Crain's Detroit Business, Nov. 3, 2014 by Crain's Detroit Business

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www.crainsdetroit.com Vol. 30, No. 44

NOVEMBER 3 – 9, 2014

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A foreclosure notice was posted last week on the hotel’s entrance.

Can Adoba make comeback?

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Ex-Defense CIO comes home, heads Meridian IT

New operator named; experts see costly road BY SHERRI WELCH CRAIN’S DETROIT BUSINESS

Palace forms B-to-B league that adds net to networking

The former Hyatt Regency Dearborn will live to see another day — and operate under yet another management company. But is the 772-room hotel and conference center now known as the Adoba Hotel viable long term?

Hotel experts say only with longdeferred renovations that don’t seem likely given the slim prospect for return on investment. Management of the Adoba Hotel Dearborn/Detroit was set to transfer to Texas-based Lodging Host Hotel Corp. on Nov. 1, following South Dakota-based Atmosphere Hospitality Management Services LLC’s departure Friday after managing the hotel for the past two years. The name was also expected to change, but the new name had not yet been announced as of Friday. Separately, the hotel’s overseas ownership group, Royal Realties LLC, had a plan in place to pay

SHERRI WELCH/CDB

Lodging Host Hotel Corp. was to take over management of the Adoba Hotel Dearborn/Detroit Nov. 1.

about $335,000 in back personal property taxes owed to the city of Dearborn to enable renewal of nine licenses needed to operate the massive hotel. There are also back taxes owed to Wayne County. A notice of fore-

closure was posted on the hotel’s entrance doors last week. Properties with taxes that are two years delinquent may be foreclosed and the property can be sold at a public auction. The $856,816 in back real property taxes from 2012 owed the county was still outstanding as of Friday. A representative for Royal Realties, Steven Cohen, senior partner at Cohen, Lerner & Rabinovitz PC in Royal Oak, could not be reached Friday for further comment. However, he said last week for an online report at www.crainsdetroit.com See Adoba, Page 22

Inside

OAKLAND COUNTY is launching an initiative to build a brand for its emerging information technology industry

David Brandon’s background as a CEO and former UM football player wasn’t enough to avoid problems with students and alumni.

This Just In Wayne County, Chinese city make cooperation pact

NEWSPAPER

Wayne County and Xuancheng, a city in China southeast of Shanghai, entered into a memorandum of understanding last week to cooperate on economic development and cross-promotion. Under the agreement, the county and representatives from Xuancheng will share information on trade and development and explore opportunities for companies in each region and for promotional functions. The nonbinding agreement comes after years of discussions, the county said in a release. Wayne County Executive Robert Ficano made his first trade mission to China in 2005. “We want our manufacturers and suppliers here in Wayne County and in the region to be part of the growth and believe the MOU with Xuancheng Municipal Government is a step toward reaching the goal,” he said. — Dustin Walsh

ASSOCIATED PRESS

New challenges for UM’s next AD Brandon’s successor must handle biz issues, changing sports field BY BILL SHEA CRAIN’S DETROIT BUSINESS

Observers say the University of Michigan’s choice for its next athletic director won’t be a simple binary between an ex-jock traditionalist or Wall Street swashbuckler. A common narrative in the criticism of David Brandon, the former Domino’s Pizza Inc. CEO who resigned Friday after nearly five years as UM’s athletic direc-

Tech248 to be hub for talent BY ZACK BURGESS SPECIAL TO CRAIN’S DETROIT BUSINESS

tor, was that he tried to deploy a corporatist style to an athletics program deeply rooted in glitz-resistant tradition. But the fact is Brandon was both a former football player who professed devotion to Michigan’s venerated nostalgia, and a successful CEO who made scads of money for two major corporations. Neither background proved adequate because Brandon wasn’t a good college athletics CEO, said Andrew Zimbalist, a noted professor of economics at Smith College and author of several sports finance books. “The problem with Brandon wasn’t that he was a CEO type but that he didn’t have the right sensibilities to be an athletic director,” Zimbalist said.

On Wednesday, Oakland County will launch Tech248, an economic initiative and brand for the county’s information technology industry intended to help it build broad visibility. It’s similar to the Medical Main Street program launched in 2008 for the county’s health and life sciences industry, said Irene Spanos, county director of economic development and community affairs. Both industries are part of Oakland’s emerging sectors initiative, which identifies industries with high growth potential and develops strategies to foster them. After observing the rapid growth in IT, the county pulled some companies together to ask their advice, which resulted in the initiative. “They were excited and we asked them: ‘What are some of the things we as local government, state government and in County on economic development can do to help?’ ” rebound, Spanos said. thanks to That resulted in three answers: jobs, real Talent. Both help in finding people to estate development, fill positions and, longer-term, help the industry to be part of growing the talent. Page 9 Connectedness. Helping IT

OAKLAND FOCUS

See Brandon, Page 24

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See Tech248, Page 24

ISTOCK PHOTO

Town Center likely to fill Fifth Third space soon, Page 4

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Magna opens plant near Lansing, gets state grant for another Canadian auto supplier Magna International Inc. opened a $75 million, 290,000-square-foot parts plant, called DexSys, in Delta Township near Lansing. The paint line and injection molding factory is expected to add about 340 jobs when it reaches capacity, likely sometime next year, the Lansing State Journal reported. Magna, which roughly doubled its Michigan workforce in the past several years, employs more than 10,000 statewide. In other news involving Magna, the Michigan Strategic Fund approved a $2 million grant to the supplier’s interiors division for a plant in Eaton County’s Windsor Township.

Toro to pay $277M for U.P. maker of equipment to clean up winter Iron Mountain-based Northern Star Industries Inc. plans to sell its Boss snow and ice management business to Bloomington, Minn.based Toro Co., MiBiz reported. Toro expects to pay $227 million in a deal expected to close in the first quarter of the company’s 2015 fiscal year. Boss designs, manufactures and sells snowplows, salt and sand spreaders for light- and mediumduty trucks as well as all-terrain

MICHIGAN BRIEFS Whirlpool turns clothes-washing routine inside out At some point, one has to wonder why some entrepreneurial parent, clashing with a child over the propriety of turning clothes inside out and declaring them clean, didn’t think, “Hey, there might be a market for …” For what, exactly? Well, Benton Harbor-based Whirlpool Corp., with help from Cincinnati-based Procter & Gamble Co., had tried a couple of times to market a device that cleaned clothes that didn’t need much cleaning, only to take a bath, so to speak. Then came the third try, a product known as a Swash. Three months ago, Swashes started showing up in select Bloomingdale’s stores and Delta Airlines airport lounges. Bloomberg News reports that the 4-foothigh, steel-and-plastic box shaped like a radiator vehicles. Boss expects 2014 sales of about $125 million.

MICH-CELLANEOUS The Michigan Supreme Court up-

held lower court decisions that prevented West Michigan Film LLC from receiving a $10 million tax credit from the state for its Hanger42 project. The courts ruled that West Michigan Film never had an agreement with the state to get the money for the proposed movie production facility and that the owners waited too long to file the lawsuit. Gerber Products Co. is being accused by the Federal Trade Commission of claiming falsely that its Good

“could in just 10 minutes unrumple a cocktail dress or whisk cigar stench from a sport jacket, almost as if they’d gone through a wash cycle or a trip to the dry cleaner.” Online ads and videos said the Swash could cut dry-cleaning bills in half. The $499 Swash is now available nationwide. Most encouraging to Whirlpool and P&G was the testers’ enthusiasm. Some stopped returning calls when it was time to return the prototypes, said Megan Chase, a Whirlpool employee who leads Swash engineering. And in perhaps the ultimate testimonial, Bryan Aown, Whirlpool’s director of new business creation and innovation, said he uses his Swash to clean hockey gear.

Start Gentle baby formula can prevent or reduce allergies, The Associated Press reported. About 1,200 people work at Gerber’s campus in the West Michigan town of Fremont, where the company was founded. It now is a subsidiary of Switzerland-based Nestlé S.A. Charlotte-based Spartan Motors Inc. will close its Ocala, Fla., fire truck body assembly plant by the end of the year and move half of the plant’s operations to Michigan by early 2015, the Lansing State Journal reported. The work formerly done by 75 Florida employees will be split between Spartan’s Charlotte and South Dakota plants. MPI Research Inc. in Mattawan

will acquire the assets of Jasper Clinical Research and Development Inc. in nearby Kalamazoo, MiBiz reported. The pre-clinical testing lab will acquire Jasper’s 50-bed clinical trial unit of Bronson Methodist Hospital in downtown Kalamazoo. Terms were not disclosed. More than $95 million will be spent over the next six years to

A story on Page 152 of Crain’s 2014 Giving Guide gave an incorrect corporate designator for Mission Throttle LLC, which changed its corporate form from L3C earlier this year. A story on Page 12 of Crain’s 2014 Giving Guide should have said the Des Moines Register is owned by Gannett Co. Inc. An incorrect owner was given.

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renovate the Gerald R. Ford International Airport in Grand Rapids, The Associated Press reported. Work will include reconstruction of the north and east parking lots. Renovations to Cooley Law School Stadium in downtown Lansing, home of the Lansing Lugnuts minor league baseball team, are expected to cost up to $3 million more than the $22 million budgeted, the Lansing State Journal reported. The city underestimated the cost of some materials. Amtrak said ridership on the Wolverine line from Pontiac to Chicago fell 6 percent to about 477,000 in the fiscal year that ended Sept. 30, the Lansing State Journal reported. The blue line linking Chicago and Port Huron carried about 190,200 passengers, 125 more than the previous fiscal year.

Muskegon gon n

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Takai rejoins private sector Ex-Defense CIO charts health insurer’s IT growth BY JAY GREENE CRAIN’S DETROIT BUSINESS

Teri Takai, who began her first official day today as chief information officer and executive vice president of Detroit-based Meridian Health Plan, has spent the last decade as CIO of governmentowned information technology departments in Michigan, California and the U.S. Department of Defense. Now back in her native Michigan and in private industry, she said she is excited to parlay her experience in the health care industry. “I wanted to work in an environment where I could make a difference and provide services directly to people,” said Takai, 66. “I am happy to be back in the private sector and being in an industry focused on people.”

GLENN TRIEST

Teri Takai on her decision to come to Meridian Health: “I wanted to work in an environment where I could make a difference and provide services directly to people.”

Takai, who grew up in Detroit, spent more than 30 years with Ford Motor Co., had stints at FederalMogul Corp. and Electronic Data Systems and also served as CIO for the state of Michigan from 2003-08 un-

der Gov. Jennifer Granholm. Sean Cotton, Meridian’s chief administrative officer, said Takai takes over Meridian’s IT department at a crucial growth stage in the company’s 17-year history.

“We are going to double in size and should be a $3 billion to $4 billion company by the end of 2015 with the settled contract lines we have,” Cotton said. “We are a managed care company, but really an IT company because our main product is information. It is critical we have an (IT system) that is scalable and fits our future needs.” Investment in IT systems is crucial to long-term growth strategies, especially in the health care industry that is expanding under health care reform, said Doug Wiescinski, information technology consulting partner and head of IT for Plante Moran PLLC in Southfield. “The changes that are occurring in the insurance industry itself and the health care value chain are significant,” Wiescinski said. “Companies that have been fairly localized are becoming broader, regional and even national. The ability of IT to support that growth with flexibility, as well as to take on new constituencies, is critical.” For example, when the auto industry faced economic challenges See Takai, Page 23

Inside Q&A: Advice for suppliers on recalls, costs, Page 17 Company index These companies have significant mention in this week’s Crain’s Detroit Business: XAdoba Hotel Dearborn/Detroit . . . . . . . . . . . . . . . 1 Advocate Commercial Real Estate Advisors . . . . . . . 4 Axis Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Blue Cross Blue Shield of Michigan . . . . . . . . . . . . 21 Cohen, Lerner & Rabinovitz . . . . . . . . . . . . . . . . . . . 1 Commerce Towne Place . . . . . . . . . . . . . . . . . 13, 14 Detroit Metro Convention & Visitors Bureau . . . . . . 22 Detroit Pistons . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Dietz Trott Sports & Entertainment . . . . . . . . . . . . 25 Edward G. Lennon . . . . . . . . . . . . . . . . . . . . . . . . . 22 Fifth Third Eastern Michigan . . . . . . . . . . . . . . . . . . 4 Funderbuilt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 General Retirement System . . . . . . . . . . . . . . . . . 16 Gibbs Planning Group . . . . . . . . . . . . . . . . . . . . . . 14 Henniges Automotive North America . . . . . . . . . . . 15 Hotel Investment Services . . . . . . . . . . . . . . . . . . . 22 Hunter Pasteur Homes . . . . . . . . . . . . . . . . . . . . . 13 Insite Commercial . . . . . . . . . . . . . . . . . . . . . . . . 13 Jones Lang LaSalle . . . . . . . . . . . . . . . . . . . . . . . . . 4 LSG Insurance Partners . . . . . . . . . . . . . . . . . . . . 25 M. Shapiro Real Estate Group . . . . . . . . . . . . . . . . 13 Media Genesis . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

B-ball for B-to-B LEAGUE MEMBER OPTIONS There are two options for the new Networking Business League for current Detroit Pistons season ticket members who spend a minimum of $15,000 with Palace Sports: 䡲 Pistons-only NBL license ($2,000): Includes eight pregame receptions in the President’s Club with all-inclusive food and beverage, and presentations from businessfocused speakers. Also includes premium ticketing concierge service to buy highdemand/sold-out tickets to Pistons events, and discounts to book President’s Club suites. 䡲 Pistons and Palace license ($6,000): Adds an additional three to five pre-event receptions for Palace shows in the President’s Club, along with invitations to select third-party events and President’s Club suite branding opportunities. There are four packages for companies or individuals who don’t already spend at the Palace: 䡲 10-Game Courtside Mini-Plan ($10,000): Two seats per game and three pregame receptions in the President’s Club. 䡲 4-Game Pistons Suite Flex-Plan ($13,500): Includes four Pistons games with a $600 food and beverage credit per game, and four pregame receptions in the President’s Club. 䡲 3-Event Suite Flex-Plan ($13,500): Includes three PS&E shows with $600 food and beverage credit per event, and three pregame receptions in the President’s Club. 䡲 The premium option is the full-season package at $17,000. It includes two seats for all 41 Pistons games and eight pregame receptions in the President’s Club.

THIS WEEK @ WWW.CRAINSDETROIT.COM

Palace Sports launches business networking league

Meridian Health Plan . . . . . . . . . . . . . . . . . . . . . . . 3 Moceri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Moncur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Newmark Grubb Knight Frank . . . . . . . . . . . . . . . . 11 Original Equipment Suppliers Association . . . . . . . 17 Palace Sports and Entertainment . . . . . . . . . . . . . . 3 Penske Automotive Group . . . . . . . . . . . . . . . . . . . 18 Plante Moran . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Robert B. Aikens & Associates . . . . . . . . . . . . . . . 13 Southfield Town Center . . . . . . . . . . . . . . . . . . . . . . 4 Tech248 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Transwestern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 University of Michigan . . . . . . . . . . . . . . . . . . . . . . 1

BY BILL SHEA

VanOverbeke Michaud & Timmony . . . . . . . . . . . . . 16

CRAIN’S DETROIT BUSINESS

Warner Norcross & Judd . . . . . . . . . . . . . . . . . . . . 17

hen Dennis Mannion was vice president of sales and marketing for the Philadelphia Phillies in 1990, he hatched the idea of persuading the CEO of the club’s corporate sponsors to play together in a fantasy baseball league. Several of them joined, and the fantasy league became a networking group in which members not only traded players but also began to do real-world business deals with each other. “What ended up happening was amazing chemistry. These guys started to bond together,” Mannion said, adding that the CEOs were permitted to bring their CFOs to the fantasy draft to oversee the numbers. Now, as president and CEO of the Detroit Pistons and Palace Sports & Entertainment, Mannion is using that networking idea from 24 years ago to create something similar. Palace Sports launched the Networking Mannion Business League on Oct. 22 with a gathering of the initial 15 charter members for the sold-out Fleetwood Mac concert at The Palace of Auburn Hills. Management sees the league as a way to provide additional value to corporate clients while also increasing Palace revenue. See Pistons, Page 25

Election Day coverage Crain’s reporters and editors will be there as the results come in Tuesday night for all the important regional and statewide races.

Department index BUSINESS DIARY . . . . . . . . . . . . . . . . 20 CALENDAR . . . . . . . . . . . . . . . . . . . . 19 CLASSIFIED ADS . . . . . . . . . . . . . . . . 21 KEITH CRAIN . . . . . . . . . . . . . . . . . . . . 6 LETTERS . . . . . . . . . . . . . . . . . . . . . . . 6 MARY KRAMER . . . . . . . . . . . . . . . . . . 7 OPINION . . . . . . . . . . . . . . . . . . . . . . . 6 PEOPLE . . . . . . . . . . . . . . . . . . . . . . 20 RUMBLINGS . . . . . . . . . . . . . . . . . . . 26 WEEK ON THE WEB . . . . . . . . . . . . . . 26

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Experts: Town Center will fill void left by Fifth Third BY KIRK PINHO

for the 2.3 million-square-foot Prudential Plaza in Chicago. The Southfield Town Center price was also lower than what Blackstone paid, which was $131.82 per square foot, or $290 million, in 1999, according to CoStar Group Inc. According to New York Citybased Trepp LLC, the 601W purchase was made in part using $142 million from commercial mortgagebacked securities deals, one for $80 million and one for $62 million. The comparatively low price, along with low interest rates, will allow 601W to bend a bit on rental rates if needed and secure a tenant or tenants in relatively short order, Morris said.

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Don’t feel too badly for 601W Cos. The new owner of the Southfield Town Center may have been dealt a blow last week when it lost a prominent tenant that will largely vacate its six floors there beginning next year. But 601W isn’t expected to have much trouble finding a tenant or tenants to fill that space. Although some experts said 601W may have to be flexible with rental rates, which are higher than the Southfield Class A office space average — and needs to continue its $50 million in planned capital improvements — all agreed that the space Fifth Third Bank Eastern Michigan is vacating for Dan Gilbert’s One Woodward downtown won’t sit empty for long. As the suburban office market continues to recover, there are enough suitable tenants looking for space. And the landmark Southfield complex is still considered one of the most desired office locations in the area because of onsite amenities like parking, restaurants, a hair salon, dry cleaner and bank. Plus, it offers a central location north of 10 Mile Road between M-10 and Evergreen Road. “Southfield Town Center is going to do just fine,” said Sam Munaco, president of the regional office of Chicago-based Advocate Commercial Real Estate Advisors LLC, which leases space in the 2000 Town Center building. New York City-based 601W first swooped into metro Detroit this spring with its purchase of the 2.2 million-square-foot Class A complex out of default for $177.5 million from New York City-based Blackstone Group LP.

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Last week, Fifth Third Bank Eastern Michigan, the regional arm of Cincinnati-based Fifth Third Bank and the largest tenant in one of Southfield Town Center’s four towers, announced it would lease about 62,000 square feet in One Woodward. Regional leadership will move in March, and the rest of the 150 full-time employees are expected by summer 2016. As part of the 10-year lease agreement with two five-year options, the 360,000-squarefoot building will be renamed Fifth Third Bank at One Woodward. Weiner Getting Fifth Third’s space occupied likely won’t happen without luring tenants from nearby buildings, said A.J. Weiner, executive vice president in the Detroit office of Jones Lang LaSalle. The Farmington Hills

Leasing trends

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The Southfield Town Center is considered desirable because of its amenities and location.

office of Transwestern, which 601W hired in July to handle leasing and management, will have to look to other suburban tenants to fill the 85,000-square-foot space. “We are getting to a point where downtown is just taking from the ’burbs, which is a huge reversal of what we saw in the last three decades,” Weiner said. “They’ll have to ask, ‘Who is established in our immediate area that we can attack and secure into our complex?’ The space and buildings are relevant and attractive and will succeed, but it might be at the peril of other buildings.” Michael Silberberg and Mark Karasick, principals of 601W, said in a spring interview with Crain’s that one reason they bought the center was because none of its tenants lease more than 5 percent of its total square footage. “You can’t be hurt too badly by any one tenant,” Karasick said. And talks are already in the works to fill Fifth Third’s space. Clarence Gleeson II, senior vice president of the local Transwestern office leasing group, said there have been tenants seeking 75,000, 60,000, 50,000 and 40,000 square feet of space at the complex. Steve Morris, principal of Farmington Hills-based Axis Advisors LLC, said 601W got a good deal on the complex, buying it in May for about $80.55 per square foot. That’s low compared to prices it typically faces in its bread-and-butter markets of San Francisco, Washington, D.C., Chicago and New York. For example, the company paid $818 million, or $451.67 per square foot, for the 1.8 million-square-foot Bank of America Center in San Francisco. It paid $193.33 per square foot for the 1.05 millionsquare-foot 1185 Avenue of the Americas building in New York City, and $146.09 per square foot

Gleeson said rents range from $21.75 to $22.75 per square foot per year. But he said rent reductions are not on the table for 601W. According to data from the Southfield office of Newmark Grubb Knight Frank, the average asking rent for Southfield Class A office space in the third quarter was $20.17 per square foot per year, making rents at Southfield Town Center 7.8 percent to 12.8 percent higher than the average rates. “They recognize they didn’t come to the Town Center and the marketplace to buy an asset to drop the rents to fill it up with tenants. The higher the rents, the higher the valuation of the property, and they have a five-year plan to lease it out,” Gleeson said. The complex is about 70 percent occupied, Gleeson said, and three of the four towers have occupancy rates above 80 percent. The 3000 Town Center building is about 34 percent occupied. There is also the flexibility to lease the space one floor at a time, or shoot for larger leases. However, tenants looking for 10,000 to 20,000 square feet are more abundant than those looking to lease 85,000, Morris said. Gleeson said he expects Fifth Third’s space to be divided among a couple of different tenants. The most likely are regional offices of Fortune 1,000 companies, wealth management and law firms, Morris said. A health care firm would also be a fit, Munaco said. Of the 105,000 square feet Fifth Third leases in the Southfield Town Center, the bank will only keep about 20,000 square feet for 30-40 of its employees, according to Jeffrey Wagner, vice president of corporate real estate for Fifth Third. The lease is set to expire in August 2016, according to CoStar. Southfield’s Class A office vacancy rate has improved since its eight-year high in the fourth quarter of 2011, when it was 29.4 percent, according to data from Newmark Grubb. In the third quarter this year, it was 24 percent. Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB

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OPINION

Schlissel sets tone for AD successor T

he resignation of David Brandon as the University of Michigan athletic director on Friday was inevitable, given the events of the past few weeks, and so not especially surprising. But that Brandon and UM found themselves in this place is surprising, at least to us. Brandon, despite what you may have heard on sports talk radio, was a respected and successful executive at both Domino’s Pizza and Valassis. He came to his alma mater with a strong executive pedigree, previous experience as a regent, and a love and appreciation for what UM symbolizes. He was successful at important parts of his job — fundraising and the overhaul of UM’s aging athletic facilities begun by his predecessor, Bill Martin. But there also were fumbles. Football ticket prices increased as the team lost more. Changes were made to student seating policies without talking to students. A series of errors related to the mishandling of an injured quarterback and the revelation of dismissive emails to fans surely were the last straws. New UM President Mark Schlissel thanked Brandon publicly on Friday for his service but made clear the university is a students-first institution. Schlissel set the welfare of student athletes as a priority, along with more tightly integrating them into normal campus life and academics. That will be the job of the next athletic director — to be sought by interim AD Jim Hackett, retired Steelcase CEO. And perhaps the start of a legacy for Schlissel.

DIA can learn from PR mess If you take public money, public scrutiny — and responsibility — come along for the ride. The Detroit Institute of Arts is learning that the hard way in the public relations fiasco following media reports of large salary increases and bonuses for the fiscal year ended June 30, 2013, for its two top executives. The pay was awarded in the same year tri-county voters approved a millage that delivers $22 million in tax dollars a year to the art museum. The optics of pumping up pay dramatically as Detroit entered bankruptcy and public pensioners faced cuts — even if the raises were in line with peer museums — was terrible. Museum leadership initially seemed tone-deaf to the outcry, but by late last month had agreed to discuss compensation in the future with county officials. The solution is simple: If raises were deserved and museum volunteer leadership concurred, they need to dip into privately raised dollars to grant them.

LETTERS Don’t stereotype women in tech Editor: Thank you for your article “8 small groups making big impact on Detroit” (Detroit 2.0 and crainsdetroit.com/detroit2.0). I enjoy reading about the people and organizations in the city that are working hard to make Detroit a great place to live and work. I was happy to see that Girl Develop It Detroit was featured; my employer has opened its doors to give them space in which women and men can learn to write software. That being said, I was a dismayed by the author’s and editor’s choice of words when describing Girl Develop It and the work they do: “Coding is sexy with @GDIDet. …” The underrepresentation of women in the tech industry is well-recognized and much-discussed. One reason few women choose to work in tech is their frustration with not being taken seriously, paid fairly and promoted to leadership positions. Organizations like Girl Develop It help women acquire the technical skills

Crain’s Detroit Business welcomes letters to the editor. All letters will be considered for publication, provided they are signed and do not defame individuals or organizations. Letters may be edited for length and clarity. Write: Editor, Crain’s Detroit Business, 1155 Gratiot Ave., Detroit, MI 48207-2997. Email: cgoodaker@crain.com they need to get tech jobs. This will increase the number of women in the field. Strength in numbers means we can combat the persistent prejudices, conscious and subconscious, that have prevented so many women from considering and sticking with this career. When Crain’s writes that an organization that promotes women in tech is making coding “sexy,” it’s focusing on exactly the opposite of what so many of us are striving to do in this industry. We are just as smart, hard-working and creative

as our male colleagues, and we want to be respected for those qualities. I want to be recognized as the developer who writes beautiful, reliable code; works effectively side by side with my colleagues; and comes up with creative solutions to hard problems. I am not just a pretty face. I did not get this job because I fill a quota or, worse, catch the boss’s eye. There are so many more apt ways to describe Girl Develop It and the fantastic work they are doing in the city of Detroit for women and men, girls and boys who want to break into the tech industry. Coding is: empowering, accessible, affordable, enjoyable, interesting, smart, creative … with GDI. I hope that Crain’s will in the future consider its words more carefully and not continue to perpetuate tired, unproductive stereotypes. Anne Marsan Managing partner – Ann Arbor Atomic Object

TALK ON THE WEB From www.crainsdetroit.com Re: Adoba hotel in Dearborn headed into foreclosure That’s a big white elephant. It is too Detroit for Detroitophobes (current safe zone is west of I-275), and not nearly Detroit enough to draw conventions looking for a vibrant downtown location. It is a relic of the inner-ring suburban bunker era. Rikemolfsman

Reader responses to stories and blogs that appeared on Crain’s website. Comments may be edited for length and clarity.

Re: Crain’s endorses Terri Lynn Land Totally agree with this assessment. Terri Lynn Land can make a difference in D.C. Her opponent has been, and would continue to be, a part of the continuing problem. William J Seriously? How can a publication that reports on business endorse candidates whose policies actually are detrimental to business? Daddyo

DAVID HALL/CMB

Working on the M-1 Rail.

Re: Complex funding puts M-1 Rail project on the right track Big waste of money. Good intentions, but this is Detroit. Once up and running, it will be another thing taxpayers will have to fund

year after year to keep running. Detroit is dead, except the casinos and sporting events. Kaos Rex Streetcars offer benefits beyond simply transporting people. They’re catalysts of economic development. The rail lines encourage development along the dense urban corridor in which they are built. This is already happening in Detroit along the M-1 route. There’s the David Whitney Building, Lawrence Tech’s building, HopCat’s building, retail along Merchant’s Row, the Hudson’s project, arena district, Woodward Garden Apartments, WSU’s biomedical building in New Center and more. I live and work downtown and am beyond excited for this project to be complete. I will use this just as I use the People Mover to go to See Letters, Page 7

KEITH CRAIN: Your vote is worth a lot of money I always see that World War I poster of Uncle Sam looking at you sternly and proclaiming, “I want you.” Millions — no, billions — of dollars have been spent in the United States in the past few weeks to get you to vote for political candidates. Local money, state money and national money have been poured into the races in an effort to persuade you to vote for whomever. Ironically, there has been little or no amount of money spent to persuade anyone to show up Tuesday and vote. We will be lucky if

we persuade a third of the eligible voters to actually show up and cast their ballots. Meanwhile for those of us who are planning to vote, there will be lots of names on the ballot that you’ve never heard of before and might not even after the election. When you realize the money being spent on the top-of-the-ballot candidates, there is little or no money being spent on the myriad of candidates for so many local and regional of-

fices. Yet they are often equally important. My guess is that if you tried to quantify the amount of money spent not by each candidate but divided it by each voter, you’d be quite amazed at the lavish amount of money being spent by the candidates for your vote. You would probably like it a lot better if they just handed you the money when you emerged from the poling booth. Illegal, of course, but when you real-

ize the billions of dollars being showered on you, it should give everyone a chuckle. Since those politicians are spending so much money on you and me, it would seem necessary to reciprocate by not only voting but becoming informed about the candidates. We all know that everyone has strong opinions about the top of the ballot, but the challenge is to understand who is running for all the other offices and, just as importantly, what proposals are being offered for your opinion that will often turn into law, not to

mention have a direct impact on your pocketbook. You might as well consider it a two-for-one sale. You will be voting once, but the other two voters aren’t going to show up, so your vote will represent all three of you. The money people are spending to persuade you to vote for them is significant. Even though you’re not getting a check, it should almost force you to consider their message. Your vote is worth millions. Just ask a statewide candidate. Educate yourself and then head for the polls. It’s worth a lot of money.

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MARY KRAMER: Truth Squad helps sort election claims Do newspaper endorsements matter? At last count last week, Democrat Mark Schauer had not received any major Michigan newspaper endorsements in his bid for governor. Oddly, Schauer was endorsed by The Toledo Blade. Go figure. Even the Detroit Free Press, the liberal/labor bastion in Michigan, grudgingly endorsed Republican incumbent Gov. Rick Snyder. In one Freep essay, the governor was referred to as “the man who saved the Motor City?” No question mark needed. Snyder saved Detroit. Period. As our own endorsement noted on Oct. 6, Snyder’s biggest win in his first term was to address issues in Detroit that had been kicked down the road for 40 years. Snyder set the table; now it’s up to Mayor Mike Duggan to make sure he can serve the meal for a city starving for results. If voters are undecided about the governor’s race on Tuesday,

they haven’t been reading, listening or thinking. In this race, endorsements probably won’t matter that much. Newspaper readership has declined dramatically in the past decade, in Detroit and around the country. And research shows that endorsements matter less in hotly contested, much-publicized races than they do in bottom-of-the-ballot contests that get far less coverage. Voters are already bombarded

by emails, radio spots and TV commercials touting candidates of all stripes. The problem is that many of the ads are misleading at best and outright lying at worst. So the most important media contribution these days might not be an endorsement but a tool like the Michigan Truth Squad created by the Center for Michigan and its e-publication, The Bridge. A team of unbiased reviewers verifies the “facts” in political ad-

vertising, issuing judgments of “no foul,” “warning,” “regular foul” and “flagrant foul.” The fouls have been awarded across the board, regardless of party. And it’s a good way for voters to sift through the accusations and counter-accusations and figure out just who might be worthy of their vote. A Pew Research Center for People & the Press study earlier this year indicated Americans are more polarized politically than at any time in the past two decades. Another Pew study a couple of election cycles ago suggested that an endorsement from Oprah Win-

frey or a “minister, priest or rabbi” holds more influence than the endorsement by a local newspaper. My guess is that respected friends might influence many votes even more. Another interesting question to ponder on your way to the polls. Who influences your vote? Mary Kramer is publisher of Crain's Detroit Business. Catch her take on business news at 6:10 a.m. Mondays on the Paul W. Smith show on WJR AM 760 and in her blog at www.crainsdetroit.com/kramer. E-mail her at mkramer@crain.com.

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TALK CONTINUED ■ From Page 6

my job in the winter months. Eric Henry

Re: Fifth Third Bank to move 150 employees to downtown Detroit Perhaps more businesses located downtown and limited parking spaces will ignite the flame for public transit. While the M-1 Rail is meant to spur business activity along Woodward Avenue, it also connects Amtrak at Grand Boulevard. With the cost of parking and time of commute, perhaps it will make more sense for people to take the train to the streetcar and back. Now if only Amtrak ran at convenient times instead of 5 a.m., 2 p.m. and 11 p.m. BloggerDave

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Re: Downtown high on retail: Varvatos lease could spur others I am so happy to hear all the good things that are happening in our great city, and I hope and pray that this momentum keeps going. Tim Detroit is an ideal city for high-end retail. Justin Thompson

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The Risks of Change For CFOs, fast growth brings many new challenges By James Ritchie s firms throughout the U.S. undertake growth initiatives such as introducing new products, entering new markets, and acquiring other companies, they’re looking to their CFOs for much more than financial leadership. They’re depending on them to oversee a wide range of new areas Matthew Elliott Michigan Market and play a key role in setting corporate President Bank of America direction and identity. Merrill Lynch “The CFO has evolved from this accounting function — the most senior accountant in a company — to being this strategic leader who, by the way, is also involved in finance,” says Matthew Elliott, Bank of America Merrill Lynch market president for Michigan. One task in particular associated with an aggressive growth enterprise is managing risk. In modern high-growth companies, the concept of risk is broader than ever. In addition to worrying about liquidity and other financial issues, the CFO must keep watch on areas such as data security, corporate reputation and, because of just-in-time sourcing and globalization, the supply chain. “Risk used to be how much leverage you could take on,” says Elliott. “Now it probably has 10 or more prongs that fall to the CFO.” Examples include interest rates, commodity prices, disruptive technology, and unanticipated labor costs, including health care. And there’s the ever-present risk of running afoul of changing government regulations. What’s required is for the CFO to monitor and adjust for any problems that could throw the company’s growth strategy off track. A strong balance sheet is important, but it does little good if a data breach sinks public trust in the business.

the bank works with clients to offer credit support to foreign suppliers. Firms can also measure their performance against vast amounts of benchmarking data through a Bank of America Merrill Lynch tool called PeerProfiler®. A view into other companies’ approaches can be invaluable to executives creating risk-management strategies. That’s especially true in high-growth firms, where CFOs may not have the benefit of long years on the job and extensive mentoring.

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oakland county

On the rebound Oakland County growing again with jobs, real estate development

Source: University of Michigan Institute for Research on Labor, Employment and the Economy

Ranked by percent change

BY DUSTIN WALSH

from 9.3 percent in 2009. However, Oakland County’s unemployment rate continues to drop more akland County has a concrete chin. swiftly than the region’s other counties. Once a top-five placeholder on the For example, Macomb County regislist of the country’s wealthiest tered an unemployment rate of 8.0 percounties, Oakland felt the blow of Southcent in September, and Wayne County’s east Michigan’s monolithic economy as rate was 9.2 percent. Washtenaw Counthe recession hit in late 2008. New cars ty, which historically maintains the gathered dust on lowest unemploydealer lots. The ment rate in the recounty gathered gion, is fairing pink slips — 80,096 slightly better than jobs were lost in Oakland, recording 2008 and 2009. a 4.7 percent nonBut with a reseasonally adjusted covering national unemployment in and regional econSeptember. omy, along with a Tracy predicts diversified workthe county’s unemforce and economployment rate will + 65,011 ic development inidrop below 4 percent tiatives, Oakland before the national County is again average and well be-105,504 outpacing its fore counties like neighbors, accordWayne and Macomb. ing to such metrics The plummeting as job growth and Data compiled by University of Michigan Institute for rate can be attribnew real estate deResearch on Labor, Employment and the Economy uted to automotive velopment. demand and a sharp “Everything that’s happening in rise in the service sector, Tracy said. Oakland County is really a function of Oakland County added more than the overall economy, but we’re still 65,000 jobs in 2011, 2012 and 2013, acmuch better off than other areas; we alcording to an economic outlook for the ways have been,” said Ronald Tracy, ascounty produced in May by the University sociate professor of economics at Oakof Michigan Institute for Research on Labor, Emland University. “Oakland County is doing ployment and the Economy. very well; we’re growing, there’s more Since 2010, the industries with the optimism.” greatest growth in Oakland County have CRAIN’S DETROIT BUSINESS

49.1% Engineering services

Employment trends The unemployment rate in Oakland County decreased to 6.9 percent in September from a peak of 12.9 percent in 2009, according to data from the U.S. Federal Reserve. That figure remains higher than the national unemployment average of 5.9 percent in September, down

been in business support services and engineering services, which grew 56 percent and 49.1 percent, respectively. See Oakland, Page 10

41.2% Fabricated metals manufacturing 38.9% Transportation equipment manufacturing

38.7% Services to buildings BUSINESS SUPPORT SERVICES

Oakland County and the rest of the U.S., 2009-16 (projected) 2009

12.9 %

2009

9.3 %

2014

6.9 %

2014

5.9 %

2016

5.0 %

2016

5.2 %

OAKLAND COUNTY

UNITED STATES Source: U.S. Bureau of Labor Statistics

PROFILES IN GROWTH Page 13

Commerce Township: The recession sunk the dream of a championship golf course, but now that the Oakland real estate market has re-emerged, developers plan housing and retail on 200 acres owned by the Downtown Development Authority. Artist’s rendering below.

Page 15

Auburn Hills: New corporate and commercial investment is driving a recovery of the city’s tax base.

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Focus: Oakland County

Oakland: On a rebound ■ From Page 9

Big Solutions

For Small Businesses.

Medical Main Street

Manufacturing and R&D

But manufacturing remains at Oakland County Executive L. the heart of Oakland County’s Brooks Patterson’s Medical Main economy. Transportation equipStreet initiative, launched in 2008, ment manufacturing grew by 38.9 has also help to boost medical percent, fabrijobs, at least increcated metal mentally, since the manufacturrecession. ing by 41.2 perHealth cent and macare and life chinery science emmanufacturployment ing by 20.1 pergrew to cent between 88,500 in the 2011 and 2013, county in according to 2013 from the UM study. 77,135 in “We have 2004. The the most county has volatile econoadded 2,768 jobs in my in the those fields since the country,” Trastart of 2009, accordcy said about ing to U.S. Bureau of the state. Labor Statistics data. “We’re based Medical equipon durable ment and supplies goods, but Ronald Tracy, Oakland University manufacturing has we’re not goled the emerging ining to get rid dustry in Oakland of all of our County, growing 51 percent since manufacturing jobs, because we 2004, according to data provided shouldn’t. It’s boosting us back up by the county. Nursing and resito the top now that people are buydential care has grown by 32 pering cars again.” cent, while the entire health care Projections from IHS Automotive Inc. in Northville show new car and life science industry grew 15 sales topping 16.4 million in the percent since 2004. Matt Gibb, deputy county execu- U.S. this year, a sharp rise from 10.4 million units in 2009. tive, said MedOakland County is home to ical Main Street roughly 200 of the state’s 375 autowas started as a motive research and development branding initiacenters. Plus, of the top 50 global tive for the tier-one auto suppliers, 40 have ofgrowing health fices or manufacturing facilities sector — and in Oakland County, said Gibb. more jobs will For example, Faurecia North follow, especialAmerica Inc., the North American ly in medical subsidiary of French supplier Fauequipment. Gibb recia SA, opened a new $30 million “We don’t beheadquarters in Auburn Hills in lieve this industry is ever going to July. (See related story, Page 15.) be static,” Gibb said. “The traditional medical models are going to change, but people will continue to reinvent health Despite these upward economic care, and a portion of those jobs See Next Page will be in Oakland County.”

the most “ We havevolatile economy in the country. We’re based on durable goods, but we’re not going to get rid of all of our manufacturing.

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Real estate

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Focus: Oakland County From data compiled by Newmark Grubb Knight Frank

Oakland County

Oakland County Vacancy rate:

Vacant square feet:

8.8 MILL

Average rental asking price: $

22.27

$191,554

$165,514

Average days on market

$96,621 Vacancy rate:

24.6

Vacant square feet:

11.2 MILL

Average rental asking price: $

19.60

11.1 MILL

Average rental asking price: $

18.46

Median sales price

trends, commercial real estate is still in recovery mode. While the residential market has recovered in many parts of town — visible with new infill housing and shortened average days on market for existing homes to be sold (see chart, above) — the office market is still working off excess inventory. Vacancy rates remain higher than pre-recession levels — the average vacancy rate was 22.5 percent in the third quarter of 2014, compared to 19.7 percent in the same quarter in 2006.

116

2009

115 59

2013

*Through Sept. 30, 2014

From Previous Page

2013

Vacant square feet:

2009

Vacancy rate:

2006

This translates to nearly an average of 11.1 million square feet of vacant office for the year. In 2006, vacancy was at 8.8 million square feet. Price per square foot has also failed to recover. In fact, it’s lower than during and coming out of the recession. The average asking rental rate in Oakland County in 2014, so far, is $18.46 per square foot, according to data gathered by Southfield-based Newmark Grubb Knight Frank. Short of a jump in rental pricing in the fourth quarter, this year’s asking rate

Source: RealComp 2

will be the lowest in more than a decade — lower than in 2009 at $19.60 per square foot and much lower than 2006 at $22.27 per square foot. However, landlords are starting to hold the line when it comes to rent concessions. John DeGroot, vice president of research at Newmark Grubb Knight Frank, said the gap has been narrowing between what landlords are asking and what tenants are agreeing to pay for a lease, which has led to lower rents. “The market is showing great improve-

ment, but there is still a lot of competitive office space on the market that keeps the rate of increase in check,” said DeGroot. “Landlords are not signing deals for much less than quoted rents, while rent concessions are tightening.” DeGroot Dustin Walsh: (313) 4466042, dwalsh@crain.com. Twitter: @dustinpwalsh

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Focus: Oakland County

With downturn done, Commerce project back on course White Lake Township

Commerce Township Wise Road

Carroll Lake Road

Sleeth Road

Haggerty Road

Kathleen Jackson, director of planning for Commerce Township and executive director of the DDA, said the project is expected to cost $130 million to $140 million and be completed in two phases. Last month, the DDA approved a purchase agreement for $10.5 million. Aikens, whose company owns and developed the 375,000-squarefoot Village of Rochester Hills, said the 32-acre first phase would consist of 120,000 square feet of depart-

il Tra ac i t n Po

M-5

Developers eyed the land for Commerce Towne Place for years, but lack of road access was an issue. Martin Parkway helped pave the way to development. Page 14

Martin Pkwy

ROAD TO GROWTH

Glengary Road

Oakley Park Road Welch Road

Wixom Road

Commerce Towne Place*

W. Bloomfield Township

E. Commerce Road

Benstein Road

One of the most expansive developments in recent memory is getting off the ground after years of languishing during the recent downturn. But the plans for developers of Commerce Towne Place to build a total of about 700 single-family houses, senior housing units and townhouses along with at least 550,000 square feet of retail and office space on just over 200 acres (an additional 130 acres will remain undeveloped) owned by the Downtown Development Authority actually originated from an ambitious idea for a golf course development. Township Supervisor Tom Zoner first spoke about what eventually would become the $272 million Commerce Towne Place with Ernie Fuller, who designed and owned the Links of Pinewood Golf Course in Commerce before the DDA purchased it about 10 years ago. “He said, ‘You know, Tom, I’m thinking about making a championship golf course here,’ ” Zoner recalled Fuller saying. “ ‘I can see a road coming through the (El Dorado Country Club and Links of Pinewood) golf courses and making a 27-hole golf course.’ ” Construction on the road finished four years ago, although the 27-hole course never came to fruition. But then the township and DDA were off and running with largescale plans to create a downtownlike area and relieve Commerce Township’s growing traffic congestion, first by purchasing 50 acres of Huron-Clinton Metropolitan Authority parkland and the El Dorado in 2003. Then it was 70 acres of Dodge Park No. 5 from the Michigan Department of Transportation and several other parcels. The various land purchases, totaling 330 acres and $41.2 million, gave the township enough space to build a new library in 2005 and redevelop the former Links of Pinewood clubhouse into a new Township Hall in 2009. The plans were tabled — then

the economy crashed. “Everything blew up in 2008,” said Robert Bruce Aikens Jr., vice chairman of Birmingham-based Robert B. Aikens & Associates LLC, which has been looking at the property since 2005 and now has a purchase agreement to buy 51 acres of the land for at least 550,000 square feet of retail space in the development area. “When times were bad, you couldn’t give the dirt away,” said Randy Thomas, president of Insite Commercial in Commerce Township, which the DDA hired to Thomas market the land to developers. “Now, on every parcel we’ve had competing offers. That hadn’t happened in years.” Township officials now say the land is primed for development, with miles of trails, wetlands and most of the needed infrastructure, such as sewers and water mains, in place. All told, the DDA issued a series of bonds totaling $80 million to pay for the land, Commerce Township’s $12.5 million portion for the southward extension of Martin Parkway and its contribution to the construction of a roundabout at M-5 and Pontiac Trail. The rest of the bond proceeds were used for things such as engineering, environmental surveys and purchasing other properties outside the project area.

Milford Township

BY KIRK PINHO CRAIN’S DETROIT BUSINESS

* Boundaries are approximate. CDB MAP

ment store space, another 250,000 square feet of retail and 40,000 square feet of restaurant space. All of it is expected to open in 2017. The second, 19-acre phase would have 120,000 square feet of retail, plus another department store. “The basic premise is that on the west side, there is no town now,” Aikens said. “There is the opportunity to create retail, and it’s got to be more than just going to a store. It’s got to have enter-

tainment, it’s got to have architecture, it’s got to be a place. “What is the new shopping center going to look like in 2025? 2030? We are kind of in this time of change in developing these types of centers, so it will be interesting.” Insite’s Thomas compared what is being considered for the Aikens land to the Mall at Partridge Creek in Clinton Township or the Easton Town Center in Columbus, Ohio. Another developer, Farmington Hills-based Hunter Pasteur Homes, has broken ground on 15 acres in the northwest part of the land that will hold about 40 single-family homes ranging from 2,800 to 3,500 square feet and expected to sell for between $400,000 and $475,000. Hunter Pasteur closed on the land for $1 million on Aug. 7. The developer plans another 110 single-family homes on about 43 acres in the northeast part of the developable land, with homes ranging from 1,800 to 3,200 square feet and costing $375,000 to $475,000. The Hunter Pasteur developments are expected to cost $42 million. A land purchase agreement signed in September is for $2.65 million. M. Shapiro Real Estate Group has signed a purchase agreement for 60 acres for $5.15 million and expects to use that land for about 400 townhouses and commercial space with a development cost of $70 million. The housing would be two- and three-bedroom units renting for $1,350 to $1,700 a month. See Commerce, Page 14

Land rush Brokers say interest has been high in the land, which has been divided into eleven parcels of varying sizes for a variety of uses. Nearly all of it is either under contract, sold or a developer has an option to buy it. Aikens & Associates has an option to buy 51 acres for an undisclosed price for a more than 550,000-square-foot “lifestyle center.”

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Focus: Oakland County

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Commerce Towne Place has tangled roots in traffic snarls The roots of the Commerce Towne Place development can be traced back four decades to the construction of I-275. The Federal Highway Administration and the Michigan Department of Transportation conducted environmental impact studies on whether to build the freeway, which stops at I-96/I-696, all the way north to M-59, with some even informally considering bringing it all the way north to I-75 near Clarkston. That never happened, in large part because of the impact on nearby wetlands. As the years passed, the township’s and surrounding area’s population grew, residential and commercial development ramped up, and existing roads couldn’t handle the rising traffic. So between 1994 and 2002, the M5 Haggerty Connector extension from 12 Mile Road to Pontiac Trail was built. But it still wasn’t enough. M-5 dead-ends at Pontiac Trail, leaving commuters who wanted to go farther north to explore other options. They took routes into Commerce or neighboring Waterford, White Lake and West Bloomfield townships to take the twolane stretch of Haggerty Road to the east or Welch Road to the west.

Neither were optimal. Haggerty james up on a daily basis as commuters to north to get to Richardson Road or south to get to the mile roads. “People can get in but they can’t get out because they can’t pull on to Haggerty,” said Kathleen Jackson, the township’s planning director. Because of that, the township has long wanted to widen Haggerty from Pontiac Trail to Richardson to five lanes. However, that plan has faced opposition from West Bloomfield, which is on the east side of the road; Commerce is on the west. So the township and its DDA instead moved forward with two projects: a $12.5 million Martin Parkway extension and construction of a $5 million roundabout (which included funding from the township and DDA, the Road Commission for Oakland County, Oakland County and the Michigan Transportation Economic Development Fund) at M-5 and Pontiac Trail in 2010 and 2011, respectively. With both now completed and the township and DDA armed with 330 acres of vacant land for development, traffic snarls are far less of a concern than a few years ago. — Kirk Pinho

Commerce: On course ■ From Page 13

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The land also would include hotels and restaurants. Farmington Hills-based Shapiro is expected to apply for site plan review this year or early next, according to a document provided by Jackson. Granger Group, based in the Grand Rapids suburb of Wyoming, plans a senior living development with 10 duplex ranch homes for lease and a senior living center with 60 beds for independent living and 100 beds for assisted living and memory care. Granger has an agreement to buy the 16 acres for $3 million. The development is expected to cost $30 million to $32 million.

Location, location Real estate experts called the development one that, after a rocky beginning, is viable and should prove to be a success. “It’s a phenomenal location,” said Dominic Moceri, a partner in Auburn Hillsbased developer Moceri Moceri Co. On Monday, Moceri hopes to receive site plan approval from the Clinton Township board of trustees for a large residential housing development of its own — the $150 million, 613-townhouse Montage at Partridge Creek. There are 55,000 people living

within three miles of Commerce Towne Place, while 150,000 live within five miles and 490,000 within 10 miles, according to data provided by Robert Gibbs, managing principal of Birmingham-based Gibbs Planning Group Inc. Those figures are expected to increase to 57,000, 155,000 and 502,000 by 2019. The average household income within three miles of the site is $97,000. Within five miles, it’s $101,000 and within 10 miles $97,000, according to the data. Gibbs said both the retail and residential aspects of the development should thrive. “Aikens is a top-drawer company,” he said. “A walkable town center should do very well at that location. You would think it’s a little oversaturated, but it’s far enough from Twelve Oaks Mall (in Novi), so it will survive.” Moceri said demand exists for high-quality multifamily space as well as new single-family houses. But Gibbs point to one drawback with the plan as proposed: The different housing types are segregated from one another on different parcels. “That’s the old way of planning,” he said. “The new way is to mix it so that each neighborhood would have senior housing, singlefamily and townhouses. That way, you can move up and down to different home products within the same neighborhoods.” Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB

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Focus: Oakland County

Auburn Hills expects tax base growth fueled by corporate new builds BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS

Auburn Hills has a long reputation as a hub for automotive research and engineering and — out of necessity and design — has oriented its economic development strategy around R&D and corporate headquarters. After facing the same economic downturn that affected the rest of the region, the city is expected to see tax base growth next year, the first time since 2009, said Tom Tanghe, city manager and director of human resources and Tanghe labor relations. That growth is attributed to an influx of corporate headquarters and North American subsidiaries calling Auburn Hills home — most of which have been new builds.

“Our available (commercial real estate) inventory is pretty well picked over,” Tanghe said. “Now we’re seeing greenfield.” Some new builds in Auburn Hills since 2011 include: 䡲 U.S. Farathane Corp. built a new $27 million, 240,000-square foot headquarters. 䡲 Henniges Automotive North America Inc. built a new $10 million, 54,000-square-foot North American headquarters. 䡲 Gardner-White Furniture Co. Inc. moved its headquarters from Warren to Auburn Hills, retrofitting an existing 350,000-square-foot manufacturing plant, spending $15 million. 䡲 GKN Driveline North America Inc. built a new $23 million, 158,000square-foot Americas headquarters. 䡲 Atlas Copco North America Inc. built a new $13.3 million, 120,000square-foot tools and assembly division headquarters. 䡲 Hirotec America Inc. is building a new $23 million, 214,000-square-

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Henniges Automotive North America built a $10 million North American headquarters in Auburn Hills. It was one of several new corporate builds in the city since 2011.

foot U.S. headquarters to be completed in August 2015. Other commercial success stories for Auburn Hills: Noah’s Event Venue, an events and conference center planned to house corporate training and social events; new headquarters for Visioneering Inc. and Ralco Industries; and a new Marriott TownePlace Suites hotel off Baldwin Road. And while its tax base is not primarily residential — it has just

over 21,000 residents — Tanghe said the city has approved or is in the process of approving $90 million in residential development as well. “What we’re seeing is a stabilization,” Tanghe said. “Existing properties are being swallowed and we’re seeing lots of new developments, which should do great for us in the years to come.” Corporate buyers and real estate developers are attracted to

Auburn Hills because of low-debt operations, strong infrastructure spending, and streamlined assessing and permitting process, Tanghe said. “We’ve always understood the importance of not having a bureaucratic form of government,” Tanghe said. “It’s part of our culture, and it’s paid off.” The 2009 recession hit Auburn Hills the same way it did the rest of the county. It lost 30 percent of its tax base. Oakland County watched its tax revenue fall into the real estate sinkhole, declining by 36 percent of its taxable value, or $62 billion, because of the nationwide housing crisis and subsequent auto industry collapse. It will be decades before the tax base recovers to post-recession levels, Tanghe said, but at least the community is moving in the right direction now. Dustin Walsh: (313) 446-6042, dwalsh@crain.com. Twitter: @dustinpwalsh.

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City retirees in annunity may have to decide soon on repayment BY CHAD HALCOM CRAIN’S DETROIT BUSINESS

Detroit retirees who participated in a city employee annuity savings plan may have to decide quickly how to repay excess investment returns from the General Retirement System, the city’s largest bankruptcy creditor. The proposal awaits a decision

Friday from U.S. Bankruptcy Judge Steven Rhodes as a part of the city’s overall bankruptcy exit plan. The plan in question was a voluntary one in which city employees could contribute up to 7 percent of after-tax pay and receive a guaranteed minimum return of 7.9 percent, regardless of actual market performance. Many years, the return was larger. Accounts are

usually cashed out when employees retire. The Detroit City Council passed a resolution about three years ago that generally tied the return to market performance, with an upside limit of 7.9 percent and a downside limit of no gain or loss. The city now estimates retirees covered by the GRS will repay about half the excess returns — $190 mil-

lion out of $387 million — paid between July 1, 2003, and June 30, 2013, just a few weeks before the city’s $18 billion petition for Chapter 9 bankruptcy was filed. That’s about $40 million less than originally projected because of two recent plan changes: An option for retirees to make repayment in a lump sum, and a limitation on repayment to 20 years.

Employees could receive an inquiry about the lump-sum option a few weeks after confirmation. Here’s how it will work: The adjustment plan would go back and re-compute interest over the 10 years based on actual returns, capped at 7.9 percent. The difference between the refigured payments and those actually received is considered excess return. What any individual retiree owes will depend on factors like wages and contribution level, years of participation, and whether money was withdrawn or borrowed before retirement. The repayment term is based on actuarial life expectancy. So, for example, a 58-year-old female retiree might have a repayment plan spanning 20 years. If that person’s excess contribution was $25,000, the plan calls for a 6.75 percent interest rate on what is essentially a 20-year loan. That works out to about $190 per month and a total payment of more than $44,000 by 2035, over and above the 4.5 percent negotiated benefit cut all GRS retirees receive under the adjustment plan. The excess return is capped at 20 percent of the account’s highest balance over the 10 years, and the retiree’s repayment payment cannot exceed 15.5 percent, so no retiree’s benefit cut can exceed 20 percent per month. The city originally expected to recover about $230 million of surplus return for the pension plan under this strategy. About four months ago, however, the city updated the adjustment plan to include a lump-sum repayment option. That’s a better option for most retirees who can get loan rates of less than 6.75 percent, but the city has limited lump-sum repayments to $30 million if Rhodes confirms the plan. If retirees offered to repay a collective $50 million up front, for example, all lump-sum payments would be pro-rated to come in under the $30 million limit — in this case, 60 percent. So the employee owing $25,000 could pay $15,000 upfront and finance the remaining $10,000 via benefit cuts. “Getting a bigger lump sum upfront puts the fund in a better position. But the city in this process was more interested in a liability reduction,” said Michael VanOverbeke, partner at VanOverbeke Michaud & Timmony PC and general counsel for the General Retirement System. The city previously wanted to make the repayment a permanent one — so if a retiree lived to be 85 instead of, say, a projected 80, the reduction would continue five years beyond what the current plan dictates — but during the confirmation hearing, it agreed to end reductions once balances are paid. “But there’s not any must-hit number for the recoupment to put back into the pension plan. No one else is going to have to come up with a greater contribution if that part of it comes in lower,” said Bill Nowling, spokesman for Detroit Emergency Manager Kevyn Orr. Chad Halcom: (313) 446-6796, chalcom@crain.com. Twitter: @chadhalcom

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OESA counsel offers suppliers advice on protecting against recalls, fighting costs portation Safety AdminisThis yearâ&#x20AC;&#x2122;s flurry of recalls â&#x20AC;&#x201D; affecting more tration notice discloses a than 50 million vehicles particular failed part in the U.S. â&#x20AC;&#x201D; are a black that is often relatively ineye on automakers like expensive, but the total of General Motors Co. the recall, including the While the public and sale of a replacement part Congress are putting to the OEM, who in turn pressure on the automaksells it to a dealer, who in ers, itâ&#x20AC;&#x2122;s those automakersâ&#x20AC;&#x2122; turn disassembles the vesuppliers that could feel hicle to remove and rethe pain. place the part, can get Crainâ&#x20AC;&#x2122;s manufacturing reporter Dustin Walsh very expensive. Thus, a chatted with Tom Man- Tom Manganello, supplier who makes 50 ganello, partner and head Warner Norcross cents to $1 on a part, with of the automotive practice total program sales of a for Warner Norcross & Judd LLP in few million dollars, could be liable Southfield and legal counsel for for $20 million to $250 million, acthe Troy-based Original Equipment Suppliers Association, about how the cording to contractual terms. So the obligation to reimburse an aurecalls are distressing suppliers. tomaker for recall costs can literalWhy is the current rise in recalls ly bankrupt a supplier overnight.

This depends on the terms and conditions governing the contractual relationship between the suppliers and their customers. Most automaker terms and conditions say that the manufacturer of the defective part is responsible. However, if the supplier has entered into a contractual relationship where it is responsible to pay only for a percentage of cost based upon a faulty part determined by a joint root cause analysis, the supplier may only be responsible for a percentage of the total recall costs. In most cases, the supplier does not have control over system integration or system validation, and frequently it is a combination of parts and the way they interact that causes an eventual vehicle failure.

dangerous for the supply base? In terms of costs, in many recalls, the National Highway Trans-

What can suppliers do to protect themselves before a recall? Carefully negotiate limitations of liability based upon attribution of fault as determined by a joint root cause analysis of the entire vehicle system. Suppliers are frequently required to accept terms that state they are aware of the (vehicle) environment in which the product is performing. Suppliers should try to avoid agreeing to language that turns them into an insurer rather than a parts manufacturer. Further, suppliers should avoid agreeing to contractual terms that bind them to liability based upon allegations or events â&#x20AC;&#x153;relating to or in any way arising out ofâ&#x20AC;? the sale of a part or any other such conduct.

Q&A

Do suppliers have options to combat these recall costs?

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What can a supplier do to ensure a recall is successful? During product development, suppliers should meticulously document the specifications to which they are designing a product, including any deviations from those specifications mandated by or agreed to with their customers. Automakers often contract with a supplier to do one thing and then, over the next 12 months to 24 months, change the scope of the project, thus affecting the overall performance of the product while hiding behind contractual obligations they negotiated with the supplier that no longer reflect the roles or conduct of the parties. How can the automaker/supplier relationship improve in the area of recalls? Open communication during the design development and validation of a program or platform is absolutely necessary. All changes should be documented and the party responsible for the change should be contractually obligated to stand by the impact of the changes, good or bad. If a supplier raises a concern about system validation or testing that only its customer or its customerâ&#x20AC;&#x2122;s customer can perform, those concerns should be addressed before the product is sold to the public.

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Penske growth plan: Add overseas dealerships, retail truck stores BY JAMIE LAREAU CRAIN NEWS SERVICE

Bloomfield Hills-based Penske Automotive Group Inc. wants to grow by snapping up more car dealerships overseas and by buying other businesses, such as heavy-duty retail truck stores. Penske said last week that it agreed to raise its stake in The Around the Clock Freightliner Group LLC, a heavy-duty retail truck dealership group in Texas, Oklahoma and New Mexico. Penske said such businesses are attractive because they provide strong revenue with lower costs. CEO Roger Penske said in an analyst conference call, “When I look at the commercial vehicle business, 70 percent of the total gross profits are from parts and service. So less capital is involved. It’s a more stable business, and there are not the facility requirements, such as the tiled floors and fancy showrooms,” that many automakers require. He said his company is spending $150 million a year largely on car dealership renovations that manufacturers want. Penske said he also is monitoring a no-haggle pricing program being tested at Toyota of Surprise in Surprise, Ariz. He said he is a “long, long way” from deciding whether or not to take the process to all of the company’s 244 U.S. dealerships, but it is successful so far. He said using one salesperson from start to finish is a cost saver. “The business has grown nicely,” Penske said. “We’re seeing our margin, based on one price, is competitive in the marketplace.”

The vision is to grow internationally. “ Every manufacturer in Europe is knocking on our door today to say, ‘Hey, we have an opportunity.’

”

Roger Penske, Penske Automotive

stay focused on premium luxury brands and will still consider some “opportunities” in the U.S., too. “But we want to stay in line as a premium volume foreign player,” Penske said.

Retail sales gains The company’s third-quarter results were driven by solid sales in its U.K. operations. Those operations account for 35 percent of Penske Automotive’s revenue. The U.S. makes up 61 percent, and other international operations account for 4 percent. The higher revenue came on a 10 percent increase in retail sales to 104,963 vehicles. New-vehicle sales rose 9 percent to 57,273 units, outpacing the U.S. industry’s new-vehicle sales growth of 6 percent in

the quarter. Penske’s used-vehicle retail sales rose 12 percent to 47,690. On a same-store basis, though, new-vehicle retail sales lagged the overall market with a 4 percent gain to 54,572. Same-store used-vehicle sales rose 7 percent to 45,678. Penske Automotive doesn’t break out unit sales by geographic region — all totals reflect U.S. and overseas operations. After-tax income from continuing operations rose 16 percent to $77 million. The company said it agreed to raise its stake in ATCFreightliner Group to 86 percent from 27 percent. The acquisition is expected to add $600 million to $700 million in incremental annual revenue, Penske said. From Automotive News

Knocking on doors Also last week, Penske Automotive reported that its third-quarter net income rose 15 percent from the year-earlier period to $75.1 million on strong new- and used-car sales aided by robust business at its U.K. dealerships. Revenue increased 18 percent, to $4.42 billion, and rose at a doubledigit pace in all categories: newand used-vehicle sales, fleet and wholesale sales, service and parts, finance and insurance operations and commercial vehicle, car rental and others. Roger Penske envisions 60 percent of Penske Automotive Group’s revenue coming from its U.S. operations and 40 percent coming from various international holdings. That’s close to where it is now. He wants the company’s vehicle business revenues to grow 5 percent to 10 percent over the next two years. “The vision is to grow more internationally,” Penske said. “I think that gives us balance. When we look at Spain and Italy today, they’re performing well. Every manufacturer in Europe is knocking on our door today to say, ‘Hey, we have an opportunity.’” He said the company wants to

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CALENDAR WEDNESDAY NOV. 5 Michigan Tax Conference, 8:30 a.m.-5 p.m. Michigan Association of Certified Public Accountants. MICPA, the Michigan Department of Treasury, State Bar of Michigan â&#x20AC;&#x201C; Taxation Section and Michigan Womenâ&#x20AC;&#x2122;s Tax Association will discuss the latest state tax issues affecting businesses and individual taxpayers in Michigan. Suburban Collection Showplace, Novi. $215 members, $345 nonmembers. Contact: CPE Department, (888) 877-4273; email: cpe@micpa.org. Website: store.mic pa.org/product/30545. Michigan Roundtable for Diversity and Inclusionâ&#x20AC;&#x2122;s 67th Annual Humanitarian Tribute. Noon-3 p.m. This yearâ&#x20AC;&#x2122;s honorees are Linda Forte, senior vice president of business affairs and chief diversity officer, Comerica Bank, and Terry Barclay, president and CEO, Inforum Michigan. Advocates and Leaders for Police and Community is also being honored. MGM Grand Detroit. $150. Contact: Lawrence Jones, (313) 8701500, ext. 108; email: ljones@miround table.org; website: miroundtable.org.

THURSDAY NOV. 6 Health Care Leadership Summit and Health Care Heroes Awards. 7:30 a.m.-1 p.m. Crainâ&#x20AC;&#x2122;s Detroit Business. Discover ways to provide health care in an age of reform, with keynote speaker Joe Flower, author and health care futurist, and a panel discussion on health care consolidation featuring Rob Casalou, president and Flower CEO, St. Joseph Mercy Ann Arbor and Livingston hospitals; Gene Michalski, president and CEO, Beaumont Health; Joe Mullany, CEO, Detroit Medical Center; and Nancy Schlichting, president and CEO, Henry Ford Health System. Shriners Silver Garden Events Center, Southfield. Walkin registration $130 per person. Contact: Kacey Anderson, (313) 446-0300; email: crainsdetroit.com/events. inGAGE Role Model and Investor Series: Introducing Women to Successful Entrepreneurs and Angel and Venture Capital Professionals. 7:30-9 a.m. Inforum Michigan. Meet women who have started companies and learn about investment opportunities, with moderator Paula Sorrell, vice president of entrepreneurial services, innovation and capital, Michigan Economic Development Corp., leading a conversation with Christie Coplen, president, Versicor; Andrea Roumell Dickson, president and CEO, ENT Biotech Solutions LLC; and M. Christine Gibbons, president and CEO, HistoSonics Inc. Westin Book Cadillac, Detroit. Free; registration is required. Contact: (877) 633-3500; website: inforummichigan.org. Detroit Economic Club Presents. 11:30 a.m.-1:30 p.m. Detroit Economic Club. With Mike Jackson, chairman and CEO, AutoNation Inc. Dearborn Inn Marriott, Dearborn. $45 DEC members, $55 guests of members, $75 others. Contact: (313) 963-8547; email: info@econ club.org; website: econclub.org. Grosse Pointe Chamber of Commerce 2014 Business EXPO. 5:30-7 p.m. Keynote speaker is Sandy Baruah, president and CEO of the Detroit Regional Chamber. Grosse Pointe War Memorial, Grosse Pointe Farms. Free. Contact: (313) 881-4722; email: info@grossepointechamber.com; website: grossepointechamber.com.

UPCOMING EVENTS Special Veterans Day Dinner, 6-8 p.m. Nov. 11. Leadership Oakland. Hear from keynote speaker John Barfield, veteran and founder of Bartech Group. Iroquois

MICHIGAN CEO SUMMIT Business and community leaders gather to examine the future of business and industry and how to stay competitive in the global market at the Business Leaders for Michigan CEO Summit, 8 a.m.3 p.m. Nov. 13 at the Westin Book Cadillac Detroit. The keynote speaker is Peter Diamandis, chairman and CEO, X Prize Foundation, and author of Abundance â&#x20AC;&#x201D; The Future Is Better Than You Think. He will make a presentation titled â&#x20AC;&#x153;Do You Know Who Your Competition Is?â&#x20AC;? Tickets are $125 for individuals and include breakfast and lunch. For more information on the event, call Jennifer Hayes, (313) 2595400; email jenniferh@business leadersformichigan.com; or visit businessleadersformichigan.com. Club, Bloomfield Hills. $47 general registration; $25 LOAA veterans. Register at leadershipoakland.com. Contact: info@leadershipoakland.com; website: leadershipoakland.com. 2014 Small Business Conference and Expo. 8 a.m.-4 p.m. Nov. 12. Walsh College and South East Michigan Entrepreneurs Association. Learn the tools to successfully own and operate a business in Michigan. Walsh College, Novi. $39. Contact: ZaLonya Allen, (248) 491-3146; email: administrator@ semea.info; website: semea.info. Jonah Peretti, BuzzFeed, 11:30 a.m.-1:30 p.m. Nov. 12. Adcraft Club of Detroit. The keynote speaker is the CEO and founder of BuzzFeed. The Reserve, Birmingham. $35 members, $45 nonmembers, $25 junior and student members. Contact: (313) 872-7850; email adcraft@adcraft.org; website: adcraft.org. Inside the CEO Mind, 8-10 a.m. Nov. 13. Detroit Regional Chamber. Hear from Tony Michaels, president and CEO of The Parade Co., then take a behind-thescenes tour of the company headquarters. The Parade Co., Detroit. $20 members, $50 nonmembers (includes continental breakfast); preregistration required. Contact: Maggie Oldenburg, (313) 596-0482; email: moldenburg@ detroitchamber.com; website: detroitchamber.com. Voice and Vision: Women Journalists Documenting History & Humanity. 11:30 a.m.1:30 p.m. Nov. 13. Inforum Michigan. NBC News Chief Environmental Correspondent Anne Thompson speaks with photojournalist Stephanie St. Clair about documenting history and humanity. Westin Book Cadillac, Detroit. Register at inforummichigan.org. Contact: (877) 633-3500; website: inforum michigan.org. APACC Womenâ&#x20AC;&#x2122;s Leadership Conference. 1:30-6:30 p.m. Nov. 13. Asian Pacific American Chamber of Commerce. Keynote speaker is Betty Chu, M.D., chief medical officer, Henry Ford West Bloomfield Hospital. The Inn at St. Johnâ&#x20AC;&#x2122;s, Plymouth Township. $35 members/strategic partners, $45 nonChu members, $10 students. Contact: Sarah Lalone, (248) 430-5855; email: sarah@apacc.net; website: apacc.net. 2014 North American International Cyber Summit. 8:30 a.m.-4:30 p.m. Nov. 17. Engineering Society of Detroit. Keynote speakers include Gov. Rick Snyder, Detroit Mayor Mike Duggan and David Behen, director and CIO, Michigan Department of Technology, Management and Budget. $99, or $79 for students or members of ISSA, InfraGard, West Michigan Cyber Security Consortium, ISAC, Mi-ISAC, Mi-GMIS, WC4. Contact: Leslie Smith, (248) 353-0735, ext. 152; email: lsmith@esd.org; website: esd.org.

Detroit Economic Club Presents. 11:30 a.m.-1:30 p.m. Nov. 17. With Daniel Loepp, president and CEO, Blue Cross Blue Shield of Michigan. Westin Book Cadillac Detroit. $45 DEC members, $55 guests of members, $75 others. Contact: (313) 963-8547; email: info@econclub.org; website: econ club.org. Michiganâ&#x20AC;&#x2122;s Got Talent Series: Creating a Winning Corporate Culture. 11:30 a.m.-1 p.m. Nov. 18. Automation Alley. Joe Neary, CEO of Carite, talks about how companies can attract and retain talent. Automation Alley, Troy. $20 members ($30 at the door), $40 nonmembers ($50 at the door). Preregistration ends Nov. 14. Contact: (800) 427-5100; email: info@auto mationalley.com; website: auto mationalley.com. Detroit Community Development Awards. 6-11 p.m. Nov. 18. Detroit Local Initiatives Support Corp. and Community Advocates of Detroit. Dinner and awards program celebrates champions of community development. Cobo Center, Detroit. $75. Register by Nov. 10. Contact: (313) 596-8222, ext. 10; email: detroitcdawards@lisc.org. Website: lisc.org/detroit. Breakfast of Champions. 7:30-9 a.m. Nov. 19. Leadership Oakland. Executive coach and author John Baldoni speaks on â&#x20AC;&#x153;Moxie: The Secret to Bold and Gutsy Leadership.â&#x20AC;? MSU Management Education Center, Troy. $25 members, $36 nonmembers. Register at leadershipoakland.com. Contact: info@leadershipoakland.com; website: leadershipoakland.com. 2014 Women Entrepreneurs Conference. 8:30 a.m.-1 p.m. Nov. 20. Michigan Association for Female Entrepreneurs. The conference brings together top female entrepreneurs, business experts and media professionals who will discuss components of a successful business. Michigan First Credit Union, Lathrup Village. $35. Contact: Tonya McNeal-Weary, (866) 490-6233; email: info@mafedetroit.org; website: mafedetroit.org. MSED 21st Annual Awards Gala. 6-10:30

p.m. Nov. 20. Marketing & Sales Executives of Detroit. Among MSED honorees are Joseph Anderson Jr., chairman and CEO, TAG Holdings LLC; John Rakolta Jr., chairman and CEO, Walbridge; and Toby Barlow, CCO, Team Detroit. Detroit Athletic Club, Detroit. $150 members, $195 nonmembers. Contact: (248) 6436590. Register at msedetroit.org; website: msedetroit.org. Networking Reception With L. Brooks Patterson, 5:30-7:30 p.m. Nov. 20. Detroit Regional Chamber. Join more than 300 members for networking and to hear the Oakland County executive. Meadow Brook Hall, Rochester Hills. $10 members ($25 on site), $590 nonmembers; preregistration required. Contact: Maggie Oldenburg, (313) 596-0482; email: moldenburg

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@detroitchamber.com; website: detroitchamber.com. The D Show 2014. 6-10 p.m. Dec. 3. Adcraft. Detroitâ&#x20AC;&#x2122;s creative, media, entertainment and production communities celebrate top talent. Masonic Temple, Detroit. $130 regular, $65 student members. Register at adcraft.org. Website: thedshow.org. State of the Region/Annual Meeting. 5 p.m. Dec. 10. Detroit Regional Chamber. The chamber discusses an analysis of business and economy trends. Westin Book Cadillac, Detroit. $25 members, $595 future members. Contact: Janelle Arbuckle, (313) 596-0340; email: jarbuckle@ detroitchamber.com; website: detroitchamber.com.

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CRAIN’S DETROIT BUSINESS

PEOPLE

BUSINESS DIARY

CONSULTING

CONTRACTS

IN THE SPOTLIGHT

Dave Antis to managing partner in business development, Global Productivity Solutions LLC, Clinton Township, from senior vice president, Sigma Breakthrough Technologies Inc., San Marcos, Texas. Tina Marie Wohlfield to human reAntis sources and compliance manager, Michigan branch offices, employee benefits consulting and brokerage operations, Arthur J. Gallagher & Co., Bingham Farms, from human resources/compliance manager, Benefit Review Services Inc., Sterling Heights.

Big Brothers Big Sisters of Metropolitan Detroit has named Jeannine Gant as CEO. Gant brings more than two decades of nonprofit experience to her new role. She most recently was executive director of Playworks Michigan, Detroit. She also held leadership roles at Wayne State University’s School of Business, The Children’s Center and the Epilepsy Foundation of Michigan, Southfield. Gant, 48, replaces Dara Munson, who is now the COO of the Girl Scouts of Southeastern Michigan, Detroit. Gant holds a master’s degree in public relations and organizational communication from Wayne State Gant University.

NONPROFITS Heidi Grix to president, Children’s Leukemia Foundation of Michigan, Troy, from executive director, Arbor Hospice Foundation, Ann Arbor. Shivangee Pandya to director of services for Lawyers for the Creative Economy program, Creative Grix Many Michigan, Wixom, from attorney, Counsel Advocacy Law Line, Southfield.

ENGINEERING John Dell’Isola to project manager, Professional Engineering Associates Inc., Troy, from project manager, Anderson Eckstein & Westrick Inc., Shelby Township.

ENTERTAINMENT Gordie Schaeffler to hockey director and assistant manager, John Lindell Ice Arena-Royal Oak, Royal Oak. He will continue as head hockey coach, Oakland University, Rochester Hills.

Beth Wallace to manager of sustainability, Detroit Zoological Society, Royal Oak, from community outreach regional coordinator, Great Lakes Regional Center of the National Wildlife Federation, Ann Arbor. She is founder of SURF (Sustain Unite Restore Fortify) Great Lakes, Ann Arbor.

TECHNOLOGY Patrick Fetterman to vice president of marketing, Sight Machine, Troy, from vice president of product marketing, Plex Systems Inc., Troy. Also Brian Gillespie to director of global sales, from vice president of sales, Imaginestics LLC, Clarkston.

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G2 Consulting Group, Troy, an engineering services firm specializing in geotechnical, environmental and construction engineering services, was awarded a geotechnical project from the Veterans Administration’s Puget Sound Healthcare System, Seattle, to engineer and construct a retention wall for a new 400,000-square-foot parking deck. Website: g2consulting group.com. ImageSoft Inc., Southfield, and its JusticeTech Prosecution solution has been implemented by Lenawee County Prosecutor’s office, Adrian. JusticeTech simplifies the way caserelated information is organized, transmitted and accessed using digital files automated processes. Website: imagesoftinc.com.

EXPANSIONS Art Van Furniture Inc., Warren, has opened a new store at 5946 N. Grape Road, Mishawaka, Ind. Telephone: (574) 271-6400. Website: artvan.com. CMS Creative Designs Inc., Belleville, has opened Crafted: Modern Handmade boutique at 204 E. Columbia Road, Belleville. Telephone: (734) 363-3531. Dick’s Sporting Goods Inc., Pittsburgh, has opened a store at Macomb Mall, 32385 Gratiot Ave., Roseville. Telephone: (586) 279-1221. Website: dicks.com. Icom North America LLC, New Hudson,

has opened its new Icom Technology and Training Center, dedicated to the development, integration, upfitting and training for its liquid propane autogas injection systems. 30100 S. Hill Road, New Hudson. Telephone: (248) 573-4934. Website: icomnorthamerica.com. Rainbow Child Care Center, Troy, an early education provider, has opened a new school, Rainbow Child Care Center of Byron Center, 6419 Byron Center Ave., Byron Center. Telephone: (248) 569-2500. Website: rainbowccc.com.

MOVES Amson Dembs Development Inc. has moved from 46855 Magellan Drive, Suite 200, Novi, to 27750 Stansbury Blvd.,Suite 200, Farmington Hills, and has changed its name to Dembs Development Inc. Website: amson dembs-dap.com.

STARTUPS Laidler & Zielinski PLLC, attorneys specializing in civil litigation, criminal defense, probate, collection, consumer law and appellate. 720 N. Lapeer Road, Suite. 203, Lake Orion. Telephone: (248) 693-2300. Website: orionoxfordlaw.com. Twisted Tavern & Twist Night Club has opened at 22901 Woodward Ave., Ferndale. Telephone: (248) 545-6750. Website: thetwistedtavern.com.

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CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS

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Blue Cross Blue Shield of Michigan seems to be quietly winding down a three-year court tussle with dozens of self-insured employers who claim the insurer misled them about fees and surcharges that were rolled into claims in their administrative services contracts. Of the 52 cases that businesses have brought since 2011 against Blue Cross through the Varnum LLP law firm over those fees, 10 reached out-of-court settlements in October alone â&#x20AC;&#x201D; most recently LaBelle Management Inc. and Morbark Inc. That includes seven of the 10 cases in front of U.S. District Judge Victoria Roberts in Detroit, who inherited the largest share of those federal lawsuits. An eighth case before Roberts, the 2011 claim from Litchfieldbased Hi-Lex Controls Inc. that was the first to go to trial, got as far as the U.S. Supreme Court, which decided Oct. 20 not to hear the case. That meant Hi-Lexâ&#x20AC;&#x2122;s $6 million

Of the 52 cases that businesses have brought since 2011 against Blue Cross through Varnum, 10 reached settlements in October alone. from Roberts will stand. But seven of the 10 settlements came before the Hi-Lex ruling, and many of the fees cases have been in mediation hearings in recent months. If Blue Cross pays the judgment and resolves Hi-Lex as well, that will bring the total closed case count to 16. Administrative services contracts allow self-insured employers, retirement funds, unions and other organizations to use Blue Crossâ&#x20AC;&#x2122; network and administrative services to process insurance claims. Roberts found the Blues

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had used a deceptive practice to hide fees and surcharges that were rolled into claims billed under those contracts. But the Blues contended in court that customers had agreed to access fees in those contracts; the Detroit-based insurer has also said the Hi-Lex contract is similar to one it signed with Calhoun County. This was in a separate case where the Michigan Court of Appeals unanimously sided with the insurer. Other self-insured employers to sue Blue Cross between 2011 and earlier this year, and then dismiss those cases in October, include: Plymouth-based Master Automatic Machine Co. Inc.; Lenawee Countyâ&#x20AC;&#x2122;s Adrian Steel Co.; Frankenmuthâ&#x20AC;&#x2122;s Star of the West Milling Co.; Grand Rapids-based American Seating Co.; Flexfab Horizons International; AutoWares LLC; Cedar Springs-based Truss Technologies Inc.; and Grand Haven-based Automatic Spring Products Corp. Chad Halcom: (313) 446-6796, chalcom@crain.com. Twitter: @chadhalcom

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November 3, 2014

Adoba: Open, but will it stay that way? ■ From Page 1

that securing the new operator would ensure a “seamless transition.” “The hotel will be open for business as always, and there will be no break in operation or obligation ... everyone we’ve committed to will be honored.” But beyond the back taxes or operating license issues, industry experts are questioning the longterm viability of the hotel and conference center without tens of millions of dollars of needed investment. “To take halfway measures in terms of renovations just doesn’t cut it,” said Ann Arbor-based hospitality consultant Charles Skelton. “You’re still odd man out because you’ve got newer, more competitive hotels in other locations and just can’t break back in.”

Hotel’s role

Trusted Business

The hotel plays an important economic development role for the city of Dearborn. Late last week, the city released a statement to say that it is working with the hotel’s owners to settle the personal property taxes owed and renew its licenses. “We are optimistic that this landmark hotel will continue serving guests and employing staff members,” Dearborn Mayor Jack O’Reilly said. “The hotel accommodates so many conferences and visitors to Dearborn — whose impression of our city often starts with their experience at the hotel.” The hotel is also key to helping attract large conferences to the region, given that it’s the state’s second-largest hotel, behind the Detroit Marriott Renaissance Center, said Bill Bohde, senior vice president of sales and marketing at the Detroit Metro Convention & Visitors Bureau. “We’re still out there selling the hotel; we have a couple of major conventions utilizing it next year,” he said. Those include the Association of Evangelical Lutheran Churches, which has a significant room block at the Adoba for next summer as part of 35,000-40,000 rooms booked around the region, Bohde said. “We’re rooting for it to get stabilized, hopefully get renovated and to continue to be a major player,” he said.

the process. That could work for a while, Skelton said. But competitors for group business elevate the market, including the three Detroit casino hotels and the Westin Detroit Metropolitan Airport hotel, he said. Hotel occupancy rates for Wayne, Oakland and Macomb counties are at their highest rate in at least a dozen years, propelled by resurgence in business travel and corporate meetings and an increasing number of large conventions and conferences coming to Detroit. But there also is strong competition to land those groups. The convention bureau said earlier this year that occupancy rates for hotels and motels in the three counties reached 63.1 percent last year, up from 61.9 percent the year before, 47.5 percent in 2009 and 55.3 percent in 2008. Operating as the Adoba, the hotel has averaged just under 50 percent occupancy the past year, “which is better than Hyatt was doing before it left,” said Ed Lennon, managing member of the Edward G. Lennon PLLC law firm in Birmingham, speaking on behalf

of Atmosphere, the departing management company. Still, everybody who came in to do a proposal to manage the property prior to Atmosphere told the owners “there’s got to be significant capital infusion,” Lennon said. Hyatt ended its longtime management of the hotel in the fall of 2012, after failing to reach an agreement with the ownership group. A subsequent deal with Minnesota-based Carlson Rezidor Hotel Group to operate the hotel as a Radisson fell through. The hotel’s new operator, Lodging Host, manages eight hotels across Texas and New Mexico under flags including Residence Inn, Holiday Inn Express, Staybridge Suites and Comfort Suites. Those are limited service or long-term stay brands without a high degree of food service, Skelton said. With its 62,000 square feet of meeting space, the Dearborn hotel requires a high degree of food service, he said. Sherri Welch: (313) 446-1694, swelch@crain.com. Twitter: @sherriwelch

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The needed capital improvements — which Ron Wilson, CEO of Troy-based Hotel Investment Services, has estimated at $50 million or more to bring a well-known, full-service flag back to the hotel — bring into question whether such an investment would ever produce a return on investment. “The cost to bring a hotel like this back online is staggering, (and) the market and price points for it have passed,” Wilson said in an email. “Design, location and its age are working against this hotel from ever being financially viable.” Said Skelton: “Obviously, (the Adoba’s owners) weren’t willing to spend the money to remain a Hyatt” because they didn’t see a return on their investment. So they’ve sought brands that would accept lesser quality and lost some of the hotel’s competitive edge in

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Takai: ‘She fits in perfectly with our family,’ says Meridian exec ■ From Page 3

in 2006 to 2013, Wiescinski said IT investment was cut. “Now we are seeing an incredible amount of investment in IT as organizations are trying to catch up,” he said. “Those that were able to invest were able to expand quickly and support customer and supplier relationships. Those that couldn’t (invest) had to put projects on hold.” Meridian was founded in 1997 as Health Plan of Michigan Inc. by CEO David Cotton, M.D., and his wife, Shery, who last December stepped down as the company’s COO. Michael Cotton, who formerly headed up Meridian’s Medicaid health plan in Illinois, took over for his mother. Jon Cotton, Sean’s twin, is president of Meridian Health Plan of Michigan, the state’s largest Medicaid HMO with 370,000 members. Takai replaces Tom Lauzon, 58, who earlier this year announced his retirement from Meridian after helping David Cotton get the company started. Lauzon will remain on Meridian’s board and work on specific IT projects. Sean Cotton said Takai brings varied IT technical and leadership experiences to Meridian, but more importantly a comfort level with the family and senior management. “She fits in perfectly with our family,” he said. “She has big shoes to fill with Tom. We are happy to get someone of her caliber.”

Road to Meridian In May, Takai decided after three years it was time to step down from the Defense Department, return home to family in Michigan and ponder whether she wanted to go back to work in the private sector or possibly go into the academic environment. “When you are a political appointee, you know you are there for a certain amount of time,” Takai said. “I took work on a consulting basis (Lansing-based Dewpoint Inc.) to see how I liked consulting and look at opportunities in other areas. ... Health care kept cropping up.” In early July, David Cotton read in Crain’s that Takai had returned to Michigan. He phoned her to ask for advice on Meridian’s IT department and to help with Meridian’s CIO search, Sean Cotton said. “We found out she has a real personality fit with our family, with Tom, and everybody,” Sean Cotton said. “She is on the same page as we are with family values, and she comes with an impressive background, talent and aptitude.” Educated at the University of Michigan, Takai spent 30 years at Ford, helping the company implement a global IT strategy for such departments as engineering, marketing, purchasing, supply chain and financing. She then spent several years as managing director for Electronic Data Systems and as process development director at FederalMogul Corp. before joining the Granholm administration. “I am most proud in Michigan of getting the (IT) department stood up,” Takai said. “(Former Gov. John) Engler consolidated 1,700 employees into a single department” and then left office. “We got everybody working together, linked IT with the gover-

nor’s (Granholm) agenda” and four times was named the No. 1 best digital government by the Center for Digital Government, she said. “They judge you on how well you put out information to the public. Costs were down 25 percent, and we put those savings into new projects.”

Future plans Over the next two years, Takai will expand the scale of Meridian’s IT system to prepare for massive growth over the next five years in employees and members, Sean Cotton said. By 2019, Meridian is expected to hire another 1,000 workers, mostly at its headquarters in Sean Cotton downtown Detroit, to support a nearly tripling of membership growth that now totals about 540,000 members. Under the Patient Protection and Affordable Care Act and an effort of state Medicaid programs to shift to lower-cost managed care, Meridian has been increasing membership at more than 30 percent in Michigan with even larger growth in Illinois and Iowa. “By the end of next year, we expect to see a bigger percentage of our revenue coming from Illinois than Michigan because Illinois is

expanding” Medicaid managed care, Cotton said. In 2015, Meridian plans to bid for Medicaid contracts in at least two states, Cotton said. He declined to name the states. The company also operates Medicare health plans in Michigan and Illinois and Medicare drug prescription plans in Michigan, Indiana, Kentucky and Illinois and a fast-growing pharmacy benefit management program, Meridian Rx LLC. Takai said some of her priorities will be to assess the needs of Meridian’s homegrown IT system to support future growth. Issues include enhanced data and personal information security, server capacity and storage, user efficiency and networking ability, she said. “We need software to be flexible enough to meet the demands as we add new states and industries” that may use a variety of different information systems, Takai said. Meridian spent $6 million on IT improvements this year and expects to increase that spending the next two years, Sean Cotton said. He said Meridian has reorganized its IT department, which employs about 180 workers, with four directors reporting to Takai. “Our corporate headquarters will be in Michigan and 90 percent of hires will be here, so we see our IT system as an enterprise-wide system supporting membership, fi-

nance, human resources, training, marketing and communications,” Cotton said. During the next several weeks, Meridian is expected to unveil its new corporate headquarters plan and location. The company has been working with its architects, Southfield-based Neumann/Smith Architecture, to determine how much more office space it needs for

growth and employee needs going forward. Meridian currently leases space in two buildings — One Kenney Square and the Dan Gilbert-owned building at 1001 Woodward Ave. — for approximately 120,000 square feet. Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene

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Tech248: Oakland County launching hub for its IT industry ■ From Page 1

companies find each other. A brand. Hence, Tech248. “Michigan is still not known as a tech hub,” Spanos said. “When you’re looking at bringing world customers, they need that branding.” The county is working from a base of about 2,000 IT companies, which includes software, Spanos Internet development, networking, game development, health care-related IT, connected car technology and infotainment, and others. Already begun is a Twitter hashtag, #Tech248, as a means of communication for companies, and meet-up events. Also planned are meet-ups around the county that will include students. As an example, Spanos cited the Oakland Intermediate School District’s iTeam program, in which 11th- and 12th-graders learn to write code and

create apps. “They’ve been working in isolation. Now that we’re bringing in these 2,000 companies, they’ll have access,” she said.

Networking – beyond computers Antoine Dubeauclard, president of Media Genesis, a Troy-based Internet development company, said that simply better connecting the Oakland tech community will yield results, especially in talent development and recruitment. Dubeauclard was one of the original founders of Tech248 after County Executive L. Brooks Patterson had the idea and asked that a focus group be put together, Spanos said. “The one thing we all agree on is that if we can make this area more attractive to the right people, nationally and internationally, then it increases our ability to draw the right talent,” Spanos said. She said Dubeauclard’s feedback, and that of the other 20-plus initial focus group members,

shaped what Tech248 will be and how it will run. “Networking and connecting with one another is key,” Dubeauclard said. “There are a lot of opportunities that arise out of two people connecting with one another. And sometimes it’s as simple as: ‘Let me be your supplier and you can be my supplier.’ “And sometimes it’s as simple as … ‘Wow, you’re doing this, and with what I do, we can put these two things together and get something more.’ ” David Moncur, principal at Moncur, a Southfield-based branding and digital agency, agreed that creating community will benefit the stakeholders. “I think what happened is that Oakland County said, ‘We’ve got all this data about all these companies and they may not even know of one another — they may not know that they can work with one another,’ ” he said. “So they started saying, ‘Wouldn’t it be great if we can convene all these people, make them aware of what’s going on?’ ”

The feedback for the idea of building Tech248 has been positive, said Moncur. “In the last two or three years, there has been a much more concerted effort to help certain businesses in terms of their industry sectors. And I think to do that, we need more of a community around those organizations,” he said. Plus, simply better branding for the strong tech presence the county already has will help with growth plans, he said. Unlike other parts of the country with a tech “moniker, like the Research Triangle or Silicon Valley … we have to get the word out that we have 1,900 technology businesses right here in Oakland County; that’s huge.”

The launch The Tech248 launch event will take place Wednesday at Koala CoWork at Arbor Lofts in Southfield, where Patterson and an expected 100 participating companies will discuss the overall plan, plus resources that are out there to help

companies grow. For example, the crowdfunding tool Funderbuilt will be explained. It offers crowdfunding options through donation, reward or equity. Southfield-based Funderbuilt is “focused on Michigan- and Oakland County-based companies to help them grow their business and raise funds to do that,” said Michael Melfi, general counsel for Funderbuilt. During the launch event, brand initiative founders will also discuss Tech248 quarterly IT CEO meet-ups and resources available through the county to help with company goals. “Collectively, you can get people together that may even be competitors in their respective spaces,” Dubeauclard said. “But one thing they all agree on is that if we can make this area more attractive to the right people, nationally and internationally, then it increases our ability to draw the right talent.” For more information on the initiative and launch, see mitech 248.com.

Brandon: Awaiting successor: ‘Unstable’ world of college sports ■ From Page 1

That may stem from Brandon jumping from pizza to college sports. “Working for a pizza chain as CEO, that’s an established business, a stable business. The model of how you grow the pizza business is well known,” Zimbalist said. “The skills you need to do that are vastly different than in a business that’s so dynamic and so uncertain (as college athletics).” A bad football team may be Brandon’s biggest crime, something so repugnant to students, alumni and donors that marketing and public relationships missteps were magnified. Being an athletic director is a hard job, Zimbalist said, and it becomes untenable when the football team is mediocre, or worse. “There are lots and lots of issues. At the same time, you’ve got to worry about putting a winning team on the field,” Zimbalist said. “College sports, for all of tradition, is a very unstable and very dynamic industry.” Finding a replacement for Brandon won’t be cheap, especially if Michigan prefers another CEO type, Zimbalist said. “It’s very hard to do that at $500,000 or $800,000 (per year). The best people are getting paid a lot more than that in industry,” Zimbalist said. “If you’re trying to recruit really competent and forward-looking CEO types, you cannot give them a couple hundred thousand; you’ve got to give them a million or more. You’re recruiting a group of people that is inherently more expensive because of their background.” UM also still has to pay Brandon. A separate deal he signed with the university that was released Friday shows that he’ll be paid $3 million between Nov. 1 of this year and June 30, 2018. Two names that have been re-

WIKIPEDIA

David Brandon’s troubles were magnified by the struggles of the University of Michigan football team.

peatedly mentioned as potential replacements for Brandon are two former UM football players who are athletic directors elsewhere: Brad Bates at Boston College and Warde Manuel at the University of Connecticut. Whoever is hired will have to deal with sea changes on how college athletics are handled: The NCAA’s long-standing amateurism model has been challenged in the courts, and the door is open for student-athletes to get paid for use of their likeness and potentially paid for their labor. “College sports are at a crossroads. In many respects, it’s an extremely difficult job to run an organization where the environment is so unstable,” Zimbalist said. “It’s a little bit like conducting business on quicksand. You don’t know where you can move.” The new athletic director also will have to raise money. Major college sports programs have an endless thirst of cash, for operations and for capital projects. UM’s budget this year, for example, is $151 million, and hundreds of mil-

lions more have been spent in recent years on a facility-building construction binge that will go through 2019. As important as fundraising is, it cannot be the primary characteristic of a good athletic director, said Michael Rapkoch, president of Addison, Texas-based Sports Value Consulting LLC. “If you have a good program, you’re going to be able to get money,” he said. The ability to fundraise is good, but it cannot be the most important thing.” UM President Mark Schlissel announced Brandon’s resignation on Friday and said former Steelcase Inc. CEO Jim Hackett will serve as interim athletic director. They will work closely “to develop a plan to identify and recruit Schlissel Michigan’s next permanent athletic director,” Schlissel said.

Details of the search process haven’t been disclosed. Michigan used noted sports executive and coaching headhunter Jed Hughes to find Brandon, who was hired in January 2010. Hughes and Brandon played together at UM under Bo Schembechler in the 1970s. “Dave was a teammate of mine in the ’70s, and I knew him during my business career in Michigan. I have a tremendous amount respect for him and thank him again for an extraordinary commitment to this university,” Hackett said Friday. A message was left for Hughes, who is now vice chairman, global secHackett tor leader for sports at Los Angeles-based search giant Korn/Ferry International. Hughes worked for Chicagobased Spencer Stuart when Brandon was hired, and he also was part of the coaching search effort that resulted in Brady Hoke’s hiring in 2011. Brandon was hired to replace Bill Martin, who retired after being hired in 2000. Martin also came from a corporate background: He launched Ann Arbor real estate development firm First Martin Corp. in 1968, and was founder and chairman of the board of Bank of Ann Arbor. Martin wasn’t on the finalist list for the job assembled by a 17-member committee for then-UM President Lee Bollinger, who instead opted for Martin, a UM grad. The university president hires and fires the athletic director. The litany of what critics say are Brandon’s offenses including changing the student seating for

football games (a move reversed after one season), increasing prices, and a marketing gimmick in which students could get two UM football tickets if they bought a $3 Coke product — something Brandon said was a misunderstanding and shouldn’t have occurred. Students launched a petition drive to get Brandon fired, and almost 1,000 of them rallied for his dismissal on Sept. 30. That led to Brandon announcing a nearly 38 percent reduction for 2015 in student season-ticket prices, which led the Big Ten Conference this season at $295. Brandon came under renewed fire this week when a batch of snarky email exhanges between the athletic director and fans were published by MGoBlog.com. In past years, he was criticized for failing to hire then-Stanford University football coach Jim Harbaugh, a former UM quarterback who now is coach of the San Francisco 49ers. Instead, Brandon hired Hoke, who won the Sugar Bowl with an 11-2 team in 2011 but has fielded mediocre teams in the three years since then. Lowlights this year included a 31-0 loss at Notre Dame and 35-11 defeat at Michigan State. UM was 3-5 going into Saturday’s homecoming game against Indiana University, and 1-3 in the Big Ten. “Dave feels that it would be in the best interest of our studentathletes, the athletic department and the university community if he moved on to other challenges and allowed the important work of the department and university to continue without daily distractions. And I agree with this decision,” Schlissel told reporters gathered Friday afternoon at UM’s Fleming Administration Building. Bill Shea: (313) 446-1626, bshea@crain.com. Twitter: @bill_shea19

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Pistons: Palace Sports starts networking league ■ From Page 3

“We think there’s a fairly large gap out there for networking,” Mannion said. Instead of CEOs drafting shortstops or quarterbacks in a fantasy league, the NBL provides access to a dedicated B-to-B networking space at the Palace during Pistons games and shows — for a price. There are $2,000 and $6,000 NBL packages for companies or individuals that already spend at least $15,000 at the Palace, and another four that range from $10,000 to $17,000 for those that don’t have season tickets or suites at the venue. The Palace has dedicated one of its nine club spaces, with a central round bar along with seating and tables for use as the networking space for the NBL. Known as the President’s Club, the area also has a number of furnished suite-like private meeting spaces that branch off the lounge area. All include varying levels of access to the President’s Club for pre-event networking, and there will be an app that lets NBL members know who is at the networking events. “We wanted to create kind of a staircase for customized inventory,” Mannion said. The NBL has 15 charter members, and more are expected to sign up as it’s rolled out to the Palace’s entire base, Mannion said. “The sales process is just beginning,” he said. “The buzz will really begin when we start putting businesses together.” Pete Ginopolis, a vice president at Bloomfield Hills-based LSG Insurance Partners and a Pistons ballboy in the 1980s, is one of the NBL charter members. “It’s pretty cool when you put different people in the room and you start Ginopolis mingling and interacting with different interests and personalities,” said Ginopolis, whose family has had Pistons season tickets for more than 30 years. “What I hope to get out of it is an opportunity to expose my clients to other members of this group and expand their relationships and my relationships with businesspeople in the community.” Mike Dietz, president and director of sponsorship consultants Dietz Trott Sports & Entertainment in Farmington Hills, is both a sports industry insider and a participant in the NBL as a longtime Pistons season ticket holder. “I think it’s going to be neat Dietz to meet the different business people who are at Pistons and Palace events. It allows us to share ideas and compare best practices,” he said. “You want decision-makers to attend your events. I don’t know of a lot of others doing this.” Mannion believes in-person networking is a lost art in the digital age. “We want them to form these

www.crainsdetroit.com EDITOR-IN-CHIEF Keith E. Crain GROUP PUBLISHER Mary Kramer, (313) 446-0399 or mkramer@crain.com ASSOCIATE PUBLISHER Marla Wise, (313) 4466032 or mwise@crain.com EXECUTIVE EDITOR Cindy Goodaker, (313) 4460460 or cgoodaker@crain.com MANAGING EDITOR Jennette Smith, (313) 4461622 or jhsmith@crain.com DIRECTOR, DIGITAL STRATEGY Nancy Hanus, (313) 446-1621 or nhanus@crain.com MANAGING EDITOR/CUSTOM AND SPECIAL PROJECTS Daniel Duggan, (313) 446-0414 or dduggan@crain.com SENIOR EDITOR/DESIGN Bob Allen, (313) 4460344 or ballen@crain.com SENIOR EDITOR Gary Piatek, (313) 446-0357 or gpiatek@crain.com WEB EDITOR Kristin Bull, (313) 446-1608 or kbull@crain.com RESEARCH AND DATA EDITOR Sonya Hill, (313) 446-0402 or shill@crain.com WEB PRODUCER Norman Witte III, (313) 4466059, nwitte@crain.com EDITORIAL SUPPORT (313) 446-0419; YahNica Crawford, (313) 446-0329 NEWSROOM (313) 446-0329, FAX (313) 4461687 TIP LINE (313) 446-6766

REPORTERS

COURTESY OF PALACE SPORTS & ENTERTAINMENT

To make room for improvements, about 840 seats were removed from The Palace this season.

WHAT’S NEW Here are the off-court developments this past offseason for the Detroit Pistons: About $40 million in renovations over the past three years were completed this year at the Palace of Auburn Hills. Improvements were made to suites, restaurants, bathrooms, locker rooms, lounges, lighting, improved disabled fan access, concourse improvements, better Wi-Fi, an upgraded media work room, a new ventilation air handling system and digital menu boards. A $15 million video board system with six highdefinition displays called “Palace360” was hung from the center of the Palace. It’s triple the size of the fourscreen standard definition scoreboard it replaced that had been installed for the 1999-2000 season. The new scoreboard, from Brookings, S.D.-based electronic signmaker Daktronics Inc., is a 60-by-22, 56,000-pound rectangle that is 21 times sharper than its predecessor. There also are new upper-level end zone boards with game statistics, new LED ribbon boards encircling the lower- and upper-level fascia, arena tunnel entrance digital displays, and audio system enhancements. The Palace’s standard full seating configuration was reduced to 21,231 from 22,076 to accommodate the improvements. It still has the most seats in the NBA. In April, the Pistons changed radio broadcasters bonds. Everything has gotten so electric and so cold. I think meeting face to face will be appealing,” he said. Premium seat-holders, suite lessees and corporate sponsors are the most desirable and the most vital to retain because they’re high revenue and they commit money ahead of time, said Rodney Fort, a University of Michigan sports economics professor. And that’s why teams create programs such as the NBL. The use of an app as part of the initiative is something teams do now, too. “Technology had enhanced the ability to (add value),” Fort said. The NBL is among the many offcourt measures Palace management is taking to bolster revenue, especially from corporate sponsors and premium seat holders, while the Pistons team is rebuilt into a contender. Investments have been made in hospitality, gameday experience and ticketing perks, with more than $40 million worth of upgrades made to the Palace itself. The business staff, front office and coaching staff have been replaced — some positions more than once since private equity billionaire Tom Gores bought the team in 2011 — and new departments such as a data and analytics unit have been created to improve the Pistons and Palace Sports. The Pistons’ on-court woes are well established: Detroit finished

when they signed a three-year, live play-by-play deal with Greater Media Inc.’s WMGC 105.1 FM to replace CBS Radio Inc.’s WXYT-FM 97.1 after four seasons. The deal includes two one-year mutual options, which could take it through the 2018-19 season. The contract includes content creation and streaming for all types of digital platforms. There also will be content on the station’s HD radio frequency, 105.1 HD-2. Games and other content will be streamed live on the station and team websites and mobile apps. Longtime NBA coach Stan Van Gundy was hired in May as the Pistons coach and president of basketball operations; and in June, Jeff Bower was hired as general manager, a role he formerly held with the New Orleans Hornets. Van Gundy and Bower fill the personnel management roles formerly held for 14 seasons by Joe Dumars, whose contract as president of basketball operations wasn’t renewed in April. Other hires include Tim Hardaway and Malik Allen as assistant coaches, Jeff Nix as an assistant general manager and Quentin Richardson as director of player development. Greg Campbell, formerly of the NBA’s Memphis Grizzlies, was hired in October as CFO for the Pistons and PS&E. Emily Thornhill, who writes for Metro Times and is a part-time fashion designer, was hired for this season to DJ home games, making her the NBA’s first female resident DJ. She’ll perform under her stage alias, “Thornstryker.”

29-53 last season and hasn’t had a winning season since 2007-08. The team hasn’t made the playoffs since being swept in the first round by Dan Gilbert’s Cleveland Cavaliers in 2008-09. That ended a run of eight straight seasons in the playoffs, and attendance went from among the best in the National Basketball Association to among the worst — fueling a revenue drop-off. Detroit has improved slightly in attendance, averaging 15,005 fans per game at the Palace last season to rank 26th in the 30-team NBA. That’s up from 14,782 in 2012-13, which ranked 28th in the league. As recently as the 2009-10 season, the Pistons led the NBA in average per-game attendance. In 2011, Crain’s reported that the team had lost half its season-ticket base, which translates into 6,000 seats and more than $6 million in annual revenue. The front office has had some success in rebuilding revenue. The Pistons said per-game revenue has increased 15 percent to 20 percent for premium games since introducing variable pricing in 2011. The team is averaging about $600,000 a game from ticket sales, and the goal is to reach the NBA norm of about $1 million for each of the 41 home games. Last season, the Pistons sold 4,800 full- and half-season seasonticket plans, a 19 percent growth rate over 2012-13 — an effort that

earned PS&E Director of Consumer Sales and Member Services Elizabeth Godek Crain’s 40 under 40 recognition this year. The Pistons are on pace to sell 6,000 full- or half-season seasonticket plans for 2014-15, Mannion said. When Gores bought the team, that number had dwindled to 2,800. The goal is to get to 10,000. While it keeps some open for flex plans, the Palace said 96 percent of leases for the arena’s 164 suites were renewed this season. “That business is very healthy, with about 10 percent growth each year,” Mannion said, adding that 99 percent of the on-court seats were renewed. The Palace will experiment with using upper-level “theater box” seating arrangement — groups of four swivel seats that can face the floor or turn around to food and beverage service, Mannion said. Management has said the team is profitable. The Pistons-Palace Sports combined 2013 revenue was $152 million. The Pistons opened the season on the road with losses to the Denver Nuggets and Minnesota Timberwolves last week, and began their home schedule against the Brooklyn Nets at the Palace on Saturday. They will host the New York Knicks on Wednesday. Bill Shea: (313) 446-1626, bshea@crain.com. Twitter: @bill_shea19

Jay Greene, senior reporter: Covers health care, insurance, energy utilities and the environment. (313) 446-0325 or jgreene@crain.com Amy Haimerl, entrepreneurship editor: Covers entrepreneurship and city of Detroit. (313) 4460416 or ahaimerl@crain.com Chad Halcom: Covers litigation and the defense industry. (313) 446-6796 or chalcom@crain.com Tom Henderson: Covers banking, finance, technology and biotechnology. (313) 446-0337 or thenderson@crain.com Kirk Pinho: Covers real estate, higher education, Oakland and Macomb counties. (313) 446-0412 or kpinho@crain.com Bill Shea, enterprise editor: Covers media, advertising and marketing, the business of sports, and transportation. (313) 446-1626 or bshea@crain.com Dustin Walsh: Covers the business of law, auto suppliers, manufacturing and steel. (313) 4466042 or dwalsh@crain.com Sherri Welch, senior reporter: Covers nonprofits, services, retail and hospitality. (313) 446-1694 or swelch@crain.com LANSING BUREAU Chris Gautz: Covers business issues at the Capitol and utilities. (517) 403-4403 or cgautz@crain.com

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RUMBLINGS

WEEK ON THE WEB FROM WWW.CRAINSDETROIT.COM, WEEK OF OCT. 25-31

Lions’ Stafford pushing Pepsi in new promo atthew Stafford is peddling Pepsi again. The Detroit Lions quarterback is the star of a new Pepsi digital-only commercial that has been getting chatter since it was unveiled Oct. 28 Stafford, in full uniform, lets shoppers into a “Can Cave” party room built from hundreds of cases of Pepsi Stafford in the deli area of the Meijer store on 13 Mile Road in Madison Heights. Inside, they dance to music and, of course, guzzle Pepsi. His fiancee, Kelly Hall, briefly appears. The commercial — 2 minutes and 31 seconds long — was filmed in September, and on Friday afternoon the video on Pepsi’s official YouTube page had more than 400,000 views. Purchase, N.Y-based PepsiCo Inc., a $66 billion soft drink giant, is one of the National Football League’s major corporate sponsors, paying

the league about $100 million annually. The spot is a deal made directly with Stafford, who is represented by New York City-based IMG for endorsements, and is not part of the league deal. The spot is part of Pepsi’s #AllForFootball campaign that runs through Thanksgiving.

Bloomfield Park could still get movie theater An Emagine Entertainment Inc. movie theater could still happen at the Bloomfield Park development. Paul Glantz, founder and chairman of the theater chain, said last week he has been in “regular contact” with Redico LLC, the Southfield-based developer that, along with California-based PCCP LLC, purchased the foreclosure rights to the 87acre site along Telegraph Road north of Square Lake. Troy-based Emagine, which owns and operates theaters in Canton Township, Novi, Woodhaven, Rochester Hills and Royal Oak, had proposed a theater with 10 screens at the

HONORING WOMEN OF COLOR

site. It was expected to be one of the anchor tenants of the failed development on which construction was halted six years ago. “We would consider, under the right terms, coming back,” Glantz said. Those terms, he said, include having the right mix of restaurant space to service theater customers. A joint venture between Redico and PCCP bought the foreclosure rights from San Francisco-based Wells Fargo Bank NA last month. The JV plans to foreclose on the property within a year and is determining the best use.

Beaumont Royal Oak opens natural birth center This week, the Karmanos Center for Natural Birth and the Danialle and Peter Karmanos Jr. Birth Center opens at Beaumont Hospital, Royal Oak. The holistic birthing center, which is expected to attract an additional 200 to 250 births annually, will combine the comfort of a home-like environment with high technology that is available at a full-service hospital. The center was funded by a $6 million gift from Peter and Danialle Karmanos. The center includes six private birthing suites equipped with large hydrotherapy tubs, massaging shower heads and other special amenities for natural labor and delivery. Mothers will be offered holistic techniques such as aromatherapy, therapeutic touch, reflexology and music therapy. There also will be a walking path and a rooftop garden. In 2013, Beaumont Hospital in Royal Oak delivered 5,186 babies, and systemwide there were 9,358 births that included Beaumont’s other two hospitals in Troy and Grosse Pointe.

Old Newsboys to honor Detroit Police COURTESY OF WOMEN PRESIDENTS’ ORGANIZATION

Fifteen leaders were honored last week as Detroit Women of Color Achievement Award winners as selected by 100 Black Men of Greater Detroit Inc. and the New York City-based Women Presidents’ Organization. Pictured at the Skyline Club in Southfield are (front row, from left) Teleese Nobles, State Farm Insurance; Juliet Shrader, iVantage Group; Beverly Bantom, Unique Expressions; Marsha Firestone, president and founder, Women Presidents’ Organization; Tina Harmon, The Harmon Group; Madhuri Deshpande, GDI Infotech; (second row, from left) Trayce Parker, UPS; Kathy Pavlik, IBM; Bonnie Mayfield, Dykema Gossett; Pamela Rodgers, Rodgers Chevrolet; Mary Cafarelli, Criticore Healthcare Staffing; Vickie Lewis, VMX International; Maria Thompson, Arsenal Venture Partners; Margie Garza-Carlson, Alliance Technology Solutions; Tanya Allen, HBF-APU JV LLC; (back) Bill Luse, president, 100 Black Men of Greater Detroit Inc. Winners not pictured are Lydia Gutierrez, Hacienda Mexican Foods; Andra Rush, The Rush Group; and Sharon Madison, Madison Madison International. Firestone and Luse represented their respective organizations, and Parker and Pavlik attended as representatives of WPO corporate sponsors.

The Detroit Police Department will be presented with the Old Newsboys’ Goodfellow Fund of Detroit’s 2014 Edward H. McNamara Goodfellow of the Year award Nov. 19 during the fund’s annual tribute breakfast. The event, expected to draw more than 1,200 people, will be held at Cobo Center at 8 a.m. and last about an hour and a half. Chief James Craig will accept the award. Individual tickets are $150. See detroitgoodfellows.org. Money raised will go toward providing Christmas gifts, shoes and dental care to Detroit children.

Judge orders DMC talks with housekeepers federal judge ordered Detroit Medical Center into arbitration with its housekeepers union before it signs a contract with Sodexo USA. At issue was whether Sodexo will cut pay and benefits and rehire all 565 workers from the American Federation of State, County and Municipal Employees Council 25.

CITY HISTORY UP FOR AUCTION

COMPANY NEWS 䡲 A consortium of four companies won the contract to design and build the Penske Technical Center for the M-1 Rail streetcar system in Detroit. Detroitbased Turner Construction Co., 3.L.K Construction and ABE Associates Inc. will team with RNL, a Denverbased designer of light rail and mass transit maintenance facilities, on the $6.9 million system slated to open in early 2016. 䡲 General Motors Co. is moving production of the Chevrolet Volt’s electric drive unit from Ramos Arzipe, Mexico, to its Warren transmission plant as it works to increase its electric range and performance, CEO Mary Barra said in a speech at the Detroit Economic Club. Barra also said GM will invest another $300 million in Southeast Michigan factories before the end of this year. 䡲 Autosystems America Inc., a subsidiary of Canadian auto supplier Magna International Inc., won a $3 million Michigan Business Development Program performance-based grant to move its headquarters and manufacturing facility into an existing building in Plymouth Township. The $59.2 million project is expected to create 466 jobs. 䡲 The state took a 20 percent equity stake in a plan to convert the former Detroit Fire Department headquarters and an adjacent vacant building into a 100room boutique hotel and retail space. 250 West Larned LLC received a $5.84 million Michigan Community Revitalization Program equity investment. The $28.9 million project is expected to create 97 jobs. 䡲 The following companies won performancebased grants from the Michigan Strategic Fund: Mobis North America, which makes auto chassis systems, was awarded $1.25 million to buy a larger facility in Plymouth Township.

DAVID HALL/CRAIN’S DETROIT BUSINESS

Detroit’s surplus municipal equipment — including three of the trolley cars (pictured) used on the vintage Detroit Citizen’s Railway — will be up for auction this week. The auction, scheduled to begin at 10 a.m. Nov. 5 at the Coleman A. Young Municipal Center, also will include old fire trucks, buses and snowplows. Participants must register in advance at hilcoind.com. Details about the auction and a catalog of items are also available on the website. The assets to be sold will be available for bidder preview Nov. 3-4; an online-only auction closes Nov. 13.

It plans to create 121 jobs and invest up to $26.6 million. Thomson Reuters Inc. was awarded $2.4 million to consolidate four sites in the Ann Arbor area and move to a facility in Pittsfield Township. The company plans to invest more than $19.8 million and add 300 new jobs. NBJX USA Inc., a subsidiary of Chinese auto supplier JianXin Zhao’s Group Corp., plans to acquire a Canton Township building and create 75 jobs from the $8 million investment. It won a $300,000 grant for the proposed warehouse, testing lab and possible manufacturing site for the supplier. 䡲 Detroit Manufacturing Systems LLC plans to hire 200 assembly workers by January 2015 to support production growth of the Ford F-150 truck. The joint venture between Waynebased Rush Group and French auto supplier Faurecia SA will host a job fair Nov. 8 at the DMS plant at 12701 Southfield Road. 䡲 Farmington Hillsbased Innovation Ventures LLC, maker of the popular 5Hour Energy drink, cannot revive a dismissed 2012 lawsuit against a company that used to bottle its energy shot in Livingston County, the Michigan Court of Appeals ruled. Liquid Manufacturing LLC no longer bottles the Eternal Energy shot drink or anything else. LXR Biotech LLC, based in Green Oak Township when it was also targeted in the lawsuit, is now in Auburn Hills and continues to sell its Eternal Energy drink online and through retailers. 䡲 The Detroit Red Wings ranked ninth among the 30 National Hockey League clubs for its financial fan friendliness, according to an annual ranking by

Chicago-based Team Marketing Report of each team’s Fan Cost Index. 䡲 Washtenaw Community College announced it has raised more than $8 million as part of the WCC Foundation’s Campaign for Success fundraising campaign over the past 18 months. 䡲 Twenty-three Michigan hospitals — 14 of them in Southeast Michigan — were rated “A” by the Washington, D.C.-based The Leapfrog Group in its latest round of safety scores, intended to reflect how well hospitals avoid medical errors and patient harm. See the list at crainsdetroit.com.

OTHER NEWS 䡲 Rosie the Riveter’s old plant in Michigan avoided the wrecking ball when papers were signed making Yankee Air Museum the owner of a 144,000-square-foot slice of the former Willow Run Bomber Plant, where workers built B-24 Liberator bombers during World War II, AP reported. 䡲 Bernard Kilpatrick, the father of imprisoned former Detroit Mayor Kwame Kilpatrick, was released from a federal prison in Texas to a Dallas-area halfway house following his tax crime conviction in Detroit, AP reported. 䡲 The Michigan Strategic Fund approved the Community College Skilled Trades Equipment Program, making $50 million available for skilled trades equipment purchases at state community colleges for programs and training, AP reported.

OBITUARIES 䡲 Sterling Heights May-

or Richard Notte, who served more than 20 years in office, died Oct. 28 of pancreatic cancer. He was 76.

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