — in mind. We will get past this pandemic. When we get there, it will be better if arts organizations are able to do their thing, even stronger than before.

Executive Editor: Elizabeth McIntyre (emcintyre@crain.com) Managing Editor: Scott Suttell (ssuttell@crain.com) Contact Crain’s: 216-522-1383 Read Crain’s online: crainscleveland.com

It’s often said that small businesses are the foundation of the American economy. What isn’t routinely recognized is the fact that small businesses owned by women and minorities face significant barriers to long-term economic success, namely access to capital and access to contracting opportunities.

White business owners were more likely to get a bank loan in their first year Shumate is of business, use business credit cards in executive vice their first year and have more capital to president of the start a business than Black business Construction owners, according to a report published Employers by the Stanford Institute for Economic Association.

Policy Research in 2016.

Access to capital is a significant barrier to small companies, one that can be addressed with programs that help minimize the risk in lending for banks and other creditors. The Small Business Association Office of Capital Access, for example, offers microloans, surety bonds and other financing tools to small, minority- and femaleowned businesses. However, data show that in 2019, only 3% of 7(a) loans, the SBA’s primary small business loan program, were awarded to Black-owned small businesses.

These disparities persist, including in the federal Paycheck Protection Program recently launched to help business PUBLIC SECTOR owners withstand pandem- DISPARITY STUDIES ic-related challenges.

SHOW THAT MINORITY Public sector disparity studies, like the one published by AND FEMALE Cuyahoga County on Nov. 4, CONTRACTORS RECEIVE show that minority and female DISPROPORTIONATELY contractors receive disproportionately less business from the LESS BUSINESS FROM county than majority-owned THE COUNTY THAN firms. The study found that “all MAJORITY-OWNED minority-owned construction firms have revenue shares be- FIRMS. low their firm representation shares.”

These barriers exist despite the fact there are long-established programs and initiatives to address these gaps. We can and must do more to help minority- and female-owned businesses achieve equity in contracting. The key is to create long-term partnerships between project owners and small minority- and female-owned businesses that provide sustainable opportunities for contracts, income and business growth.

Why is sustainability important? Consistent contracting opportunities over time help small businesses gain experience, establish a qualified workforce, build credit, become more competitive and potentially transform from a subcontractor to a prime contractor.

Two of the more effective tools for supporting equitable and sustainable opportunities are the Small Business Administration’s (SBA) 8(a) program and Job Order Contracting.

The SBA’s Minority Small Business and Capital Ownership Development Program, known as the 8(a) program, facilitates and strengthens relationships between established SBA businesses and small socially- and economically-disadvantaged businesses. The goal of the 8(a) program is to ensure at least 5% of federal contracting goes to disadvantaged businesses. In 2019, the federal government awarded $18.5 billion in contracts to 8(a) companies.

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

See SHUMATE on Page 9

Sound off: Send a Personal View for the opinion page to emcintyre@crain.com. Please include a telephone number for verification purposes.

8 | CRAIN’S CLEVELAND BUSINESS | November 30, 2020

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OPINION

PERSONAL VIEW

Cleveland Innovation Project goes ‘Back to the Future’ with its 2030 plan

330 18

REAL ESTATE PROFESSIONALS

22

YEARS COLLECTIVE EXPERIENCE IN COMMERCIAL REAL ESTATE

5 4 13

CCIM DESIGNEES SIOR DESIGNEES

TEAM PROPERTY PROJECT and the St. Lawrence Seaway; more MANAGEMENT MANAGERS recent plans focused on wind turbines. While innovative water techThe Greater Cleveland Partnership, Team NEO, nology may make a small positive JumpStart, Cleveland Foundation and the Fund For contribution to the area’s economy, Our Economic Future’s collective vision for the demajor innovations are more likely cade, the Cleveland Innovation Project (CIP), regrettato come from regions with scarce, bly falls short as a compelling vision for the future.

IN TRANSACTIONS PROPERTIES UNDER not abundant, water resources.

The strategic economic drivers largely reboot past MANAGEMENT COMPLETED A more forward-looking apinitiatives and are too narrow to meet broad commuproach to selecting target sectors for nity employment needs. New measures to improve the Trutko is an innovation would be to look at the “innovation ecosystem” strive to advance equity but economist and A World of Support | www.naipvc.com will have only a modest impact on entrepreneurship market research whole economy, including service Offices in Medina 330.239.0176 | Cleveland 216.831.3310 | Akron 330.535.2661 and business formation. professional. The industries, and to identify niche industries that are growing andwww.naipvc.com have By slanting the project’s 2030 goals toward unrealis- lifelong potential regional or national martic social objectives rather than the broad economic Cuyahoga kets. Targets should include Clevebenefits of innovation, community leadership has County resident land industries with a decent base of missed an opportunity to rethink economic develop- lives in Rocky IT’S ALL IN THE DELIVERY! ment and apply some lessons from the COVID-19 pan- River and can be companies with varied capabilities where the development organizademic. reached at tions can amplify collective impact The strategic sectors selected by CIP include smart jmtrutko@ through cooperative planning. The manufacturing, health innovation and water technolo- gmail.com. sectors should also offer potential gy. Helping Cleveland manufacturing adapt to new for short-term employment gains technology — to become “smart manufacturers” — was part of the rationale for the Manufacturing Advo- and provide spinoff benefits to the community.

In addition, CIP should analyze the economic and cacy and Growth Network (MAGNET) 30 years ago.

The CIP has fixated on manufacturing industries as an social effects of the pandemic and generational changeconomic driver, but manufacturing and its related es on Cleveland’s competitive advantages. Despite COVID-19’s disruptive imemployment have contractpact on business, it has uned by more than 30% over BY SLANTING THE CLEVELAND Since www.bonniespeed.com doubtedly created opportuthe past 20 years, limiting INNOVATION PROJECT’S 2030 GOALS 1959 nities for innovative growth potential. products and services that Likewise, an effort to en- TOWARD UNREALISTIC SOCIAL can address virus-created courage “health innovaproblems. tion” is not new — the real OBJECTIVES RATHER THAN BROAD As part of its strategy, CIP issue is how to do it sucECONOMIC BENEFITS OF INNOVATION, plans to strengthen the recessfully. The community gion’s “innovation ecosysprovided strong support for CIP MISSED AN OPPORTUNITY TO tem,” but its initiatives will the failed BioEnterprise orhave slight immediate imganization and made a RETHINK ECONOMIC DEVELOPMENT pact on innovation. One inimultimillion-dollar bet on AND APPLY SOME LESSONS FROM tiative, “catalyzing a capital the unsuccessful Global continuum,” simply dresses Center for Health Innova- THE PANDEMIC. up an old problem — the retion. Employment in the health sector has increased dramatically over the past gion’s anemic ability to attract venture capital — withBUSINESS & RESIDENTIAL two decades under the leadership of the Cleveland out hinting at a solution.

To foster greater employment equity, CIP proposes Clinic, University Hospitals, several other hospitals and corporations in the medical field. These success- encouraging schools to strengthen digital/STEM skills ful organizations will likely find profitable innova- and expedite high-quality broadband access to housetions to exploit without the advice of economic devel- holds without it. While good in themselves, these actions will have little immediate impact on innovation opment professionals.

The ill-defined third sector, “water technologies,” and the area’s future. has to do with water processing and controls. Earlier economic development plans touted port expansion See TRUTKO on Page 15

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pared to design-build (73%) or design-bid-build (63%) projects.

Long-term partnerships benefit owners and small From Page 8 companies, particularly minority- and female-owned Locally, both Coleman Spohn and Ozanne Construc- companies that too often face high barriers to business tion participated in the 8(a) programs leading to long- success. Creating sustainable opportunities and imterm success. The first generations of these businesses proving cash flow and payment terms for minority- and female-owned companies is a moral struggled through significant chaland economic imperative. lenges. Now, Coleman Spohn and THE BENEFITS OF JOB We all benefit from a diverse and Ozanne Construction have seen the inclusive construction industry. The benefits of consistent and intention- ORDER CONTRACTING TO al opportunities through programs INSTITUTIONS ARE CLEAR. more opportunities there are for people of color to participate in the conlike 8(a).

Job Order Contracting (JOC) allows a small minori- struction industry, the stronger our economy will be. ty-owned enterprise to bid for a long-term contract that More people of color will have the opportunity to train for covers numerous small construction and maintenance and get good-paying jobs. More local and small minorityprojects, eliminating the need to bid each project. While and female-owned businesses will have the opportunity in use at some state of Ohio agencies, higher education to thrive, hire more people and grow. And more young institutions and within the Cleveland Clinic, it is not yet people can be inspired when they see people who look like them working on the job sites in their communities. standard practice.

Let’s utilize these tools to help make all of this a realiThe benefits of JOC to institutions are clear. According to Gordian, JOC offers administrative cost savings to ty. It is time that we, as trade associations, developers, both the owner and the contractor, and projects are project owners and allies of small business, become inmuch more likely to be completed on time (94%) com- tentional about ensuring the tools are used successfully.

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MEET MAKER TOWN A web app created by a Cleveland artist helps consumers find art-related businesses. PAGE 14

RETAIL

SELLING A NEW VISION

Retailers are working harder, smarter to pivot from traditional strategies as pandemic lingers BBY JUDY STRINGER

Brecksville’s Davide Cotugno Executive Tailors has emerged, over the past couple of decades, as a destination shop for busy professionals seeking custom dress clothes and distinctive business attire.

When the pandemic forced an unprecedented shift in the number of people working from home, however, owner Davide Cotugno said the company immediately began mounting its defense — a focus on casual clothing.

Carefully curated soft-shell jackets, five-pocket jeans and cotton-blend chinos and sweaters are featured at the 1,700-square-foot showroom for the first time, alongside the store’s trademark men’s suits and accessories. Cotugno said his team also heightened its attention to women’s casual attire, adding to a modest but growing ready-towear product line.

“We almost look at it as starting a new company,” he said. “We are starting from scratch.”

COVID has been a one-two-punch for Cotugno’s shop, as it has for most independent retailers. First, there was the physical lockdown, when nonessential businesses were closed for two months in an effort to quell the outbreak. Perhaps more damaging has been the pandemic’s lingering toll as many people have remained leery of shopping in stores.

This year, Cotugno estimates a 34% drop in revenue from 2019, which was a record-breaking sales year at the shop.

“That being said, our team is working three times harder for that business, and we have a very loyal clientele who are rallying for us,” he said.

While the retail sector has made a pretty impressive comeback since the spring shutdown, the recovery is lopsided, according to Mark Matthews, vice president of research, development and industry analysis for the National Retail Federation.

Through September this year, NRF

“WE ALMOST LOOK AT IT AS STARTING A NEW COMPANY. WE ARE STARTING FROM SCRATCH.” ——Davide Cotugno, Davide Cotugno Executive Tailors owner

finds, retail sales are up 5.8% over the first nine months of last year.

“This compares with an average growth per year of 3.8% for the last five years. So despite the pullback during the pandemic, retail is growing at faster pace than usual,” Matthews said, adding that food and beverage (up 12%) and nonstore e-commerce sales (up 20%) are fueling much of that growth.

“Outperformance in these sectors has offset weaker growth in nonessential retail categories that were shut down during the early parts of the pandemic and while recovering, are still running behind last year’s levels.”

‘Service innovations’

To combat changing styles stemming from a socially distanced workforce, Davide Cotugno Executive Tailors in Brecksville is branching out beyond its trademark line of men’s suits with more casual offerings for men and women. | CONTRIBUTED PHOTOS

Amanda Weinstein, assistant professor of economics at the University of Akron, said small momand-pop businesses have suffered the worst, partly because many of them did not have the systems in place to quickly transition to online sales. This is perhaps most exagger-

ated in the restaurant category, she explained, where brands already heavily invested in digital ordering and delivery/takeout models — like Domino’s Pizza — are seeing big gains even as restaurant sales overall remain in a slump.

“Big box and large restaurant retailers in many ways were ready for this because of their online accessibility,” she said, “but it’s been really hard for small businesses to adjust.”

And the recession is exacerbating an uneven pandemic recovery, according to Weinstein, as consumers economize by buying in bulk at stores like Walmart and Costco, which can undercut smaller retailers.

“We hear a lot about how much the internet has been taking away market share from these mom and pops, but I think the big box shops have taken more business away from them than internet retailers at this point,” she said.

Weinstein thinks that what she calls “service innovations” — as opposed to outright product or service pivots — have been the leading COVID response from small businesses owners. Most brick-and-mortar vendors allow customers to order items over the phone or online and pick them up in the store or curbside. Some will even deliver.

The Learned Owl Book Shop, a 50-year-old bookseller in Hudson, began offering free delivery to Hudson, Stow and Twinsburg during the shutdown. Owner Kate Schlademan said she had delivered books pre-COVID to a limited number of nursing homes and elderly customers. As people sheltered in place, however, she expanded the service to all area customers.

“At one point, I was spending about three hours a day making up to 30 deliveries,” she said. “That has slowed down now to probably 15 to 20 deliveries a week. A lot are choosing in-store pickup, and we are also doing curbside pickup.”

Schlademan said Summit County Public Health allowed The Learned Owl to stay open “with a very limited staff” during the shutdown because it provided books to schools. She credits that and free delivery with counterbalancing what could have been catastrophic losses.

To date, the store is about $90,000 short of where it was last year going into the holidays, and Schlademan anticipates 2020 revenue will be down 20% from 2019.

“I guess it could have been a whole lot worse,” she said.

See PANDEMIC on Page 14

10 | CRAIN’S CLEVELAND BUSINESS | November 30, 2020

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Connecting workers to new skills This health and humanitarian crisis has had a disproportionate impact on employment for people of color. Here in Ohio, there is an urgent need for skill building — including re-skilling and up-skilling — to create a clear pathway to jobs that can deliver upward mobility and economic stability.

To drive progress, Bank of America is investing $1 billion over four years to advance racial equality and economic opportunity, building on work we’ve had underway for many years.

We’re helping to connect people to the skills, resources and experience needed to succeed by building partnerships with nonprofits and local government, and through our own recruiting and hiring. This includes partnerships with Community Colleges that serve predominately Black and Hispanic/Latino students, and public Historically Black Colleges and Universities and Hispanic Serving Institutions.

In Ohio, we remain committed to supporting organizations that help people in our community get the skills they need.

Jeneen Marziani Ohio Market President

Strengthening pathways Here in Ohio, we’re partnering with local organizations to create pathways to better jobs, including: Cuyahoga Community College EDWINS Leadership & Restaurant Institute Youth Opportunities Unlimited Center for Employment Opportunities

To learn more, please visit bankofamerica.com/community

Bank of America, N.A. Member FDIC. Equal Credit Opportunity Lender. © 2020 Bank of America Corporation. All rights reserved.

FOCUS | RETAIL

Maker Town app links consumers with Northeast Ohio’s creative sector Database contains hundreds of artistic businesses

BY DOUGLAS J. GUTH

Artist Anne Harrill knows she’s fortunate to have kept her business open during a pandemic that shuttered small storefronts nationwide.

Océanne — which deals in vintage-inspired jewelry, apparel and accessories — has been buoyed by a combination of online sales, a $23,000 Paycheck Protection Program loan and a dedicated shop-local movement.

Further support arrived in early November with the mobile launch of Maker Town, a web application created by Cleveland artist Susie Frazier to help consumers find Northeast Ohio’s art-related businesses, boutiques and galleries.

Harrill is one of 498 entrepreneurial artists on the budding Maker Town network. Though the mobile app directs users to artist studios, commercial workshops and other maker-related businesses, it is not an e-commerce site.

Rather, the app — now available through Google and Apple — aggregates regional data to reveal types of handmade products and where to find them. Acting as a shopping concierge with GPS functionality, Maker Town sorts searches by home décor, furniture, jewelry and additional products. Qualifying businesses are

Acting as a shopping concierge with GPS functionality, Maker Town sorts searches by home décor, furniture, jewelry and additional products. | MAKER TOWN

Artist Anne Harrill feels fortunate to have kept her business, Océanne, open during the pandemic. Her business is one of hundreds featured on the Maker Town app. | THIS LOVELY LIGHT

Maker Town ideally improves upon features found on Etsy, Shopify and similar apps, said founder Frazier. For instance, consumers can shop for makers that offer products at $100 or below. A few clicks navigates users to short company descriptions alongside product images and links to e-commerce sites. Frazier expects the app to boost a transitioning Cleveland maker community impacted by virus-canceled festivals, art walks and flea markets.

“Access to artists is gone with events being shut down, so as a region, where are people getting their touchpoints with local makers?” Frazier said. “We need ways for people to find us without being dependent on physical walk-ins.”

viewable by interactive maps, alphabetical lists or Instagram-style messages.

Océanne began life a decade ago in a spare bedroom of Harrill’s home, growing into a modern jewelry and apparel brand now operating from a 2,000-square-foot Gordon Square storefront. COVID-19 stay-at-home orders closed the business from March to June, with online sales now comprising 80% of overall revenue, a figure Harrill declined to share.

“We also sell wholesale, so things have been steady business-wise,” said Harrill, a native of France.

“We’ve been featured as a minority-owned business as well, which has drawn some new eyes. We are lucky to be in a supportive neighborhood.”

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“People have misperceptions about what artists do. It’s not a persona; it’s a profession,” Schumacher said. “This app is a tool to get eyes on your business that you Frazier o t h e r w i s e wouldn’t. What Susie is doing is important work that’s keeping that innovative spirit alive, and exactly why we do what we do as a nonprofit.”

Navigating through a crisis

Cleveland artist Susie Frazier, who created the Maker Town app, sells home accessories, apparel and high-end art as well as custom products geared toward corporate clients. | CONTRIBUTED PHOTO

‘All boats rise with the tide’ Housed in 78th Street Studios at the Gordon Square Arts District, the Suzie Frazier Showroom sells home accessories, apparel and high-end art as well as custom products geared toward corporate clients. Loss of “Third Friday” art walks at Frazier’s West Side location — not to mention other live events fallen victim to the pandemic — cut her annual revenue by 53% in 2020.

Frazier released Maker Town in deference to COVID shutdowns and a retail environment trending toward digital even pre-pandemic. For the first 10 days of the 2020 U.S. holiday shopping season, buyers spent $21.7 billion online — a 21% jump over last year, according to Adobe Analytics. Not having the luxury of a storefront further motivated Frazier in forming an online directory of area craftspeople.

“I have 20 years in the arts community and maker scene, and know all boats rise with the tide,” Frazier said. “When you make choices as a collective, you get a better success rate than doing it on your own.”

The maker sector is much broader than artists, Frazier said. Makers are businesspeople who have built an

economic ecosystem via online commerce and point-of-sale transactions.

Markets such as home décor (estimated at $125 million in 2019 per Allied Market Research figures) and furniture ($800 million by 2025) are populated by creative product designers. Visual artists and gallery owners, meanwhile, fall into a market valued at $64 billion, per estimates from the Statista business data platform.

Impressive figures aside, the virus crisis has exposed the sector’s vulnerabilities, Frazier said. Foundation and grant dollars are generally funneled to arts nonprofits rather than entrepreneurs, leaving a multimillion dollar industry in dire straits.

“This (app) is about introducing a tangible solution that appeals to people today,” Frazier said. “It’s the most simple, basic stuff that should have been happening for years, but never did. So when the coronavirus happened, we had to shift as an industry.”

The Arts Cleveland nonprofit is leading efforts to get CARES Act funding to the artist community, distributing $1.3 million to for-profit arts venues and artists. The organization is also serving as fiscal sponsor for Maker Town, assisting in the initiative’s marketing and financing ef-

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forts. Director of programs and services Valerie Schumacher said her organization is getting a major uptick in requests from craftspeople facing fundraising struggles due to their nontraditional business status.

While Frazier has identified about 500 Northeast Ohio makers thus far, she is always on the hunt for more. Qualifying businesses must be located within 50 miles of downtown Cleveland and have an active website or physical location. Local artists not pre-loaded on the app can submit their details for inclusion through the Maker Town website.

As of mid-November, Maker Town has procured 778 unique visits. About 700 would-be consumers linked from the app to artist websites, although Frazier is currently unable to track whether those users made purchases.

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As a firm providing wealth management services to clients, UBS Financial Services Inc. offers investment advisory services in its capacity as an SEC-registered investment adviser and brokerage services in its capacity as an SEC-registered broker-dealer. Investment advisory services and brokerage services are separate and distinct, differ in material ways and are governed by different laws and separate arrangements. It is important that clients understand the ways in which we conduct business, that they carefully read the agreements and disclosures that we provide to them about the products or services we offer. For more information, please review the PDF document at ubs.com/relationshipsummary. © UBS 2020. All rights reserved. UBS Financial Services Inc. is a subsidiary of UBS AG. Member FINRA/SIPC. CJ-UBS-2031105874_4 Exp.: 10/31/2021

Contact Douglas J. Guth: clbfreelancer@crain.com

GROWTH IN ACTION

Modesto “Moe” Ruggiero Managing Director– Wealth Management Senior Portfolio Manager Wealth Advisor

ubs.com/team/ruggiero

team Frazier hired. A comprehensive search tool has always been the plan, considering the proliferation of e-commerce sites in existence.

“Makers have platforms like Etsy, or social media pages where they’re selling to the public through DMs,” Frazier said. “Another e-commerce platform wouldn’t be useful. This is more powerful.”

Jewelry maker Harrill envisions Maker Town as a beacon for the “shop small” movement currently keeping her business afloat.

“It’s a way to find brick-and-mortar stores without going to Target,” Harrill said. “It’s a really cool concept. I browse the app myself to find other stores.”

Maker Town remains free for users until 2021, when Frazier plans to move to a tiered subscription pricing model.

For now, she’s proud to help fellow makers navigate tough times while giving the public a clearer picture of an underappreciated creative sector.

“My hope is that agencies broaden their scope of what they’re measuring to more accurately include the hundreds of arts entrepreneurs playing a significant part in America’s fast-growing maker movement,” Frazier said.

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NOVEMBER 30, 2020 | CRAIN’S CLEVELAND BUSINESS | 13

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FOCUS | RETAIL

PANDEMIC

Greg Carlin opened Play: CLE in Avon in late 2017. The indoor park, seen here before the pandemic, reopened for general admission a second time after the company felt more comfortable about how it could safely manage guests.

From Page 10

‘Pi-vahhht!!!’

Of course, Cotugno is not alone in making more strategic changes as a result of the pandemic. Facing a shortage of donated cabinets, appliances, sinks and toilets — big sellers at ReStore outlets — the Greater Cleveland Habitat for Humanity began filling its two resale shops with new furniture earlier this year.

“People may have been cleaning out their closets and organizing during quarantine, but they were not redoing their kitchens or bathrooms,” said president and CEO John Habat.

“Those are great sources of donations for us, and they weren’t coming in.”

The nonprofit depends on ReStore margins to fund its homebuilding projects. To keep that money coming in despite a dearth of donated materials, “we improvised,” Habat said, buying brand-name furniture from a bankruptcy liquidation sale.

“We have since started selling even more products that we purchased brand new for resale like rugs, pots and pans, and pillows and bedding.

We ventured into these types of products just to keep our numbers up and keep our employees paid,” he said.

The strategy is working: “Since reopening in May, every month’s sales have averaged about 10% to 12% higher than the previous year’s month,” Habat said.

For startup Mine Stencils, the pivot has been in the way founder Kerri

CONTRIBUTED PHOTOS

Mine Stencils founder Kerri Butcher, shown here on “Modern Living with Kathy Ireland,” switched gears to a digital sales strategy when rolling out her eye shadow stencil collection.

Butcher plans to roll out her eye shadow stencil collection.

“Initially we were more focused on getting into retailers and for women to try to sample the product,” she said. “But it quickly became apparent that was not going to happen.”

Butcher, a Cleveland-based finance executive by day, switched gears to a digital sales strategy. She pursued an Amazon Vendor Agreement, which will allow the e-commerce giant to sell Mine Stencils directly once she gets the products uploaded into its system.

Butcher also created a series of video tutorials on how to use the stencils, aiming to release those via social media outlets and capitalize on the recent spike in eye shadow sales as makeup users focus more “above the mask.”

It’s been a far bumpier road for Play: CLE, an indoor adventure park in Avon. Greg Carlin, who opened Play: CLE in late 2017, said the site reopened for about two months following the mandated spring shutdown but then closed to the public voluntarily to focus on private events and parties.

“For last couple of years, we have handled well over 500 events a year,” he said, “but it would be really tough to do so indefinitely.”

It reopened for general admission a second time in October, after, Carlin said, the company felt more comfortable about how it could safely manage guests.

Self-imposed capacity limits are the latest pivot for Play: CLE and its sister park in Columbus. The buildings have occupancy allowances of over 700 people, and their obstacles and activities are inherently social distanced, according to Carlin.

Still, no more than 100 users, spectators and staff are allowed at either location at any one time, a ceiling that rarely — “if ever” — is reached, he said.

The challenge remains, Carlin added, convincing people they can be as comfortable coming into a place like Play: CLE as they are Target or the grocery store.

“I think we just have to be realistic and patient,” he said, “and recognize a lot of businesses are facing that same problem.”

Contact Judy Stringer: clbfreelancer@crain.com

INDUSTRY ACHIEVERS ADVANCING THEIR CAREERS Recognize them in Crain’s

For listing opportunities, contact Debora Stein at dstein@crain.com or submit directly to

CRAINSCLEVELAND.COM/PEOPLEMOVES

14 | CRAIN’S CLEVELAND BUSINESS | NOVEMBER 30, 2020

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SHOTSTOP

From Page 7

Once he had done some testing, he invested himself.

“I had to, just because I could not believe what I was seeing,” said Titus, who added that he marveled at the ability of a very thin and lightweight material to stop bullets from pistols and high-powered rifles alike.

ShotStop’s dealers say the product is easy to sell, largely because of its weight savings and a warranty longer than competitors offer. They like that Iliev doesn’t demand ex-

TRUTKO

From Page 9

Another equity-focused proposal is “Innovation Zones” to encourage development in Cleveland neighborhoods centered on Euclid Avenue and Kinsman (East 30th to East 105th). Encouraging development in areas with good public transportation, like the so-called Health Corridor, is a good idea, provided companies want to go there. But building the “Opportunity Corridor” by extending I-490 from East 55th to University Circle has been stalled for years because highway planners are not convinced the economic impact would be worth the cost.

CIP supporters will probably praise its bold, aspirational goals, but CIP’s education, job and investment goals appear unrealistic. CIP is counting on inexperienced management and newly trained technical

clusivity, too. Dealers are free to sell other brands of armor plating if they wish. They’re also welcome to test and demonstrate the product for potential customers at the shooting ranges.

“There’s no other product they’d rather have,” said Connor Paysse of the law enforcement agencies that buy ShotStop armor from his company, Paysse Arms in Moses Lake, Wash.

Michael Micha, owner of Venture Tactical in Fort Lauderdale, Fla., echoed Paysse’s sentiments. Micha’s store also sells Team Wendy helmets and other police gear. personnel to lead innovation and spark growth in new businesses and jobs. They are hoping for capital investment in locations and on a scale that has not previously happened and on an expansion of broadband connectivity paid for by third parties.

They forecast a major uptick in center-city real estate development, but the Cleveland market has high vacancy rates even in desirable areas.

In addition, CIP’s 2030 goals include highly prescriptive equity targets that focus on increased participation of minorities and females in training, jobs and investment, without identifying the broad economic growth targets that will enable the area to achieve these goals. The failure to identify overall employment growth, business formation, GDP and unemployment targets is a significant omission because it uncouples CIP strategy from success metrics.

By focusing so intently on remedying inequality, CIP seems unwilling to

YOUR GUIDE TO

GIVING TUESDAY

“We could sell other armor if we wanted to, but we chose theirs. If something vastly better came along,

“WE COULD SELL OTHER ARMOR IF WE WANTED TO, BUT WE CHOSE THEIRS.” — Michael Micha, owner of Venture Tactical in Fort Lauderdale, Fla.

we’d have to consider it. We basically do the research for our clients,” Micha said.

Micha said the law enforcement agencies he sells to also like the fact that ShotStop armor is lightweight. In

Florida, where officers often patrol around water or are even on boats, that can be a bigger deal than some other places, he said.

“You don’t want to go into the water with a 20-pound vest on,” Micha said.

The law enforcement market has given ShotStop a big boost, especially this year, and Iliev said he has no plans to abandon it.

But the other, bigger goal, he said, is defense and federal government work — and not just for soldiers’ personal gear, but for vehicles and even buildings, Iliev said.

That, though, will require a much

DAVID KORDALSKI/CRAIN’S CLEVELAND BUSINESS

recognize that sustained economic growth is not only difficult to attain but is inherently unequal. In any community, only a small number of people are willing and able to invest in new enterprises, and they are primar-

ily motivated to invest to make more money. Entrepreneurs won’t invest time, capital and effort in innovative enterprises with a high possibility of failure without the promise of a significant reward. CIP should give more

bigger operation. Iliev said he’s had some interest from the military, but he won’t bid on a contract until he’s sure he can live up or exceed expectations. He said he recently passed on an opportunity to bid on a $20 million Defense Department contract because it would have called for as many as 6,000 armor plates to be produced per day until the contract was filled. Iliev said he can’t do that with his existing scale.

“Now, we’re doing 6,000 plates every two months,” Iliev said.

Dan Shingler: dshingler@crain.com, (216) 771-5290, @DanShingler attention to creating a bigger economic pie and be less concerned with how the pie is to be split. If the region becomes more prosperous, and new people, including women and minorities, enter and rise within the innovation process, inequality will inevitably diminish.

Moreover, CIP’s approach fails to demand performance from institutions set up to deal with root causes of racial inequity. Rather than trying to achieve equity through fragile new businesses, CIP should focus on demanding more from the county’s social service delivery system, improving schools with poor performance and reforming police departments and the criminal justice system. The reason the organizations funding the CIP don’t focus on these priorities is the difficulty of transforming intransigent government bureaucracies. It is just easier to imagine that new businesses can solve social problems after government has failed.

NONPROFITS:

Cleveland Metroparks

Akron Children's Hospital Foundation

Cleveland Orchestra

American Heart Association

Cleveland Zoological Society

American Red Cross

College Now Greater Cleveland

Benjamin Rose Institute on Aging

Crossroads

Care Alliance Health Center

First Year Cleveland

Catholic Community Foundation

Great Lakes Science Center

IN NORTHEAST OHIO. The past year has been challenging for all sectors, but especially for Northeast Ohio’s nonprofit community. Not only did most

organizations face increasing needs, they were

ideastream Julie Billiart Schools JumpStart Inc. New Directions, Inc. OhioGuidestone Stella Maris, Inc. United Way of Greater Cleveland VA Northeast Ohio Healthcare System

faced with unprecedented challenges in terms of fundraising. The 2020 Crain’s Cleveland

SOCIAL RESPONSIBILITY CHAMPIONS:

Business Giving Guide is designed to serve as a one-stop resource for reviewing the various philanthropic endeavors available for giving back to the community. This year’s guide is accompanied by a wish list, highlighting the needs from our 2020 Giving Guide nonprofits.

Check out the guide and wish list to learn how you can give back to these organizations today:

CrainsCleveland.com/Giving20

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TEAM NEO

BOR

From Page 6

From Page 1

Shawn Gaffney Jr., Infinium’s vice president of operations, said he worked with Team NEO, the city of Strongsville and the Ohio Department of Transportation to build out the company’s new site so that the company is able to receive raw materials and ship finished p r o d u c t across the country.

“There was not a ton of a p p ro p r i a t e 12-acre parcels that Shawn Gaffney Jr. would allow a manufacturing facility to the size and scale we needed,” he said. “The site that we are building on now required a bit of develRyan Gaffney opment.

It was not ready for the contractors to drop off their equipment and build.”

Without Team NEO’s help negotiating the construction of a functioning truck route as well as a bridge, the multimillion-dollar building might have been forced to move to another city, he said.

The new building was part of the strategic plan well before the onset of the global pandemic and is necessary for what Ryan Gaffney, Infinium’s director of business development, thinks will be an uptick in businesses.

“We did not have the year we drew up on paper, but it was better than last year and we continue to grow,” said Tom Fritsch, director of sales operations for Infinium, adding that the company’s strong regional and domestic business is what has helped keep sales relatively stable.

Ryan Gaffney thinks lingering COVID-19 concerns most likely will mean fewer open-office designs, and it follows that things could get hectic quickly for the company. Infinium has made substantial investments in new product design and workforce, with hiring across the board.

“We saw, as the unemployment pool was growing, that there were a lot of talented individuals on the market,” Shawn Gaffney said. The company made a point of searching out workers for every part of the business.

“We have probably added more than 10% of new employees to our entire team,” he added.

The company’s main competition is international, Fritsch said, which makes the strong relationship with its domestic supply chain a benefit and bodes well for increased business in 2021.

“We are very much selling the idea of moving back to private offices,” Fritsch said. “We are expecting a tidal wave of work.

There are a lot of big jobs out there on pause, and we have planned for the day all those phone calls come in and things are really moving again.”

The vast majority of petitions to the court never get an airing. But if four justices deem Feltner’s case worth reviewing, a fight that’s brewing in two Ohio counties could land in a national spotlight.

Former property owners in Cleveland and Dayton are pushing back against 2006 and 2009 laws that created a streamlined path for dealing with deserted houses, commercial buildings and land where unpaid tax bills are piling up. They assert that the government, by transferring their properties to nonprofit land banks for revitalization, took more than it was owed.

Public officials say these so-called administrative foreclosures are a lawful, and logical, approach to tax delinquencies. Such properties often have little to no value, they add.

In Cuyahoga County, administrative foreclosures have laid the groundwork for residential demolitions and rehabs. They’ve played a role in land assembly for projects including a Heinen’s food production facility in Warrensville Heights, housing for families of hospitalized veterans in Cleveland and a massive Amazon fulfillment center that replaced long-ailing Randall Park Mall.

But lawsuits have slowed, if not stopped, the flow of such distressed properties to land banks and community development organizations in the past two years. The Cuyahoga County Prosecutor’s Office has filed only one administrative foreclosure in 2020, down from a peak of 2,676 new cases in 2017.

“This hampers community development in a very large way,” said Sally Martin, housing director for South Euclid and a member of a regional consortium of leaders focused on vacant properties and tax delinquencies. “There’s a large number of properties vacant and abandoned that are just sitting, with nothing happening.

And, unfortunately, many of those are going to be on the East Side of Cleveland, in minority neighborhoods.”

If the plaintiffs are successful, legal experts say, counties and school districts could be hit with millions of dollars in costs and what several onlookers described as a bureaucratic nightmare.

Marc Dann, a Cleveland lawyer representing Feltner and other plaintiffs, lauds the goal of reviving abandoned real estate. But in a trio of lawsuits, he and Centerville attorney Andrew Engel contend that Ohio is going about the process the wrong way, particularly when it comes to properties that appear to be worth more than the tax debt that’s tied to them.

“Taking vacant and tax-delinquent properties and turning them to productive use is a good thing. It’s a worthy thing,” said Dann, a former politician who briefly served as the state’s attorney general. “The fact is that you just can’t go about it in an unconstitutional fashion.”

Kim Palmer: kpalmer@crain.com, (216) 771-5384, @kimfouroffive

Alternative to courts Fourteen years ago, heading into the housing bust, the Ohio General Assembly created an alternative to the courts for abandoned, tax-delinquent real estate. The idea was to help communities more swiftly, and strategically, tackle vacant properties that scar neighborhoods and serve as magnets for crime and bottom-feeding investors.

Administrative foreclosure pro-

A former Kentucky Fried Chicken restaurant in Cleveland’s Union-Miles neighborhood went through an expedited tax-foreclosure process that targets vacant and abandoned properties. Now in the hands of a neighborhood development corporation, the boarded-up building is the subject of a lawsuit over whether the former owner deserves to be paid for any equity he lost. | MICHELLE JARBOE/CRAIN’S

ceedings take place before county boards of revision, the bodies that hear challenges to government tax valuations of real estate. In such cases, counties still can dispose of properties traditionally — at an auction called a sheriff’s sale, where the minimum bid is the taxes owed.

Or counties can transfer the real estate to nonprofits like the Cuyahoga Land Bank, a quasi-governmental corporation formed under a 2009 state law that enabled land banks to be much more than passive repositories. County land banks wipe out liens and cleanse titles before selling or handing off properties for redevelopment, often with strings attached to ensure that projects happen.

Proponents say that structure allows counties to take the long view, focusing on sustainable property tax growth and neighborhood stabilization. The direct-transfer process also breaks a troublesome cycle, in which foreclosed properties are purchased by speculators or financially unprepared buyers at a public auction and, within a few years, end up in tax foreclosure again.

“The judicial sales are debilitat-

A Google Maps photo taken in late 2018 shows the state of the former KFC restaurant on Cleveland’s East Side not long after a tax-foreclosure process began. | GOOGLE

Akron attorney Stephen Funk, who is representing Cuyahoga County in two disputes and Montgomery County in a third, described the administrative foreclosure process as a legislative solution to a property tax problem — not a real estate seizure

“TAKING VACANT AND TAX-DELINQUENT PROPERTIES AND TURNING THEM TO PRODUCTIVE USE IS A GOOD THING. IT’S A WORTHY THING. THE FACT IS THAT YOU JUST CAN’T GO ABOUT IT IN AN UNCONSTITUTIONAL FASHION.” ——Marc Dann, a Cleveland lawyer representing Elliott Feltner and other plaintiffs

ing,” said Tony Brancatelli, a Cleveland city councilman and chairman of the Cuyahoga Land Bank, or Cuyahoga County Land Reutilization Corp.

But Feltner and plaintiffs in other cases say their properties should have been offered up for bid. If their buildings had sold for more than the outstanding debt, they would have received the surplus. Instead, they got nothing.

that requires a payout.

“You have, essentially, plaintiffs who by definition refused to pay their taxes — and want the taxpayers, who paid their taxes, to essentially pay them money,” he said.

Funk stressed that property owners can stop a board of revision action by negotiating a payment plan, to catch up on their taxes; paying off their debts in full; proving that the property isn’t actually vacant; or asking to have

the case moved to court. The law also gives owners 28 days after a foreclosure to redeem properties set for transfer to a land bank or community development organization.

Dann acknowledges that his clients didn’t intervene during the foreclosure process. But that doesn’t change his stance.

“At the end of the day, it doesn’t matter how much due process you give somebody … if you take their stuff, you still have to pay for it,” he said.

‘Hard truth’ of cases When Feltner lost his property to foreclosure in 2017, Cuyahoga County valued it at $144,500 for tax purposes. He owed $65,189 on the buildings, which he inherited after his wife’s death in 2012. His attorneys claim that the county essentially stole $80,000 from him.

The Cuyahoga Land Bank accepted the buildings, then transferred them to a neighboring automotive business on St. Clair Avenue. Now renovated, they house a used car dealership.

In 2018, Dann filed a lawsuit on Feltner’s behalf in the Ohio Supreme

16 | CRAIN’S CLEVELAND BUSINESS | November 30, 2020

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11/25/2020 2:30:43 PM

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Both cases include requests for class-action status, positing that there are thousands of former property owners who could make similar claims.

Dann said he’s considering additional suits involving a property owner and a lender in Summit County.

‘It just seems wrong’

Court, challenging the process and the legitimacy of the underlying statute. In May of this year, the court ruled against him on procedural grounds, without resolving the constitutional question. That’s the subject of the U.S. Supreme Court petition, filed by the nonprofit, libertarian-leaning Pacific Legal Foundation.

Christina Martin, a Pacific Legal Foundation attorney, is waging war across the country on what she characterizes as “home equity theft.” The details of the laws on trial vary by city, county and state. The common thread in the complaints is that property owners say the government took something of value from them, without appropriate payment.

“The hard truth is that these property rights cases are very hard to win,” she said.

But the Pacific Legal Foundation has notched some triumphs, including a 2019 U.S. Supreme Court victory that enabled property owners to file takings claims against local governments in district court, bypassing state court.

That ruling set the table for two federal lawsuits filed by Dann and Engel a year ago.

In one case, the former owner of a long-vacant Kentucky Fried Chicken restaurant on Cleveland’s East Side sued Cuyahoga County over a foreclosure and transfer to the Cuyahoga Land Bank. The land bank turned over the property to the nonprofit Union Miles Development Corp.

In 2019, when the foreclosure occurred, the overdue taxes, interest and fees totaled $18,638. County tax records listed a market value of $176,800 for the real estate.

In the second case, a woman sued Montgomery County over a 2018 foreclosure on her deceased mother’s home in Dayton. The county valued the real estate at roughly $3,000 more than what she owed. The Montgomery County Land Bank took possession of the property.

Two district court judges have taken opposing tacks. In August, a judge dismissed the Dayton lawsuit. Engel and Dann have filed an appeal. In Cleveland, a judge is allowing the litigation

Jim Rokakis, a former Cuyahoga County treasurer who helped write the expedited foreclosure law and create the Cuyahoga Land Bank, said county appraisals rarely reflect reality when it comes to forsaken buildings, which tend to deteriorate quickly once they go dark.

Dueling appraisals filed in court for the former fast food restaurant in Union-Miles don’t provide much clarity. An outside appraiser hired by the county arrived at a value of $19,000. An out-of-state appraiser working for Dann came up with a $100,000 figure.

“Nobody sits and watches their property go up in smoke when they have tons of equity to protect,” said Gus Frangos, the Cuyahoga Land Bank’s president, in a March deposition in the Union-Miles case. “They won’t wait for the auditor or the treasurer. They’ll sell their property or list it, or do whatever a responsible citizen would do.”

Citing the litigation, Frangos declined an interview request. Dann said Khaled Taye, the former owner of the boarded-up KFC, was unavailable to comment.

Feltner said he tried to sell his buildings — and by mid-2017 had found a buyer open to paying $120,000. But it was too late. The foreclosure process, which started in 2015, was complete. And he’d missed the chance to redeem the property.

“It wasn’t fair to me, it wasn’t fair to the county, and really the only one that seems to have benefited was the company that took over,” he said.

“The way that it happened was unjust because no one else got a chance to bid on it. It just seems wrong.”

The Cuyahoga County Board of Revision, which largely put tax foreclosure hearings on hold as mounting litigation made title insurers skittish about the properties, began reviewing cases again in August, after the Ohio Supreme Court’s decision against Feltner.

But panels that once heard dozens of cases in a day now are taking up only a handful, said Ron O’Leary, a former Cleveland judge who became the board’s administrator in March.

The prosecutor’s office is shifting more backlogged cases to court and sending many foreclosed properties to auction. The only direct transfers — those handoffs to land banks — involve real estate where the county’s valuation is less than the outstanding debt.

“We could go forward on this,” said Michael Kenny, an assistant prosecutor who runs the tax foreclosure division. “But government, and especially prosecutors, are conservative by nature. Why do that when we could just as easily wait a few minutes and be assured?”

Kenny and Funk, the county’s outside attorney, doubt that the U.S. Supreme Court will take up Feltner’s case. Dann, conversely, is hopeful, particularly with the court’s recent shift to the right. “I’m a liberal who opposed Amy Coney Barrett’s appointment to the Supreme Court,” Dann said. “But I’m viewing this as an economic justice issue.”

Michelle Jarboe: michelle.jarboe@ crain.com, (216) 771-5437, @mjarboe

M&A

From Page 1

This isn’t the Great Recession.

The impact of the shutdowns hasn’t been as drastic as had been expected, he said, and most companies that are trying to sell because they’re struggling were facing challenges before the pandemic hit.

Chris Hogan, managing director for mergers and acquisitions for KeyBanc Capital Markets, said deal volume in the third quarter of 2020 was basically flat compared to the same time in 2019, but value was up.

A recent report on the M&A market from KeyBanc found that particular areas of strength that saw large deals were “coronavirus-resilient sectors” such as health care and technology. In the industrial space, deals were driven both by diversification efforts and efforts to divest noncore assets, as well as by the addition of technology.

Ultimately, Hogan said, there’s a lot of “nuance” in the market right now. People are looking at how companies have been doing recently, the markets they sell into and their growth prospects.

“You’re seeing certain businesses, if you check all those boxes — if you fared very well during COVID and you’ve got a strong path of post continued organic growth — in some instances, those businesses are trading at levels that are higher than they were going into the pandemic because you’ve got the scarcity factor, if you will, and a lot of capital chasing those types of businesses,” Hogan said.

That’s not to say there aren’t challenges. Pre-COVID, there was a typical process for closing a deal that included in-person meetings and management presentations, Hogan said. But deals have moved forward in recent months, despite the challenges posed by the pandemic, and have found ways to make the process more virtual.

“People adapt and figure out the new normal,” Hogan said.

Take B’laster Corp. in Valley View.

B’laster completed two acquisitions this year: one before the pandemic made an impact in Northeast Ohio and one in the midst of the crisis.

B’laster makes products such as penetrants and lubricants for the automotive, industrial and hardware markets. The first deal the company completed in 2020 — the acquisition of the Workshop Hero rust-removing and rust-preventing brand — was relatively small. The second acquisition, of AC Avalanche, was far more “substantial,” almost doubling the size of the business, said Randy Pindor, president and CEO of B’laster Holdings.

Texas-based AC Avalanche, which makes recharging systems for automotive air conditioners, had been part of TSI Products Inc. B’laster had been looking for acquisitions for a while as part of its larger strategic plan, and there were a lot of synergies between the two companies.

“It just made sense,” Pindor said.

Talks began in January, and B’laster put forth a letter of intent near the end of February. Then came the pandemic. Pindor said COVID-19 created challenges for the deal, but the companies still wanted to make it happen.

B’laster stayed open during the pandemic shutdowns as an essen-

B’laster, which makes products like industrial lubricants, completed two deals this year: one before the pandemic made an impact in Northeast Ohio and one in the midst of the crisis. | CONTRIBUTED

tion. Companies are looking for a way to get a “competitive edge,” Datta said. If manufacturers don’t do this on their own, private equity is likely to step in and force their hands, he noted in an email.

Sayan Chatterjee, a professor at Case Western Reserve University’s Weatherhead School of Management whose focuses include strategic management, corporate diversification, and mergers and acquisitions, has seen large companies divesting nonessential businesses in recent years and private equity firms buying those up. The firms have then been building up businesses around those small buys and reselling them.

Recently, private equity has been spending in the infrastructure space, Chatterjee said, buying up compa——Randy Pindor, president and nies that make everything CEO of B’laster Holdings from cement to pipes. That hasn’t paid off yet, but he exBut B’laster typically does well pects those acquisitions to be resold during recessions, as people use its if the government passes an infraproducts to repair equipment in- structure bill.

Chatterjee also sees companies stead of buying new, and the hand sanitizer bolstered the company’s making acquisitions aimed at imearnings further. The company se- proving productivity, a trend he excured the financing it needed and pects to continue as work becomes was able to close the deal in August. more automated.

After the AC Avalanche acquisition, The tight labor market has driven B’laster has 58 employees across mergers and acquisitions in manuthree states. facturing in recent years, as companies moved toward more automation, said Eric Brisker, associate Looking to the future professor of finance at the UniversiThere’s a lot of divestiture hap- ty of Akron. Going forward, he expening right now in manufacturing, pects “massive” changes to global as companies are trying to figure out supply chains will drive deals. There what the next generation of the in- is uncertainty around what a Biden dustry will look like, said Pratim presidency will mean for trade Milton Datta, professor of informa- deals, but Brisker said it’s likely to be tion systems at Kent State Universi- less restrictive than Trump’s adminty. Companies are trying to get rid of istration. anything that doesn’t add value.

Overall, there’s been a shift away On the acquisition side, compa- from China toward countries in nies are either buying up competi- Southeast Asia, he said. And the tors in their sector or expanding into pandemic has shown the dangers of more technology-driven opera- having supply chains that are detions. These trends were already in pendent on single markets. the works prior to COVID-19, but the pandemic accelerated them, Rachel Abbey McCafferty: (216) 771particularly in the area of automa- 5379, rmccafferty@crain.com tial business and even started making hand sanitizer. Alongside that work, the company was taking steps toward closing the acquisition of AC Avalanche, securing credit, doing due diligence and completing its corporate restructuring.

Balancing all of that was rough, Pindor said. Institutions were hesitant to loan money, and the due diligence process was more detailed than normal.

“It was nonstop phone call after phone call, conference call after conference call,” he said.

“IT WAS NONSTOP PHONE CALL AFTER PHONE CALL, CONFERENCE CALL AFTER CONFERENCE CALL.”

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PEOPLE ON THE MOVE

Advertising Section To place your listing, visit www.crainscleveland.com/people-on-the-move or, for more information, contact Debora Stein at 917.226.5470 / dstein@crain.com

ADVERTISING / MARKETING

ADVERTISING / MARKETING

LAW

akhia communications

Falls

Gallagher Sharp LLP

April Wonsick has been named executive vice president, overseeing the agency’s core service offerings. Wonsick joined akhia in 2011 and has served as account director, director of account services and vice president of client services.

Prior to joining akhia, Wonsick spent eight years at LiggettStashower and began her career as a reporter and producer for WTOV-TV in Steubenville, Ohio.

She holds of Bachelor of Science degree in journalism from Ohio University.

Alisa Greenwood joins Falls as Senior Digital Producer, offering a wealth of producer and project management expertise. Previously, she ran her own interactive design agency, Clickit! Creative, for nearly a decade, developing eLearning programs, intranets and websites. Most recently she worked for Compass Marketing, honing her skills in transformative B2B and B2C digital projects.

Alisa is a graduate of Ohio University. www.wearefalls.com

Gallagher Sharp is pleased to announce that Rachel L. Coles, Esq. has joined the firm as an Associate.

Rachel defends attorneys in legal malpractice litigation, and businesses, insurance carriers, and individuals against claims alleging personal injury, property damage, occupational injury, and wrongful death. Her experience includes government and public entity liability, premises liability, and other tort litigation. Rachel received her law degree from The University of Akron School of Law.

ADVERTISING / MARKETING

CONSTRUCTION

akhia communications

GARDINER

Jamie Gyerman has been named director, channel strategy, and will join akhia’s executive committee.

Gyerman has been with akhia since 2016 and held the positions of account director and associate director. She has 18 years of agency experience, including five years as account director at Meredith Xcelerated Marketing and two years as director of marketing at Susan Davis International based in Washington, D.C. Gyerman holds a bachelor’s degree in political science from the University of Dayton.

Rob MacKinlay has joined GARDINER as Executive Vice President & Chief Financial Officer, bringing more than 20 years of experience in accounting, finance, mergers & acquisitions and executive leadership to the commercial HVAC & building services firm.

He will be a key member of the company’s executive team in driving performance and strategic growth, while overseeing all financial aspects of the business. MacKinlay was previously National Managing Partner, Private Companies for Cohen & Company.

ADVERTISING / MARKETING

Falls Mary Lou Brink joins Falls as Senior Director, Content, bringing nearly three decades of journalism experience from publications such as The Plain Dealer, Fort Wayne NewsSentinel and Midland Daily News. She offers a wealth of experience in content management and SEO, with a solid resume of managing websites, social media and digital publications. She earned a bachelor’s degree from Ohio University and master’s degree from Purdue and serves on the executive board for the Press Club of Cleveland. www. wearefalls.com

LAW

Gallagher Sharp LLP Gallagher Sharp is pleased to announce that Jennifer L. Gardner, Esq. has joined the firm as an Associate. Jennifer defends businesses, insurance carriers, and individuals against claims for breach of contract, personal injury, property damage, and wrongful death.

She also has experience with contract drafting and review, compliance with federal employment regulations, and complex environmental litigation.

Jennifer received her law degree from American University, Washington School of Law.

COMPANIES ON THE MOVE To place your listing, visit www.clevelandbusiness.com/companymoves or contact Debora Stein at 917.226.5470 / dstein@crain.com COMPANY LAUNCHES

S H A R E YO U R C O M PA N Y ’ S J O U R N E Y

Feature your latest milestones, launches, partnerships, awards and more in Crain’s

Alliance Healthcare Solutions Independence, OH 216-525-0200 alliancehealthcare.jobs/

Alliance Healthcare Solutions launches as a new company within the TalentLaunch network, a nationwide network of independent-operated staffing and recruitment firms, to effectively keep up with the growing demand for healthcare staffing across the country and further its reach as an expert in the industry. Alliance Healthcare Solutions has been at the forefront helping place qualified candidates in essential positions throughout the COVID-19 pandemic specializing in Allied Health, Travel, Hospital/Acute, Non-Acute, Corrections, and Schools. The C R Acompany IN’S CLEV ELAND B U Ceo, SINESS named Nick a healthcare staffing industry veteran, as President.

For more information, contact Debora Stein at dstein@crain.com or submit directly to CRAINSCLEVELAND.COM/COTM |

S E P T E M B E R 3 - 9 , 2 018

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PA G E 17

Advertising Section

CLASSIFIEDS To place your listing in Crain’s Cleveland Classifieds, contact Suzanne Janik at 313-446-0455

FINANCIAL SERVICES

Elios Financial Group, Inc. Elios Financial Group is proud to announce the promotion of Ryan M. Dobroka, CFP® to Wealth Advisor and congratulate his successful passing of the CFP® examination. The certification requires a vigorous process for candidates to satisfy educational and experience-based metrics in all aspects of financial planning.

Ryan works with personal clients using a holistic view of wealth management to provide analysis and recommendation on retirement, investment, and tax planning.

18 | CRAIN’S CLEVELAND BUSINESS | NOVEMBER 30, 2020

BUSINESS OPPORTUNITY LAW

McGlinchey McGlinchey Stafford is proud to announce the appointment of Kelly Lipinski, a member (partner) in the firm’s Consumer Financial Services Compliance practice group, to the Governing Committee of the Conference on Consumer Finance Law (CCFL).

The CCFL is a non-profit organization founded in 1926 by members of the legal profession and the financial services industry to offer educational services, publications and research relating to consumer financial services law.

BUSINESS OPPORTUNITY

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CRAIN’S CLEVELAND LOOK BACK | CHANGING FACE OF TRANSIT

RTA’s HealthLine connects Cleveland centers In 2008, after decades of planning, three years of design and four years of construction, the 9.2-mile, $200 million Euclid Corridor Transportation Project, later renamed the HealthLine for the project’s two main sponsors (the Cleveland Clinic and University Hospital), began offering a cleaner and faster way to travel to and from Public Square and University Circle via Euclid Avenue.

The Greater Cleveland Regional Transit Authority’s HealthLine was touted as a means to link the two important business and cultural hubs and spur redevelopment in the city’s Midtown area — and then the Great Recession hit. — Kim Palmer

``THE HISTORY

``IN THEIR OWN WORDS

The HealthLine was the first Bus Rapid Transit (BRT) project in the country. The RTA project spearheaded the use of hybrid-electric vehicles (producing 90% fewer emissions than standard buses) on 7.1 miles of lanes dedicated to transit traffic. The line was outfitted with 36 rail stations that replaced 108 separate bus stations and allowed off-board fare payment and traffic signal prioritization.

The new design eventually cut the existing public transit trip time to 28 minutes from 40.

Former RTA general manager Joe Calabrese said the project was the reason he joined RTA in 2000. He saw it as the answer to connecting two important business and cultural centers in the city, addressing “a logistical issue that has hindered the city’s development for a number of years.”

Creating a faster link between downtown and University Circle, Calabrese and other leaders believed, would be “a catalyst for redevelopment,” with Midtown becoming a “job creation and research center” spurring billions in spinoff investment and development.

The HealthLine, conceived as part the region’s investment in the medical and biotechnology industry that included what initially was referred to as the Medical Mart, now the Global Center for Health Innovation, was thus seen as part of the city’s economic and community improvement.

In 12 years of operations, the HealthLine has received several awards. In 2010, for instance, the Ohio Chapter of American Council of Engineering Companies named it Ohio’s top engineering project of that year.

The HealthLine in 2011 received the Award of Excellence from the Urban Land Institute for the transit project’s part as a catalyst of “$4.7 billion in spinoff investment and 11.4 million square feet of new and planned development.” That same year, the line celebrated its 10 millionth rider.

“The once-famous avenue is also becoming a place for tech firms, empty nesters and Iron Chefs. And soon, it will be a place to display advancements in medical technology, with the creation of the Medical Mart.”

——RTA news release announcing the HealthLine in February 2008

Crews work during the winter on the construction of the HealthLine at a station near the Cleveland Clinic. | GREATER CLEVELAND REGIONAL TRANSIT AUTHORITY PHOTOS

Cleveland Mayor Frank Jackson led the ribbon-cutting for the new HealthLine in 2008.

``WHY IT MATTERS TODAY Shortly after the HealthLine’s debut, the economy fell into a deep recession.

In 2009, after years of ridership increases, the numbers started contracting, and RTA was faced with looming budget shortfalls. Fares were raised by 25 cents, and in December of 2009, major service reductions were announced to help address a $17 million budget gap.

Public transit ridership rebounded starting in 2011. However, the HealthLine was dealt another blow when, in 2017, Cleveland Municipal Judge Emanuella Groves ruled that the use of armed police to conduct

fare enforcement on the line and the RTA’s Red Line was unconstitutional.

The efficient proof-of-payment fare collection system, which validated tickets at the stops, was replaced with on-car collections, bringing down the HealthLine’s 88% on time rates. HealthLine ridership declined by 21% after the policy changes, marking a higher rate of decline than other RTA services.

Transit advocates look to the 2017 ruling and its aftereffects as an argument for the dismantling of the transit police department altogether, and in time doing away with all fare collection, eventually making public transit free.

“Ten years later and the HealthLine is the standard for Bus Rapid Transit projects around the country. It is the catalyst for over $9.5 billion in projects constructed and planned adjacent to the HealthLine. Most importantly, it has provided faster, cleaner, safer and more reliable transit service to over 44 million customers, and that is why we built the HealthLine.”

——Joe Calabrese, former RTA general manager, on the 10-year anniversary of the HealthLine

“This court recognizes that there are no free rides and that every passenger must pay his or her fare. However, the cost to ride should not include the surrender of passengers’ Fourth Amendment right to be secure in their person against unreasonable searches and seizures.”

——Cleveland Municipal Judge Emanuella Groves, who ruled the RTA policy of fare enforcement using armed police unconstitutional

THE WEEK MAKING A CONNECTION: Cleveland-​ based TransDigm Group Inc., a maker of aerospace components and systems for commercial and military aircraft, agreed to buy Marlow, United Kingdom-based Cobham Aerospace Connectivity for about $965 million. Cobham makes highly engineered antennas and radios for the aerospace end market. It’s expected to generate about $225 million in revenue this year. Cobham has operations in Marlow and Prescott, Ariz., and it employs about 760 people.

TransDigm said the acquisition, which is expected to close during the first quarter of 2021, is subject to reg- Rick Buoncore, center, is MAI Capital Management’s managing partner. | CONTRIBUTED ulatory approvals and customary closing conditions.

Greenway Family Office of St. Louis vestment adviser, or RIA. Financial in a deal that adds about $500 mil- terms of the deal, which adds a new FAMILY AFFAIR: MAI Capital Manage- lion in assets under management to presence for MAI in the St. Louis ment announced the acquisition of the Cleveland-based registered in- market, were not disclosed.

GET MOVING: Athleta, the women’s exercise apparel unit of Gap Inc., plans to open a store at Pinecrest in Orange Village. Square Mile Capital Management LLC of New York City, which owns Pinecrest, announced Athleta leased 3,000 square feet for a store it plans to open in spring. Square Mile managing director Charles Ochman said the lease “represents an exciting start to our stewardship of the center.” Square Mile was the lender on Pinecrest and assumed control through a deed-in-lieu action in October that prior ownership had blamed on the pandemic lockdown earlier this year. Ochman said Athleta fits the merchant mix at Pinecrest, which includes a Peloton store and two fitness operations.

crainscleveland.com

Publisher Mike Schoenbrun (216) 771-5174 or mike.schoenbrun@crain.com Executive editor Elizabeth McIntyre (216) 771-5358 or emcintyre@crain.com Group publisher Mary Kramer (313) 446-0399 or mkramer@crain.com Managing editor Scott Suttell (216) 771-5227 or ssuttell@crain.com Assistant managing editor Sue Walton (330) 802-4615 or swalton@crain.com Creative director David Kordalski (216) 771-5169 or dkordalski@crain.com Web editor Damon Sims (216) 771-5279 or dasims@crain.com Assistant editor Kevin Kleps (216) 771-5256 or kkleps@crain.com Senior data editor Chuck Soder (216) 771-5374 or csoder@crain.com Editorial researcher William Lucey (216) 771-5243 or wlucey@crain.com Cartoonist Rich Williams REPORTERS

Stan Bullard, senior reporter, Real estate/ construction. (216) 771-5228 or sbullard@crain.com Lydia Coutré, Health care/nonprofits.

(216) 771-5479 or lcoutre@crain.com Michelle Jarboe, Enterprise reporter.

(216) 771-5437 or michelle.jarboe@crain.com Amy Morona, Higher education.

(216) 771-5229 or amy.morona@crain.com Rachel Abbey McCafferty, Manufacturing, K-12 education/ technology. (216) 771-5379 or rmccafferty@crain.com Jay Miller, Government.

(216) 771-5362 or jmiller@crain.com Jeremy Nobile, Finance/legal/beer/cannabis.

(216) 771-5255 or jnobile@crain.com Kim Palmer, Government.

(216) 771-5384 or kpalmer@crain.com Dan Shingler, Energy/steel/auto/Akron.

(216) 771-5290 or dshingler@crain.com ADVERTISING

Local sales manager Megan Norman, (216) 771-5182 or mnorman@crain.com Events manager Erin Bechler, (216) 771-5388 or ebechler@crain.com Integrated marketing manager Michelle Sustar, (216) 771-5371 or msustar@crain.com Managing editor custom/special projects Amy Ann Stoessel (216) 771-5155 or astoessel@crain.com Senior account executive John Petty Account executives Laura Kulber Mintz, Loren Breen, Mara Broderick People on the Move manager Debora Stein, (917) 226-5470, dstein@crain.com Pre-press and digital production Craig L. Mackey Office coordinator Karen Friedman Media services manager Nicole Spell Billing YahNica Crawford Credit Thomas Hanovich CUSTOMER SERVICE

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Crain’s Cleveland Business is published by Crain Communications Inc. Chairman Keith E. Crain Vice chairman Mary Kay Crain CEO KC Crain Senior executive VP Chris Crain Secretary Lexie Crain Armstrong Chief Financial Officer Robert Recchia G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Editorial & Business Offices 700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1230 (216) 522-1383 Volume 41, Number 43 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for the first issue in January, July and September, the last issue in May and the fourth issue in November, at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230.

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November 30, 2020 | CRAIN’S CLEVELAND BUSINESS | 19

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