Crain's Detroit Business, April 29, 2024

Page 1


Newlab creates pipeline for new businesses

Newlab is putting Detroit on the map for startup companies.

One year in, the membersonly shared workspace, research lab and venture platform in the former Book Depository building next to Michigan Central Station is not only driving innovations, it’s creating a pipeline for new businesses to come into the city.

“When we opened the doors of Newlab in Detroit, we did a lot of analysis, we did a lot of think-

ing, we did a lot of upfront work to have this have the best chance for success. We were like absolutely not expecting the amount of success that has happened,” said Garrett Winther, head of startups and venture at Newlab. “I would say the pattern of the last couple of months has almost been like, founders and companies that we usually would have had to go out and talk to are now coming to us …

See NEWLAB on Page 16

Venture makes big bet on THC beverage market

Michigan’s marijuana market is among the biggest in the nation — sales averaged more than $300 per capita last year on more than $3.05 billion in total sales, the most of any legalized state.

But it’s not top shelf in THC beverages, a growing market segment nationally that reached more than marginal sales gures in states like Minnesota. In Michigan, infused liquids, which include THC tinctures as well as THC beverages, accounted for less than 0.34% of the $286.8 million in recreational marijuana sales last month.

Yet Mount Clemens-based Emerald Canning Partners, a joint venture between cannabis

company Pleasantrees and hard cider giant Armada-based Blake’s Hard Cider Co., is banking on a liquid future in the weed market.

Fees for Realtors might not change much — or at all

Change can be tough, and that’s a reality with which the residential real estate industry is quickly coming to terms.

It’s been just more than a month since the Chicago-based National Association of Realtors trade group suddenly announced wholesale changes to the ways its members will operate — a result of myriad legislation — with the most signi cant being a shift in how agent compensation can be advertised.

How that will change the traditional 6% commission structure, typically split 50-50 between buyer and seller agents, is far from clear. Many real estate experts think it might not change it much, or even at all.


Detroit shines as the event draws record rst-day crowd.



House inventory and prices are rising. PAGE 8

Oakland of ce-to-apartment conversion opens. PAGE 9

City will get its rst 5-star hotel in three years. PAGE 10

Junior League ending house showcase series. PAGE 10

To be clear, Realtor commissions are unlikely to go away. Traditionally, broker compensation was advertised on multiple listing sites visible only to Realtors, but that practice will be prohibited.

‘The last good site’ in hot Detroit enclave hits the market. PAGE 4


Cybersecurity is big business for adviser James Giszczak. PAGE 18

Cans of Armada Cannabis Co.-branded THC cider, which contains 20 mg of THC. | DUSTIN WALSH
See THC on Page 17
on Page
Sam Shapiro, CEO and founder of Grounded Electric RVs, at Newlab in Detroit. | PHOTOS BY SYLVIA JARRUS Inside the Book Depository building where Newlab is housed in Detroit.


After months and years of preparation and anticipation, the NFL’s Draft fanfest delivered for Detroit.

The rst-round opening night brought crowds from all over the country — crowds that lled the of cial draft footprint and beyond, a sea of colors that showed off downtown Detroit at its best.

As entrance gates closed for the capacity crowd, the NFL said 275,000 fans had attended. As of press time, the city was looking forward to welcoming hundreds of thousands more.

Amid the smiles and sel es, out-of-towners drank in the Detroit of 2024 — and revamped their opinions and preconceptions about the Motor City.

As one rst-time visitor and 49ers fan told Crain’s: “It’s actually not been anything like we’ve been told, or been told to worry about.”

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Detroit-based startup raises $6M from VCs

Detroit-based Rivet Work Inc., an electrical construction workforce management platform, announced $6 million in fresh capital from its latest funding round.

California-based Brick & Mortar Ventures led the round with, also based in California, as well as Dan Gilbert-founded Detroit Venture Partners, East Lansing-based Michigan Rise and Ann Arbor-headquartered Augment Ventures. To date, Rivet has raised $14 million.

Rivet was founded in Detroit in 2020 by Alison Accavitti, Andy Lawrence, Louis Gelinas and Ryan Meitl.

Meitl, CEO of Rivet, moved to Michigan from Illinois in 2011 to work at Bosch, where he met Accavitti and Lawrence. e three met Gelinas at Bamboo, a co-working space in Detroit, in 2019.

Rivet has more than 100 customers nationally, Meitl said, and 40 employees across its two o ces in Detroit and Kansas City.

“We believe Detroit is a great place to build a business,” Meitl said. “I believe that the people of Detroit, people of Michigan and more broadly, the Midwest, are as good as anywhere else in the country. And for our industry speci cally, I believe the Mid-

west ‘roll up your sleeves’ values align really well with the construction industry at large and that’s Detroit, so that’s a reason why we’re building the business here.”

Meitl said Rivet hopes its work helps to make the construction industry more productive in light of a labor shortage in the industry.

Rivet’s HR software is customized for construction companies and specializes in eld communication, labor forecasting, workforce management and scheduling. e software allows customers to report and

Airbnbs would be taxed, regulated under new bills

LANSING — Michigan lawmakers opened hearings this month on bills that would create a state law to regulate and tax Airbnbs and other short-term home rentals while allowing local governments to limit, but not ban, such rentals.

It was the rst of what the committee chair said could be two or three hearings of testimony on the contentious legislation, which is supported by municipalities but opposed by Airbnb, Vrbo owner Expedia and other groups representing short-term rental owners.

Pushes to restrict or foster the rentals, a ashpoint in tourist towns especially, have been ongoing for seven years in the state Capitol.

e main measure, House Bill 5438, would create the ShortTerm Rental Regulation Act. A 6% state tax would be levied on occupancy charges for houses, apartments and condos that are rented for more than 14 days a year. e estimated $35 million to $70 million in annual revenue would go to local governments where the properties are located, except up to $1 million for administrative costs.

and enforce “reasonable” regulations and zoning ordinances to safeguard public health and safety, set the number of allowable short-term rentals — including geographical restrictions — and establish a process to revoke a permit. ey could not ban short-term rentals.

House Bills 5437 and 5439-5446 would extend local hotel taxes and assessments that fund sports stadiums, convention centers and visitors bureaus in various communities to short-term rentals. ey range from 1% to 5%. A law enacted this month authorizes some counties to go as high as 8% with voter approval.

“We were seeking to nd a good compromise here that lets our local governments function, allows the tourism activity to continue, lets short-rentals continue to exist in properly zoned places and ideally takes a lot of

“Tourism’s a private enterprise that has a very public cost. Those costs are not remunerated.”

Buffalo Mayor

John Humphrey

Owners would be required to have at least $1 million in liability insurance and functioning carbon monoxide detectors, smoke detectors and re extinguishers.

ey would have to le a certicate each year to go into a new state-run database of dwellings and provide information such as an emergency contact who lives within 30 miles.

Hosting platforms like Airbnb and Vrbo would have to register with the state, pay an annual $100 fee per listed rental property — capped at $50,000 — and provide a record of booking transactions.  Municipalities could enact

the tension out of this argument,” the lead sponsor, Democratic Rep. Joey Andrews of St. Joseph, told the Democratic-led House Local Government and Municipal Finance Committee.

Leaders in Traverse City and the Lake Michigan towns of Saugatuck and New Bu alo advocated for the legislation. ey pointed to nuisance issues from the explosion of short-term rentals and said there should be tax parity between Airbnbs and hotels so all visitors contribute toward local budget pressures due to seasonal population spikes.

See AIRBNBS on Page 15

Here’s what it will cost to live in Hudson’s Detroit condos

e nearly 100 Edition-branded condos planned for the Hudson’s Detroit skyscraper will be unlike anything that “has ever been done in Detroit before,” according to the New York City broker leading sales of the units.

Detroit-based developer Bedrock LLC and Douglas Elliman, the New York City-based luxury brokerage with a presence in several established condo markets including Miami and Los Angeles, formally announced the partnership and limited details on the condos — such as their

hotel-a liated branding — last week.

Condo units — slated for closings in late 2026 — will be priced starting at about $550,000 and are expected to top out around $3 million, according to Howard Lorber, executive chairman, president and CEO of Douglas Elliman.

A sales center is expected to open this week along Woodward Avenue near the footprint of the NFL Draft taking place downtown this week, but actual condo sales have not yet formally commenced.

e formal announcement of the Hudson’s Detroit condos

comes as the city's condo market remains burdened with oversupply and minimal sales velocity, but those marketing the units say interest has already been signicant.

Interest has already been strong, said Bruce Ehrmann, the New York City-based associate broker with Douglas Elliman who's leading the sales and marketing for the project.

Since the announcement last week, the rm has already received about 300 inquiries, Ehrmann told Crain's.

Anna Fifelski
See STARTUP on Page 14 General
Renaissance Center
be seen in the
the new Hudson’s site
Ryan Meitl, co-founder and CEO of Rivet Work Inc. (left), explains how the Detroit company’s platform works. | RIVET WORK
to move into the Hudson’s Detroit development, still under construction, next
The towers of the
background of

last good site’ in a hot Detroit enclave hits the market

One of the the last unrehabilitated buildings in a hot spot in downtown Detroit is up for sale.

e nearly 80,000-square-foot Cunningham Building in Capitol Park is on the market but does not have a listing price through Farmington Hills-based Friedman Real Estate, which is marketing the Cunningham Building on behalf of its longtime owner.

e property is wrapped around the David Stott Building — now apartments after a Dan Gilbert redevelopment.

Andrew Bower, senior associate for brokerage services for Friedman Real Estate, called the Cunningham building “the last good site in Capitol Park.”

“Everything else has been renovated or redeveloped and I think there is a lot of good momentum going on right now with downtown, retailers, the draft,” Bower said. “It’s our feeling that the best use for this site is hospitality, multifamily, mixed-use — something revolving around those.”

e property is owned by 1134 Griswold LLC, an entity registered to Bill Hahn in Pontiac. Wayne County land records show that entity paid $1.05 million for the property in November 2003.

e Cunningham Building was designed by Smith Hinchman & Grylls, according to a city report on what is now the Capitol Park Local Historic District. at rm

designed the Buhl Building, Penobscot Building and Guardian Building, per the report.

e Cunningham Building was built by and named after Andrew Cunningham and Edward Cunningham, father and son druggists, the report says. It’s technically two buildings — one at 27-31 State St. that has retained its original façade and one at 1134 Griswold, which has had its facade dramatically altered from the original design — and a permit at the time they were built estimated the cost at $492,632 (roughly $9 million today).

It’s been more than 10 years since a slew of rehab projects began in Capitol Park — a tiny downtown enclave that was once home to Michigan’s rst state capitol. Developers Richard Karp and Richard Hosey led the charge, followed by what is now Broder Sachse Real Estate and Dan Gilbert.

ere are few other buildings in the tiny neighborhood with fates that are as-of-yet unknown.

up,” Basmajian said on April 23, noting that there had been a deal close to nalizing right before the COVID-19 pandemic but that fell through.

“We do have it on the market for sale but we are not rushing into anything,” Basmajian said. “It’s one of those hard properties to nd still left in Capitol Park that have not been redeveloped. Ours is kind of the crossroads between the Financial District and Capitol Park.”

e listing price for 44 Michigan is $5.5 million and it went up for sale a few weeks before Christmas, according to CoStar Group Inc., a Washington, D.C.based real estate information service. Basmajian paid $2.45 million for it in December 2015, per CoStar.

“Everything else has been renovated or redeveloped and I think there is a lot of good momentum going on right now with downtown, retailers.”
Andrew Bower, senior associate for brokerage services at Friedman Real Estate

In particular, there’s the former bank building at Michigan and Griswold owned by Roger Basmajian. at property has been on and o the market for several years, with various concepts oated, including adding several oors to what is now a two-story building. When it was originally built, it was eight stories but was brought down to two stories in the 1970s.

“ e goal has always been to go

In addition, there is the small Gilbert-owned building at 1250 Griswold next to e Albert apartments, which were redeveloped by Broder Sachse. at building, the former National Loan & Investment Building, is less than 9,000 square feet and most recently had been home to a restaurant and recording studio.

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Kirk Pinho The Cunningham Building in Capitol Park wraps around the David Stott Building that was redeveloped a few years ago into apartments by Dan Gilbert. | COSTAR GROUP

Marijuana sales hit record high in March

Michigan marijuana continues to reach new heights.

Statewide sales hit another alltime record in March, recording more than $288.8 million, up nearly $28 million, or 11%, from February, according to data from the Michigan Cannabis Regulatory Agency.

March’s sales eclipsed the previous monthly sales record of $276.7 million, set in July last year.

It’s unclear why March was such a strong sales month after a soft end to 2023.

Jerry Millen, co-owner of dispensary Greenhouse of Walled Lake, told Crain’s a number of new dispensaries opened this year, leading to increased access and therefore sales.

e CRA approved 31 new dispensary licenses in January and February this year. As of February, the state had 769 active dispensary licenses.

e new record may indicate the state has not yet reached saturation, as more stores lead to more sales.

Experts had predicted Michigan sales would start to slow in 2024 as it reached saturation, but that

Legal marijuana sales by month in Michigan

appears not to be the case as adult-recreational marijuana in the state hasn’t yet peaked.

Fewer than 10% of of Michigan’s 1,773 cities, villages and townships have opted in to allow marijuana sales in their communities. eoretically, if more communities opt in in the future, more sales could occur.

Medical marijuana, however, continues its sales decline across the state, recording just $2.05 million in sales in March, down from $2.2 million in February and $7.8

million in March 2023.

e decline stems from a mix of cheaper adult-recreational marijuana — adult-rec costs about $10 per ounce less than medical, making the nominal tax savings from medical moot — and reduced availability as many dispensaries choose not to renew their expensive medical license.

Given the boost from March’s sales, Michigan’s marijuana industry is on pace to best last year’s total $3.05 billion in sales. Given the current pace, the industry would sur-

pass $3.17 billion in sales this year.

Michigan’s marijuana industry continues to rise as other established markets are experiencing slowing sales. Colorado, the rst state to legalize marijuana sales, has seen sales decline over the past two years, down to $1.53 billion in 2023 from a peak of $2.23 billion in 2021. Marijuana sales in Washington last year declined to $1.4 billion from $1.5 billion the year prior.

However, Michigan’s market is likely to feel the e ect of Ohio’s

legal market, which is expected to begin by the fall this year.

Aric Klar, CEO of Birminghambased Quality Roots, told Crain’s last year that as much as 30% of marijuana sales at dispensaries near the Ohio border come from Ohioans.

e question is how quickly Ohio’s market comes on line and its prices drop to meet Michigan’s prices, which are among the lowest in the nation. If that happens, Michigan’s marijuana market could stall out later in 2024 and into 2025.

Lume Cannabis Co. store in Kalamazoo sells a wide variety of products. | LUME CANNABIS
Medical sales Adult-use sales $300 million 200 100 0 Jan. 2020March 2024 $286.8 million $2.1 million
Source: Michigan Cannabis Regulatory Agency

Duggan touts progress — but much work remains

Mike Duggan took a long look into the rear-view mirror in his State of the City speech. His presentation re ected on where the city was when he took o ce during the 2013 municipal bankruptcy and touted a seemingly endless list of accomplishments.

To be sure, it was a credit-taking exercise, a victory lap, a political speech. But there’s no question Detroit’s mayor has a lot to brag about.

In his annual State of the City address, Duggan ticked o a lengthy and impressive list of accomplishments since he took o ce while the city was in bankruptcy in 2013.

He speci cally highlighted the turnarounds of familiar symbols of Detroit’s decline that were featured endlessly in national coverage of the bankruptcy — Michigan Central Station, the Packard Plant — and invited the nation to take another look as it peered in on the NFL Draft.

e mayor made his case that the event was an opportunity to “introduce America to a very di erent Detroit than they expect.”

ough we all know intuitively lots has happened in Detroit since the tense days of the bankruptcy, it’s easy to forget just how much.

In 2013, the old Hudson’s site was still a hole in the ground. Michigan Central Station didn’t have windows, or much in the way of plumbing left. The state fairgrounds were abandoned, the Book


Tower empty and rotting. e progress made in reversing that drew the attention of the Wall Street Journal last week, highlighting Detroit as

what’s possible for cities that see themselves in a “doom loop” of decline and decay.

Duggan’s penchant for PowerPoint

presentations rather than staid speeches helps him drive his points home. Showing the change in Detroit has a power that simply talking about can’t match.

ere’s a lot of story to tell. But there is also plenty yet to be written.

e battle against blight in the city isn’t close to won yet, though the strides Duggan has made would have seemed fantastical 10 years ago.

e city’s schools are still an impediment that keeps the population from growing.

Crime, both real and perceived, still keeps people away from the city, though Duggan rightly brags about how the city’s approach to policing has prevented the increases in crime that other big cities have su ered.

And plenty of the wins Duggan highlighted aren’t fully in the history books just yet. Demolition of the rotting Packard Plant is well under way, but guring out what’s next for that sprawling property — and making it happen — is a gargantuan lift.

Duggan’s own political future isn’t yet clear. e mayor hasn’t yet said if he’ll run for a fourth term in 2025, but other candidates have started to jockey for position. Some think he might want to run for governor in 2026, when he’ll be 68 years old.

Whatever he decides, it’s critical for Detroit to continue the momentum, carrying on with the organization and cooperative spirit that Duggan has brought to the o ce.

Trash tax will add strain to residents, businesses

Like most in Michigan, businesses don’t want to hear about COVID-19 anymore, and we’re glad to be at a point where the health threat is largely contained. But the pandemic was always a dual public health and economic crisis. e long-term economic implications of the pandemic are far from clear, meaning we must make every decision with the goal of helping Michigan emerge more resilient as the post-pandemic economy continues to take shape.

Many of the harsh economic realities of this ongoing recovery are settling in for employers, governments, schools, and households at the same time pandemic assistance programs and funds are fading away.

Now is not the time to add an $80 million tax burden that will make the cost of doing business in our state greater while putting further strain on Michigan families by adding to existing in ationary pressures. It is also not the time to jeopardize critical infrastructure — in this case, trash collection — that enables economic growth and is essential to public health.

Unfortunately, that’s exactly what increasing the state’s tipping fees on waste disposal by 1,289% to $5 will do, as proposed in the state’s budget. While proponents of the trash tax are quick to try and frame this ill-conceived proposal as an environmental issue stemming from out-of-state trash, the reality is the additional expenses, both direct and indirect, will be borne largely by Michigan residents and businesses, the users of Michigan’s disposal facilities. ey will be left covering more than 75% of the $80 million trash tax. e tax will also add strain to the budgets of local governments and schools, something that cannot be ignored in a region and state that was hit harder than any other in the Great Recession. By now, we should be well versed on the painful cuts that occur when governments and schools face budget shortfalls and insolvency — it’s largely employees and pensions, teachers and police o cers and re ghters — because there are few other areas left to signi cantly cut following past austerity measures. We should avoid add-

ing scal pressures to our local governments and schools while we face another time of economic uncertainty.

Beyond the increased burden on Michigan residents and businesses, the trash tax will also increase the costs of environmental protection and development projects by an estimated $25 million annually, undercutting the notion this proposal will be a “win” for the environment. Michigan land lls provide disposal services for materials associated with environmental remediation and brown eld redevelopment for everything from river sediment dredging to urban blight removal to tire pile cleanups. e trash tax will serve as another deterrent to these projects and development e orts, which are essential to improving our environment and putting long-vacant and underutilized sites back into productive use and back on the tax rolls as locations for job-creating businesses.

collection has also been modernized as methane gas can be harnessed for conversion to renewable energy.

Hiking tipping fees will also have little if any impact on the lifespan of our land lls. More than 75% of waste deposited in Michigan comes from Michigan, and imposing a trash tax is not going to curb the amount of trash produced in Michigan.

What it will do, however, is send trash pickup fees soaring for every Michigan household, which based on simple economics, will increase the potential of illegal dumping by residents who can’t a ord proper waste disposal.

What it will do, however, is send trash fees soaring for every Michigan household.

In many ways, the proposed trash tax is a solution in search of a problem. e land ll industry is highly regulated — as it should be — to ensure that sites are properly managed into the future. Land ll gas

At a time when we are looking for ways to improve Michigan’s attractiveness and grow its population, increasing the trash tax will add cost to every household and business in the state as well as local governments, hospitals, schools, and public safety organizations. at’s not the way to accelerate economic growth and make Michigan more prosperous.

6 | CRAIN’S DETROIT BUSINESS | APRIL 29, 2024 Sound off: Crain’s considers longer opinion pieces from guest writers on issues of interest to business readers. Email ideas to Managing Editor Michael Lee at EDITORIAL Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited for length or clarity. Send letters to Crain’s Detroit Business, 1155 Gratiot Ave, Detroit, MI 48207, or email Please include your complete name, city from which you are writing and a phone number for fact-checking purposes.
Brad Williams is the vice president of government relations at the Detroit Regional Chamber. Detroit Mayor Mike Duggan delivers his State of the City presentation on April 17. | CITY OF DETROIT FLICKR

MSU doc who led HFH partnership leaving Michigan

Dr. Norm Beauchamp, who led the formation of Michigan State University’s 30-year partnership with Henry Ford Health in Detroit, plans to depart MSU this summer to join the School of Medicine at Georgetown University in Washington, D.C.

Beauchamp also recently led e orts to create the medical research campus in downtown Grand Rapids.

Beauchamp, a Spartan medical school alum and a neurointerventional radiologist, “made an indelible mark” during his tenure at MSU, rst as dean of the College of Human Medicine beginning in 2016, and then as executive vice president for health sciences since late 2019, MSU President Kevin Guskiewicz said in a statement.

“As those who know Dr. Beauchamp can readily attest, his overarching care for people and drive to make a di erence in the world propels everything he does. His vision for health, hope and healing and his ability to inspire teams of supporters and talented Spartans to create high-impact solutions will leave a lasting legacy,” Guskiewicz wrote April 16 in an email addressed to the “Spartan community.”

Guskiewicz praised Beauchamp for providing “visionary leadership and execution in expanding our medical footprint in the Flint and Grand Rapids communities.” Most recently, he led the formation of MSU’s 30-year partnership with Henry Ford Health in Detroit “and has laid out a successful collaboration with our partners in Detroit for decades to come,” Guskiewicz said.

“While sad to see Dr. Beauchamp leave MSU, I am also happy for him as he feels strongly called to the mission at Georgetown as the nation’s largest and most prominent Catholic academic health center

Gilbert plans return to Mackinac conference

Dan Gilbert will speak at the upcoming Mackinac Policy Conference, his rst appearance at the event in eight years and near the ve-year anniversary of his stroke.

e Detroit Regional Chamber announced April 17 that Gilbert will participlate in a conversation with Dennis W. Archer Jr., CEO of sixteen42 Ventures in Detroit. Topics will include bridging community needs by increasing access to opportunities, building equity and economic stability for Detroit residents and inspiring others to invest in the city.

It will be Gilbert’s second time on the agenda, following an appearance in 2016. He was scheduled to speak at the 2019 conference but had a stroke just days

with a focus on caring for the most vulnerable among us,” he said. “Located in our nation’s capital, there is a unique opportunity to hasten the pace of delivering compassionate health and health care locally, nationally and internationally.”

Beauchamp departs MSU on June 30 to become executive vice

president for health sciences and executive dean at Georgetown University’s School of Medicine. Guskiewicz wrote in his email that he will “take the coming weeks to assess and determine a succession plan.”

In announcing Beauchamp’s hiring, Georgetown University Presi-

dent John DeGioia wrote that he “brings tremendous leadership and energy and has demonstrated a deep dedication to our vision for the future of health sciences at Georgetown and the mission of our university.”

Beauchamp starts at Georgetown University on July 1.

Leader unveiled to boost state’s defense, aerospace industries

LANSING — Michigan has a new o ce and a new leader to help grow its defense and aerospace industry.

e O ce of Defense and Aerospace Innovation is now the name for what was the Michigan Defense Center, according to an announcement April 22 from Gov. Gretchen Whitmer and the Michigan Economic Development Corp.

before. e 2019 conference took place just after passage of no-fault auto insurance reform legislation, a push that Gilbert spearheaded. He is the founder of Rocket Mortgage and real estate rm Bedrock. e chamber announcement billed him as a co-founder of the Gilbert Family Foundation. It came the same week General Motors announced it will leave its Renaissance Center o ce complex for Gilbert’s Hudson’s Detroit development downtown.

e conference will be held May 28-31 at the Grand Hotel on Mackinac Island.

Other speakers announced so far include Gov. Gretchen Whitmer, Detroit Mayor Mike Duggan, former U.S. House Speaker Paul Ryan and NBC News chief political analyst Chuck Todd.

Col. John Gutierrez, a retired Marine Corps o cer, will serve as executive director. Mark Ignash had been the Michigan Defense Center’s interim leader since March 2023, according to his LinkedIn pro le.

“Michigan is all-in on defense,” Whitmer said in a statement.

“With our new O ce of Defense and Aerospace Innovation and its new director, we are positioning Michigan to build on its long, proud legacy of leadership in these sectors. We will compete with other states and nations to grow our defense and aerospace economy, harnessing our strong base of talent and building on our powerful ecosystem of businesses in this space.”

Gutierrez has more than thirty years of experience in acquisition, operational and joint assignments. He most recently worked as portfolio manager for the Marines’ Logistics Combat

Element Systems. He said he is deepy honored and excited to lead the new o ce.”Michigan, renowned as the Arsenal of Democracy and a beacon of industrial prowess, holds immense potential,” he said in a statement.

“I look forward to working with government o cials, business leaders, stakeholders, and partners to leverage Michigan’s defense and aerospace capabilities in order to meet the evolving needs of our nation and its allies at this decisive time.”

Ignash, a senior sector development director and defense advisor for the MEDC, said it is an honor to welcome Gutierrez, with whom he will work “hand in hand” to drive growth within the aerospace and defense industry.

e governor’s o ce and the

MEDC said the defense industry is responsible for $30 billion in economic activity in the state, support 116,000 jobs and accounting for nearly 4,000 businesses. e Michigan National Guard has ve major installations and additional armories in Michigan.

“In 2022 defense contract awards performed in Michigan reached $5.5 billion, ranking Michigan 22nd among states. ere’s great potential to rank even higher, with tremendous opportunity for our defense and aerospace industry to compete, win, and drive greater economic impact,” said Tammy Carnrike, chief operating o cer of the Detroit Regional Chamber and a civilian aide to the secretary of the Army.

Mark Sanchez Norm Beauchamp Dan Gilbert spoke at NF Forward’s annual fundraising gala on Nov. 18 at Huntington Place in downtown Detroit. | NF FORWARD The new Henry Ford Health + Michigan State University Health Sciences Research Center in Detroit is expected to break ground in mid-May.
and additional
David Eggert
The Michigan National Guard has
major installations
armories in

More houses for sale, but prices rising

Housing inventory is on the rise in much of the country, but that trend remains largely elusive, according to new data and local industry experts.

All told, home prices around metro Detroit continue to rise amid limited, albeit slightly increasing inventory as buyer demand remains relatively strong, according to the monthly data reports released by Troy-based brokerage Re/Max of Southeastern Michigan and Realcomp II Ltd., a Farmington Hills-based residential real estate data provider and multiple listing service.

Both reports — which cover slightly di erent metrics, and thus have di erent numbers — do tell a similar story. Prices continue to tick up, both month over month and year over year, largely fueled by a lack of available options for buyers.

And that trend, which has been ongoing, is unlikely to change in the immediate future, according to Jeanette Schneider, president of the local Re/Max o ce.

“I wish I could say, ‘Hey, hang on in a couple of months, we’ll have a whole new story to tell,’” Schneider told Crain’s on April 11. “But given recent reports this week — with in ation … and it being an election year — I just don’t know that I see anything (changing).”

Both the Re/Max and Realcomp reports show that the median sale price in the region was up about 8% last month from one year earlier, and stands at $308,000 per Re/Max and $250,000, according to the Realcomp data. Where the reports di er somewhat is in the gures pertaining to available inventory.

e Realcomp report shows that new listings in March jumped about 16% from the previous month and homes on market increased just slightly. e Re/Max report, meanwhile, doesn’t have speci c breakout gures for those metrics, but does show that supply of inventory

has fallen to 1.6 months, down from 2.8 months a year earlier, indicating a tight market.

Schneider said she’s seeing signs of a “granular” market in which certain counties or even cities see slight upticks in inventory.

Still, any uptick in inventory should be taken as a welcome sign, said Karen Kage, CEO of Realcomp.

“Anytime the homes on market … goes up — I don’t care if it’s one or two or 2,000 — it’s a positive thing,” Kage told Crain’s.

Online brokerage Red n late last month reported that overall supply of homes for sale around

the country had increased 5% for the four weeks ending on March 17, the largest increase since May of 2023.

e San Jose, Phoenix and Sacramento metro areas saw the largest increases in homes on market, with increases of 30% or more, per Red n. Only Atlanta and Chicago saw decreases in inventory, according to the report.

Much of the limited inventory seen across the nation’s housing market can be attributed to the so-called “lock-in e ect,” or “golden handcu s.” Essentially, homeowners who either bought or renanced when interest rates were at

their lowest point in history as a result of the pandemic.

A report last month by mortgage data company Intercontinental Exchange Inc., or ICE, sought to look at just how “locked in” many of those homeowners are. e nding? Very locked in.

Per the report, from 2000 to 2022, upgrading to a 25% more expensive home would have required the average homeowner to increase their principal and interest payment by roughly 40%, or about $400 per month.

Today, however, that same trade-up buyer’s payment would increase by an average of $1,384 per month. at amounts to a 103% jump “that highlights the real-world pressures keeping current mortgage holders “locked in” to their homes, according to ICE.

While the hope is that the U.S. Federal Reserve eventually moving to cut interest rates would result in some of those “locked in” owners opting to sell their homes, experts aren’t so convinced.

“Lower rates would ease the calculation for many and make moves more reasonable,” Andy Walden, ICE’s vice president for enterprise research and strategy, said in the report. “But the net result continues to be too few homes for too many buyers. Until that fundamental mismatch is addressed, simple supply and demand will continue to press on both inventory and a ordability.”

Nick Manes
A “sold” sign in the front yard of a home in Detroit’s Bagley neighborhood on April 11. NICK MANES Metro Detroit’s housing market Source: Realcomp Closed sales For March of each year 10,000 8,000 6,000 4,000 2,000 0 ’20 ’21’22’23’24 7,411 Median sale price For March of each year $250,000 200,000 150,000 100,000 50,000 0 ’20 ’21’22’23’24 $250,000 Overall inventory For March of each year 30,000 24,000 18,000 12,000 6,000 0 ’20 ’21’22’23’24 14,909

Of ce-to-apartments conversion of former Kelly building opens

An Oakland County o ce-toapartment conversion project is complete and leasing is underway.

A joint venture between Birmingham-based Cypress Partners and Douglas Capital Partners in South eld set out in late 2022 to undertake the conversion of a former Kelly Services Inc. o ce building and retro t it into 90 new apartments. Two other new apartment buildings on the site, totaling 55 units each, are also being built with completion expected in the coming months.

Increasingly a popular — albeit, pricey — trend given the COVID-19 pandemic-era shift away from inperson o ce work ve days a week, the push toward converting underused o ce space into apartments came even more into public view locally April 15 as General Motors Co. announced it would move its headquarters next year from the Renaissance Center on the Detroit River a few blocks north to Dan Gilbert’s new Hudson’s site project in the middle of downtown.

Since then, and well before the announcement this month, many locals have wondered whether the underutilized RenCen o ce complex could see a similar shift toward residential.

For the developers of Forum Flats, the former Kelly Services building at 295 Kirts Blvd. just east of the Somerset Collection shopping mall, the redevelopment worked for a handful of reasons.

“ e Kelly Services building with it being sort of an o ce building but kind of long and the correct depths, we were able to put that centralized corridor down the middle and then stack units, which helps with that because then most of your kitchens, bathrooms ... stack up (to) add the plumbing in,” said Je Buck, project manager at Cypress Partners.

Additionally, as is always true in real estate, the project’s “location,

location, location” near the Big Beaver retail corridor but just o of it was a draw, Ben Israel, principal with Douglas Capital Partners, told Crain’s.

Another draw with the former o ce building, according to Parks, is the fact that it lent itself to far more oor plan layouts than would typically be o ered in ground-up construction, according to the developers.

e new apartment units o er oor-to-ceiling windows, quartz countertops and Whirlpool appliances. Community amenities include outdoor grilling and dining areas, a 24-hour tness center, as well an on-site dog park and pet cleaning area.

Rents in Forum Flats start at $1,375 for a 399-square-foot studio and ramp up to more than $2,700 for a 1,325-square-foot twobedroom/two-bathroom unit, according to the Forum Flats website.

e developers declined to provide an overall project cost, beyond describing it as being in the “multi-millions.”

Of ce-to-apartment deals ramp up

While conversions of increasingly vacant o ce space into housing makes for a trend that pre-dates the pandemic that started in the spring of 2020, more such deals have taken hold in recent years.

Between 2021 and March of this year, the number of o ces slated for apartment conversion increased 357% to 55,300 units, according to a report last month by RentCafe.

e metro Detroit region, per the report, has 1,070 units in the conversion pipeline, an increase of 40% from a year earlier and the 12th most in the nation.

Crain’s has reported on a variety of conversions, some already underway and others merely oated as ideas. ey include talk of the Buhl Building in Detroit’s central business district being converted

into housing, as well as the o ce headquarters of Henry Ford Health, just south of the New Center neighborhood.

e Downtown Detroit Partnership has a list tracking many other conversions in recent years.



Meanwhile, news this month that GM plans to move its headquarters out of the massive Renaissance Center complex opens a multitude of questions as to what a redevelopment of the 1970s-era o ce towers could look like.

Mayor Mike Duggan this month told reporters that he is “totally open minded” about the Renaissance Center’s future. He pointed to what he described as an “enor-

mous demand for housing” but also noted that a redevelopment into that kind of space would be expensive. He also pointed to other potential uses that could be in the mix.

He also pointed to the history of Detroit billionaire businessman Dan Gilbert — whose real estate company Bedrock LLC will work with GM and other parties over the next year to study reuses for the RenCen complex — nding new uses for old, iconic properties around downtown.

“Nobody has repurposed buildings more than Dan Gilbert,” the mayor said.

Buck, the project manager with Cypress Partners, said each building is unique and whether a conversion is viable for the buildings

at the RenCen — or anywhere else — depends on myriad factors. at includes the location of mechanical equipment and elevators, and while acknowledging that his company had not directly evaluated the Renaissance Center towers, the circular shape of the buildings could present challenges.

at said, the RenCen could “make a good multi-family product and Gilbert has got some of the best of the best on his sta to evaluate that,” Buck said.

“My guess is there’s something there for at least a couple of those towers,” Buck added. “It’s just a matter of digging into it and getting the architects to really start to sketch something out.”

Crain’s Senior Reporter Kirk Pinho contributed to this report.

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A former Kelly Services of ce building in Troy has been converted into the Forum Flats apartments. | FORUM FLATS Forum Flats kitchens feature quartz countertops and Whirlpool appliances. | FORUM FLATS

City to see rst 5-star hotel open in 3 years

Downtown Detroit will see its rst ve-star hotel when the Edition opens at the Hudson’s Detroit project in three years, its developer said April 17.

As the new high-rise tower and smaller o ce building at the site of the former J.L. Hudson’s department store come to fruition, the hotel and condo components remain several years out.

Developer Bedrock LLC formally announced April 17 that the hotel and residential components of the Hudson’s Detroit project will carry the luxury brand Edition, and that sales and marketing of the 97 condos will be handled by Douglas Elliman Development Marketing, a division of New York City-based high-end brokerage Douglas Elliman.

Availability of the condos and hotel bookings is not expected until 2027, according to a news release from Bedrock. A marketing website for the condos lists a variety of price points for the units, starting at $550,000 and going as high as $3 million or more.

Crain’s reported in October that Douglas Elliman — which does about $40 billion annually in sales and rental transaction volume — would be handling sales and marketing for the condo units. A year earlier, Crain’s reported that the high-end Edition brand would be the hotel operator.

e Detroit Edition hotel — the city’s rst ve-star hotel — and e Residences at e Detroit Edition will together occupy all 45 oors of the tower at 1208 Woodward Ave., the release says.

“Hudson’s Detroit is synonymous with excellence, style and grit, so it is only tting that it will be home to legendary and iconic global brands,” Dan Gilbert, founder of Bedrock, said in the

release. “EDITION’S eagerness to enter the Detroit market and introduce its rst property in the Midwest, is a true testament of how magnetic our city is today. Hudson’s will be a catalyst for attracting visitors, residents and businesses to the city and we welcome them to enjoy all the amenities, entertainment, retail, hospitality and dining that Detroiters know and love.”

e 97 condos above the hotel will include one- to four-bedroom units, 10-foot ceilings, natural nishes and simple materials such as monolithic stone slabs and rich wood, the release states.

Interiors will be designed by New York- and Toronto-based studio Yabu Pushelberg. Residents will have access to a private lobby, 14,000 square feet of indoor and outdoor amenities exclusive to condo owners, as well as shared amenities with the hotel such as the tness center and pool, valet parking and housekeeping.

A sales center at 1225 Woodward Ave. will open “soon, by appointment only,” the release states.

Bedrock formally unveiling the condo and hotel branding and timeline came amid a busy week for the $1.4 billion development. On April 10 the project had its formal “topping out” ceremony to commemorate the last and highest piece of structural steel being raised at the 685-foot tower. And Bedrock announced the formal name of the project: Hudson’s Detroit.

On April 15, General Motors Co. and Bedrock announced that the Detroit-based automaker will move its headquarters from the Renaissance Center on the Detroit River a few blocks north to the “Block” o ce component of Hudson’s Detroit next year.

Junior League hosting nal show with Grosse Pointe home

The Junior League of Detroit is gearing up for its final Designers’ Show House next month — a biennial event dating back nearly 50 years.

e volunteer organization focused on women’s leadership has selected a prominent home in the region every other year dating back to 1976, and enlisted designers from near and far to put their individual touch on a single room. Proceeds from the event have bene ted charitable organizations around Detroit since its inception, raising more than $5 million over the years.

But now, as the organization seeks to focus on other priorities, the exhibition will wind down after one last home, a roughly 8,000-square-foot Tudor mansion just o of Je erson Avenue in Grosse Pointe.

Mary Hollens, president of the Junior League of Detroit, declined for now to provide speci cs about what kind of initiatives the organization will undertake following the Designers’ Show House event, but said there’s more to come.

“We just see this not as a stop, but it’s a continuation,” Hollens told Crain’s. “So we have lots of major projects, lots of opportuni-

ties, and we just want the community to stay focused on the Junior League of Detroit.”

e Lakeland Street mansion dates to 1929 and stands as an ideal template for the Designers’ Show House with loads of original details from architect George D. Mason, a Detroit architect known for designing numerous churches in the city, the Masonic Temple and the Detroit Yacht Club, as well as a role in the design of the Grand Hotel on Mackinac Island.

Some of those features include original stained glass and wooden doors, as well as a variety of ceiling styles with diverse molding, according to Ann Baxter, one of

the co-chairs for this year’s event.  “We’re thrilled to have this house because everything is original,” Baxter said.

Of course, getting a home that suits the needs of the exhibit isn’t always an easy task. e nearly 20 designers selected to take part in the show and design a room began their work in February. e homeowners relocate for the months during which work is ongoing.

e show will kick o with a preview party May 3 featuring heavy appetizers, an open bar and live music and dancing in the backyard. Tours will run May 4-19. Tickets for the charity pre-

view and the public event are available on the JLD website.

Some designers for the show are local, but many travel from afar. Many have Detroit roots.

“I’m based out of Atlanta but my roots are in Detroit,” said Ti any Cobb with Ti any Rene Interior Design & Bath, who designed a Tuscan-inspired lounge and bath on the home’s second oor with what she described as “luxurious” features, such as a custom wine chiller.

“It feels not only appropriate but essential to be a part of Detroit’s design footprint and give back to the city that ignited my passion for design,” Cobb said in

a news release.

In order to pull o the event, with scores of designers each putting their personal touch on an individual room, there’s a need for “design by committee” with a lead designer to oversee the overall theme, said Colleen Gahry Robb, a design consultant with Ethan Allen in Auburn Hills, who designed the home’s family room.

“I would say that it is de nitely more traditional feel with a modern perspective,” Robb said of the overall aesthetic of the Grosse Pointe home. “I think every (designer) put in something that’s very classic, (but) with a modern perspective.”

This rendering shows the entrance to the Edition hotel and condos at Hudson’s Detroit in downtown Detroit. | BEDROCK Nick Manes The Junior League of Detroit’s 25th and nal Designers’ Show House is located at 315 Lakeland St. in Grosse Pointe. At right, the home’s library with chandelier, designed by Anne Kordas of Anne Kordas Interiors. PHOTOS BY THE JUNIOR LEAGUE OF DETROIT AND NICK MANES

Vaccine-tech startup hopes it can make lightning strike again

Don Parfet is hoping he can experience some déjà vu all over again, to use a phrase coined by that great microbiologist Yogi Berra.

Parfet is managing director of Kalamazoo-based Apjohn Group LLC, which focuses on investments in early-stage life sciences companies and which has led a seed funding round of $1.25 million in Iaso erapeutics Inc., a spino of Michigan State University housed in the school’s Van Camp Incubator building east of its East Lansing campus.

Apjohn invested $387,000 in the round, joined by two MSU funds, the Michigan Rise fund, which invested $175,000 and Red Cedar Ventures, which invested $130,000.

Also joining the round was the Biosciences Research and Commercialization Center at Western Michigan University, which invested $150,000.

Robert Forgey, who was recruited to Iaso as its president and CEO by Je Wesley, executive director of Michigan Rise and Red Cedar Ventures, said the company will begin raising a series A funding round of $10 million later this year.

Iaso was founded in 2018 by Xuefei Huang, who has joint appointments in the departments of chemistry and biomedical engineering at MSU.

e company’s technology involves what is termed a mutantbacteriophage vaccine platform to make next-generation vaccines to target cancers and infectious diseases.

Vaccines are delivered in what is called a conjugate-vaccine process. e antigen, which boosts the immune system, is attached to a carrier that delivers it into the body.

Iaso’s technology shows the potential for needing smaller amounts of antigens, which reduces side effects, while increasing the immune response.

e company has been granted patents on its core technology in the U.S., Japan, China and Europe and has several pending.

In 2004, Apjohn was the founding investor in ProNAi erapeutics Inc., a startup company that hoped to develop drugs to ght cancer.

ProNAi traced its roots to 2001 and to the work of Reza Sheikhnejad, a scientist at Wayne State University and the Barbara Ann Karmanos Cancer Institute in Detroit.

Karmanos and WSU declined to pursue patents on his work, so he funded a patent himself, and later assigned it to ProNAi.On April 22, 2014, ProNAi, which was based in Plymouth Township, closed on what at the time was the largest venture-capital round of any com-

pany in state history, a series D round of $59.5 million.

Its president and CEO was Mina Sooch, one of Parfet’s partners at Apjohn and a member of the 2007 class of Crain’s 40 under 40.

e company was just getting warmed up.

On July 24, 2015, ProNAi, which had moved to Vancouver the previous month, closed on its initial public o ering. When the o ering began, the company priced its stock at $17 a share, but it closed its rst day of trading at $28.50, raising $158.4 million.

e company changed its name to Sierra Oncology Inc. in 2017 and in 2022 was bought by GK plc,

an English company traded on both the London and New York stock exchanges.

“We like to back promising technologies and help commercialize them,” Parfet said.

In 2021, Iaso was awarded a grant of $600,000 from the National Institute of Allergy and Infectious Diseases to develop a vaccine carrier platform for an anti-salmonella vaccine.

In 2022, the company got a grant of almost $1 million from the National Science Foundation to develop its carrier platform to create what were described as “powerful and versatile vaccine carriers for pre-clinical and clinical studies.

Forgey is another factor Parfet hopes will lead to recurring déjà vu. Forgey was a co-founder, president and COO at ProNAi and previously spent 15 years in various leadership and operational roles at such large pharmaceutical companies as Searle, Pharmacia and P zer.

“Bob approached me two and a half years ago to see if I’d be interested,” said Parfet, who is Iaso’s board chairman. “ is was right on the heels of the miracle of the COVID vaccines. It’s an exciting technology that demonstrates you can get more with less. So far, so good. e company has hit all its milestones so far.”

Forgey said it has three applications for other large federal grants pending and that the company has a research contract with one of the six large pharmaceutical companies that make vaccines. He cannot name it because of a nondisclosure agreement.

Last year, Ann Arbor-based Renaissance Venture Capital includ-

ed Iaso on what it calls its Startup Hotlist, which features the most promising early-stage companies in the Midwest.

Iaso has four employees, now. Forgey said it is adding two interns this summer and will add to its head count by two or three as it raises its Series A round.

Iaso’s chief scientist is Herbert Wanjala Kavunja, an organic chemist who got his bachelor’s of science degree from the University of Nairobi in Kenya and his Ph.D. from MSU.

He joined Iaso in 2019.

In April, Forgey made a formal pitch for people and companies to join that round at the World Vaccine Congress in Washington, D.C. Forgey will make further pitches at the annual BIO International Convention in San Diego June 3-6 and at the Disease Prevention & Control Summit in Philadelphia Sept. 5-6.

“ is technology allows us to make vaccines that previously couldn’t be made,” Forgey said.

Forgey said the goal of the Series A round will be to fund an Investigational New Drug application with the U.S. Food & Drug Administration, and once that is approved, to begin human trials.

It won’t be a quick process. He said best-case scenario is to start human trials in two and a half years.

Iaso Therapeutics chief scientist Herbert Wanjala Kavunja (left) and research scientists Rachel Moszyk and Soham Maity. | ASO THERAPEUTICS Van Camp Incubator, which houses Iaso. TOM HENDERSON Robert Forgey Don Parfet

Economic developers call Lansing a key leg of ‘Research Triangle’

A consortium of groups has set out to brand Lansing as a bioscience destination in a move to better position the region within the industry in Michigan, and maybe even begin to craft a state version of North Carolina’s famed Research Triangle.

In launching the Michigan’s Health Core brand initiative, the private- and public-sector partners want to highlight and leverage the Lansing region’s biosciences strengths and grow the local sector.

Area Partnership (LEAP), the economic development organization in Eaton, Ingham and Clinton counties. “We’ve recognized that there’s so much unconnected potential. Michigan’s Health Core is really about bringing together all those di erent pieces.”

To create a brand identity, the backers behind Michigan’s Health Core want to better connect with other markets that are home to growing bioscience clusters. at includes leveraging the work in Ann Arbor, Lansing, Kalamazoo, Grand Rapids and Detroit to form “our own kind of research triangle” between the I-96 and I-94 corridors across the state, Lambert said.

“(Michigan doesn’t) want to be a one-trick pony in manufacturing or in technology.”
Keith Lambert, COO, Lansing Economic Area Partnership

“It’s a testament to the advancement and opportunities within the life sciences and medical technology industry in our region,” said Keith Lambert, chief operating ofcer for the Lansing Economic

“It’s understanding what each is really good at and helping to build each other up. We think Lansing’s stronger when Grand Rapids and Detroit are stronger. We see our competition as out of state and (want to) build up more of a ‘super region’ across Michigan that is

Structural shift: Building tomorrow’s workforce

Events over the last few years have shi ed our work and how people choose to chart their future. A shining spot of opportunity is construction. e Associated Builders and Contractors shared a staggering statistic: beyond the construction workforce recruited today, an additional 501,000 skilled workers are needed in 2024 to meet labor demands.

Feeding this demand is outsized workforce retirement levels, construction mega projects scooping up workers and the lack of support for young people considering construction careers. Recruitment is where Christman sees the opportunity to help our clients succeed.

Attract, Inform, Intern Jobs in construction require transferable skills that include teamwork, communications and attention to detail. Construction is a hands-on industry that supports creativity, problem solving and provides job security. is summer, Christman will

competitive (nationally),” he said.

“We all have our own specializations and competitive advantages that, from a statewide perspective, it’s important to understand and leverage properly to make a bigger bang against the Minnesotas and the Massachusetts and a lot of the heavy hitters across the country.”

In addition to LEAP, Michigan’s Health Core includes Michigan State University, the MSU Research Foundation, health systems University of Michigan HealthSparrow and McLaren Greater Lansing, the Michigan Economic Development Corp. and Michigan Biosciences Industry Association (MichBio). Biosciences companies Emergent BioSolutions Inc., Neogen Corp., and Niowave Inc. also are involved in the e ort.

Driving awareness

e partnership behind Michigan’s Health Core hopes to “create economic opportunity” through greater recognition and awareness of the Lansing region’s bioscience cluster that can draw investments

in health care and life sciences, medical technology, research and development, and advanced manufacturing in pharmaceuticals and medical devices, Lambert said.

e growth can come from companies already based in the Lansing area, outside rms investing in the region, or startups, particularly MSU spino s and companies started by graduates.

“We’re looking at attracting new market entrants to come in, whether they’re in technology or manufacturing associated with health care, and demonstrate that we’re a great place for them to continue to grow their business,” Lambert said.

e bioscience industry presently employs about 3,000 people in the Lansing region in manufacturing and medical technology, plus several thousand more at health care providers, he said.

As of 2021, the bioscience sector employed an estimated 44,340 people in Michigan at more than 2,400 companies, according to the most recent biennial economic re-

port from Bio Industry Organization (BIO), a national trade group. Medical devices and equipment companies accounted for 454 of Michigan’s life sciences establishments — a 22% increase from three years earlier. e state ranks fth nationally, up from sixth in 2018, according to BIO.   Employment in Michigan’s life sciences sector grew by 5.6% from 2018 to 2021, ranking the state among the top 15 in the nation by industry size, according to the BIO report prepared by Columbus,

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Ohio-based TEConomy Partners LLC.

“Michigan’s Health Core is an innovative approach to move technologies from the lab bench to the bedside more e ciently and accelerate the growth of the statewide life sciences cluster with the potential to yield new company formation, high-paying jobs, attraction of capital investment, advance the regional economy, and strengthen Michigan’s position as a biosciences leader,” said Stephen Rapundalo, the president and CEO

at Ann Arbor-based MichBio.

MSU, which is part of the University Research Corridor (URC) with the University of Michigan and Wayne State University in Detroit, plays a key role in Michigan’s Health Core. In 2022, the URC collectively generated $20 billion in economic activity and accounted for $2.6 billion, or 91%, of academic R&D in Michigan.

Michigan’s Health Core “aligns with our values by working with those across Greater Lansing through discovery and innova-

Collaboration imperative to transforming Lansing

Downtown Lansing stands poised for ongoing development, boasting coveted amenities such as a thriving High A’s a liate minor league baseball team, a picturesque river trail spanning over 20 miles through the heart of the city, just a few minutes away from a prominent Big Ten university.

In 2008, Gillespie Group seized the opportunity to create an energized district just outside the Downtown Lansing main strip, known as “ e Stadium District.”

e district was developed to surround the Lansing Lugnuts’ minor league baseball stadium with energy and entertainment. We saw rsthand how districts enhance the economic growth of a downtown corridor, and we envisioned an experience for all.

Revitalizing the district required more than just erecting buildings — we sought to curate an experiential, walkable environment for residents. Collaboration emerged as the linchpin in our approach, drawing upon the diverse

tion,” said Norman Beauchamp Jr., MSU’s executive vice president for health sciences. “We look forward to sharing our stories of transforming health to attract new health care professionals and industry partners seeking to join us in the discovery and implementation of ways to improve the health and wellbeing of our community, state, and nation.”

Seeking diversi cation

In creating Michigan’s Health

Core, LEAP and other partners also want to further diversify the Lansing-area economy. Pharmaceutical and medical device manufacturing have tripled in size in the region since 2000 as other industrial sectors declined or held steady.

By building greater brand awareness for what the region has to offer, the partners seek to elevate the local bioscience sector to a far larger economic status, Lambert said.

“We looked at this and said,

‘What if we put more effort in terms of collaborating and connecting and making sure all these pieces are aware of each other? Can we further that growth and help to continue to further diversify?’” he said.

“We’re really good at automotive. We’re getting EVs (electric vehicles) and that’s all great and very important. But we don’t want to be a one-trick pony in manufacturing or in technology. We don’t want to be overly dependent on any one industry, so we saw this as an important opportunity that’s already naturally growing organically. Can we supercharge that?”

Michigan’s Health Core originated in early 2020 “to focus and rally around this cluster,” Lambert said. The initiative soon got sidetracked with the onset of the pandemic as partners refocused on local response efforts. The partners later went back to the original purpose and delved into research and data analysis on the local industry.

A $1 million U.S. Economic Development Administration grant supported the work, which led to the region’s first “game plan” for biosciences and to the formation of two medical technology accelerator programs.

Launching the branding initiative is the culmination of the prior work, Lambert said.

perspectives, skills, and resources of various stakeholders to fuel the transformation of the region.

Our team thrives on collaboration and utilizing pioneering initiatives that help create and elevate experiences. Over 15 years, we partnered with 10 business to establish their inaugural brickand-mortar locations, attracted 15 more businesses, developed ve residential buildings to accommodate over 550 residents, introduced the region’s second hotel in over 30 years and opened its rst grocery store.

Additionally, we assisted in facilitating the lease extension of the Lansing Lugnuts through a Public-Private Partnership. Over the next ve years, more than $120 million in development investment is earmarked to be activated in the Stadium District, building upon the energy and activation of this downtown corridor.

e success of the Stadium District emphasizes the importance of collaboration when fostering innovation and sustained growth. rough strategic planning, this vision is becoming a reality, marking just the beginning of Lansing’s revitalization journey.

Keith Lambert is chief operating of cer for the Lansing Economic Area Partnership. JULIA KOBLITZ/UNSPLASH

Under the settlement agreement announced in March, listing agents will no longer be permitted to advertise the commission to buyers’ agents, a practice that change advocates have said led representatives toward homes with higher commissions, a breach of duciary duty for Realtors working on behalf of buyers.

Going forward, commissions will be negotiated on an individual basis and buyers will be advised to discuss upfront with their agent what kind of fee or commission will be paid, and perhaps most importantly, whether the buyer or seller will pay that.

But while the settlement agreement — the terms of which are expected to take e ect in July — will likely mean change, not all experts agree on just what it means yet, or that the change will even be that signi cant.

“We may well see the percentage commission model continue to survive in some form in the future, just because sellers are going to be saying, ‘Well, I’m willing to fork over a portion of the sale price of the home to pay a buyer’s agent just because that might allow me as a seller to attract more buyer interest,’” Connolly said. “I do think there’s just some inertia in the system that may mean that we actually continue to see the percentage commission model.” ose in the industry are quick to note that change should be minimal as broker commission has always been negotiable. While technically true, only the savviest of buyers and sellers may know that.

What the NAR settlement is likely to do — and is already doing in some cases — is “sparking dialogue” between home buyers and sellers and their respective agents, according to Jeanette Schneider, president of Re/Max of Southeastern Michigan, a Troy-based residential brokerage.

“I think it’s an opportunity for us as an industry to be able to remind consumers (that) there’s always been negotiation and choice as to how you handle (agent commission),” Schneider said.

Who pays?

Of course, one of the many questions with an unknown answer revolves around who might actually pay buyer agents. Traditionally, for the last several decades, sellers have paid those agents out of the proceeds of their sale. Under the new deal, buyers could be on the hook for their agent’s share of commission or fee — several thousand dollars

extra out of pocket. Still, many expect the traditional practice to continue, with it being more of a customary concession o ered by sellers.

e proposed settlement by NAR puts an end to “the collusion that has knowingly and unknowingly been taking place in the industry by agents when they meet with a seller to list their home,”

Realtor Tarick Salmaci, principal broker and president with e Tarick Salmaci Group based in Detroit.

By “unknowingly,” Salmaci wrote in an email to Crain’s, he’s referring to how agents present commission to a homeowner.

“ ey tell the seller the com-

From Page 3

ll labor requests, dispatch assignments and share project updates, track and send schedules. Rivet also can monitor the workforce capacity and populate charts to gauge labor days or months into the future.

“ e reality is like we're in a really deep construction labor shortage, and we're likely facing a multi-decades-long labor shortage in the industry and so we have to gain e ciencies elsewhere,” he said. “We are on a mission to make these construction businesses more productive. Labor productivity drives pro tability, it drives wages, and downstream it

mission amount is 6% and that the seller would be paying 3% to both the buyer agent and seller agent,” Salmaci continued. “ e seller may then feel pressured and feel they have no choice but to pay a buyer agent commission, when in fact, they do have a choice. Even with that choice, future home sellers will opt in to pay a buyer’s agent commission so that they will be able to receive top dollar for their home.”

Dan Elsea, president of brokerage services at South eld-based brokerage Real Estate One, concurred with that assessment, noting that the vast majority of buyers put up 15% or less for a down payment. Middle-income buyers

drives a ordability of development.”

is funding enables Rivet to provide its platform to multi-trade businesses like mechanical and bring even more value to existing electrical partners, according to a news release. Meitl said there’s potential for the company to expand its footprint in California in the future, as both the previous

working to come up with the money for a down payment and facing thousands of dollars for closing costs means that the appetite for cash out of pocket for a Realtor commission is likely to be minimal, even if it could lower long-term costs for buyers.

Sellers would also be incentivized to let go of some of their proceeds to pay the commission for the buyers.

“A seller’s incentive is to have as many buyers looking at your house (as possible),” Elsea said. “It’s smart for a seller to o er that.”

Unintended consequences

Sources interviewed for this report noted that one possibility as the terms of the settlement take e ect in the coming months would be more buyers choosing to forego representation and work on their own behalf, possibly just using a Realtor or attorney for the more administrative tasks associated with home buying.

tate attorney, noted that the litigation that brought about the NAR settlement stemmed from homeowners who felt that their Realtors were not working in their best interest.

On the ip side, however, not using buyer representation means “buyer beware,” Connolly said. e most signi cant change, he said, will likely come in the form of “more robust, upfront negotiations of buyer-broker agreements” as a way of agents seeking to protect themselves from the possibility of litigation.

While the full e ect of the settlement and the proposed changes remains to be seen, sources tend to agree that could mean some chaos in the early days as agents and those they represent navigate the new terrain.

Asked whether the settlement taking effect during the busy summer season could exacer-

“A seller’s incentive is to have as many buyers looking at your house (as possible).”

Such scenarios might lead to increased litigation, according to real estate executives, particularly if buyers move into a home and discover defects.

Dan Elsea, president of Real Estate One

“So we would anticipate, yes, that (litigation) would be on the checklist of unintended consequences,” Elsea said.

Connolly, the UM professor and a former residential real es-

funding rounds were led by venture capital rms in California.

Meitl said Rivet rst connected with Brick and Mortar Ventures more than a year ago.

“We're pretty geographically agnostic,” Katstubah Pandya, a partner at Brick & Mortar Ventures, told Crain’s. “Over the course of the year when we met them, we actually tracked them and they

bate the confusion, Connolly said it’s the overall market conditions that prove much more concerning.

“If I were a buyer coming into the market, I’d be way more about home prices and mortgage rates than this,” Connolly said. “It’s a tough time to be a buyer.”

grew pretty aggressively. Which is, I would call pretty unusual for our industry. We know the growth rates and how hard it is to satisfy customers in our industry, and what it takes to deliver a good product. Rivet did that by leaps and bounds and we saw that not just in the numbers, but also in the customer interviews that we did.”

REALTOR From Page 1
Realtor Andrea Carollo (left) shows interested homebuyer Samantha Robinson a house for sale in Ferndale on Nov. 17. | NIC ANTAYA Change is coming for how real estate agents get paid and in how Americans buy and sell homes. BLOOMBERG

Hotel project at Joe Louis Arena site secures tax incentives

With public funding now secured, developers are expected to start construction this year on a nearly $400 million 25-story, convention-style hotel on the Detroit riverfront.

e Hotel at Water Square project on the former site of the Joe Louis Arena will receive a 30-year, $130.6-million Renaissance Zone tax break and an $11.6 million Public Act 210 Commercial Rehabilitation Act property tax break over 10 years. Approvals at the local and state level were granted this month.  Although the total Renaissance Zone package is $130.6 million, there is a state reimbursement of $48.5 million for local school and library taxes, bringing the net value of the tax break to $82.1 million, a Detroit Economic Growth Corp. executive said earlier this year. e total package between the Renais-


“We are all under some form of duress from the long-term e ects of the unrecovered costs of tourism,” New Bu alo Mayor John Humphrey said, referencing deteriorating roads and old sewer and water infrastructure he blamed on state sales tax revenue-sharing distributions being based on the city’s Census population of 1,800 when it routinely has 15,000-20,000 people in town on any given weekend. “Tourism’s a private enterprise that has a very public cost. ose costs are not remunerated. ere are use taxes, lodging taxes or excise taxes available to the city of New Bu alo. at puts the entire burden of tourism directly on the local residents.”

O cials from Michigan Realtors, the Michigan Restaurant & Lodging Association, Airbnb, Expedia, the Rental Property Owners Association of Kent County, the Michigan Short Term Rental Association and other groups testi ed in opposition.

Nathan Rotman, a regional lead for Airbnb, pointed to its voluntary 2017 tax-collection agreement with Michigan that has generated more than $85 million in revenue for the state from the 6% use tax, including $24.5 million last year. He also cited several county tax-collection deals.

“While Airbnb is committed to responsible regulation and working with local authorities, the bill’s provisions raise serious legal and economic concerns,” Rotman said. “First, the bill introduces a new, anti-competitive short-term rental-only tax, doubling the tax rate for short-term rental guests to 12% while hotel guests would continue to enjoy a 6% rate. is increased tax burden on Michiganders will make holidays, moves, medical stays more expensive. Further, the bill creates a complex, costly and duplicative state registration system. Many Airbnb hosts are already required to register at the local lev-

sance Zone and the PA 210 abatement is valued at $93.7 million.

As proposed, the Hotel at Water Square will o er 600 rooms in a building attached to the Huntington Place convention center and is intended to help the city attract more convention and event business. e project is expected to start construction this year and nish in 2027.

e Sterling Group is developing the project through an a liate, Atwater & Second Associates LLC, which is registered to the company’s general counsel, Eli Halpern. e company is run by the adult children of Gary Torgow, who started the rm and is now chairman of the board of Huntington National Bank.

Renaissance zones allow for waivers of Detroit’s income and utility users tax, city and county property taxes plus state income tax.

e DEGC said earlier this year

during the Community Bene ts Ordinance process for the $396.5 million project that the economic bene ts outweigh the value of the incentive package. Economic bene ts are anticipated to be close to $2.6 billion — the vast majority of which would come from spending by Detroit visitors attending conventions and events. e organization also says that without the incentives, the project could not be built. If it is not built, the incentives are not awarded.

e hotel would have ve podium oors with restaurants, a lobby bar, a pair of ballrooms and 50,000 square feet of meeting rooms. A pedestrian bridge would connect it to Huntington Place.

e tourism industry and broader business community have argued for years that the city needs more hotel rooms overall, but in particular such a hotel connected to its convention center.

el, and this legislation would burden them with a second registration system with a second set of reporting obligations.”

Trevor Tkach, president and CEO of Traverse City Tourism, spoke on behalf of the Michigan Association of Convention and Visitors Bureaus. He supported local control for governments, the statewide registry and the proposal that short-term rentals pay regional lodging assessments and taxes, though he urged legislators to study taxation disparities depending on hotel sizes and where they are in Michigan. He and others criticized the proposed 6% tax on short-term rentals.

“It leans too far in the opposite direction and penalizes those doing short-term rental business. We are ghting for parity,” Tkach said.

John McNamara, vice president of government a airs at the Michigan Restaurant & Lodging Association, said it is getting more di cult for servers, bartenders and hospitality workers to nd a ordable housing, particularly in Northern Michigan, because many former long-term rental houses have been converted into short-term rentals.

“What was once a couplethousand-dollar-a-month rental is now a couple-thousand-dollar-aweek short-term rental,” he said.

He called the excise tax a “non-starter,” though suggesting a compromise under which lodging taxes would apply to all short-term rentals. at could bring $27 million to the state, a signi cant por-

Based on his experience in New York City, that proportion of inquiries would translate to around 10%-15% of interested parties starting to move forward with the sales process and perhaps 5%-10% purchasing a unit.

Detroit, with fairly limited inventory of high-end condos in the central business district, provides some key advantages for sales compared to many other markets where Douglas Elliman has a significant presence.

“In other places like Miami or Los Angeles or New York, if you don’t like this condominium, there is always that condominium two blocks away,” Ehrmann said. “In Detroit, if you are interested in a luxurious residence that you own, (have) views in every direction and every kind of amenity in a central location, you will have one choice.”

Douglas Elliman executives said likely buyers include executives from General Motors Co., which this month announced it will move its headquarters from the Renaissance Center just south to the adjacent office building being built as part of the Hudson’s site redevelopment. “Major sports figures” have also inquired, Ehrmann said.

Representatives for Bedrock and Douglas Elliman declined at this time to discuss pricing on a per-square-foot basis, a general metric used in condo prices.

tion of which should help fund the Pure Michigan tourism campaign, he said.

Andrews, the bill sponsor, contended there would be parity with a 6% excise tax and it would not be out of step with surrounding states.

“I know dollar parity, maybe it doesn’t look like” that, he said. “But in terms of making up the gap on the investment that the community makes when they put in a hotel versus these STRS just being put in, it’s to help back ll the extra demands that are being put on the community to supply public safety and upgrade infrastructure as a rental’s put in.”

Backers of the legislation emphasized that municipalities could not ban short-term rentals or have regulations that e ectively prohibit them.

“ ere’s already law clarifying that locals can’t do that. ... at No. 1 concern that we have heard over and over again is being addressed in this bill,” said Jennifer Rigterink, the Michigan Municipal’s League assistant director of state and federal a airs.

e committee chair, Democratic Rep. John Fitzgerald of Grand Rapids, said he hopes to hold another hearing or two this month. He did not commit to holding a vote.

“We do need to understand that the landscape of lodging has evolved. I think these bills seek to address that,” he said. “I’ll be looking forward to seeing the product as it evolves and continues to be brought forward by the sponsors.”

agant, it’s continuity of the market. It fills a space that doesn’t exist — the super-luxury product.”

To that end, two condos sold last summer in the nearby e Exchange development for nearly $1.5 million each, with one selling at about $915 per square foot, believed to be a record for a condo sale in the city.

A condo market report published in February by The Loft Warehouse shows the average price per square foot in Detroit overall over the last decade was $261, while in the CBD — where the Hudson’s Detroit units are located — was $428.

The overall condo market in Detroit remains oversaturated with more than eight months of supply on the market, but sales in the price range of $300,000$500,000 have been a bright spot and inventory within that segment is much tighter, per The Loft Warehouse report.

Bedrock executives tapping an out-of-state brokerage for the sales and marketing of their units makes sense, Huez said, noting that most local brokers have not sold $1,000 per square foot condos.

“These people have done it a million times,” he said.

A Bedrock spokesperson did not respond to a message seeking comment on the decision to go out-of-market for the brokerage services.

But Jerome Huez, a Detroit condo market expert and owner of Detroit-based brokerage The Loft Warehouse — an affiliate of Berkshire Hathaway Home Services — said he anticipates pricing of around $1,000 per square foot.

“I think it’s reasonable that they will ask $1,000 per square foot,” Huez said. “It’s not extrav-

While the Detroit condo market remains far from what is seen in markets such as New York City, the growing list of amenities — from sports teams to art galleries and nearby shopping — makes for significant interest, according to Lorber, the Douglas Elliman chairman.

“New York will always be a top market no matter who screws it up. They have everything you want,” Lorber told Crain’s. “Detroit — on a smaller scale — is the same thing.”

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And it’s more of, they’re telling us that they’re moving instead of us saying ‘You should move.’”

e rst startup to take root at Newlab — an electric RV company called Grounded — has already outgrown its space in the Corktown building and now works out of a warehouse four blocks away, where the company’s six employees construct and assemble the e-RVs.

For Grounded founder and CEO Sam Shapiro, Detroit had never even been on his radar. Shapiro, a 30-year-old Atlanta native, said he had been considering starting Grounded, an electric RV startup, in Austin, Texas.

While he was down south looking at warehouses, one of his investors introduced him to Newlab at Michigan Central. e move proved to be good for business — and for communal support.

“I’ve made a lot of great friends here who are other startup founders,” Shapiro said of his experience at Newlab. “I mean, starting a startup is hard and it’s an emotional roller coaster and so it’s really nice being in a physical space and a community of people kind of going through the same thing. We help each other with business and engineering questions, but I think honestly, much more than that, we’re just like an emotional support system for each other.”

Unlocking Detroit’s potential

Newlab at Michigan Central opened April 25, 2023, with 25 startups and 150 members. After its rst year, Newlab now includes 92 startups and 540 members. Carolina Pluszczynski, chief operating o cer of Michigan Central, said that number re ects just 30% of the building’s physical capacity.

But Newlab has no plans to cap the number of startups it supports, Winther said, as companies — like Shapiro’s Grounded — are already starting to spill out into other buildings near the Michigan Central campus. Rather, Newlab is focused on facilitating that expansion to the rest of the community.

“It’s interesting, in Detroit, there’s both limited resources and in nite resources. It’s just a matter of how you unlock it and kind of shape the opportunity,” Winther said. “A lot of these resources exist throughout Detroit and the good thing is that a lot of companies aren’t asking for handouts. ey’re paying fair-market rent, they just need fast, they need to go and get in there and start building. So I think what we found is that as soon as they start stepping outside the walls, it’s almost like they’re taking advantage of all this potential that’s already in Detroit, and that’s the exciting part.”

e network of innovative energy at Newlab is a key function of its location at the Ford-backed Michigan Central mobility campus in Corktown. Newlab frequently hosts Black Tech Saturdays events — an e ort founded by Johnnie and Alexa Turnage to promote diversity and inclusion in the technology industry — and was visited

in February by U.S. Deputy Secretary of Commerce Don Graves and by U.S. Treasury Secretary Janet Yellen. Newlab’s role will likely grow in the next year, as its highly visible neighbor — Michigan Central Station — is set to open June 6. Tech incubator Newlab was founded in Brooklyn, N.Y., in 2017. It has another location in Uruguay that opened in 2021, but Detroit is by far its largest in terms of space, Winther said. Newlab is leasing space in the Book Depository building, which has a rich history.

e Albert Kahn-designed building opened in 1936 as the Roosevelt Annex, eventually the Roosevelt Warehouse, for the U.S. Postal Service. After the city moved its mail processing to a different facility in 1959, the Roosevelt Annex became the Detroit Public Schools Book Depository.

In 1987, the building su ered a catastrophic re in which thousands of textbooks were lost. e building was abandoned for more than 30 years and bought by the Moroun family in 1995.

Ford Motor Co. purchased the Book Depository building and Michigan Central Station in 2018. Renovation of the three-story, 270,000-square-foot depository building began in early 2021. e tunnel in the basement where postal vehicles would enter to drop o mail was kept for startups in case they have vehicles that

need to easily be transported in and out of the building.

e Book Depository building now includes 2,000 square feet of exhibition space, a 200-seat event space, an 11,000-square-foot robotics and prototyping facility and two open studio spaces with desks, lounge spaces, meeting and conference rooms and classrooms.

Keeping companies here

e model around Newlab at Michigan Central is to not only attract entrepreneurs to Michigan, but to keep them here, Pluszczynski said.

“Newlab was the startup and the entrepreneurial ecosystem, but we needed industry partners here as well. So when we think about rounding out the ecosystem, we need corporates, and so as we build out the other buildings and really bring some of the industry partners here, we need to start making sure they know how to work together and create those connections because that’s what keeps companies here,” Pluszczynski said.

ose industry partners with ofces in the building include venture capital rms, the Michigan Economic Development Corp., the Boys & Girls Clubs of Southeastern Michigan headquarters, the Michigan Council of Women in Technology Foundation and

Arnold Kadiu’s family immigrated to metro Detroit from Albania when he was a child, he said, and so he founded his company, Intermode, a robotics hardware infrastructure company, in Canton.

Kadiu, 30, moved Intermode’s headquarters to Detroit when approached by a Newlab representative last year. He was drawn in by the utilities Newlab o ered, as well as the community of a space dedicated to startups.

In the Intermode workshop, no space was left unused. One wall held oor-to-ceiling shelves of storage, work surfaces were cramped with screws and spare parts and the back of the shop was lined with four industrial 3D printers that the Intermode team built for their warehouse in Canton — which they no longer need, as Newlab provides its own. One constructed a part for a mobile robot while Kadiu spoke with Crain’s.

One of the biggest impacts that Newlab has made to Kadiu’s company is by taking care of the small things, he said.

“We have the ability to just focus. A lot of startups here that are early stage didn’t have to run their own space and they started here, and so they sometimes miss the appreciation of simple things, like not having to clean bathrooms, or managing toiletries for the o ce or like crappy landlords or your roof leaking,” Kadiu said. “It’s really nice here because they do a really good job of managing it and just giving us a space where we can focus on growing the business.”

more. e introduction of additional o ces is intended to allow startups to meet and scale more seamlessly, Pluszczynski said, and ensure they have the resources to keep their company in Detroit.

Grounded’s Shapiro said the value of the facilities and the bene ts it has provided to his e-RV company cannot be understated.

“I can’t emphasize enough having access to $10 million of stateof-the-art manufacturing equipment and prototyping machines,” Shapiro said. “Down here in the shops — the full woodshop, metal shop, electronics lab, 3D printing lab, textile shop — and having access to all of that, for such a low monthly rate for a hardware startup, it’s just been pretty invaluable. And I really think that’s like the biggest, by far the most impactful value add that we’ve gotten from Newlab and Michigan Central, who owns the building.”

Grounded is raising funding through its rst seed round and plans to double its team size by the end of the year, Shapiro said. All of the employees will be based in Detroit.

City’s tech renaissance

Newlab at Michigan Central attracted many of its rst startups by reaching out to those that tackled “existential challenges” and inviting them to Detroit, Winther said.

ESSPI, a pre-revenue startup focused on safe lithium ion battery logistics and intelligent transport systems, has a space on the second oor of the building where Ron Butler, founder and CEO, works with his 14-person team to build and brainstorm products.

“You can build, I mean, anything. You can build anything in the workshops,” Butler said. “ at’s what prototyping is. at’s what hard tech is: You build it, test it out, it doesn’t work, waste it, start over. ere’s not many places you can do that, and Detroit is one of those. at’s very special when it comes to hard tech and Newlab is front and center.”

Butler, 55, a Detroit native, served as Detroit re ghter for 25 years and for six of those years simultaneously taught at Detroit Public Schools. He has a passion for Detroit and, on top of attracting companies to the city, he hopes to see more companies founded by Detroiters in the future.

“What I’ve seen in the last few years is this absolute renaissance where people do want to come here and it’s mostly young people who don’t have deep-seated reservations and stories they’ve heard,” Butler said. “ ey’re willing to explore, and then they come here and they’re like, ‘ is place is awesome.’ And I hear that over and over again and I even have to take a step back. Like, my experiences don’t tell me that. I think we’re harder on ourselves than the rest of the world. ey come in, they see this as a playground where ‘I can do whatever I want.’ And they’re right. ey’re absolutely right.”

NEWLAB From Page 1
ESSPI Energy Storage Safety Products International has a space on the second oor of the Book Depository building, where Ron Butler, founder and CEO, works with his 14-person team to build and brainstorm products. | PHOTOS BY SYLVIA JARRUS Arnold Kadiu, co-founder and CEO at Intermode, moved the company’s headquarters to Detroit when approached by a Newlab representative last year. Carolina Pluszczynski, COO of Michigan Central, at the Book Depository building in Detroit where Newlab is housed.

e company invested $6 million to construct a 20,000-squarefoot canning operation at the old Gibraltar Trade Center in Mount Clemens with plans for further expansion.

Matt McAlpine, president of Emerald Canning and former COO at Blake’s, said the company aspires to own 2% to 3% of the total Michigan cannabis market — which would have represented about $60 million to $80 million in sales in 2023.

But regulatory hurdles are stymying Emerald Canning’s plans, as THC-infused beverages, often called “alcohol alternatives,” are currently only available for purchase at licensed marijuana dispensaries, not traditional retail stores like groceries or gas stations.

“To be competing with alcohol, it needs to be displayed with alcohol,” McAlpine said. “To really succeed, we need to get these into the hands of consumers in an appropriate setting.”

Crushable cannabis

Inside, Emerald Canning Partners’ operations at the old Gibraltar Trade Center building look like any other canning operation, not too dissimilar from what patrons of local craft brewers see beyond the glass of a taproom.

e process starts with reverse osmosis water from a 1,200-gallon holding tank. THC-infused drinks are highly sensitive to oxygen, McAlpine said, so as much oxygen is removed as possible, down to only ve parts per billion. Beer is roughly 50 parts oxygen per billion.

en the ingredients are added to make the drinks a tea, seltzer or cider. ere is no fermentation process like making a beer or hard seltzer.

In the nal stages, the THC emulsion is added, a pretty precise process to make sure the correct amount of the psychoactive ingredient is mixed. Pleasantrees THC distillate is turned into an emulsion by a third-party provider. In a cooler at Emerald Canning rests canisters of the emulsion containing between 2 million and 3 million milligrams of THC — the equivalent of up to 60,000 joints.

Emerald Canning produces four brands with varying THC content. Its own Highly Casual seltzer brands and Pleasantea range from 2 mg THC per can to 10 mg. Its Armada Cannabis Co.-branded THC cider is 20 mg.

e beverages retail between $2 and $10 per can.

Emerald also produces a new, 7.5-mg THC seltzer for competitor Lume Cannabis Co. called Buzzn. ose seltzers are hitting dispensary shelves now.

“We entered because the overall beverage market is massive and experienced and not-so-experienced cannabis consumers want a THC beverage,” Doug Hellyar, COO and president of Lume. “It’s also an entry point for the ‘canna-curious’ people who prefer not to smoke or vape. Market data shows there is a

sizable shift from alcohol to cannabis and providing a high-quality beverage will accelerate that.”

In Canada, where recreational marijuana sales began in 2018, beer sales have averaged a decline of nearly 1,600 cases, or more than 30,000 12-ounce cans, per month per 100,000 people, according to a recent study by researchers from University of Manitoba, Memorial University of Newfoundland and University of Toronto.

Emerald Canning currently produces 24 di erent THC-infused beverage varieties and sizes, and expects that number to grow to 58 in the next three months, McAlpine said.

e company formed between Blake’s and Pleasantrees roughly a year ago with the idea of capturing an untapped market, said Bryan Wickersham, president of Pleasantrees.

“We know how to make cannabis, but didn’t have the rst clue about beverages,” Wickersham said. “Luckily, we knew the Blake family and thought we could make a go at the market.”

e company struggled for most of its rst year of existence, losing money, McAlpine said. So in March, the company had McAlpine, who was college roommates with

Blake’s Hard Cider founder Andrew Blake at Michigan State University, back ll his COO role at Blake’s and come over to run Emerald Canning.

Part of the reason is the slow-regulatory approval process, McAlpine said. It takes approximately three weeks to turn water into a THC beverage, and for that beverage to hit a dispensary shelf due to testing and labeling requirements, or about three times longer than getting a Blake’s Hard Cider on the shelf, McAlpine said.

Currently, Emerald is making about 400 cases of THC beverages per day, but the facility is capable of producing double that — about 300,000 cases annually.

Its canning operation is designed to produce 300 cans of THC-infused drinks per minute, McAlpine said.

Hemp or THC teas?

e Michigan cannabis market has been slow to catch on to THC beverages, largely due to the state’s regulatory framework.

Hemp-derived THC products are technically allowed in many states due to the 2018 Farm Bill, which clari es that THC of 0.3% or less of dry weight is not a federally controlled substance. is has

allowed companies to crop up across the U.S. that distribute hemp-derived THC beverages to liquor and grocery stores.

In Michigan, however, hempderived THC is regulated like traditional cannabis-derived THC, and therefore is barred from sales outside of a marijuana dispensary.

Emerald Canning produces THC drinks because cannabis THC marijuana is more readily available than hemp-derived THC.

e Farm Bill opened up the hemp-derived market for major beverage producers, like Seattlebased Jones Soda Co. Jones launched its own hemp THC drink under the brand Mary Jones in 2022. It plans to be available in 30 states by the end of June.

But Michigan is e ectively a walled-o market for hempderived THC companies like Massachusetts-based Cantrip, said CEO Adam Terry.

Cantrip distributes to 39 states, thanks to the Farm Bill.

Terry said THC beverages don’t sell well in dispensaries because they are simply expensive for the dosage.

“I have no interest in returning to a dispensary-based model,” Terry said. “I don’t see a way that it’s economically viable. I’d probably spend more making the prod-

uct than I could make in a market like Michigan.”

In Minnesota, which is just launching its legal recreational marijuana market, sales of hempderived THC products, mostly beverages, have totaled roughly $78.5 million since July last year, according to data from Andrew Livingston, director of economics and research for Denver cannabis law rm Vicente LLP.  In Michigan, THC beverages and tinctures totaled roughly a paltry $9 million in 2023.

“ e state’s regulation on hemp are incredibly tough,” Wickersham said. “We have probably the most speci c-use facility in the country because of them. Most other beverage producers outside of Michigan can participate e ectively in both arenas.”

But even if Michigan decided to re ne its stance on hemp-derived THC, Emerald Canning may still be in the weeds on growth. Current Michigan regulations bar cannabis THC and hemp THC production and processing in the same facility, meaning its Mount Clemens facility would have to pick between the two to be able to be sold outside of dispensaries if the state allowed it.

e Michigan Cannabis Regulatory Agency declined to comment on the topic.

It’s unlikely traditional retail outlets, like grocers, would ever stock cannabis-derived THC beverages because of federal illegality and the high taxes associated with selling the state-legal product.

Nevertheless, Emerald Canning is prepared to expand its operations as it is becoming the marijuana beverage maker of record in the state. e company is currently running one shift, ve days a week but is adding ve more employees and a second shift in the next three weeks, McAlpine said.

e company also plans to announce in the coming weeks that it will make a THC beverage for a national beverage brand.

THC From Page 1
Employees at Emerald Canning Partners apply labels to cans of Armada Cannabis Co.-branded THC cider this month at the company’s facility in the former Gibraltar Trade Center in Mount Clemens. | PHOTOS BY DUSTIN WALSH The former Gibraltar Trade Center building near I-94 and River Road in Mount Clemens houses Pleasantrees medical and recreational marijuana dispensary, as well as operations for Emerald Canning Partners. Matt McAlpine, president of Emerald Canning Partners, stands in front of THC beverage tanks this month in the company’s Mount Clemens facility.

Cybersecurity is big business for adviser James Giszczak

Data breaching has become such a sophisticated enterprise that many hacker groups have helped departments to guide victims through the ransomware payment process. Cyber-pirates can compromise a company’s data with just one phishing email, but they sometimes lie in wait in a company’s system for years before striking at the most opportune moment. James Giszczak, copresident at Bloom eld Hills-based business advisory rm McDonald Hopkins, has seen all sorts of cyberattacks in his three decades of experience. He says the amount and severity of the attacks across all industries have increased dramatically in the past ve years with bad actors proliferating in Russia, China and elsewhere. That has kept Giszczak’s cybersecurity practice — the fastest-growing piece of business for the rm — humming all hours of the day and night. The following conversation has been condensed and lightly edited for clarity. By | Kurt Nagl

How has your cybersecurity practice grown in recent years?

We’ve seen the growth really across our platform. So every one of our o ces has added data privacy attorneys. In addition, we’ve got a dozen or so that are 100% remote and spread across the country. So from our perspective, we’ve seen consistent steady growth. It has been the fastest-growing area in the rm by far. We’re averaging now 2,200 to 2,300 data security incidents a year. And then on the litigation front, we’ve seen a dramatic rise in litigation over the last three to four years, and we’ve had to expand our data privacy litigation group as well. We have 45 attorneys total that are practicing in our data privacy and cybersecurity team. It started with two: myself and partner Dominic Paluzzi.

What industries are targeted most frequently?

Really, every industry, every size organization, they’re all being targeted all day, every day. Certain organizations have much larger budgets to pay, and they may have more technical defenses in place versus some smaller organizations … We do see a lot in the health care space. We see a lot in higher education. We’re seeing a lot of municipalities that are being targeted. But really, every organization, every industry needs to be concerned because they’re all being targeted.

Are most attacks originating from China and Russia?

It’s a big criminal organization. Certainly, there’s some speculation that some are state-sponsored. But they have a tendency to be in countries where we often don’t have the ability to extradite anybody. So, to the extent that law enforcement is able to put together a case and gure out who may be behind an attack, it’s often a challenge just because they’re in countries where we can’t extradite and prosecute somebody.

Can you speak to how the sophistication of these attacks has changed

over the years?

These groups are extremely sophisticated, so much so that some of these groups actually have help centers that if, for example, they hit you with ransomware and you’re locked down and you make a ransom payment, and you’re having a problem decrypting your data, they will actually be providing technical suggestions and advice to help you get restored because they want to be seen as good criminals… There’s been an evolution really in our industry. So, if you think back to the Target and Home Depot days, those were very large data breaches that involved credit card information that was stolen. So the criminals were stealing this information, and the whole goal of course is they wanted to monetize it. Well, then they started to steal personally identifiable information, your name coupled with your Social Security number, driver’s license, banking information, etc., and they were selling that data. Then they really started to focus on protected health information, which could be used again for identity theft purposes. Then you started to see the proliferation of ransomware …

Stellantis and its supplier Yanfeng are litigating over a ransomware attack that hit the supplier late last year and forced its customer to shut down temporarily. There have been numerous other disputes recently involving data breaches. Who typically bears responsibility for damages caused by a cyberattack?

It’s interesting because more and more, we’re seeing provisions in contracts that are very speci cally related to data privacy and cybersecurity. So the contracts themselves are oftentimes controlling from a liability standpoint. ere may be obviously indemni cation clauses, etc. But we’ve seen more and more contracts that are very speci c when it comes to cybersecurity, and we encourage our clients to really look at not only their own contracts, but any contract they’re signing so that they can ensure that they understand who does bear the liability should you have a cyber event. And part of that is really having a more in-depth discussion with them about their overall cyber stance. How are they positioned? Have they taken appropriate steps to be proactive? What did their contracts say? Do they

have appropriate insurance coverage? Are they taking the technical safeguards and defenses and implementing those? Are they providing appropriate training? But from a liability standpoint, certainly the rst thing that folks are looking at is the contract.

What was the most bizarre cyberattack case you have worked on?

We’ve seen cases where the criminals have been sitting in an organization’s system for over two years and were literally just monitoring all of the activity until there was a very large multimillion-dollar payment that had to be made. And at that time, they were able to insert themselves. e payment was made, and the money was gone. at was shocking because it was a not a small organization, and they had a level of sophistication. We’ve also seen very high ransom demands, $40 million, $50 million ransom demands. We see some of the vendor incidents that are huge … at’s another part of the connectivity. If they have an issue, then it cascades down to all of their clients or customers and these types of events then can become national or global in scale very quickly.

How are these incidents typically resolved?

ere’s a number of variables that are considered. So rst, does the organization need to communicate? We never want the organization to be communicating with criminals. We want to make sure that we’ve got professional negotiators that we engage on the company’s behalf to conduct the negotiations. If they get hit with ransomware, do they have a viable backup so that they can get up and running and they don’t need to pay for a decryption key? If that’s the case, great. It may end there. ere may be no communication with the threat actor. However, if we believe that data was taken, they may want to have the negotiators communicate with the threat actors to determine what type of information they have.

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