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An old meat plant is now home to a tight-knit community of entrepreneurs and artists — P. 3 Slack, the ‘fastest-growing business app ever,’ replaces internal email at local tech companies — P. 6
Call it a comeback Mortgage businesses hitting highest peak since Great Recession By JEREMY NOBILE jnobile@crain.com
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AND SO IT BEGINS... Debate gives city taste of what to expect when convention comes to town By JAY MILLER jmiller@crain.com
“I’m just so impressed with the city, especially with the police, really impressed,” said the man in the dark suit and tie, wearing a badge around his neck that identified him as a Republican National Committee “Guest.” It was 11:45 p.m. last Thursday, Aug. 6, and he was talking to a pair of police officers in front of the Horseshoe Casino Cleveland on Public Square. “We’re always here; there’s just a few more of us because of the debate,” said one of the officers. “Well, I’m just so impressed,” the man said as he and his companion continued walking toward the Renaissance Hotel. Earlier that day, on MSNBC’s “Morning Joe” broadcast, Chuck Todd, the host of NBC’s “Meet the Press,” pointed out that most of the
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who attended Thursday’s main event. An under-construction downtown and whispered, off-the-record comments that convention planning may be a little, but not seriously, behind schedule make that clear. The city, for example, is still waiting for Congressional approval of a security grant. But, for now, those are minor concerns.
‘Buckle up’ for the ride The pats on the city’s back last week were bipartisan. As Democratic Party leaders were assembling for a news conference last Thursday afternoon at the Radisson Hotel ClevelandGateway, just across the street from the Quicken Loans Arena debate site, Rep. Marcy Kaptur told Crain’s that she was hearing good things about the city from outside the political arena. “We were just with some people from the British Embassy,” she said. “They’re here for the See DEBATE, page 22
See MORTGAGES, page 21
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presidential candidates had until the debate, never been “face-to-face” with a large national audience before, and so it was important that they make a good first impression. He could have added that Cleveland was getting the same chance to make a first impression. “It’s going to bring tremendous interest in the city,” said former state Rep. Ed Jerse, a Democrat and veteran of four of his party’s national conventions, as he walked downtown streets early Thursday. “It’s a dry run for the convention.” The early returns suggest it was a landslide win for Cleveland, and certainly for the restaurateurs and hoteliers who catered to packed houses while the Republican National Committee, its 17 presidential hopefuls and their entourages and a media horde did their business. Of course, the city is not quite ready for next summer’s Republican presidential nominating convention, when the number of people who come to town will grow to 10 times the 4,500
The housing market is truly recovering, and that’s translating into surging business for banks. Residential lending is a common cornerstone of business for community banks like Orrville’s legacy First National Bank, which merged in June with Canfield’s Farmers National Banc Corp. And it remains a main focus for Mark Witmer, former First National president and CEO turned chief banking officer and senior executive vice president for Farmers. Witmer said mortgage closings are up 70% over this point last year. Income from that business is growing at the same clip. Considering deals already in the pipeline, Witmer said he expects to exceed 2014’s total number of sales by the end of the month. It’s far and away the strongest activity they’ve seen since the economic downturn, Witmer said. And for Farmers, now with $1.6 billion in total assets, the mortgage business absorbed through First National marks the bank’s secondlargest bucket of non-interest income behind the trust and wealth management business. Westfield Bank president and CEO Jon Park said the housing market is “sizzling” right now — and it’s not just a flash in the pan. The $1 billion asset community bank logged 60% growth at mid-year 2015 in its mortgage business compared with the like period last year. About 30% of that business is for new residential construction alone. And houses appear to be selling faster. For Westfield, homes sold last year were on the market between
MIDDLE MARKET Good help is hard to find, but growing companies have learned a few tricks ■ Page 13 PLUS: ADVISER ■ TAX TIPS ■ & MORE
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Small Business Matters i Want more information and resources on this week's topics, ideas and events? Go to www.cose.org/smallbizmatters.
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Retail clinic biz gets competitive By TIMOTHY MAGAW tmagaw@crain.com
Northeast Ohio’s ballooning health care infrastructure might be dominated by big-box bricks and mortar, but a less-assuming version of care is unfolding in neighborhood convenience stores. Retail clinics — basically, small offices housed within drug stores like CVS or Walgreens — are nothing new, but a handful of new players recently entered the fold and are promising to shake up an alreadycompetitive market for low-cost, ondemand services for non-emergency health care needs such as sinus and ear infections, sore throats or rashes. HealthSpot, a Columbus-area company, recently rolled out its virtual walk-in health care kiosks at 25 Rite Aid stores throughout the state, including 18 in Northeast Ohio. HealthSpot’s kiosks allow patients to interact with physicians through videoconferencing software and interactive medical devices. As part of its statewide rollout, HealthSpot connects patients with physicians from Cleveland Clinic, University Hospitals and Kettering Health Network in the Dayton area. Also, last week in Parma Heights, The MetroHealth System opened its first clinic staffed by a nurse practitioner within a Discount Drug Mart store. The health system plans to open four more in Cuyahoga County by year’s end, with the possibility for even more beyond that. The parties are in talks about extending the Medina-based retail chain’s relationship with the health system beyond Cuyahoga County, according to Discount Drug Mart chief
operating officer Doug Boodjeh. Across the country, there are 1,800-plus retail clinic locations, according to a recent report from Manatt Health, a national health care consulting firm. Still, according to the study, that represents only a sliver — about 2% — of all primary care encounters. That said, local health care officials stress that this isn’t a fad considering many of the patients that use retail clinics don’t have a designated primary care physician. MetroHealth CEO Dr. Akram Boutros said the clinics are a “permanent part of the health care system.” “This is a way of engaging these patients early on in their health care journey,” he said.
It’s tough business While the retail clinic industry is a relatively young one, it’s not terribly easy to break into. CVS’ Minute Clinic, for instance, is by far the largest provider of retail-based health care, with more than 900 locations across the country. The Cleveland Clinic, meanwhile, has had an arrangement with the drugstore chain since 2009, and today its docs serve as the medical directors for 26 of its clinics in Northeast Ohio. Giant Eagle made a concerted effort to get into the health care space a few years back, but it has halted those efforts. The Pittsburgh-based grocery chain had forged arrangements with UH and Summa Health System in Akron to open so-called FastCare clinics in cities such as Lyndhurst, South Euclid and Wadsworth. All of those locations See CLINICS, page 4
Finally: Builders plan new east side offices By STAN BULLARD sbullard@crain.com
The long drought in construction of multitenant office buildings in the east suburbs may soon end, perhaps even giving way to a flash flood, as developers pursue plans to add four projects in the region’s largest suburban office market. Realty developers are putting their fingers to the wind to see if the time is right to build as the last properties added to the market, DDR Corp.’s headquarters expansion at 3333 Richmond Road in Beachwood and homebuilder Dino Palmieri’s Landerwood Crossing building at 3350 Lander Road in Pepper Pike, celebrate their sixth and seventh birthdays, respectively. Those spotty offerings also are a testament to how the rental office market slowed after 2001 through war and recession in an area that once spawned at least one new office building, and once as many as six, in a single year. However, the rise of mixed-use projects, with combinations of retail
and residential space as well as offices, means there is a new breed of offerings to the traditional freestanding office building. The work also takes place as the appetite for office space diminished this past decade as open office designs and a more mobile workforce continue to gain momentum. Steve Egar, the broker at Beachwood-based Steve Egar Associates, reflects the handicapping among commercial realty pros as he surveys the situation and observes, “It’s not about what’s proposed. It’s about who will put a building up.” There even is talk of construction on a speculative basis, or building without having a high percentage of space leased to tenants in advance of breaking ground. That has been unheard of here since the late-1990s. The most recent project to surface is a new joint venture between two Beachwood-based real estate concerns, Goldberg Cos. and the King Group. The two quietly last month began circulating among office leasing agents plans for a four-story ofSee OFFICES, page 4
STARTUPS, ARTISTS INVADE MEAT PLANT Hildebrandt is home to woodworkers, bikers and beekeepers By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com
Between the walls of what once was a meat processing plant in Cleveland now resides an eclectic mix of entrepreneurs and artists, a number of whom just moved in this year. Bill Hildebrandt, property manager and owner of Hildebrandt Building LLC, has been deliberate about attracting small businesses and artists to his family’s historic 120,000-square-foot building. After the Hildebrandts’ meat processing company closed its doors in 1970, the building at 3619 Walton Ave. housed a number of industrial tenants before Hildebrandt shifted his approach to small businesses. “Everybody who came in, they had a vision and a dream,” Hildebrandt said. Construction of the building began in the early 1900s on Clark Avenue as a home for what Hildebrandt said became Hildebrandt Meat Products; his great grandfather originally worked for another meat processor, becoming more and more involved until he eventually bought the other partner out. The German immigrant was hardworking and inventive, Hildebrandt said, and the maker of products like lunch meats, hot dogs and sausages thrived through the World Wars and the Depression. But as the company shifted to focus on supermarket chains and private label products in the ’60s, business started to suffer. “We were literally shrinking our market,” Hildebrandt said. By 1970, the company had closed its doors, facing more intense national regulations. Hildebrandt’s parents — Joseph and Coletta — bought the building from the other
REBECCA R. MARKOVITZ
Dani Pajak runs Disowned Customs, a custom motorcycle shop, out of Skidmark Garage, one of the small businesses helping to transform the Hildebrandt building. See page 12 for profiles on three of these companies. shareholders and started renting it out for general warehousing and light industrial purposes. In the ’90s, Hildebrandt convinced his mother that the time was right to start weeding out the building’s most environmentally unfriendly tenants. Today, the building is home to more than a dozen artists and small businesses who keep the spirit of invention alive, from Soulcraft Woodshop to Wake Robin Fermented Foods to Rising Star Coffee Roasters. Rates on the first floor are comparable to other buildings, but the second floor is more affordable, Hildebrandt said, noting that he plans to offer nonprofit rates in the future. Meat processing was such a segmented business that no two rooms in the plant are alike, Hildebrandt said. The building also boasts a
kitchen that food trucks, chefs and other businesses can use. The majority of the second floor is filled with artists, and there’s a beekeeper on the roof.
‘Home away from home’ The draw of the building varies by tenant. Some mentioned the community that’s been created there. Jamie Doyle, vice president of Appropriately Applied Technologies Inc., said the small solar panel installer has made contacts at the building and has even been able to adapt some small solar-related projects to the other entrepreneurs’ needs. Michael Mikula of Mikula Glass and Katie Simmons, founder of the Hildebrandt Artist Collective, both said they liked being part of a comSee BUILDING, page 12
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CLINICS
SOLD
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1331 KELLY AVENUE, AKRON, OHIO
Newmark Grubb Knight Frank is pleased to announce the $9.2 million sale of the 212,000 SF manufacturing facility located at 1331 Kelly Avenue in Akron. Terry Coyne and Mike Plaspohl represented the seller.
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have since closed, though Giant Eagle still operates one FastCare clinic in the Columbus area. “We continue to evaluate numerous opportunities to deliver a strong overall health and wellness experience for our customers,” said Dan Donovan, Giant Eagle’s marketing manager, in an email. “While customer acceptance of this clinic is high, we do not currently have plans for additional locations.” When asked about the relationship with Giant Eagle, a UH spokesperson said those locations closed due to low volume. A Summa spokesperson said the model “didn’t make sense for us any longer.” MetroHealth’s Boutros, however, doesn’t seem fazed by the spirited competition in the retail space. As he sees it, the MetroHealth outposts at Discount Drug Marts are a “way of engaging these patients early on in their health care journey.” He said the staff won’t just be working on an episodic basis but also doing pro-active follow-up to ensure the patients visiting the clinics are recovering and following care instructions. They’ll also be part of the system’s electronic medical record. “We have been in a very deliberate way looking at population health and the role of the retail market in managing the population,” Boutros said. By integrating its retail outposts with the rest of the health system,
OFFICES continued from page 3
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800.PAVE.NOW www.RonyakPaving.com Volume 36, Number 32 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2015 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373. REPRINT INFORMATION: 212-210-0750 Subscriptions: In Ohio: 1 year - $64, 2 year - $110. Outside Ohio: 1 year - $110, 2 year - $195. Single copy, $2.00. Allow 4 weeks for change of address. For subscription information and delivery concerns send correspondence to Audience Development Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, Michigan, 48207-9911, or email to customerservice@crainscleveland.com, or call 877-824-9373 (in the U.S. and Canada) or (313) 446-0450 (all other locations), or fax 313-446-6777.
fice building on the northwest corner of Chagrin Boulevard and Richmond Road next to Goldberg’s Signature Square I and II office buildings. Also nearing the starting gate after making plans for another building since 2008 is Palmieri, who sources say is close to signing a prospective anchor tenant for 3900 Park Boulevard. The three-story office building is located between the Chagrin Highlands Buildings I and II in Beachwood. Going into the mix as well are office spaces at mixed-use projects in Orange Village and Shaker Heights. Fairmount Properties of Cleveland and its partners plan to install a total of 150,000 square feet of office space above storefronts in two buildings at the proposed Pinecrest project in Orange, which also includes restaurants, a movie theater and apartments in a $225 million project. Meantime, RMS Enterprises, a development concern formed by the founding families of Forest City Enterprises Inc., plans to construct 60,000 square feet of offices in its proposed remaking of the dated Van Aken Shopping Center, 20119 Van Aken Blvd., as a contemporary, open-air retail, residential and office complex. Future phases could take the project to as much as 200,000 square feet of office space. At first blush, with 18% vacancy in the eastern suburbs according to the Newmark Grubb Knight Frank’s second quarter office market report, adding new buildings seems to be a reach. However, vacancy dropped from 19.7% just a year ago, according to NGKF’s same-quarter 2014 report, and rents have climbed. However, both brokers and developers say the opportunity for a new building or buildings is hidden in the details of the office market. Chandler Converse, a CBRE
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Boutros said MetroHealth will be sidestepping what has become the largest criticism of the health care industry — the fragmentation of health care. Industry groups have chastised the retail health care industry for working outside the parameters of local health care delivery systems. Retail clinics might be convenient, but if that care isn’t coordinated or communicated in some way with a patient’s primary care physician, complications could occur. That’s part of the reason major retail chains like CVS and Walgreens are collaborating with health systems as they open new clinics. Over the last five years or so, the Clinic’s relationship with CVS has evolved to a point where they’re electronically sharing patient records. When it started, the Minute Clinic’s staff were faxing over patient notes. “We know there’s a segment of the population that loves the convenience of Minute Clinics, but we want to know what’s going on and what’s exactly happening with these patients,” said Dr. Michael Rabovsky, chairman of the Clinic’s department of family medicine. He added that the Clinic and CVS are in talks about how to expand the relationship even further, though he couldn’t get into details. HealthSpot’s entrance into the market has been perhaps the most intriguing development on the retail health care front.
All of the Cleveland-based health systems have been piloting the kiosks, but the Rite Aid deal facilitated the first major push by HealthSpot to get its technology in front of consumers. Over the next six months, the company plans to put 50 to 100 more of its kiosks at Rite Aids in Ohio and beyond. The goal, according to CEO Steve Cashman, is to make HealthSpot as common as Redbox — the automated movie rental kiosks at grocery stores and convenience stores. The biggest challenge to its growth, he said, is customer awareness. After all, walking into a giant box and chatting with a doc through a monitor isn’t your average health care encounter. But don’t knock it until you try, he said. “You didn’t use Uber until you tried Uber,” said Cashman, referring to the popular ride-sharing app. “There’s definitely a customer-awareness issue.” Retailers have spent billions of dollars trying to get into the health care space, but Cashman argues that the traditional model — quaint offices within drugstores — is too expensive. It costs significant dollars to build out and staff a space whereas the HealthSpot kiosks carry an upfront cost of about $10,000 to $15,000 apiece. “We’re shovel-ready with very low overhead,” Cashman said. “We’re low-cost out of the gate and can scale very quickly.”
Group managing director who heads its tenant rep practice in Cleveland, believes the timing is right for new rental office space. “There is a lack of high quality office space in the eastern market,” Converse said. “If you want 20,000 square feet in the eastern suburbs, there are basically no good options.” New product comes at a price, probably above $30 a square foot, but Converse said companies are in the hunt for efficient space that is designed for their use, which offsets higher costs.
weaken the appetite for new buildings. The lack of recently built properties attracts Adam Fishman, a principal of Fairmount properties. “I think there’s pent-up demand,” Fishman said. He said Fairmount, at its mixed-use projects in Hudson and with Iris and Scott Wolstein at the Flats East Bank, has found stronger demand for office space close to amenities such as restaurants than in freestanding suburban office buildings of old. Another factor may tip the balance in favor of newly developed office buildings, according to Donald King, CEO of King Group. “Frankly, a lot of what are considered Class A office buildings in the east suburbs are 30 to 35 years old,” King said. “We will have a building that is modern, more efficient, designed for today’s tenants who no longer have big (private offices) but want more collaborative space.” The Signature Square III plan includes space for a building housing a restaurant on the corner. The building’s location and amenities such as a fitness center at the existing Signature Square buildings will also attract tenants, he said. “We absolutely believe the market is ready for new buildings,” King said. Palmieri, CEO of Solon-based Palmieri Enterprises, said the market is the strongest it has been since 2008 when he bought the land for his building at the Chagrin Highlands office park. He hopes to start construction before the fall. Although he is negotiating for an anchor tenant, his financing would allow him to start building on speculation if he chooses to do so. That may be the biggest other difference between now and the recent multitenant office-shy years, which were dominated by corporate build-to-suit headquarters projects. “Every week I get calls from lenders wanting to loan money,” Palmieri said. “I used to be calling them.”
‘There’s pent-up demand’ Brian Hurtuk, managing director of Colliers International’s Cleveland office, has experience as an officebuilding developer as well as a broker. He points to the most compelling argument for new office buildings: There are a sizable number of leases that will come up for renewal by the end of 2016. With office leases expiring, companies are more willing to consider moving and, with few options for new properties the past decade, may be ready to do so. “Basically, 10% of the market is going to turn over the next 18 months,” he said. “That’s about 700,000 square feet of space. A third of those tenants will not hit the market; they’ll renew. However, some tenants will need new space to expand. Or someone else may own the building they leased before.” Hurtuk worries there may be one office building too many in the planning stages. In part, that’s because so little has been built here for so long that it’s hard to project office demand. Moreover, many east suburban and Rockside Road office buildings have changed hands over the past year. He said new owners deserve a chance to upgrade those properties and seek tenants. Such attractive offerings from less pricey buildings also may
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Auto bigwigs back Everykey prior to launch By CHUCK SODER csoder@crain.com
Former Chrysler CEO Tom LaSorda thinks Everykey “will change the way we control our daily lives.” The Cleveland-based startup just raised $720,000 — and it landed a bunch of big-name allies in the process. Many of them are tied to the automotive industry, which is not a coincidence. Everykey is about to release a wristband that lets you automatically unlock your smartphone, your computer and almost all of your Internet accounts, when it gets close to them. All it needs is your permission. No passwords required. But the company’s grand plan is bigger. It wants the device to unlock everything you own: Including your house and your car. That’s why Everykey wanted to raise capital from IncWell. The Michigan-based venture capital firm and two Cleveland-area investors have injected $520,000 into the company, which raised another $195,000 in grants and loans from state and local economic development programs. LaSorda founded IncWell. And a few of its investors have impressive resumes as well. To name a few: Roger Penske is chairman of Penske Corp., a huge player in the world of automotive dealerships and transportation logistics. Dieter Zetsche is chairman of Daimler AG and head of its Mercedes-Benz car division. Wayne Sales is a former CEO of two major retailers, Supervalu and Canadian Tire Corp. Everykey CEO Chris Wentz said he’s met all of the investors listed on IncWell’s website and regularly gets advice from them. “They’re becoming pretty good friends of mine,” said Wentz. The 24year-old had started multiple small companies before he and a few other students at Case Western Reserve University came up with the idea for Everykey. The company’s 14 employees work out of a single conference room on campus, though they’re looking for more permanent space nearby. In addition to advice, LaSorda also has given Everykey a glowing endorsement. “Everykey technology will change the way we control our daily lives,” LaSorda stated in a news release about the investment. “It’s one of the most exciting products we have seen for some time.” The IncWell team eventually could help Everykey build partnerships with major auto manufacturers — a step that will be necessary if the device is ever to work with their vehicles. First, however, Everykey has to focus on a more basic problem: Getting the product out the door. The company plans to release the device in late September. However, it was originally supposed to hit the market in March. The delay upset some of the 2,300 people who pre-ordered the device through Kickstarter.com. A few of them even posted comments saying they wanted refunds. So what happened? The company decided to redesign the product.
The new version is less expensive to manufacture. It also allows you to pull the electronic fob out of the wristband, in case you’d rather put it in your purse or your pocket. There shouldn’t be more delays, but Wentz noted that Everykey still has to pass a security audit being conducted by a local company called SecureState. Everykey is almost ready to start manufacturing, so issues could crop up there, too. For instance, it’s buying parts from 25 different companies. Each part has a different lead time. Right now, however, those lead times appear manageable,
according to Mike Maczuzak, CEO of SmartShape Design, which helped Everykey design the product and work with suppliers and a few local manufacturers. “Everything is accounted for at this point, so it’s not just a guess,” he said. Maczuzak was one of the two individuals who invested in Everykey. The other was Edward Cochran, an attorney in Shaker Heights. Maczuzak said he immediately understood the value of the product. Plus, he was impressed by Wentz. “Chris Wentz personally is an impressive, bright guy,” he said.
CONTRIBUTED PHOTO
Everykey’s device was designed to unlock smartphones, doors — even cars.
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By CHUCK SODER csoder@crain.com
Employees at University Tees don’t send all that many emails to each other these days. They now use Slack, which is quickly becoming the main internal communication tool for a long list of local tech companies, as well as a few other tech-savvy businesses. Slack claims to be “the fastest growing business app ever,” and it might be true. Launched in February 2014, the app had 1.1 million daily users as of June 24 — up from 750,000 in mid-April. And many of them keep the app open on their computers for hours on end. Don Pawlowski of University Tees closes it only when he restarts his computer. “How did we do our business before Slack existed?” said Pawlowski, who is chief technology officer for the Lakewood-based custom apparel company. University Tees relies heavily on Slack. For instance, customer service employees keep the app open all day, since they use it to respond to customer questions. And some of the company’s business development leaders use it to communicate with teams of college students who market the company’s clothing at campuses throughout the country.
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But why not just use email? For one, Slack more closely mimics the back-and-forth flow of an inperson conversation — even if people log in at different times, according to Pawlowski and several other people interviewed for this story. To illustrate the point, Pawlowski and University Tees CEO Joe Haddad pulled up a Slack conversation from Thursday, July 23. At 1:17 p.m., Haddad posted an email he received from a student who said that working for University Tees had jumpstarted his career and his life. Two minutes later, Pawlowski chimed in, saying that somebody should read the letter at the upcoming summer sales conference to get new students “jazzed up.” At 1:18, someone else said they loved that idea. Then, at 1:33, one of the company’s business development leaders said he wanted to do it. Two days later, he read the letter to a group of about 80 students in Chicago. What if Haddad had forwarded the letter via email? People probably wouldn’t have been so quick to chime in, since that would involve putting another email into everyone’s inbox, Haddad said. “This dialogue wouldn’t have taken place,” he said. Slack mentions 10 big-name customers on the home page of its website, most of them tech companies (Salesforce.com, eBay, etc.) or media companies (such as The Wall Street Journal and NBCUniversal). However, Slack is still working on a more
A young group of fans The Fighting Unicorns love Slack. So much so one member of the allgirl robotics team sent the company an email this past spring. Lauren Egts — a sophomore at Hathaway Brown School in Shaker Heights — asked Slack to sponsor the team. Slack said yes. And they wrote a blog post about it. One of the team’s mentors introduced them to Slack. At first, a few students used it to communicate while scouting the competition at events — including the FIRST Robotics Competition World Championship in April. Then it spread. In her interview with Slack, Egts said they use the tool “for everything from lunch instructions, to switching out pit crew, to finding where that rookie wandered off to.” They’re serious about it. During competitions “everyone has to be with someone with Slack on their phone at all times!” Egts said. You can find the entire blog post by doing a Google search using the words “Slack” and “Fighting Unicorns.” Or visit: bit.ly/1MXMBiW — Chuck Soder
expensive “Enterprise” version of its software, which could help the company make inroads with major corporations, especially those that have to meet strict data security and retention policies. But for a small company like BoxCast — which sells a device that allows video cameras to send live HD video to the Internet — it’s nearly perfect, according to CEO Gordon Daily. Four of the Cleveland company’s employees (the founders and the technology team) started using the free version of Slack in January. They loved it. And they think the other eight people at BoxCast will, too: They plan to roll it out to the rest of the company by Labor Day. When they do, they’ll probably upgrade to a paid version of Slack. For $8 per user, per month, they can get a permanent, searchable archive of their message and the ability to integrate the software with an unlimited number of other programs. It’s worth it, Daily said, noting that he rarely sends email to other employees anymore. His reasoning: Why would he want to hit “compose,” type email addresses, fill out a subject line and click on the body of the email — before he starts writing? “Whether you know it or not, there’s a ceremony you’re going through,” he said.
A channel for everyone Another advantage over email: Slack makes it easier to follow ongoing conversations — even if you’re jumping in midstream, according to Lori Franklin. She’s chief operating officer at OverDrive, a big player in the electronic book business. The entire
company, which has 240 employees in Garfield Heights, started using Slack in September 2014. Today, there are conversation “channels” for every department at the company, which specializes in distributing digital books and audio books through libraries. For instance, if you’re on the marketing team, you’ll probably end up following conversations in the marketing “channel.” But if you end up working on a project with the marketing team, you can jump into their channel at any time. “It easy to tell somebody, ‘Just go grab that channel. You’ll get up to speed quickly,’ ” Franklin said. Projects have channels, too. Some subprojects do as well. And then there are some random channels. A book channel. A wellness channel. A kudos channel. Sound complicated? It’s not, Franklin said. Employees picked it up fast, she said, adding that she probably did more training than she needed. On the other hand, if you were trying to have all those conversations via email, that would be hard, according to Lauren Kotmel of the Downtown Cleveland Alliance. She’s using Slack to communicate with a handful of volunteers who are working to promote the new dog park near the Cuyahoga River. “If I imagined the amount of conversation we’re having on Slack in email, it would be very overwhelming,” she said. The group attracted about 100 people to the dog park for a grand opening-style event on July 19, and it went smoothly. Slack “probably played a big part in that,” she said, because the app made it easy for the volunteers to keep up with the plans. Partly because messages didn’t end up getting buried in people’s inboxes. Slack also helped the volunteers get to know each other, Kotmel added. “On Slack, we’re more inclined to talk to each other as friends and be less formal,” she said. That may scare some companies, especially bigger ones, according to Daily, of BoxCast. “You can so see how the corporate antibodies will start to activate,” he said. How did OverDrive react? It created software that monitors Slack for foul language. For the most part, though, Franklin’s strategy is to trust her employees. They’ve behaved pretty well so far, she said. But even clean Slack conversations are often peppered with jokes, silly video clips, smiley faces and other stuff that has nothing to do with work. Pawlowski, of University Tees, is all for it. Having fun online can create stronger bonds between employees, he said. And that’s important — especially for companies where people work in different offices. Or different states. “It’s easy to lose touch when you’re 2,000 miles away,” he said.
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AUGUST 10 - 16, 2015
CONTRIBUTED PHOTO
Platform Beer brewmaster Shaun Yasaki brews a beer the company created with Michael Symon’s B Spot burger joints.
B Spot, others tap local brewers for unique beers By KATHY AMES CARR clbfreelancer@crain.com
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A hybrid brew more than a year in the making is rolling out this week in all of chef Michael Symon’s B Spot burger joints in Ohio. The brew’s name — to be announced this week — is a collaboration between B Spot and Ohio Citybased Platform Beer Co. It’s the first time B Spot has partnered with a local brewery to coproduce a house-made craft brew. “We’ve always promoted quality craft beer, but we’ve really taken our support of local to the next level through this partnership,” said Brian Deibel, director of business performance and technology at Michael Symon Restaurants. The principals behind Platform Beer Co., whose model is predicated on incubation and collaboration, say this particular line of business is a harbinger for similar future projects. “A core concept of our business was to invite home brewers in to collaborate, but we realized there’s a huge market for collaboration in the food and beverage industry,” said Platform co-founder Paul Benner. Talks between B Spot and Platform materialized more than a year ago, before Platform opened its doors, Deibel said. “They approached us, and we loved the idea,” Deibel said. “This presented an opportunity for us to be on the ground level and be involved in making our own product.” Discussions about recipes and styles formalized about six months ago. “We sampled a bunch of different products, including some commercial examples,” Benner said. “They were looking for a unique sensory experience.” The end result is a co-branded 6% ABV Belgian Pale Ale with specific saison yeasts that yield a fruity, spicy aroma and a little bitterness. “We think it’ll attract a lot of palates, which is great for B Spot,” Benner said. The beer is available at Platform’s tap house and at B Spots in Strongsville, Crocker Park, Woodmere, Columbus and at FirstEnergy Stadium and Quicken Loans Arena. Deibel hinted at an eventual presence at B Spot’s two Detroit locations and its new Indianapolis outpost. “We have a lot in common,” Deibel said. “We’re both Cleveland businesses that want to grow in Cleveland and grow with integrity.” Once Platform’s 120,000 square-
OCTOBER FEST Cleveland Beer Week’s annual brewery collaboration is its largest yet. “This year, 24 breweries will be involved, with 16 of those based in Northeast Ohio,” event director Christine Montague said. “MadCap, Platform, Butcher and the Brewer, and Brick and Barrel are all new participants, so we’re really excited.” The categories and partnerships are: WILD CARD: Brew Kettle, Rocky River, Rhinegeist
APA/IPA/IPL/PILS: Buckeye, Smuttynose, Portside
SESSION: Great Lakes Brewing Co., Lager Heads, Oskar Blues
STRONG BEER: Fat Head’s, Green Flash, Cornerstone
BELGIAN/GERMAN HEFFE: Thirsty Dog, Victory, MadCap
DARK: Platform, Mad Tree, Brick and Barrel
LIGHT ALE/LAGER: Butcher and the Brewer, Ommegang, Chardon BrewWorks
TBD: Willoughby, Cellar Rats, national partner TBA
The format also is new. “Last year, all participants created session beers under 6%,” Montague said. “This year, each brewer has a different style they will be brewing.” The beer names will be announced mid-August. Meantime, Cleveland Beer Week’s website, www.clevelandbeerweek.org, will be posting details beginning this week on the event’s festivities. Cleveland Beer Week runs Oct. 9-18 and features more than 350 keg-tapping and beer-sipping celebrations — including 10 flagship events — at various restaurants, bars, retailers and other participating locations throughout Northeast Ohio. “We know that some 50,000 patrons attend Cleveland Beer Week,” Montague said. “Retailers and breweries tell us this us their single best week out — Kathy Ames Carr of the year for craft beer sales.”
foot Gypsy contract brewing production facility starts cranking out beer in November, Platform’s owners are hoping to schedule in more housemade conquests. “We’re in talks with a couple other local restaurant groups,” co-founder Justin Carson said. “We love taking someone’s idea, and working with (brewer) Shaun (Yasaki) to translate that idea into a beer.” Other breweries are aligning with locally based or mission-drive organizations by way of co-developed beers, and industry followers expect this trend to continue. Microbrewers gain more grassroots exposure, while for-profits and nonprofits alike benefit from the positive associations linked to homegrown craft brewers. Heinen’s earlier this year created a CollaBEERation project that spotlights unique small-batch craft brewed products at its downtown Cleveland location. The project began with Great Lakes Brewing Co.’s special Rotunda Pale Ale that commemorated the downtown grocer’s opening in February. “Great Lakes had never partnered with a retailer before,” said Ed Thompkins, Heinen’s wine and beer merchandiser. “The beer sold out in
a day-and-a-half.” Thompkins organized a schedule of collaboration brews that so far have also included Portside, Platform, Cellar Rats and Market Garden Brewery, the latter of whose Ginger Pearl — a blend of Market Garden’s Pearl Street Wheat and Old City Soda Co.’s ginger beer — is currently on tap. Up next are Bottle House in September, Butcher and Brewer in November and Brew Kettle in December. “These collaboration beers are so fun to do because there are no rules or boundaries,” Thompkins said. “We visit the brewery, determine a style, and then they go really quick.” Meanwhile, Fat Head’s Brewery and Great Lakes Brewing Co. in July each tapped their own iterations of a special brew that benefits ALS research. A portion of the proceeds from Fat Head’s Trail Head Pale Ale benefits the Cleveland Metroparks. And Brew Kettle is set to release at the onset of the Cavaliers season its All For One session IPA. “Craft breweries are finding creative ways to engage or even give back because they are so connected to their communities,” said Mary MacDonald, executive director of Ohio Craft Brewers Association.
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CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
AUGUST 10 - 16, 2015
PUBLISHER:
John Campanelli (jcampanelli@crain.com) EDITOR:
Elizabeth McIntyre (emcintyre@crain.com) MANAGING EDITOR:
Scott Suttell (ssuttell@crain.com)
OPINION
Clean slate The battle over the Obama administration’s Clean Power Plan began long before it was officially unveiled last week. So it came as no surprise when Ohio on Aug. 5 joined 14 other states to fight the implementation of new federal regulations to reduce power-plant emissions. Like most of the others challenging the U.S. Environmental Protection Agency, we are a coal-producing state. Coal stands to lose under the new rules, which require states to reduce power plant carbon emissions 32% below 2005 levels by 2030. The president called the plan “the biggest, most important step we’ve ever taken to combat climate change.” The majority of Americans agree that action must be taken to limit greenhouse gases from power plants, even if it means higher electricity costs, according to a recent Washington Post-ABC News poll. Those in support include people in coal country. Here’s what those fighting the regulations seem to be missing. The Clean Power Plan doesn’t tell states what and how to cut. The plan gives states flexibility to come up with their own solutions, with the initial plans due in 2016 and the final ones in 2018. Yes, Ohio is a coal-producing state. But coal has proven to be harmful to our environment. Coal-fired plants are the largest source of the planet-warming greenhouse gas emissions causing climate change. Ohio’s power plants produce the fourth most emissions per year, according to U.S. EPA data. The tide, however, has long been turning away from coal. Ohio gets that it is not just a coal-producing state. We now are also a natural gas producer. The U.S. shale gas boom here in Ohio and surrounding states and elsewhere has lowered natural gas prices. Natural gas, in fact, passed coal in April as the dominant fuel for electric power generation in this country for the first time in history, according to the U.S. Energy Information Administration. Ohio is also a wind and solar energy manufacturer. We now are a national leader in the production of clean energy technologies, ranking first for the number of facilities manufacturing wind components and second for the number of solar equipment providers as of 2013, according to the Pew Charitable Trusts. Green energy is getting cheaper and may one day make the whole debate moot. In the meantime, a mix of energy sources — with far less coal — ought to be embraced. There are those who argue that U.S. emissions are a drop in the global bucket. But what we do matters to the rest of the world. If we want to have a cleaner planet, we won’t get there pointing fingers. It’s time for the United States to lead. Ohio was on its way to forging a greener path with its renewable energy mandates. Those were frozen last year and the Legislature is taking another look. The federal mandates ought to provide plenty of incentive for Ohio to renew its renewable portfolio.
FROM THE PUBLISHER
Weed: Real industry, real news It was just before noon when I got based GIE Media, which publishes busiNoelle Skodzinski on the phone last ness magazines serving dozens of inweek. dustries. By April, the deal was done. She’d spent the morning doing what “We signed the papers on 4/20 — editors in the news business do these April 20th ,” Skodzinski said with a laugh. After the sale, Hermes moved on, but days: searching news feeds, checking on Skodzinski stayed. impending legislation, writing an article She’s telecommuting to Northeast or two, tweeting links and posting news Ohio from her home in New online. Jersey. Skodzinski is CBT’s Skodzinski is editor of one only editorial staffer, at least of Northeast Ohio’s newest for now. media outlets, and unlike the The search is on for a manwell-publicized downward aging editor, someone who trajectory of other local news can work at GIE Media’s brands, her operation is rockhome office on Canal Road eting upward. and who can oversee the first You could say that these print issue, set to launch — at are the salad days at Cannabis an ambitious 100 pages — in Business Times. November. Skodzinski and media vet- JOHN Job candidates won’t have eran Tim Hermes founded CAMPANELLI to worry about a pre-employCBT in July 2014 in Virginia, ment drug screening. launching it as an online-only “It’s not that we’re seeking out somenews site with a weekly email newsletone who actually is a cannabis conter, which now has more than 8,000 sumer,” Skodzinski said. subscribers. “But obviously with the position of They soon added white papers on the magazine and the industry we’re topics such as “The Marijuana Dispencovering, that’s not something we sary Handbook — 68 Golden Rules for would hold against someone.” Success.” Cannabis Business Times isn’t a re“We were surprised by how quickly creation of High Times; it’s a businessthe product took off and the readership to-business news outlet with a diverse grew,” Skodzinski said. audience that ranges from growers and The plan was to grow the brand and cultivators to lawyers and security experhaps get lucky enough to sell the perts. business in three years. (It’s also not alone: There is a MariYet within six months of the launch, juana Business Daily, Marijuana Venthey were in talks with Valley View-
ture Magazine, THC Biz and more.) One of the reasons behind CBT’s rapid growth is that it’s positioned itself as an ally to the marijuana businesses. “We’re advocating for the advancement of the industry,” Skodzinski said. “There’s a need out there for all kinds of information. The businesses in this industry are struggling with so many issues.” It also doesn’t hurt that legal marijuana is officially the fastest-growing industry in the United States — with 74% growth in 2014 and another 32% in projected growth in 2015, according to research from the ArcView Group. “The trajectory for this industry is unbelievable,” Skodzinski said. And she is hoping to take advantage. “We want to become the go-to resource for businesses looking to navigate this very complex industry,” she said. “Cannabis Business Times is going to continue to grow and grow very rapidly, and I think it will be around a very long time.” On Skodzinski’s business card is CBT’s logo, a circle with a marijuana leaf inside. She has no problem passing it out. “I’m very proud of what I do,” she said. “The information is finally catching up with the plant. People are beginning to understand marijuana is not something to be afraid of.”
LETTER TO THE EDITOR The U.S. gross national debt is over $18 trillion. That number may be abstract to some Americans, but the consequences are real. Interest rates will rise, and more Americans will pay higher rates on their mortgages, student loans and credit card bills. The high debt will also crowd out investments we should be making in research and education to create jobs and better equip our workforce with the skills they need to be successful in a global
economy. The Congressional Budget Office and organizations like the Committee for a Responsible Federal Budget and the Campaign to Fix the Debt have issued several warnings that the unsustainable debt, if left unchecked, will slow down job creation and hurt wages. But our leaders haven’t shown the leadership or willingness to address this issue. Reforming the tax code and reducing the growth of entitlement spending are a few steps we could take to reduce the
long-term debt. So, as all the 2016 presidential hopefuls campaign throughout the country following the GOP primary debate in Cleveland last week, we must continue to hold their feet to the fire and demand that they offer specific solutions to fix the debt. We cannot allow the candidates to ignore the urgent need for action on this issue. — Bruce Akers Pepper Pike
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CRAIN’S CLEVELAND BUSINESS
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CRAIN’S SUMMER IN THE CITY PHOTO CONTEST “Cotton candy Cleveland sky� — By Julia Brown Julia Brown was rooting for the Tribe and enjoying her first date with her (now) boyfriend and friends when she took this photo. Brown, 26, works for an events company in downtown Cleveland where she is a reporter and associate editor for two print and digital magazine brands. Her prize is two tickets for a cruise on the Nautica Queen. Summer in the City is a contest inviting people to share their Cleveland photos. Weekly prizes include gift certificates to metro Cleveland venues, grocery stores and retailers at a value of $50 to $100. Three grand prizes will be awarded after Labor Day. Add images at crainscleveland.com/SITC.
PHOTO COURTESY OF THE CLEVELAND INDIANS
PERSONAL VIEW
Building a website takes a village — and a good, regional economy By JOHN ETTORRE
Not long after the Internet era began, General Electric CEO Jack Welch stumbled on a great idea: reverse mentoring. Knowing that senior executives of a certain age would need to understand the Internet if the company hoped to continue to thrive, he paired 500 of his top people with young GE technology guides. Knowing Welch, a famously great manager of people, I think he intended the mentoring to flow in the other direction, as well. He understood that in the process, these young tech Sherpas also would gain valuable pointers about corporate culture and some softer skills from their elder colleagues. Everyone would win, because successful organizations need all sorts of contributions from people with a wide variety of skills. I was reminded of that program when I recently took part in Cleveland GiveCamp, an annual event in which the region’s grassroots tech community pitches in to create websites, mobile apps and other technical projects for about 20 local nonprofits, all in a single weekend. Yes, I wanted to do my small part to help these great causes, by joining some of my favorite bighearted veteran colleagues. I was just as eager to meet and collaborate with new creative talent, which I’ve always found stimulating. I knew the combination would be exhilarating. Amid all the focus on technology, it’s easy to think of these projects as requiring just “coding,� and equally easy to assume all coders are young. Actually, a good website or other tech project requires so many more skills, and
John Ettorre has been writing about Northeast Ohio’s entrepreneurial economy for more than 25 years. You can connect with him on Twitter @workinwithwords, and check out GiveCamp at www.clevelandgivecamp.org. great contributors can be found in every age group. It needs seasoned business analysts who understand how the tool will be used not only by the nonprofit’s audience, but also by the organization itself. It needs people who understand how to arrange information most efficiently, how to design it for visual appeal, and how to craft a concise message that resonates with various audiences. Crucially, it also needs project managers, who know at least a little about all these disciplines and how they intersect. They function like skilled conductors, orchestrating the whole thing on an unusually tight deadline. And yes, it also requires plenty of purely technical skills. Everywhere you went that weekend, you bumped into talent. And it defied categories in a most pleasing way. The project manager for one of my two projects was a seasoned pro, perhaps about the same age as some of the participants’ parents. Yet she embraced everyone with the same infectious enthusiasm for their contributions and the importance of our mutual task. For me, the real beauty of events such as these comes in the periodic down moments, when you get to know your collaborators. Will, a heavy-duty coder and game developer whose day job is with one of Cleveland’s most prominent software companies,
was perhaps my favorite new acquaintance. Slowly throughout the weekend, he revealed interesting personal tidbits: that he had served in the Marines, that he’s a martial arts enthusiast, and (a bit bashfully) that he’s tried his hand at fiction. So much for lazy media generalizations of young tech workers, I thought. Afterward, with the aid of social media, I dug a little deeper for insights about my collaborators. I learned that middle-aged Margaret had been excited but a little nervous about joining her first GiveCamp (she performed brilliantly). I found out that Michelle was a computer science major at Ohio State, and I was touched by a poetic passage I found on her website: “I believe that code can be powerful and beautiful.� After Sunday’s closing presentations of the projects, everyone left on an emotional high, looking forward to doing it all again next summer. I also left bearing a useful reminder about what’s required for a successful region in the 21st century. In this cultural moment that glorifies technology, STEM learning and the accumulation of wealth — sometimes to the exclusion of all else — we need to remember how much more it takes to succeed, in technology, let alone in the larger society. GiveCamp was a powerful reminder of how much can be accomplished by channeling powerful altruistic instincts of smart people and valuing contributions from those from all sorts of backgrounds, at every stage of life, with just about every kind of skill. Because we’re going to need them all to succeed.
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BUILDING
A closer look at some of the Hildebrandt tenants:
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Skidmark Garage
munity that included artists, but also other diverse businesses. “It’s like a home away from home for most of us,” Simmons said. Hildebrandt’s “vision” for the building helped make the space attractive to Soulcraft Woodshop when it moved in about three and a half years ago, said co-owner Peter Debelak, who also runs his own custom furniture business out of the community woodshop. Hildebrandt’s family had a history of entrepreneurship, Debelak said, and he wanted to fill the building with people with that same spirit. “There’s a pretty rich community there,” Debelak said, noting the informal get-togethers, collaborative open studio events and holiday markets hosted. Soulcraft’s presence helped draw another relatively recent addition to the building in Skidmark Garage, a community motorcycle shop. The shop, where customers can bring in their bikes to work on them, opened in March. Skidmark’s owner Brian Schaffran said he envisioned a place for apartment dwellers to store their bikes, but it’s ended up being more of a gathering place. He first learned about the Hildebrandt building after chatting with Debelak, whose woodshop used the same model he planned for the motorcycle shop. Schaffran said he loved the “industrial feel” of the building and was sold on it immediately.
One of the Hildebrandt building’s newest tenants is a long-simmering idea finally come to fruition. Owner Brian Schaffran was living in LA 20 years ago, wishing there was something like a community car garage nearby. He sat on the idea after moving back to the Cleveland area in 2000, but realized a motorcycle shop would be more manageable. He took the plunge this year, opening the shop up in March. Customers can use one of five bays in the garage, each decked out with a set of tools. Schaffran also wanted to bring on someone with repair expertise to help customers and found Dani Pajak of Disowned Customs who had been revamping bikes from his home. Both also have day jobs outside of the garage. Pajak said if customers see him working on custom bikes in the shop, it will help them see the potential in their own bikes. Schaffran said the garage is really about learning and creating. “There’s something about working with your hands that rules,” Schaffran said.
On the rise Location and room to grow is another attractive feature for many of the businesses there. For Rising Star, a move to the Hildebrandt building earlier this year meant freeing up some room at its Hingetown location, where the roasters had taken up a third to half of the space. The roasting operation is now up and running at the Hildebrandt, and general manager Robert Stockham said he hopes the paperwork for a retail component can be filed by fall. The company is envisioning a bit of coffee tourism, he said, and he wants the space to be a “destination” where guests can learn about the roasting process. Paula Hershman, owner of Storehouse Tea Company LLC, said she was interested in moving to Cleveland from Chagrin Falls, both for a better demographic fit with its customers and to work with the local refugee population. The company, which moved in May, has brought on two sisters from Rwanda to help with labeling, packaging and blending its teas. And the space meant the company could use Hildebrandt’s existing kitchen until it’s ready to build out its own. Part of the building’s appeal to Molly Murray, manager of Wake Robin, was the chance to add to its history. The meats made there had been processed and sold locally. The story is similar for Wake Robin, which uses some locally grown produce and sells much of its sauerkraut, kimchi and other products locally. “It’s neat to be restarting that history and using the old infrastructure in new ways,” Murray said.
At left, owner Brian Schaffran and Dani Pajak. Above, Sarah Begg said working on her first-ever motorcycle is “therapeutic,” and she looks forward to coming to the shop after working all day as a hairdresser. The shop makes the process doable, because it has all the tools she needs. PHOTOS BY REBECCA R. MARKOVITZ
Above left, Skidmark Garage has bays set up for members or other customers to work on their bikes, plus one for Pajak. Above right, Marcus Hoffman works on a custom paint job for one of Pajak’s customers.
Above, Pajak works on a set of custom handlebars for a bike he is modifying for a customer.
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Making fermented foods like sauerkraut or kimchi was a hobby for Molly Murray. But when her father, who had been reading up on business theory and how businesses help communities, retired from being a physician, it became her full-time job. Murray is the manager of Wake Robin Fermented Foods, which opened about two-and-a-half years ago and has been in the Hildebrandt building since the beginning. (As an aside, she and her father aren’t the only Murrays in the Hildebrandt. Her brother, Myles Murray, is the president of a small solar-related company in the space.) Wake Robin offers five flagship products, including sauerkraut, kimchi and a garlic cucumber mixture, which can be found at grocery stores and restaurants around the area. The company also has been working with local farms to make some seasonal products, like pickled green beans or curried cauliflower. Murray said she’s passionate about bringing healthy food to the people of Cleveland.
For about the past two years, a 5,000-square-foot space in the Hildebrandt has been home to about a dozen artists who use it as a gallery and studio. Textile artist Katie Simmons, pictured at right, had been looking for a space of her own when she saw the spot up for grabs in the Hildebrandt building. She said the building has “good energy� and she just fell in love with it. “I saw the need to have affordable workspace in Cleveland, especially,� Simmons said, noting that it’s difficult to be creative without a space to work. Simmons found some friends in mediums ranging from graphic design to painting to help her create the Hildebrandt Artist Collective. The shared workspace lends itself to collaborative projects, she said, which can help artists get out of their usual medium. The artists open the studio up to the community for events from time to time, where pieces might be on display or bands may be playing.
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Wake Robin Fermented Food
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GOING PLACES JOB CHANGES Finance FARMERS NATIONAL BANK: Mark R. Witmer to senior executive vice president, chief banking officer; James R. VanSickle to senior vice president, chief risk officer; Joseph A. Gerzina to senior vice president, chief lending officer, regional president.
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PARTNERS: Andy Malitz to general manager, Sequoia Wellness, and executive director, the NEW Center at NEOMED.
NORTHWEST BANCSHARES INC.: Kevin Nelson to Ohio region president.
Insurance
Financial Service
METLIFE PREMIER CLIENT GROUP OF OHO: Danielle Sydnor to financial services representative.
BDO USA LLP: Laurence Talley to director. SEGAL ROGERSCASEY: Richard D. Pietrzak to vice president.
WESTFIELD INSURANCE: Brian Roche to group procurement leader.
SKODA MINOTTI: Jeremy Long and Jon Shoop to principals.
Legal BENESCH: Richard D. Kalson to partner.
VANTAGE FINANCIAL GROUP: Deborah Baynes to human resource specialist.
Manufacturing
WESTERN RESERVE PARTNERS: Andrew R. Ripich and Thomas A. Wyza to analysts.
BUD INDUSTRIES INC.: Josiah Haas to president; Blair Haas to CEO.
Health Care
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Marketing HENNES COMMUNICATIONS: Thomas Fladung to vice president.
Nonprofit OHIOGUIDESTONE: Cindy Naegele to vice president of advancement.
Real Estate COLLIERS INTERNATIONAL CLEVELAND: Katie Watts to vice president, brokerage services. NORTHSTAR TITLE SERVICES: Chris Romano to escrow officer.
Telecommunications DCT TELECOM GROUP INC.: Debbie Monroe to account service representative; Noreen DeLuca to customer service representative; Brett
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BOARDS ALZHEIMER’S ASSOCIATION CLEVELAND AREA CHAPTER: Ronald C. Stansbury (Ulmer & Berne) to chairman; Robert L. Bazzarelli to secretary; Russell Grindon to treasurer. AMERICAN COUNCIL OF ENGINEERING COMPANIES OF OHIO: Lynn S. Miggins (KS Associates Inc.) to president. NATIONAL ASSOCIATION OF WOMEN BUSINESS OWNERS CLEVELAND CHAPTER: Megan Patton (O’Donnell & Associates) to president; Heidi Murphy to president-elect; Donna Metzger to vice
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president, finance; Elizabeth Radivoyevitch to immediate past president.
AWARDS PRESS CLUB OF CLEVELAND: Mark Dawidziak (The Plain Dealer), Bob Dyer (Akron Beacon Journal), Tom Hamilton (Voice of the Cleveland Indians); Ken Robinson (WTAM 1100) and Liz Ludlow Vaccariello (Reader’s Digest, formerly with Cleveland Magazine) named to the 2015 Journalism Hall of Fame. Betsy Kling (WKYC-TV3) received the Chuck Heaton Award. UNITED WAY OF SUMMIT: Debbie Plate (Akron General) received the Barbara Matthews Woman Philanthropist of the Year Award.
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MIDDLE MARKET
It takes a variety of bait to reel in the right talent By CHRISSY KADLECK clbfreelancer@crain.com
Recruiting and relocating an average of five of its 30plus annual hires from outside the area, Mentor-based Component Repair Technologies (CRT) struggles to find the expertly skilled, highly technical employees it needs here in Northeast Ohio to keep its growing aerospace component repair business on course. “As far as recruiting and getting the right talent in place, anybody who tells you that they don’t lose sleep over that is not concerned about the future of their business,” said John Gallagher, human resources manager for CRT, which has 400 employees — all in Mentor. CRT “cannot fill positions fast enough to keep up with business needs and growth,” he says, but it’s difficult to source skill sets such as engineering, machining, welding and non-destructive testing. As Gallagher suggested, CRT is not alone in facing this workforce nail-biter. The ability to attract and retain talent is collectively one of the top three challenges cited by Ohio middle market companies, according to the report “State of the Middle Market in Ohio.” The report, which is a product of the National Center for the Middle Market in collaboration with the Ohio
Chamber of Commerce, reveals that 87% of companies surveyed list it as a challenge, and that same percentage of firms have open positions. Of those companies, 33% have 11 or more open positions and 68% say it is somewhat/extremely difficult to find qualified candidates for open positions. Middle market companies — defined nationally as those with revenues between $10 million and $1 billion — in Ohio primarily are adding jobs in operations, marketing and sales, and manufacturing. In Northeast Ohio, the struggle is real and has prompted more and more companies into action, said Judith Crocker, executive director for workforce and talent development at Magnet. “In the last year-and-a-half, we have seen more companies in this region realize that they have to become part of the solution,” Crocker said. “They can’t just sit and complain and be critical; they need to actually become active in developing a solution.”
Getting to them early That paradigm shift has sparked an increase in workbased learning and internship programs. More local companies are recruiting college students and even high See TALENT, page 16
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school students and offering them paid work experiences. “So they, the company, start to grow their future worker,” Crocker said. Jack Schron, president of Jergens Inc., which manufactures clamping, fixturing and work-holding products as well as a line of precision electric screwdrivers, said his company has a very aggressive internship program. “We bring people in from what’s left of the vocational school programs, as well as community colleges and associate degree programs,” he said. “We also encourage our employees to bring their friends and neighbors in, and we’ll help train them and bring them up to speed.” In those training scenarios, entrylevel workers first work in shipping and then move into assembly. From there, it’s all about aptitude and drive, he said. T.J. McGowan, manager of employment services at WIRE-Net, helps manufacturing companies with recruiting and placement and currently has a list of about 30 current job openings he is trying to place. “There is a large uphill battle trying to find people in skilled trade positions,” he said. “We’ve had a surge over the last four or five years of companies looking for machinists, welders and industrial maintenance people. If a company is looking to hire someone with five years of experience, there is an even bigger gap.” McGowan and Crocker both urge their partner companies to consider improving the skills of their current workforces to fill higher-level slots. “We have been urging companies
FROM THE RECRUITING FILES ERIKA SORRELL After being laid off in early 2014, Erika Sorrell struggled for 11 months to find a good paying job that put her experience and her associate’s degree in electronics to work. She finally turned to a local temp agency to help her connect with a manufacturing company with open positions. Her first and only placement was at ASG, a division of Jergens, Inc., based in Cleveland. “It was months of putting in applications and going on interviews and it didn’t seem to be going anywhere,” says Sorrell, 41. “It’s really tough to find jobs direct hire, at least for me it was.” The Warrensville Heights resident started Jan. 12 in ASG’s X-PAQ manufacturing department as a bench technician. She’s responsible for the assembly of many of the ASG Precision Fastening products, specifically its SD2500 product line. She knew the company was looking to fill a permanent full-time position and immediately felt it was the right fit for her skills and her work ethic. “You get that vibe about a company,” she says. “The people were really nice and that’s really important. They take pride in doing quality work and that’s important to me as well. When I do my job, my name is on that job and I want to do my best at it.” Sorrell transitioned to a full-time permanent employee June 1, said Chris Consolati, engineering manager at ASG, which has had good success to train the workforce they already have,” McGowan said. “You already have people who have proven themselves a cultural fit, and people that are going to be reliable employees.” He points to one local company which was able to promote eight or nine people from production work into more technical positions rather than “searching for eight or
sourcing local talent working with a local temp agency. “Erika came in and demonstrated her abilities on the technical side very quickly,” Consolati said “Her eagerness to learn new things and great ability to work with existing team members has made her a valuable member of our group.”
JUSTIN ROSA After serving two tours in Iraq with the U.S. Marine Corps, Justin Rosa returned home to southern California to map out his next career adventure, which included an internship with the California State Assembly and a stint with the U.S. House of Representatives as a field representative supporting veterans. Rosa, who worked as a helicopter mechanic in the military, had remained close with fellow veterans, including Henry Distad, a Marine and current inspection lead at Component Repair Technologies Inc., a Mentor company specializing in aerospace component repairs. Distad encouraged Rosa, 33, to consider bringing his technological expertise from the military to CRT, which handles unique repairs on gas turbines. Distad had already recruited another veteran from Georgia to join the company. “My friends were doing well here. They liked the organizational atmosphere at CRT, and they convinced me that it would be worth looking into,” said
nine people off the street to fill that role.”
Building from within Crocker said her organization helps companies identify good candidates for upskilling and additional training. Companies can then promote those individuals and fill the less
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skilled, entry-level positions with newer workers. “That is going to be a lot faster than waiting for a kid who is in the ninth grade to get through four years of high school and two years of community college training to do that job,” she said. Gallagher said his company invests mightily in finding the best candidates and has hired an internal recruiter to devote 100% of their efforts to fill the 20-30 open positions at any given time. “We need talent that problemsolve, think quick on their feet and can be creative with solutions to fix these components,” he said, adding that CRT sits on advisory boards at places like Lakeland Community College, Auburn Career Center and Willoughby’s technical school and recruits heavily in Northeast Ohio. “Every minute a plane is grounded, that airline is losing money on
that plane, so quick-turn times are required to stay competitive in our industry.” To keep that competitive edge, CRT has had to search nationally for workers. The company has found success recruiting from places such as Pittsburgh Institute of Aeronautics, Michigan Institute of Aviation and Technology, Embry-Riddle Aeronautical University and Purdue. CRT also actively recruits veterans and those serving in the National Guard and Reserves. “The troop drawdown across all branches of the U.S. military over the past couple of years has allowed us to hire some amazing talent that would not have been available otherwise,” Gallagher said. “We were fortunate enough to help a lot of these folks transition from military to civilian life and assist their families with relocating to (Northeast Ohio.)”
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Rosa, who took his time investigating job possibilities both in California and Northeast Ohio. “It aligned with what I did in the service but it was not a dead match.” He ultimately decided to take a job at CRT and move to where he and his wife, Jane, would experience their first “winter.” He joined the company as a technical program manager on June 30, 2014. “Making a move from southern California to the Midwest is quite a staggering jump, and I think it took most of my family and friends by surprise that I was willing to that,” he said. Beyond salary and benefits, Rosa and his wife looked at the community, schools, crime statistics, housing and other quality-of-life issues. “There’s a lot to be said about quiet, quaint places, family-owned business and a place where you can raise a child in safety,” said Rosa, whose wife is expecting their first child in about a month. “This is a great place to start our family and we’re both very happy here. We purchased our own home in November — so very soon after moving here.” John Gallagher, human resources manager for CRT, said Rosa was “an attractive candidate for many positions within the company.” His job never lacks for excitement, Rosa said. “It is very high-paced and I have adapted well,” he said. “It took some time to get used to but it’s definitely a fun, challenging job.” — By Chrissy Kadleck
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Growing firm, ‘small company feel’ By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com
Fleet Response of Independence has been growing steadily in recent years, reaching 100 employees in 2013 and $100 million in annual revenue in 2014. But the company has maintained its small business culture as it’s grown. And, it’s a commitment that company officials believe has helped attract and retain workers to the middle market firm by empowering employees to make decisions, promoting from within and keeping leadership accessible to the rest of the team. “We try to keep that small company feel,” said vice president of sales and marketing Jeffrey G. Fender. Fleet Response is a custom fleet services company with programs including accident and insurance claims management. It can serve customer fleets of all kinds of vehicles, from small passenger sales cars to large flatbed trucks. The company was started in 1986 by Ron Mawaka Sr. as Rental Concepts Inc. The idea, Fender said, was to provide less expensive rental vehicles for self-insured companies after accidents. The company started doing some accident management in the ’90s, and that side of the business took off, Fender said. In 2003, the company combined its different businesses to become Fleet Response. Today, the company is owned by the Mawaka family, along with Myron Zadony and Claude Nolty. The company has historically targeted large, self-insured companies, but it continues to look for ways to grow by finding new spaces in the insurance world, like handling some outsourced services for insurance providers, Fender said.
Decision makers The nature of the business means all employees at Fleet Response are encouraged to make decisions on their own. Clients call when they’ve been in an accident, and Fleet Responses’ employees take care of the rest, from arranging for a tow and a rental car to negotiating with a body shop to following up on claims. One of the company’s mantras is never to leave a driver stranded, said Jodie Varner, director of business development. “That empowerment, I think, is the culture we create,” Varner said. Kari Hagan, a business development supervisor at Fleet Response, joined the company in November 2013 from the corporate office of the Dots retail stores. She said she was drawn to the company because of its people and its culture. The fact that it was still small, but growing, also offered “lots of opportunity to play a big role,” she said. Hagan said she was impressed by the accessibility of the company’s executives, none of whom employ administrative assistants. The company also supports work-life balance, which she thinks affects turnover, because people don’t get burned out. According to an email from Varner, more than 45% of Fleet Response employees have been with the company for more than five years. More
than 20% have been there for more than 10 years. The company invests in its employees, said CEO and president Scott Mawaka. It helps them maximize their strengths and find resources to improve upon their weaknesses. The stability of employment helps management feel good about the company, but it’s also good that customers know the continuity is there. Companies get the most out of employees who are “loyal, proud and dedicated,” Mawaka said. The company’s commitment to maintaining its culture is perhaps
most clear when it discusses change, big and small — from deciding to assign ID badges to installing new coffee pots. Varner said the latter decision actually raised issues because there was some concern that employees might interact less if the new coffee stations were installed in different places around the office, though the final decision was made to scatter them. The important thing is that the company be conscious of the impact even small decisions could make on its culture and communicate the hows and whys of changes to employees, Varner said.
That sense of transparency is part of the company from day one for employees and for clients. Fender said employees in clientcritical roles sit with each department in their first week and learn what everyone does. For prospective new clients, the company has the customer meet with the people they’ll be working with at Fleet Response. The idea is to make sure “everyone’s pulling in the right direction,” Fender said. In the past six months, Fleet Response took that idea even further. The company started a mentor program that could help with its goal of
maintaining its culture, as well as promoting from within. Fender said at least half of the people at Fleet Response started in either its call center or its claims department. Fender said the mentor program started with about a dozen employees at the manager level in all departments and five mentors at the director level. It gives people the chance to see what other areas of the business they might be interested in, as well as how “what they do affects the next process on down the line,” Fender said.
I’m not a matchmaker. I’m an
attorney and a
relationship builder.
I know what it takes to grow a business. It’s a melding of ambition and opportunity. A process of carefully matching potential with the resources to realize it. It’s about cultivating relationships. All while representing interests and managing expectations. I work with companies at all stages of growth. And represent funds and portfolio companies in their quest to invest. After years of leading our firm’s expansion, I’m acutely aware of the risks and rewards. So if you’re ready to grow, or ready to invest, I’m ready to do the deal. I’m IRA KAPLAN. I’m on your team.
MY BENESCH MY TEAM
> Executive Chairman; Corporate & Securities Practice Group; Private Equity Practice Group > Representing public and privately held growth companies; private equity, subordinated debt and venture funds; portfolio companies. > Legal Services Include: Mergers and Acquisitions; Public and Private Debt and Equity Financings; Business Counseling. > 216.363.4567 | ikaplan@beneschlaw.com
www.beneschlaw.com
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TAX TIPS
AUGUST 10 - 16, 2015
CARL GRASSI
Shareholders can be liable for unpaid taxes Most business owners operate their businesses as corporations or other separate business entities in large part to protect their personal assets from liabilities of the business. Many owners are surprised, therefore, to find that the IRS can hold business owners responsible for the tax liabilities of the business under certain circumstances. A recent tax court case found not only that shareholders were liable for tax debts of the business, but that several minority shareholders who had nothing to do with the financial fraud relating to the unpaid tax debts were liable for the taxes. Although this type of transferee liability is relatively rare, business owners must bear in mind that the IRS does have the authority to hold them responsible for unpaid corporation taxes under certain circumstances. In general, the IRS is able to hold shareholders responsible for corporate tax debts if there is a basis to do so under applicable state creditor law. If the state law relating to fraudulent transfers would allow a creditor to pursue a shareholder for monies transferred to the shareholder, then the IRS is also able to do so. In the recent tax court case, a corporation failed to file tax returns or pay taxes for a number of years, even though the corporation had been very profitable. During this time, the majority shareholders were essentially embezzling funds from the corporation, unbeknownst to several minority shareholders. The minority shareholders (who were also employees of the corporation) did, however, receive transfers of money from the corporation, including loans that were made in lieu of normal bonuses, and dividends that were paid by the corporation in other years based on their percentage of stock ownership. Upon audit, the IRS determined that the corporation owed over $120 million in taxes, penalties and interest.
Grassi is president of McDonald Hopkins LLC. Although the corporation entered into an agreement to pay this liability over time, it was determined that it would take longer than 150 years to complete the payment program. The IRS therefore turned to the minority shareholders to recover a portion of these taxes. The IRS asserted that all of the amounts transferred by the corporation to the shareholders (other than salaries) were fraudulent transfers and could therefore be recovered by the IRS. The tax court decided that the loans (which were effectively treated as advances of bonuses because no loan documentation was ever prepared) were actually compensation and could not be recovered. The dividends paid to the minority shareholders, however, were found to be fraudulent transfers under state law and therefore recoverable. The ability of the IRS to recover taxes from a transferee such as a shareholder in a corporation is dependent on state law. If the transfer is fraudulent under state law such that a creditor could recover transferred funds, the IRS can also recover. The issue under Florida law (the state involved in this case) was whether the corporation received a
reasonably equivalent benefit in exchange for the payments to the shareholders. If not, the transfers would be fraudulent if the corporation was insolvent at the time of the payments, or became insolvent as a result of the payments. With respect to the bonuses and loans, the tax court decided that these were payments for services rendered by the shareholders and that the corporation had therefore received reasonably equivalent value for the transfers. The dividends were another matter; under Florida law, dividends are not a transfer in exchange for reasonably equivalent value. The tax court then determined (based on experts’ reports) that the corporation was insolvent at the time of the dividends, which was no surprise given the unpaid tax liability. The dividend transfers were therefore fraudulent under Florida law and the IRS could recover. The shareholders also argued that the IRS had entered into a payment plan with the corporation, and therefore could not hold them responsible until it had exhausted its remedies against the corporation. However, Florida law provides that a creditor need not exhaust its remedies against the transferor before proceeding against the person who received the fraudulent transfer. Normally a corporation provides complete protection of shareholders against liabilities of the corporation. In situations such as the case discussed above, where the corporation is not adequately capitalized (and particularly where the undercapitalization is caused by fraud), the IRS as well as other creditors can pursue shareholders for funds transferred to them. It is therefore important to consider the corporation’s financial solvency before paying dividends to shareholders or large bonuses to shareholders who also are employees.
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ADVISER
CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
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KATE HUBBEN
Technology offers a solution for health care Even though telemedicine has been around since 2002, its time has come. The telemedicine business is booming and is projected to be a $2 billion industry by 2018. Now is the time for the owners of both small and large businesses to take a closer look and see if it is right for their employees. Telemedicine has the potential to impact myriad problems such as a shortage of primary care physicians, rising health care claim costs and absenteeism. Moreover, the early resistance from physicians who thought it would disrupt the relationship with patients and adversely affect care has certainly waned. Last month, the Cleveland Clinic unveiled its program called MyCare Online, a partnership with American Well, so patients can virtually visit a physician for $49. Most carriers and larger health systems also are buying in and have created their own “private label” telemedicine services by using the technology established by telemedicine vendors such as Teladoc, Doctors on Demand, MD Live and American Well. In 2009, the University of Texas Medical School predicted that the only obstacle to the growth of telemedicine would be the adoption by providers.
Six years later, physicians report that telemedicine allows them to dedicate more time to patients with complicated symptoms. The shortage of primary care physicians is a significant market force that may not affect business owners directly, but it is one that eventually will have an impact through increased absenteeism in the workplace. By 2025, experts predict the United States will be facing a shortage of 160,000 physicians. Studies show that telemedicine results in fewer follow-up appointments, which can mean fewer days out of the office. Virtual medicine originally was used exclusively by rural communities and remote populations that did not have access to local physicians. As access to primary care physicians becomes more of a challenge, health systems and carriers are seeing that this might offer a solution. Additionally, physicians are actually seeing that the introduction of email and a focused visit online can ultimately create a closer relationship with the patient. A telemedicine appointment can cost between $35 and $55 compared with a specialist visit that can range from a $50 to $80
co-pay, with an additional claim cost. An emergency room co-pay can be several hundred dollars, not to mention the investment of time and energy expended while sitting in the waiting room. Telemedicine giant Teladoc claims there is a 400% return on investment. The challenge to business owners is utilization. Employees barely read their benefit summaries, much less remember they have access to virtual medical care. The key to getting the return on investment for business owners is being strategic in plan design and communicating with your employees at open enrollment and throughout the year. If you want to pursue telemedicine as an option for your business, be mindful of a few factors that can impact its success or your satisfaction. First, the per-employee, permonth cost can vary significantly. For a self-funded group, it appears to be free. However, carriers will insert it into the administrative fees and not bifurcate the cost. For a fully insured group, the cost can be hidden in your premium. Work with your broker consultant to make this completely transparent.
Kate Hubben is client advocate, human capital practice for Willis of Ohio. Second, thoroughly understand how your carrier integrates telemedicine into your company’s plan design and cost structure. One of my clients has access to a telemedicine vendor through the insurance carrier, but until January 2016, the visit cost of $40 won’t count toward the maximum outof-pocket. It is essentially a standalone vendor that cannot “speak” to the carrier to track the cost. It is not ideal and challenging to commu-
nicate to employees. Some vendors do have the capability to “speak” to the carrier and it is worthwhile to ask this question and make sure it is ACA compliant. And finally, consider if you want to incent your employees to use telemedicine through plan design. Work with your broker consultant to determine if you could offer a reduced co-pay or no co-pay at all to contrast with an office visit. The claim cost will be less than an office visit and more employees will use it. There are still outstanding issues that need to be resolved in the world of telemedicine. Not every state allows for video conferencing or for physicians to prescribe virtually, and the reimbursements through Medicaid and Medicare still are undefined. And to add more complications, while physicians and health systems move toward the Accountable Care Organization model in which reimbursements and fees are paid based on outcomes, the telemedicine outcomes can be harder to measure. But despite the changing landscape of health care, one thing for sure is that virtual medicine is here to stay and is another “arrow in the quiver” for employers.
HOW CAN SOMEONE HAVE ALL YOUR ANSWERS BEFORE THEY ASK ANY QUESTIONS? Clairvoyance isn’t one of our skills. But curiosity is. It’s what leads us to listen to you. To think about what you’re telling us. And then ask thoughtful questions. It’s the only way to crack the puzzle. Because the answers don’t just jump out. You have to dig. Subordinated debentures, equity infusions and other solutions are all well and good, but when is the right time to use them? And why? Shouldn’t your bank want to find out? We do. Learn more at 53.com/Commercial We’re Fifth Third Bank.
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CRAIN’S CLEVELAND BUSINESS
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three to six months. Most today are selling in less than three.
Healthy appetite The mortgage business is rebounding as the economy improves, and the evidence is in bank balance sheets. Appetites for residential loans are hitting their highest levels since the housing bubble popped years ago. With the federal funds rate pressed so close to zero for so long, a focus on the residential lending business is one way banks are successfully expanding margins today. We’re in a “sweet spot” right now, said Mike Fratantoni, chief economist for the Mortgage Bankers Association trade group association in Washington, D.C. And the strengthening economy presents a positive outlook for mortgage banking. In July, the association hiked its forecast for purchase originations by almost 10% from June. The group projects $801 billion in home originations this year and $885 billion in 2016 — a significant increase from the $638 billion logged in 2014. The
group also predicts that mortgage rates will hit 4.5% by the end of the year, but the stronger job market should offset higher mortgage rates. Of course, the housing market hasn’t returned all the way just yet. For example, according to RealtyTrac, a real estate data company, about 13% of homes nationwide are still mortgaged for more than they’re worth. In Cuyahoga County, that figure is nearly 33%. Yet, new home purchase volumes nationwide are up by about 20% at this point, Fratantoni said. “Compared to a weak 2014, 2015 is looking strong,” he said. “And the growth is much stronger than any time we’ve seen since post-crisis.” Notably, a July report by the Federal Reserve Board reinforces there’s been “moderate to large” groups of banks reporting strong demand across most categories of home-purchase loans. Bankers say new-home sales are definitely leading the business overall as opposed to refinances that surged prior to the downturn. The balance of mortgages to refinancings is closer to 50/50 now, Fratantoni said.
Witmer said his mortgage business split has flipped completely since 2008-09 when 75% of the book was based in refinancings. Those make up just 25% of the business today. The bulk is in new home sales.
A positive outlook The vibrancy of the local market seems to generally mirror the national pulse, and Northeast Ohio’s largest banks are getting their share of the boom, too. Huntington Bank reported growth in its mortgage business of 70%, which in turn spurred a 13% hike in non-interest income. “We expected the purchase market to be strong, but it’s a bit stronger and broader than we expected it to be,” said Jay Plum, senior vice president and director of consumer lending for Huntington. Despite an expected hike in the federal funds rate this fall, Plum said the strong market should continue for some time because it’s not like rates are going to go jump 10% all at once. “I would say that we’re expecting these kinds of trends for a little
while yet,” Plum said. “This low-interest rate environment will be a great opportunity for people to consider finding a house.” PNC Bank’s mortgage business is growing at a pace of 20% year-overyear. The market is “definitely coming back,” said Pete Boomer, mortgage origination executive for PNC Bank. “We’re in the middle of the best
“The bank has planned this change for more than a year. Done right, providing mortgages can help Key acquire new customers and retain existing customers for our consumer bank segment.” – Mark Danahy president, KeyBank Mortgage activity we’ve seen since the downturn,” Boomer said. “The economy continues to improve and we’re going to see more people entering the home buying arena, and we’re positioning ourselves to have contin-
ued growth.” Capitalizing on the appetite, some banks are launching new services specifically to draw customers. PNC, for example, has launched a Home Insight Tracker to enhance the mortgage application process. Next year will bring the start of an additional education tool. Much of it is designed to target new, millennial homeowners. Meanwhile, KeyBank is getting back into first mortgages in 2016 after cutting the business about seven years ago. “Of course, being able to help customers buy homes will generate revenue for Key,” said Mark Danahy, president of KeyBank Mortgage appointed to the post this spring. “But for us, it’s not simply a question of revenue, and it’s definitely not simply a question of capitalizing on increased home sales,” he said. “The bank has planned this change for more than a year. Done right, providing mortgages can help Key acquire new customers and retain existing customers for our consumer bank segment.”
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first time and they were saying what a nice city Cleveland is.” A few minutes later, Democratic National Committee chair Debbie Wasserman Schultz told the city to get ready — with a partisan twist. “Buckle up, Cleveland. You’re in for an interesting ride, from the debate tonight to the GOP convention in 11 months,” she said. “The good people of the Forest City are going to get an up-close and personal look at the Republican Party of today, and I’m confident that when they get a close look they won’t like what they see.” Cuyahoga County Republican Party chairman Rob Frost, relayed a slightly different message. In the bowels of the Q after the debate, not far from where the candidates’ surrogates were putting their spin on the two-hour gabfest, he said his party’s leaders have been complimenting him and the city on their stay here. “I think this week has been great for the city and I think the city has
been great for the party,” Frost said. “I’ve spoken to our national leaders, to our state leaders, and they are very grateful to the city of Cleveland for the job that they’ve done.”
Eating it up Earlier that day, restaurateurs in the crowded East Fourth Street district, talked about the bump they were seeing in weekday business. “It’s been great,” said Jude Feyedelem, director of fine dining for Michael Symon Restaurants, who was overseeing Lola Bistro last Thursday night. “We’ve been fortunate that Wednesday and Thursday nights have been pretty good, but we’ve certainly seen an uptick this week.” Brad Friedlander, one of three partners of Praxis Restaurant Group, said the Republican Party had pretty much commandeered his restaurant on Prospect Avenue — Red, The Steakhouse — to use as party central on Wednesday and
Thursday. They particularly laid claim to the restaurant’s rooftop patio overlooking the Q. “Some of the candidates were here for dinner last night,” he said Thursday afternoon. Friedlander, who worked for his father at Alvie’s delicatessen on Public Square when the city was at its depths, is enjoying the recent upswing. “To see what’s happening now and to be a part of it is unbelievable,” he said.
A walk down memory lane Convention veteran Jerse wandered downtown for much of Thursday taking in the sights — the crews setting up the stage on East Fourth Street for broadcasts by the MSNBC cable news network, the crowds of Republicans whooping it on Red’s rooftop patio, and even the protestors gathered outside The Q. It reminded him of some of the cities that successfully hosted the four Democratic conventions he at-
tended. “For a political junkie, well, (those cities) were paradise,” he said. “You see everyone you ever wanted to see and it’s one big party and everybody is in a mood to talk.” In Atlanta for the 1988 Democratic convention, Jerse walked the streets like he was doing in Cleveland last week. “And here comes (current secretary of state, then senator from Massachusetts) John Kerry from the other direction and we just kind of looked at each other and laughed,” he said. The one glitch he remembers occurred in Charlotte, N.C., during the 2012 convention. “In Charlotte, we went out to dinner the night President Clinton was supposed to speak,” Jerse recalled. “Even though we had credentials we couldn’t get back in the hall because they let so many people in. But it’s the good feelings he came away from Charlotte and the other cities.
“It’s like street theater,” he said. “As you see here on East Fourth Street, you see MSNBC setting up, and they’ll be interviewing celebrities and politicians, and huge crowds of young people interested in politics will be out there.”
Talking up Cleveland There was even a radio talk show host, a native Clevelander, who already was planning for her return trip when she comes back for the Republican convention. “I’m going to have a big party during the convention, you should come,” Ellen Ratner, Washington bureau chief for Talk Radio News Service, told a group for 40-plus reporters waiting for the Democratic Party’s news conference to get underway. “I’m going to talk to my cousin Albert (Ratner, co-chairman emeritus of Forest City Enterprises Inc.) about holding it at Terminal Tower (a building owned by Forest City),” she said.
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THE WEEK JULY 27 - AUGUST 2 The big story: Cleveland was the focus of the political world as the 10 leading candidates for the Republican Party’s nomination faced off at Quicken Loans Arena on Thursday, Aug. 6, for the first debate of the election season. Frontrunner Donald Trump was aggressive and boastful, while analysts gave high marks to the performance of Ohio Gov. John Kasich. The city itself drew praise and was the home base for a couple days of many cable TV news shows. See related story, Page One. End of the line: The lawsuit that caused TCP’s stock price to crash is over. The company lawyer who filed it will receive $3.9 million, and she resigned from the Aurora-based lighting products company, according to a TCP filing with the U.S. Securities and Exchange Commission. In February, TCP general counsel Laura Hauser sued the company and Ellis Yan, who has since stepped down as CEO. Yan received $2.2 million in severance benefits. The lawsuit claimed that Yan “physically assaulted” Hauser, threatened her and pressured managers to release mislabeled products. A new era:
Northeast Ohio stands to lose a publicly traded company and a corporate connection to one of its home-grown property empires as shareholders of Associated Estates Realty Corp. approved its purchase by investment funds associated with Toronto-based Brookfield Asset Management Corp. Associated Estates reported that 82% of its shareholders approved the deal. Brookfield has a more than 100-year history of owning and operating assets with a focus on property, renewable energy, infrastructure and private equity.
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Belting one out:
North Canton-based Timken Co. reached an agreement with private equity firm American Industrial Partners to acquire the Springfield, Mo.-based Carlstar Belts Business for $220 million. Timken CEO Richard G. Kyle said the deal adds a new category of products to the bearings company. Carlstar makes belts for the industrial, commercial and consumer markets in brands including Carlisle and Ultimax.
Come together: Five of Ohio’s independent physician groups formed a statewide collaborative designed to allow them to better compete with the state’s health care giants like the Cleveland Clinic and Cincinnati-based Mercy Health. The organization, dubbed the Ohio Independent Collaborative, brings together more than 400 primary care providers and specialists spanning the northern part of the state from Canton, Cleveland, Sandusky and markets in between.
In the money: Case Western Reserve University, again, shattered its yearly fundraising record. For fiscal year 2015, which ended June 30, the university reported bringing in $166.9 million — about $15.3 million more than 2014’s recordbreaking haul. Of note, the university’s School of Medicine, which is raising funds for its new medical education building, brought in $62.9 million — over $10 million more than last year’s all-time high.
23
REPORTER’S NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS
This group knows how to engage an audience Engage! Cleveland — a local young professionals organization — is growing up. The organization, which launched in 2011, is moving out of its incubator space within the Greater Cleveland Partnership’s offices on Huron Road in downtown Cleveland and into its own digs at 8200 Sweet Valley Drive, just south of Interstate 480. The organization has filed an application to become a tax-exempt 501(c)(3) nonprofit entity. In quantifying its growth, Engage! Cleveland said it now reaches more than 20,000 young professionals every year through social media and events. Its hallmark program — Cleveland Young Professionals Week — included 39 events over eight days during the first week of June. During the week, the organization worked with KeyBank as its title sponsor and more than 125 other sponsors and partners. The group sold more than 2,250 tickets to the events. “It’s been very rewarding to provide Engage! Cleveland and its people with a variety of resources that helped them advance their mission to energize Greater Cleveland’s YP community,” GCP president and CEO Joe Roman said in a statement. “We’ve proudly watched them mature as an organization and now wish them even greater success as they rev up their agenda in the coming months and years.” Engage! Cleveland also named a slate of new board officers effective Oct. 1. They are: chair Ira Kaplan (of Benesch); vice chair Lauren Rudman (of ERICO); treasurer Chad
MILESTONE
Kunkle (of Cleveland Clinic); and secretary SueAnn Naso (of Staffing Solutions Enterprises). — Timothy Magaw
Minecraft players are game for anything Have kids who are good at (or just obsessed with) Minecraft? An outfit called Super League Gaming is hitting town this week to give them a chance to strut their stuff in a very public setting. Super League Gaming, which bills itself as “the world’s first in-theater gaming league,” on Monday, Aug. 10, is bringing one of its events to the Regal Cinemas at Crocker Park in Westlake. The Crocker Park event is part of a 25-city tour running through Aug. 26 to introduce Super League Gaming’s concept. Participants play Minecraft and watch the game play out on the big screen of the movie theater. Each event is comprised of a 100minute session that includes live team gameplay and individual battles, while players work to climb the leaderboard. Gamers play in the traditional first-person view on their laptops while watching a customized third-person aerial ‘world view’ with all players on the theater screen. “Our own children were the inspiration for Super League,” said Super League Gaming co-founder John Miller in a news release. “We saw how much our kids loved to play and we wanted to bring a more positive element to the whole thing. Making games interactive, team-based, and bringing gamers into a movie theater to play face-to-face really changes the experience for everyone.” Gameplay is open to players ages 7 to 14.
On the ball
COMPANY: Giovanni’s Meats and Deli, Lyndhurst PRODUCT: Its sale after 47 years in business Giovanni’s, at 5716 Mayfield Road, has been acquired by a couple who say they plan to “add a modern twist to the traditional Italian atmosphere.” The company was founded in 1968 by a traditional Italian butcher, and it remained in the Castrataro family for multiple generations. John Castrataro sold the business to the husband-and-wife team of Matthew and Priscilla Palesh in late June. Matthew Palesh has a banking background and a passion for food, and Priscilla Palesh has a master’s degree and a background in business and financial services. The Paleshes said they worked closely with Castrataro throughout the transition process, “getting to know the regulars and paying attention to the details that have made the deli a success for nearly 50 years,” according to a news release about the transition. The new owners said they have overhauled the deli’s older systems, making the checkout process faster and smoother, and giving more services and better choices to their customers. They have also doubled the staff, and are preparing for additional improvements as the months continue. To celebrate the new ownership and new direction, Giovanni’s Meats and Deli will host a launch party from noon to 2 p.m. on Saturday, Aug. 29, featuring free samples, door prizes, music and 10% off all purchases.
The cost to participate is $20; parents get in free. Gaming starts at 4 p.m., though players are asked to arrive by 3:30 p.m. Information is available at SuperLeague.com. — Scott Suttell
Case Western is open to new ideas in teaching Case Western Reserve University is offering a new course — a free one, no less — on how coaching with compassion can help inspire and motivate people to be effective leaders. It’s the latest massive open online course, or MOOC, from the university’s Weatherhead School of Management. The course, which will be made available through Coursera, starts Oct. 5 and will be led by Case faculty members Ellen Van Oosten, Melvin Smith and Richard Boyatzis. The five-week course builds off concepts introduced in Boyatzis’ other MOOC on inspiring leadership through emotional intelligence. The course is geared toward advanced students and professionals, including executives. Enrollment already has exceeded 11,300 and is expected to grow even further by its start. Successful completion of the course will be based on quizzes, the completion of what Case refers to as “personal learning assignments” and the assessment of the coaching essay. “You will learn how to truly help others, and the techniques you learn will improve your relationships in all areas of your life,” said Smith, a professor of organizational behavior and faculty director of executive education at Weatherhead. — Timothy Magaw
BEST OF BLOGS Excerpts from recent blog entries on CrainsCleveland.com.
Interest crests: The $225 million Pinecrest mixed-use real estate project in Orange Village gained a $17 million initial investment from an affiliate of Miami Beach-based Lennar Corp. and started clearing the site for the development. Randy Ruttenberg, founder and principal of lead developer Fairmount Properties, said, “It’s extremely gratifying to see the potential we knew in Pinecrest affirmed by an accomplished national investor.” The $17 million is from Rialto Capital, a real estate investment unit of the Miami-based homebuilder.
CRAIN’S CLEVELAND BUSINESS
A fledgling professional football league that hopes to kick off in spring 2016 is targeting Akron as the home of a franchise. Major League Football Inc. said it’s “in discussions” to base a franchise at the 30,000-seat InfoCision Stadium at the University of Akron. The Florida-based company said it’s also engaging in a “series of community-centric outreach programs to help build a fan base, support local businesses and develop football talent in the surrounding area.” Wes Chandler, president of Major League Football, said Akron is the sixth city in which the new league has begun conversations to establish a franchise. Major League Football is reviewing venues in the six cities and is evaluating fan and local business support to determine which cities are the best fit for a team. It said it “plans to make additional announcements over the next few months expanding that number.” Chandler, a former NFL wide receiver, was a coach for the Cleveland Browns in 2007 and 2008. The league’s CEO is former Chicago Bears general manager Jerry Vainisi.
Second time around In what The Wall Street Journal said may be “a sign of intensifying competition for assets,” several private equity firms — including The Riverside Co. Cleveland — are dipping back into old investments. From the story: Private equity firms, armed with $1.2 trillion in uncalled capital, need to fend off peers and strategic buyers in the fierce pursuit of assets. Standard & Poor’s Capital IQ Leveraged Commentary and Data said that as of the first half of the year, the average pri-
vate equity purchase price multiple crept up to 10.1 times the target company’s trailing earnings before interest, taxes, depreciation and amortization, topping a historical high of 9.7 times in 2007. As a result, The Journal said, “some firms looking for an edge in deals are taking a trip down memory lane.” For instance, Riverside in May bought for a second time Health & Safety Institute, a provider of training materials and cardiopulmonary resuscitation courses. It previously owned the business between 2006 and 2012. Riverside partner Karen Pajarillo told The Journal that her firm “didn’t have as much of a learning curve as others who are new to the business,” though Health & Safety Institute’s mix of revenue has changed over the years to include more online learning material.
The need for speed Cleveland Hopkins International Airport is a star performer in at least one respect: cell phone data speed. CNNMoney.com noted that independent network analysis company RootMetrics recently put to the test cell phone data speeds at the nation’s 50 busiest airports. The analysis measured how the four major carriers perform in upload speeds, download speeds and the reliability of the connection. The best smart phone data speeds were found in Atlanta, at the country’s busiest airport. The fastest carrier there was AT&T, but Verizon was the only network that stayed connected 100% of the time. No. 2 was Hopkins, where T-Mobile offered the fastest service. Verizon on average left T-Mobile and AT&T far behind, as it was the best carrier in 29 of the top 50 airports. Sprint performed the worst of the four major carriers. It was not the best cell phone network at any of the 50 busiest airports.
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