Crain's Cleveland Business

VOL. 39, NO. 34

AUGUST 20 - 26, 2018

Source Lunch

Real estate Union Trust building could be home to condos. Page 2

Greg Malkin, fellow, Burton D. Morgan Foundation Page 39

CLEVELAND BUSINESS

The List The region’s highest-paid CFOs Page 34 GOVERNMENT

AT THE TABLE

SIZZLING OUTDOOR SPACES

JobsOhio likely will survive election But the group could soon get new leader

By JAY MILLER jmiller@crain.com @millerjh

The screened-in, outdoor kitchen at the Fredericks’ home in North Ridgeville includes a TV screen over the fireplace and a conversation pit, with a ceiling fan and heating units to temper air flow. (Peggy Turbett for Crain’s)

Backyard cooking has gone high-end, and business for outdoor kitchens is booming

By JOE CREA clbfreelancer@crain.com

Like legions of Clevelanders, Kevin and Mary Frederick call themselves foodies. They dote on fine dining, enjoy discovering new restaurants, love to cook at home and even have taken cooking classes with Michael Symon.

But like an increasing number of Americans, the Fredericks take their hobby up another notch. They’ve invested big time in the luxury of a sprawling outdoor kitchen.

Just a few steps from their house, the North Ridgeville couple has erected a storm-resistant pavilion that serves as an open patio fitted

with an electronic system to raise and lower screens if the flying pests are too pesky. There’s a bar, TV screens, a conversation pit, and both ceiling fans and heating units to maintain just the right degree of comfort.

But that’s just where the fun begins, at least for a cooking couple like the Fredericks.

Their outdoor kitchen is fitted with a sophisticated Wolf range specifically outfitted for outdoor use. The setup includes a grill, an oven and a side gas burner. Oh, and a brick pizza oven.

So, seriously, why?

“Well, we love to entertain. And to SEE KITCHENS, PAGE 33

Entire contents © 2018 by Crain Communications Inc.

The Fredericks’ outdoor kitchen features a wall of cooking appliances, including a pizza oven, a Wolf oven and main grill, and side gas burner.

Inside We visit Kent to chat about small-town banking in the modern era. Page 15

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It looks likely that JobsOhio,, the private-sector economic development nonprofit created by outgoing Gov. John Kasich, will survive in 2019, regardless of whether Democrat Richard Cordray or Republican Mike DeWine becomes the next governor.

Both candidates issued statements indicating that they intend to keep the state's principal business attraction organization outside of state government.

The only question may be who will get to choose the nonprofit’s next leader: the current, nine-member board, all named by Kasich, or the board that will lead the organization after the new governor fills five seats that have four-year terms that expire in July 2019?

John Minor, who became JobsOhio’s president and chief investment officer in July 2012, told Crain’s he plans to leave the job, but he is vague about details.

“I plan to leave JobsOhio at some point, but I do not have a set timeframe or a specific date,” he said in a telephone interview. “The board and I have had ongoing discussions about succession planning relative to my role as leader of JobsOhio.”

Asked whether the board would wait to appoint a successor until the new governor filled board seats with directors of his choosing, Minor said that has come up in the succession conversations the board is having but he would not be more specific about when he would leave and when the SEE SURVIVE, PAGE 35

Banks are looking to bolster offerings with help from fintech startups.

Page 11

M&A market forces tweaks in PE dealings.

Page 14

8/17/18 4:09 PM

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CRAIN’S CLEVELAND BUSINESS

For-sale suites eyed for Union Trust space

By STAN BULLARD sbullard@crain.com @CrainRltywriter

In the hunt for uses to occupy the massive Union Trust office building at 925 Euclid Ave., real estate owner and developer Frank Sinito’s Millennia Cos. is contemplating a run at the missing link in downtown Cleveland’s revival: condominiums.

A proposal to include 60 luxury condominiums is included in an investment summary that Millennia Housing Capital Ltd., Sinito’s finance-raising subsidiary, is sharing with prospective investors for the proposed $350 million project.

The investment outline, which includes potential costs and sources of funds for the mammoth project was obtained by Crain’s Cleveland Business from a third party on grounds he not to be identified because he is not part of Millennia’s staff or the project team.

Co-working space, a trendy open office-sharing plan serving multiple tenants in one suite, also is a component of the office portion of the plan if a third-party provider such as WeWork or Regus will lease space for such an operation. However, other potential uses have been aired publicly since Millennia bought the property for $40 million last spring, including market and affordable apartments, a restaurant and a luxury car showroom.

Taking a run at for-sale condominiums reflects the entrepreneurial

Cleveland-based Millennia Cos. may put luxury condominiums into the former Huntington Building as part of its $350 million plan to resurrect the mostly empty property for contemporary use. (Stan Bullard)

spirit that drove Sinito, in partnership with his wife Malisse, to build a hospitality company with multiple restaurants, a more than 20,000-suite apartment empire and the 2016 purchase of Key Center and its 57-floor Key Tower centerpiece.

Condominiums are often discussed downtown because they provide a way to introduce home ownership to the city center where land costs are high. However, condo projects are only now starting to surface and rise because, developers say,

lenders dislike the property type after suffering huge losses on them nationally in the housing bust. They can also provide a source of continued development when real estate developers overbuild the rental apartment market, but that’s not yet on the horizon.

The last major downtown condo construction project sank during the housing bust as the 10-story Avenue Tower, 1211 St. Clair Ave., which had 62 suites, failed.

A construction setback caused the

developer, the late Nathan Zaremba, to lose presales on units as the housing market soured in 2008. A welter of lawsuits resulted that were consolidated into a single case. Zaremba Management Co., a company then headed by the late brother, Timothy Zaremba, one of Nathan Zaremba’s siblings, led an investor group that bought the remaining 57 unsold units in 2012 to resolve the litigation.

They've remained rentals since.

Another potential hurdle for condos at 925 Euclid Ave. might be less daunting than generally thought.

Projects such as Union Trust, a property better known by its former name as the Huntington Building, generally require using state and federal tax credits, which are not applicable to for-sale projects. They need to be rented for five years under federal law.

However, experts say it might be possible to include for-sale units because they are technically air rights within the walls of a structure renovated with the credits.

Clevelanders already have demonstrated an appetite for condos in a historic property, however. Public Square also is home to the Park Building, a 140 Public Square landmark that was converted to condominiums in the housing boom. The residential conversion met historic guidelines but did not use the credits, which allowed the suites to be sold.

Suites have recently been resold for upward of $400,000 according to Cuyahoga County land records.

Since condos use air rights, local

41

Condominium and townhouse units that were listed for sale in the 44113 and 44114 zip codes on Realtor.com, as of Thursday, Aug. 16.

lenders since the housing market started to recover in 2011 have preferred townhouse units which allow buyers to own the ground underneath their units.

The Realtor.com website shows how little is underway in the condo category, at least in downtown Cleveland. The market last Thursday, Aug. 16, offered just 41 condominium and townhouse units for sale in the 44113 and 44114 zip codes, but just one new construction offering, townhouses at the low-rise portion of Zaremba’s Avenue District. If downtown does not offer condominiums, it risks losing buyers to city neighborhoods that are offering townhouses for sale with prices from $260,000 to almost $1 million. Or such wellheeled prospects might buy highpriced suburban townhouses.

True to form, Sinito’s Millennia has talent in even the condo arena.

Michael Friedman, for the past three years president of Millennia Housing Capital, sold distressed condos and townhouses throughout the nation for lenders and developers in the early 2000s. Friedman declined to comment for this story on the inclusion of condos in the 925 Euclid plan.

For his part, Sinito, via his assistant, declined comment.

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State’s business gateway has roadblocks

By JAY MILLER jmiller@crain.com @millerjh

The updated Ohio Business Gateway, which Lt. Gov. Mary Taylor has beefed up to be a one-stop location for all business transactions with the state, has had more than its share of glitches since the new site went live July 2.

Business users and their accounting firms have struggled to create logins and get running on the system they use to file local income tax withholding and net profits tax withholding. Municipalities, which receive the proceeds of the income tax withholding, are complaining about slow payment.

In a letter to legislators released on Aug. 10, Kent Scarrett, executive director of the Ohio Municipal League, complained about the gateway’s shortcomings.

“We are writing to alert you to the disgraceful failure of the Ohio Business Gateway to collect and remit municipal tax revenues despite repeated assurances they would be able to do so,” the letter stated. “For weeks, both taxpayers and municipalities have been unable to properly use the Ohio Business Gateway. Municipalities are reporting taxpayers, including entire accounting offices, attempting to file and finding themselves locked out of the OBG completely, unable to even log into their accounts to make payments.”

Ohio municipalities have been at

The Ohio Business Gateway has been updated, but the website has had a plethora of glitches since it went live July 2.

odds with the state since legislation, which passed last year and went into effect in January, allowed businesses to elect to file their municipal tax collections with the state, through the Business Gateway. The state tax department then would distribute the taxes collected to the local governments.

The state developed and is promoting the Business Gateway as a one-stop, online location for all business transactions with the state, including license applications and other certifications.

The cities opposed letting businesses file through the gateway.

When communities get payments filed with them directly, they get their money immediately. Payments made to the state are forwarded to municipalities through a city’s Business Gateway account. State processing

means a delay of a month in getting payment.

So it is an option for businesses, or their accountants, to make monthly or quarterly payments for municipal net profits taxes and state commercial activity taxes, as well as local income tax withholding for employees.

State collection is attractive to businesses, which must file with multiple communities because they have employees working in a number of communities.

Then the state updated the gateway design in July. Shortly after the new system was up and running, Taylor told Crain’s about the startup pains. She said the gateway’s telephone help desk was getting 5,000 calls a day.

“That was extraordinary volume,” Taylor said. “Of course, you’re going to have glitches, but from everything I’ve heard, those glitches are being managed and dealt with as quickly as possible.”

However, the complaints continued.

The volume prompted Joe Testa, director of the Ohio Department of Taxation, to issue a statement on July 26 that acknowledged that customers of the gateway had “experienced issues” when they logged onto the new system. The statement said that both the Department of Administrative Services, which administers the system, and the Department of Taxation, which processed tax payments made through the gateway, had added help desk staff to speed up problem solving.

“Several businesses have called to ask us to fix it because they couldn’t log on. We can’t fix it. It’s the state’s system.”

— Veronica Showalter, fiscal manager, Troy

As important, the statement said no late payment penalties would be assessed to any business that was unable to make a monthly tax payment by their deadline, provided a complaint had been made through a help desk.

“It was a frustrating process as (accountants) were trying to get into the system and get their login and password updated and make a payment,” said Greg Saul, director of tax policy for the Ohio Society of Certified Public Accountants. “The tax deadlines were coming whether you could get into the system or not.”

Part of the problem was the tighter security on the Business Gateway system. Accounting firm tax professionals, who used to be able to log on to their clients’ accounts and make periodic tax payments through their own email addresses, now had to create a new email address — and login and password — for each client to get into the client’s tax department account.

On the other side of the process, municipalities are complaining

about not getting their withholding and net profits payments from the tax department. The cities count on those monthly or quarterly distributions from the state to pay their bills.

Amy Arrighi, chief legal counsel for the Regional Income Tax Agency, the Brecksville agency that collects and administers municipal income taxes for 320 Ohio cities, said the cities that RITA represents got only $6.5 million of an expected $7.8 million in employee withholding payments in July.

Veronica Showalter, fiscal manager of Troy in Central Ohio, said last Wednesday, Aug. 15, that until now, the city was getting its June net profits and withholding tax payments through the state a month after the state collected the taxes. So she expected that taxes collected in June would be released to the Troy Business Gateway account in July.

“This past month, we didn’t get our June disbursement until August,” she said. “This is money we used to collect ourselves and got in June. We actually received notification of how much we would get (for June) on July 27, but it wasn’t deposited (in the city’s Business Gateway account) until Aug. 3.”

She added that she, too, is hearing from businesses about their struggles with the new gateway.

“Several businesses called to ask us to fix it because they couldn’t log on,” she said. “We can’t fix it. It’s the state’s system. But their payment is still due by a certain date. I can’t waive that deadline.”

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CRAIN’S CLEVELAND BUSINESS

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The sweeping cuts to degree programs at the University of Akron and Hiram College aren’t taking place in a vacuum. In fact, even more programmatic shakeups could be on the horizon as Northeast Ohio colleges face heightened competition for their services and calls from state officials for more cross-institutional collaboration.

The University of Akron last week announced plans to phase out nearly 20% of its less viable degrees or degree tracks — such as a master’s in sociology or a bachelor’s in interior design. It also identified programs in which it wanted to pump more resources, including cybersecurity and polymer science. Hiram College in May approved a plan to add some programs in areas it believes could grow and eliminate others. Hiram’s recommended restructuring, for example, would cut religious studies as a major and a minor and cut majors but retain minors in economics, philosophy and mathematics.

“Part of the solution to the economic problems that the university and many, many other universities face is to have distinctive programs we can grow and attract resources from the outside,” said John C. Green, a 30-plus-year veteran of the University of Akron who took over as interim president in May. Cleveland State University went through a similar review a few years ago, suspending a little more than 20 programs, said Jianping Zhu, provost and senior vice president for academic affairs. Suspended programs included a graduate program in art history, while the areas of investment included health and engineering.

Since that major review, the university has continued to monitor its programs and invest in areas it sees potential growth, Zhu said. There are a few reasons he sees this as a necessity.

State support for higher education is less than it was a few decades ago, Zhu said. And in Northeast Ohio, there’s a large number of higher education institutions and fewer traditional, college-aged students than in the past.

“So going forward, this should be an ongoing process for all universities, if they want to survive, basically,” Zhu said.

The University of Akron currently offers 414 degrees or degree tracks — that is, concentrations within larger degrees. The plan approved by the board of trustees on Wednesday, Aug. 15, will cut 80 of those degrees. Those programs are ones facing low enrollment and, in some cases, competition from nearby universities. Fewer than 5% of the university’s students are enrolled in those programs.

Though the University of Akron has made its share of cuts in recent years, university officials have stressed this plan is not purely based on its well-documented financial problems over the last few years brought on largely by shrinking enrollment.

Provost Rex Ramsier said that while admission has been suspended in bachelor’s programs like art history or mathematics, the university won’t stop teaching those subjects entirely.

And no layoffs are planned for regular faculty, contract professionals or staff positions. Green said faculty will be reassigned once their programs are

The University of Akron last week announced plans to phase out less viable degree programs. (Contriubted photo)

taught out.

Joseph M. Gingo, chair of the University of Akron board and president, chairman and CEO of A. Schulman Inc. in Fairlawn, said that could mean some tenured faculty members will teach more undergraduate courses, lessening the university’s reliance on adjunct faculty.

Overall, the academic program review is expected to lead to about $6 million in savings in the coming years, Gingo said. But that money is going to be applied to other areas, like salaries for new hires and money to start labs where appropriate.

“We’re refocusing, redirecting — this is not a cost-cutting program in that sense,” Gingo said.

The university plans to hire 23 tenure-track faculty, eight non-tenuretrack faculty and one contract professional in the areas in which it sees growth potential. Green said the searches will begin immediately, with the hopes of having these hires in place by fall 2019. The university expects to spend about $2.8 million on these hires.

The areas in which Akron wants to invest are cybersecurity, criminal justice and emergency services; polymer and chemical sciences; health and biosciences; performing arts; digital communication; and business, law and education. Green said the areas identified for growth had the potential to attract students, but also grant funding.

Ultimately, Ramsier said, the review was important to set a “baseline” as the university decides what it’s going to be going forward.

Honing the vision UA’s academic program review will inform its next strategic plan, which the university hopes to approve by December. University leadership will also look into whether it needs to do any academic reorganizing in light of the academic program review. Plans for the university’s next budget, which will have to account for many of these academic changes and hires, will take place in the spring.

The university, of course, is now searching for its next permanent president following a series of leadership changes, and Gingo said he hopes having a solid strategic and academic plan in place will help attract candidates who are the best fit.

Hiram, meanwhile, aimed for its redesign to transform it into the “new liberal arts,” a reimagining of how a liberal arts education is delivered. At Hiram, these changes included addition of programs like criminal justice and international studies, and the

elimination or redesign of others. And Hiram’s plan did include a small number of layoffs.

Hiram president Lori Varlotta said the college has made “significant strides” in its restructuring this summer and has finalized the names and configuration of its new schools.

But these plans aren’t without challenges. At UA, ripples of dissent began almost immediately, as the University of Akron chapter of the American Association of University Professors and the Faculty Senate Executive Committee released a statement questioning whether there was adequate faculty input in this decision. A report from the Academic Policies Committee described what it viewed as limitations to the academic review process, including its “ambitious timeline” and whether there was enough shared governance. The process reflected “years of under-investment in the academic mission, which in itself no doubt affected programmatic outcomes on metrics which primarily had to do with current and potential financial performance,” the statement read.

Time will tell what comes of these concerns.

At Hiram, Varlotta said some people have questioned the college’s new approach, but that many also got involved in the implementation process. When people voice their concerns, the college can better understand them.

“And I think it’s a very healthy way to effect change on a college campus,” Varlotta said. “We’re not always going to be in agreement.”

In addition, cuts to majors in core areas, like mathematics, can bring challenges, said Martin Van Der Werf, associate director of editorial and postsecondary policy at the Georgetown University Center on Education and the Workforce, which studies post-secondary education and workforce needs. A discipline like math is a “building block” for other areas, like computer science, he said, and cutting the major can weaken that education overall. Without a major, there’s less incentive for faculty in that area to join a college or university.

Many of the programs that Hiram saw low enrollment in, like math and second languages, are those seeing low enrollment across the country, Varlotta said. Colleges and universities will have to find a way to continue teaching those foundational courses.

“We can’t abandon those disciplines,” Varlotta said. “That we know for sure. But we also need to figure out creative ways to get those very important parts of the curriculum into an undergraduate student’s repertoire of classes.”

8/17/18 3:36 PM

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Pennsylvania Steel reinforces its local foothold

By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com @ramccafferty

Pennsylvania Steel Co. has been in the metal distribution business for almost 50 years, but in Ohio, it’s pretty new.

The company acquired Erie Metals Inc. for an undisclosed amount in 2016, giving the metal service center a foothold in the Cleveland market.

President and COO Barry Walsh said the current challenge is to raise the brand awareness of the business locally.

Erie Metals had kept a pretty low profile as it is, and now Pennsylvania Steel and its workers are the “new guys” in the market, he said.

“They just don’t know who we are,” Walsh said. “And that’s our biggest challenge is establishing our brand and letting people know that we’re here for the long haul.”

Pennsylvania Steel aims to grow the companies it acquires, and Walsh said moving what was known as Erie Metals to a new, larger location is an “important step” in that process. Erie Metals had been located in a small building on Lincoln Avenue in Berea and moved in May to a building it’s leasing on Geiger Street, also in Berea.

Walsh said the old building was just about 7,500 square feet, while the new one is about 21,000 square feet. He declined to share how much Pennsylvania Steel was investing in the new building.

Walsh doesn’t think this will be the last stop for the Northeast Ohio division. Pennsylvania Steel has made quite a few acquisitions in its history, so he has experience with similar market expansions.

“This is really what I’d call our stepping stone building,” Walsh said.

Pennsylvania Steel recently moved into a new building on Geiger Street in Berea.

Pennsylvania Steel offers products such as carbon and alloy tubing, and stainless steel and aluminum bars. (Contributed photos)

“And with good fortune, good sales, good luck, good reception by the market, we’ll be outgrowing this building sooner than later.”

Pennsylvania Steel, based in Bensalem, Pa., was founded in 1972.

When Walsh joined in 1981, it was still a very small company. The company made its first acquisition in 1997.

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scary life moment, either getting married or buying your first house, right? Where you’re like, ‘What are we doing? Can we pull this off?’ ” Walsh said.

Apparently, they could. Since 1997, Pennsylvania Steel has expanded to New York, Connecticut, Massachusetts, North Carolina and Virginia.

Overall, Pennsylvania Steel has

derstood sales, and what we had to do to, you know, was get where we wanted to go,” Straka said.

The former owners were around retirement age, and Straka said Pennsylvania Steel made them a “generous” offer.

Straka has stayed with the company part-time to maintain the Erie Metals accounts. Walsh called the arrangement a “win-win.”

Straka said there have been some challenges since the acquisition, as the company has struggled to find employees. Walsh, too, noted the difficulty of finding employees at every level, and they’re not alone. Straka said it’s a problem he hears about from his customers, as well.

But overall, Straka said Pennsylvania Steel is “determined” to grow the company, and he thinks it’s headed in the right direction.

The Berea facility is still a small part of Pennsylvania Steel’s operations, but it’s growing. When Pennsylvania Steel acquired Erie Metals, it had about six to eight employees. Today, employment is around 15, Walsh said.

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about 340 employees. Joe Dombrowski, the founder, is still the majority owner, and Walsh has a minority stake. Walsh said annual revenue was in excess of $130 million last year.

Pennsylvania Steel got its start as a distributor of cold finished steel bar, but its acquisitions have helped it to add to its product line over the years.

Today, it offers products like carbon and alloy tubing, stainless steel bar and aluminum bar. It also has value-added cutting services and its own drivers.

At the time of the acquisition, Erie Metals specialized in Pennsylvania Steel’s “favorite product,” Walsh said: cold finished steel bar. But now, Pennsylvania Steel can offer its other products through the Berea location, too.

The Berea acquisition in 2016 is the company’s most recent addition.

Jim Straka and Mike Reese started Erie Metals in 1991. Straka said he handled the administrative side of things, and Reese, his brother-in-law, was in charge of the operations.

“He understood the steel and I un-

8/9/2018 9:58:33 AM 8/17/18 11:43 AM

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When K&D Group opens apartments in the Halle Building, 1228 Euclid Ave., for the first residential move-ins on Friday, Aug. 24, tenants will begin to occupy all 20 suites on the landmark’s sixth floor.

Even though the Willoughby-based real estate owner and developer will be finishing additional floors in the 11-story structure and turning them over to tenants through December, Doug Price, K&D Group CEO, said the firm has leased 70% of the 123 suites it’s installing above the old department store’s retail first floor and office suites.

Although Price credits K&D’s strategy for building bonus-sized apartments suited to downsizing empty nesters for its progress so far at Halle, it’s another sign the apartment market regained its momentum through the region’s key spring and summer leasing season.

Statistics from the Northern Ohio Apartment Association show the switch in downtown’s outlook. The trade group reported vacancy at the end of July of 3.3%, compared to 5.6% vacancy at the beginning of the year.

That’s very different than last October, when vacancy for the Northeast section of Cleveland, which includes downtown and near West Side neighborhoods, hit 8.4%, the highest figure since 2010.

Part of the surge in empty suites was due to new properties opening in the fall and winter that have now benefited from a strong spring and summer leasing season.

Warrensville Heights-based Weston Inc.’s Standard, 99 W. St. Clair, opened in January with 20 tenants but now has 157 suites leased and another 128 available, according to the company.

Cleveland-based Millennia Cos. opened The Garfield, 1965 E. Sixth St., with 123 suites last fall. Through Aug. 6, it had leased 74 of its 123 units, according to online real estate data provider CoStar, compared with 40 last January.

Millennia did not comment for this story, but seems unperturbed by the building’s 33% vacancy rate.

That’s because owner Frank Sinito has deepened his commitment to downtown by buying and undertaking a renovation of The Statler Apartments, 1128 Euclid Ave., and the empty 925 Euclid Ave. building for a mixed-use project including new apartments and a hotel.

And at Independence-based Dalad Group’s Worthington Yards, 623 Johnson Court, all 108 suites have been full since the early spring.

While the market is more competitive — a shock after owners leased most of the downtown apartments as they opened the door — developers and owners see things settling down.

“I’m pleased with the market and the properties,” said Rich Cicerchi, CEO of Cleveland-based Cicerchi Development Co. “Both my downtown buildings (The Southworth on Ontario and The Krause on East Fourth Street) are full.”

He said the downtown market is more competitive than other parts of the region where he has holdings, but they don’t have the current level of new development downtown enjoys.

“We just work at it,” he said. “When we have a vacancy, we advertise it and show it. Sometimes we don’t get a qualified tenant who went elsewhere, but we keep at it.”

At Landmark Management of Cleveland, which owns six properties downtown, Robert Rains, a principal, said the company’s portfolio is almost 95% leased, the same as it was in August a year ago. Last winter, Rains was worried about a 20% vacancy rate. However, the occupancy came back with the new renting season.

“The market has really come back,” Rains said. “I can’t explain it.”

At downtown Cleveland’s North Coast Harbor, the Verandas has started leasing because the building should be ready Nov. 1. Dick Pace, president of Cumberland Development Co., which partners with Dallas-based Trammell Crow Co. on the waterfront project, said the 16-unit property is half-leased.

“We’re confident we’ll be leased by Nov. 1,” Pace said. “We’re pleased with the activity because the windows are just now going in at the building. We’ve got a mix of mid-career professionals and people with families moving in from out of town.”

He’s eager to land tenants on a 1-million-square-foot office and retail section of the lakefront project so he then can focus on the next round of apartments.

However, caution is manifest.

Price said Halle has leased because it has larger suites and multiple two-bedrooms to attract empty nesters and others who want to live downtown for a long time.

“It’s not a case of build it and lease it now,” he said. “It’s back to strategy and the specifics of each property, such as its location and amenities.

Apartments in the region as a whole remain strong, with vacancy at 3.6% as of June 1, according to NOAA, the same as in June 2017. Regional vacancy peaked at 6.6% last January.

Price said K&D, which has apartments from the West Side to Shaker Heights, has occupancy in the 90% range.

“It’s strong everywhere except for (the older) high-rise buildings,” Price said.

He said the slowing for-sale residential market means K&D is not losing tenants to home purchases as it was a year ago.

K&D is also readying apartments at Terminal Tower for delivery late next year, but Price said the growing number of projects was a factor in the company’s recent decision, among others, to drop the purchase of the 55 Public Square office building, primarily as a candidate for conversion to mixed-use with the addition of apartments.

So it goes for this year. However, CoStar estimates about 2,000 apartments that are in the planning and construction phases will hit the market in the next few years.

People watching the apartment market for softening might do well to keep in mind the phrase that Cleveland sports fans know so well: “Wait until next year.”

8/17/18 1:23 PM

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PA G E 7

The Week THE END IS NEARER

FirstEnergy Solutions Inc., the subsidiary of Akron-based FirstEnergy Corp. going through bankrupt proceedings, moved one step closer to shuttering its three nuclear power plants. The company said Aug. 15 that it submitted plans to the federal Nuclear Regulatory Commission for its "certified fuel handler training and retraining program," which details how those who supervise and conduct the removal of the plants' nuclear fuel would be trained. Submitting the program plan to the NRC is a required part of the agency's decommissioning process, and FES described it as "its latest step in the regulatory process leading to the deactivation of its three nuclear power plants beginning in 2020."

Those plants include one in Pennsylvania and two in Ohio — the Perry Nuclear Power Plant and the Davis-Besse Nuclear Power Station near Toledo — that local officials have said will cause significant job losses if they are shuttered. FES says there are 625 employees at Davis-Besse, 655 at Perry and 691 workers at the Beaver Valley Power Station in Shippingport, Pa.

ON TRACK

The Cuyahoga Valley Scenic Railroad bolstered its fleet in a big way. The CVSR signed an agreement to buy four historic California Zephyr cars — two vista dome dining cars, one sleeper car and one baggage car. Joe Mazur, president and CEO of the nonprofit railroad, said CVSR will pay $1.5 million for the historic cars, which were all built in the 1940s and sold as a set by private owners. "We're really ecstatic to bring a fleet like this into the Cuyahoga Valley National Park," he said. The cars, which Mazur said are in great condition and will immediately

square feet, is considered the world's largest incubator for startups.

A CLOSER LOOK

The Cuyahoga Valley Scenic Railroad will buy four historic California Zephyr cars for a combined $1.5 million. (Contributed photo) be put into service on the CVSR, will arrive in the valley on Sept. 20 after making the trek from Seattle, with a stop in Chicago.

AROUND THE BLOCK

The effort to create a center for blockchain development in Cleveland is getting a boost, with the membership of JumpStart Inc. in the Toronto-based Blockchain Research Institute. The institute, known as BRI, is conducting multimillion-dollar research on the impact of blockchain technology on business, government and society. It's working through more than 70 projects that explore blockchain technology and will inform members about blockchain strategies and market opportunities.

Blockchain technology allows information to be distributed securely, but not copied. A key attraction for government and business is that everything from driver's license registrations to medical records can be stored digitally, and securely. "This partnership will bring an

“You can count on

unprecedented level of access to BRI data across our region," said JumpStart CEO Ray Leach. "Not only is this an essential building block in the effort to put Northeast Ohio at the forefront of blockchain-based technology, it is also important evidence of the critical mass the Blockland movement is gaining."

Blockland Cleveland is an organization that auto dealer and investor Bernie Moreno hopes will grow into something on the order of Station F in Paris, which, at 366,000

CRAIN’S

The Cleveland Orchestra said it formed a five-member committee of prominent Northeast Ohio business executives to investigate allegations of sexual misconduct against suspended concertmaster William Preucil. Preucil was suspended on July 27 in the wake of a Washington Post story that detailed allegations made against him by violinist Zeneba Bowers. In that story, Bowers said Preucil assaulted her in his hotel room after a lesson when she was a fellow at the New World Symphony, the country's leading training orchestra for young professionals, in 1998. The orchestra on Aug. 16 said its board of trustees appointed the following people to the special committee to conduct the investigation: David J. Hooker, former managing partner of

GIVING GUIDE

Thompson Hine LLP, who is serving as chair; Alexander Cutler, former chair and CEO of Eaton Corp.; Stephen Hoffman, president of the Jewish Federation of Cleveland; Loretta J. Mester, president and CEO of the Federal Reserve Bank of Cleveland; and Beth E. Mooney, chair and CEO of KeyCorp. Committee members selected Helen V. Cantwell and Arian M. June from the New York law firm Debevoise & Plimpton LLP to investigate Preucil's tenure at the orchestra.

CHANGE OF PLANS

K&D Group of Willoughby dropped its planned purchase of the 22-floor 55 Public Square office building from an affiliate of Optima Management Group. Doug Price, K&D CEO, said the deal was "just not a good fit for us."

K&D Group on May 30 had confirmed its intent to buy the structure. If the deal had gone through, Miami-based Optima would have trimmed its exposure in Cleveland to one building, the One Cleveland Center skyscraper, from four office buildings it acquired in the mid-2000s. K&D is currently converting part of Terminal Tower on the opposite quadrant of Public Square to apartments as well as retaining office space in part of the building.

T

his special supplement is used as a tool for readers to become more actively involved within our region’s nonprofit community.

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To view the 2017 Giving Guide, visit CrainsCleveland.com/GivingGuide

8/17/18 2:37 PM

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CRAIN’S CLEVELAND BUSINESS

Opinion Personal View

It’s OK to start small in efforts to spark change in the region

By ED BUCHHOLZ

Editorial

Greener pastures The University of Akron’s recent academic pruning — a move that will ultimately eliminate almost 20% of the beleaguered university’s degree programs and tracks — is a welcome move in a region where educational overlap is bogging down an otherwise strong, if slow-moving, academic ecosystem.

Should the University of Akron, for example, offer a fashion merchandising program when Kent State University offers one of the best in the nation only a few miles down the road? Absolutely not, and it appears the cadre of university leaders in Northeast Ohio are cooling their competitive instincts in the spirit of strengthening the region’s talent pipeline.

Also, the decisive and thoughtfully considered actions to slim the offerings and invest in some others at the University of Akron are a welcome development for a university that has spun — and even flattened — its tires in recent years amid a flurry of recent leadership upheavals.

John Green, a veteran of the university and the fifth person to hold presidential duties in five years in some capacity, isn’t shying away from difficult decisions to right-size an institution where he’s worked for 30-plus years. Green, the oft-quoted political scientist during election cycles, isn’t in the job to stroke egos.

Scott Scarborough — who was ousted from the top post after a mere two years on the job — wasn’t off base when he declared the university needed to reinvent itself to thrive in the modern economy. His tact, of course, left plenty to be desired. So, it’s refreshing to see Green take a thoughtful approach with his first major decision.

As the University of Akron goes on the prowl for a permanent — and hopefully transformational — president it so desperately needs, its interim leadership must not shy away from the difficult decisions needed to make the university a sustainable and ultimately thriving enterprise.

After all, finding a capable captain for a ship that’s already taking on water is a herculean task — one the University of Akron’s trustees haven’t been able to accomplish yet.

Restored

There’s a valuable lesson in persistence and the pursuit of good policy to be learned from the effort to secure full funding for the Great Lakes Restoration Initiative.

The U.S. Senate this month signed off on a 2019 funding bill that included $300 million for the initiative, which was started in 2010 and since then has helped preserve the environmental well-being of the Great Lakes through efforts to, among other things, reduce pollution, combat harmful algal blooms and fend off invasive species such as Asian carp. The U.S. House of Representatives in July approved a funding bill that also provided $300 million for the effort, which virtually ensures that level of funding when the two bodies reach the final version of the spending legislation.

The funding is a significant victory for Great Lakes states.

President Donald Trump wanted to reduce spending on the initiative to $30 million, which continued a trend (misguided, in our view) started by President Barack Obama of proposing massive cuts to a modestly budgeted program that represents the largest investment in the health of the Great Lakes.

The effort by Ohio’s elected officials to keep the initiative fully funded was bipartisan, with key roles played by Republicans including Sen. Rob Portman and Rep. Dave Joyce, and Democrats including Sen. Sherrod Brown and Rep. Marcy Kaptur. Republicans since January 2017 have not distinguished themselves in standing up to the president, so we’re pleased to see that in this case, they were able to put partisanship aside to support an initiative that since its founding has supported more than 3,000 projects that address Great Lakes environmental problems. As Portman noted, the Great Lakes provide drinking water for 40 million people and contribute $10 billion in tourism each year. If the cost to be vigilant in preserving that is $300 million, it represents a strong return on investment.

We’re in an era of political division and distraction, but it doesn’t have to be that way. When our elected representatives focus on constructive, responsible solutions to our problems, we all win.

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

CLEVELAND BUSINESS

CLEVELAND BUSINESS P008_CL_20180820.indd 8

Managing Editor:

Scott Suttell (ssuttell@crain.com)

Sections Editor:

Timothy Magaw (tmagaw@crain.com)

Contact Crain’s:

216-522-1383

It’s an exciting time in our beloved city’s business community. There is a feeling that anything could happen, and that all possible futures might be better than the status quo. Several initiatives and reports have taken the focus recently, with bold visions of what Cleveland can be and should do.

I’ve heard many people admonishing those with concerns about these projects as having “typical Cleveland mindsets” and flippantly dismissing them as “naysayers.” As a founder excited about the promise of these efforts, but lifetime Ohioan, let me try to bridge the gap between My years of enthusiast and skeptic.

The initiatives getting the ma- startup life jority of the attention are all rooted in “transformational change.” have taught me This is a tried-and-true Midwestplenty about ern approach. It’s always about “building the largest thing” or be- seeing things coming “the capital of” another thing. Swinging for the fences and through. thinking big are the metaphors of They’ve also choice at the moment, and have been for the majority of my mem- taught me ory. about the I don’t disagree that bold visions and speaking with certainty importance of are important to catalyzing defining change. The thing about swinging for the fences is that when you fall success and short, it’s usually a quick out. This embracing has been the story with several of the game-changing projects that failure. we’ve undertaken in recent history. It’s not that they didn’t have promise, rather the will (whether political or financial) to follow through ran short.

Some of our best results have come from the most aged programs. Look at JumpStart’s 15 years of continued monetary and cultural returns. Destination Cleveland has altered the perception of our metropolis in the minds of countless visitors. Jobs Ohio and Third Frontier have done material good for the state’s economy.

These are well-funded initiatives with specific goals. They’ve also had the time and space to make incremental improvements and learnings. Grind-it-out stories of building a wall by laying individual bricks.

My years of startup life have taught me plenty about seeing things through. They’ve also taught me about the importance of defining success and embracing failure. Not every great idea works out. Not every late night of fevered programming results in usable code. Not every iteration of a logo design leads to an acceptable result. Not every sales call means revenue in the door. It doesn’t mean that those hours and labors were wasted.

Rather, they serve as opportunities to practice, to hone skills and to learn from mistakes.

Even failed startups build relationships, develop muscle memory and improve odds for future success. They instill value in hard work, persistent effort and small wins. So, too, should be our approach to initiatives to change Northeast Ohio’s economic outlook. Here’s how we can maximize the outcomes: SEE REGION, PAGE 9

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

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

Please include a telephone number for verification purposes.

8/17/18 11:41 AM

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REDEFINING CORPORATE HOSPITALITY Personal View

Data can be key in aiding students’ career decisions

By RANDY BENNETT and WILLIAM H. GARY SR.

Recently, students across Ohio and the country graduated with precious two- and four-year degrees, the first step toward gainful employment, essentially with a family sustaining wage. Thousands more have earned short-term certificates and other credentials to make them attractive employees. These individuals have invested time and money to obtain skills and training required for employment in industries that are eagerly looking for hard-working, qualified employees.

This investment in education is one of the most important actions an individual can take, because it should lead to a better job. At manufacturing company Automation Tool & Die in Valley City, hiring decisions are critical, and we look to partner with educational institutions like Cuyahoga Community College to develop and employ the best trained individuals. The value of this training cannot be understated. Prospective students must be proactive in deciding which programs and institutions will best help them achieve their goals.

To this end, there is legislation in the U.S. Congress called the College Transparency Act. The bill would create a user-friendly website with information about college costs, graduation rates and post-college employment, with the purpose of revealing what careers are in demand, what programs are best for getting students employed and what wages they can expect once employed.

The data, from colleges and universities and from federal and state agencies, could lead to skilled, motivated workers. There would be a real connection between a selected curriculum and a job in the workforce, and potential students would be able to make

REGION

CONTINUED FROM PAGE 8

Focus on founders Startups fuel the engine of emerging economies.

Without founders, that motor grinds to a halt. Founders are the key. Regions with poor startup communities view entrepreneurs as grist for the mill. The best ones treat them as catalysts, leaders, even celebrities.

We should view ourselves as cheerleaders for, and servants to, entrepreneurs. Every PowerPoint slide mapping the ecosystem should have founders as the hub of the wheel, not as a spoke. Every decision made on a new innovation space should be through the lens of what will attract and help entrepreneurs. Every conference should be about informing and connecting those starting and running companies.

Build relationships Never before have I seen such levels of cooperation between civic leaders, business owners and economic development organizations. The relationships developed are going to be fruitful regardless of the outcome of any one mission.

So, too, have been the results of StartInCLE’s events and platforms. We’ve never seen more founders connecting on a deeper level and building real relationships that can benefit each of us, but also as a whole.

Simplify social structures Committees and subcommittees are great for structuring unwieldy groups and focusing labors. They’re not great at allowing for the organized chaos and serendipity required to encourage greatness. Democratize and decentralize with technology.

P009_CL_20180820.indd 9

choices that reconcile their passions with opportunities — rather than having to choose one or the other.

From a financial perspective, having this information is more important to students than ever before.

Ohio ranks 16th on the list of average student loan debt by state. Ohio’s class of 2016 has average student loan debt of $29,579, which, with a 6% interest rate, can mean monthly payments of $333 over 10 years. To be able to afford to repay this loan, including interest, at 10% (gross monthly income), students will need to find a job that pays over $40,000.

The College Transparency Act could help change this, by collecting existing information in one place where it can be available publicly. This data would be useful and clear to career-minded students, parents and high school guidance counselors that jobs in the tool and die industry, for example, are in demand, lucrative and provide immediate employment for people with in-demand skills and credentials. The bill also is vital to Ohio businesses that benefit from the existence of a navigable data system that would yield the talent pipeline that growing local industries demand.

In this tight labor market, businesses are struggling to find qualified workers.

If students have the data to make an informed decision, they will consider pursuing fields where employers are hiring.

Not only would that make the toughest decisions for businesses and students much easier, it would go a long way to growing our local economy.

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Bennett is vice president of Automation Tool and Die in Valley City and a member of Business Leaders United for Workforce Partnerships. Gary is executive vice president for workforce community and economic development at Cuyahoga Community College.

Make smaller objectives Lofty goals are important. But let’s set out a plan of action that gets us there with smaller steps that each have their own value. Track metrics against the sub-objectives to get a picture of how we’re progressing to the final goal.

Keep going Even if we’re not the “Capital of X Technology” by 2020, why should we stop working together toward being one of the hot spots? If we don’t end up with the “World’s Largest Z,” why can’t we just have a great one, filled with talented energetic people doing amazing things? You don’t have to be the very best of something to have value. Your worth is not based in superlatives, and neither is Cleveland’s.

The future is in our hands, and many of us are showing our commitment to Northeast Ohio by engaging and making an effort. No one will “naysay” our intent to help, and we should not begrudge their well-earned skepticism of “savior projects.”

I encourage everyone to do something to improve our region’s future. Any of the initiatives in the spotlight will welcome your involvement. Bringing together three peers over coffee or mentoring a young founder can have dramatic impact. Don’t be discouraged if your contributions feel small. They are important.

Cleveland has always been great. Yes, it can be improved, but it doesn’t need to be the best at anything for me to happily call it home. Listen to LeBron James’ advice to the media after Game 1 of the NBA Finals …

“Be better tomorrow.”

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8/6/18 3:42 PM

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8/17/18 12:02 PM

SPONSORED CONTENT

August 20, 2018

ASK THE PROFESSIONAL

The Evolving Community Banking Landscape Insights from a financial industry veteran

W

estfield Bank manages $1.5 billion in assets and serves business and individual clients from locations throughout Northeast Ohio. As president, Mike Toth oversees Westfield Bank’s performance and growth objectives. He is responsible for retail, mortgage and private banking. Mike has more than 25 years of banking experience across Northeast Ohio, including leadership roles with large regional banks in retail banking, business banking, product management and procurement.

As such, he has experienced significant changes within the banking industry. Community banks, he says, are uniquely positioned to both retain and build their customer base amid an evolving, tech-dependent banking landscape. “We believe that you have to strike the right balance between investing in technology while continuing to develop and maintain relationships with customers,” Toth says. “We’ve found, through client feedback and testimonials, that clients still prefer to have a relationship with a banker they know and trust.”

Mike shares his perspectives with Crain Content Studio — Cleveland on how banks are reshaping their delivery models to serve the financial needs of consumer and business clients.

What is your outlook on the local banking climate?

Population trends suggest that the density is shifting to the Columbus and Cincinnati areas. While some new middle market-sized companies have entered Northeast Ohio, there hasn’t been

a wholesale surge in new companies in the region. Despite this, Northeast Ohio still is an attractive market for companies; therefore, it still is attractive to banks. New regional and national banks have entered the region because of the opportunities.

This environment creates more

Business Banking Simplified.

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competition, which can lead to irrational pricing and terms on loan and deposit products. Community banks offer a unique solution by partnering with businesses long term while reinvesting in the communities they serve.

How do small banks compare to big banks?

The ability to leverage outsourced technology partners levels the playing field. Years ago, new bank products and solutions were developed in-house.

However, fintech firms and other partners now enable banks to buy the services rather than investing in the “build.” This allows smaller banks to purchase and integrate solutions into the bank in a faster and cheaper way and can create parity of financial solutions with the larger banks.

Historically, larger commercial clients have sought loans and deposits from bigger banks with larger balance sheets.

In today’s banking era, smaller banks often provide capital to larger commercial clients. Banks such as Westfield use local deposits to reinvest into local relationships in the form of loans to both businesses and consumers. Larger banks can take local deposits and allocate them to other markets, which benefits communities other than Northeast Ohio.

How do banks make money, and how is that impacted by the economic environment?

Community banks make money primarily in two ways: net interest income, which reflects the difference between what clients pay on their loans and what they are paid on their deposits, and fee income. Generally, community banks derive the bulk of their income — often 80% or more — from the income they generate from their loans.

Other banks formed hundreds of years ago have expensive branches that no longer align with client preferences.

Westfield Bank, founded in 2001, is part of the modern era. We leverage technology to serve clients through mobile and internet banking, while still delivering personalized interactions at our branch locations in Cuyahoga, Medina, Stark, Summit and Wayne counties. This approach has enabled the bank to provide trust, personal relationships, convenience and security.

Will emerging technologies make traditional banking Bank deposits are the “raw materi- obsolete?

als” that banks use to fund their loans.

In a rising rate environment, banks’ raw materials become more expensive.

A shortage of raw materials (deposits) can make it more challenging to provide loans to businesses and consumers. That is why so many banks across the region have increased their focus on deposit offers.

Westfield Bank has launched special rate offers to attract new depositors to the bank and to retain the clients we have. Those local deposits help us provide loans to local businesses.

“Banking local” is one way Northeast Ohio residents help the Northeast Ohio community financially prosper.

How are client preferences changing for banking services?

The first ATMs were introduced in the 1960s, and the fear was that tellers would become obsolete. This didn’t happen. Internet banking was introduced in the 1980s, and the fear was that bank branches would become obsolete. This didn’t happen.

Mobile banking was introduced in the mid-2000s, and the speculation was that internet banking would become obsolete. This didn’t happen.

Clients prefer to have multiple options available to them. When a new banking channel is introduced, some clients migrate to the new channel more quickly than others. However, they still use the other channels. The introduction of a new banking channel becomes more of an “and” than an “or.”

We’ve found that clients like a mix of traditional banking coupled with modern technology. Our goal is to provide high-touch personalized service while also investing in technological solutions that enable banking 24/7. We strive to provide a consistent experience across all channels.

Some banks formed in the modern era have no physical branch presence.

Bitcoin and cryptocurrencies will continue to become more prevalent.

However, they are not a threat to traditional banking.

Our industry is governed through rules and regulations that are designed to protect clients, banks and shareholders.These regulations have been tested and modified over decades and through multiple economic cycles. The industry continues to evolve in a way that is safe, secure and delivers necessary services to clients.

Cryptocurrencies are not regulated in the same manner. They have experienced extreme volatility despite a relatively stable economy. Time will tell how these cryptocurrencies respond in an economic downturn.

What will the industry look like in 10 years?

There were approximately 18,000 banks in 1986. Today, there are fewer than 6,000. While the number of acquisitions has dropped, the pace of acquisitions has remained fairly steady.

There are more than 180 banks headquartered in Ohio, most of which are below $1 billion in asset size.

(Westfield Bank is around the 15thlargest.) That number climbs to 450plus when you add in Ohio-based credit unions and other financial institutions.

It is likely that the historical pace of acquisition will continue into the future as banks deal with the changing technological, regulatory and economic environments. This will create opportunities for both community and regional banks to achieve greater efficiencies and provide enhanced capabilities to consumers and businesses across the state.

Technology will continue to evolve and help banks deliver financial solutions that are safer, faster and cheaper. Keeping up with the pace of technological innovation and providing client-centric solutions will not be nice to have, but table stakes for all banks.

6/14/18 10:21 AM

This advertising-supported section is produced by Crain Content Studio-Cleveland, the marketing storytelling arm of Crain’s Cleveland Business. The Crain’s Cleveland Business newsroom is not involved in creating Crain Content Studio-Cleveland content.

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Focus FINANCE

Private equity’s evolution - Page 14 | Q&A - Page 15 | Adviser - Page 17

Banks unlock new business with fintech

erhui1979/iStock

Banks are increasingly locking arms with innovative tech startups in hopes of modernizing their offerings

By JEREMY NOBILE jnobile@crain.com @JeremyNobile

A few years ago, traditional banks largely looked at fintech startups — many of which sought to flip the world of financial services on its head — either dismissively or as foes eager to disrupt their business models.

But banks and fintechs have become darlings in recent years. That trend is resulting in new and modern products, services and revenue streams for banks while simultaneously creating a slew of lucrative opportunities for fintech companies — a sector that has seen $57.9 billion of global investment at mid-year 2018, which is already 52% more than the $38.1 billion invested through the entirety of 2017, according to KPMG’s Pulse of Fintech report.

“I think there might have been historically convention-

P011_CL_20180820.indd 11

al wisdom to go and build it yourself, particularly if you’re a larger institution,” said Dennis Devine, head of consumer and business banking and co-president of community banking for the $136 billion in assets KeyBank. “We learned quickly there is innovation occurring in the space that we could partner with in ways we had not thought of before.”

Fintech is a term generally ascribed to any financial technology. In that regard, banks have been engaged with fintech since they started using computers and the internet. The term itself could refer to any financial process built around technology or firms developing those. That could involve payments or money management services for consumers, or something that streamlines internal accounting processes for companies, or cryptocurrencies like Bitcoin and the blockchains on which those are built.

Within that space are countless startups racing to develop the next big fintech-based service or product.

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But it was really just within recent years that fintech companies truly began finding their place in the banking world.

The modern-day dynamic between fintechs and financial institutions began a few years ago as large U.S. banks and regional banks started working with them. That includes Cleveland-based KeyBank, who had consolidated computer systems in 2014 with the Oracle Banking Platform.

A good example of how the company turned an early fintech relationship into an additive service for the bank itself comes with its investment in HelloWallet in 2015.

The 2009-founded startup offers financial management tools, which Key first rolled out for its employees before offering the same platform to customers. Before that partnership, HelloWallet had hardly any users.

Since then, Key has grown into HelloWallet’s largest customer. Key was so enamored with the service it acquired the business from Morningstar in May, adding about 36 employees.

“Four years ago, we might’ve thought about just building that ourselves. Now I have a separate office in Washington, D.C. with tech leaders and designers, most of whom didn’t work with a bank before,” Devine said. “Now they’re designing financial wellness solutions central to the client. That’s an excellent evolution that has occurred.”

Today, thanks to HelloWallet, Devine said the number of clients taken onto the financial wellness platform per banker per day is up by 32%.

“So that’s where this fintech fits,” he said. “There’s a really quantifiable way to look at this.”

Key has engaged a slew of fintech companies through general investments, partnerships and acquisitions since Oracle and HelloWallet. One this spring, with Bolstr, is designed to streamline small business lending.

Another, with Billtrust, began in 2017 and offers cloud-based payment cycle management. One from 2015 with AvidXchange establishes automated bill payment solutions. The examples go on from there.

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By JEREMY NOBILE jnobile@crain.com @JeremyNobile

VOL. 39, NO. 21

MAY 21 - 27, 2018

The largest money manager in NortheastFINANCE Ohio, which has been quietly amassing Byrather JEREMY NOBILE size for well over a century, has achieved explosive growth sincejnobile@crain.com a management-led and private equity supported separation from Key@JeremyNobile Corp a few years ago.

Now, following a recent IPO, Brooklyn, Ohiobased Victory CapitalThe Management’s parent largest money manager in Northeast company, Victory Capital Holdings, is setting Ohio, which has been rather quietly amassing NOBILE the stage for its next size era of driven by itsBy JEREMY forgrowth well over a century, has achieved exmulti-boutique model and agrowth consistent acquiplosive since a management-led jnobile@crain.com and sitions strategy. private equity supported separation from Key@JeremyNobile CEO David Brown: “We eventually evolved to the point where it just didn’t make sense for Key “We saw an opportunity the market Corp a in few years ago.to do to be the owners of Victory Capital.” (Ken Blaze for Crain’s) something different than what was happening, following a recent IPO, Brooklyn, OhioNow, which was our integrated, multi-boutique no animosity there.

The relationThat was nearly five years ago. And while The There largestwas money manager in Northeast based Victory Capital Management’s parent model that we havecompany, today,” said Victory CEOOhio, ship between Keyrather and Victory is still strong, in Crestview is still a majority owner of the busiwhich hassetting been quietly amassing Victory Capital Holdings, is David Brown, who joined the firm in next 2004 era while — the headquarters off exTiedeman ness — of which employees own a 35% stake fact for well overlatter’s century, has achieved the stage for its ofsize growth driven bya its plosive growth since a complex management-led and staff it — it’s given Brown and Victory’s board freeit was still a part of Key. Road sits within for KeyCorp multi-boutique model and a consistent acquiequity supported separationThe from Key- simply dom to operate how it likes.

That model, whichsitions truly started to develop atprivate subleases from the company. timing strategy. a few years ago.said, CEO separate from Key,where Victory on an Victory following a management-led buyoutCorp Brown for Victory step out oneventually its Once David to Brown: “We evolved to the point it set justout didn’t make sense for Key “We saw an opportunity in felt theright, market to do following a recent Brooklyn, OhioNow, to be the owners of Victory (Kenstreak Blaze for acquisition toCrain’s) give it more scale. It’s from Key in 2013, is largely what Brown feels po-what own continue theIPO, work it had been doing for Capital.” something different than wasand happening, based long Victory Capital Management’s parent sitions the firm to flourish as its industry bought companies as Key refocused on other which was our evolves. integrated,somulti-boutique There wasstrategies. no animosity there.

The three relationThatsince was then: nearlyMunder five years ago. And while company, Victory Capital Holdings, is setting management business Key’s investmentmodel 2014); Efficient Model Port- owner of the busi“We eventually evolvedbetween to the point it Capital that we have today, ” said CEO Keyitswhere and Victory is still (in strong, inCompass Crestview is still a majority the stageVictory for its next era ofship growth driven by that eventually became Victory was more thanthe firm folios (in 2015), which became known as CEMP; just didn’t for—Key be the owners thetolatter’s David Brown, who joined in 2004make whilesense multi-boutique model andfact a consistent acqui- headquarters off Tiedeman ness — of which employees own a 35% stake a century old as theitcompany to shedsitions RS Investments 2016).

It also took and a mi-Victory’s board freeof Victory Capital,” Brown said.

Road sits within a complex forand KeyCorp staff it (in was still alooked part of Key. — it’s given Brown strategy. the division several years ago.

CEO David eventually to the point where it just didn’t make sense for Key fromtothe TheBrown: timing“We simply That model, which truly started to develop at subleases domevolved to operate how it likes.

“We saw an opportunity in the market docompany. to be the owners of Victory Capital.” (Ken Blaze for Crain’s) Many banking conglomerates were making felt right, Brown for Victory to step out on its Victory following a management-led buyout Once separate from Key, Victory set out on an something different than what was happening, Victory Capital at a said, glance similar moves around thatKey time, shedding theirwhich There wasbeen no animosity The relationwas our multi-boutique years acquisition streak toThat givewasit nearly more five scale.

It’sago. And while continue the work it had doing for there. from in 2013, is largely what Brown feels integrated, po- own and J JVictory Capital spun out KeyCorp a management-led, private equity-supportmoney managers to cut costs focus on coreas ship Key and Victory bought is still strong, incompanies model that weevolves. have today, ” long said Victory CEO following Crestview is stillthen: a majority owner of the busisitions theand firm to flourish its industry three since Munder so asof Key refocused onbetween other strategies. ed buyout at firm $246 million in 2013. the point latter’swhere headquarters off Tiedeman ness — of which employees fact — who valued joined the 2004 while banking services in those following management theDavid Brown, investment business Key’syears “We in eventually evolved to the it Capital (in 2014); Compass Efficient Model Port-own a 35% stake JJSince Road sits within a complex forfolios KeyCorp staff — it’s given known Brown as and Victory’s board freeit was still amore part that ofthan Key. deal,just thedidn’t firm has gone from $18 billion assets to $60.9 billion, 148it which last recession. Key eventually sold the business that eventually became Victory was (in 2015), became CEMP; make sense for Key to bein the owners employees totruly 300,started 18 investment to 72 andthe five franchises to nine, plus a dom to operate how it likes. from company.

The timing simply model, which to developstrategies at subleases to Victory employeesa—century there were at Thatlooked old about as the148 company to shed of Victory Capital,” Brown said. and RS Investments (in 2016). It also took a misolutions platform, VictoryShares. felt right, Brown said, for Victory to step out on its Once separate from Key, Victory set out on an Victory following a management-led buyout the time — and New York private equity firmago. the division several years acquisition streak to give it more scale. It’s and continue the work it hadThat beencapital doing for from Key in 2013, is raised largely what Brown po- in aown JJ The firm about $140feels million recent IPO (NASDAQ: VCTR). will help Crestview Partners for Many $246 million. bankingProceeds conglomerates were making Capital glance sitions the firm toits flourish as itsVictory industry evolves. bought three companies since then: Munder so long asat Keyarefocused on other support eventual separation from Crestview Partners, the New Yorkstrategies. private equity firm of Key’s sale were used to buy back stock, benesimilar moves around that time, shedding their investment business Key’sthat “We eventually evolved to the point where it Capital (in 2014); Compass Efficient Model Portstill holdsmanagement a majority stake in the business. fiting shareholders. money managers to cut costs and focus on core JJVictory Capital spun out of KeyCorp following a management-led, private equity-support-

SUCCESS IS IN VICTORY’S SIGHT

that eventually became Victory was more than

just didn’t make sense for Key to be the owners

folios (in 2015), which became known as CEMP;

ed buyout valued at $246 million in 2013. banking services in thosea years following the century old as the company looked to shed of Victory Capital,” Brown said. and RS Investments (in 2016). It also took a milast recession. Key eventually sold theseveral business the division years ago.JJSince that deal, the firm has gone from $18 billion in assets to $60.9 billion, 148 employees to 300, 18 investment strategies to 72 and five franchises to nine, plus a to Victory employees — thereMany werebanking about 148 at conglomerates were making Victory Capital at a glance solutions platform, moves around shedding their VictoryShares. the time — and New Yorksimilar private equity firmthat time, JJ Victory Capitalinspun out ofIPO KeyCorp following a management-led, JThe money managers to cut costs J and focus onraised core about firm $140 million a recent (NASDAQ: VCTR).

That capital willprivate help equity-supportCrestview Partners for $246 million.

Proceeds ed buyout valued at $246 million in 2013. support its eventual separation from Crestview Partners, the New York private equity firm banking in those years following the of Key’s sale were used to buy backservices stock, beneholds a majority stake in the JJ Since that deal,business. the firm has gone from $18 billion in assets to $60.9 billion, 148 last recession. Key eventuallythat sold still the business fiting shareholders.

to Victory employees — there were about 148 at the time — and New York private equity firm Crestview Partners for $246 million. Proceeds of Key’s sale were used to buy back stock, benefiting shareholders.

employees to 300, 18 investment strategies to 72 and five franchises to nine, plus a solutions platform, VictoryShares.

JJ The firm raised about $140 million in a recent IPO (NASDAQ: VCTR). That capital will help support its eventual separation from Crestview Partners, the New York private equity firm that still holds a majority stake in the business.

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Many others are taking a similar approach toward fintech and innovation, partnering with related startups to ultimately either cut costs, improve services or grow revenues — and those things certainly aren’t mutually exclusive.

“At Fifth Third Bank, we see fintech as an opportunity, not a threat. We have always embraced innovation, and our strategy is to buy, partner and/or build, as illustrated by several of our recent innovations,” said Fifth Third Bank president and CEO Greg Carmichael, whose background is in technology, having worked at Emerson as chief information officer and in IT at GE before that, in an emailed statement. “This strategy is driven by the way our customers and clients want to bank, which is anywhere, anytime. Innovation and technology are in the bank’s DNA. Fifth Third was the first bank to introduce a network ATM infrastructure back in the late 1970s.”

One of the bank’s more recent partnerships involves Intellect Global Transaction Banking, whose services include not just payment transactions but cash management,

Mu

“Four years ago, we might’ve thought about doing that ourselves. Now I have a separate office in Washington, D.C. with tech leaders and designers, most of whom didn’t work with a bank before.”

— Dennis Devine, head of consumer and business banking and co-president of community banking, on KeyBank’s HelloWallet acquisition

collections and receivables. Designed to support corporate clients, the firm incorporates machine learning and predictive analytics as well.

For smaller banks, which don’t have the scale to even consider building such comparable tech platforms themselves even if they wanted to, fintech partnerships are an important way to compete for market share just like their larger counterparts.

First Federal Lakewood, a mutual bank with roughly $1.8 billion in assets, invested in Boston startup Numerated Growth Technologies in 2017 out of interest in its small business lending app, which was rolled out in the first quarter of this year.

The bank, which has a nearly 5% stake in the company, sought that deal because of concerns customers might seek loans through online lenders like Kabbage (which secured $250 million from SoftBank Group last year) or peer-to-peer lending platforms like LendingClub, said Tom Fraser, president and CEO of First Mutual Holding Co. The new app lets First Federal streamline the traditionally slow loan process while maintaining low rates so it can compete not just with fellow banks but non-bank financial institutions.

“It’s moved from being fear or disrespect or a sense of rivalry,” Fraser said of how bankers view the fintech space. “When each sees the benefits the other brings to the table, it makes the partnership easier and creates a sense of trust.”

So are tiny and agile fintech companies really the disruptors of banking they claimed they could be — or wanted to be — years ago?

Bankers don’t seem to think so.

The concern has largely faded, at least.

In fact, partnering with them may be a path toward avoiding impacts from the real disruptors. It's quickly becoming a common practice in banking today.

“The true disruptors are the Amazons of the world. The Googles. Those accumulating massive amounts of data consumers in general. They’re the greater threats to banks than any startup fintech is,” Fraser said. “Do

8/17/18 11:20 AM

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FINANCE we want the banking experience to be in the hands of big data providers such as an Apple or Amazon? Or do we as consumers want trust and access available through the local bank? The local bank can make the customer experience better and easier by working with fintech.”

Mutual understanding In the tech world, banking’s dynamic with fintech companies is due to a confluence of factors from a competitive landscape to the sheer sophistication of technology to the brainpower behind it all that’s allowing these startups to go to market in droves.

In many ways, though, fintech’s themselves weren’t developing products and services with the customer in mind. That’s something that has evolved in the last five years or so, said Nathan Hodgen, a senior product manager in Cleveland for AmTrust Innovation Lab. “There’s been such an engineering and IT focus for so long in fintech and other tech. But concentrating on the customer experience and what the customer really needs as the focal point — which seems obvious — we’re actually doing now instead of briefly talking about what customers want and then how do you build the infrastructure for it,” Hodgen said.

“Also, the discipline of product management is starting to get traction in more traditional institutions.”

Prior to his current job, Hodgen worked with the Federal Reserve Bank of Cleveland, where he worked on a series of projects, including modernization and mobile efforts for banks in the Fed's system.

“In a lot of ways, people are just coming to their senses as banks have success with technology,” Hodgen said.

As far as the role banks are playing in the fintech revolution, much of that is also simply an evolution of strategies for those fintech firms.

Just like how banks have been leery of startups, some startups, often erroneously, believe they can reinvent financial services without the support of a bank in their corner.

Maybe some will be succesful with that. Yet, they ultimately benefit from the customer base and legitimacy a traditional, regulated banking company has to offer.

“You can’t just pull those customers out of thin air,” Hodgen said. “If you’re a fintech company, you’re better off doing things together. And maybe that’s just a natural evolution.

Startups and fintechs are drawing this conclusion: I got these great ideas, but how do I get customers?”

But the evolution in thinking for banks can’t be understated.

“Banks are going to be looking to partner with smaller companies because just naturally larger corporations are slower at creating innovation,” said Ari Lewis, co-founder of Grasshopper Capital, a cryptocurrency hedge fund launched in Cleveland, and a consultant to blockchain and other fintech companies. “Many corporations are concerned more with preserving management and making sure bottom lines are good.”

It’s all about growth and revenue for banks.

Take, for instance, Goldman Sachs.

The massive bank, which is known for banking some of the world’s wealthiest people, now offers a lending product for middle-class people through Marcus, an online banking business that started in 2016. There have been some hiccups there. But for Goldman Sachs, the opportunity

is in creating new revenue streams by serving people it hasn’t before all while cutting costs or otherwise keeping them super low.

All those factors mean there is a dearth of opportunity for fintech startups today, which could very well see a lucrative payday if they build something the traditional finance sector really wants.

“As technology grows and you see more advancements with AI or blockchain or whatever, there’s always going to be opportunity. I believe startups are better versed for that opportunity because they have the ability to not have to worry about things like shareholders and have the opportunity to move quickly,” Lewis said. “Banks are recognizing this.

And that will only create more opportunity.”

The bull run that has taken U.S. equities to record highs this year may be about to reach its peak, according to the latest survey of fund managers by Bank of America Merrill Lynch.

Allocations to U.S. stocks jumped 10 percentage points this month to a net 19% overweight, the highest since January 2015, the survey said.

That makes America the most popular equity region for the first time in five years, according to the bank’s analysts.

“With investors telling us they are long on the U.S., the Fed and cash,

our view remains: peak profits, policy and returns,” said Michael Hartnett, Bank of America Merrill Lynch’s chief investment strategist.

“Rising corporate leverage concerns say bonds should outperform stocks, while a weaker profit outlook suggests defensives could outperform cyclicals.”

Safe-haven appeal has combined with a strong earnings season to keep the stock market of the world’s biggest economy attractive this year even as President Donald J. Trump’s trade curbs pose a threat to global economic growth.

Some 57% of respondents in the survey cited a trade war as the biggest tail risk.

A net 67% of recipients said the U.S. was the most favorable region for corporate profit expectations, the highest proportion in 17 years.

Long FAANG and BAT remained the most-crowded trade identified by investors for the seventh straight month.

The survey was conducted between Aug. 3 and Aug. 9 among 243 investors with a total of $735 billion under management.

— Bloomberg

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M&A market spurs shifting PE strategies

By JEREMY NOBILE jnobile@crain.com @JeremyNobile

ular strategy for putting that money to work.

Meanwhile, financial buyers — like private equity funds and other investment firms — continue to see dry powder build up as investors flood funds with capital.

As of June, that global dry powder supply topped $1.07 trillion, setting a new high-water mark for the industry, according to research firm Preqin. At least $3 trillion has been raised for funds in the past five years.

That competition for deals is what’s creating today’s seller’s market where price multiples are regularly in the double digits. They were 11 times EBITDA for half of all companies acquired in recent years, ac-

++ ++ +

++

+

Blue Point Capital Parnters partner Chip Chaikin, right, said the last five companies his firm has sold have had an EBITDA in double digits. Resilience Capital Partners co-CEO Steve Rosen, meanwhile, said, “Small is where it’s at to generate above-market returns.” (Contributed photos)

+

When Chip Chaikin started in private equity two decades ago, company multiples of earnings before interest, taxes, depreciation and amortization (EBITDA) — the key element in a company’s price tag when it’s being bought or sold — were roughly half of what they are today.

Investment firms are enjoying those prices on the sell side. But on the buy side, that trend is making it increasingly difficult for funds and their investors to make as much as they used to. The margin between buying and selling is under pressure from high front-end costs.

And that’s reshaping strategies for private equity funds across the industry.

“When I started, we were buying companies at five times EBITDA,” said Chaikin, a partner with Cleveland-based Blue Point Capital Partners. “Now, the last five we sold were in double-digit multiples. You’re just not doing your job if you’re not thinking about how to get returns out of this environment.”

The M&A landscape has been this way now for a couple years, and it’s reshaping strategies for investment firms.

Strategic buyers — think of companies buying other companies — are flush with cash to put to work.

Earnings of companies in the S&P 500 were just 2% shy of a record in July.

Tax reform is inflating balance sheets even more. Naturally, buying other companies has become a pop-

+

cording to Bain and Co.’s 2018 Global Private Equity Report.

Firms typically go for large companies first because they have the scale to offer more transformative impact, as in stronger returns.

So to keep those returns strong, firms are evolving in their approach to making deals.

They’re diversifying the types of companies they’d consider investing in, while looking for add-on companies like never before.

And, even though they’re still digging through the upper ends of the market, they’re increasingly paddling downstream for deals. There, multiples are lower because cash flow is lower. But there’s also more risk.

++ ++ +

Evolution in thinking

that, but the big one is the deals are cheaper. That’s sort of just a fact of life.”

Investment firms in Northeast Ohio tend to focus on the middle market, even lower ends of the middle market. A number of relatively young firms in this region, like Align Capital Partners, MavenHill Capital and Watervale Equity Partners, are doing just that. MavenHill, for example, is targeting companies in the industrial and health care sectors with between just $1 million and $6 million of cash flow.

But even the market’s larger firms are doing the same thing.

“Small is where it’s at to generate above-market returns,” said Steve Rosen, co-CEO of Cleveland’s Resilience Capital Partners. “Keep in mind that a recession is coming and there are going to be plenty of losses and failures, and most will be in small business. That is exactly the reason why the regulated banks focus on making loans to larger companies. Resilience will be there when the recession hits and most small businesses, if they can find a financial partner in that period, will come out stronger with fewer competitors.”

The Riverside Co., a global private equity firm co-headquartered in Cleveland and New York and the largest in this region, closed a micro-cap fund in 2016 with $650 million of capital. It’s still going after large companies in other funds. But money in the microcap fund is targeting companies with roughly $7 million of EBITDA, something much smaller than the firm has typically focused on in its 30-year history.

The idea of private equity being drawn to smaller and possibly even earlier stage businesses is an evolution for the industry. The whole purpose of a venture capital sector, after all, is to feed capital to those riskier investments that coincide with younger companies. Among various things, private equity funds like scale and predictability, which is something a startup simply doesn’t offer.

“Everyone has been moving downstream,” said Douglas Neary, vice chairman at Calfee, Halter & Griswold and senior partner in the firm’s corporate and capital markets practice.

“There are a couple factors in 03-07John S Grimm.qxp 2/23/2016

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FINANCE

Q&A: Howard Boyle

President and CEO, Hometown Bank And that will change things even more. Wait until five years from now.

It will be even more different than it is today.

At 120 years old, Kent’s Hometown Bank, which has roughly $200 million in assets today, has witnessed — and weathered — plenty of change unfold through the years, from evolutions in the banking industry to the multimillion-dollar redevelopment of a now-college town that was historically founded due to the surrounding canal and railroad network. The same can be said for the bank's 68-year-old leader, Howard Boyle, who has worked at the institution more than 43 years and guided it as president and CEO since the mid-1980s. From the advent of the internet to modern regulations squeezing community bank margins today, Boyle brings a unique and long perspective of how the industry has changed through the decades. Crain’s sat down with Boyle to discuss those very trends from the point of view of a seasoned community banker — who once did every job at the bank, including shoveling the sidewalk — to get a sense of what’s on his mind as he looks at the landscape for banking today. — Jeremy Nobile You’ve been with Hometown Bank now for more than four decades and CEO for over three. What path lead you here?

So I became CEO in ’85 or ’84, but actually got here in 1975. Kent is my hometown, and I went to Theodore Roosevelt High School (in Kent) and Ashland University. When I got out of college, I got drafted and spent two years in the service. One of my friends, someone I grew up with, told me if he weren’t a lawyer, he’d be a banker. Well, he said there were two banks down the road and he made me an appointment with both of them. I just picked one. And that’s about it. I just thought it was wonderful to work for an institution in a community I grew up in.

Did you ever aspire to work at a bank, let alone become the CEO of one?

I really didn’t. I was just looking for a job at the time. When I started, the bank only had five employees. We

Do you think there will always be a draw to a physical branch location?

I do. I mean, look at our lobby. There’s people there all the time, and they don’t have to do that. To come in and talk to a teller is something that is still in demand, particularly in a small town. There is always someone who wants a relationship with their bank that’s more than you can have online. And there’s enough of them in our community that keep us viable.

And it’s people from all different age groups.

have 66 today. So it wasn’t a real long ladder. And I was working for a president at the time who had been in place since 1943.

When you look around town, does it feel like a lot has changed?

Well, we may be the only community charter in the area besides Portage Community Bank now. There used to be more. There was a period in time when I knew all the CEOs and I could pick up the phone and call any one of them. I don’t have the foggiest idea who’s running some of these banks now.

A lot of that is probably just due to consolidation.

Yes, everything has consolidated.

What I used to consider main offices aren’t there any longer. They just have some operations there, but they don’t have staff with backroom administration and things like that.

So there’s really no one to talk to.

Sometimes there’s a branch manager, sometimes not.

What first comes to mind when you reflect on how the industry itself has changed over all these years?

Banking used to be a very personal type of activity, but over the years, we’ve created so many types of access to the bank we haven’t had before. Online. Mobile. It’s great for the bank and the consumer. But it’s a

lot less touchy-feely than banking was in that era. People used to come in and sit down and talk. We still do that. But it’s not as prevalent as it was 20 or even 10 years ago.

Compared with 40 years ago, it’s completely different.

Tech has really revolutionized the business.

As one of the local banks for a college town, do you get many students from Kent State University as customers?

We really don’t. The only draw we get from KSU is because we have an ATM that’s closer to the bars than anyone else. That’s a very popular machine. But students anymore don’t bank in the community of their college, which is what you did when I was in college. It’s not necessary now with online banking. And there really aren’t many banks that go on campuses anymore to try to get people to open accounts, unless you’re a regional or national bank.

Like that’s something maybe Fifth Third would be interested in. It’s expensive to have an office on campus itself.

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Pay gap narrows among highest-paid local CFOs

By CHUCK SODER csoder@crain.com @ChuckSoder

There’s still a huge gap between the executives at the top our Highest-Paid CFOs list (see Page 34) and those at the bottom. But the gap got a little bit narrower in 2017, at least by one measure.

The median total compensation increase for the 60 local chief financial officers on the full digital version of the list was 11.1% in 2017, up from 4.7% the previous year.

That increase might not be too surprising to regular Crain’s readers. Earlier this year, we published two other lists ranking local public company executives by total compensation. The median 2017 total compensation figure rose tremendously for our Highest-Paid CEOs list; it also edged up for our Highest-Paid Non-CEOs list.

What’s more surprising is that CFOs toward the bottom of the full list (who tend to work for smaller companies) actually got better raises

A LITTLER REGIONAL E M P LOY E R

on a percentage basis than those at larger companies.

The median 2017 pay increase was 5.4% for the top 20 CFOs who held the position through both 2016 and 2017.

By comparison, the median increase for the other 18 CFOs meeting that criteria was 12.1% — and only two of those executives saw their pay drop in 2017, compared to eight in the top 20.

That certainly wasn’t the case with this list last year, when the median increase for the top 20 was 6.9% — more than double the 3% increase for the rest of the CFOs on the list. And CEOs at larger public companies have received pay increases way beyond their counterparts at smaller companies, judging by our Highest-Paid CEOs lists from the past two years.

Of course, we’re talking about small numbers of executives, so the median could change noticeably if we were to remove just a few executives from our calculations.

And the story would change drastically if we were looking at average pay increases — largely because of Terrance Paradie, who served as CFO

for TransDigm Group until January 2018. His pay increased 717% to $7.1 million, but only because the Cleveland-based aerospace supplier awards stock options to most of its top executives every two years. He’s at No. 2 on the list. No. 1 is Eaton CFO Richard Fearon, who earned $8.6 million in 2017.

This year, we added tenure information to the list, so you can see how long each executive has been a CFO — and if they’ve left the position. And in the full digital list — which is available to Crain’s Data Members — we included how long they’ve been with their companies. On average, the CFOs on the list received the title roughly eight years ago and joined their respective companies about 16 years ago. Some of them have been working for the same firm for quite a while: 19 joined in the 1990s, six joined in the 1980s and one — former FirstEnergy CFO James F. Pearson, who is now executive vice president of finance — has in a sense worked for the same employer continuously since the 1970s. He joined an Ohio Edison subsidiary, Penn Power, in 1976.

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“As bigger boys are moving downstream, the middle market is moving further downstream, too,” Neary said.

“Everyone is looking for smaller deals because they want to find anything. And the bigger (the companies) are, the more competitive they are.”

Riverside co-CEO Stewart Kohl said, “We are not going downstream per se, but we are definitely looking and creating new ways to maintain the quality of deals and returns in a hyper-competitive environment.”

Those methods for achieving value in a deal include viewing deals more globally — particularly for firms like Riverside and Blue Point that own companies overseas that could benefit from a domestic company in the United States, or vice versa — strategically using operating partners and specializing in other industries.

Rowing downstream Even fintechs and related startups, which are ripe for venture capital, are increasingly hitting radar screens of private equity funds. For firms based in Northeast Ohio, who as a group have historically focused largely on manufacturing, opening up to tech investments marks an evolution in strategy.

Private equity funds aren't just carelessly throwing money at risky investments, of course. They're not really doing venture deals. Their investors wouldn't like that.

“Don’t be shy about reaching out to who you think might be a logical partner. Even if you’re not ready to sell, (the firms) will be willing to sit down and talk with you today.”

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But they are taking on more risk than before.

Blue Point, for instance, acquired an online sales platform a few years ago called NWL to support one of its portfolio apparel companies, Vetta LLC. NWL only existed for a few few years and was rather small when Blue Point bought it. The deal was more of an indirect reaction to market conditions: Blue Point wasn't actively thinking about going downstream as much as finding something that was particularly additive to Vetta, something which was prioritized over size or longevity of the target company.

“That's a business we would not have bought 10 years ago,” Chaikin said. “But given the growth in that segment and the value it could add, we did end up buying a pure e-commerce business.”

Smaller, tech-centric companies are often tacked on to other companies as add-on acquisitions to support platform investments. There has been a significant uptick in add-on deals as a result of that movement.

Riverside is especially active with add-on deals today.

Even Resilience, which has historically focused on manufacturing companies, is looking at smaller tech companies for value.

“We are not going downstream per se, but we are definitely looking and creating new ways to maintain the quality of deals and returns in a hyper-competitive environment.”

— Stewart Kohl, co-CEO, Riverside

“Today, every business is a technology business. We've applied for more than 50 patents across the portfolio over the past five years,” Rosen said. “We have three operating partners focused just on robotics, software and digital marketing. We have made tech add-on acquisitions within a platform investment. I would say that, if you are not investing in these areas, you are not going to be around for long.”

Nachshon Ventures is a new investment firm recently formed in Kirtland that hasn't made any deals yet but is targeting a slew of potential companies in industries ranging from commercial real estate to data security. The firm is being led by Jason Wuliger, a co-founder and former vice president at Beachwood's SplashLink.

For Wuliger — who said he's being opportunistic about what deals his firm would seek — the chance of a recession in the future is influencing his perspective on investment strategies as much as anything in today's market.

“There has been a lot of talk about us being at the peak of the cycle or even beginning to look downward instead of up,” he said. “I'm not sure how accurate any of that is, but it's something to keep in mind when you decide how much risk to put on. As we look at various opportunities, one question we are asking regardless of the industry or stage of the company is, what makes you think your company is going to be resilient through a recession? It's not like we're calling for one. But a downturn is more likely now than it was a few years ago.”

Neary said the takeaway for all this for companies who could be featured in a deal is that now may be the best time to shop around.

“Don't be shy about reaching out to who you think might be a logical partner. Even if you're not ready to sell, (the firms) will be willing to sit down and talk with you today,” Neary said. “Building bridges with those who might be logical buyers as a way for you, the seller, to gather information probably isn't a bad idea today.

It'll be a cagey discussion. But over time, you could get some good insights into where your business would fit with some of them and how to position it best.”

As Chaikin points out, “It's hard to imagine there'll be a better time to sell.”

8/17/18 12:03 PM

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Adviser: Tony Constantine

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The potential benefits are as follows: JJProperty owners can defer the gains on the sale of existing properties for up to 10 years, and JJProperty owners may be able to exclude all, or a portion of, the gain on the eventual sale of the opportunity zone property.

For example, if a property sells for $2 million, triggering a $1 million gain, the owner may be able to defer recognition of this gain if it’s reinvested in qualifying property in an opportunity zone within 180 days. In addition, if this replacement property is held for sufficient time, the gain on the sale of this replacement property will not be taxed.

The opportunity zone program was established by Congress as part of the Tax Cuts and Jobs Act — the federal tax overhaul that was signed into law late last year. The goal of the program is to address the uneven economic recovery taking place throughout the nation by providing valuable tax incentives to encourage investment in distressed communities. Every state has now identified low-income census tracts as opportunity zones, and a full listing of all areas is available online.

In Northeast Ohio, Gov. John Ka-

Constantine is a tax partner at Ciuni & Panichi in Beachwood.

sich has identified several census tracts as opportunity zones, including parts of downtown Cleveland and Akron. A number of suburbs, such as Cleveland Heights, Euclid and Warrensville Heights, also have qualified census tracts.

Investments must be made through a qualifying fund The investment must be made through a qualified opportunity fund organized for the purpose of investing in opportunity zone assets. The opportunity fund is required to hold at least 90% of its assets in qualified opportunity zone property. That’s defined as a business or business property located within a qualified opportunity zone.

Qualified opportunity zone business property means tangible property used in a trade or business.

Property must be acquired after Dec. 31, 2017 or substantially improved.

U.S. Department of Treasury and IRS guidelines defining “substantially improved” have not yet been released.

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Any future gain beyond the deferred gain can be eliminated if held for 10 years.

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There’s one area where the traditional pension plan is getting new life — as a tax dodge for wealthy business owners.

Pensions, also known as defined-benefit plans, can be used by doctors, law partners and wealth managers to stash hundreds of thousands of dollars in income a year. By doing so, they’ll get around the income limits Congress created to bar them from a generous new tax break for owners of pass-through entities, who report the firms’ income on their individual tax returns.

The Treasury Department proposed regulations this month specifying who qualifies for the 20% deduction, which effectively slashes the top tax rate to just under 30% from 37%. The rules also say that planning techniques such as the “crack and pack” — where business owners split their firms into different entities to lower their tax bills — are considered abusive.

That’s pushing top-earning service professionals to figure out other ways to get below the income limits of $315,000 if they’re married, or $157,500 if they’re single, so they can take full advantage of one of the tax law’s biggest gifts. One of the workarounds is a retirement plan more associated with union workers.

“Doctors and lawyers got really annoyed when they were excluded from the pass-through deduction,” said Daniel Kravitz, president of retirement plan administrator Kravitz. “After tax reform, these plans become even more beneficial.”

Kravitz said his firm, a specialist in defined-benefit plans for small businesses, is actively marketing pensions as a way for service professionals to get around the new rules.

Before the tax overhaul, clients typically used them to defer paying taxes on income.

Defined-benefit plans are generally set up in the last few months of the year, but Kravitz said he’s already having his busiest sales year ever, as clients start new pensions called cash balance plans and boost contributions on existing plans.

With a cash balance plan, participants know each year how much they individually hold. Employers make contributions according to a set formula and manage all participants’ investments collectively, usually guaranteeing a set return.

The contribution limits are based

on age: Generally, workers in their 30s and early 40s can pitch in fewer than $100,000, but limits for older workers rise quickly, to above $200,000 for those in their late 50s and above $300,000 for those in their late 60s.

Many large law firms and medical groups already offer cash balance plans to help their highly paid partners lower their tax bills. While these professionals may boost contributions, if possible, to try to take advantage of the pass-through deduction, the biggest potential opportunity under the new law is for the thousands of smaller businesses that don’t yet have such offerings.

Even before the tax law, the popularity of cash balance plans was surging for small business owners. There were 20,500 such plans in 2016, up almost threefold since 2010, according to Kravitz estimates based on Internal Revenue Service data. The majority are run by businesses with fewer than 10 employees; 37% of plan holders were doctors or dentists, while 10% were accounting, finance or insurance firms, and 9% were legal firms.

The interest is a change for the traditional pension plan, which has been slowly dying after most big U.S. employers replaced guaranteed retirement benefits with less-costly 401(k) retirement accounts.

Defined-benefit pensions can shield more income from the IRS than a 401(k)-style defined contribution account or individual retirement account, or IRA. Annual employee contributions are capped at $18,500 this year for 401(k)s and $5,500 for IRAs for those under 50.

A cash balance pension is the “next logical step” for successful business owners who are already funding their 401(k) profit-sharing plans up to their limits and want to avoid taxes by deferring even more income, said Keith Steidle of Steidle Pension Solutions, a small plan administrator based in New Jersey.

A 61-year-old married doctor with a practice earning $650,000 a year could set up a defined-benefit pension to get his taxable income under $315,000. He could put $268,000 in a cash balance pension, in addition to putting money in his 401(k) and contributing to employee retirement accounts, and get down to an effective tax rate of 20%, according to Kravitz’s calculations.

After several years of saving in a

cash balance plan, recipients generally roll their account balance into an IRA and manage the money themselves. Most choose to do so since the IRA is a more cost-effective vehicle and they can invest more aggressively than in a cash balance plan. There’s no limit on how much users can roll over. They don’t pay taxes until they pull the money out, typically when they’re in retirement and in a much lower tax bracket.

Lower-paid employees The rich aren’t the only ones who can benefit from the pension workaround. Like other retirement plans, defined-benefit plans are governed by regulations, called non-discrimination rules, that require owners to spread at least some retirement wealth to lower-paid employees.

The rules depend on the age and income levels in a workforce, but typically setting up a cash balance pension for a business’s owner will require a profit-sharing retirement contribution for middle-class employees equal to about 7.5% of their salaries. A cash balance plan can be too expensive, therefore, for larger businesses with many low earners.

For small, profitable professional businesses, however, the vast majority of the benefit can usually go to owners, not employees. If the doctor’s office that brings in $650,000 employs four people earning from $21,000 to $51,000 a year, retirement rules dictate that those four employees would split an annual retirement contribution from the doctor of $13,825.

Setting up a cash balance plan isn’t the right strategy for every

Plans shift focus away from costs With about one-third of plan sponsors citing it as their major concern, effectively preparing employees for retirement financially has slightly edged out an emphasis on reducing plan costs as their top issue.

That was the key finding of Fidelity Investments’ ninth annual study of plan sponsor attitudes, which also found that 82% of sponsors are making changes to their plan design and 83% are changing their investment menus.

The survey also found that more plans than ever — 92% — use plan ad-

visers, and that the number of plan sponsors actively looking to switch plan advisers — 22% — while historically high, is down considerably from an all-time high of 38%.

The reason for most plan design changes, the survey found, was to increase employee participation or savings rates.

A greater percentage of plan sponsors — 39% versus 25% in 2017 — reported that they added or changed a matching contribution, making that the top change to plan design this

year, with 56% of sponsors saying they made that change to increase employee participation and 47% saying they did it to increase savings rates.

The top changes to investment menus included replacing an underperforming fund — 33% — adding an index fund — 28% — and adding a lower-cost class of shares — 25%.

The study surveyed sponsors that use a variety of record-keepers and have at least 25 participants and $10 million in plan assets.

— Investment News

8/16/18 4:00 PM

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Bloomberg

business. Owners must be sure of stable, consistent profits before they commit to funding several years of pension contributions, said Jamie Hopkins, a professor at the American College of Financial Services.

No annuities Businesses also need to make sure they’re cutting their owners’ tax bills enough to make up for pensions’ higher costs. Because of the complex rules, it can cost thousands of dollars to set up and then administer a defined-benefit plan. Kravitz estimates the doctor’s office above would be charged a one-time setup fee of $5,500 and annual fees of $8,880.

Charges can be much higher for

larger firms, though they can spread the costs over more partners or participants. Typically, the money is invested conservatively, guaranteeing a particular rate of return, such as 4% a year.

For rank-and-file workers, the great appeal of a defined-benefit pension is that it can guarantee a certain level of income for life. Cash balance plans effectively offer the same thing, with rules requiring them to offer a way to convert pension balances into an income stream from an annuity. In practice, the wealthy participants in cash balance plans aren’t interested.

“Nobody ever takes an annuity,” said John Lowell, a partner and actuary at October Three Consulting. “Ultimately, they are a tax play more than they are a retirement plan play.”

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This panorama shows downtown Kent in 1917 near the intersection of Main and Water streets. Hometown Bank, founded in 1898, can be seen in the center by the front two cars. (Hometown Bank)

Q&A

CONTINUED FROM PAGE 15 What’s the greatest challenge for community banks today? Costs of business and technology?

Regulations?

Yes. It’s having the staff to understand all the regulations and being able to satisfy those and IT concerns, which are difficult for a community institution. When there were five of us, we still had reports we had to send to the government.

But you have to drill down so much deeper today. We couldn’t do that if we weren’t so computerized. It’s just a totally different environment. But as far as the customer is concerned, we try to get that face to the customer to be the same.

And as far as keeping faces the same, you’ve been the face of the bank as CEO for a particularly long time. Why do that? Isn’t it good to have new leadership at some point?

You have to look at the bank we have. We think it’s important to the community that the staff is consistent and recognizable. They want to bank with someone who lives next door. It’s part of this community bank mentality.

You’re 68, right? If I may be so blunt, are there any plans to retire?

Not in the near term.

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But surely there’s a succession plan in place, yes?

Possibly. (Boyle smiles and glances at president and COO Michael Lewis sitting nearby.) He’s been at Hometown Bank now 20 years.

Is the plan for the bank to stay independent?

A bank could come into Kent and open up across the street and in a relatively short amount of time be the size that we are. No one really needs us, so there’s no market for us. That said, we don’t have any interest in selling. We control our stock to the point we aren’t going to be sold unless we want to be.

Hometown Bank in Kent is 120 years old.

Growth overall at the bank has been somewhat flat in recent years. Is that by design?

It is. We are growing, but modest growth, we think, is smart growth.

We are not trying to be the largest bank in the metropolitan area.

There’s no way in the world we could compete with Huntington Bank or anyone like that. Well, we compete in different ways, like for service and in the hearts of the community.

Does the regulatory environment still feel like the greatest headwind to growth for banks of your ilk?

It is for sure. We’ve been here a while, including through the 1980s and all the issues going on then. It’s very common for legislatures to overreact and close the barn door when the horse is already gone. They realize they’ve done these things and then come back and make adjustments.

We’re in a period of adjustment-making right now, and that is making it a little easier for us.

I assume you’re talking about the scaling back of Dodd-Frank in the spring?

Yes. Dodd-Frank was tremendous overkill. The CFPB was tremendous overkill. Frankly, both were unnecessary. There was plenty of ability for the regulatory agencies to do all those things. They just didn’t. It’s not uncommon for a regulator who has effectively overlooked something that has caused a problem to come up with some new concept of

stopping it when they had the ability to stop it before.

Are there any kinds of regulatory roadblocks you’ve encountered that don’t seem to get talked about as much?

I’ll tell you what one of my pet peeves right now is. I think banks should be more involved in helping communities regenerate. You see these abandoned houses because banks have no ability to do anything with them. The bank will walk away and leave it for someone else to worry about. I think banks should have the ability through a subsidiary to help redevelop distressed communities. But right now, banking law doesn’t allow us to do that. I mean, who is better suited to pick up a piece of property, fix it up and sell it because it was foreclosed?

We could make it viable. Why can’t we just do that?

Sounds like you tried to do this before, establishing a community development company through the bank.

We did, just a few months ago, in fact. And we were rejected by the state. They said we could own the property, but there was no enabling legislation in banking law that would allow the renovation of property that wasn’t taken back in foreclosure.

And that’s only because nobody ever thought of it. It’s not a bad idea. It’s a great idea. I definitely think a bank should be able to have a development company.

Employers are expected to stick with modest pay raises next year Despite a corporate tax cut, record low unemployment and an accelerating economy, employers aren’t planning big increases to their salary budgets for next year, a new survey from Willis Towers Watson finds.

In a survey of 814 organizations, the consulting firm found that, on average, employers plan on giving out 3.1% pay raises in 2019. That’s an increase of about 0.1 percentage point from previous years. Before the recession, employers gave out 3.8% increases. Since then, despite the im-

proving economy, raises have hovered around 3%.

“Since 2008, we have been waiting” for employers to meaningfully raise wages, says Sandra McLellan, the North America Rewards practice leader at Willis Towers Watson. This year will not be that year. “It’s not a radical change, it’s a slight uptick,” she says.

The economic recovery has yet to hit workers’ wallets. Unemployment continues to fall, and demand for labor is increasing, but employers are

still not raising wages.

In fact, American workers effectively got a pay cut this year: U.S. average hourly earnings adjusted for inflation fell 0.2% in July from a year earlier.

Economists have multiple theories about why wages haven’t grown, despite all signs suggesting they should: decreased bargaining power for employees, low productivity, stock buybacks, globalization and automation, to name a few.

— Bloomberg

8/16/18 4:02 PM

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ENRICHING THE WORKFORCE Leaders outline some ways the industry is coalescing a workforce that best serves, represents the community

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T

he health care industry is a jobs generator in Northeast Ohio, employing about 214,000 within a ninecounty region, which is 31% above the national average. The predominantly female-employed health care and social service workforce is composed mostly of registered nurses (16.5%), nursing assistants (8.3%), home health aides (6%), licensed practical and vocational nurses (4.5%), and medical secretaries (4.1%). Employment streams through various facets of an operation — including administration and leadership — and permeates through fields such as law, retail, manufacturing, education, food service, construction, communication and technology. With a workforce that is 74% white and 80% female, the industry indeed has an opportunity to diversify its workforce, local industry leaders say.

“When we look at the disparities in the health care workforce, what we’re seeing is the sector is still largely trending toward female nurses and male doctors,” said Carolyn Lanier, chief of staff and vice president for diversity, equity and inclusion at Northeast Ohio Medical University.

But, workforce demographics are shifting, driven in large part by more intentional outreach and recruitment efforts among NEOMED and other health care providers and stakeholders.

“Our incoming classes are approaching a gender-split, of which we are very proud,” Lanier said. “We’ve also been working with the admissions department and have made changes to our student admissions process. We’re looking at holistic admissions.”

By those measures, standardized test scores now form just part of the candidate’s picture.

“We look at the student’s background, experi-

CAROLYN LANIER chief of staff and vice president for diversity, equity and inclusion Northeast Ohio Medical University

LORRAINE WASHINGTON

senior vice president of human resources and volunteer services Summa Health

ence and philosophy on health care. Our interviews with our candidates are very important because we want to know if they will be able to empathize with and understand the needs of the patients they will be caring for.”

PAMELA WAITE director of healthcare workforce The Center for Health Affairs

The Center for Health Affairs, the region’s hospital advocacy organization, views diversity and inclusion as a key aspect of filling a workforce need, particularly as Northeast Ohio faces a shortage of 3,500 nurses by 2020. Its Nursing

Forecaster reflects a nudge in the number of male RNs — to 9% in 2015 from 8% in 2013, but gender parity is just one consideration, said Pamela Waite, director of healthcare workforce.

The center is also working closely with the Ohio Action Coalition (led by the Ohio League for Nursing and the Ohio Hospital Association) on one of its main initiatives, which is to increase diversity in nursing to reflect the patient population’s ethnic and cultural diversity. These efforts are especially significant because Northeast Ohio is one of the few regions in the country that is a health care export market, meaning that patients who live outside of the region come here for health care.

“We are encouraged because the numbers are changing,” Waite said. “There is more diversity in the younger nurses when you look at the breakdown of nurses by age. In the category of nurses who have 41-plus years’ experience, there are only .1% who are Hispanic or Latino.

That number increases to 1.6% when you look at nurses with 0 to 10 years’ experience.”

Plus, according to the Nursing Forecaster, males represent a larger percentage of younger nurses — at 13.3% with 10 or fewer years in the field, versus 1.1% among nurses with 41 years-plus experience.

“There are a lot of initiatives in Northeast Ohio to continue improving these numbers,” she said.

Summa Health has a large immigrant and migrant patient population, and is implementing an English as a Second Language, or ESL, offering, to attract more employees representing those communities, said Lorraine Washington, senior vice president of human resources and volunteer services. The health system also has developed resource groups for LGBTQ employees and employees of color. The 7,200-employee system currently has nearly 400 job openings, and is increasing its recruitment efforts among diverse populations as part of its goal to fill those openings, including senior leadership positions, said Washington, noting that the health system has made gains there as well.

“We have three African-Americans on our leadership team. Three years ago, there was one,” she said. “Among every business and in health care, the objective should be to have a workforce that reflects the community they serve,” Washington said.

DATA SOURCES: July 2018 EMSI employment data for Ashtabula, Cuyahoga, Geauga, Lake, Lorain, Medina, Portage, Stark and Summit counties; Center for Health Affairs; Ohio Action Coalition’s Education Diversity Toolkit.

Profiles included in Northeast Ohio’s Notable Women in Health Care represent women nominated by companies and organizations within Northeast Ohio. To be considered, completion of an extensive survey, including a letter of endorsement, was required. Stories included in this section are based on submitted survey information. Additional women were submitted by an internal selection committee for the purposes of creating a diverse and comprehensive list.

FOR MORE FACES OF NOTABLE WOMEN IN NORTHEAST OHIO’S HEALTH CARE COMMUNUTY, SEE PAGES S2-S11.

This advertising-supported section is produced by Crain Content Studio-Cleveland, the marketing storytelling arm of Crain’s Cleveland Business.

The Crain’s Cleveland Business newsroom is not involved in creating Crain Content Studio-Cleveland content.

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Mr. Willie F. Austin, the NEON Health Services’ Board of Directors, and staff would like to congratulate Ms. Karen K. Butler, Chief Operating Officer, for being selected as one of Cleveland’s Notable Women in Health Care. www.neonhealth.org

Congratulations to all of the 2018 Notable Women in Health Care.

Cynthia Moore-Hardy, FACHE President and CEO of Lake Health

Director, External Affairs The MetroHealth System Rita Andolsen is nothing short of a “force of nature,” according to Elizabeth Allen, senior vice president of external affairs for The MetroHealth System. “She wants to make Cuyahoga County a better place for everyone, especially children and those who face the highest hurdles and toughest challenges,” Allen said in the nomination.

“Join her – or get out of the way.” Andolsen took a communications leadership role at MetroHealth four years ago after more than 25 years in media, TV newsrooms and community outreach, including a long and prominent career at WKYC Channel 3. At MetroHealth, Andolsen’s direction of the “Know the Risks” campaign has been particularly impactful. Launched in conjunction with the county in 2017, the campaign enlightened the public about the link between prescription painkillers and heroin addiction. It was run almost exclusively pro bono and resulted in unprecedented local media coverage that garnered MetroHealth about $2 million in free media/advertising.

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JULIA (JUDY) BARTEL

Chief Clinical Officer Hospice of the Western Reserve It is not a stretch to say Julia (Judy) Bartel is a pioneer in hospice and palliative nursing. She entered the field when it was a comparatively new and unfamiliar specialty. Ursuline College was the first in the U.S. to offer a master’s in palliative nursing, and Bartel was the first student to graduate from the program. During her career at Hospice of the Western Reserve, Bartel has innovated, among others, a consultative palliative care program that reduced hospital readmissions and enabled independence; a dementia care program that engages individuals in care decisions earlier in their disease process; and a renal disease model that integrates palliative care with dialysis services. Today, she is one of only 68 Palliative Care Nursing Fellows in the U.S. In the nomination, Hospice vice president of human resources Clement Hearey credits Bartel’s leadership for being “a nationally recognized leader in hospice and palliative care.”

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DIANE BEASTROM

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KAREN BUTLER

President and CEO Koinonia Homes Inc.

Diane Beastrom has nurtured Independence-based Koinonia Homes Inc. from a handful of Cuyahoga County group homes to one of the region’s leading community-based service providers for adults with intellectual and developmental disabilities. Today, Koinonia is a $30 million enterprise with 21 licensed residential homes, 51 supported living sites, day support and vocational and career services. Beastrom has managed mergers with two other intellectual and developmental disabilities service providers, expanding into Summit, Medina, Lake, Geauga and Lorain counties. She also helped launch adult and school-based employment services. In addition, she has overseen two strategic planning processes, “which have made the growth and prosperity of the organization possible,” according to Koinonia board member Julie Johnson, president of the Boys & Girls Clubs of the Western Reserve. “The key to Diane’s success is that she understands the various social determinants that impact those with I/DD and addresses them in a holistic fashion,” Johnson said in the nomination.

VICKI BOKAR

Senior Director of Corporate Compliance and Business Ethics Cleveland Clinic While most compliance departments consist of lawyers writing policies and responding to issues, Vicki Bokar has taken a more creative approach to Cleveland Clinic’s corporate compliance oversight, according to Don Sinko, the health system’s chief integrity officer. “Vicki has developed a staff with diverse backgrounds: nurses, coders, billers, lawyers and researchers,” Sinko said in the nomination.

The diversity provides insight into effective implementation of various laws and regulations, he said, “because they know the operations.” Bokar began her career at Cleveland Clinic as an emergency room nurse before transitioning to compliance roles. Recently her expertise has been integral in due diligence related to the acquisitions of Akron General Hospital in 2015, Union Hospital this year, current acquisition activities in Southeast Florida and the startup of Cleveland Clinic London. Bokar also coordinates cybersecurity and HIPAA security matters and has been effective at educating technical staff on the people aspects of patient data security.

Chief Operating Officer Northeast Ohio Neighborhood Health Services Inc. Karen Butler’s superpower is her innate ability to bring people together to achieve a common vision, according to Mary Scott, center director of Northeast Ohio Neighborhood (NEON) Health Services Inc. In 2018, Butler devised and implemented NEON’s first agency-wide operations planning process. “The process opened dialogue and spurred interpersonal interaction among groups of employees ... many of whom had never had the opportunity to engage with each other,” Scott said in the nomination form. Butler is the second-most senior executive at the nonprofit health center network where she is responsible for the effective operation of its seven locations that staff more than 235 employees. Under Butler’s leadership, the agency initiated the full-scale implementation of a $1 million renovation project at the Hough Health Center, increased revenues by more than 35% and expanded its pantry program to more than six locations distributing more than 125,811 pounds of food to families in need.

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People with developmental disabilities have intricate healthcare needs and Koinonia is committed to ensuring those who are medically fragile enjoy healthy, fulfilling and enriched lives.

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PATTI DEPOMPEI

President UH Rainbow Babies & Children’s and UH MacDonald Women’s hospitals Patti DePompei has been a champion for women’s and children’s services at University Hospitals for nearly three decades. DePompei began her career as a registered nurse at Rainbow Babies & Children’s and held several management roles before being named president of both that hospital and MacDonald Women’s Hospital in 2012. Under her leadership, Rainbow improved the delivery of health care to 65,000 children enrolled in Medicaid through a coordinated-care program that later received a $12.7 million federal Health Care Innovation Award.

Earlier this summer, she opened the doors of the new Rainbow Center for Women & Children in Cleveland’s MidTown neighborhood. The center addresses health care disparities by increasing access to care and focusing on community wellness beyond traditional medical services. “Patti’s unwavering passion for quality patient- and family-focused care and service is remarkable,” said Mary Ann Dragon, director of patient and family services at UH Rainbow and MacDonald, in the nomination form.

NOTABLE WOMEN IN HEALTH CARE

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DR. CHARIS ENG

Chairwoman Cleveland Clinic’s Genomic Medicine Institute Dr. Charis Eng’s pioneering work to unite “cancer” and “genetics” research as a young student “set sail on an unpredictable journey that would eventually make her the leading expert in the field of clinical cancer genetics,” according to Dr. Serpil Erzurum, chair of Cleveland Clinic’s Lerner Research Institute. In the nomination form, Erzurum cites Eng’s “tireless support, inspired mentorship and active promotion of young scientists” among her key contributions to cancer research and treatment. In addition to breakthrough training initiatives, Eng, who has directed the Genomic Medicine Institute for 13 years, is an empathetic caregiver to her patients and an active investigator, having published more than 500 peer-reviewed articles to date and serving as the principal investigator on over $50 million in lifetime grants and other funding. Her lab has led discoveries in breast and thyroid cancers, among others, as well as identified a mutation associated with Cowden disease and autism. She also is professor and vice chair of the Department of Genetics and Genome Sciences at Case Western Reserve University School of Medicine.

CINDY GENSAMER

Vice President Absolute Rehabilitation & Consulting Services Inc. Cindy Gensamer started in an entry-level position at Absolute Rehabilitation & Consulting Services Inc. 26 years ago and has worked her way into a leadership role at the North Canton organization. Named vice president in 2003, Gensamer manages a team of 12 direct reports and oversees a staff of more than 1,800 employees throughout Ohio, Michigan, Pennsylvania and West Virginia. During her tenure, Absolute Rehabilitation has developed multiple person-centered care therapy interventions and has become a leader in “bundling,” a new way that collaborative services are delivered to clients and billed to payors. Meanwhile, Gensamer herself has emerged as an expert in areas related to fiscal responsibility, clinical expertise, regulatory compliance and management of successful rehabilitation departments.

“Cindy is highly respected nationally,” said Gerald Schroer Jr., CEO of Absolute Rehabilitation’s parent company, The Schroer Group, in the nomination form. “She knows more about health care details than nearly anyone I know.”

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Leading the Way in Health Care Congratulations to all Crain’s Cleveland Business Notable Women in Health Care, especially our own.

Dr. Deborah L. Hardy Associate Provost for Teaching & Learning, Dean of Faculty and Dean of Health Technologies Lakeland Community College

Lisa Kristosik, MSN, RN President Visiting Nurse Association of Ohio Associate of Applied Studies in Nursing Lakeland Community College

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Executive Chief Nursing Officer Cleveland Clinic Charged with overseeing Cleveland Clinic’s nursing organization – which is its largest employee group – K. Kelly Hancock leads approximately 24,000 caregivers, including 13,000 bedside nurses, 1,100 advanced practice nurses and 610 executive nurse leaders.

Hancock, who is a 25-year Cleveland Clinic veteran, recently developed an integrated system-wide nursing operating model and budget. She also led nursing functions for the service expansion at Avon Hospital, played a vital role in integrating nursing services at Cleveland Clinic Abu Dhabi and established a centralized 24/7 nurse staffing office. Additionally, under her leadership, Cleveland Clinic launched the first comprehensive APRN/PA transition to practice/ fellowship program in the country and became a National League of Nursing Center of Excellence.

Calling her a “remarkable, forward-thinking leader, a smart and compassionate colleague and an exceptional nurse,” in the nomination, Cleveland Clinic CEO Dr. Tom Mihaljevic said Hancock “fulfills her calling with a level of poise and professionalism that is unmatched.”

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August 20, 2018 S5

DEBORAH HARDY

Associate Provost for Teaching and Learning, Dean of Faculty and Dean of Health Technologies Lakeland Community College A 17-year veteran at Lakeland Community College, Deborah Hardy has created, implemented and overseen a number of initiatives in response to the educational, social and economic needs of Lake County and beyond.

Among her recent accomplishments are facilitating designs for a $40 million overhaul and expansion of the college’s dated Health Technologies Building and crafting and carrying out a launch plan to align curriculum development, program implementation and hiring at the renovated facility. The latter led new high-demand programs and certificates, according to nominator Bob Cahen, executive director of The Lakeland Foundation, who said Hardy managed the project alongside a long list of day-to-day responsibilities. “It requires extensive creativity, time management and skills to manage her many roles,” he said. Outside of the classroom, Hardy also is noted for her leadership in the Ohio Skills Bank initiatives, collaboration with employer and educational systems, nursing and allied health programs, and advancement of biotechnology.

ANDREA KANTER JACOBS

Executive Director of Operations Cleveland Clinic

Andrea Kanter Jacobs leads enterprise-wide initiatives of Cleveland Clinic’s operations division, which serves more than 57,000 caregivers globally. Appointed to the position in 2012 after executive roles at South Pointe Hospital and Regional Hospitals, Jacobs’ responsibilities span strategy, policy, system integration and change initiatives. In the past five years, she has proposed $32 million of initiatives of which $28 million was either approved or endorsed. Efficiencies enacted resulted in $83.8 million, or 18.6%, savings between 2014 and 2017. Jacobs is also actively involved in the High Reliability rollout, which aims to build the safest hospital system and chaired the 2017 corporate United Way campaign, which yielded the highest participation since 2012. “Her experiences, from a practicing attorney to an administrator in various capacities with deep financial, strategic and operational knowledge, help her bring best practices to the team for successful outcomes,” Cleveland Clinic communications director Eleanor Hayes said in the nomination.

Congratulations, Grace Wakulchik, on being named a Notable Woman in Healthcare.

You’ve made the future brighter for the kids in our care.

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Notable. Insightful. Resourceful.

Congratulations

Elizabeth Sullivan We are pleased and proud to congratulate our accomplished colleague on being honored as one of Northeast Ohio’s Notable Women in Health Care.

As co-chair of our firm’s national Healthcare Practice Group, Liz demonstrates her commitment every day to advising healthcare providers on a variety of legal, business and regulatory issues.

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LISA KRISTOSIK

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President Visiting Nurse Association of Ohio When Visiting Nurse Association of Ohio merged with New Jersey-based Visiting Nurse Association Health Group in 2017, the Cleveland organization’s president and CEO Dr. Steven Landers tapped Lisa Kristosik as the new leader of Ohio operations. Kristosik, who joined VNA in 2010, became chief operating officer in 2012. Over the last several years, she has spearheaded many innovative programs, notably an Ambulatory Withdrawal Management Program that expanded VNA’s role in behavioral health to address the opioid crisis. Recently, she also facilitated the launch of a pediatrics home visiting program with MetroHealth to address the high rehospitalization rate of NICU babies. In the nomination form, Landers credits Kristosik with being at the center of VNA’s growth, especially relative to the partnership between VNA Health Group and VNA of Ohio. “Lisa was at the forefront of the partnership and played a critical role in the transition,” he said.

JEANNINE MARKS Executive Director Stewart’s Caring Place

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6X6

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The Board of Directors, Donors, Staff, Volunteers and Participants of The Gathering Place

Congratulate Eileen Saffran

Jeannine Marks launched the Akron Marathon with her husband in 2003, but today the lifelong Akron resident charts the course for Stewart’s Caring Place. A friend of the late Dr. Stewart Surloff’s family, Marks helped open the nonprofit cancer wellness center in 2004 and has been involved in various roles from an unpaid board member and committee leader to a staff position as director of development. Since being named executive director in 2016, she has stabilized the center’s financial health by leveraging relationships with donors, corporations and community partners to establish a capital campaign, increasing endowments with Akron Community Foundation and driving the organization’s income “to a meaningful positive,” said Stephanie Davis-Dieringer, Stewart’s director of programs and operations, in the nomination. “Her efforts also allows Stewart’s clients access to health care services at significant cancer wellness programs at University Hospitals, Cleveland Clinic, Akron General, Summa Health Systems and Aultman Hospital,” Davis-Dieringer said.

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For Her Commitment to Enhancing the Lives of Those Touched

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RITA NAVARROHORWITZ

Chief Human Resource Officer Cleveland Clinic Linda McHugh is the highest-ranking female administrator in the history of Cleveland Clinic, where she oversees the work lives of Ohio’s second-largest employer with more than 50,000 caregivers and a $1.5 billion-plus annual payroll. McHugh started her 33-year career at Cleveland Clinic as a medical technologist, later holding administrative positions of increasing responsibility including executive administrator for the Cleveland Clinic and former CEO Toby Cosgrove. In 2016, McHugh oversaw implementation of a complete replacement of the human resources technology and the creation of an internal caregiver resource portal with mobile capabilities for access in multiple ways at any time or location. More recently, she has focused on the integration of more than 5,500 new caregivers from the merger with Akron General Health System. McHugh also leads Cleveland Clinic’s employee engagement efforts.

In the nomination Cosgrove said McHugh “brings strategic leadership, broad-based management, financial and administrative skills and knowledge to this very important position.”

CYNTHIA MOORE-HARDY

President and CEO Lake Health

Cynthia Moore-Hardy calls on her nursing background to drive patient-centered care at Lake Health and beyond. President and CEO for more than a decade, “Cynthia has been able to keep Lake Health a strong, independent, high quality organization while competing with significantly larger health systems in Northeast Ohio,” Michael Mayher, chair of the Lake Health Board of Trustees, said in the nomination. Moore-Hardy initiated a Lean program in 2012, which has saved more than $11 million and has avoided $2.5 million in additional construction costs by improving patient flow in pre- and post-op surgery areas. She also has overseen service expansion, including the recently opened SOM Center and Perrico health campuses, a new Mentor wellness campus, which opened in January, and a planned hospital in Beachwood, which is scheduled to open early 2019. Among her contributions outside of Lake Health, Moore-Hardy served as the 2016 board chair of the Ohio Hospital Association.

President and CEO Better Health Partnership

Rita Navarro-Horwitz’s job is to reduce health and health care disparities in Northeast Ohio. A native Clevelander, she joined Better Health Partnership in 2011 as business development director and advanced to the organization’s top official in 2017. Navarro-Horwitz contributed to a $4 million CDC regional grant for improving racial and ethnic approaches to community health, and disseminated Better Health Partnership’s hypertension best practice intervention to Medicaid providers statewide. She also was instrumental in forming a ground-breaking partnership with the United Way of Greater Cleveland 211 to connect primary care and social services to address social determinants of health, which are the conditions in which people are born, grow, live, work and age. In the nomination, Dr. Shari Bolen, a medical professor and director of Better Health Partnership’s cardiovascular disease programs said in the nomination that Navarro-Horwitz “has a gift for connecting with others on health improvement in a way that has allowed her to lead Better Health Partnership staff and others in the community to successfully collaborate to improve health outcomes in the region and reduce disparities in care.”

Congratulations Cindy

e ng ha ion

The Schroer Group proudly acknowledges Cindy Gensamer, Vice President of Absolute Rehabilitation for being recognized as one of Crain’s Cleveland Business 2018 Notable Women in Healthcare. We are grateful to Cindy for her dedication to patients, families and staff and her commitment to providing excellence in quality care.

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HOLLY PERZY

CHRISTINE POLISENA

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Vice President of Care Delivery, Executive Director, Skyway The MetroHealth System

Dr. Holly Perzy is on the frontline of health care transformation. She is responsible for leading value-based care delivery through The MetroHealth System’s Skyway program, which aims to help Northeast Ohio businesses provide affordable quality health care to employees. In four years, Skyway has grown to 30 clients and 24,000 members and accounts for approximately 7.5% of patient encounters and just under 10% of MetroHealth’s revenue. Among the accomplishments under her leadership, the health system developed the first internal medicine/pediatric department in the nation. Perzy also created Spry, a membership-based personalized primary care practice. In the nomination, colleague Dr. Eileen Seeholzer calls Perzy a “clinician visionary” whose “work in benefit design and patient care operations has helped more people have affordable high-quality care with a better experience.” Previously, the Cleveland native was the first medical director of one of the largest multispecialty suburban practices. She and her husband are also actively involved in donating and fundraising for the new MetroHealth Brecksville location.

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As a registered dietitian, Christine Polisena used to help people eat healthier or stop smoking. Today, she deploys those same counseling and coaching skills to help the corporate clients of Clevelandbased Gallagher make smart choices in the design of patient-centered health care and benefits programs. Polisena joined Gallagher in 2017 after more than a decade of benefits consulting and product management at Healthspan, Mercer and Oswald Companies. At Gallagher, Polisena launched a strategic initiative of developing direct relationships with health systems to open the lines of communication and negotiation between employers and providers. She also founded the internal Gallagher Resources and Opportunities for Women (GROW) initiative to develop skills and leadership among women in its Ohio office. In the nomination, Gallagher marketing director Leslie Berzansky said Polisena “challenges the status quo and pushes all of us to think differently in our approach to solving today’s complex issues in our industry.”

EILEEN SAFFRAN

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Founder, CEO The Gathering Place

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The Gathering Place is the 18-year-old realization of founder and social worker Eileen Saffran’s dream to create a place to support patients and their families through a cancer journey. Saffran launched The Gathering Place’s first support center in Beachwood in 2000, after raising $920,000 in less than one year. Under her leadership, the organization has expanded its footprint by doubling the Beachwood presence with a larger facility, opening a Westlake location and adding a Wellness Center. To date, Saffran and her staff have raised more than $35 million to support The Gathering Place’s mission.

More than 40,000 different individuals making more than 309,000 visits have accessed its free programming. The Gathering Place also manages a warehouse that sells gently used home furnishings and accessories. “Ms. Saffran’s resonate leadership and vision has forever changed the landscape for supportive care oncology services in Greater Cleveland,” said Wendy Rowehl Miano, director of nursing for University Hospitals Seidman Cancer Center, in the nomination.

CONGRATUL ATIONS SHERYL L. SEREDA Crain’s Cleveland Business 2018 Notable Women in Healthcare Honoree

Sheryl L. Sereda

Vice President and Chief Advancement Officer

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INNETTE SARDUY

Chief Nursing Executive Northeast Ohio VA Healthcare System Innette Sarduy leads the nursing practice for Northeast Ohio VA Healthcare System, which serves more than 112,000 veterans with 18 locations across 24 counties. She has comprehensive oversight over approximately 1,115 nurses and 800 nursing students. Nominator Susan Fuehrer, the health system’s CEO, credits Sarduy’s leadership for how Northeast Ohio VA has “remained a 5-Star Overall Quality hospital and frequently outperforms VA and the private sector on all patient care metrics.”

Coming to the Northeast Ohio VA in 2012, Sarduy has empowered nurses by decentralizing decisionmaking at the organization-wide council level and the patient-care unit level. She also created an award and recognition program and a hospital-wide Nurses Week celebration, which has ushered in one of the lowest RN turnover rates in all VA, and most recently helped deploy an RN Care Management initiative, which aims to reduce emergency room visits and acute hospitalizations among veterans through more integrated chronic disease management.

SUSAN SCHEUTZOW

Partner Kohrman Jackson & Krantz Susan Scheutzow is a nationally recognized leader in health care law. At Kohrman Jackson & Krantz, Scheutzow chairs the Cleveland firm’s Healthcare Law Practice Group, which she started upon joining KJK eight years ago. Previously, Scheutzow served as in-house general counsel for Southwest General Health Center, for which she currently serves as outside general counsel and board member of Southwest General Community Health Foundation. “She has participated in the formation of the organization’s direction, assists us through challenges and celebrates with us in our successes,” said Southwest General’s CFO Mary Ann Freas in the nomination. Among other notable contributions to her field, Scheutzow pioneered the curriculum in health law at Cleveland State’s Cleveland-Marshall College of Law, continues to teach health law graduate and undergraduate courses at Baldwin Wallace University, authored the book, Ohio Health Care Provider Law, an essential reference guide for 20-plus years, and is editor-in-chief of the American Health Lawyers Association’s professionally reviewed journal.

August 20, 2018 S9

SHERYL SEREDA

Vice President and Chief Advancement Officer Eliza Jennings Sheryl Sereda is the driving force behind Eliza Jennings’ emergence as a progressive provider of services for older adults, particularly those struggling with dementia.

Joining Eliza Jennings as chief development officer in 2011, Sereda gained responsibility for sales and marketing, board development/education and special projects in 2013. Under her leadership, the Olmsted Township nonprofit underwent a complete rebranding, including a new name and tag line, and raised $1.1 million toward the launch of Saido Learning, a national business line that provides training in a cognitive therapy technique shown to improve the symptoms of dementia. Sereda’s advocacy of the dementia therapy at national industry and scientific conferences has resulted in contracts with 20 aging services organizations in 12 states. “Her thoughtful execution and versatility is evidenced in her success as a fundraiser, marketer, program manager and proponent for Saido Learning,” Richard Fletcher, Eliza Jennings Advancement Committee chair, said in the nomination.

Congratulations!

Christine Polisena | SeniorAccount Executive

Congratulations to our colleague, Christine Polisena, on your recognition as a Notable Woman in Healthcare.

We are proud to have you on our team.

© 2018 Arthur J. Gallagher & Co. | AJG.COM 34004A

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NOTABLE WOMEN IN HEALTH CARE

S10 August 20, 2018

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EL

Executive Director Health Action Council

KJK is proud to congratulate

SUSAN SCHEUTZOW for being selected as one of Crain’s Notable Women in Healthcare.

Patty Starr is breathing new life into the Cleveland-based Health Action Council by driving conversation, creativity and programming around corporate and community responsibility in fostering healthier, more productive workforces. Coming to Health Action Network in 2013 from a leadership role at the Council of Smaller Enterprises, Starr led the staff and board through an extensive five-year planning process, instituted an annual two-day strategic planning session and strengthened the organization’s group purchasing and education portfolios. With her guidance, Health Action Network marks its fourth consecutive year of year-over-year growth and national expansion — now at more than 200 corporate members nationwide — while maintaining a 95% retention rate. Don Bell, Health Action Council Board chair and Ohio Health director of executive rewards, called Starr “the most innovative health care professional I have met,” in the nomination. “She pushes the boundary of health care into areas that have not yet been considered or fully explored,” he said.

A law firm built for business kjk.com

Congratulations Judy Bartel, MSN, ACHPN, CHPCA, FPCN Chief Clinical Officer

Crain’s Cleveland Business will highlight accomplished women within Northeast Ohio’s finance sector in a special section October 15.

Submit your nomination today: CRAINSCLEVELAND.COM/NOMINATIONS Deadline to nominate is August 24.

For questions, contact Amy Ann Stoessel, managing editor of custom and special projects, at astoessel@crain.com or at 216-771-5155.

THANK YOU for your leadership and committment to our mission.

2018 Notable Women in Health Care Northeast Ohio

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NOTABLE WOMEN IN HEALTH CARE

August 20, 2018 S11

ELIZABETH SULLIVAN

GRACE WAKULCHIK

In the 10 years since graduating from law school, Elizabeth Sullivan has emerged as a go-to resource for health care organizations navigating complex regulatory, licensing, contractual, compliance, corporate and reimbursement issues. Sullivan began her legal career at McDonald Hopkins in 2008, and returned in 2016 as a member in the Cleveland firm’s Business Department and National Healthcare Practice, after four years as associate counsel for The Cleveland Clinic Foundation. In 2017, she became the firm’s co-chair. Recently, Sullivan and her practice group represented a number of clients in overpayment disputes with government and commercial payors.

Sullivan and her practice group advocated on behalf of client providers, successfully halting government payment suspensions as well as reducing alleged overpayment amounts, in some cases by millions of dollars. Sullivan also has been instrumental in raising awareness of the practice group’s expertise, internally and externally. “She brings an enthusiasm and effort to the growth of our health law practice that serves as a great example to our associate attorneys,” co-chair Richard Cooper said in the nomination.

Grace Wakulchik is the third president in Akron Children’s 128year history and the first woman to hold the title. Wakulchik began her career in nursing, joining Akron Children’s in 1992 and advancing into various management roles before being named president last year. Today, the seasoned leader oversees the largest independent pediatric health care system in Northeast Ohio with more than 1,000 providers spread across two hospital campuses with 24/7 emergency rooms; more than 60 primary, specialty and urgent care locations; and nearly 30 NICU, pediatric inpatient unit and specialty care services at partner facilities. Wakulchik championed Lean Six Sigma practices, which were integrated into the 2015 design and construction of the Kay Jeweler’s Pavilion, implementation of electronic health records and patient portal, and regional growth, among others. “She leads by engaging stakeholders in decisions at the point of impact and celebrating wins across the team,” Akron Children’s COO Lisa Aurilio said in the nomination.

Co-Chair, National Healthcare Practice Group McDonald Hopkins

President Akron Children’s Hospital

Managing editor, custom and special projects: Amy Ann Stoessel, astoessel@crain.com

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For more information about custom publishing opportunities, please contact Amy Ann Stoessel.

We salute you.

Congratulations to our 2018 Notable Women in Health Care Honorees: Vicki Bokar, RN Charis Eng, MD, PhD K. Kelly Hancock, DNP, RN, NE-BC Andrea Kanter Jacobs, JD Linda McHugh, MT, MBA

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CRAIN’S CLEVELAND BUSINESS

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PA G E 3 3

Big Green Egg’s popularity is driving business

By JOE CREA clbfreelancer@crain.com

You can call cults a weird thing.

And granted, it’s easy to be creeped out by them, or dismiss them out of hand.

But certain cults are just so joyful, so mesmerizing, you almost want to join right in with the innocently addictive fun.

That is how so many of us feel about the Cult of the Big Green Egg. For the unacquainted, “the Egg” (or “BGE”) is a large, heavy ovoidshaped ceramic outdoor cooker clad in a distinctive shade of avocado green. Generically speaking, the BGE employs the “kamado” style of cooking, an ancient technique that dates back to China’s Qin Dynasty, about 221 to 206 BC. Later adopted by the Japanese, kamado is Japanese for “stove.” BGE’s

KITCHENS CONTINUED FROM PAGE 1

us, the biggest part of friendship is to break bread with someone. Why not have them over?” Kevin Frederick said.

And given the shorter outdoor entertaining season in Northeast Ohio, the Fredericks reasoned, if you can extend the patio’s use — maybe a month before the season and a month or so after — why not?

“That’s why we put in the heaters,” Kevin Frederick said.

So what started out as maybe a high-end grill and a microwave unfolded into a dream space.

“When we started to build the house, we know something would be out there — a sound system, maybe the TVs — but this was all uncharted ground for us,” he said.

What was once a niche is, increasingly, going mainstream. According to the Freedonia Group, a Cleveland-based marketing research group, demand for outdoor cooking is projected to rise by 5.4% annually to $325 million in 2022. Infrared grills, multiple cooking units, artisanal equipment like pizza ovens and more are driving costs — and sales.

Sure, millions of us satisfy our passion for playing with fire with a $50 charcoal setup from the local hardware store. Upgrading to a Weber Spirit propane grill, typically priced around $300 to $400, is a big deal. A great guy I know, a pure red-collar working guy, is not-so-secretly salivating over the prospect of finishing out his patio to expand the brickwork, add a pergola and build a granite-topped counter to accommodate his real pride-and-joy: a large Big Green Egg kamado-style cooker.

Clearly, it’s more than weekend warrior stuff. It’s full-blown passion.

“Over the past three to five years, it’s exploded,” said Jason Bosze, who runs the Northfield Fireplace & Grill (formerly the Fireplace Shoppe) in Northfield. At age 39, he’s been in the wood stove, fireplace and grill business for 20 years, starting in the 800-squarefoot showroom his father and uncle opened in 1976.

“Fireplaces have always been our main business. When gas prices were high, people who were struggling to pay their utility bills were buying wood stoves like crazy. But now grills are huge.

“It used to be grills were just sold in the summer. But now, these past five years, (sales) are busy constantly.”

P033_CL_20180820.indd 33

and other brands (Kamado Joe, Akorn Kamados, Primo Ovals, Visions) are charcoal- and hardwood-fired cookers. Although they can be used to turn out a quick batch of burgers, kamado-style cooking is exceptionally versatile, from cold-smoking salmon to high-heat stir-frying.

Unlike conventional grills, kamados shine at “low-and-slow” cooking.

The kamado creates an airtight environment that slowly cooks and smokes meats, poultry and other foods to perfection.

With estimated annual revenues just shy of $5 million (tracking the actual numbers of units sold annual proves elusive) the BGE brand is a potent product. An average setup for a large Egg will set you back around $1,000.

Competitors abound, but “Eggheads” — I’m among them — are devoted to the latter-day original.

Founded in 1974 in Tucker, Ga., today

the porcelain-clad kamados are made in Monterrey, Mexico, by the Daltile company.

With 15 stores in Northeast Ohio and Erie, Pa., Litehouse Pools and Spas is arguably Northeast Ohio’s biggest distributors of Big Green Eggs.

Regional general manager Ken Seeber said sales of BGEs have more or less doubled over the past five years.

“The unit sells itself,” Seeber said.

“The popularity of the product, through their forums and people using them — pure word of mouth — are what really drive the sales.”

Because of their sheer bulk — sizes range from the 10-inch “mini” to XXL (a 29-inch, 375-pound behemoth) — few stores display the full range of units. Seeber said the large and extra-large units are Litehouse’s biggest sellers.

First, sales of built-in units took a big jump, Bosze said. People began putting money into their patios, the better to enjoy Northeast Ohio’s toobrief summers.

“The DIY shows out there are part of it, and in Cleveland, with our climate, you’d think that would stop people,” he said. “But they’re putting in whole kitchens, with refrigerators, wine coolers and fully plumbed sinks out there.”

One customer, in Sagamore Hills — “not exactly a high-end community,” Bosze said — has probably sunk north of $300,000 into his outdoor patio.

“That’s including a pool and other amenities,” Bosze added. “And that’s just a modest house. You wouldn’t know from looking at his house from the street that his backyard is like heaven.”

Dan Baron of Baron Landscaping in Independence already is booking installations well into 2019. Outdoor kitchens have become his main enterprise, and business is booming.

“Ten years ago, maybe we were doing one a year. Today, we’re doing maybe 25 a year. That’s how much it’s grown. Now outdoor living spaces is ALL we do,” Baron said.

And every project is unique.

“Not every client has the same goals in mind,” Baron said. “My first objective is to find out what they want, then produce a kitchen that meets their needs and desires.”

Baron said he’s currently involved in completion of a $100,000 project that will take his group until the end of the season to finish.

“These projects are done everywhere, even in Battery Park, on a rooftop four stories up,” he said. “If you want to do it right, all the bells and whistles, you’re looking at $30,000 to $40,000. You want to add a fireplace?

We’re not talking about a fire pit, (which) can add about $2,500. A real fireplace can add $15,000 to $20,000.”

And it probably goes without saying — and with all due respect — the equipment involved isn’t exactly the stuff you’ll find on the big-box store display floors.

Matt Kyser, who specializes in topline appliances at Trevarrow Inc. in Parma, said there are major reasons why savvy customers spend large on dedicated outdoor equipment.

“As I told one of our customers who looked at the price of an outdoor grill and kind of shook, these are a whole different league. They’re thinking they’ll pay $1,500 or under, but the moderately priced units aren’t built the same way.”

SubZero/Wolf, the leader in topline cooking appliances, produces a line exclusively manufactured for outdoor kitchens. A 30-inch Wolf outdoor unit runs around $4,670; the 54-inch model is $8,450. A Swedish-made Asko outdoor dishwasher (who wants to haul dirty flatware back into the

Northfield Fireplace & Grills, which has been selling BGEs for nearly 25 years, carries most of the sizes or can have one shipped within the week.

“Over the past 15 years, it’s become a big entity,” said co-owner Jason Bosze. “Maybe 10 years ago, we might have sold 20 or 15 Eggs. Once we started cooking on them — our side patio is right out on Route 82, and traffic would be backed up and the smoke would be spewing — that drew customers in, and it really took off.”

Each year, the numbers went up steadily, at around 30% to 40% annually. Today, the shop sells upward of 100 units a year.

The bonus benefit, he adds, as how the Eggs draw customers, and sales, for other products.

“We get more business because of our Egg customers,” he said.

The Big Green Egg comes in several sizes, including large ones like this one, which requires its own stand. (Contributed photo)

house?) runs around $3,200, versus an indoor unit priced closer to $1,700.

Carefully insulated and waterproofed wiring, corrosion-resistant metals, weatherproofed casings and higher levels of testing all add cost.

Kevin Frederick hesitates a moment when asked exactly how much

he and his wife have sunk into their backyard Valhalla.

“I wish I knew,” he said. A couple of times I started to put that together just to find out. I guess I can say that it was probably upwards of $100,000.

“I’m probably afraid to know, exactly. And it’s probably better I don’t.”

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PA G E 3 4

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A U G U S T 2 0 - 2 6 , 2 018 |

CRAIN’S CLEVELAND BUSINESS

THE LIST

Highest-Paid CFOs Ranked by 2017 Compensation THIS CFO YEAR TENURE IN POSITION

TOTAL COMPENSATION 2017 2016

% CHANGE SALARY

BONUS

STOCK AWARDS

OPTION AWARDS

NONEQUITY INCENTIVE PLAN

PENSION VALUE CHANGE

OTHER

1

Richard H. Fearon/Eaton April 2002 - present

$8,602,980 (1) $8,673,939

(0.8)

$764,850

$0

$2,508,244

$820,473

$1,347,288

$2,983,382

2

Terrance M. Paradie/TransDigm Group Inc. April 2015 - January 2018

$7,122,400 (2) $871,439

717.3 (2)

$520,000

$2,300

$0

$3,047,850

$445,200

$0

3

James F. Pearson/FirstEnergy Corp.

2013 - March 2018

$5,977,966 $5,670,945

5.4

$662,214

$0

$2,124,671

$0

$662,943

$2,512,687

4

Jon P. Marten/Parker Hannifin Corp.

November 2010 - April 2017

$3,812,399 $4,394,354

(13.2)

$688,615

$0

$1,350,166

$746,967

$905,085

$0

$121,566

5

John P. Sauerland/Progressive Corp.

April 2015 - present

$3,701,176 $3,349,554

10.5

$571,154

$0

$1,840,065

$0

$1,277,957

$0

$12,000

6

Donald R. Kimble/KeyCorp June 2013 - present

$3,585,368 $3,125,076

14.7

$650,000

$0

$1,349,971

$149,997

$1,400,000

$0

$35,400

7

Catherine A. Suever/Parker Hannifin Corp.

April 2017 - present

$3,550,813 NA

NA

$570,747

$0

$1,849,646

$153,010

$538,377

$343,023

$96,011

8

Laura K. Thompson/Goodyear Tire & Rubber Co. December 2013 - present (3)

$3,547,080 $5,105,271

(30.5)

$650,000

$0

$495,463

$712,490

$298,192

$1,350,719

$40,216

9

Mark R. Belgya/The J.M. Smucker Co. January 2005 - present

$3,241,202 $3,801,050

(14.7)

$618,125

$11,500

$1,150,000

$0

$569,250

$861,358

$30,969

10

Allen J. Mistysyn/Sherwin-Williams Co. January 2017 - present

$3,201,662 NA

NA

$600,002

$0

$878,969

$757,237

$849,000

$0

$116,454

11

Vincent K. Petrella/Lincoln Electric Holdings Inc. February 2004 - present

$3,129,746 $3,230,903

(3.1)

$485,000

$0

$1,053,455

$275,030

$952,004

$169,120

$195,137

12

Christopher A. Chapman/Diebold Nixdorf June 2014 - present

$2,978,218 (4) $1,919,629

55.1 (4)

$574,178

$0

$1,710,187

$343,487

$230,000

$80,875

$39,491

13

Robert G. O'Brien/Forest City Realty Trust Inc. April 2008 - present

$2,865,741 $2,079,242

37.8

$583,000

$0

$790,418

$0

$1,425,133

$9,732

$57,458

14

Michael F. Biehl/Covia Holdings Corp. (formerly Fairmount Santrol) (5) April 2016 - June 2018

$2,777,382 $1,910,446

45.4

$453,200

$0

$435,302

$261,510

$1,610,168

$0

$17,202

15

Philip D. Fracassa/The Timken Co. February 2014 - present

$2,771,845 $2,035,672

36.2

$512,500

$0

$645,104

$275,865

$525,902

$670,000

16

John W. Richardson/A. Schulman Inc. November 2016 - present

$2,694,386 NA

NA

$432,692

$0

$2,025,300

$199,976

$0

$0

$36,418

17

Gregory A. Thaxton/Nordson Corp.

January 2008 - present

$2,288,063 $2,419,339

(5.4)

$450,000

$0

$567,270

$423,951

$397,215

$407,504

$42,123

18

Matthew L. Ostrower/DDR Corp.

March 2017 - present

$2,281,443 NA

NA

$414,744

$522,260

$1,325,789

$0

$0

$0

$18,850

19

Timothy K. Flanagan/Cleveland-Cliffs Inc. January 2017 - present

$2,194,333 NA

NA

$400,000

$318,000

$760,951

$0

$540,829

$144,000

$30,553

20

Robert Kenneth Gudbranson/Invacare Corp.

April 2008 - November 2017

$1,974,545 $1,488,883

32.6

$445,668

$0

$939,602

$576,452

NA

NA

$12,823

21

Brian C. Witherow/Cedar Fair LP January 2012 - present

$1,949,060 $1,942,116

0.4

$525,838

$0

$907,187

$0

$495,636

$0

$20,399

22

Bradley C. Richardson/PolyOne Corp.

November 2013 - present

$1,775,275 $1,577,332

12.5

$569,615

$0

$277,915

$295,964

$576,063

$0

$55,718

23

Michael J. Tokich/Steris March 2008 - present

$1,713,052 $4,452,251 (6)

(61.5) (6)

$456,250

$0

$606,564

$394,605

$180,244

NA

$75,389

24

Russell L. Gordon/RPM International Inc. April 2012 - present

$1,583,008 $3,066,097 (7)

(48.4) (7)

$475,000

$0

$213,546

$387,000

$450,000

$16,671

$40,791

25

Andrew J. Rebholz/TravelCenters of America LLC November 2007 - December 2017

$1,572,500 $1,655,000

(5.0)

$300,000

$750,000

$522,500

$0

$0

$0

26

Mark O. Eisele/Applied Industrial Technologies Inc. January 2004 - August 2017

$1,475,726 $1,161,767

27.0

$451,500

$0

$350,187

$135,844

$404,409

$85,974

$47,812

27

Ware H. Grove/CBIZ Inc. December 2000 - present

$1,448,731 $1,282,525

13.0

$428,500

$0

$466,500

$261,750

$262,242

$0

$29,739

28

David S. Huffman/TFS Financial Corp.

2000 - present

$1,390,284 $1,319,790

5.3

$481,166

$0

$94,619

$217,728

$534,821

$2,796

$59,154

29

Benjamin J. Schlater/Ferro Corp.

September 2016 - present

$1,334,386 $1,091,181

22.3

$412,000

$0

$345,334

$149,556

$380,800

$0

$46,696

30

Joseph P. Kelley/Materion Corp.

January 2015 - present

$1,301,833 $1,062,448

22.5

$406,615

$0

$295,568

$72,225

$485,743

$30,587

$11,095

31

Matteo Anversa/Myers Industries Inc. December 2016 - present

$1,275,393 $277,784

359.1

$425,000

$0

$362,062

$202,339

$275,193

$0

$10,800

32

Patrick W. Fogarty/Park-Ohio Holdings Corp.

June 2015 - present

$1,228,732 $1,089,281

12.8

$345,000

$400,000

$457,200

$0

$0

$7,506

$19,026

33

Paul F. DeSantis/Omnova Solutions Inc. July 2014 - present

$1,219,526 $998,987

22.1

$448,818

$0

$450,640

$0

$269,400

$0

$50,668

34

Christopher J. Holding/TimkenSteel Corp.

June 2014 - present

$1,147,118 $864,197

32.7

$376,688

$0

$450,468

$188,928

$91,021

$0

$40,013

$37,493 $3,107,050 $15,451

$142,474

$0

RESEARCHED BY CHUCK SODER (CSODER@CRAIN.COM) Data provided by S&P Global Market Intelligence (Marketintelligence.spglobal.com), with additional information researched by Crain's. The full digital list includes 60 public company CFOs. Crain's does not independently verify the information and there is no guarantee these listings are complete or accurate. Send feedback to Chuck Soder: csoder@crain.com.

(1) Fearon’s total compensation was higher than normal in 2016 and 2017 because it includes payouts from a discontinued incentive plan and stock awards from a new plan. (2) TranDigm awards stock options to most of its executives every two years, which causes their compensation to vary widely from year to year. (3) Thompson is slated to retire in the first quarter of 2019. (4) Multiple Diebold Nixdorf executives received additional compensation in 2017 for work related to the company's merger with Wincor Nixdorf. (5) Fairmount Santrol merged with Unimin Corp. on June 1, 2018 and changed its name. (6) Certain Steris executives received large one-time stock awards in fiscal 2016 as compensation for work related to the Synergy Health acquisition. (7) RPM granted performance-based stock awards to several top executives in 2016.

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CRAIN’S CLEVELAND BUSINESS

SURVIVE

CONTINUED FROM PAGE 1

board would name his replacement.

“Come July of 2019 there are five seats whose terms end,” he said.

“Whoever the next governor is may actually decide to reappoint some of those board members. It’s hard to know what the makeup of the board will be.”

Asked about the candidates’ assessment of JobsOhio and the naming of Minor’s successor, the DeWine campaign said JobsOhio has served Ohio well and that the candidate would like to name Minor’s successor.

“We’ve seen tremendous job growth in Ohio since its inception and have an unemployment rate near historic lows,” the campaign said in an emailed statement. “If John Minor decides to leave, the board should proceed with identifying a list of qualified successors.

We’re hopeful that the time frame for a final selection can wait until the new or reappointed board members are in place.”

The Cordray campaign also indicated its support of JobsOhio.

“As governor, I’ll maintain and reform JobsOhio so that it creates more economic opportunity for all Ohioans by investing in our homegrown small businesses across the state, in addition to effectively competing to bring more jobs and companies to Ohio,” an emailed statement read. “I’ll also work to improve our workforce development programs and keep Ohio an open and tolerant state so that businesses can find the skilled workers they need and feel comfortable here, and so our children can stay here, start families and invest in our communities.”

The Cordray campaign did not respond to a second email late last week about the timing of choosing Minor’s replacement.

Ohio governor candidates Richard Cordray, left, and Mike DeWine have issued statements indicating they intend to keep business attraction organization JobsOhio. (Bloomberg/contributed photos)

The board members who hold seats with terms that end in July 2019 are James Boland, retired vice chairman of the Ernst & Young accounting firm and former president, CEO and vice chairman of the Cavaliers Operating Co.; Gary Heminger, chairman and CEO of Marathon Petroleum Corp. of Findlay; Stephen E. Markovich, senior vice president of OhioHealth, a Central Ohio hospital group; Larry Kidd, principal and CEO of Reliable Staffing Services of Jackson; and Barbara Snyder, president of Case Western Reserve University.

Other members of the board are William Batchelder of Mentor, former speaker of the Ohio House of Representatives; John Bishop, chairman of the executive committee of the Columbus-based Motorists Insurance Group; and Thomas Williams, president and CEO of North American Properties of Cincinnati; and Minor.

Minor joined JobsOhio as a managing director when it was created in July 2011. He was named president and chief investment officer in November 2012, replacing Mark Kvamme. Both Minor and Kasich had worked at the Lehman Brothers

investment banking firm before its collapse in 2008.

JobsOhio took shape during the 2010 election campaign. Kasich said then he would replace the state’s department of development with a private, nonprofit economic development corporation that, he said, the governor would lead.

After Kasich defeated Democratic incumbent Ted Strickland to become governor in 2011, House Bill 1 created JobsOhio. To create a revenue stream to staff the organization, to market the state to businesses internationally and to offer financial incentives, the Legislature allowed the state to lease the profitable,

state-run liquor agency to JobsOhio.

The new nonprofit issued long-term bonds to pay for the use of the liquor business and used the profits to provide grants and loans to induce businesses to move to the state or to help existing businesses expand operations in Ohio rather than elsewhere.

The idea drew on programs in other states, including economically booming states like Texas and Florida. Those states had moved economic development from a state agency to a nonprofit entity that could have a freer hand when it came to using tax dollars to attract new business to the state. While these private economic development organizations, including JobsOhio, generally are considered to be able to negotiate more quickly and easily with a business choosing among expansion sites in several states, they are criticized for high pay to staff and a lack of transparency in their handling of what is, ultimately, public money.

In a meeting at Crain’s office July 16, Minor said that in a performance review conducted by the McKinsey & Co. consulting firm, JobsOhio ranked among the top five in a group of 17 similar economic development organizations that included all of its Midwest peers as well as organizations in faster-growing states such as California, Florida and Texas.

However, Tim Bartik, senior econ-

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omist at the W.J. Upjohn Institute for Employment Research in Kalamazoo, Mich., responded to that assessment in a tweet saying that while the McKinsey report provides some useful analysis of Ohio’s strengths and weaknesses, it doesn’t tell the whole story. “(T)his report does not in any way provide an impact evaluation or a performance assessment or a benefit-cost analysis of how the world differs with JobsOhio’s various programs, versus a world without those programs,” he wrote. “We need better performance standards for economic development evaluation reports. There is no evidence that privatizing economic development either helps or hurts economic development.”

Bartik is among a small group of critics of privatized state economic development programs.

Good Jobs First, a Washington, D.C., nonprofit, in a 2014 survey of these organizations, including JobsOhio, said that these privatizations have done a poor job of reporting their results publicly.

“Three-fourths of major state development programs still fail to disclose actual jobs created or workers trained, and only one in 11 discloses wages actually paid,” the report stated. “Despite having three separate sources of disclosure, the quality of disclosure for (JobsOhio) has been declining.”

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CRAIN’S CLEVELAND BUSINESS

AKRON

Rice Oil turns to water for new endeavor

By DAN SHINGLER dshingler@crain.com @DanShingler

For 60 years, Akron’s Rice Oil & Environmental has been selling petroleum and synthetic oil to area manufacturers, auto shops and dealers, and anyone else who needed lubricants.

Now, it’s taking oil away from client sites, as well as delivering it. And it’s getting a lot of attention from folks who hope it will succeed with its new endeavor — and maybe even help Akron develop a new economic development cluster around water technology.

“Since we started this at the end of April, we’ve met with 49 people across 37 different organizations,” said David Charlton, who co-owns the company with his wife, Susan.

Everyone, it seems, is interested in new technology Rice is preparing to use, which Charlton said comes from Wooster-based ABS Materials and the College of Wooster.

That’s because Charlton said — and demonstrated — that the system can take dirty water that’s full of oil in one end and produce clean water out the other, along with separating waste. That, supporters say, is huge — and warrants attention.

“There’s a lot of interest in this,” said Tom Chema, chairman of the Cleveland-based Gateway Group and longtime local economic developer whose previous roles also include chair of the Public Utilities Commission of Ohio and president of Hiram College.

Chema was one of those 49 people, as was a water expert he brought along from California to see and evaluate Charlton’s system. Both were impressed, and his associate went home interested in partnering with Rice, Chema said.

“There are a lot of interesting technologies out there, and that’s one of them. To separate oil and water is a very important task right now, and we need to try technologies that are

Rice Oil & Environmental co-owner David Charlton says the company is getting a lot of attention for the water-cleaning technology it’s using. (Dan Shingler)

different from what’s been used in the past — in my opinion, for two reasons, one is environmental and the other is cost,” Chema said.

Chema said he’s somewhat familiar with the challenges of cleaning dirty water from his days at the PUCO, which oversees private water and sewer companies around the state. There are ways to do it now, he said, but Charlton appears to have a better and cheaper mousetrap.

“These are all very expensive processes, and there has to be, from a societal point of view, a lower cost alternative — and I think David has his finger on one,” Chema said.

For his part, Charlton’s not claiming to have any second sight as he basically fell into this opportunity.

Rice began getting requests to clean

its clients’ oil-water separators, Charlton said, and cleaning the oil from the water is the toughest part.

He has been sending the dirty water he collects elsewhere to be cleaned, but now hopes to start doing it himself — at a lower cost and with a much cleaner end result.

“When I started this, I didn’t even know what an oil-water separator was until someone called and asked me if we could clean one out. I said sure, and then I had to look it up,” said Charlton.

Once he started, though, he discovered something else about oil-water separators. Almost every business has one, but most don’t know it, and few ever bother to clean them out. That’s a problem for sewer systems, but an opportunity for Rice,

he said.

They’re not complicated devices.

Basically, they’re underground tanks that take in oil and water and then allow the heavier water to flow out a lower outlet, while the oil is retained.

Except, if they’re left unattended, they no longer work. They fill with oil and begin discharging it into the sewer system, where it’s difficult to fully remove, Charlton said.

So, he’s working with his customers to help raise awareness and begin cleaning more of the systems.

He hopes to begin using his new system sometime later this year or early in 2019.

The system is now being evaluated by the U.S. Environmental Protection Agency, and Charlton says he’s hopeful to get approval to use it soon.

As far as how it works, it’s mostly proprietary, but Charlton said the system uses a medium developed in Wooster that separates the water from oil as they pass through it — and it doesn’t wear out or fill up with oil and have to be replaced.

If the EPA agrees it works as well as advertised, Charlton said he’ll first use the system to expand his oil water separation cleaning business, but then look for other industries to serve.

Chema thinks he’ll find them.

“At every turn, there’s some water-related problem,” Chema said.

“There are humanitarian crises in Africa because there’s not drinking water available, we have worries about homeland security and people possibly poisoning water supplies, we have algae in Lake Erie — and the oil and gas industry is really in search of new solutions for its water challenges,” Chema said.

That last one, the oil and gas industry, could be big for Rice given its system specifically works with oil and there is now so much shale drilling going on in Ohio.

The interest goes beyond Rice, too.

Chema and others hope Akron and the region can use water technology as an economic development lever.

Thanks to work by groups like the Akron Global Water Alliance and the Cleveland Water Alliance, the area is already known as a hot spot for water tech, and designated as a water technology hub by the EPA, Chema noted.

“I think we could be a real hub not only for cleaning up water but for some of the related IT solutions … the Akron water department is very highly regarded, and having that available to review new technologies could be a big benefit to the city as a whole,” Chema said.

Kyle Kutuchief, Akron program director for the Knight Foundation, said he’s also talked with Charlton and been impressed as well, though he cautions he’s not one to give a technical evaluation of the ABS system.

SEE RICE, PAGE 37

BioflightVR gets investment in Akron operations

By DAN SHINGLER dshingler@crain.com @DanShingler

BioflightVR has caught an updraft in Akron.

The company, which works with hospitals to develop virtual reality training modules for doctors and other health care providers, said it has received a new investment in its Akron operations and is close to unveiling its first products in conjunction with Akron Children’s Hospital and Duke University in Durham, N.C. The investment is coming via Akron-based Acquire Investments, said Acquire founder and managing partner Bill Manby.

“This round is $500,000, and we’ve seeded it with $250,000 from Acquire. We hope to coordinate an effort to close out that round pretty quickly,” said Manby, who added that he’s working to raise another $250,000 from local investors.

Los Angeles-based BioflightVR established an office in Akron in 2017, largely because co-founder Rik

P036_CL_20180820.indd 36

Shorten married a woman from Akron who wanted to move back home.

That has worked out for the best, Shorten said. His company has found a capable and willing partner in Akron Children’s and may ultimately partner with other area hospitals.

Finding local investors is a nice bonus, too, he said.

The modules that BioflightVR and its partners create are meant to help train doctors and others, including doctors in training, without always requiring a physical patient or cadaver.

Shorten brings a special effects background — he was the architect of many of the effects on the television show “CSI” — to the company and said his work with Duke is actually to support their cadaver training.

It won’t replace the use of real cadavers altogether, Shorten said, but it will enable Duke to use them more effectively by allowing students to work with virtual cadavers before they are given real ones.

At Akron Children’s Hospital, the current work is toward developing modules that will help doctors deal with pediatric cardiac arrest.

“I think it’s going to be very helpful in a pediatric setting,” said Dr. Elizabeth Biddell, head of the Austen Simulation Center for Safety and Reliability, which is BioflightVR’s neighbor in Akron’s Austen BioInnovation Institute and its partner in development.

If you’re thinking pediatric cardiac arrests are fairly rare, you’re right.

But that’s exactly why the module is needed, Shorten and Biddell said.

They said that in most cases in which a child goes into cardiac arrest, he or she is taken to the nearest emergency room, which is not likely to be a pediatric unit. Virtual reality modules can give doctors there the pediatric training they need to quickly and properly treat a patient having a cardiac event, they said.

That’s another reason that Akron Children’s and BioflightVR said they’ll make the modules available to other hospitals, possibly on a subscription basis, so patients get the best care whether they’re taken to the Akron hospital or not. It’s also the company’s long-term business model: develop with partners and then

share the product with others and the sales revenue among themselves.

Shorten said the company’s first modules from its Akron office will be out this year, first at Duke and then at Akron Children’s.

Then, to continue the work, the company will need to raise money.

Shorten said he hopes to raise $1.2 million by early 2019, a figure that includes the $500,000 being invested and raised by Acquire and $200,000 previously put up by an angel investor.

That will enable Shorten to finish his current projects with Akron Children’s and maybe even begin to hire a few people. So far, he’s been largely a one-man-show in Akron, albeit with plenty of help from folks at Akron Children’s and BioFlightVR in Los Angeles.

Manby said he thinks the fundraising is doable, in part because numerous doctors have shown interest in the technology, and physicians often are comfortable investing in companies or technologies they understand in a medical context.

As for Shorten, he’s apparently here to stay. Yes, he said his cowork-

ers in California still make a little fun of him for moving to Ohio, but they’re no longer dubious about Akron’s ability to support the operation like they once were.

Shorten said his co-founders came out for a week in July, and he thinks it changed their outlook on Akron.

“That absolutely helped galvanize them and gave them the confidence that we absolutely have the right people here to make this work,” Shorten said.

BioflightVR co-founder Randy Osborn said he’s exactly right.

“To be honest, I was a little skeptical at first that we could actually make it work there,” Osborn said.” We have pretty good inroads here in L.A. But it turns out it’s a gold mine of medical opportunities there. I didn’t realize all that was there around Akron.”

Now, he’s not only no longer skeptical, he thinks Akron could see more of BioFlightVR, especially with the new local investment.

“Since we’ve received this investment, we’ll be expanding in the Akron area as well,” Osborn said.

8/17/18 1:29 PM

CRAIN’S CLEVELAND BUSINESS

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AKRON

Seco plots $8M expansion in Green

By KYLE BROWN kdbrown@crain.com

Seco Machine, a manufacturer of cast urethane products and a division of A. Stucki Co., will move to a new facility that increases floor space by about 60% in the first quarter of 2019.

The move to a new $8 million facility in Green has been a few years in the making, said Tom Seccombe, general manager at Seco. The new facility will have 120,000 square feet of manufacturing, distribution and office space, an expansion from the 75,000 square feet at its current facility in North Canton.

“It was pretty apparent by about 2014, 2015 that it wasn’t our ideal building,” Seccombe said.

The North Canton facility wasn’t intended for heavy industry, and wasn’t a location that would impress customers, Seccombe said.

“Our workmanship and our people do, but getting customers there was always a problem,” he said.

As it became a division for A. Stucki, Seco grew from a two-bay section of the North Canton facility, taking on its urethane line in addition to its machine shop capabilities, said Jon Kaufman, product manager of urethanes and polymers for A. Stucki. The company worked with Seco to develop its capabilities and bring more processes in-house, which calls for a larger footprint.

The North Canton facility did give the company room to grow without needing to move right away, but the new planned facility in Green will improve on that as well, Seccombe said.

The way the building is designed, it gives Seco an additional 50,000 square

Construction is underway at Seco Machine’s planned facility in Green.

(Contributed photo)

feet of infrastructure as a knockout that can be added in the future. The location also has additional land that could be used for expansion.

The site already is being excavated, Kaufman said. The majority of the space in the new facility will be covered by the machine shop, with the urethane line on a smaller footprint.

Seco also worked with the city of Green because of a tax abatement in which any improvements to the site have taxes abated by 100% for 15 years, Seccombe said.

“It was one of the only cities around that was willing and able to do this sort of thing,” he said. “The city of Green is really aggressive in bringing in retail as well as industrial business, and we just really felt like they were a fit.”

As part of the abatement, the company is required to create a certain number of jobs over time, so employees will be added in the future, he said. Seco still will pay taxes on the land, and pay the city’s 2% income tax

on payroll from the first day in the new facility.

The new facility also will give the company more accessibility options, with close proximity to the Akron-Canton Airport, Seccombe said.

Seco is looking into working with the Ohio government to establish itself as a foreign trade zone to take advantage of import and export incentives. From a transportation standpoint, being near the airport also will assist traveling employees, as the company logs more than 100 flights per month.

A. Stucki has 17 global locations, and moving near an airport will provide a facility as a central hub for meetings, Kaufman said.

The firm already is purchasing new equipment for its machining line, Seccombe said. On the urethane side, the company is looking at adding another line specifically to build inventory for the move and then to add capacity for when they move into the new facility.

The company also will be using the

REAL ESTATE

move as an opportunity to try to reKutuchief said water issues are beplace some older equipment, coming increasingly important in Kaufman said.

Akron, which not only is spending “When you get into a nice, new more than $1 billion to separate its place, you want to upgrade some storm and sanitary sewer systems equipment,” he said. under a federal mandate, but inAs it continues to grow, Seco will be creasingly is using its waterways to focusing on more opportunities for make the city more desirable to resiautomation, Seccombe said. The dents by improving the Ohio and Erie company already has three robot Canal, its locks and Summit Lake in work cells, and rather than taking the city. away jobs, they’ve allowed Seco to Knight doesn’t make grants to priadd more employees. vate companies but might help Rice “Our goal is not to reduce labor,” convince some of its beneficiary orgaSeccombe said. “It takes the monotony nizations to use the system, he said.

CRAIN'S CLEVELAND BUSINESS μ AUGUST 20, 2018 μ PAGE 37 out of some of the jobs, and I think it “We’re interested because we just makes the quality of the job better.” know as a region, and certainly in the Seco recently hired its first robotics city of Akron, we view our waterways engineer, and the company is looking a very important public resource … at several projects especially in its ure- making sure people aren’t dumping thane line that could benefit from au- unnecessary oil into our waterways, especially if you can do it effectively tomation, Seccombe said.

The move also will give Seco the working with a local company, it’s a ability to diversify its offerings as it no-brainer,” Kutuchief said.

Charlton said he’s been a bit overgrows more toward industrial customers, Kaufman said. whelmed by all the attention. Rice Oil “Even though Stucki in general has is small, with just 13 employees, and been a rail-based company, it’s an op- Charlton said he’s often a bit intimiportunity to get into more of the in- dated hosting important people like dustrial segment as a whole, to be able Chema in his modest offices. to provide turnkey solutions, whether But he’s glad for the support and it’s just a machining job or urethane, very optimistic. Oil and water cleanor a component that combines both up could become bigger than the luof those to diversify the product line bricant business ever was for Rice and reach outside of rail,” Kaufman Oil, Charlton predicts. said.

There’s another bonus, too. CharlWith both its urethane and ma- ton’s children were never interested chining lines seeing growth, the new in selling oil. Like many in their teens facility will prime Seco for the current and early 20s, they had higher ideals.

But suddenly they’re interested in the economy, Seccombe said.

“We really feel there’s some great family business — previously owned opportunities to grow business in the by their paternal grandfather — now that it’s involved in sustainability.

U.S.,” he said.

“We talk about it around the dinThis story originally appeared in Rubber & Plastics News, a sister publi- ner table now,” Charlton said. “We never used to talk about oil at home. cation of Crain’s Cleveland Business.

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CRAIN’S CLEVELAND BUSINESS

Meet the Leadership Cleveland Class of 2019 The Cleveland Leadership Center has announced the 65-member Leadership Cleveland Class of 2019.

Leadership Cleveland is a 10-month program “that empowers recognized, senior-level leaders with additional knowledge, skills and relationships to advance and deepen their community impact,” according to a news release from the Cleveland Leadership Center. The program “engages participants in opportunities

to address community issues through collaborative civic leadership while developing a broader and more diverse set of relationships among peers.”

The program year begins with a retreat in September 2018. One day each month, participants take part in a civically themed session built around a curriculum featuring other civic, political and business leaders.

The members of the Class of 2019 are:

n Harlin Adelman, vice president and

Wellness and Family Resource Center, Murtis Taylor Human Services System n Jason Bristol, partner, Cohen Rosenthal & Kramer LLP n Roseann Canfora, chief communications officer, Cleveland Metropolitan School District n Tracy Carter, vice president of government relations, The MetroHealth System n Charles Chaikin, partner, Blue Point Capital Partners n Laura Chalker, chief program officer, The Centers for Families and Children and Circle Health Services n Thomas Coyne, partner, Thompson Hine LLP n Severine De Wagheneire, managing director, Accenture n Michael Deemer, executive vice president, business development,

deputy general counsel, University Hospitals Health System n Jennifer Allanson, senior vice president, Falls Communications n Christopher Alvarado, executive director, Slavic Village Developmwent n Stephen Anthony, special agent in charge, Federal Bureau of Investigation n Amy Arbogast, chief financial officer and treasurer, Vocational Guidance Services n Nic Barlage, president, business operations, Cavaliers Operating Co. n John Barnes, partner, Grant Thornton LLP n Michael Bates, president, Notre Dame Schools n Jack Binder, CEO, LifeAct n Kevin Bishop, council member, City of Cleveland n Heather Brissett, director of the

Downtown Cleveland Alliance n Grant Dinner, chief operating officer, Weinberg Wealth Management, LLC n James Eck, vice president and general manager – Ohio & West Virginia distribution, Dominion Energy n Julie Edgar, vice president of innovation, chief sustainability officer, Lubrizol Corp. n Mary Kim Elkins, senior vice president, taxes, Eaton Corp. n Christopher Ericksen, vice president, UWUA Local 270 n David Eubank, chief information officer, Forest City Realty Trust n Timothy Flanagan, executive vice president, chief financial officer, Cleveland-Cliffs Inc. n Michelle Fritz, director of development and donor communications, The Cleveland Foundation n Katherine Gallagher, mayor, City of Brooklyn n Scott Garson, manager, Allegro Realty Advisors n Don Graves, head of corporate responsibility & community relations, KeyBank n Kevin Griffin, senior vice president, The Adcom Group n Kenya Guess, president, Bonnie Speed Delivery n Kenneth Haffey, senior partner, Skoda Minotti & Co. n Phyllis Harris, executive director, LGBT

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Community Center of Greater Cleveland n Timothy Hilk, president and CEO, YMCA of Greater Cleveland n Wendy Hoke, president, Beaumont School n Rita Navarro-Horwitz, president and chief executive officer, Better Health Partnership n David Kall, Cleveland office managing member, McDonald Hopkins, LLC n Douglas Katz, chef/proprietor, chef/ partner, chef owner, fire food and drink/ Provenance/Fire Spice Co. n David Leopold, partner, chair immigration law, Ulmer & Berne LLP n Nora Loftus, partner, Frantz Ward LLP n Manoj Malhotra, dean, Weatherhead School of Management, Case Western Reserve University n Kelly Manderfield, chief marketing officer, Cleveland Metroparks n Kevin McDaniel, executive director, Neighborhood Leadership Institute n Margaret McKenzie, president, Cleveland Clinic South Pointe Hospital, Cleveland Clinic n Azim Nakhooda, principal and partner, Cedar Brook Group n Christopher Nehez, vice president and chief information officer, Oatey Co. n James Newbrough, chief executive officer, Menorah Park n Nigamanth Sridhar, dean of the college of graduate studies and professor, Cleveland State University

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Kichler announces the addition of Amy Herrbold as vice president - human resources. She will contribute to the company’s performance in areas of leadership alignment, organization development and performance, talent expansion and acquisition.

She has over 20 years of experience in consumer goods, retail and service businesses with Kellogg, Luxottica and Accenture. Amy attended Minnesota State University, and earned a Master’s degree in Industrial/Organizational Psychology.

ACCOUNTING Paul Gregory

Ken Woung

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communications manager, ArcelorMittal n Gregory Peckham, executive director, LAND studio n Erica Penick, executive director, The Presidents’ Council n Steven Ross, president, Squire Ridge Company, LLC n Joao Jose San Martin, senior VP and chief human resources officer, PolyOne Corp. n Jason Shefrin, executive vice president, operations, InterDesign n Lawrence Soloff, senior director, medical services, Cleveland Indians n William Stewart Jr., partner, Jones Day n Karyn Sullivan, chief operating officer, Bober Markey Fedorovich n Catherine Tkachyk, chief innovation and performance officer, Cuyahoga County n Daniel Urban, executive vice president and chief operating officer, Wickens Herzer Panza Cook & Batista Co. n Allison Vann, rabbi, Suburban Temple-Kol Ami n Ramonita Vargas, executive director, Spanish American Committee for a Better Community n Natoya Walker Minor, chief, public affairs, City of Cleveland, Office of the Mayor n Richard Wesorick, managing partner, Tarolli, Sundheim, Covell & Tummino LLP n Brian Williams, executive director, PNC Fairfax Connection

WEATHERHEAD SCHOOL OF MANAGEMENT

www.crainscleveland.com/onthemove

Nathan Creviston

n Summer Paris, corporate responsibility &

Previously a partner at Cohen & Company, Gregory brings more than 25 years of public accounting experience with him. He helps clients grow revenue, shrink expenses and make the connections needed to succeed.

Gregory specializes in business succession planning, debt refinancing, M&A, analyzing cash flows and expenses and projections and forecasts for the construction, manufacturing, medical, service and retail industries. One of his goals is to help expand the firm’s Lorain County presence.

KNOW SOMEONE ON THE MOVE?

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8/17/18 3:07 PM

CRAIN’S CLEVELAND BUSINESS

Source Lunch

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A U G U S T 2 0 - 2 6 , 2 018

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PA G E 3 9

Greg Malkin

Director of the Young Entrepreneur Institute at University School and fellow at the Burton D. Morgan Foundation Greg Malkin will tell you he loves being an evangelist for capitalism — spreading the word about how young people can use it to advance themselves, their families and communities. It might not be a perfect system, he tells them, but it’s the best so far when it comes to generating wealth and producing the things that people need and want. ¶ After 30 years of practicing what he preached as an entrepreneur, mostly in the field of computer-aided design, Malkin is now at his pulpit full-time. ¶ Malkin recently became a fellow at the Burton D. Morgan Foundation in Hudson — itself a virtual church of capitalism — where he’ll help the organization work with teachers and schools to teach entrepreneurialism, financial literacy and other important topics related to business. ¶ It won’t be a new challenge for Malkin, though — he’s been doing this very thing through the Young Entrepreneur Institute at University School, where he already teaches teachers and other school officials what they need to know in order to prepare students to succeed, whether they become entrepreneurs or not — because everyone needs to have at least some understanding of how business and money works, Malkin contends. — Dan Shingler

Five things Favorite entrepreneur in history Henry Heinz

Favorite restaurant Paris Room in Chagrin Falls

Favorite movie “The Man Who Would Be King”

Favorite music event Paris Jazz Festival in France

Favorite local park Cuyahoga Valley National Park

First, where are you from?

I went to Cleveland Heights High School. I’m a Heights Tiger, ’72.

about systems. … That actually turned out to be very useful, because everything is a system.

You have a new role at the Morgan Foundation. Are you leaving the Young Entrepreneur Institute at University School?

No, I’ll remain director there. And while it’s basically at University School, 98% of what I do has nothing to do with University School — but University School provides us with parking, office and all kinds of services. They also provide us with a 501(c)3 designation.

What’s your favorite thing about what you do today?

The impact. It’s changing children’s lives. A lot of my friends say I should be teaching college, but college kids don’t have the same relationship with teachers as high school, middle school and elementary school kids.

You can really change the trajectory of somebody’s life in a really profound way at that age, and I want to have impact on kids.

You already reach more kids than are at University School then.

How many?

We work with 300 or 400 schools, and reach about 10,000 students in Northeast Ohio every year.

How is that possible?

We focus on teaching the teachers, so those 10,000 kids were primarily taught by teachers that we taught …

That leverage model, that’s how we can reach so many kids.

You obviously think education is important. Where did you go to college?

MIT. But I don’t think I could get in today (chuckles).

Lunch spot Panera Bread 6130 Kruse Drive, Solon www.panerabread.com

The meal One had a four-cheese grilled cheese sandwich and a Pellegrino water, the other had a large iced tea/lemonade.

The vibe Need you ask? Panera is everywhere and the Solon store is fairly typical — generally busy, full of a diverse mix of people from business types on laptops to parents herding kids and teens gathering for lunch.

The bill $13.27, plus tip

P039_CL_20180820.indd 39

Any advice for kids and parents picking a college?

Parents ask me what college a kid should go to, but I say there’s no correlation to the college you go to and happiness in life. … You can go to Harvard and still be unhappy and unsuccessful. There’s no correlation.

It’s what you do with it.

You have a degree in chemical engineering, but you didn’t become a chemical engineer. Why? My dad. He was a chemical engineer and I wanted to be like him … but I hated it, hated it. Boring, buried in smelly stuff, it was horrible and it just wasn’t interesting to me.

But it still helped you?

It helped me, because chemical engineering is very much about the design of chemical plants, which is

Why do you think kids need to learn about entrepreneurs?

Entrepreneurship is a vehicle to teach resilience and grit. It’s a great way to teach overcoming failure.

That’s why I also like sports. When I first got into this, I was skeptical about middle school and high schools. I thought that there’s too much emphasis on sports. … But sports do a great job of teaching how to overcome failure — you lose all the time in sports — as well as teaching teamwork and leadership.

What about schools generally: What can they do better?

School, in my opinion, doesn’t reward many of the skills that make you successful in life. In school, there’s a test with an answer you’re looking for. But failure in school is catastrophic. That’s not a good way to teach failure. … Another thing I don’t think schools are very good at is teaching risk management. Life is all about risk and reward. If you take a risk and it doesn’t work out, do you never take a risk again?

Why do you do this?

I’m a big believer in capitalism. I say that I’m a preacher for the gospel of capitalism. Most schools don’t do a very good job of teaching capitalism. …

Much of what kids learn in school is negative about capitalism. It has serious faults, but it has been the most successful system we’ve come up with so far. Our children are going to grow up in a capitalistic society. They need to understand how that works.

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