VOL. 39, NO. 5
JANUARY 29 - FEBRUARY 4, 2018
Source Lunch
Akron ABIA shifts gears, seeks new revenue sources. Page 16
Girl Scouts of North East Ohio CEO Jane Christyson Page 19
CLEVELAND BUSINESS
The List Largest retirement communities Page 15 FINANCE
Banks feeling the draw to NEO
GOVERNMENT
Port keeps pulling its weight
By JEREMY NOBILE jnobile@crain.com @JeremyNobile
Jim Geuther, a Northeast Ohio banking veteran who has worked the market for some of the region’s biggest players — like FirstMerit Bank, KeyBank and JPMorgan Chase Bank — said that at first thought, the increasing push by companies into this region the past few years was a bit unexpected.
Inside A look at the active M&A market for the regional banking sector in the last five years. Page 17
looking the docks, he said he remains optimistic about the Port Authority’s signature Cleveland-Europe Express (CEE). It is the only regularly scheduled cargo service between the Great Lakes and Europe, and it carries containers, the boxes that move from ships to rail cars to truck beds carrying consumer goods such as televisions, clothing and appliances. The Port Authority struck a threeyear deal for regular service with the Spliethoff Group, an Amsterdam-based shipper, that began in March 2014 with once-a-month service between Antwerp, Belgium, and Cleveland that could carry containers between the two cities. That’s now up to two to four calls a month to the Port of Cleveland.
Cleveland is a cheap place to do business and is surrounded by resources. The market has been growing slowly and steadily, and the mix of companies has been diversifying. So other banks wanting a piece of the market should makes sense, right? Yet the trend of banks breaking into this market has been steady, and on the surface, surprising to Geuther. “I scratched my head at first seeing the number of banks coming in,” he said. “What were they seeing that I wasn’t? I wasn’t sure the middle market here was exploding exactly. But when you look at the market factors, you can see this market really is expanding. It’s not just manufacturing anymore. And it’s really not your grandfather’s rust belt any longer.” That changing perception of the market seems to be one of many factors increasingly drawing banks to an already crowded banking sector as growth-hungry firms both in and outside Ohio see opportunity to gain share here that they may have not considered just a few years ago. And that trend is very likely to continue, if not speed up.
SEE PORT, PAGE 6
SEE BANKS, PAGE 17
There was a 19% increase in tons of cargo that moved across Cleveland-Cuyahoga County Port Authority docks in 2017. (Contributed photo)
After robust 2017, Port Authority anxiously awaits U.S. decision on tariffs By JAY MILLER jmiller@crain.com @millerjh
After strong cargo growth in 2017, the Cleveland-Cuyahoga County Port Authority’s high hopes for 2018 could sink if the Trump administration decides to put a tariff on imported steel. “There certainly are some scenarios that could be bad for us. There is just no way around it,” said Will Friedman, the port’s president and CEO. “We’re still pretty dependent on steel.” U.S. steelmakers have complained for years about unfair foreign competition, but only now is the federal government stepping up protection-
ist trade policies. On Jan. 11, the U.S. Commerce Department sent to the White House a range of options to counter what domestic steel makers believe are foreign suppliers selling of steel and aluminum in the United States below cost. The options President Donald Trump is considering include steep tariffs or quotas. He has 90 days to decide whether to impose sanctions. A significant majority of the ships dropping cargo at the lakefront docks are carrying steel, usually low-end, commodity steel in coils or plates. “It goes into automotive, battery casings, appliances, lots of things (manufactured) around here,” Friedman said. “We’re holding our breath on that.” In 2017, 464,000 tons of cargo
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moved across Port of Cleveland docks. That was a 19% increase from 2016, when ships brought in 375,840 tons of cargo. Of the 2017 tonnage, 90% was shipments of Friedman steel. Friedman said he is hoping that if tariffs are imposed, they only will affect steel imported from China, the leading steel exporter, and not from the European steel plants that ship into the Port of Cleveland. While Friedman is worried about the fate of steel cargos, in an interview in the public agency’s headquarters building on West Ninth Street over-
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TECH MATTERS Sparking innovation through diversity hiring K ate Volzer knew she wanted to run someone else’s company or preside over her own startup after graduating from the University of Chicago. An entrepreneurship expo in Cleveland galvanized her vision, and the boomerang returned to her native Northeast Ohio in 2016 to co-found Wisr, which works with colleges and universities to create a career and advising network for students. The business garnered $425,000 from JumpStart’s Focus Fund, which invests seed capital in tech companies led by female or minority entrepreneurs, a group that only receives 3% of all venture capital dollars in the U.S. “With that kind of investment, JumpStart and the state (of Ohio) are sending a message to entrepreneurs like me that Northeast Ohio is a place to start your business in a meaningful way,” Volzer said. JumpStart’s Focus Fund is just one touchpoint amid local efforts to promote diversity and inclusion in tech, which flows through every aspect of business. Diversity is the fulcrum of intelligence, business growth and innovation, diversity in employment advocates say. “You need to have every customer in mind when you’re creating and delivering a tech product,” said Mel McGee, CEO and founder of We Can Code IT, a coding bootcamp based in Cleveland and Columbus. “Employing people who have different perspectives, different cultures and different backgrounds enables you to see a product from 360 degrees.” Research suggests that a workforce with inherent and acquired diversity also correlates to increased profitability. Companies in the top quartile for gender diversity are 15% more likely to financially outperform their national industry medians, while ethnically diverse companies are 35% more likely to outperform the industry norms, according to a 2015 report from McKinsey & Co., a global management consulting firm. Nationwide, a disproportionate number of whites serve in executive roles in the tech industry (83.3%), compared to AfricanAmericans (2% to 5.3%), Hispanics (3.1% to 5.3%) and Asian-Americans (10.6% to 19.5%), according to a 2014 employment data analysis by the U.S. Equal Employment Opportunity
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We Can Code IT is a coding bootcamp based in Cleveland and Columbus that focuses on diversity and inclusion in tech.
Commission. About 80% of executives in the high-tech industry are men, while 20% are women. The high-tech sector employs individuals in the science, technology, engineering and mathematics Volzer occupations as well as in electronics and computers, and is a significant source of U.S. economic growth. In Ohio, We Can Code IT is aiming to balance the workforce composition by training women, minorities and those who are economically disadvantaged how to code. The coding bootcamp matches graduates with employers who have a need for programmers. We Can Code IT works with about 180 employer partners that range from large public companies to startups. To that extent, the National Black MBA Association’s local chapter is amplifying its membership exposure to professional development,
career and networking opportunities within Northeast Ohio, said Shaquira Johnson, president of the Cleveland Northeast Ohio chapter. The nonprofit primarily represents minority business professionJohnson als who have an MBA; graduate or undergraduate degree students enrolled in those degree programs; entrepreneurs; and high school students involved in its Leaders of Tomorrow program. The NBMBAA Cleveland Chapter and targeted corporate partners — ranging from large local banks, real estate firms, health care institutions and technology companies like OEC — allotted over $10,000 in a 2017 scholarship fund to help offset college costs and incentivize more career diversity, Johnson said. “The recent partnership with OEC is a perfect alignment that helps forge deeper
MORE ABOUT JUMPSTART’S FOCUS FUND
T
he Focus Fund invests in high-potential tech companies led by women and minority entrepreneurs located within Ohio, or who are willing to relocate to the state. Investments typically begin at $250,000, but funding levels vary. Investments can climb to $600,000 over time. “We’ve also made additional validation investments in four growing female/ minority-led companies to help them fund projects to validate their business model and prepare for larger investments (from JumpStart or others) down the line,” according to Nick Worner, content manager for JumpStart, who added that he expects investments to accelerate over the next year and a half. So far, the Focus Fund has invested in five companies, with a sixth to be announced soon. “The Focus Fund is based on the idea that any industry dominated by one race or one gender — including the tech industry — will never be as strong or innovative as it should be,” said JumpStart CEO Ray Leach. “The only way the U.S. will lead the 21st century global economy is to start thinking more inclusively. That’s why JumpStart has committed to investing in female and minority tech entrepreneurs, who are highly qualified yet vastly underrepresented in the industry right now.” Eligible companies can apply for funding by visiting www.jumpstartinc. org/apply and filling out a centralized application.
connections for our members with the tech community,” Johnson said. The organization also plans to continue its Last Monday of the Month series in 2018, which features educational, leadership and networking opportunities for its members and the community. “Our corporate and community partners view us as a great resource for diverse talent,” Johnson said. “Our goals are to deepen partnerships with local colleges and universities to help set students up for success in their future careers, allowing us to promote intellectual and economic growth in the community.”
JAN. 30-FEB. 1
FEB. 8
FEB. 24
DATA ANALYTICS WORKSHOP: Cleveland State University’s Washkewicz College of Engineering’s Fenn Hall, 1960 E. 24th St., Cleveland. This DigitalC workshop is geared toward beginners and intermediates who want to improve skills in data analysis. Info: digitalc.org/events/
STARTUP STORIES: 5:30 p.m. to 8:30 p.m., Collision Bend Brewing Co., 1250 Old River Road, Cleveland. Hear tech insiders’ perspectives on lessons learned from building a tech company. Info: jumpstartinc.org/events/ startup-stories-things-wish-id-known/
NE OHIO DIVERSITY IN EDUCATION RECRUITMENT EVENT: Key Tower, 127 Public Square, Cleveland. District, independent and charter schools are looking to hire teachers who reflect the diverse student populations they serve. Visit the website for the final full-day schedule and details. Info: neodiversityevent.org.
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Young Align quickly moving into action “You need to know exactly what you’re looking for and move quickly and aggressively to have that opportunity. That’s how we’ve been able to do five deals in 15 months. You have to be quick to say yes and go all in to win.”
By JEREMY NOBILE jnobile@crain.com @JeremyNobile
In a crowded private equity field, one of Cleveland’s younger firms is standing out as one of the market’s most active new funds. A willingness to move fast when a good deal is spotted is not just crucial in today’s competitive environment, said Align Capital Partners managing partner Chris Jones, but it’s a big part of what’s spurring their deal activity. But that velocity doesn’t mean they’re being any less diligent in vetting an investment. “You need to have a clearly articulated investment strategy and angle to add value to a business post-deal close,” Jones said. “You need to know exactly what you’re looking for and move quickly and aggressively to have that opportunity. That’s how we’ve been able to do five deals in 15 months. You have to be quick to say yes and go all in to win.” Align formed in spring 2016 with a trio of principals who splintered off from The Riverside Co., a global PE firm with co-headquarters in Cleveland. The following September, the lower middle market buyout firm closed its first fund at $325 million, 30% higher than its $250 million target. A strong fundraising environment — which is contributing to a buildup of dry powder in the PE world — certainly helped, as did the network and
— Align Capital Partners managing partner Chris Jones
track record of Jones’ fellow founding members and managing partners Steve Dyke and Rob Langley. Since closing its first fund, Align has completed six deals, comprising five platform investments and one add-on. And the pipeline today is looking pretty full. According to PitchBook, which tracks info on M&A deals, private equity and venture capital, Align had the fifth-largest fund to close in 2016 across the PE sector. Those with larger funds in their class were CenterGate Capital (a $350 million fund in Austin, Texas), Gemspring Capital (a $350 million fund in Westport, Conn.), CenterOak Partners (a $420 million fund in Dallas) and Gamut Capital Management (a $1 billion fund in New York City). All of those have been active, but they haven’t achieved a pace for deals like Align has. Align focuses on niche businesses in the lower middle market, particularly specialty manufacturing, distri-
bution and business services companies. According to PitchBook, lower middle market deals reflect transactions with prices between $25 million and $100 million. Coincidentally, PitchBook’s 3Q 2017 US PE Middle Market report found that while 2016 set a record in terms of lower middle market PE activity, the $15.1 billion invested through 531 deals in those companies through the third quarter of 2017 was putting the industry on track for its slowest year since 2011 in that particular bucket. The report cites rising price multiples — the media valuation multiple in U.S. M&A deals reached 10.3x in 2017, according to PitchBook, and Jones declined to share what his average price multiples have looked like — as one factor for that. It also postulates that many of the best lower middle market companies have been rolled up as add-ons to larger platforms, especially by big PE
firms working downstream in search of smaller, valuable businesses. Meanwhile, other buyout funds have continued to splinter off from larger ones, with most saying they are looking at deals in the lower middle market as competition for M&A stays hot. In the Northeast Ohio region alone, Watervale Equity Partners, MavenHill Capital and The Inkwell Group all formed in 2017 with an investment approach along those lines. Working with smaller companies is vastly different from doing the same with smaller ones, Jones said, adding “it’s not as easy as everyone thinks.” That may be one reason why other firms comparable to Align haven’t closed a similar frequency of deals. Jones doesn’t see the pool of targets getting much shallower, though, despite the increasing number of feelers digging through the M&A market. Those rising prices are bringing
more businesses into the market that may have been reluctant to sell in the past. Jones said Align prides itself on providing resources to companies post-deal close. While a promise to support a business through an investment is a best practice in the M&A world, Jones said it’s something he emphasizes when approaching deals with target companies. And he believes that’s been key in securing partnerships. One of their most recent deals involved the acquisition of Lewellyn Technology in December from a fellow Cleveland private equity firm, Evolution Capital Partners. It’s not terribly common to see firms in the same market work on a deal like that together directly through an investment bank. The Align team has grown fast, too, in support of their investment thesis. The firm now numbers a dozen people, and Jones said he’s already in the process of hiring two more. The team will continue to expand as needed as Align continues to aggressively seek out deals. The only thing that might evolve a bit this year is the deal mix. “Each company has an acquisition strategy,” he said. “I don’t expect us to have four more platforms, but we may close several add-ons. We will continue to be an acquirer. It’ll just be a little different mix of platforms and add-ons now that we’re managing a large portfolio.”
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siders say Hudson has been actively seeking a buyer or big investor to make the project a go. Hudson last month secured an extension until July 1 to demonstrate progress on the project, according to Penny Martin, a public information officer for the Ohio Development Services Agency. The agency jointly operates the state tax credit program with a unit of Ohio History Connection in Columbus. It’s not the first extension the project has received, as the agency’s rules for the program indicate its developer may rescind the credits if the developer does not document reviewable progress within 18 months of the award. Extensions are issued if the developer demonstrates that financing and construction are imminent, according to the state rules. “We want to work with the project team and give them the opportunity to complete the project,” Martin wrote in an email. Ryan Sommers, managing director of financial services at Project Management Consultants of Cleveland, said the state extension, which the city of Cleveland had backed, is “extremely helpful” in putting together a project of Union Trust’s scale. Sommers is working as a financial adviser for the Union Trust project. “If the state had taken back the credit, it would have been able to award the credit to other projects in future rounds,” Sommers said. “Developers of Union Trust would be in the position of having to reapply for state tax credits.” Moreover, fewer funds would be available for the taking. State legislation in 2016 eliminated the catalytic program.
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The languishing $200 million remake of the Union Trust Building, 925 Euclid Ave., to mixed use has helped spawn a big move by the Western Reserve Area Agency on Aging. In what would have ranked as one of last year’s largest downtown office deals, the nonprofit late last year agreed to lease 57,000 square feet of office space on three levels on the East 13th Street side of K&D Group’s Reserve Square apartment-office complex, 1701 E. 12th St. About 300 employees will move to Reserve Square by late fall. They will occupy space on three floors, according to Timm Judson, a principal of Cleveland-based High Rock Property Advisors Ltd., a real estate investment development and advisory firm that represented the state-designated aging agency. Judson returned calls and emails to Doug Beach, the agency’s executive director, who declined to be interviewed. Judson said the agency landed at Reserve Square after considering multiple options for its headquarters, including buying and renovating a building for itself, to create a more accessible location for its clients and a more functional site for its staff. With direct access from East 13th, the agency will occupy the street level, second floor and basement of the northeast corner of Reserve Square’s office space. The new office also will have closer, more accessible parking, he noted. The existing office is on the fourth and fifth floors of Union Trust, which
has been difficult for clients to negotiate and is not close to parking. The nonprofit was able to negotiate an early termination of its lease at 925 Euclid to make the move a reality, Judson said. Asked if that was difficult because the building is targeted for conversion to as many as 500 apartments and a hotel with some remaining offices, Judson said, “I won’t go there.” Dyann Davison, who represented Willoughby-based K&D in the transaction, said the entire space will be gutted and rebuilt. The space formerly housed a charter school and is on the north side of a corridor connecting Reserve Square’s twin apartment towers. It’s across the hallway from a large office space that K&D subdivided three years ago for multiple tenants. “This location has amenities to offer Western Reserve’s clients,” she said. K&D CEO Doug Price had declined to identify the tenant because the agency had asked him not to do so. The move will cause Union Trust’s largest remaining office tenant to exit, Judson acknowledged. Several small office and retail tenants still remain in the 1.5 million-square-foot building. The building was targeted for reuse after its prior namesake, Huntington, moved to 200 Public Square, and it donated multiple tenants to the E&Y office building in the Flats East Bank Neighborhood. An affiliate of Delray Beach, Fla.based Hudson Holdings bought the building in 2015 with plans to convert it to new use in a historic adaptive reuse project. Although Hudson Holdings secured a $25 million catalytic state historic tax credit in late 2015 for the project, it has not proceeded, and in-
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Real estate developer and owner Joseph Shafran’s Paran Management Co. didn’t go far for his latest deal: the former Franklin Simon department store building next to Shaker Square. Paran’s office, where it runs a shopping center and apartment ownership firm with holdings throughout Ohio, has been on the second story of the structure at 2720 Van Aken Blvd. since 2002. “We plan to make a substantial investment here,” Shafran said in a Jan. 23 phone interview. “The building has sat and become increasingly derelict for years.” However, the opportunity to restore the property and make it more of a community asset attracted Shafran, in part because he remembers going into the first-floor department store known for high fashion as a boy to pick up packages for his mother. Along with the building constructed for Franklin Simon came an empty former CVS store, as well as another vacant building — once home to a Heinen’s — connecting the structures, and parking lots behind Shaker Square in Cleveland as well as the south side of Drexmore Road in Shaker Heights. Through an affiliate — Bonwit Teller LLC, recalling Franklin Simon’s better-known rival in the high-end market — Shafran on Jan. 17 bought
the properties for $796,000. The seller was 2720 Van Aken Blvd. LLC. Cuyahoga County values the properties at $1.65 million for property taxes, which shows how much work awaits Shafran and Paran’s consultants. Basic housekeeping is the first order of the day, Shafran said. Paran even has to prepare as-built drawings of the structures for the firm to craft its own plans. Franklin Simon, part of a national chain, was in space now home to a Goodwill store. Shafran won’t speak specifics with respect to current and potential tenancy until more planning is done. However, one concept is to demolish the single-story building between the 2720 Van Aken building and the CVS to add more than 100 market-rate apartments in a mid-rise building of as much as five stories. “We know it’s very well built,” Shafran said of the original store building, which dates from 1931. The CVS store dates from 1979. “It’s already a landmarked building,” Shafran said of the northernmost building, “and we are orthodox in how we handle historic properties.” The properties adjoin the southeast quadrant of the 1920-vintage Shaker Square office and shopping complex. The transaction is welcomed by Peter Rubin, who owns and manages Shaker Square through Coral Co., also located there. “We’re thrilled (Shafran) got it,” Rubin said in a phone interview Jan.
24. “He’s thoughtful and community-minded.” Rubin knows what kind of task faces Shafran. “We had it under contract once and backed away because of its challenges,” Rubin said. For his part, Shafran said he tried to buy the block in the late 1970s but “couldn’t swing it” because Paran was then in its early stages. Shafran grew up in the realty business. His father, the late Nathan Shafran, was one of the founding members of what’s now Forest City Realty Trust. He considers himself a product of the “child labor practices” of founding families’ children, as he helped lease Forest City properties here as a teenager. However, after spending years in Venezuela, first with the Peace Corps and then pursuing other ventures, he returned in 1975 to Cleveland and launched Paran to go his own way. Today, Paran owns more than 20 shopping centers, 2 million square feet of selling space, and five apartment buildings. Shafran’s best-known project is Glidden House, a boutique hotel installed in 1988 in a University Circle mansion. It filled a need because outof-town guests then had to stay as far out as Beachwood, Shafran recalled. He sees this as a similar effort. “These buildings can become a center for the community again,” Shafran said. “Our investors are a group of people who have a strong belief in Cleveland.”
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That first year, the Port Authority subsidized the service to the tune of $850,000 for each month of the roughly eight-month shipping season. That cost has come down over the threeyear life of the contract. The Port Authority spent $3.1 million to subsidize the service in 2015 and $1.8 million in 2016, according to the agency’s audited financial statements. Friedman said the Port Authority is in the midst of negotiations with Spliethoff to continue the service. The port is now moving between 2,500 and 3,000 TEU-equivalent containers a shipping season. TEU is short for “20-foot equivalent unit,” the international measure of containers, which now can be as large as 40 feet long. Friedman said he would like to build that to about 15,000 TEUs a year. Emails to Spliethoff executives were not returned at deadline last week. Friedman said his goal in the new contract the Port Authority is negotiating with Spliethoff, in addition to reducing the agency’s overall cost, is to give the shipper a greater incentive to build export volume, which lags behind import container volume. He said that some local shippers like using the local direct-to-Europe service but can’t justify its use financially. Price competition among shippers for international cargo is intense, due to an oversupply of ships, Friedman said. As a result, shipping rates are especially low to the highly competi-
tive coastal ports. That gives shipping through an East Coast port like Newport News, Va., or Baltimore, and moving containers by truck to or from Ohio a price advantage. So far, no other Great Lakes port has mounted a competitor of the CEE, although other port operators have been impressed with the local operation, according to Great Lakes shipping observers. “We’ve been impressed with the Port of Cleveland’s innovative Cleveland-Europe Express with its vessel partner Spliethoff Group,” said a spokeswoman for the Marine Chamber of Commerce in an emailed statement. “It could be a model that is emulated in other parts of the Great Lakes-Seaway system.” The chamber is a U.S.-Canadian association that represents ship owners and operators, port authorities and other marine-related businesses. Intra-lake cargo on the Great Lakes was up 3%, according to the Lake Carriers Association, which represents American flag vessels that carry raw materials. Except for iron ore shipments to the Port Authority-operated Cleveland Bulk Terminal on Lake Erie, most of that cargo coming into Cleveland harbor, carrying raw materials such as coal, limestone and salt goes into and out of private docks along the Cuyahoga River. The Lake Carriers Association reported that iron ore shipments into Cleveland were essentially flat in 2017, at 3.004 million net tons, from 3.008 million net tons in 2016. Friedman is chairman-elect of the
American Association of Port Authorities. In testimony Jan. 10 before U.S. Senate Committee on Environment and Public Works to push for waterway improvements to be included in any federal infrastructure plan, he mentioned, almost in passing, that he anticipated that the Port of Cleveland will spend $43 million on waterway improvements between 2016 and 2020. In the interview, Friedman said he anticipates the Port Authority will spend $11.4 million of that amount in 2018, with much of it going to rehabilitate its Cleveland Bulk Terminal, which is a transshipment point for iron ore headed to the Arcelor Mittal steel mill along the Cuyahoga River and other bulk material. Voters in 2017 approved a renewal of the Port Authority’s 0.13-mill operating levy that will raise about $3.1 million a year, or about one-third of the authority’s annual budget. In addition, the authority, the city of Cleveland, the state of Ohio and the Northeast Ohio Regional Sewer District have raised $10 million on their way to matching an $11.5 million federal grant to keep the hillside along the Irishtown Bend in Ohio City to keep a portion of the west bank of the Cuyahoga River in Ohio City from collapsing and blocking river traffic. Though the problem was identified more than a decade ago, only now, with the Port Authority taking responsibility and bringing the sewer district in, is it being tackled. “We made that our project some years ago,” Friedman said. “We’re pretty happy about that progress.”
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At the Table
Full plate of Restaurant Weeks could be a good thing Maybe I’m slow on the uptake, but it suddenly dawned on me: This winter, Cleveland is home to no fewer than three Restaurant Week promotions. Is Joe that too much of Crea a good thing? It’s tempting to call it overkill. Well … maybe yes, maybe no. I’ve long been a fan of such promotions. Restaurant Weeks are an opportunity for mainstream diners to go out and mix with the swells who go out all the time. It’s an opportunity for newbies to try new places and experience unfamiliar dishes and flavors, and better understand what all the buzz is about. As for seasoned restaurant goers, well, who doesn’t like a good deal? For those very same reasons, though, a lot of people hate these types of promos. Such events “occur too often and last too long,” says one writer for The Washington Post. “It brings out ‘amateur eaters’ who tip poorly, crowd out regular customers, and seldom return beyond deal season.” Just as bad, or worse, critics coastto-coast point to menus built around the cheapest ingredients rather than operations trimming their margins and strengthening the promotion’s value by inventively showcasing their chefs’ talents. Then there’s the sheer frequency of such enticements. In some cities, Restaurant Weeks have turned into restaurant months, or more sprawling promotions. Thus, the Cleveland conundrum. I say it’s a good thing, or certainly can be. Here’s why. The post-holiday lag — typically January and February, and even longer with a late winter — can be deadly slow for restaurants. Bargain pricing can entice customers to fill seats. That helps places survive. And, frankly, such enticements drag otherwise curious diners out of their cocoons. It’s a fun diversion, a lower-risk opportunity to try new places and a healthy midwinter boost. “Frankly, a three-course meal at a good restaurant for $33 is a great deal,” said Matt Anderson, executive chef for Table 45 restaurant and newly elected president of Cleveland Independents, a trade organization representing more than 80 Northeast Ohio restaurants. “And for the restaurant, it drives revenue at a time that’s typically difficult for us and opens up places to people that may not be familiar to us. It gets your name out, and guests see a new place,” Anderson added. Anderson said that 5% or 10% growth during Restaurant Week periods is average. “Some do better,” he said. “But frankly, even 1% or 2% is an improvement, right?” Jonathan Stone is the marketing and communications manager for Downtown Cleveland Alliance (DCA), which hosts Downtown Cleveland Restaurant Week, Feb. 16-25. Stone said that DCA’s Restaurant Week has shown growth in sales. “Last year, our partnership with Open Table, which tracks overall bookings, we saw an increase of $12,000 in revenue — and that’s only the growth Open Table charted,” Stone said.
Cleveland events
On crainscleveland.com
This winter will see three “Restaurant Week”-style promotions in the Greater Cleveland area.
How chefs and restaurateurs can make the most of Restaurant Week promotions
Zack Bruell Restaurant Week: With six restaurants in Cleveland, the city’s most prolific chef-restaurateur will hold his “week” for 13 days, from Jan. 22 through Saturday, Feb. 3. Each of Bruell’s six restaurants will offer three-course prix fixe meals (with a variety of options) priced at $33. Beverages, gratuity and tax are additional; wine pairings are available for $20. For more information: zackbruell.com. Downtown Cleveland Restaurant Week: The city’s 13th Restaurant Week runs Friday, Feb. 16, through Sunday, Feb. 25. Sponsored by the Downtown Cleveland Alliance, the 10-day promotion features more than 50 downtown restaurants, from sports-bar casual spots to top-shelf destinations. At the discretion of their operator, individual restaurants will offer menus priced in the $15, $30 and $40 range. DCA’s week starts with a ticket-only ($35) kickoff event from 5 to 7 p.m. Thursday, Feb. 15, at the Hyatt Arcade Cleveland. For more information: downtowncleveland.com.
Cleveland has a plethora of restaurants, including many on East Fourth Street. The city will be home to three Restaurant Weeks this winter. (Larry E. Highbaugh/ThisisCleveland.com)
Restaurant Week promotions. “You want to hit as many people as you can. It’s simply a good opportunity to introduce ourselves to new customers,” Bruell said. “And, frankly, we’re at the whim of the weather.” Still, he understands the reluctance some voice about lowest common denominator offerings. “We’re not taking the inexpensive
Cleveland Restaurant Week: Soon after Downtown Cleveland’s big splash, Cleveland Independents, representing more than 80 indie restaurants, hosts its 12-day event, from Monday, March 5, through Friday, March 16. As of press time, 43 restaurants will take part, featuring three-course meals priced at $33 (exclusive of tax and tip), though participating restaurants have the option to raise or lower the price. On Monday, Feb. 19, Cleveland Independents’ website will post a complete list of participating restaurants and more details. For more information: clevelandrestaurantweek.com.
“Discounted prices definitely bring different individuals out to try some of the best restaurants in the world,” he said. “Often, they’re people who don’t normally try those restaurants — and, hopefully, make them more frequent customers.” Of course, virtually every participating restaurant continues to offer its usual range of menu items and specials. By one measure, the promotion is merely an enticement, a draw for new customers. No one’s stuck accepting their reduced-price portion of the “plat du jour” plopped out of a steam pan. (That’s obviously a worstcase scenario, though not entirely uncommon at the hands of less artful kitchens.) To remedy that pitfall, DCA implemented a tiered pricing structure for its Downtown Cleveland Restaurant Week. Participating restaurants are invited to offer specials in the $15, $30 and $40 range. “Restaurants are asked to offer all three price points,” Stone said. “If (the businesses) can’t meet one of those prices, that’s fine. But the idea is that the patrons are able to dine and eat the dishes they want.” “We’re all about driving traffic into restaurants,” he added. “They’re part of downtown’s business community, and building a vibrant economy. The more traffic being driven into restaurants, the better. The more revenue moving, the better.” Zack Bruell’s six upscale destinations will participate in all three of the
dishes on the menu and running them as an option,” Bruell said. “We’re coming up with whole separate menus. “I think that’s the right thing to do when you’re doing something like this. Because you’re giving people an option to try something different — not necessarily something that’s already on the menu, but something
that fits with the concept of that restaurant.” That means you’ll find Franco-Asian specials at Parallax or Italian-influenced dishes at Chinato. And my advice for diners? If you’re dead-set on getting the best bang for your buck, do some homework before you book a table. Set your sites on destinations with a solid reputation, then go online and review the Restaurant Week menus they’ll be offering. Anyone who can read a menu, has any awareness of food prices and even a vaguely solid sense of how expensive it is to run a restaurant can gather a sense of what promo dishes are good values and interesting offerings. Then don’t expect massive platters full of food. Anticipate moderate serving sizes — ones, hopefully, commensurate with the general quality and reputation of the restaurant you’re visiting. And remember: An artful chef can turn cheap cuts into a feast. A dining experience is more than the dollar value of the ingredients on your plate.
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Opinion From the Editor
Remain vigilant while in vortex
Editorial
Creeping progress It’s hard to believe that it has been more than five years since a diverse coalition of stakeholders came together to craft a bold plan to turn around Cleveland’s struggling public schools. And quite frankly, it’s even harder to believe the same group of stakeholders — politicians, charter schools, administrators, teachers, civic leaders — still has its nose to the grindstone, steadily pushing the district and charters in the right direction. After all, historically, education reform plans in urban districts — particularly Cleveland — don’t have much of a shelf life. Our message? Keep it up. The Cleveland Transformation Alliance — the watchdog panel of sorts that tracks the turnaround efforts — released a report last fall outlining the progress, and shortcomings, thus far. For one, the Cleveland Metropolitan School District’s graduation rate is up 20 percentage points since 2010. At 72%, it's still 11 points lower than the state average, but the rising clip certainly shows the district’s strategy of phasing out larger, low-performing schools in favor of smaller, more focused ones is working. It's also the fastest-growing graduation rate among Ohio’s urban districts. The success stories coming out of some of these schools, like Lincoln-West’s School of Science and Health, are particularly encouraging for a community in dire need of a more prepared workforce, especially one rooted in the STEM fields where opportunity is endless. In terms of something that could take that progress to the next level, Cleveland officials are holding out hope that the district is selected to take part in the Say Yes to Education program, a national effort best known for its promise to pick up college tuition bills for graduates of the city’s schools. It’s certainly something that could bolster interest in Cleveland schools and, perhaps more importantly, infuse dollars into needed wraparound programs that support students whose home life often gets in the way of optimal educational
attainment. In its report, the Transformation Alliance is quick to note, however, that progress at the K-8 level “has been slow and uneven” despite the heavy investment of resources. The challenge that remains, according to the alliance, is that too many K-8 schools are under-enrolled and low-performing. To its credit, the district realized its Investment Schools approach that targeted the lowest performing schools wasn’t working and paused the program. Going forward, the district is looking to replicate, in some way, what has worked at some of its high schools at the K-8 level and ultimately to close some of its lowest-performing schools — a painful process, no doubt, in communities where these elementary and middle schools are entrenched. The level of collaboration in the Cleveland reform plan is unique on many levels — notably, the level of cooperation with the charter school community. The number of charter schools sponsored by or formally partnered with CMSD increased to 19 in 2016-17, from 11 in 2013, the year the partnerships began. Despite a bevy of positive metrics and signs, perhaps the most impressive is the level of engagement. Doing right by our city’s children, particularly at the K-8 level, isn’t just about writing checks. For example, True2U, a mentorship program that launched in 2015 in just 22 schools, now serves eighth graders in every CMSD school. Among its several dedicated volunteers are workers from corporate giants like Medical Mutual of Ohio and Lubrizol. Those mentors are trained on a curriculum and work in teams of students once a month. The idea is to begin raising career awareness for students even before they enter high school. At this point, city and district leaders aren’t doing any sort of victory laps as it relates to the plan for transforming the city’s schools — and rightfully so. Plenty of hard work remains. Still, we like what we’re seeing.
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Our daughter tried lots of sports when she was younger: volleyball, soccer, basketball. They held her heart for a while, but softball was the one she married. Maura graduated from T-ball to our community’s Little League program, where she, the only girl in the minor leagues back then, was welcomed and treated well. She soon switched to softball, and by her early teens, she played for two teams in the summer — a local one during the week, and a regional team that traveled on weekends. We spent Friday nights, Saturdays and SunElizabeth McIntyre days at local tournaments and beyond, from Columbus to Toledo to Youngstown. It wasn’t unusual for her to catch a dozen games a week during the summer season and into fall. As she approached her 16th birthday, though, she’d had enough. Her knees, back and hips constantly ached from catching year-round, and her passion for the game was waning. Playing high school softball, she decided, was enough. Looking back now, I realize we had been caught up in a vortex of the all-consuming world of youth sports. Beyond practices and tournaments, there were hitting and catching coaches, trainers and a seemingly endless stream of money that flowed from our bank account. We obviously weren’t the only ones swept up in the madness. The U.S. youth sports economy is now a $15.5 billion market, according to Wintergreen Research, which tracks the industry and projects “there is no end to growth in sight” for the market. My husband and I found there were as many bad actors in the industry as good — from parents and coaches to league organizers and business owners. Parents and young players sacrifice and endure plenty when in the vortex. The sickening news about the sexual assault of hundreds of young female athletes that’s been in the headlines recently forced me to think about how those parents and those girls must have felt. How driven they were to succeed and how violated they were not just by their abuser, but by the vortex. Larry Nassar, the predator who served as team doctor for USA Gymnastics and Michigan State University, was sentenced by a judge last week to up to 175 years in prison for sexual abuse. Prior to his sentencing, more than 150 women and girls shared their stories about the impact of his sexual assaults while he was “treating” them for sports injuries. May no young athlete ever endure what Nassar inflicted ever again. And may Nassar never breathe another free breath. The whole episode has caused me to pause and consider what safeguards we have in place for our athlete children, what level of trust we ought to place in those who coach them, and what we ought to say to prepare our kids for the possibility that a monster in a lab coat or a track jacket may be lurking. It made me think about my role as a sports parent, and how the responsibilities go so far beyond cheering and writing checks. An infinitesimally small percentage of elite athletes will ever compete in the Olympics. Fewer still will become household names. But many will pursue their hopes and dreams through sweat and effort and sacrifice. Our daughter competed on Catholic Youth Organization teams. In the midst of the church sex abuse scandals, CYO in Cleveland in 2003 began requiring every coach and anyone else interacting regularly with children to receive extensive training through the VIRTUS program. It’s a proactive step that sets parameters and trains adults to look for signs of abuse and know how offenders commit it. Kids are safer because of it. Training in sexual abuse should be required for all sports. Parents, coaches, league administrators, all of us, need to be vigilant. The women and girls who testified before Nassar’s sentencing should have displayed their incredible strength in competition, not in a courtroom.
Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing ClevEdit@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes. Sound off: Send a Personal View for the opinion page to emcintyre@crain.com. Please include a telephone number for verification purposes.
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Virtual charter schools could face more scrutiny SEE WHAT ECOT’s closure means such institutions have to ‘own’ the issue By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com @ramccafferty
The closure of e-school giant Electronic Classroom of Tomorrow could signal more — or at least continued — scrutiny for the state’s virtual charter schools in the years to come. ECOT shut down operations on Jan. 19 following more than a year of turmoil for the virtual charter school. Problems first arose in 2016, when the state determined that ECOT’s enrollment was inflated based on the amount of time students spent actually logged in. In July 2017, the Ohio Department of Education began withholding $2.5 million a month to repay the state for almost $80 million for students that didn’t meet the state’s participation requirements, the Columbus Dispatch reported. It was those financial struggles that ultimately led to the school’s sponsor, the Educational Service Center of Lake Erie West in Toledo, to suspend its sponsorship. Attempts to reach ECOT through calls, emails and a Facebook message were unsuccessful. Apryl M. Morin, executive director of the Educational Service Center of Lake Erie West’s Community Schools Center, responded to inquiries with an email, saying while the organization “regrets the negative impact that this necessary decision may have on enrolled students and employed staff,” the school did not have the money to finish out the year. Chad Aldis, vice president for Ohio Policy and Advocacy at the Washington, D.C.-based Thomas B. Fordham Institute, said he thinks there’s a risk that the closure will portray charter schools in a “negative light.” And public confidence matters. But the charter sector has to “own” the issue when something like ECOT’s closure happens, Aldis said. It’s important to learn from it and to make sure students are actually learning. The institute sponsors some charter schools of its own in Ohio, including Village Preparatory School’s Woodland Hills campus and Citizens Leadership Academy East,
both in Cleveland. Longterm, ECOT’s closure brings up questions of the best way to track attendance and, ultimately, fund online schools, Aldis said. Online education is likely to continue increasing in popularity, but he’s not sure keeping track of how long someone is logged into a computer is the best way to monitor attendance. “This is a challenge,” Aldis said. Todd Ziebarth, a senior vice president for the National Alliance for Public Charter Schools in D.C., thinks ECOT’s closure will accelerate efforts in Ohio and elsewhere to better hold e-schools accountable. “School closures, particularly those mid-year, are always challenging for the impacted students, their families and school faculty,” Ziebarth said in an emailed statement following the closure. “Ohio should take steps to strengthen its funding and accountability framework for fulltime virtual charter schools so midyear closures are few and far between. However, Ohio deserves credit for tracking student participation in online coursework and not funding schools strictly based upon enrollment.” In 2016, the alliance, along with the 50-State Campaign for Achievement Now and the National Association of Charter School Authorizers, released a report calling for improvements in the quality of so-called “full-time virtual charter public schools.” According to the report, the majority of virtual charter schools showed weaker growth in reading and in math than their comparable traditional public schools, and students of all subgroups had weaker academic growth in virtual charter schools than traditional public schools. The report noted that Ohio, Pennsylvania and California enrolled more than half of all virtual charter school students across the country. ECOT had struggled academically, as well as financially. ECOT received Fs in almost all categories on the state’s 2016-2017 report card, with K-3 Literacy — in which ECOT received a D — being the only exception. Stephen Dyer, education policy
fellow at the Innovation Ohio think tank, thinks the closure of ECOT will send a message to other charters that no charter is too big to be closed. Columbus-based Innovation Ohio runs the Ohio Charter School Accountability Project, which compares charters and traditional public schools with public data like report card statistics and state funding figures, along with the Ohio Education Association, a Columbus-based teachers organization. The department is taking on the “800-pound gorilla,” Dyer said, and he hopes this means a new era of quality. The school had been failing students for years, he said, but nothing was done until it was experiencing financial troubles. While ECOT has posted on its Facebook page that it plans to appeal its sponsor’s decision, and it’s expected to appear in front of the Ohio Supreme Court in February, its 12,000 students already have begun seeking other options. And they don’t seem to be staying away from online charter options. E-schools like Ohio Virtual Academy and Quaker Digital Academy have seen enrollment grow in the wake of the ECOT closure. Last Tuesday, Jan. 23, New Philadelphia-based Quaker Digital Academy CEO Richard Varrati said he had seen 67 applications in recent days, a sizable number for a statewide e-school with enrollment of about 675 students. Maumee-based Ohio Virtual Academy has seen a sharp increase in enrollment since ECOT’s closure. Head of school Kristin Stewart said the school’s enrollment was in the 9,000s during the week of Jan. 15. By last Thursday, Jan. 25, it was at about 11,000. Stewart and Varrati both said they had seen increased scrutiny of virtual charter schools in recent years. Though Stewart has concerns about how excused absences are counted for e-schools, she doesn’t think schools should shy away from accountability measures. When the state tells it the rules are changing, Ohio Virtual Academy and its management company make sure it will be in compliance.
Web Talk Re: Greater Cleveland RTA’s future Crain’s wrote in its Jan. 22 editorial, “Running on empty,” that “RTA is on life support, and its CEO, Joseph Calabrese, can only pump so much morphine into the agency to ease the pain for riders and his staff. Local intervention is needed, and it must happen now.” Could THIS be a clarion call for regionalism? — Rob Toth I agree that they need to start figuring out different funding sources. It is important to keep RTA strong and modernized for Cleveland to continue its climb out of its fall. The failure of Columbus to see this is an issue, but first they need to shore up RTA. — Matt Wallenhorst
GCRTA is an important part of all communities and it should be supported by corps, hospitals, county, etc. It’s not only the poor who ride. It is kids, students who attend the higher-ed schools, suburbanites who park and ride, parents taking their kids to school and more. It’s not a government handout! I see many people in ALL walks of life riding the trains and the HealthLine. ... It is a convenience that is very much needed in all communities. I have never understood why RTA is looked upon as some type of privileged convenience that only the poor take to get to their destinations. The mayor needs to ... do something to stop the continuous fare hikes and route deletions and figure out what to do with this much-needed part of the city. — Wedia Media
Re: Amazon’s HQ2 search Northern Virginia, Atlanta, Dallas and Denver would appear to the most logical choices. If the eventual workforce will be 50,000 employees, they will want the amenities and features offered by large metropolitan areas. Pittsburgh, Austin, Indianapolis and similar medium-sized cities are probably too small. Chicago has too much bad press on a daily basis. New York is the center of it all, but the negatives probably outweigh the positives. However, a wild card in the final decision could be the tax incentives, abatements and other benefits showered onto Amazon by all the contenders. — James D
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Focus HEALTH CARE
Adviser - Page 11 | Clinic’s content push - Page 12 | Paladina making its mark - Page 14
Seeing a path to success
Illustration by erhui1979/iStock
Northeast Ohio’s independent physicians face plenty of hurdles, but believe it’s a route that provides the best chance to thrive By LYDIA COUTRÉ lcoutre@crain.com @LydiaCoutre
In a consolidated market dominated by large health care institutions, some doctors have carved out a space to practice independently, despite the many forces working against physicians setting out on their own. In 2016, Dr. Rebecca Ware decided to leave the Cleveland Clinic — where she’d practiced primary care at the Lorain Family Health & Surgery Center since 2004 — and venture out to practice independently. Her biggest hesitations over the move concerned whether patients would follow and how easily she’d be able to refer those patients to other doctors they’d need to see. Most patients happily followed, she said, and the health systems have made it fairly easy
for independent physicians to refer patients. In Northeast Ohio, the health care giants have an important role, said Ware, who’s now an internist with Northshore Healthcare, an independent physician group. “But with primary care, I think it’s different,” she said. “Patients want that established relationship with their doctor, and in the big systems, we tend to lose that a little bit.” Many docs are choosing to punt the regulatory headaches and administrative burdens of running a practice in favor of working for a larger hospital system that can handle that work for them. For example, 2016 was the first year nationally in which fewer than half of patient-care physicians had an ownership stake in their practice, according to a 2017 report from the American Medical Association. It was also the first year when there was an equal portion, 47.1%, of physicians who were employees and owners.
Northeast Ohio’s physician environment is, of course, fairly consolidated among the large health systems like the Clinic and University Hospitals, but many independent doctors believe this is a region where they can still practice and even thrive. For example, NOMS Healthcare has been experiencing rapid growth in the number of physicians who want to practice independently. In two and a half years, the Sandusky-based physician-owned and led medical practice grew from 60 providers to more than 200, with most of that growth in the Toledo and Cleveland areas. NOMS chief strategic officer Rick Schneider said he sees many physicians who are ready to go back to independent practice, but who remain nervous without a platform like a physician group to navigate through various governmental and regulation issues.
SEE SUCCESS, PAGE 13
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HEALTH CARE Adviser: Jeff Smith
New tax law provides credit for paid employee leave Although promoting a healthy workforce is a top priority for businesses, most serious medical issues often pop up unexpectedly, leaving both the employee and employer in a tough spot. Many employers are covered by the Family and Medical Leave Act, which allows employees to take the time off needed to improve their health. However, these medical issues — whether stemming from an employee or a family member — often impact more than just physical well-being. While some employers voluntarily offer paid leave to their employees, it is not required by state law and can be costly to do so. On the flip side, this means extended time off from work for medical reasons can greatly reduce, or even eliminate, an employee’s income during that period, which ultimately only adds to the hardship at hand. The Tax Cut and Jobs Act, passed and signed into law by President Trump on Dec. 22, provides an incentive for employers to offer paid leave to their employees. Under a new provision — Section 45S — added to the TCJA’s Internal Revenue Code, employers will receive a tax credit of up to 25% of an employee’s compensation when offering paid family and medical leave. Specifics of this new provision are as follows: ■ The leave must qualify under the Family and Medical Leave Act. ■ Paid leave must provide at least 50% of an employee’s compensation for a minimum of two weeks, if not more and for a longer period. ■ The tax credit ranges from 12.5% up to 25%, depending on the amount of compensation that is paid. Only employers that provide payment of full earnings receive the 25% credit. (Keep in mind, though, that the cred-
Crain’s seeks innovative physicians It’s no secret that health care is a driving force in Northeast Ohio’s economy. Making that possible are thousands of physicians who work tirelessly to advance the health and well-being of Northeast Ohio. To guarantee success in this sector, physicians continuously demonstrate commitment to innovation and excellence — both toward their patients and the Northeast Ohio community. Do you know a physician we should know about? If so, let us know. This year, Crain’s Cleveland Business is honoring a group of these individuals in our new Physician Innovators feature. The deadline to nominate is Friday, Feb. 2. To complete a nomination, visit CrainsCleveland.com/section/nominate. If you have questions, please contact sections editor Timothy Magaw at tmagaw@crain.com.
Smith is a partner at the Cleveland office of Fisher Phillips, a labor and employment law firm.
it is only available for employees that earned up to $72,000 in 2017.) ■ The paid leave program must be made available to both full-time and
part-time employees who have been employed for at least one year. Whether a company considers initiating a paid leave program or already has one in place, a clear policy will need to be carefully developed. Any existing paid leave programs that don’t meet each of the above guidelines will not qualify for a tax credit under this new provision. Further, an employer considering such a program may find that it has eligible employees already on leave, or planning to take leave soon. In
these cases, the employer should develop and promptly implement a new policy that provides paid leave to receive the tax credit. In addition, because there are no regulations on point, it’s important that employers keep thorough records to prove that they have complied with the new law. Although there are some states that require paid leave, the concept of paid leave is not uniform under federal law. This provision is only in place for
2018 and 2019 so far, but we can anticipate attempts to expand and make it permanent. Employers that provide paid leave allow employees to take the much-needed time to address their medical issues and come back to work healthy and re-energized. Because most employers view their benefit plans as crucial recruitment and retention tools, we expect many employers will consider adding paid leave as an additional benefit over the coming year.
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HEALTH CARE
Clinic’s content has healthy visitor count By DOUGLAS J. GUTH clbfreelancer@crain.com
Recording more than 7 million visits annually, the Cleveland Clinic is one of the nation’s most visited health care institutions in the country. The hospital system is enjoying similar popularity in the online space, via a health and wellness portal that has been driving public engagement since its inception more than five years ago. Launched in April 2012, the Clinic’s Health Hub blog — now called Health Essentials — expanded from 200,000 monthly visits to 3.2 million monthly visits in its first 18 months. Today, Health Essentials has more than 4 million monthly guests, making it the most visited hospital blog nationwide and leading to the formation of a content marketing department with 26 employees. Site proponents said the Clinic’s content creation efforts satiate the growing public appetite for easyto-read wellness-related material. Looking for a recipe for a lighter version of a New York-style cheesecake? The Clinic has one. Or perhaps you’re curious whether Vitamin C or Zinc “immune boosters” will help your cold. Spoiler alert: evidence to their benefits is pretty sparse. Of course, the blog tackles heavier topics, too, such as cancer care, chronic pain and lung health. “A lot of what we’re doing is our at-
The Cleveland Clinic’s Instagram account is one of the many ways in which it promotes a healthy lifestyle.
tempt to keep people healthy,” said Dr. Michael Rabovsky, a Clinic physician and contributing editor for the Health Essentials blog. “From the public’s standpoint, they can trust this is accurate information.” The Health Essentials team publishes three to five posts daily, disseminating content across Twitter, Facebook, Pinterest, Instagram and Snapchat. Topics cover a mixture of timely, scientifically proven advice (“How to Make Your Health and Wellness a Priority This Winter”), dietary tips (“What’s Worse for You: Sugar or Artificial Sweetener?”) and nourishing recipes (“Brussels Sprout Slaw with Apples and Pecans”). Written content is bolstered by informative graphics and short videos, said Paul Matsen, chief marketing
and communications officer at the Clinic. About 80% of Health Essentials traffic derives from mobile sources, with visitors eager to click quick-hit videos on subjects like how to avoid the highly contagious norovirus, a type of gastroenteritis. “It’s important to remember that many people watch our videos with the sound off, so we put vitals on the screen,” Matsen said. “The primary goal is to engage the consumer. This is not designed to be a volume-generating platform.” Health Essentials drew 51 million total visitors in 2017, a jump from 43 million the previous year. As the platform’s primary audience is women age 35 and up, content is developed around this demographic as well as what’s trending in the news. Theme
months on colon cancer and heart health are tailored for use on social channels, while additional content varies depending on time of day. For example, a post on insomnia might perform best if it’s shared on Facebook at 7 p.m., when people are settling in for the evening. “The nature of social media means a great amount of information will be passing through, so there’s always opportunities to post content people may not have seen, or breaking news that can be brought back,” Matsen said. Posts are reviewed for accuracy by on-staff physicians, with Clinic doctors also providing quotes and material for monthly articles. Some topics are more divisive, requiring special editorial attention from Rabovsky and his colleagues. “Nutrition might be controversial, because the government keeps changing recommendations on what makes proper diet,” Rabovsky said. “I’ll review the story to make sure what’s being said is qualified based on opinion or a functional medical standpoint.” Health Essentials began life on Facebook, Twitter and YouTube, coalescing into a more structured format as it gained popularity. In 2014, the Clinic followed its consumer-based platform with Consult QD, where physicians and health care professionals discover the latest research, treatment trends and innovations as shared by their colleagues. Consult QD currently has 20 medi-
cal specialties, or “verticals,” ranging from bioethics to urology. A handful of case studies, thought leadership insights and research posts are published daily, a plethora of leading-edge work that Matsen said has doubled site visits in the last year, from 655,000 to 1.5 million. “We’ll have doctors at a cancer or neurological conference creating content about those conferences,” he said. “Usually this information would be written in a medical journal. The site is another way to engage with audiences.” This year will see even more informational innovations, Matsen said. Along with the system’s two main content platforms, the hospital is providing daily health tips for users of Alexa, the “personal assistant” built into Amazon’s in-home Echo devices. Meanwhile, a series of podcasts will draw upon Health Essentials content or an upcoming Facebook Live program. As long as there’s knowledge to be obtained, consumers will continue to flock to the Clinic’s various information-packed platforms, Matsen said. “Content around health, wellness and medical innovations is separate from our core website, which is popular with treatment seekers,” he said. “Health Essentials gives out information on living a healthy life, and it needed its own home. It has its own look and feel, and the content is designed in a consumer-friendly way.”
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CRAIN’S CLEVELAND BUSINESS
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HEALTH CARE
SUCCESS
CONTINUED FROM PAGE 10
“I think now that they’re seeing that there are platforms out there, independent platforms out there, that’s one of the real reasons why we’re seeing this surge in growth,” he said. Last year, a team of independent doctors announced they’re building a specialty hospital in Beachwood. The for-profit, full-service hospital will specialize in orthopedics, urology, general surgery and gastrointestinal procedures and is looking to attract high-quality, independent doctors. Dr. Reuben Gobezie, who’s part of the team behind that hospital, moved into independence in 2012 and has started various practices. The entrepreneurial former University Hospitals doctor says being independent allows him to practice medicine and treat patients the way he wants to, rather than being confined by guidelines of a large institution, which he calls “too limiting.” “Building this hospital that we’re building, that is tangible evidence (that) the pendulum has just swung so far over toward institutionalized medicine,” Gobezie said. “The pendulum is starting to swing back.” How far back that pendulum will swing is yet to be seen, considering the hurdles doctors face. Kathryn Hickner, an attorney who co-chairs the health care practice group at Ulmer & Berne, said it is increasingly difficult for independent physicians to thrive in the way they used to thrive financially. “Based upon my discussions with clients, they often want to align with larger groups and institutions in order to mitigate the burden of running a practice,” Hickner said. “It’s a reaction to the increasing expense of running a practice because of the MACRA reporting requirements, for example, or EHRs (or) the cost of employee health benefits.” MACRA — the Medicare Access and CHIP Reauthorization Act of 2015 — creates a payment framework for rewarding physicians for providing higher quality care. MACRA, along with electronic health records, or EHRs, administrative burdens and more make up a long list of reasons physicians align with a bigger health system, Hickner said. While the recently passed federal tax law isn’t likely to be a driving factor in decisions on whether to align with a system, it has a couple of wins for those doctors who wish to remain independent. For one, the tax rate for C-corporations was reduced from 35% to 21%. The second change impacts physicians conducting their practice through a pass-through entity, which Hickner said in her experience is more common. A 20% pass-through deduction will benefit some physicians who meet certain criteria and make below a certain threshold. “In my experience working with physicians, the decision to align with a larger system is a very difficult one, and there are many, many factors that go into that decision,” Hickner said. “I would be surprised if this was a catalyst to change the physicians’ mind if they were already leaning toward an agreement.” UH has seen its physician group grow from about 1,350 doctors in 2014 to about 2,100 today. Dr. Cliff Megerian, president of UH Physician Network, said about a third of this has come from the health system’s hospital acquisitions; another third has been physicians joining from
Corporate Training and Performance Solutions Corporate College® provides professional training and development customized for your organization. HEALTH CARE TRAINING SOLUTIONS Reuben Gobezie and Rebecca Ware left established careers at University Hospitals and the Cleveland Clinic, respectively, to join forces with other independent physicians. (Contributed photos)
outside the region or state; and the final third is local independent physicians joining the system. Right now, UH is talking with “a number” of different independent groups considering aligning with the system, which is becoming more common as the administrative burden for physicians grows “tremendously,” Megerian said. But short of actually joining the system, UH makes it possible for physicians to work with its network of doctors while remaining independent, most notably through its clinically integrated network. This network allows independent physicians to align with the system and participate in its accountable care organization contracts. In just two years, the clinically integrated network has grown to 2,800 independent physicians. “UH is committed and has doubled down on the notion that we want to work and maintain independent physicians’ livelihood,” Megerian said. “We want to maintain their independence, but we want to also hopefully have them desire to use our system when they so see fit.” The Cleveland Clinic similarly offers ways for independent physicians to connect with the system without becoming employed doctors, such as through its own clinically integrated network. An ecosystem in which doctors have choices in how they practice, be that independent or employed, is important for meeting the different desires and goals of different physicians, said Dr. Brian Donley, the Clinic’s chief of staff. “I think if you just have one model of care, one model for physician participation, I think you limit yourself as a health care system to the opportunities to have a variety of skilled physicians be a part of your system that delivers outstanding care,” he said. Ware, the internist with Northshore Healthcare, said she believes more of her peers are considering independent practice, but haven’t made the jump. “I think the more that we can show that this is an option and a viable option for us as well as our patients, I think there will be more of an interest in it,” she said. “I do think people are looking at it as an alternative.”
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PA G E 14
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CRAIN’S CLEVELAND BUSINESS
HEALTH CARE
Denver firm beginning to make waves here By TIMOTHY MAGAW tmagaw@crain.com @timmagaw
A few Northeast Ohio employers are looking westward for a solution to rising health care costs. Enter Paladina Health, a Denver-based primary care outfit that is quietly making an entrance in Ohio with the ultimate goal of disrupting the patient-doctor relationship. Consider it primary care on steroids for middle-market companies. Patients have direct access to their docs, 24/7 phone access for urgent needs and no co-pays. At its core, the model revolves around the concept that a doc with a smaller caseload can take better care of patients — and ultimately lower an employer’s health care spend by focusing on prevention rather than utilization. Paladina — a subsidiary of DaVita Inc., a Fortune 500 company well known for its dialysis centers across the country — opened its first office in Ohio in 2016 and slowly has been inking relationships with sizable local employers, including Euclid’s
Lincoln Electric and, just recently, Akron Public Schools. Last fall, Paladina also forged an alliance with ERC, a Highland Heights-based human resources organization, to offer a primary care plan. Robert Klonk — CEO of Oswald Cos., the Cleveland-based insurance brokerage and risk management giant — was first made aware of Paladina by one of its investors about three years ago. After several phone calls and some research, he flew out to the company’s headquarters to see it for himself. The model, he said, “fit perfectly with what we at Oswald felt was the next phase for employee well-being,” so he signed an exclusive deal with the company that covers all of Ohio and Michigan. So far, Paladina operates four primary care facilities in Northeast Ohio, with a fifth slated to open in Akron in early February. Also, the Akron school district is building out space in one of its facilities on West Market Street for a Paladina clinic, expected to open in April and to be used by the Akron schools’ employees and their dependents. Paladina CEO Chris Miller, who
“At the end of the day, the health care system is broken.” — Paladina Health CEO Chris Miller
grew up in Geauga County, told Crain’s in a recent interview that he also sees opportunity in the Columbus and Cincinnati markets. Paladina’s publicly traded parent, DaVita, even touted its subsidiary’s performance in a press release outlining its 2017 accomplishments. In the release, DaVita said Paladina offered primary care services for an eligible population of more than 90,000 covered lives, an increase of over 42,000 from the year prior. The com-
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pany opened seven new locations serving six new clients, including expansion into Ohio. Paladina provides care at 50 locations across 11 states. At its most basic level, the idea behind Paladina’s business model is to take the insurance company out of the equation. For a flat, monthly fee — typically paid by the employer — patients can get that concierge care from the docs. It’s a far cry from the traditional fee-for-service model that Miller said is “all about misaligned incentives.” “At the end of the day, the health care system is broken,” Miller said. Instead, Miller said, Paladina’s physicians are paid a “fair market salary” and awarded bonuses for reaching certain quality targets. Plus, given their smaller caseloads, the docs are encouraged to spend significant time with patients — 30 or 40 minutes per visit with little to no wait times. Those longer visits allow more services to be rendered rather than punting to another provider, which could drive up costs. “We’ve all grown up in the waiting room when going to our primary care physician and not seeing the doctor for more than a minute or two,” said Anthony Barisono, Oswald’s vice president of benefits and practice leader for ERChealth. “That’s the way the system is built today. This offers a unique opportunity to get to know your physician.” Paladina, of course, isn’t the only provider in the direct primary care, or DPC, space. As of this year, nearly 3% of members of the American Academy of Family Physicians, for example, practice in a DPC setting. Some experts predict interest in the DPC space will only grow as the number of Americans enrolled in high-deductible health plans continues to rise. According to a recent report from the Kaiser Family Foundation, 28% of all covered workers are enrolled in high-deductible health plans, which require patients to pay hefty out-of-pocket costs before insurance starts picking up tabs. With DPC, the idea is that higher utilization of primary care at a controlled cost ultimately will drive down the
number of serious medical issues that could require hospitalization or costly specialty care. “This direct care model is one of those few things we can do as a large employer that’s a win-win,” said Akron schools treasurer and CFO Ryan Pendleton. “We can offer what we know will improve health and wellness, but also help us address costs.” Paladina’s services aren’t a replacement for an employer’s traditional health plan. The Akron school district — which spends roughly $50 million a year on benefits for its employees and their dependents — covers the fees for employees who wish to opt into the DPC arrangement. The hope is that it’ll ultimately bend that $50 million cost curve downward. In the few weeks since enrollment opened, the Paladina offering has drawn enough interest that it may have to bring on an additional doc to keep the caseload at the desired 700 to 800 patients, as opposed to the average of 2,500. As for ERChealth, the group is characterizing its plan as a “PCP+ option.” ERChealth’s renewal comes July 1, but so far, the excitement over the Paladina add-on has been at a “feverish pitch,” according to Pat Perry, ERC’s president. Given the breadth of Northeast Ohio’s homegrown nonprofit health systems — namely the Cleveland Clinic and University Hospitals — it has proven difficult for outside groups to make a successful run for business in Northeast Ohio. For one, both systems have robust primary care networks that feed directly into their hospitals’ systems. But for Miller, Paladina’s CEO, the depth of Northeast Ohio’s medical community — particularly its specialty network and hospitals to which Paladina can refer patients — made it an attractive place to do business. “This concept is going to produce a return on investment (for our clients) in a couple of years,” Miller said. “The biggest response we’re hearing is that it sounds too good to be true … We have a pretty decent brand in Northeast Ohio. We hope to carry that throughout the entire state.”
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CRAIN’S CLEVELAND BUSINESS
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PA G E 15
THE LIST
Continuing Care Retirement Communities Ranked by Number of Residents THIS YEAR NAME
FTE STAFF # OF RESIDENTS (1)
ENTRANCE FEE/ INDEPENDENT LIVING RENT
# OF # OF # OF NURSING YEAR INDEPENDENT ASSISTED FOUNDED OWNER LIVING UNITS LIVING UNITS BEDS
TOP EXECUTIVE
1
Ohio Living Breckenridge Village 36855 Ridge Road, Willoughby 44094 (440) 954-8364/www.ohioliving.org
780
450
$100,000-295,000 $1,820-5,325
527
42
108
1979
Ohio Living
David Schell executive director
2
Judson Services 2181 Ambleside Drive, Cleveland 44106 (216) 791-2004/www.judsonsmartliving.org
613
338
$85,000-600,000 $2,600-4,600
377
160
36
1906
Judson Services Inc.
Cynthia H. Dunn president, CEO (2)
3
Laurel Lake Retirement Community 200 Laurel Lake Drive, Hudson 44236 (330) 650-0681/www.laurellake.org
491
193.70
$76,000-340,600 $1,959-3,458
293
56
75
1989
Laurel Lake
David A. Oster CEO
4
Anna Maria of Aurora 889 N. Aurora Road, Aurora 44202 (330) 562-6171/www.annamariaofaurora.com
436
407
$2,500 $1,200-3,800
69
61
200
1965
Rob & George Norton
Aaron Baker administrator
5
Jennings 10204 Granger Road, Garfield Heights 44125 (216) 581-2900/www.jenningsohio.org
423
273
None $446-2,225
220
54
174
1942
Jennings
Allison Q. Salopeck president, CEO
6
Wesleyan Senior Living 807 West Ave., Elyria 44035 (440) 284-9025/www.villageliving.org
385
500
$0-180,000 $600-3,000
195
130
136
1896
American Eagle
Jessica Short executive director
7
Brookdale Westlake Village Retirement Community 28550 Westlake Village Drive, Westlake 44145 (440) 892-4200/www.brookdale.com
360
270
$2,500 $2,400-3,500
205
86
60
1989
Brookdale Senior Living
Kate Dorsey executive director
8
Kendal at Oberlin 600 Kendal Drive, Oberlin 44074 (440) 775-0094/www.kao.kendal.org
323
192
$99,938-460,975 (3) $2,909-5,432
223
37
42
1993
Kendal at Oberlin
Barbara W. Thomas CEO
9
The Renaissance Retirement Campus 26376 John Road, Olmsted Township 44138 (440) 235-7100/https://renaissance.elizajennings.org
312
139 (4)
Starting at $94,990 Starting at $2,483
175
23
96
1989
Eliza Jennings
Sandy Skerda executive director
10
Sprenger Healthcare Towne Center Community Campus 500 Community Campus Drive, Avon Lake 44012 (440) 930-6600/www.sprengerhealthcare.com
271
229
None $1,300-1,600
80
87
120
2004
Sprenger Health Care Systems
Morgan Hammond administrator
11
Stow-Glen Retirement Village 4285 Kent Road, Stow 44224 (330) 686-7100/www.stowglen.com
270
150
None $2,100-3,000
140
75
90
1985
Employee owned
Tammy Denton CEO
12
Western Reserve Masonic Community 4931 Nettleton Road, Medina 44256 (330) 721-3000/www.wrmcohio.org
265
100 (4)
$40,000-$160,000 (optional) (5) $3,144-4,437 (5)
118
53
50
2005
The Ohio Masonic Home
Scott A. Buchanan CEO
13
St. Luke Lutheran Community 220 Applegrove St. NE, North Canton 44720 (330) 499-8341/www.StLukeLutheranCommunity.org
257
187 (4)
$150 for assisted living $1,850-3,200
68
52
202
1954
St. Luke Lutheran Home for the Aging
John L. Spieler president, CEO
14
Altenheim Senior Living 18627 Shurmer Road, Strongsville 44136 (440) 238-3361/www.altenheim.com
249
225
None $3,084
52
37
160
1892
Altenhiem
Paul Psota CEO
15
McGregor 14900 Private Drive, Cleveland 44112 (216) 851-8200/www.mcgregoramasa.org
226
300
None $1,500-2,325
13
29
148
1877
McGregor Foundation
Rob Hilton president, CEO
16
Brethren Care Village 2140 Center St., Ashland 44805 (419) 289-1585/www.brethrencarevillage.org
225
400
$2,500-5,000 $2,300-2,600
12
108
99
1972
Brethren Care Inc.
Troy Snyder CEO
16
Gateway Retirement Community 3 Gateway Drive, Euclid 44119 (216) 486-4949/https://gatewaycarecommunity.com
225
200
None $705
99
99
99
1986
Eli Gunzberg
Kimberly Armstrong administrator
18
The Village at Marymount 5200 Marymount Village Drive, Garfield Heights 44125 (216) 332-1100/www.villageatmarymount.org
219
156
$1,500 for assisted living $2,565-4,390
4
96
142
1988
Marymount Health Care Systems
Jeffry A. Myers chief operating officer
19
O'Neill Healthcare Lakewood 13900 Detroit Ave., Lakewood 44107 (216) 228-7650/www.oneillhc.com
205
130 (4)
First month's rent for security deposit $575-865
60
54
135
2006
O'Neill Healthcare
Kimberly Murphy administrator
20
St. Mary of the Woods 35755 Detroit Road, Avon 44011 (440) 937-3111/www.stmaryofthewoods.com
179
NA
None Starting at $3,100
81
48
50
2005
Atrium Living Centers
Charles Rupert administrator
21
Ohio Living Lake Vista 303 N. Mecca St. (Rt. 46), Cortland 44410 (330) 638-2420/ohioliving.org/communities/ohio-living-lake-vista
163
107
$55,000-185,000 $1,500-4,000
83
10
57
1998
Ohio Living
Dean Michael Palombaro executive director
22
The Lutheran Home at Concord Reserve 2116 Dover Center Road, Westlake 44145 (440) 871-0090/www.concordreserve.org
140
+200
None NA
80 (not yet open) (6)
43
154
1932
Lutheran Home
Charles H. Rinne CEO
23
Briar Hill Health Care Residence 15950 Pierce St., Middlefield 44062 (440) 632-5241/www.briarhillhealthcare.com
120
86 (4)
None $965-2,600
11
35
85
1965
Anderson Ohman Sr.
Anderson C. Ohman, CEO; Christian J. Ohman, administrator
23
Concordia at Sumner 970 Sumner Parkway, Copley 44321 (330) 664-1000/www.concordiaatsumner.org
120
90 (4)
$25,000-281,600 $1,370-4,500
101
40
48
2003
Concordia Lutheran Ministries
Charlene Kish CEO
23
Smithville Western Commons 4110 E. Smithville-Western Road, Wooster 44691 (330) 345-9050/www.sprengerhealthcare.com
120
186
None $500
7
63
131
1975
Sprenger Health Care Systems
Amanda Hilliard administrator
26
Sprenger Healthcare Amherst Manor Retirement Community 175 N. Lake St., Amherst 44001 (440) 988-4415/www.sprengerhealthcare.com
110
168
None $575-1,500
68
18
114
1959
Sprenger Health Care Systems
Kristen E. Gollinger administrator
RESEARCHED BY CHUCK SODER
Want the Excel version of this list Ă‘ and every other Crain's list? Become a Data Member: CrainsCleveland.com/data
The full list includes 28 CCRCs, amenities lists and names of additional executives. We define a CCRC as a senior-living community that offers independent living, assisted living and skilled nursing care. Numbers as of Jan. 1, 2018. Send feedback to Chuck Soder: csoder@crain.com.
(1) Full-time equivalent unless otherwise noted (2) Dunn is slated to retire on June 1. She'll be replaced by Kendra J. Urdzik, Judson's chief collaborative health officer and vice president of health services. (3) Discount for longterm care insurance (4) Full time (5) Residents who pay entry fees receive rent deductions, depending on how much they pay upfront. (6) These units are scheduled to open in summer 2019. Land preparations began in December.
PA G E 16
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CRAIN’S CLEVELAND BUSINESS
AKRON
ABIA looks to move in a new direction
After years and years of deficits, the innovation nonprofit looks to be self-sustaining with new revenue sources By LYDIA COUTRÉ lcoutre@crain.com @LydiaCoutre
The Austen BioInnovation Institute in Akron, founded in 2008, has never had a profitable year. Buoyed for years by philanthropy, membership fees and some support from Summit County, ABIA is looking at new sources of revenue as the nonprofit quickly erodes its fund balance, which, as of the end of 2016, was $4.6 million. That’s down from $11.6 million at the start of 2013. Recent tax forms show year after year of deficits, most recently a deficit of more than $1.5 million in 2016. With dwindling grant support and only one remaining founding member (Akron Children’s Hospital), the organization tasked with turning Akron into a hub of biomedical innovation is turning to three new sources of revenue: leasing out three floors of its building that have been vacant since the county left in May 2016; offering 3-D printing services; and commercializing two medical technologies. “Progress is being made and revenue targets related to rental of open building space, development of technologies and fee-for-service projects have to be hit to ensure future operations,” Scott Rainone, director of communications and governmental relations, wrote in an email to Crain’s. ABIA’s annual budget in 2014 was close to $10 million. Today, it’s in the range of $2 million, according to Rainone. A few years ago, the institute had 40 full-time-equivalent employees. Today, it operates with just four: executive director Joe Randazzo, Rainone and two engineers. Rainone noted that all four work with a “startup mentality” and wear multiple hats. “We continue to be lean, scrappy and resilient,” Randazzo wrote in the email. “Like all reorganized businesses, we developed a strategic plan and we continue to make progress
The Austen BioInnovation Institute is looking to rent out unused space in its building in downtown Akron as a source of revenue, among other initiatives. (Chuck Soder)
and grow revenue.” Initially, much of ABIA’s funding came from the Akron-area hospitals and universities that created the nonprofit. Randazzo said Randazzo the economy forced ABIA to move from its membership-fee model in 2014 after most founding members — Summa Health System, Akron General Medical Center, the University of Akron and Northeast Ohio Medical University — didn’t renew their memberships. Today, Akron Children’s is the only founding member still partnering with ABIA. It conducts simulations and training sessions at its Austen Simulation Center for Safety and Reliability at ABIA. Relying on grant funding and founding members proved to be “shaky,” Randazzo said. The focus now is to become self-sustaining. ABIA has engaged commercial real estate agents to help lease out floors
four through six in its building at 47 N. Main St. in Akron. Getting that space occupied will provide a “good foundation” of revenue, Randazzo said. The second primary revenue source would be offering 3-D printing services, in which engineers can take CT scans and convert them into 3-D models. For instance, ABIA is working with a physician at Akron Children’s to model 3-D versions of a pediatric heart he is going to work on. “It’s anecdotal at this point, and at some point we would like to partner with a physician and develop a white paper,” Randazzo said. “But we’ve been told that it reduces surgical time, which saves the hospital money. It increases patient outcomes; it’s safer for the patient. So at some point, once we get that established, that’s something that we want to partner with one of the physicians and demonstrate.” Though they’re initially working toward cardiac applications, Randazzo said he believes, “quite frankly, the sky’s the limit” for how else the ser-
vice could be used. The third source of revenue ABIA is focused on is commercialization of two medical technologies at ABIA. Apto Ortho is a pediatric spinal device to address early-onset scoliosis that allows for implanted rods to be adjusted from outside the body as a child grows, eliminating the need for repeated invasive surgeries. ABIA is in negotiations with a national medical company to license the technology, which ABIA owns in conjunction with Akron Children’s. ABIA has sole ownership of the patent for the other technology, Micro Matters, which is a disposable, ultra-low volume syringe that provides users in a research laboratory more accuracy and resolution of low-volume fluid injections. ABIA also is looking to license that technology to a national medical company. Summit County has been a key backer of ABIA, working with the institute on what became its headquarters, on which the county still holds the mortgage. The county also guaranteed the debt that was taken
out by ABIA to make improvements to the building and buy the equipment. Jason Dodson, the county’s chief of staff, said that investment was important to Summit County because of the “promise” ABIA brought at the time, and he maintained it still “has the potential to realize now.” That promise was creating jobs, advancing the medical and biomedical community and bringing additional business and investment into the community. “I think as a lot of startup entities go through, they had ambitions, they had plans, designs as to where they thought they could be, where they thought they could take the organization,” Dodson said. “For various reasons, numerous reasons, those did not materialize in the way I think that anybody thought they were going to.” At that point, startups have two choices, he said — close up shop or downsize and refocus. ABIA choosing the latter is why it’s still here today, Dodson believes. ABIA continues to get some philanthropic support. For instance, the Burton D. Morgan Foundation supported BioInnovation Academy student scholarships with grants of $20,000 in 2016 and 2017. The Knight Foundation supported ABIA with operating grants of $1 million each in 2015 and 2016. The funding from the Knight Foundation in particular provided “runway” for ABIA. “We’re seeking funding for additional runway,” Randazzo said. “We can see the finish line. We have these two medical devices that can provide a substantial amount of money. … We’re working toward that. It’s certainly not as quick as we would like, but you know, we’re just like any other startup. Every business has to focus on revenue, and you’ve got to increase that revenue to grow and continue. That’s the phase we’re at right now.”
FirstEnergy's new tech center clears first hurdle By DAN SHINGLER dshingler@crain.com @DanShingler
Akron-based FirstEnergy Corp. is progressing with the approvals and support it needs to build a $37 million Center for Advanced Energy Technology in the city, on Mull Avenue near White Pond Drive. That’s going to mean some business for a local architectural firm, as well as one of the region’s largest builders. And the project probably will help fill some hotel rooms in the area once the center is up and running. FirstEnergy said it has selected Akron’s Braun & Steidl Architects to design the 88,000-square-foot, single-story facility. It will be built by Fairlawn-based Welty Building Co., which has done work for FirstEnergy’s West Akron Campus on adjacent White Pond Drive. To move forward, the company needs approval from the city for a conditional-use permit to build the facility in a residentially zoned area.
That said, the area is already full of businesses. In addition to FirstEnergy’s campus, nearby is the cityowned White Pond Office Park, where the Sikich LLP accounting firm established its new office one year ago. FirstEnergy got the first approval it needs on Jan. 19, when the Akron Planning Commission approved the company’s request for a zoning variance, said FirstEnergy spokesman Doug Colafella. Now it needs approval from City Council and the administration. Ellen Lander Nischt, the spokeswoman for Mayor Dan Horrigan, said legislation enabling the authorization is to be submitted to City Council on Monday, Jan. 29, with a public hearing set for Monday, Feb. 12. If council follows Horrigan’s lead, approval seems likely. “We are very supportive of this project and believe it will have a positive impact on both the neighborhood and the region in terms of economic development,” Lander Nischt said in an email. Once the company has its permit,
things should proceed swiftly, according to FirstEnergy. “We’re anticipating a Feb. 26 approval, ahead of a March groundbreaking,” Colafella said. Assuming that happens, the facility should have a roof on it by December and will be occupied early in 2019, he said. The company’s need for the facility is growing, in part because its electrical grid is becoming “smarter,” with more pieces of equipment able to talk to one another and remote technicians over the internet, said FirstEnergy director of assets Dana Parshall. Plus, if the equipment is connected to the internet, that means it also is exposed to the internet, creating a host of new security needs for the company to address, he said. “Us installing new tech out in the field has really caused us to focus more on cybersecurity,“ Parshall said. For instance, a year ago the company had fewer than 50 of its substations online with the internet. Today, it has about 200 of them connected, and the number continues to grow, Parshall said.
That’s a trend that seems destined to continue, if not accelerate, as both FirstEnergy and the Public Utilities Commission of Ohio recently have said that they want to see Ohio’s electric grid become smarter and embrace more new technologies. At the new tech center, FirstEnergy will conduct baseline testing of new equipment and prepare it for the field, develop cybersecurity tools and construct mock substations and other equipment for training its field technicians and other personnel, Parshall said. The site is also going to be something that pulls in out-of-town employees. While about 20 FirstEnergy personnel will work there full-time, the facility is expected to have about 50 employees training there at any given time. They’ll come from all over FirstEnergy’s service area, which includes much of Northeast Ohio and parts of West Virginia, Pennsylvania, Maryland and New Jersey. Most people will be in town for about a week during their training programs, Parshall said. Akron deputy mayor for economic
development Sam DeShazior said he likes that the project brings or secures high-tech jobs in the city. “The CAET center will fill an opportunity for market development in the future of advanced energy training and technology. It will bring professionals from around the nation to Akron to be trained in service dependability, which will improve service for electricity customers in Akron and across the nation,” DeShazior said in an email provided by Lander Nischt. As for funding the center, FirstEnergy likely will have little trouble. For one thing, the center is part of its profitable, regulated distribution utility, not it’s deregulated generation arm, FirstEnergy Solutions, which is widely believed to be headed toward bankruptcy as it fails to compete with new natural gas generation. On top of that, FirstEnergy just received a $2.5 billion equity investment from a group of investment funds that support its strategy of growing its regulated business. And some of that investment can be used for general corporate expenses such as the tech center.
CRAIN’S CLEVELAND BUSINESS
BANKS
CONTINUED FROM PAGE 1
The combined Akron and Cleveland MSAs, which together compose more than $80.2 billion in deposits, offer a growing, “very substantial and very attractive” market, said Charlie Crowley, a managing director in Cleveland with investment bank Boenning & Scattergood, a firm that has worked in some form on much of the bank M&A activity in this region. He said there’s clearly steady interest by banks for a slice of Northeast Ohio despite the region already being highly fragmented that’s picked up some in recent years. “I think sometimes people around here are close to the situation. We don’t realize how attractive Cleveland and Akron and Canton markets, broadly defined, are,” he said. “The perception is for one of these smaller to midsize banks to come in and nibble away at the market share of what really is a huge market.”
Flocking to NEO M&A activity in Northeast Ohio has been relatively active in recent years. Several local banks have been joining together to gain size and push deeper into Northeast Ohio’s metros. Farmers National Banc Corp. in Canfield is a prime example, as it has acquired Monitor Bank, First National Bank and 1st National Community Bank all since 2015. But new names from out of state have branched into Northeast Ohio at a good clip as well, adding to the crowd. Some have acquired smaller banks, like Pennsylvania’s CNB Financial Corp. (which operates ERIEBANK) buying Lake National Bank in Mentor. Some have bought deposits, like Pennsylvania’s First Commonwealth Financial Corp., which bought branches in the Akron/Canton market shed by Huntington Bank following the acquisition of FirstMerit Bank. It followed that up by naming a Northern Ohio president, George Moy, in December. Greg Sipos, corporate banking executive for First Commonwealth, said the bank planted itself in Ohio with a loan office in Columbus
around 2011. It has been working up toward Cleveland ever since. The bank’s operations here will continue to grow, he said, citing efforts to develop an SBA presence and add C&I and real estate lenders. “It’s absolutely a big growth market for us,” said Sipos of Northeast Ohio, adding that other possible acquisitions could be on the table. Western Pennsylvania banks have shown a clear draw to the region. It’s not just because of geographic proximity, but because the Northeast Ohio market simply has a larger business sector to service. Other Pennsylvania names that have pushed into the region recently include S&T Bank and NexTier Bank. Many are nabbing local market veterans to lead de novo lending offices to gain a foothold here, like California’s Bank of the West (a division of BNP Paribas) opening a lending office last June under David Dannemiller, who previously worked this region for Fifth Third Bank. That’s also what happened with Geuther, who was recruited by Atlanta-based SunTrust Bank last summer from Chase to lead a Cleveland office for them and introduce the company to the market. “Those in the outside looking in are starting to see it differently,” Geuther said. “They’re seeing opportunity they didn’t see a few years ago.” And that seems to be the very view SunTrust is taking. “The field is very crowded. There’s no question about it,” Geuther said. “But I think people want to come in and exploit weaknesses and gain share. And we are no different from that.”
Perfect storm Michael Adelman, president and CEO of the Ohio Bankers League trade group, said the ongoing immigration of banks to the state is “something we’re seeing play out.” The rising and diverse economy, the ongoing development of high-demand sectors like biotechnology, health care and manufacturing are just some of the reasons Northeast Ohio is hitting more bankers’ radar screens, even though the Ohio recovery post-recession has been slower than other states have seen.
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At a glance: Northeast Ohio’s active banking M&A market A look at banks with headquarters in the 216, 330 and 440 area codes that were acquired since Jan. 1, 2013: Buyer Target Completed date Target’s assets Farmers National Banc Corp. Monitor Bancorp Inc. Aug. 15, 2017 $43.2M
Deal value $7.8M
United Community Financial Corp.
Ohio Legacy Corp.
Jan. 31, 2017
$320.4M
$40.2M
Middlefield Banc Corp.
Liberty Bank NA
Jan. 12, 2017
$222.1M
$40.6M
Huntington Bancshares Inc.
FirstMerit Corp.
Aug. 16, 2016
$25.52B
$3.37B
CNB Financial Corp.
Lake National Bank
July 15, 2016
$152.2M
$24.8M
Farmers National Banc Corp.
Tri-State 1st Banc Inc.
Oct. 1, 2015
$139.5M
$14.2M
Northwest Bancshares Inc.
LNB Bancorp Inc.
Aug. 14, 2015
$1.24B
$180.6M
Farmers National Banc Corp.
National Bancshares Corp.
June 19, 2015
$529.6M
$70.7M
Peoples Bancorp Inc.
North Akron Savings Bank
Oct. 24, 2014
$146.8M
$20.1M
Ohio Farmers Insurance Co.
Valley Savings Bank
Sept. 12, 2014
$127.2M
NA
F.N.B. Corp.
PVF Capital Corp.
Oct. 12, 2013
$781.8M
$109.6M
Peoples Bancorp Inc.
Ohio Commerce Bank
Oct. 11, 2013
$106.8M
$16.5M
Source: Boenning & Scattergood
There are intangible benefits of Cleveland receiving good press, too. The spotlight from events like the recent Republican National Convention, an NBA championship from the Cleveland Cavaliers and a World Series appearance by the Cleveland Indians do, in fact, create a more positive perception of the city in the business world, Crowley said. “There have been plenty of times when people outside this region, or elsewhere in Ohio, might have had a slightly negative view of Cleveland from media coverage or embarrassments in the past,” Crowley said. “Years ago, if a bank CEO in Pennsylvania said they want to grow into Cleveland, the board might have said there was something wrong with him. Now, people look at the healthy economy, a vibrant downtown … and the perception of Cleveland is quite better now than it’s generally been.” The number of banks in the Ohio market has been consolidating at a rate of about 4% a year the past decade. According to the FDIC, in the Cleveland and Akron combined MSAs, there are about 41 banks active in the market as of mid-2017. There were 48 a decade ago. The number has stayed relatively steady because for nearly every bank that’s bought out, another name comes in. There’s a sense banking M&A could pick up in 2018. Beyond local economic factors that generally give banks more opportunity to do busi-
ness and make loans, banks have already been growing margins despite costly regulations. Combine this with the fact that banks in today’s market are relatively strong now nearly a decade removed from the last recession that pushed struggling institutions into mergers, and many are ripe with capital to make deals. That factor is compounded by the new tax bill. Ralph Della Ratta, head of the M&A advisory practice for Citizens Financial Group and founder of Cleveland investment bank Western Reserve Partners (which is now a subsidiary of Citizens), said many businesses were surprised by the extent of the tax cuts. Companies may not want to buy back stock in a record-high stock market. And funneling proceeds toward dividends may illustrate a business that has no other plans to put money to work. So, despite rising valuations — which may flush out some sellers who have been unwilling to entertain deals in the past — on the buy side, banks are increasingly likely to consider some kind of M&A deal. That trend could continue to bring more banks to the market through some kind of deal. There aren’t really any targets left of the size and scope of Akron’s FirstMerit Bank, which Huntington has absorbed, that would provide the kind of scale large, super-regional banks would desire. That means the best targets will be
the strongest, profitable midsize and community banks, and buyers may be growth-hungry midsize banks. After all, “if you want to build brick by brick, it’s going to take a long time. You’re not going to move the needle,” Della Ratta said. “The best way to do that is to make an acquisition.” And that will only ramp up competition further. For borrowers, that competition could translate to better terms on loans as companies jockey for share. “The local banks aren’t going to roll over and just let you have it,” he said. And regardless of the competition, bankers are confident they can win business. “We are willing and able to deploy our arsenal of capabilities really deep into the middle market,” Geuther said. “We think that market is underserved. And we think there is open space there to play on.”
Correction J A story in the Jan. 22 edition of Crain’s Cleveland Business contained some inaccurate information on Sugarcreek-based nüCamp RV. The company began in a 3,000-square-foot facility, then built a 60,000-square-foot plant in 2014 and added 90,000 square feet to it in 2017. Also, nüCamp expects to sell about 1,200 of its T@G model trailers this year, and about 3,000 of its larger T@B models.
CRAIN'S CLEVELAND BUSINESS
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52,000 SF ICONIC ARCHITECTURAL MASTERPIECE ON 1± ACRE, DOWNTOWN CLE
Located on 1± acre adjacent to the Cleveland State University Campus, this former Church/School property offers a variety of possible uses including religious, school, residential conversion, restaurant/bar, entertainment venue, etc. 24,000 SF Church/Sanctuary on 2 floors and 28,000 SF school on 4 floors (including lower level). The property also features fenced/gated parking with entrances on East 30th Street and Prospect Ave., full kitchen & cafeteria, located in the heart of Midtown and access to RTA’s Healthline immediately in front of the property.
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LAW
LAW
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NONPROFITS
Kimberly E. Stein
Benjamin N. Hoen
Matthew M. Young
Terrence Robinson
Laura Desmond
Partner
Shareholder
Shareholder
Senior Partner, Advancement
Schneider Smeltz Spieth Bell LLP
Weltman, Weinberg & Reis Co., LPA
Weltman, Weinberg & Reis Co., LPA
Vice President of Workforce Development and Inclusion
Kimberly E. Stein is now a Partner at Schneider Smeltz Spieth Bell LLP. According to Managing Partner, James D. Vail, “We are delighted to have Kim become a Partner at the firm. She is a valuable contributor to the firm’s Trusts & Estates and Taxation departments. We look forward to her continuing the firm’s tradition of delivering excellent client service.” Kim concentrates her practice in the areas of charitable planning, estate planning, fiduciary representation, and taxation.
Mr. Hoen was recently elected Shareholder at Weltman, Weinberg & Reis Co., LPA, a nationally-recognized, full-service creditors’ rights law firm. He has a 19-year tenure with the firm and practices in the Real Estate Default Group, providing comprehensive legal representation to mortgage lenders and servicers. Mr. Hoen’s practice focuses on foreclosure and eviction matters, including judicial/ non-judicial foreclosures, commercial/consumer evictions, and home ownership preservation programs.
Mr. Young was recently elected Shareholder at Weltman, Weinberg & Reis Co., LPA, a nationallyrecognized, full-service creditors’ rights law firm. He has been with Weltman for 14 years, and has led the firm’s Credit Union Practice Group since 2016. Mr. Young represents credit union clients on a broad spectrum of legal and regulatory issues. He also serves as General Counsel for his clients, advising on labor and employment, trust and estate, and litigation and title dispute matters.
MAGNET: The Manufacturing Advocacy and Growth Network
JumpStart is proud to announce its new Senior Partner of Advancement, Laura Desmond, who will lead the growing Advancement team in expanded efforts to engage with individuals and build new donor relationships, as well as strengthen JumpStart’s corporate and foundation partnerships. Prior to JumpStart, Laura served as Associate Dean for External Relations at the Weatherhead School of Management at Case Western Reserve University. She holds a degree in Economics from the University of Michigan.
LAW
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Seth P. Briskin
Bryan J. Dardis
Managing Partner
Management Committee, Partner
Meyers, Roman, Friedberg & Lewis Meyers Roman is pleased to announce that Seth Briskin has been named Managing Partner - the firm’s third, and youngest, Managing Partner in 22 years. Seth’s practice spans a myriad of labor and employment law issues involving private, public sector and non-profit organizations with both unionized and non-unionized workforces. Seth earned his law degree from Case Western Reserve University in 1995 and undergraduate degree from Cornell University’s Industrial & Labor Relations School in 1991.
Meyers, Roman, Friedberg & Lewis Meyers Roman is pleased to announce that Bryan Dardis has been named to the firm’s Management Committee. Bryan acts as outside general counsel to closely held companies, real estate developers, lenders, manufacturers, contractors and service providers throughout all life cycle stages, including startup and organization, growth, maturity and exit. Bryan earned his law degree from ClevelandMarshall College of Law in 2005 and bachelor’s degree from Ohio University in 2000.
JumpStart Inc.
Formerly Vice President of the Early College, Early Career program. Responsible for MAGNET’s workforce development and economic inclusion efforts.
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Jenifere R. Singleton
Brian B. Vavra
Jenny Kelley
Associate
President & COO
Management Committee, Partner
Benesch
Prosper for Purpose
Meyers, Roman, Friedberg & Lewis Meyers Roman is pleased to announce that Jenifere Singleton has been named to the firm’s Management Committee. Jenifere has worked in the firm’s Divorce and Family Law Group for 15 years and has developed a unique skill set and approach to domestic relations matters with the ultimate goal of assisting families in transition to understand and accept their “new normal.” She earned her law degree from Cleveland-Marshall College of Law in 2003 and bachelor’s degree from Villanova University in 2000.
Brian B. Vavra has joined Benesch as an associate in the firm’s Real Estate & Environmental Practice Group. He represents publicly traded companies, Real Estate Investment Trusts (REITs), institutional lenders, and developers. His work encompasses a variety of commercial real estate transactions, including the acquisition, disposition, and development of real estate, secured financing, and ground, retail, and industrial leasing.
Jenny Kelley was recently named President & COO of Prosper for Purpose, a purpose-driven public relations agency and Certified Benefit Corporation. Kelley merged her communications and development firm, Kelley Green Web, with Prosper in 2015. She has always been committed to social, environmental and economic sustainability; from grade school save the rainforest drives to growing Cleveland’s local food economy. Kelley holds a Bachelor of Arts in Sociology from Baldwin-Wallace College.
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CRAIN’S CLEVELAND BUSINESS
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PA G E 19
Jane Christyson
CEO of Girl Scouts of North East Ohio Jane Christyson’s time with the Girl Scouts long predates her current role as CEO of Girl Scouts of North East Ohio. She spent 20 years as a volunteer and member, during which she earned the highest award in Girl Scouts — the Girl Scout First Class Award (today’s equivalent is the Gold Award). ¶ A few years back, she decided to bring her 35 years of experience as a nonprofit professional to the regional chapter of the Girl Scouts. ¶ What keeps her interested in her work is getting to talk to members at events, service projects, camp, award ceremonies and more. ¶ “It reminds me what a difference we are making, not only in the lives of the girls , but in the whole community that is being lifted up by the power of the girl,” she said. ¶ Crain’s recently sat down with Christyson to discuss her role and the work of Girl Scouts of North East Ohio. — Lydia Coutré
Five things Favorite book “Quiet: The Power of Introverts in a World That Can’t Stop Talking,” by Susan Cain
Favorite spot in Northeast Ohio Any of the three Girl Scout camps
Advice for young girls Join Girl Scouts and take risks
If you weren’t leading Girl Scouts, what do you think your career would be? Costume designer for theater
Hobbies Sewing, fishing and volunteering
Why is this an important organization for girls? Because it is the best leadership development experience for girls in the world, one that is designed with, by and for girls. The exclusive all-female environment of a Girl Scout troop creates a safe space where girls can try new things, develop a range of skills, take on leadership roles and just be themselves. Girl Scouts fuels the female leadership pipeline and our alumnae are leading the way — 80% of female tech leaders were Girl Scouts, 76% of female senators were Girl Scouts and 100% of female secretaries of state were Girl Scouts. What are your goals for the organizations? We recently completed a strategy alignment process at our council, and I would say the focus areas determined by volunteers, community leaders, staff and the board are my highest priorities. They are: reach more girls, higher impact (strong programs), increased investments, effective operations and stronger brand. What are the biggest challenges facing the Girl Scouts of North East Ohio today? I would have to say building understanding of what girls in Girl Scouts get from the program and their impact in the community. I wish I had a huge marketing budget to tell this area all the good that our girls of courage, confidence and character do to make the world a better place.
Lunch spot Glenwillow Grille 29765 Pettibone Road, Glenwillow
The meal Saku tuna wrap for one, black bean burger for the other, and iced tea.
The vibe The restaurant offers up soups and salads, burgers, sandwiches, wraps, flatbreads and more. The relaxed but sophisticated atmosphere is a great spot for a meeting over lunch.
The bill $26.46, plus tip
What is the biggest misconception about Girl Scouts? That it’s cookies, crafts and camping, and that’s all we do. And it’s not true. We just released 23 new high-tech STEM badges in robotics — journeys that help girls think like a civil engineer, think like a citizen scientist. We have sort of these mind-expanding opportunities for girls to think of themselves in another way and challenge themselves to learn new ways to do things. With the Boy Scouts announcing that girls would be accepted, what does that mean for Girl Scouts of North East Ohio? It’s another competitor. We have a lot of competitors. ... (With) the people that are competing for girls’ time in sports and the arts and all kinds of programs. We feel and
continue to talk about why our program is special and unique, and that it’s the only girl-led and girl-driven organization there is. And we have this proven track record, we have lots of statistics and we have lots of information that can show that we know our program works. So I understand, you know, Boy Scouts and Girl Scouts have common roots. Nothing against the organization, I just think we have a much better experience for girls. Do the Girl Scouts fill a gap in how our society raises girls? I think we’re really there to teach, to give girls an opportunity to experience a leadership experience in a supportive environment where fear of failure doesn’t drive your actions, like you really feel like you can try. And if you fail, you’re going to get picked back up again by your sisters and you’re going to be able to continue on. There’s this thing like you really have got support around you with the leaders and the volunteers and everybody around you in order to take a chance. And that’s something that girls don’t necessarily have elsewhere? I don’t think so. I mean, you could argue sports, I suppose. You could probably argue maybe theater or some other things. ... I think all of that stuff is very fleeting. You might have it for one year. I think Girl Scouts can offer you a whole childhood of these kinds of things. Why is it important to have that environment in a girl-only space? I think there’s tons of research that’s been done that shows that girls in a girl-only environment will take more risk, it’s easier for them to recover from failure and try again, and will step up to lead, where they won’t do that in a co-educational atmosphere. … Our alumni studies really show that girls who were Girl Scouts … for at least three years, they make $10,000 more than their peers; they’re more likely to vote; they’re more likely to be engaged in their community in other ways, as volunteers; they’re more likely to have sought higher education — college and above; and probably most importantly, they express that they’re happier, more happy in their personal and professional lives than their non-Girl Scout peers. Why wouldn’t you want that for your daughter?
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