Issuu

VOL. 38, NO. 17

APRIL 24 - 30, 2017

Source Lunch

As Bolivar turns Ohio Means Jobs is looking for a new home on short notice. Page 3

Rick Batyko, senior vice president, Team Northeast Ohio Page 27

CLEVELAND BUSINESS

The List Largest family owned businesses Page 22

MEDICAL MARIJUANA

Clock is ticking on investment chances As start date for program approaches, potential grow sites are sought By JEREMY NOBILE

Illustration by David Kordalski

jnobile@crain.com @JeremyNobile

Communities across Northeast Ohio are debating whether to welcome medical marijuana businesses and how to regulate them locally, but the ones who haven’t made up their minds at this point are much more likely to miss out, particularly in terms of the more lucrative operations. That’s because those seeking licenses from the state for different activities, cultivators in particular — only 24 grow sites will be permitted initially, though the state will have an option to increase that number in September 2018, when the medical marijuana program is required to be up and running — have been actively looking at potential cities and sites to call home for quite some time. Even if a city intends to open up to

time and resources to identify a piece of property, engage with the owner for a lease option contract or purchase a contract if they don’t know the municipality is going to allow for this type of business in the commu-

marijuana businesses in the future, those that don’t seem very hospitable right now generally aren’t being as targeted by entrepreneurs and investors. “People aren’t going to spend the

nity,” said Thomas Haren, an attorney at Seeley, Savidge, Ebert & Gourash who’s working with aspiring marijuana businesspeople. “Community support is going to be one of the most important parts of the application. And if a community isn’t indicating it’s supportive of the industry, they’re basically foreclosing on any investment.” Several cities are taking “wait-andsee” approaches, keeping temporary bans in place until they do more research or the industry begins to mature in Ohio. Local governments doing that typically cite leeriness of what the industry could mean to their cities — some worry of increases in crime — or haven’t settled on their own local rules. Some just don’t like the idea of marijuana being produced or sold in their towns, even solely for medical purposes. Others are showing support in various degrees. SEE MARIJUANA, PAGE 25

HEALTH CARE

Innovation center is looking to keep blood flowing By LYDIA COUTRÉ lcoutre@crain.com @LydiaCoutre

In the decade since its founding, the Global Cardiovascular Innovation Center has reached some milestones its leaders are quick to tick off — and now the center is considering how to sustain its operations as its

original funding source wanes. A $60 million grant from Ohio Third Frontier established the multi-institutional center, which aims to advance cardiovascular innovation and contribute to economic development in Ohio. Since then, the center — which develops, incubates and commercializes cardiovascular technology — said it has created more than 1,000 jobs in Ohio, attract-

ed 17 new businesses to the state, granted funding awards totaling $21.5 million to support 51 technologies in companies and institutions in the state and helped secure more than $1 billion in new funding. “We have far exceeded every one of the original metrics that was established for the company or for the organization,” GCIC managing director Mark Low said. “Now, it’s taken us a

little bit longer to do than was originally anticipated ... It was a five-year grant, and we’re in Year 10. However, we still have not spent the full $60 million.” So far, the center has spent about $53 million of that original award, and Low expects that remaining funding will carry the center through 2018. Beyond that, the GCIC is looking at several options. For one, the

center is looking to expand the amount of equity it holds in some of the projects, which will hopefully bring a return in the future. Low is also looking at securing more investments from sources beyond Third Frontier, including venture capitalists, commercial entities, foundations, philanthropists and other organizations. SEE CENTER, PAGE 23

Legal industry outlook << ‘Stagnant’

demand forces firms to adapt in quest to maintain profits. Page 13 Succession planning is difficult, but crucial, in an older industry. Page 15 Five to watch in law. Page 16

CONTENT

SPONSORED BY

NEWS AND TRENDS FROM NORTHEAST OHIO’S TECHNOLOGY SECTOR

TECH MATTERS NEO’s tech scene kicks into high gear

PHOTO PROVIDED BY WE CAN CODE IT

We Can Code IT was launched in 2015 and provides coding boot camps to women, minorities and those who are economically disadvantaged. The program expects to graduate 300 students this year.

Setting the pace In the late 1990s and early 2000s, Northeast Ohio had one of the lowest rankings for entrepreneurial friendliness in the nation. A little more than a decade later, Cleveland was ranked as one of the top 50 entrepreneurial-friendly cities in the world (No. 34), bolstered by a network of entrepreneurs, mentors, advisers, funders and other supporters, according to JumpStart Inc.

CLEV

L A

CALENDAR OF

EVENTS APRIL 27

Venture capitalists and angels invested a total of $252 million in Northeast Ohio in 2016, with 115 companies receiving 391 total investments. The health care and information technology sectors dominated the venture capital landscape. Thirty of those companies were in health care and represented about $130 million, while 38 IT companies received more than $83 million. Those two sectors accounted for about 85% of total venture capital raised in Northeast Ohio in 2016. “The key pieces are in place, and entrepreneurial successes are now becoming a regular part of the news in Northeast Ohio,” said JumpStart CEO Ray Leach.

organization needs to learn how to code.” Meanwhile, OHTec is looking to foster industry connectivity. The group is rolling out technology peer group meetings. These small gatherings enable company leaders to discuss high-priority, critical topics such as product management, cybersecurity and IT for HR directors. OHTec’s flagship Tech Week event begins this week, with lots of programs oriented toward those who work in the tech space. Brainard hopes to gather a lot of information during

TO READ PREVIOUS TECH MATTERS STORIES, GO TO crainscleveland.com/techmatters.

Presented by OEC, this series is full of tech events and programs that support and promote Northeast Ohio’s vibrant tech community. The week’s highlights include an Innovation Event in partnership with the Health Tech Corridor; an Enterprise Tech event, with forums discussing big data, cybersecurity and the Internet of Things; several presentations by software developer boot camp organizations; Women in IT; and the signature event, the Best of Tech Awards, which celebrates regional accomplishments in tech. During this week, the Medical Capital Innovation Competition will award winning health care big data innovators with cash prizes, funding, mentoring and potential access to Cleveland’s three largest health systems. Events also include a Linking IT Talent to Opportunity career and professional development event; Women, Wine and Web Design; IT Speaker Series; Employer and Student Speed Networking; LaunchTown Entrepreneurship Awards; TechPint; and a Passport to IT Careers Day at the Global Health Innovation Center. Info: Techweekneo.com.

he growth of the region’s software development sector is illustrative of the vibrancy of Northeast Ohio’s tech scene. A number of software companies have grown continuously over the last decade or so. Indeed, according to the Crain’s Cleveland Business 2017 Book of Lists, the top 20 local software developers employ about 4,028, which is more than double the 1,680 individuals employed by the top 20 software companies in 2004. “There is a lot of activity in Northeast Ohio due to the growth in the tech sector,” said Dean Brainard, executive director of OHTec. Some of these companies developed a great product, exploited their niche, substantially grew revenue, attracted attention and have since been acquired by financial or strategic buyers, said Brad Nellis, director of market strategy for Expedient and former executive director of OHTec. “Some might be disappointed that our software companies weren’t the ones doing the acquiring, but in each case, not only did the acquired company maintain operations in the region, but they’ve grown headcount and/or made acquisitions themselves later,” Nellis said. While companies continue to grow, the demand for talent is growing more intense. National employment of those in computer and information technology occupations is projected to grow 12% from 2014 to 2024, faster than the average for all occupations. Northeast Ohio is expected to add more than 500 computer-related jobs from 2015 through 2020, according to Team NEO, the region’s economic development organization. To that extent, software development boot camps are cropping up to help plug talent gaps, including The Software Guild in Akron and Tech Elevator in Cleveland and Columbus. We Can Code IT also offers coding boot camps in Cleveland and Columbus and aims to recruit more women and minorities to the field. CEO Mel McGee points out that colleges and universities graduate only about 15% to 20% of women and minorities in computer science. More than 85% of We Can Code IT students are women, minorities or are economically disadvantaged, she said. “We enrolled 100 students in 2016. Our placement rate among full-timers was 85%,” she said. We Can Code IT plans to graduate 300 students this year. “The time is now,” McGee said. “Large corporations are saying that everyone in their

APRIL 24-28

this event to help develop an interactive tech ecosystem map. The map would identify all the players in Northeast Ohio’s tech community, including a roster of tech companies, funding opportunities, corporations looking for niche products, workforce development programs, entrepreneurial support, university technology offerings and government and civic needs. “We want to have a better understanding of our regional tech ecosystem and build its visibility to those inside and outside the region,” he said.

Lunch + Learn: Peaceful Fruits and Shark Tank: 11:45 a.m. to 1 p.m., LaunchHouse, 675 Alpha Drive, Suite K, Highland Heights. Evan Delahanty, CEO of Akron-based Peaceful Fruits, will talk about his experience in participating on ABC’s Shark Tank. Within 24 hours after the show aired in February, Peaceful Fruits received more than double of the total number of orders in 2016. Info: www.meetup.com/LaunchHouse/ events/238588770/

MAY 11 Greater Cleveland Middle-Market Forum: 7:30 a.m. to 11:30 a.m., Corporate College East, 4400 Richmond Road, Warrensville Heights. Registration is open for this program that highlights middlemarket trends. Panel discussions include data payoffs, leadership, Millennials and cyberthreats. Info: http://tinyurl.com/kroqbx3

MAY 16 Impact Program Entrepreneur Showcase: 5:30 to 8:30 p.m., JumpStart, 6701 Carnegie Ave., Cleveland. Small business owners and entrepreneurs who participate in JumpStart’s Core City: Cleveland Impact Program have the opportunity to network with program graduates, connect with resource providers and deliver “demo day” style pitches. Info: https://www.jumpstartinc.org/events/impactprogram-entrepreneur-showcase/

A PRODUCT OF

CRAIN CONTENT STUDIO C l eve l a n d

CRAIN’S CLEVELAND BUSINESS

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PA G E 3

Ohio Means Jobs is in need of a new home Public employment agency is being forced out of longtime headquarters on Bolivar Avenue By JAY MILLER jmiller@crain.com @millerjh

The downtown Cleveland office of Ohio Means Jobs, the public employment agency run collaboratively by the city of Cleveland and Cuyahoga County, is being forced to move its downtown office from its longtime home at 1020 Bolivar Ave. on short notice. But no one is able or willing to say why or discuss any details of the move. And no one is willing to talk about the fate of the 98-year-old, four-story building a stone’s throw from the Gateway complex. The property has been embroiled in legal and tax problems for more than a decade. That is not unheard of in the dark and complicated world of urban real estate development, where property owners shield their investments and their financing behind opaquely named limited liability corporations. One LLC linked to this property goes by the name 1020 Bolivar First Floor Mortgage LLC.

Grace Kilbane, executive director of the Cleveland/Cuyahoga County Workforce Development Board, the official name of the local operation, referred a reporter to city and county officials for comment. Though the agency is a joint city-county operation, the lease on the office is held and managed by the city of Cleveland. Asked the status of that lease on Thursday, April 20, Ken Silliman, chief of staff to Cleveland Mayor Frank Jackson, replied with a terse, incomplete email that said the city is continuing negotiations for a lease. Because the lease is being handled by the city, county spokeswoman Mary Louise Madigan could only say, “The county is aware that they are moving.” But a lease for the workforce agency was a late addition to the Cleveland City Planning Commission meeting the next day, Friday, April 21. There, city real estate commissioner James DeRosa sought authorization to enter into a 10-year and three-month lease for 30,000 square feet at the former Whitlatch Building at 1910 Carnegie Ave. After that

meeting, DeRosa declined to comment further on the lease. Until that property is available for move-in, the downtown Ohio Means Jobs operation is planning to share space at its suburban, county-leased office at 11699 Brookpark Road in Parma. In another twist, the Whitlatch Building was owned by Cuyahoga County until 2014, when it was sold to the Geis Cos. after the county moved into the administration building the county is leasing from Geis. The building is now a part of Hemingway Development, a partnership that includes Geis co-owner Fred Geis and James Doyle, a real estate investor. DeRosa told the planning commission that the city’s lease is with an entity called HD Medina I LLC. Streetsboro’s Geis Cos. purchased the Whitlatch Building from the county for $600,000 in 2014. The new owner had lined up Miami-Jacobs Career College, a for-profit business and technical college, to lease the first floor and basement of the building, but, DeRosa told the planning commission, that deal fell through when the college failed to get accred-

itation. Ohio Means Jobs used to be called the Employment Connection before the administration of Gov. John Kasich began an overhaul of the state’s jobs program. It is funded by federal dollars funneled through the states — in Ohio, the Department of Jobs and Family Services — then to publicly appointed local workforce development boards. The city of Cleveland and Cuyahoga County each appoint members of the Cleveland/Cuyahoga County Workforce Development Board. But that board, now led by Quentin McCorvey, principal of M&R Distribution Services in Cleveland, is not privy to the lease negotiations being handled by the city. As for 1020 Bolivar, it has been tangled in litigation that began in 2011 and remains active. At the time, Cuyahoga County was seeking more than $1 million in arrears property taxes owed by the former owner, a corporate child of the Frangos Group. Those taxes have been paid, according to a county spokeswoman. The building is actually a four-unit commercial condominium with

three units owned by BC16 LLC, which public records trace back to Birmingham Capital of Birmingham, Mich., a former lender to the Frangos Group. Brent Truscott, a partner with Birmingham Capital, declined to discuss the property and said he would ask the firm’s president, Nicholas Coburn, to respond. Coburn did not call back at press time. The other unit is owned by 1235 Euclid Avenue Cleveland LLC, which traces back to the Frangos Group. At press time, the Frangos Group was offering upper floors in the building, owned by BC16 LLC, for lease at $12.50 a square foot. It turns out, BC16 has leased the space it owns in the building to the Frangos Group and the city has been subleasing the Ohio Means Jobs space from the Frangos Group. Reached by phone, Steve Spithas, a Frangos property manager whose name is attached to the lease offering, declined to comment. Similarly, Hanna Commercial Real Estate has until recently offered the building for sale for $5.5 million. Broker Gregory West did not return a phone call at press time.

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CLEVELAND BUSINESS 700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113 Phone: 216-522-1383; www.crainscleveland.com Reprints: Krista Bora; 212-210-0750; kbora@crain.com Customer service and subscriptions: 877-824-9373

Volume 38, Number 17 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly at 700 West St. Clair Ave., Suite 310, Cleveland, OH 441131230. Copyright © 2017 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373.

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Prime industrial, office and retail sites at www.solonohio.org City of Solon • 34200 Bainbridge Road • Solon, Ohio 44139 • 440.337.1313 Peggy Weil Dorfman, Economic Development Manager • pweil@solonohio.org

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CRAINâ€™S CLEVELAND BUSINESS

EXCLUSIVE VENUES â€˘ PERFECTMENUS Western Reserveâ€™s future may include Fred Geis EXECUTIVE CATERERS â€“ EXCLUSIVE CATERER FOR CLEVELAND PUBLIC AUDITORIUM AND CONFERENCE CENTER

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In the latest sighting of real estate developer Fred Geis, he may play a part in helping even higher-profile developer John Ferchill resolve a foreclosure proceeding over the Western Reserve Building. Sources familiar with the situation have seen Geis and associates inspecting the eight-story downtown Cleveland landmark at 1462-1480 West Ninth Street dating from 1897. The property includes a contemporary office building the Ferchill-led Reserve Building Associates ownership group constructed in 1989 that connects to the landmark. Attorney Jon Pinney, who represents Ferchill, confirmed in a phone interview that Ferchillâ€™s Reserve Building Associates is negotiating a potential settlement with its lender that involves Geis. In fact, Pinney said resolving the dispute rests on if Geis invests in the property to satisfy the lender. Geis, who has emerged as Clevelandâ€™s most engaged real estate developer since he and brother Greg Geis repurposed long-empty Ameritrust Tower as The 9 with apartments and Metropolitan hotel in 2014, did not return three phone calls or respond to an email about the property. Online records of the Ohio Eighth District Court of Appeals (Cuyahoga County) show the court has delayed hearings and appointing a receiver for the complex because of a potential settlement. The latest update on the tentative settlement, which is not outlined in

The Western Reserve Building on West Ninth Street is in foreclosure. (Stan Bullard)

online filings, was due Thursday, April 20, according to court records. If a pact is not reached, briefs for the case are due Thursday, April 27. Reserve Building Associates appealed on Nov. 14, 2016, a ruling by Judge Kathleen Ann Sutula of Cuyahoga County Common Pleas Court finding the lender, Ohio Realty Development Fund of Cleveland, is entitled to the property under what was originally a $20 million loan and that Ferchill should pay a $4 million guarantee on it. Ferchillâ€™s counsel seeks an appeal on grounds the local court did not take into account disputed facts in the case and that Reserve does not control all the relevant loans. Ironically, the court found for the lender over Ferchill, who had sued Ohio Realty Development Fund because it allegedly did not operate in good faith and did not recognize plummeting values of the cityâ€™s office buildings in work-out negotiations. The fund assumed the loan from Ferchillâ€™s original lender, the former

Leader Mortgage Co. Buildings such as Western Reserve, which was constructed by Cleveland industrialist Samuel Mather, have only recently gained value as potential candidates for conversion to apartments. The 140,000-square-foot complex is about 40% empty, according to court documents, which put its value at $4 million. While the newer annex is problematic in such a conversion â€” it would not qualify for crucial federal and state restoration tax incentives â€” the Western Reserve Building is one of the cityâ€™s most noted landmarks. It was one of Clevelandâ€™s first skyscrapers. It was designed by fabled Windy city architects Burnham & Root. Tom Yablonsky, executive director of the Historic Warehouse District Development Corp. and vice president of the Downtown Cleveland Alliance, said the building is one of the cityâ€™s most architecturally significant structures. Although the original building was renovated for offices in the 1970s and was a key structure in late Higbee Co. chairman Herbert Strawbridgeâ€™s efforts to revitalize downtown Cleveland, it has not benefited from historic tax credits â€” the prior work preceded federal standards for restorations. He said the new-building annex is one of the most significant downtown in keeping an older building marketable. Yablonsky said he does not know what kind of project Geis might consider for the complex. However, if no deal results, other bidders might be interested. Yablonsky said at least a half dozen potential buyers or joint venture partners have discussed the property with the districtâ€™s staff.

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CRAIN’S CLEVELAND BUSINESS

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The Cleveland-Akron metropolitan area lost 798 jobs between February and March of this year, but that slight dip means little to the longterm outlook since the region gained 708 jobs between March 2016 and March 2017 with employment in March at 1,175,598 on a seasonally adjusted basis. “We are still holding our own relative to last year, but at a slower pace currently,” wrote Jack Kleinhenz, the Cleveland Heights economist who created the ACE Report model, in his analysis. “The economy is attempting to turn the corner toward a bit faster growth, but the momentum has been slower than expected. The unexpected backsliding in March car sales and February’s flat consumer spending confirm a sluggish start to the spring selling season.” Kleinhenz wrote that policy uncertainties due to the wrangling of issues by the Trump administration and Congress — in particular the size, composition and the timing of any tax cut and infrastructure spending package — are complicating the outlook. Kleinhenz added that a conundrum within the labor market is a resistance to wage growth in the face of growing job openings and a shortage of qualified workers for skilled positions. “Until wage gains accelerate, overall economic spending is expected to continue on a moderate path,” he wrote. In its annual Labor Day report last year, Policy Matters Ohio, the labor-backed Cleveland think tank, fo-

Crain’s Cleveland Business has partnered with The Ahola Corp., a payroll and human capital management firm in Brecksville, and local economist Jack Kleinhenz to provide monthly data — and clarity — about a key factor in business decisionmaking: the size of Northeast Ohio’s workforce.

Seasonally adjusted employment numbers, Northeast Ohio NOVEMBER: 1,165,227 DECEMBER: 1,164,811 JANUARY: 1,174,442 FEBRUARY: 1,176,396 MARCH: 1,175,598 1,130,000

1,140,000

1,150,000

cused on those wages. It argued that while pay in Ohio has been growing — to $16.61 an hour for the median worker — it remains far behind what the median wage was in 1979 when adjusted for inflation. “Wages are behind in large part because our fastest-growing sectors and our most common jobs are low wage,” the report, “Still Struggling: The State of Working Ohio 2016,” said. “Of our 13 most common occupations, only two pay more than 200% of the official poverty line for a family of three.” The state lost 75,000 relatively well-paying manufacturing jobs between December 2007 and June 2016, Policy Matters reported, while gaining 176,700 lower-paying jobs in education and the health services and the

1,160,000

1,170,000

leisure and hospitality industries. A pair of economic analysts at the Federal Reserve Bank of Cleveland see wage growth a little differently. In an “Economic Commentary” released in March, Roberto Pinheiro and Meifeng Yang contend that wage growth nationally has been sluggish since the Great Recession due mostly to weak growth in labor productivity and lower-than-expected inflation. But they argue that “wage growth since late 2014 has actually been above what would be consistent with realized labor productivity growth and inflation, and this trend in wages reflects an increase in labor’s share of income.” This, they write, shows “evidence that this increase in the labor share may be due to a reversal of the trend to replace labor with capital.”

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RelateCare picks Cleveland for U.S. center By LYDIA COUTRÉ lcoutre@crain.com @LydiaCoutre

An Irish-American health care company has chosen Cleveland to launch its largest office in the United States. Operational since December, RelateCare’s first U.S. Patient Coordination Center already employs more than 30 clinical and administrative staff who provide patient access and engagement services to several health care systems. The company expects to grow its staff to 100 people in its first year, and more than 200 clinical and administrative employees over the next three years. RelateCare, which began as a joint venture with the Cleveland Clinic, provides onsite and offsite quality assurance, workforce optimization and leadership programs. The other part of the business — the contact centers — is what the company is growing today and what brings RelateCare to Cleveland. At the center, located at 3615 Superior Ave. in Cleveland, staff will be able to communicate with patients 24/7 through telephone, email, webchat, social media and text messaging. “(We) develop programs of work and best practice engagements that ultimately lead to improved patient access, improved patient experience and then some other really good benefits around efficiencies or around saving,” RelateCare CEO Conor O’Byrne said. RelateCare and its parent company Rigney Dolphin have had a relationship with the Clinic since 2009. Though the company looked at other locations, Cleveland was the right fit, O’Byrne said. “It just to me was our familiarity with the city, having gotten to know the city over the last eight years,” he said. “Also all of the recent developments that have gone on in Cleveland and the continuing growth, I suppose, of the health care industry in Cleveland just made it a good place to open our first center.” Several organizations, including the Cleveland Clinic, outsource their contact center services to RelateCare, which fields pre-access, pre-hospitalization and post-discharge calls. “Over the years there have been some great successes and we look forward to developing new and innovative solutions together to meet the shifting demands of health care delivery,” Mary Curran, senior director of executive administration at Cleveland Clinic, said in a statement. “We hope our relationship will continue to develop as RelateCare launches their new Patient Coordination Center in Cleveland this month.” Last year, the Ohio Tax Credit Authority approved a five-year, 1.3% Job Creation Tax Credit for RelateCare. Health systems that have partnered with RelateCare have seen cost savings, according to data provided by the company. The company said one health system in the Midwest has seen savings of more than $362,000 per year after establishing an electronic appointment scheduling system across certain primary care departments. Another saw reductions between 26%

and 34% in readmissions with RelateCare’s post-discharge follow up program, which addresses risks that could lead to readmission and reassures and engages patients as they transition home. “They are a great addition to the more than 700 biohealth companies, 30 clinical, research and educational institutions, and 230,000 biomedical and health care workers that call The Medical Capital home,” Aram Nerpouni, president and CEO of BioEnterprise, said in a statement. BioEnterprise, JobsOhio, Team NEO and the city of Cleveland collaborated to help bring RelateCare’s U.S. headquarters to Cleveland. The company also maintains a small of-

AL TH

fice in Boston. RelateCare already had a couple of small offices in Cleveland: One in the Cleveland Clinic Innovations offices, which they will maintain, and another in Global Center for Health Innovation, which they’ve given up in their move to the new Patient Coordination Center. “A natural fit for The Medical Capital, RelateCare joins the ranks of innovative health care companies thriving in Northeast Ohio,” Aaron Pitts, JobsOhio’s senior managing director for biohealth, said in a statement. “We appreciate RelateCare’s partnership approach and look forward to helping the company scale from an Ohio base of operations.”

“(We) develop programs of work and best practice engagements that ultimately lead to improved patient access, improved patient experience and then some other really good benefits around efficiencies or around saving.” — Conor O’Byrne, RelateCare CEO

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CRAIN’S CLEVELAND BUSINESS

Rockwell owner hit with foreclosure suit By STAN BULLARD sbullard@crain.com @CrainRltywriter

NOMINATIONS OPEN FOR 2017 Crain’s Cleveland Business’ award and recognition programs honor those throughout the Northeast Ohio community who are excelling and thriving in their industry.

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A California-based investor group that owns the massive Rockwell Automation complex in Mayfield Heights is facing a massive foreclosure proceeding. Norman Rockwell LLC, a Poway, Calif. investor group that owns the 462,000-square-foot complex occupied by hundreds of Milwaukee-based Rockwell Automation workers, is the subject of a $52 million foreclosure suit filed April 14 in Cuyahoga County Court of Common Pleas by C-III Asset Management of Irving, Texas. The three-story group of buildings is off of Parkland Drive in Landerhaven Corporate Center. Rockwell Automation produces sensors and systems and other gear related to factory operations and related businesses. C-III is a special servicer for Bank of America, the trustee of the loan sold to multiple investors in 2006. The loans are technically termed collateral mortgage-backed securities. Norman Rockwell LLC, which was formed by Norman Real Estate in California, paid Rockwell $65.4 million for the sprawling property on July 24, 2006, according to Cuyahoga County land records. Rockwell Automation, an industrial automation and information company, continues to maintain and operate the facility under a long-term lease. Rockwell Automation even pays the property taxes on it. Such single tenant net leased deals are common among corporations that want to extract capital from their real estate and investors who want investments secured by long-term

leases from high-credit tenants. However, C-III’s court filing said the Norman Rockwell LLC did not satisfy the $52 million mortgage when it came due March 11, 2016. Since then, the suit said, the property owners owe interest and fines that are due on a daily basis and totaled $10 million as of the date the suit was filed. The lender has requested the appointment of a receiver and the ability to obtain ownership of the complex under the terms of the mortgage. The case was assigned to Judge Joan Synenberg, who assigned it to a mediator. Norman Rockwell LLC has not filed an answer to the suit, and its Del Mar, Calif., lawyer, Norman Nouskajian, did not return two calls and an email. The dispute falls into a broad category of commercial real estate financed by long-term collateralized loans during the run-up to the 2008 financial crisis that are reaching the end of their term and becoming due. However, finding such loans is difficult because lenders are setting stricter requirements in the post Dodd-Frank era. That means property owners may have to cough up millions in cash to secure a new loan if they can find a lender willing to provide one. Reduced property values after the Great Recession also compound the problem. Rockwell Automation continues to operate in the property. From the eastern suburb of Cleveland, it operates its industrial technology controls business under the Allen-Bradley name. The building’s address honors that legacy, as it is at 1 Allen Bradley Drive. Rockwell Automation constructed the Mayfield property in 1994 to provide more room for staff growth and consolidate operations from multiple smaller Cleveland-area locations.

Amazon is leasing large space in Euclid By STAN BULLARD sbullard@crain.com @CrainRltywriter

Online retailing has delivered again in Northeast Ohio, as Amazon has leased most of a new industrial building at Bluestone Business Center in Euclid. According to a lease memorandum filed March 8 in Cuyahoga County property records, the Seattle-based company has leased upward of 80,000 square feet in Bluestone Business Center II, 26555 Bluestone Blvd. Bluestone developer Ray Fogg Jr., CEO of Brooklyn Heights-based Ray Fogg Corporate Properties, would say nothing about the lease other than, “You see what it says.” The space is for an Amazon delivery station, according to a posting for parttime jobs on Craigslist Cleveland. Clicking on the post takes applicants to an Amazon website that says the shipping and receiving jobs at such facilities are the last stop in fulfilling its twoday shipping and same-day delivery promises. The post does not indicate when work would begin or how many staffers the online behemoth is hiring in the suburb east of Cleveland. However, Fogg did say his company has about 42,000 square feet left to lease in the building. Prospects are negotiat-

ing for that space, so the company will explore building again at the 80-acre industrial park, Fogg said, perhaps starting to build by late this summer. It’s the second big play for Amazon in the region in as many years. Last year, it leased space at Cornerstone Business Park in Twinsburg. It secured state incentives to hire as many as 150 people last fall for what it termed “a sorting center.” The firm also leased space for a package center at 2020 Euclid Avenue in Cleveland this winter. Amazon typically requires its property owner vendors to sign non-disclosure agreements. An Amazon spokeswoman did not reply to an email from Crain’s by April 19. The second building at Bluestone, with 127,000 square feet of warehouse/distribution space under a ceiling 32 feet from the floor, was finished last December, according to online realty data provider CoStar. Fogg said his firm may vary the design of the next building so it could accommodate smaller tenants to diversify its tenancy in the park. Bluestone is another round of industrial development of an old factorial site in the region. In Bluestone’s case, it was once the home of a 660,000-square-foot copper and brass rolling mill, first as Chase Brass and later as PMX Industries.

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The Dish: Susan Condon Love

Former TV anchor is now big part of Sides to Go Former journalist Ben Holbert is known for his 25 years as a TV reporter in Northeast Ohio, including nearly 18 years as a reporter/anchor at WKYC Channel 3. After he left the airwaves in 2005, Holbert explored several new careers: communications director for the Cleveland Municipal School District, a consulting business, a councilman in Woodmere (a position he still holds) and an adjunct professor at Cleveland State University. Holbert’s newest venture has him out of his communications comfort zone and into another daily consumer need — food. Holbert is moving into this direction with the help of Claude Booker, who is expanding a food business of his own. In 2015, Holbert started a “fast-casual” Sides to Go food cart and catering business, leasing the concept from Booker. Booker opened his Southern-style restaurant, Sides to Go BBQ, in Macedonia in November. He also runs Simply Southern Sides, which provides his barbecue and side dishes to specialty markets such as colleges, schools and the military, according to the company’s website. Holbert is now on target to open a brick-and-mortar Sides to Go BBQ restaurant in Maple Heights in late May or early June, giving Booker’s concept further reach. The 2,500-square-foot Maple Heights restaurant will be at the corner of Warrensville Center Road and South-

Condon Love is a freelance writer covering the restaurant scene in Northeast Ohio.

gate Boulevard in a former Donatos Pizza site. Booker leases the Sides to Go “system” to Holbert (Booker says it’s not a franchise). Under the arrangement, Holbert agrees to use and purchase Sides To Go brand-name products, which he will resell through his cart, restaurant and catering services. He also agrees to purchase the Sides to Go logo. Beyond that, details are proprietary, Booker said. The Sides to Go system was started as an entrepreneurial arm of Simply Southern Sides to help create business opportunities for low-income and minority communities, according to Booker. Booker hopes this is the start of something big. He believes the restaurants, which feature “true Southern dishes,” will be the biggest chain of fast-casual food stores to hit America palates since Chipotle opened in 1993. Booker already is working with others and is in the early planning stages for two more Sides to Go BBQs, likely to be located in Garfield Heights and Medina. Holbert has invested about $18,000

in the food cart and $175,000 in the new restaurant. Emotionally, he is charged up and ready to go with a business that he hopes will rejuvenate the Southgate neighborhood. Renovations are nearly complete, he said. Holbert first met Booker 10 years ago, when he was holding a meeting as president of the nonprofit, service-oriented fraternity Omega Psi Phi. “A gentleman came up to me after a meeting and said, ‘Ben, do you mind if I cook for everyone for the next meeting?’ I told him fine. I didn’t know he was an executive chef,” Holbert said. At the next meeting, Holbert watched as Booker brought in Carolina pulled pork and chicken, Bayou glazed rib tips, Cajun-style dishes, St. Louis-style ribs, collard greens, sweet corn and baked beans. “We had 40 people in that meeting,” Holbert said. “The next meeting, we had 150 people come.” In 2015, Holbert and his wife, Joyce, were looking for new challenges and he remembered the draw of Booker’s food. The couple attended a seminar Booker presented about his Sides to Go concept of carts, catering and brick-and-mortar restaurants. The three-tiered-income concept was appealing. “Following his lead, we started the food cart,” Holbert said. Rather than preparing the food in a truck, Holbert said, they put in an

Ben Holbert and his wife, Joyce, began their foray into the restaurant business with a food cart. (Contributed photos)

order to Booker, who provides the already cooked food, creating essentially a mobile cafeteria. In 2015, Holbert took his Sides to Go plans and entered a pitch competition by the Urban League of Cleveland. He won, receiving a year’s worth of business advice from Urban League experts, specifically with Darrell Johnson, director of the Minority Business Assistance Center, and later with Michael Obi of the league’s Entrepreneurship Center. “We provide advice and are a sounding board for such things as picking a location, negotiating a lease, asking the right questions and legal advice if people need it to make sure such things as a lease is balanced,” Obi said. Advice also includes helping fu-

ture entrepreneurs find ways to have access to funding. On average, about 60% of new restaurants fail in the first three years, according to a study by the Ohio State University. “By asking for help, getting expert advice and having a sound business plan, that percentage is cut in half,” Obi said. Holbert will continue working the cart and catering events after the restaurant opens. He will hire 15 restaurant employees, with hopes to eventually increase that number to 25. As part of the Sides to Go lease agreement, the restaurant has access to all recipes and cooking assistance from Booker. “This is a game-changer. I love the location,” Holbert said. “We hope to be a part of the resurgence of Southgate.”

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CRAIN’S CLEVELAND BUSINESS

Opinion From the Editor

You can be part of Cleveland Homecoming

Editorial

Bravo When asked to rattle off Cleveland’s finest institutions, the Cleveland Orchestra is usually top of mind. For the last century, the orchestra has dazzled audiences around the world and, over the last few years in particular, explored new ways to inspire audiences of all ages beyond the gilded wonder of Severance Hall. Just recently, the orchestra unveiled the details for its centennial season, and the lineup includes something for just about all palates. As such, Northeast Ohio must step up in this critical year — both in terms of attending performances and through philanthropy — to support this dynamic institution. The orchestra, like many arts organizations, has faced its share of challenges in recent years. For years, the orchestra has done a fine job of weathering those challenges, though fiscal 2016 proved to be a particularly trying year despite strong attendance and fundraising, as it finished $2.4 million in the red and its endowment slipped. One thing the orchestra hasn’t done over the last several years is rest on its laurels and long for days gone by. In 2010, thanks to a generous gift from the Maltz Family Foundation, the orchestra launched its Center for Future Audiences — an initiative designed to drum up interest among young people for classical music. In particular, its “Under 18s Free” program has resulted in a boon in attendance. Today, more than 20% of its attendance is comprised of concertgoers age 25 and under. Plus, its neighborhood residency programs have brought the orchestra to areas like Cleveland’s Gordon Square and Hough neighborhoods — areas that are a far cry from the orchestra’s comforting confines of University Circle. Northeast Ohio has no shortage of wonderful cultural attractions, and given the region’s stagnant population growth, our entertainment dollars are coveted more than ever. However, over the next year during the centennial celebration, the orchestra is perhaps more deserving than most. And if you happen to attend a performance, we’d suggest bringing

someone who has never witnessed an orchestra performance. After all, the onus is also on us to ensure this critical institution — and, of course, the art form — lives on.

Rock on

Now — shifting from Bach to Bowie — the orchestra’s younger cultural counterpart, the Rock and Roll Hall of Fame, is in the midst of its own transformation efforts, and they too deserve recognition. Since he took over as the Rock Hall’s CEO in 2013, Greg Harris has been quietly tweaking how the almost 22-year-old institution operates, and the changes are starting to result in an attendance surge. Chris Connor, the retired Sherwin-Williams head who now serves as the Rock Hall’s board chair, perhaps summed it up best in a recent interview with Crain’s. “For some people, that would be fine and we could sit back and rest on our laurels,” Connor said. “But this is a 20-year-old institution, and it’s time to give it a good kick in the backside and take it to the next level.” In addition to freshening up its digs, the Rock Hall has changed its approach to exhibits. The Rock Hall has also made a concerted effort to bring in more locals through concerts and other community events. And perhaps most notably, next year, the annual induction ceremony will return to Cleveland — which now will occur every other year. Some civic observers have questioned whether Cleveland can support hosting the inductions regularly — after all, it’s a costly endeavor to produce that requires extensive outside support in addition to the designated dollars generated by Cuyahoga County’s hotel bed tax. That said, the Rock Hall’s economic impact — and that of the inductions — is without question.

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Calling all Northeast Ohioans. This October, we are asking our region’s best and brightest to come home for a reunion like we’ve never seen before. And we need your help. Our community will host Cleveland Homecoming on Oct. 25-27. You might remember that I wrote about this impactful effort last August. Crain’s Cleveland Business is serving as the convener and producer of this three-day program — but this is not a Crain’s event. Instead, this belongs to our community. We plan to bring back “expatriates” — people who were born, raised, went to school or worked at some point in their lives in Northeast Ohio — to explore opportunities to invest, engage and reshape Elizabeth our region. We will bring together some of McIntyre the best and brightest people who currently live in Northeast Ohio with those who consider our region home but whose pursuits over the years led them elsewhere. Over the course of several days, these “expats” will meet with key local executives, civic leaders, investors and entrepreneurs to hear stories of how investment has helped Cleveland transform itself, as well as the challenges the region still faces. They will experience during immersive tours the change that has taken place in our region and hear from those who helped make it happen. We’re hoping to inspire those with roots in Northeast Ohio to take an active role in ensuring that our region continues to make strides forward. We are fortunate to have Detroit Homecoming as a successful blueprint. That effort was the brainchild of retired Fortune publisher Jim Hayes, who in 2014 reached out to our sister publication Crain’s Detroit Business to partner on that effort. The successes that arose from the first three Detroit Homecomings are impressive. Those events have brought about 500 former residents back to Detroit and resulted in more than $300 million of pending or direct investments from those who have decided to reinvest in and reconnect with their hometown. Some even decided to move back, including my colleague Ron Fournier, a political columnist and editor in Washington, D.C., who is the new publisher and editor of Crain’s Detroit. We now are in the process of reaching out to people like Fournier, people who went on to become highly successful elsewhere but who always remember where they came from. Thanks to our partnerships with local high schools and universities and dozens of community leaders, as well as your suggestions and our own research, we have identified about 400 people with ties to Northeast Ohio whom we’d like to invite back. You’d be amazed at the people who at one time called our region home. They populate virtually every facet of business, politics, academia and the arts. But there are many more we should know about. And we need your help to find them. Do you know of anyone who was born, raised or went to school here and went on to great success elsewhere? We are also looking for people who weren’t born here but achieved a level of success in our region and left for other opportunities. Please let us know who we should get to know by visiting ClevelandHomecoming.com, emailing us at CleHomecoming@ Crain.com, or just give me a call at 216-771-5358. And we’d love to hear from you, too, if you’re one of those lucky people to have remained in Cleveland to experience its renaissance. This will be a great opportunity to connect with bright people from across the globe who share with you a love of Northeast Ohio. Why not join us in hosting them by considering a sponsorship investment?

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 letters@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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HOW BAD IS THAT LEAK?

Personal View

AHC model could help county address crucial health issues By DR. JAMES MISAK

Cuyahoga County is home to outstanding health care institutions, but the health of our county’s people is far from outstanding. According to the 2017 County Health Rankings, Cuyahoga ranks 65th out of Ohio’s 88 counties in health outcomes. Our county earns particularly poor marks for the environmental, social and economic factors impacting health. The worst health outcomes are in Cleveland and many of the inner-ring suburbs, where the impacts of factors such as racial segregation, high poverty rates and community conditions combine to create barriers to health and well-being. Many organizations offer services and programs to address these barriers, but they are largely disconnected from those of us who provide medical care and the places we deliver care. This gap leads to unaddressed social needs, which adversely impact the health of our patients, and missed opportunities to improve the health of our communities. To bridge this gap, the Centers for Medicare and Medicaid Services (CMS) created the Accountable Health Communities (AHC) Model for Medicare and Medicaid beneficiaries. The model assesses whether a systematic, patient-centered approach to identifying and addressing health-related social needs at the point of medical care can improve individual health status, reduce avoidable use of high-cost care such as emergency department visits, and reduce total health care costs. United Way of Greater Cleveland received a $4.51 million grant to implement this model, one of 32 awarded nationwide. Under United Way’s leadership and in partnership with Cleveland Clinic, The MetroHealth System, St. Vincent Charity Medical Center and Care Alliance Health Center, the Cuyahoga County AHC model will assess health-related social needs of 75,000 Medicare and Medicaid beneficiaries per year who use one of these health care systems and who reside in Cleveland, East Cleveland or Warrensville Heights. These beneficiaries will be assessed at the times and places they are receiving medical care, by the health professionals providing their care. Using a standardized screening survey, individuals seeking medical care at a participating site will be screened for health-related social needs in the areas of food insecurity, housing instability, utility needs, interpersonal violence, transportation, employment

and income. Those who identify needs in one or more of these areas will be offered a real-time telephone consultation with a specialist from United Way’s 2-1-1 help center to determine which referrals to community resources would best match the individual’s needs. The 2-1-1 specialist enters these referrals into a Community Referral Summary form, which is integrated into the patient’s electronic health record. The medical team then prints the summary for the individual at the site of care. This process ensures the individual has all of the necessary information to act on the 2-1-1 specialist’s referrals at the time of the medical visit. It also ensures the medical care team has access to this summary as part of the patient’s health record and can refer to it at subsequent visits. Individuals identified as being at high risk will be offered an in-person appointment with a United Way 2-1-1 community resource navigation specialist. This specialist will develop an in-depth action plan with the individual to address identified needs and will provide ongoing support to the individual in completing the plan. United Way will also serve as an “integrator” to foster community-wide alignment of resources to effectively address health-related social needs in the target cities. A multi-stakeholder advisory board will use the data and information generated from the AHC model to ensure resources are used in the most effective and efficient ways possible. As a primary care physician in Cleveland, I believe the AHC model holds great promise to solve the vexing issue of how to systematically identify, address and intervene in issues that are not strictly medical but can have a profound impact on the health of our patients and the cost of their care. CMS is doing its part by funding the AHC model. United Way’s leadership and expertise in convening and partnering with community organizations will ensure the model’s effective implementation. I look forward to the contributions of the AHC model to our efforts to achieve health outcomes in Cuyahoga County as outstanding as our health care institutions. Misak is vice chair of Community and Population Health for The MetroHealth System’s Department of Family Medicine and is an assistant professor of family medicine at Case Western Reserve University School of Medicine.

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Letter to the Editor Live music should be part of afternoon scene Thank you for the recent column regarding our regional identity, as to what we are and where we are going. Rust Belt has a certain charm, but let’s forget Buffalo, Detroit and the region and address Cleveland instead. Cleveland has long marketed itself as the Rock and Roll Capital. Why waste all that marketing effort? Let’s truly try to be the Rock Capital. Nashville is the Country Music Capital, and they prove it. Any day and any hour after noon, there is live music up and down the “strip.” Every restaurant and bar has a band — or at least a guitar or piano player — entertaining live. Nash-

ville is an event, and people brag about going there. In Cleveland, tourists leaving the Rock and Roll Hall of Fame have nothing to do but eat and go back to their hotel. There’s no live music in the afternoons in the Rock and Roll Capital. Why not? On a beautiful Cleveland afternoon, you hear crickets on East Fourth Street, West 25th and in the Warehouse District. It seems that if you want live music, you must go out after 9 p.m. on weekends. Many people and families like to be off the streets before 9 p.m. I notice we have street musicians here and there. Why not bring them inside? Perhaps we

face some legal or musician union issue that limits live music. Could it be musicians union pay scale? Maybe we don’t have enough hungry musicians. What can be done to encourage establishments to offer live entertainment? We need a cluster of music “hot spots” where people can go to be sure there is live music. Perhaps my observations are off base. I’m sure there are some places having entertainment in the afternoons, but I don’t claim to know them. I do know you would have to search for them, and how many tourists will do that? John Mihacevich Brunswick

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CRAIN’S CLEVELAND BUSINESS

Personal View

Financial literacy is sound investment for everyone By KAREN MINGHINE and MICHAEL JEANS

Each April, Financial Literacy Month offers an important opportunity to educate consumers on the fundamentals of personal finance — from how checking accounts and credit cards work to how to establish a basic household budget. And it must be a year-round commitment by our community because it is so fundamentally important to making financially responsible decisions integral to the everyday lives of our residents. Financial literacy can also be an issue for entrepreneurs and small business owners, who can benefit from

help improving their credit and their business plans. A healthier small business means more stability for workers and the communities they live in. That’s a key goal of the work done by Growth Opportunity Partners in economically disadvantaged areas they serve in and around Cleveland. Just as many large corporations benefit from advisers and professional partners, Growth Opportunity Partners believes business owners located in under-resourced communities could benefit from the same types of partnerships. Financial literacy is a critical topic for Citizens Bank, as it is for all banks and financial institutions. The Citizens Helping Citizens Manage Money pro-

gram will improve the financial education of more than 260,000 individuals by supporting financial literacy initiatives at 80 local community organizations, which includes $1.4 million in donations to nonprofit partners and volunteer outreach by Citizens colleagues. Citizens Helping Citizens Manage Money has supported financial literacy programs at Growth Opportunity Partners for several years. The most recent contribution will help the organization offer financial education and support to both business owners and residents in the economically disadvantaged areas in and around Cleveland. Growth Opportunity Partners provides education and capital to small

businesses, and makes financial education available to the people who live in the communities where those businesses are located. The organization focuses on business projects that offer employees meaningful wage jobs, not projects that exclusively create multiple minimum-wage jobs. The market has a sufficient supply of those jobs, so Growth Opportunity Partners focuses on the quality of the job, which begins with access to a better wage and an opportunity to participate in other company benefits. Federal Reserve Chairwoman Janet Yellen recently spoke about the importance of financial literacy training in creating strong household finances,

which contribute to the growth and stability of our national economy. She said, “Whenever I am asked what policies and initiatives could do the most to spur economic growth and raise living standards, improving education is at the top of my list.” Citizens Bank’s research shows the average consumer has questions about the core financial challenges they face today, but many think they don’t have the ability to tap into the expertise they need. The good news: They’re not in it alone. Banks can offer the kind of financial expertise these consumers desperately need, but don’t realize is available to them. Financial advice on everything from saving for retirement to financing an education to even managing budgets is as close as the local bank branch. Nonprofit organizations like Growth Opportunity Partners and the nine other northern Ohio agencies Citizens gave contributions to this spring can help as well. It’s important for consumers to know that these resources exist in every city. Citizens also provides free online resources to everyone through the new Financial Fundamentals hub at www. content.citizensbank.com/financialfundamentals. The site includes basic information on budgeting and saving, managing debt, getting credit, buying a home, protecting your identity and more. Citizens also will be posting financial tips and advice on social media channels throughout April, which is Financial Literacy Month, and inviting our followers to join us in a savings challenge. We encourage consumers to improve their financial education by talking to their banker, visiting Citizens’ website or contacting a local nonprofit that offers financial counseling. We know that money doesn’t come with instructions but believe that when consumers are educated, they have the confidence and knowledge to make informed financial decisions for themselves, their families and their futures. Minghine is Ohio retail director of Citizens Bank. Jeans is president and CEO of Growth Opportunity Partners.

Letter to the Editor A worthy bill Palliative and hospice care — focusing on managing and easing symptoms, reducing pain and increasing comfort — can improve the quality of care and the quality of life for those with advanced dementia. People with Alzheimer’s and other dementias rely heavily on palliative and hospice care at the end of life. The availability of palliative and hospice care is growing, but the need is growing faster — and the quality of care remains a concern. Support of Congress’ bipartisan Palliative Care and Hospice Education and Training Act (PCHETA) is critical. I thank U.S Rep. Dave Joyce (R-Bainbridge Township) for co-sponsoring PCHETA. The fight is personal for me. My mother suffered from this devastating disease for more than 14 years, nearly 20% of her 75 years, before succumbing to the disease. Steven G. Osgood Bentleyville

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PA G E 1 3

Focus

Lawyers rethink the business

Illustration by monique28 via iStock

With demand ‘stagnant or down,’ firms must adapt to remain profitable By JEREMY NOBILE jnobile@crain.com @JeremyNobile

While the Great Recession feels more and more like a distant memory to most companies, the legal sector hasn’t had the luxury of forgetting. With some seven years passed since the downturn, demand in the legal business simply hasn’t recovered to pre-recession levels, forcing law firms to adapt in new ways never required of them before to maintain levels of growth and profitability they’ve been accustomed to.

Just barely more than a decade ago, before the last downturn struck, lawyers not only enjoyed mountains of work, but a nearly unbridled level of control over the business unmatched by any other industry at the time. The recession has, in fact, resulted in permanent changes to the legal business, said Gregg Eisenberg, managing partner at Benesch, Friedlander, Coplan & Aronoff. “Demand is stagnant or down at this point,” Eisenberg said. “As companies hunkered down during the last recession, they attacked all expenses, including legal budgets. We’re seeing larger clients bring work

in-house, beefing up in-house legal teams. That’s contributing to flat demand and increasing pressure on how these services are delivered and priced. And I don’t think that’s ever going to change.” But there’s a silver lining to all that. Despite a more challenging climate for the legal industry, firms are still managing to grow. They just need to be more creative, diligent and proactive about the business today in order to do it. “The way it was back in the early to mid-2000s, no, I don’t think that’s ever going to come back,” said Bill Josten, manager of legal industry an-

alytics for Thomson Reuters' Legal Executive Institute. Instead of general growth, what the industry will see is a shifting of market share and firms compete among each other for business like never before. “What you’ll see today are firms saying they’re laser-focused on what they can do for clients. They’re telling them, what we can’t do, we’ll find other people for those things, and it’ll be cost-efficient to you,” Josten said. “The firms that innovate service delivery are the ones that will capture more market share and see more market demand.” SEE LAWYERS, PAGE 18

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Hahn Loeser & Parks adds to Gorom’s role By TIMOTHY MAGAW

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Hahn Loeser & Parks LLP announced that Stanley R. Gorom III has been appointed to the new position of partner-in-charge of the firm’s Cleveland office. Gorom has been a member of the firm’s board of directors for more than a decade and serves as the administrative chair of its business practice area. In a release, firm CEO and managing partner Marc J. Kessler said Gorom has “long been an effective leader for our firm. I am genuinely excited to have the benefit of his counsel and skills in this new position.” Last month, meanwhile, Kessler, replaced Lawrence Oscar as Hahn Loeser & Parks’ CEO and managing partner. Gorom earned his law degree from DePaul University College of Law in Chicago and a bachelor’s from Indiana University. His personal practice is in general corporate, M&A, real estate and gaming law. Hahn Loeser said the new partner-in-charge has extensive experience in the purchase and sale of businesses of all types in the U.S., and

Gorom

has negotiated agreements with state-owned enterprises in Russia, France and China. As for community involvement, he is active with the Cleveland Restoration Society, Catholic Charities Services Corporation and the Historic Warehouse District Development Corporation. Hahn Loeser & Parks is the 12th-largest law firm in Northeast Ohio, according to Crain’s 2016 list of the region’s largest firms ranked by the number of local attorneys. Last year, the firm reported 68 local attorneys.

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Graying field brings need for succession By JEREMY NOBILE jnobile@crain.com @JeremyNobile

When midsize Cleveland law firm Sutter O’Connell lost one of its co-founders to illness, it forced some difficult conversations about how the business that individual helped build since 2002 would move forward. Lawrence “Larry” Sutter III died March 6 after a private, 22-month battle with cancer. He was 53. “Losing Larry was a shock. He was sick for some time, but it wasn’t wellknown,” said firm co-founder and Sutter’s business partner, Matt O’Connell. “We lost a significant piece of our firm then, and we needed to assess as it’s our intention to remain a viable stand-alone law firm.” The legal industry is graying. And with law firms predominantly led by aging, baby boomer attorneys who like to work until their bodies give out, more firms are feeling more urgency in the need for clear succession plans so their businesses can move on as firm leaders and those with big books of business retire, pass away or simply leave. Unfortunately, though, lawyers tend to dawdle on succession planning for a number of reasons: the conversations are hard to have or may be contentious; no one likes to talk about death; and some lawyers simply don’t want to retire. But shrugging off those conversations could be to the detriment of firms and their clients. So with the aging of the industry in mind, many firms are revisiting succession plans today, lest they face potentially crippling repercussions in the future. O’Connell and Sutter, who was managing shareholder prior to his death, were the last two of the firm’s original four founders. That leaves O’Connell as the firm’s only connection to its formative years. While there were some elements of a succession plan in place — for example, some attorneys at the firm had already begun working with some of Sutter’s clients during his ill-

Sutter

O’Connell

ness, though Sutter stayed quite busy throughout it — there were some other questions that needed answered about the business. Still, the transition was “far from chaotic,” O’Connell said, which he credits to the plans that were in place. O’Connell was clearly in line to take on managing duties. And there was an understanding among the firm’s shareholders that the business would want to remain independent. Those were good starting points in running the firm post-Sutter. However, because Sutter stayed so active in his business up until mere weeks before his death, some planning efforts were stymied. Sutter had a national practice with large clients whom he continued to serve through his illness, which meant some relationships weren’t being deeply connected with other attorneys. “Because Larry stayed so involved, it was always very difficult to sit down and discuss the future,” said O’Connell, touting Sutter’s leadership and stellar track record in litigation. “You didn’t want to do these things behind his back. That seemed disrespectful. But when Larry understood what would happen, it would become irresponsible of him to not let us know so we could make the necessary plans to run the firm in the future.”

ARN MORE TODAY ABOUT HOW CRAIN’S CAN HELP YOU AND YOUR CONTENT MARKETING PROGRAM. Contact Amy Stoessel at 216.771.5155 or astoessel@crain.com.

Graying of the field According to consulting group Altman Weil Inc.’s 2016 Law Firms in Transition survey, more than 58% of law firms surveyed reported either moderate or high concern about their firm’s preparedness to deal with retirement and succession of baby boomers. SEE GRAYING, PAGE 21

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Five to watch in law If you read Crainâ€™s, you know one thing: Cleveland is a busy town, and much of its machinations are only possible because of the brilliant legal minds in our midst. In our latest Five to Watch feature, weâ€™re putting the spotlight on a few of those people. Do you know someone â€” in any industry â€” who has a story worth telling in a future section? Let sections editor Timothy Magaw know at tmagaw@crain.com.

Joshua E. Hurtuk

Andrew J. Renacci

Erin Luke

Isabelle Bibet-Kalinyak

Henry A. Bailey Jr.

Associate Walter | Haverfield

Associate Squire Patton Boggs

Associate Thompson Hine

Associate McDonald Hopkins

Details: Though heâ€™s only 30, Hurtukâ€™s fingerprints are all over some of the most promising real estate developments taking shape in the region. The promising associate in Walter | Haverfieldâ€™s real estate and corporate transaction group has been part of the legal team that brought both The 9 complex in Cleveland and the new Hall of Fame Village in Canton to fruition. Now, heâ€™s the lead attorney for the massive $230 million Pinecrest development under construction on Harvard Road near I-271 â€” an undertaking that required the purchase of 30 parcels of land and a complex financing structure. Hurtuk, who earned his bachelorâ€™s degree from Duke University and his law degree from Ohio State University, said the best thing about his job is â€œfinding ways to get the best solution for your client.â€?

Details: Renacci admittedly â€œmeanderedâ€? his way through his undergrad studies at the University of Michigan before settling in at Cleveland-Marshall College of Law â€” an affordable option close to home for the Northeast Ohio native. Thatâ€™s where he â€œlearned how the world works.â€? Now, heâ€™s one of Squireâ€™s â€œemerging special minds,â€? as legal heavyweight Fred Nance described him. In addition to spending time on traditional corporate work, such as M&A, Renacci has assisted on legal work for cultural giants such as LeBron James and Dave Chappelle. â€œLawyers are trained not to be creative,â€? Renacci said. â€œWe tend to look at what the precedent is. Whatâ€™s exciting about sports and entertainment work is it deals with a lot of issues of first impression. You can create precedent.â€?

Details: As an associate in Thompson Hines construction practice group, Luke spends most of her time working in an area of law dominated by men. â€œIâ€™m heavily invested in the advancement of women. I love the idea of including women in this field that I love,â€? said Luke, who is also involved with the National Association of Women in Construction. â€œI think we can bring added value, a different perspective.â€? As for her practice, she loves the tangible results of her work. In fact, much of her firmâ€™s work â€” take the downtown Hilton â€” can be seen from her office window. Luke, who has been practicing law for about a decade, grew up in Arkansas and arrived in Cleveland in 2014. Though new to the area, sheâ€™s taken the area market by storm, building a local and national practice.

Details: With 20 years of business experience, Bibet-Kalinyak already was an accomplished professional before she pursued her law degree. The first-generation French immigrant moved to the U.S. when she was transferred by her employer. While pursuing her MBA, she got the itch for law school. â€œI enjoy studying technical principles and theories and applying them to solve problems,â€? she said. â€œThere is unfortunately not a lot of time for that in the day-to-day business world.â€? Today, she specializes in health care and immigration. â€œI represent hospitals and health care providers, universities and manufacturers. I am in a unique position to spot issues before they arise, because I understand their business and I have been there myself â€” visas, green card and all.â€?

Associate Ulmer & Berne Details: Before pursuing a law career, Bailey earned a masterâ€™s degree in city and regional planning â€” so he always had an interest in working in real estate. A law degree was just a natural progression of that interest, he said. â€œLaw intrigues me because each day has a tendency to present a new challenge,â€? he said. â€œWith every challenge comes an opportunity to get better and grow, both personally and professionally. I think the ability to always be faced with an opportunity for growth is golden.â€? Some of the work of which heâ€™s most proud is the acquisition of Terminal Tower by K&D (he was focused on the existing leases in the building) and the Van Aken District project in Shaker Heights. â€œBoth of these projects provided me with invaluable experience that I will draw from for the rest of my career,â€? he said.

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INDUSTRY OUTLOOK: LAW

Q&A: Deborah Read Managing partner; Thompson Hine As Deborah Read prepared to lead Thompson Hine as managing partner in 2012, she saw an opportunity to steer the Cleveland-based law firm down a fresh path. There was already a sense the legal industry was shifting following the recession. With a close eye on profits, firms trimmed costs in response to lower demand — but it became apparent lawyers needed to change the ways they do business. And so was the impetus for Thompson Hine’s SmartPaTH, a program that encompasses the firm’s approach to managing and delivering legal services through a multipronged focus on legal project management, efficiency, staffing and pricing. Every law firm with intentions to excel in the business through the coming years is looking internally at similar processes. Crain’s chatted with Read to discuss how one of Cleveland’s largest law firms is doing that through its own innovative program. — Jeremy Nobile Give me the elevator pitch. What is SmartPaTH? It’s a way of providing legal services that aligns with what clients want today. And what do they want? Predictability, efficiency and transparency. So at the heart of the program is a new approach to project management, right? Yes, but it’s more. It combines project management, value-based pricing, flexible staffing and process efficiency to deliver services in a more efficient, predictable way and

with more transparency. This is because the industry has changed so much — how would you describe that evolution? When I was in law school, lawyers were taught to build the best Rolls Royce their hands could build. We were taught to do things extremely well and with a high-degree of perfection. But it’s really changed. During the downturn, law departments were viewed by clients as cost centers. So their budgets are cut by 40%. Before that, nobody used to ask how much that Rolls Royce cost. But clients started to say, the ride isn’t that far, the

vehicles don’t need to be that sophisticated — they don’t need that Pioneer soundsystem or high-end shocks. Instead of a fleet of Rolls Royces, they wanted a fleet of Kias. So how does all this lead to SmartPaTH? Well, lawyers in large firms are not particularly good at turning on a dime. When I was elected managing partner, I spent a lot of time reading what clients were saying, and decided there was a real opportunity to embrace a new delivery model so we’d be viewed as responsive. Where did you start? What we focused on early on was pricing and legal project management because those are probably the most complex of those four elements, and it requires lawyers thinking about things before they do it. Lawyers used to give a client a bill and that was it. This was probably the last profession to have free rein like that. Lawyers would listen to the client, but really determined how they’d deliver and what it was going to cost. The client didn’t have much input. So that’s where we started. Did you try different approaches? We went down a couple paths. I was thinking we’d hire a consultant to train lawyers on it. We sent RFPs to various consultants, but the pricing was astronomical. Why would I do this when we could hire someone for a few years to power this process for us? I was looking for a needle in a haystack. We ended up changing our route and hiring Bill Garcia to do that in late 2013.

Bill sounds like a catalyst that helped make some of this work. Bill was working with lawyers to train them on how to manage a project, how to deliver on a project according to our scope of work, how to budget — budgeting is not intuitive and isn’t something lawyers have ever had to do before. And there are proprietary software systems that are a part of this, along with tools to help lawyers become proficient in SmartPaTH. This is a whole system, and it requires some change in behavior for lawyers. Is it a challenge to get lawyers to buy in to all of this? It took some selling. And we don’t have complete penetration at our firm — we actually measure this. I would say that about 30% of our partners are really steeped in this and really do it well. I haven’t really sought to measure the associate level. Some partners may be dragged along; they might be working for one of our converters or evangelists. Is getting lawyers to make and stick to a budget one of the hardest parts? Well, clients are passionate about their budgets, and lawyers were previously unprecise about theirs. A lawyer might say something costs $25,000, then the bill comes and it’s $40,000. Attorneys were never held to that before. But now clients want predictability. Our proprietary software can now calculate how much something might cost within ranges given certain assumptions. So that helps.

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I imagine that might even help convince a client that some project costs are reasonable if/ when they’re disputed if you’re itemizing things along the way. Or it at least starts a conversation. Sometimes clients will say that a case is a $750,000 piece of litigation. We use that tool, plug in the data, and the budgeting tool might come up with $1.2 million. Now there’s a problem. With the tool, you can change staffing, or use X as opposed to Y or Z as opposed to A. Maybe the time can be reduced here, and here’s why. After changing a few assumptions, you go from $1.2 million to $975,000. Then we can sit down with the client and say how we came up with that number. Sometimes shaving back costs means taking on more risk. If that’s risk the client is willing to absorb, then maybe we can do something different. So how much does all of this cost? Millions of dollars have gone into SmartPaTH, but it’s well worth the investments. We have to change with our customers. And when you think about a company spending a lot on research and development for delivering a product the way consumers want it, that’s what we’re doing. Is the firm better off today with SmartPaTH in place? It makes us better because we are very focused on what we’re doing and the purpose behind each step in the delivery of services in a way we never were before. When you think about what you’re doing more deeply, you tend to do better.

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LAWYERS CONTINUED FROM PAGE 13

Profits still grow

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In the Legal Executive Institute’s 2017 Report on the State of the Legal Market shows demand for legal services has, in fact, stagnated over the last 10 years, coinciding with a general drop in lawyer productivity and growing pressures on rates. There was some softness in the market prior to the recession, but it was the downturn that really revealed the industry’s vulnerabilities. Last year’s annual Law Firms in Transition survey by legal industry consultant Altman Weil Inc. shows that 62% of firms said demand had not returned to pre-recession levels, principal and report co-author Eric Seeger noted. “The material of work flowing through law firms is less for most firms, and in-house counsels are a big reason for that,” Seeger said. That’s a direct hangover from the recession, as companies, feeling their own margin pressures, scrutinize legal costs with a fine-tooth comb. But that doesn’t mean firms themselves aren’t growing. Indeed, the same Altman Weil report showed that of firms with 250 lawyers or fewer, nearly 74% reported revenue growth, and 70% reported increases in profits per partner. Nearly 40% of all respondents saw revenues and profits grow by more than 4%. Firms have maintained revenues by trimming costs and shaving off overhead. Meanwhile, margin pressures have led to an uptick in law firm mergers across the industry, while simultaneously prompting firms to re-evaluate their footprints. Hahn Loeser & Parks, for example, closed an Akron office with nine at-

Percentage of law firms that said demand hadn’t returned to pre-recession levels, according to legal industry consultant Altman Weil Inc.’s annual survey.

40 Percentage of firms in the study that reported revenues and profits had grown by more than 4%.

torneys and some support staff in February to encourage collaboration in its IP practice group and consolidate costs. Some other trends that seem to be more common today, Seeger said, include trimming compensation for underperformers or de-equitizing partners, lengthening partnership tracts or increasing standards to achieve partner, collecting on bills sooner and using alternative staffing or contract lawyers on projects. Those methods are of increasing significance today because steadily raising rates simply doesn’t benefit a firm like it did before. “Rate increases have covered over some of the problematic fundamentals in the market,” like waning demand for services, Seeger said. “But at the same time, that’s exacerbating the tensions that are felt on the client side to manage the legal budget.”

Local market’s evolution The Northeast Ohio legal market has shifted in its own way over the years. The region saw a surge of law firms during a boon of companies placing headquarters here, a trend that was prevalent through the 1970s. But while the density of large companies in the market has dwindled, the area’s law firms have generally

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INDUSTRY OUTLOOK: LAW The ups and downs of firm demand

eyes on their budgets, midsize law firms seem to be winning more business from the big firms in that market share shift. Some clients are scaling back work at large, ultra-sophisticated law firms, Josten said, which also happen to charge the most expensive rates. He emphasized that midsize firms tend to have sophisticated practices as well, but may have lost out to work in the past to a firm with a bigger name. As clients and general counsels scour their legal budgets, midsize firms are finding opportunities to win work. “Clients are realizing more and more that you don’t always have to Uber in a Mercedes to get where you’re going,” Josten said. The reduced number of local Fortune 500 companies such as Goodyear Tire & Rubber leads to less work for law firms. (Contributed photo)

stuck around. There are 24 Ohio companies in the Fortune 500 today, with just a handful in the Cleveland-Akron region, like Goodyear Tire & Rubber Co. and FirstEnergy Corp. But an exodus of large companies has also meant less work for local law firms, and more competition for work that is available. That, said Day Ketterer managing partner Rob Roland, has made the market “over-lawyered.” “In our region, we are busy, but we do not have a lot of new players coming to town,” said Roland, whose firm built itself on labor, employment and union work. “So if you’re getting a new client, you have to wait for them to get fed up with their current attorney, or wait for old attorneys to die.” That’s elevated lateral hires as a strategy for firms to grow their books of business. Yet, experts point out that only a fraction of them truly work out. A December report by ALM Intelli-

gence, a consultant to the consulting and legal industries, showed that 96% of law firms said hiring lateral lawyers was important to their growth strategies. Yet the same survey showed that 30% of laterally hired lawyers delivered less than half of their expected book of business in their first year with a firm. Benesch has been particularly active with them, adding dozens of lawyers in the past three years, bringing its total number of attorneys to about 180 today. Despite the risks, lateral hiring seems to be a popular option in the Cleveland region. With the tight market here, it’s not surprising more lawyers are moving around as firms fight for them and their clients. Scott Kadish, the newest managing partner at Ulmer & Berne, recently told Crain’s about the firm’s more aggressive pursuit of growth, which includes some calculated gambles on new laterals. Meanwhile, as clients keep tighter

Following the overall collapse in demand for a law firm’s services that occurred in 2009, growth, although showing occasional peaks and valleys, has remained relatively flat, according to a recent report on the state of the market. 10%

-10%

The new reality

Q 1 2 3 4 Q 1 2 3 4 Q 1 2 3 4 Q 1 2 3 4 Q 1 2 3 4 Q 1 2 3 4 Q 1 2 3 4 Q 1 2 3 4 Q 1 2 3 4 Q123O+N 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Legal Executive Institute’s 2017 Report on the State of the Legal Market; Note: 2016 numbers are for the first three quarters, plus October and November

The client relationship is a hallmark of the legal business, and a refocusing on that is at the heart of firms seeing profit growth today. While every law firm will promote its attention to client service, that’s never been at a greater premium than it is in today’s competitive market. So selling clients on those increased rates may not be worth the pushback. But client service today is about more than just appealing costs and fielding phone calls on nights and weekends. Clients are demanding transparency and predictability on projects and expecting firms to be increasingly proactive about their needs. That’s why Eisenberg envisions a firm he describes as a “tiny powerhouse,” referencing a corporate law firm with deepened expertise in a variety of fields — Benesch’s 3D printing practice is an example of one the firm has been actively growing. But Eisenberg also stressed the importance of being proactive in a business that’s been traditionally reactive.

“When I first started in law, that’s how it was: reactive. But clients require more today, and they should,” he said. “You have to provide more than just traditional legal services, or that client will potentially look elsewhere. And that’s been a huge shift. Clients want to know that you know what their industry is, where it’s been and where it’s going.” And that takes an investment of time, money and energy for lawyers to wrap their heads around a business, predict what their needs are likely to be and address them. Sometimes that might involve educating a client about the laws affecting them without ever taking on a billable project. That gets into those value-add elements that are becoming key differentiators in the market today. “When you think about competing in the market, you compete on price, value and name recognition,” Josten said. “Do they want to be the discount firm? Maybe they don’t want to be the

cheapest, but they’ll get a resolution faster, or maybe their rates are higher but they bill fewer hours. Do they want to be differentiated in terms of quality or output? Firms have to determine what speaks to their target client. But of all the differentiators firms may look into, rates is about the weakest one they can have.” That forethought could connect to a budget number the client wants to hit, or a decision on risk tolerance. The law firms are increasingly positioning themselves to be part of a business’ total strategy, said John Slagter, managing partner at Buckingham, Doolittle & Burroughs. “It’s something that’s not about us, but about how we want to help them out and help them succeed,” he said. “It’s a culture change as much as it’s a change in focus, which is something we discuss here. You’ve got to be sensitive to what clients are concerned about.” “This is the new reality,” Josten said.

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HARD-WORKING. RELIABLE. EFFECTIVE. Joshua Hurtuk Associate Walter | Haverfield Real Estate Practice Group

Is this the type of attorney you want working for you? It’s certainly who we want working for us, and that’s why we employ so many self-starters who have what it takes to get the best results possible for our clients. Successfully working on some of the region’s most complex real estate deals, Josh exemplifies the type of dedication and entrepreneurial spirit that have set apart Walter | Haverfield in the legal field for 85 years. We’re so pleased that Crain’s has recognized him as someone to watch in law. Congratulations, Josh!

The Real Estate Attorneys of Cleveland | 216.781.1212 | walterhav.com

35th Anniversary

PROMOTE.

35th Anniversary

CLEVELAND BUSINESS VOL. 36, NO. 47

NOVEMBER 23 - NOVEMBER 29, 2015

35th Anniversary ALLYSON O’KEEFE, 37 Partner; Porter Wright

CLEVELAND BUSINESS

VOL. 36, NO. 47

NOVEMBER 23 - NOVEMBER 29, 2015 Allyson O’Keefe started her legal career at Porter Wright in 2004 after completing a summer internship there as a Case Western Reserve University law student. Since then, she has worked on many significant deals across Cleveland, including Flats East Bank, The Metropolitan at the 9, Uptown in University Circle and Steelyard Commons, and has been promoted to real estateALLYSON partner. O’KEEFE, 37 “Young professionals who live downtown are so excited about the city,” said O’Keefe, a Partner; Porter Columbus native who lived downtown forWright 10 years before moving to Rocky River. “The ones who aren’t from here are often more excited about it. When you move here from somewhere else, you don’t for granted.” VOL. 36, NO. take 47 it Allyson NOVEMBER 23 - NOVEMBER 29, 2015 O’Keefe started her legal career at Porter Wright in 2004 after completing a sumWhen O’Keefe is not working or spending time with her husband and two children, she can mer internship there as a Case Western Reserve University law student. Since then, she has be found volunteering on the boards of nonprofit organizations and watching college football. worked on many significant deals across Cleveland, including Flats East Bank, The Metropolitan at the 9, Uptown in University Circle and Steelyard Commons, and has been proWHAT INSPIRES YOU ABOUT YOUR WORK? moted to real estateALLYSON partner. O’KEEFE, Just seeing what Cleveland has gone through in the time that I’ve 37 been here, there’s obvious“Young professionals who live downtown are so excited about the city,” said O’Keefe, a ly a lot of excitement around real estatePartner; development. I started in 2004 when we were crazy Porter Columbus native who lived downtown for Wright 10 years before moving to Rocky River. “The ones busy with development. That was sort of the boom from ’04 through ’08. I saw it go through who aren’t from here are often more excited about it. When you move here from somewhere the downturn, then I saw it rise again, even stronger than before locally. else, you don’t take it for granted.” Allyson O’Keefe started her legal career at Porter Wright in 2004 after completing a sumWhen O’Keefe is not working or spending time with her husband and two children, she can mer internship as a Case Western Reserve University law student. Since then, she has MANY OF THE PROJECTS YOU WORKED ON there ARE MIXED-USE URBAN PROJECTS. IS be found volunteering on the boards of nonprofit organizations and watching college football. worked on many significant deals across Cleveland, including Flats East Bank, The THAT AN AREA OF EXPERTISE? Metropolitan at the 9, Uptown in every University and Steelyard Commons, and has been proYes, definitely. Real estate is extremely interesting because deal Circle is differWHAT INSPIRES YOU ABOUT YOUR WORK? moted to real estate ent. You can never get bored because there’s so partner. much variety there, from tax Just seeing what Cleveland has gone through in the time that I’ve been here, there’s obvious“Young who live downtown so excited about the city,” said O’Keefe, a credits to historic renovations, from professionals ground-up development to rehab, are from ly a lot of excitement around real estate development. I started in 2004 when we were crazy mixed-use to residential. Columbus native who lived downtown for 10 years before moving to Rocky River. “The ones busy with development. That was sort of the boom from ’04 through ’08. I saw it go through who aren’t from here are often more excited about it. When you move here from somewhere the downturn, then I saw it rise again, even stronger than before locally. else, you LEADERSHIP don’t take it for granted.” HOW WOULD YOU DESCRIBE YOUR STYLE?

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O’KeefeI expect is not working or spending timeI work, with her husband and two children, she can I definitely believe in leadingWhen by example. the people with whom MANY OF THE PROJECTS YOU WORKED ON ARE MIXED-USE URBAN PROJECTS. IS be found volunteering on the very boards of nonprofit and watching college football. my associates, to work hard, and they see me working hard. For me, it’sorganizations all THAT AN AREA OF EXPERTISE? about working hard and doing good work. Yes, definitely. Real estate is extremely interesting because every deal is differWHAT INSPIRES YOU ABOUT YOUR WORK? ent. You can never get bored because there’s so much variety there, from tax Just WHAT seeingWAS whatITCleveland has gone the time that I’ve been here, there’s obviousWHAT OTHERS ARE SAYING: LIKE TO WORK WITHthrough O’KEEFEinON credits to historic renovations, from ground-up development to rehab, from ly a lot of excitement around real estate development. I started in 2004 when we were crazy THE FLATS EAST BANK PROJECT? mixed-use to residential. busy with development. sort of the boom from ’04 through ’08. I saw it go through “Allyson is extremely bright and quick witted, butThat whatwas truly distinguishes her the downturn, then I saw itpeople rise again, even from most successful attorneys is her exceptional skills. Shestronger has an than before locally. HOW WOULD YOU DESCRIBE YOUR LEADERSHIP STYLE? uncanny ability to encourage the ‘adversaries’ in her negotiations to work in I definitely believe in leading by example. I expect the people with whom I work, OF THE PROJECTS YOU WORKED concert with her to achieve win/winMANY solutions to difficult problems,” said ON ARE MIXED-USE UR my associates, to work hard, and they see me working very hard. For me, it’s all THAT AN AREA EXPERTISE?of the Scott Wolstein, CEO of Starwood Retail Partners andOF co-developer about working hard and doing good work. Yes, definitely. Real estate is extremely interesting because every deal is differFlats East Bank project. ent. You can never get bored because there’s so much variety there, from tax — Lee Chilcote WHAT OTHERS ARE SAYING: WHAT WAS IT LIKE TO WORK WITH O’KEEFE ON credits to historic renovations, from ground-up development to rehab, from THE FLATS EAST BANK PROJECT? mixed-use to residential. “Allyson is extremely bright and quick witted, but what truly distinguishes her successfulInc. attorneys is reserved. her exceptional people skills. She has an Reprinted with permission from the Crain's Cleveland Business. © 2015from Crainmost Communications All Rights HOW WOULD YOU DESCRIBE YOUR LEADERSHIP STYLE? ability to encourage the ‘adversaries’ in her negotiations to work in Further duplication without permission is prohibited. Visituncanny www.crainscleveland.com. #CC15040

I definitely believe in leading by example. I expect the people with whom I work, concert with her to achieve win/win solutions to difficult problems,” said my associates, to work hard, and they see me working very hard. For me, it’s all Scott Wolstein, CEO of Starwood Retail Partners and co-developer of the about working hard and doing good work. Flats East Bank project.

— Lee Chilcote WHAT OTHERS ARE SAYING: WHAT WAS IT LIKE TO WORK W THE FLATS EAST BANK PROJECT? “Allyson is extremely bright and quick witted, but what truly distinguishes her successfulInc. attorneys her exceptional people skills. She has an Reprinted with permission from the Crain's Cleveland Business. © 2015from Crainmost Communications All Rightsisreserved. ability to encourage the ‘adversaries’ in her negotiations to work in Further duplication without permission is prohibited. Visituncanny www.crainscleveland.com. #CC15040 concert with her to achieve win/win solutions to difficult problems,” said Scott Wolstein, CEO of Starwood Retail Partners and co-developer of the Flats East Bank project.

Reprinted with permission from the Crain's Cleveland Business. © 2015 Crain Communications Inc. All Rights reserved. Further duplication without permission is prohibited. Visit www. ww crainscleveland.com. #CC15040 www.crainscleveland.com.

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Tail-end funds can damage a portfolio Private equity funds that are at the Motheral is a end of their lifecycles have become partner in the popular, as these funds pushed corporate worldwide sales of private equity transactions limited partnership interests up 2.5% practice group to $18.7 billion in the first half of of Walter | 2015. These types of “end-of-life” Haverfield. funds in the secondary private equity market have increased about 35% year-over-year, accordingly to analyst NYPPEX, a private equity secondary the satisfaction of the investors. market brokerage firm. If, however, the fund is already a Not only is it important to know tail-end fund and there is no chance that these types of funds are gaining to renegotiate fund documentation, steam in the secondary private equi- investors may wish to engage with ty market, it is also important to know the manager to understand their exit that funds coming to the end of their strategy. If the manager is not relives are often forgotten, and inves- sponsive, an investor may wish to tors and managers are both seeing consider more drastic options. For the impact “tail-end” funds can have example, if the fund documentation contains a no-fault removal clause, on balance sheets and resources. For the purposes of this discus- investors could seek to remove the sion, a tail-end fund is defined as a manager. Another option is for an infund with an original term that has vestor to consider selling its interest ended, and there are still unrealized in the fund. Again, the fund docuinvestments within the portfolio. mentation would need to be reThere are a number of negative viewed as transfers are usually subconsequences for investors and ject to the prior consent of the managers who have tail-end funds in manager in its sole discretion and their portfolios, inwithout a requirecluding: Be realistic as to ment to act reasonn ably. Remaining asManagers are now sets, which are usual- how much being required to ly low in value or difplace greater emphaficult to sell, may additional time and focus on any erode available rewill be required sis tail-end funds within turns to investors. n The fund is still portfolio given to liquidate the their recent renewed focus responsible for its by investors. Managfees, costs and ex- remaining ers may therefore penses, which could wish to consider takerode returns to in- investments ing the following vestors. n non-exhaustive list of The longer the (i.e., will it take actions: holding period of the n fund without gener- one or two Share with investors any exit stratating returns, the years) when egy and business plan greater the impact it has on the internal asking investors for remaining investments in a tail-end rate of return. The status of the for any extension fund and update them regularly as to fund determines how this is being what investors can to the term of a achieved. Provided do to protect against investors are kept inthe adverse conse- fund. formed on the realiquences listed above. If the fund has not yet closed, it may zation of remaining investments still be possible to add protections within a tail-end fund and progress is clearly being made, investors typicalinto the fund documentation. And, when negotiating the terms ly do not want managers to rush a of any fund documents, investors disposal merely to liquidate a fund as may wish to consider requesting the it may negatively impact returns. n Be realistic as to how much adfollowing non-exhaustive list of proditional time will be required to liqtections. n As the manager receives fees for uidate the remaining investments acting as liquidator and may be pre- (i.e., will it take one or two years) occupied with managing successor when asking investors for any extenfunds, having a fixed winding-up pe- sion to the term of a fund. Investors riod will ensure minds remain fo- won’t look favorably upon being cused on the tail-end fund. asked to consent to extensions on n Investors must ensure that manmultiple occasions. n Consult with legal and structuragers are sufficiently incentivized to liquidate and dissolve the fund. An ing advisers to consider alternative appropriate balance must be struck options for liquidating a tail-end to ensure the manager feels ade- fund. For example, a liquidating trust quately compensated for the work may provide a viable compromise if carried out. Also, investors may wish there are one or two investments to request that any liquidation fees with no practicable exit on the horithe manager receives are offset zon, or distribute such investments against any management fees that in specie to investors. are accruing. This would avoid douTransparency and appropriate preparation by both managers and ble charging of fees. n The ability to remove or replace investors will reduce the negative imthe manager for no fault in the event the pacts a tail-end fund has on a managfunds are not liquidated or dissolved to er’s or investor’s portfolio.

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GRAYING

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Meanwhile, a similar transition survey from 2015 that took a more indepth review of succession planning called the planned (or unplanned) succession of baby boomer partners a “serious unresolved issue” in many firms, finding that only 31% of firms reported having a formal succession plan in place. The economic impact of a failure to plan could be fatal for law firms. According to Altman Weil, in 63% of law firms, partners 60 or older controlled at least 25% of firm revenues. That means firms without clear plans in place could be at risk of losing lucrative business and big clients if the relationships managed by those older, outgoing lawyers aren’t effectively transitioned to others, said Altman Weil principal and report co-author Eric Seeger. “We’re seeing a huge uptick in succession planning projects driven partly by demographics,” he said. “There are lots of attorneys today in their 60s and 70s, and some of those senior attorneys are proving slow to retire.” But why have firms been so slow with their planning? Some attorneys are working because they don’t have the retirement savings they’d intend-

ed to at their ages. Others just simply like to work and don’t care to stop. Meanwhile, the trend of law firms having mandatory retirement ages has effectively faded through the last 10 to 15 years, Seeger said. The delays could also be the function of law firms’ highly autonomous cultures. “They defer to the wishes of individual partners, and law firms tend to be nonconfrontational, especially where a senior lawyer in question is a longtime member of the firm and nobody want to feel like they’re shoving him or her out,” Seeger said. What’s more, the state of the legal market is putting more pressure on firms to have those plans in place. As demand for legal services stagnates and competition for market share hits a premium, firms are required to be more creative and proactive about their business to maintain the levels of profits to which they’ve become accustomed. And that’s putting direct pressure on margins, particularly as retired partners continue to collect on relationships and business they once controlled. At the same time, while older lawyers are slow to retire, their productivity, naturally, tends to go down. “Firms are deciding they don’t have the luxury of compensating their senior people at the same high

levels as they become less productive as they go while still commanding high compensation,” Seeger said. The detriment of not having those plans in place is clear. Besides problems that could arise and damage a firm’s culture when clear transition plans aren’t in place and the questions surrounding compensation and profits, firms that aren’t transitioning work to younger-yet-experienced attorneys are seeing those people getting frustrated and leaving. “I have seen a number of firms thinning out in the middle,” Seeger said, “meaning midlevel attorneys are leaving because they perceive a lack of opportunities due to senior attorneys hanging on well into their 70s.”

Prepared for the future Peter Brosse, a partner at Cleveland midsize law firm Meyers, Roman, Friedberg & Lewis, said he brought up the issues of succession planning recently largely because of the age factor. Brosse noted several partners are in their mid-60s and late 50s. But there’s also a younger generation in their late 30s. And there can be a civil “push and pull” between those generations, he said. Having a clear plan in place isn’t just helpful for lawyers, but the entire

administration. The review and planning process for them formally began in October 2015 and was wrapped up in February. After a comprehensive review, the firm has a better sense of where it wants to add bench strength moving forward, and it has an administrator who handles a variety of duties, from human resources to employee benefits, working with her outgoing counterpart. The firm also set a goal to review leadership development possibilities in the near future. The planning process involved settling hard-to-discuss questions on everything from compensation to who will take on clients following a lawyer’s death or retirement. If someone dies, for instance, their family is paid a certain percent of their clients’ revenue — assuming the client stays — for three years (which comes in addition to an insurance-funded death benefit). “This way, there’s less of a financial burden on the firm,” Brosse said. Relieving stress over questions about things like compensation was important to maintaining a good culture, he added. “Tension is the other reason we did that,” Brosse said. “Younger attorneys look at all this and wonder, how does this affect me? They don’t want to be sitting there paying for and

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working for a retired or deceased partner. Because we have something tied to dollars collected from clients, you don’t have that — it’s 15% in our case — and there’s a scale on retirement. At the end of the day, we were able to show there wouldn’t be a financial strain on the firm.” Brosse was motivated to start the conversation because he wants to see the business flourish. “I see this as a firm that I and others helped grow, and I want it to be sustainable,” he said. “We’re all asking these same things: What happens here if something happens to you or someone else? Well, those are good questions. But no one asked them until now.” Not having those plans in place could be devastating to a midsize firm like Brosse’s. Besides now having a clear transition plan for clients and businesses as partners leave, Brosse said the firm is feeling a renewed sense of confidence in the future. “The younger attorneys now know there’s a plan in place. They see there’s development of leadership that’s been put in place and we’ve started steps to implement those,” Brosse said. “From a sustainability perspective, I definitely think people are feeling more comfortable. It shows we’re in good shape today, and I think it will make us even more competitive in the marketplace.”

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THE LIST

Family Owned Businesses Ranked by Local Full-Time Employees (1) THIS YEAR

LOCAL FTE % FAMILY FIRST-GENERATION YEAR EMPLOYEES (2) OWNED OWNER FOUNDED

BUSINESS DESCRIPTION

TOP LOCAL EXECUTIVE

Minute Men Cos., Cleveland (216) 452-0088/http://minutemenhr.com

38,600 (3)

100%

Sam Lucarelli

1967

Human resource company specializing in staffing, PEO, workers' compensation

Jay Lucarelli CEO

Discount Drug Mart Inc., Medina (330) 725-2340/www.discount-drugmart.com

2,113

96%

Parviz Boodjeh

1968

Regional drug store chain

Don Boodjeh CEO

Ganley Auto Group, Brecksville (440) 584-8202/www.ganleyauto.com

1,476

100%

Thomas D. Ganley

1968

Auto dealership group offering sales, service, repair, insurance and financing

Kenneth G. Ganley president, CEO

Safeguard Properties Management LLC, Valley View (216) 739-2900/www.safeguardproperties.com

1,157

100%

Robert Klein

1990

Mortgage field services company; inspects and maintains vacant properties across the United States

Alan Jaffa CEO

Covelli Enterprises Inc., Warren (330) 856-3176 /www.covelli.com

1,000

100%

Albert Covelli

1978

Panera Bread, OĂ•Charley's and Dairy Queen franchisee

Sam Covelli CEO

Dave's Supermarkets, Bedford Heights (216) 763-3200/www.davesmarkets.com

942

100%

Alex Saltzman

1935

Grocery

Daniel Saltzman president

The Reserves Network, Fairview Park (866) 876-2020/www.trnstaffing.com

655 (3)

100%

Don Stallard

1984

Provider of staffing services to the office, industrial, professional and technical markets

Neil Stallard CEO

Sandridge Food Corp., Medina (330) 725-2348/www.sandridge.com

634

100%

Vincent R. Sandridge

1960

Fresh food manufacturer offering deli salads, soups and sauces

Mark D. Sandridge chairman, CEO

DiGeronimo Cos., Independence (216) 446-3500/www.digeronimocompanies.com

633

100%

Sam DiGeronimo

1956

Group of construction contractors offering site development, concrete construction, demolition and environmental solutions

Victor DiGeronimo Jr., CEO; Anthony DiGeronimo, president, Precision Environmental, Precision ProCut

East Manufacturing Corp., Randolph (330) 325-9921/www.eastmfg.com

537

100%

Howard Booher

1968

Manufacturer of all-aluminum semi-highway truck trailers, including dump, platform and refuse

David J. de Poincy president, COO

Car Parts Warehouse, Brook Park (216) 676-9304/www.carpartswarehouse.net

410

100%

Tonino and Carmelina Di Fiore

1975

Warehouse distributor and retailer of auto parts

Tony G. Di Fiore owner

Famous Enterprises Inc., Akron (330) 762-9621/www.famous-supply.com

400

100%

Hyman Blaushild

1933

Wholesale distributor of plumbing, HVAC, building and industrial products

Marc Blaushild president, CEO

King Nut Cos., Solon (440) 248-8484/www.kingnut.com

350

100%

Michael Kanan

1927

Purveyor of nuts and snacks

Martin Kanan president, CEO

Sirna & Sons Produce, Ravenna (330) 298-2222/www.sirnaandsonsproduce.com

292

100%

Gaetano Sirna

1979

Food service distribution

Tom Sirna, president; Vince Sirna, vice president

Majestic Steel USA Inc., Pepper Pike (800) 321-5590/www.majesticsteel.com

274

100%

Dennis H. Leebow

1979

Steel service center, distributor and processor of flat rolled and cold rolled steel in North American steel market

Todd M. Leebow president

COMPANY

THE LIST

Family Owned Businesses CALL THE EXPERTS FOR YOUR EMPLOYEE BENEFIT PLAN AUDIT Ranked by Local Full-Time Employees (1)

Contact Chris Villari + cvillari@maloneynovotny.com + 216.363.0100 THIS YEAR

LOCAL FTE % FAMILY FIRST-GENERATION YEAR EMPLOYEES (2) OWNED OWNER FOUNDED

BUSINESS DESCRIPTION

TOP LOCAL EXECUTIVE

New Horizons Acquisition Corp., Norwalk (419) 660-4000/www.newhorizonsbaking.com

265

100%

Tilmon F. Brown

1967

Commercial bakers

Tilmon F. Brown, CEO New Horizons Acquisition Corp.

The Cafaro Co., Niles (330) 747-2661/www.cafarocompany.com

250

100%

William M. Cafaro

1949

Real estate development firm and shopping center owner and operator

William A. Cafaro, Anthony Cafaro Jr., co-presidents

Ross Environmental Services and affiliates, Elyria (440) 366-2000/www.rossenvironmental.com

250

100%

Bob and Ada May Ross

1949

Hazardous and industrial waste management firm

William E. Cromling III, Jon Cromling co-owners

Motorcars Cleveland, Cleveland Heights (216) 932-2400/www.motorcarscleveland.com

243

100%

Chuck Gile

1972

Auto dealer (Honda and Toyota); offers sales and service, including collision, parts and accessories

Chuck Gile president

Donley's Inc., Cleveland (216) 524-6800/www.donleyinc.com

207

66%

Terry Donley

1941

Construction and concrete solutions

Malcolm M. Donley president, CEO

The A. I. Root Company (dba Root Candles), Medina (330) 725-6677/www.rootcandles.com

175

89%

Amos I. Root

1869

Manufacturer of religious and consumer candles; publisher of Bee Culture magazine

Brad I. Root president, chairman

Frank Novak & Sons Cos., Cleveland (216) 475-5440/www.franknovak.com

170

100%

Allen Pinchot

1912

Commercial finish contractor and manufactrurer of custom lighting, acoustic panels and OEM parts

Gayle F. Pinchot president

Great Lakes Brewing Co., Cleveland (216) 771-4404/www.greatlakesbrewing.com

167

100%

Patrick and Daniel Conway

1988

Craft brewery serving the Great Lakes region

Patrick Conway, Daniel Conway co-owners

Cres Cor, Mentor (440) 350-1100/www.crescor.com

160

100%

George T. Baggott

1936

Manufacturer of Commercial Foodservice Equipment

Cliff Baggott, president, CEO Greg Baggott, vice president of operations

Beverage Distributors Inc., Cleveland (216) 431-1600/www.beveragedist.com

151

100%

James Conway

1933

Beverage distributor

James V. Conway, CEO Michael D. Conway, president

1-888-OHIOCOMP, Cleveland (216) 426-0646/www.1-888-ohiocomp.com

149

85%

Sam Lucarelli

1997

Workers' compensation managed care organization (MCO)

Dan Neubert COO

Mars Electric, Mayfield Village (440) 946-2250/www.mars-electric.com

140

100%

Sam and Rebecca Doris

1952

Wholesale distributor of electrical supplies

Fran Doris CEO

Kaufman Container Co., Cleveland (216) 898-2000/www.kaufmancontainer.com

130

100%

Bernard M. Seid

1910

Rigid packaging supplier and in-house decorator for glass and plastic containers and closures

Jeffery Gross senior vice president

Standby Screw Machine Products Co., Berea (440) 243-8200/www.standbyscrew.com

125

100%

William Frederick Marcell

1939

Precision steel parts manufacturer

William F. Marcell II owner, COO

Fleet Response, Independence (800) 338-0619/www.fleetresponse.com

120

100%

Ron Mawaka Sr.

1986

Fleet services firm offering accident and maintenance management, rental services, subrogation and safety solutions

Scott Mawaka CEO, president

State Industrial Products Corp., Mayfield Heights (866) 747-2229/www.stateindustrial.com

115

100%

Jay Zucker

1911

Specialty chemicals and service for facility and process maintenance

Seth Uhrman CEO

Visual Marking Systems Inc., Twinsburg (330) 425-7100/www.vmsinc.com

114

100%

Hermann and Dolf Kahle

1962

Manufacturer of durable product identification for OEM market, vehicles, point of purchase

Dolf Kahle CEO

Marous Brothers Construction, Willoughby (440) 951-3904/www.marousbrothers.com

110

100%

Adelbert Marous Jr.

1980

Construction firm

Adelbert Marous Jr., president Ken Marous, vice president Scott Marous, COO

COMPANY

RESEARCHED BY CHUCK SODER The full list contains 58 companies and is available for purchase at CrainsCleveland.com. Information is supplied by the companies. Crain's does not independently verify all information and there is no guarantee these listings are complete or accurate. We welcome all feedback and will include omitted information or corrections in coming issues. (1) We used this definition for the list: A family-owned business is defined by having 2 or more family members in management and the majority of ownership or control lies within the family. Please contact Chuck Soder at csoder@crain.com if your company should be on the list. (2) As of March 1, 2017 (3) These companies are staffing firms; the vast majority of these employees work on behalf of other companies.

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“I don’t think it’s going to be like the founding of GCIC, which was a single, very large, very generous grant from the state of Ohio,” Low said. “I think sustainability is going to be a mixture of various sources.” GCIC focuses on five core programs: commercialization funding, company attraction, business development, new company incubation and pre-clinical investigation capabilities. Founded in 2007, it is led by the Cleveland Clinic and is comprised of Case Western Reserve University, University Hospitals, Ohio State University, University of Cincinnati and University of Toledo, as well as economic development partners BioOhio, BioEnterprise and Team NEO. Low attributes the slower pace of spending the grant to being very selective, lean and frugal in GCIC’s investments — not to purposefully stretch the money out, he said, “but in order to be able to appropriately staff ourselves and to pick right projects to support.” A little more than 70% of GCIC-funded projects are continuing to advance through stages of development, according to a recent report. The GCIC model of having an external commercialization advisory board (made up of representatives from the clinical/science community, the financing community and from industry) has been a great asset, he said. The GCIC’s commercialization work has resulted in 11 products reaching the market. Another 14 have advanced to human clinical trails and

12 are continuing to progress through earlier stages of development. CardioInsight Technologies, a medical device company bought by Medtronic for $93 million in 2015, received three GCIC funding awards several years ago, which helped the company drive feasibility of its products, said co-founder Charu Ramanathan. The rigorous application process itself was also valuable, she said. “To get through that process to put your business plan and your pitch in the right light was extremely helpful for us to think through why we were asking for money, and how we could move the business forward with it,” Ramanathan said. The very focused way GCIC looks for applicants — for companies with the discipline to build and execute a strategy — was very important for CardioInsight, she said. Most entrepreneurial ecosystems have a “huge gap,” she said, where a company is not yet ready to build a full system. “You just don’t have the funding to create that value in your company to be able to command tens of millions of dollars of funding that helps you really climb up the next phase of product development and commercialization,” she said. Focused money like GCIC, along with the business rigor of the application process, helps to create defined value that increases the valuation of a company and makes it “eligible for a robust venture capital route,” Ramanathan said. Low is also managing director of the NIH Center for Accelerated Innovations, established in 2013 and funded with grants totaling more than $12.5

million from the National Heart, Lung and Blood Institute. One of three such centers in the country, the NCAI provides project funding and management guidance, as well as a program to educate and mentor researchers, clinicians and developers, Low said. The NCAI has the potential to bring more companies to GCIC’s doorstep and to the ecosystem of working to bring technologies from early-stage innovation to commercialization, Low said. In another effort to help make GCIC ultimately sustainable, it has shifted to more investment through convertible notes, allowing loans to a company to turn into equity, giving GCIC more opportunities for returns on investment, Low said. Right now GCIC has about 10 such investments and is holding roughly $5 million worth of invested equity. And CardioInsight’s exit gave GCIC a return when it was required, he said. “We’re optimistic that there will be further exits coming and that those will be able to feed back and sustain our operations and our programs,” Low said. He added, “I think it’s a phenomenal program,” Low said. “I’m proud to have been associated with it, and I’m really looking forward to what’s next.” David Goodman, director of the Development Services Agency for the state and chairman of the board of the Ohio Third Frontier Commission, said he hopes to see GCIC become and remain self-sustaining. “What we’re trying to ultimately do with regard to GCIC is to have it become hopefully sustainable and continue to be an economic innovator and engine,” he said.

Family business list full of father-son combinations There’s a reason why so many family businesses have names like Johnson & Sons: Men started them and passed along control to their male offspring. And not much has changed, judging by this year’s Largest Family-Owned Businesses list. A total of 26 female family members hold management positions with the 57 local family businesses that answered a question asking them to list family members in management. By comparison, more than 130 male family members hold management positions with those companies, according to their answers. Those answers appear in the Microsoft Excel version of the list, which

includes 58 companies. Granted, I didn’t ask the companies why so many male family members hold management positions, so I won’t speculate about the reasons for the imbalance. And clearly, this phenomenon isn’t limited to family businesses, given that men hold the vast majority of leadership positions in the business world (for instance, a grand total of four women were listed among the 106 executives included in three 2016 lists ranking the highest paid CEOs, CFOs and non-CEOs at public companies in Northeast Ohio). You’ll notice that the largest company on our list, Minute Men Cos., has 38,600 employees — far more than any other company on the list.

That’s because they’re a staffing firm. They technically employ all of those people, but the vast majority work on behalf of other companies. Another staffing firm, The Reserves Network at No. 7, received a similar boost: They employ 655 people, and all but 72 work for other companies. The second-largest company is Discount Drug Mart with 2,113 employees. The third-largest is Ganley Auto Group with 1,476. Last year, both American Greetings and Fred W. Albrecht Grocery Co. were listed between those two companies, but this year they didn’t respond to our survey. Only one manufacturer broke the Top 10: East Manufacturing Corp., located east of Akron, took the 10th spot. — Chuck Soder

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Business leaders push for Rt. 30 expansion Buoyed by Trump’s infrastructure promises, backers hope for major artery between Canton and Pittsburgh By DAN SHINGLER dshingler@crain.com @DanShingler

If Donald Trump is reading this, a lot of folks in Canton and points east would like him to know: They want him to follow through on his pledge to invest a trillion dollars in U.S. roads, bridges and other infrastructure. More than that, they want U.S. Route 30 between Canton and Pittsburgh to be on the list of projects that gets funded. After all, they say, where else can the federal government invest in a road project that literally ends with an exit named after the president? “Route 30 runs four lanes from Chicago all the way to Trump Road, where it becomes two lanes, which has always been a bit of a head scratcher,” said Denny Saunier, president of the Canton Regional Chamber of Commerce. Saunier’s been begging for the road to be expanded for decades for a host of other more fundamental reasons, and other economic developers in the region have been asking for it since at least the late 1950s. Lately, the Canton chamber and others have been amping up their efforts. “We’re really taking an aggressive look at how we can connect to a major market like Pittsburgh in a way that will bring growth and safety to our business travelers and also to our residential travelers,” Saunier said. That includes meeting with federal officials like U.S. Sen. Sherrod Brown, petitioning the Trump administration and beginning to work with other counties along Route 30 to raise

matching funds that might spur the Ohio Department of Transportation to invest in the road. ODOT is aware of the desire to expand Route 30, but officials say the project would be too expensive for ODOT to consider on its own. “Current estimates for building the four-lane highway range from $800 million to $1 billion. Such a project would go through ODOT’s Transportation Review Advisory Council, and they have been focusing on funding projects that have a significant local funding match,” said ODOT press secretary Matt Bruning. So, for now at least, ODOT is only working on small improvements to the road. That includes things like better signage, striping, traffic signals and other improvements. ODOT is working on about $5 million in such improvements, but Saunier and other local business backers say that’s not nearly enough. Not expanding the road would be shortsighted on the state’s part, said Dennis Nash, CEO of Canton-based Kenan Advantage Group, which claims the mantle of being the largest liquids carrier among U.S. trucking companies, with more than 6,000 trucks and 10,000 employees. “We’ve got all this development in the shale areas, both in Ohio and in western Pennsylvania, and we’re making no effort to connect to that,” said Nash, echoing something he said he told Ohio Gov. John Kasich personally a couple of years ago. Nash’s company hauls drilling fluid, water, oil and other liquids involved in oil and gas production across eastern Ohio, as well as in 40 other states. In Ohio, he said, he often routes his trucks many miles out of

Many eastern Ohio residents backed Donald Trump in the election, and now at least some of them hope his promise of infrastructure spending will result in an expansion of U.S. Route 30. This large sign sits next to Route 30, about 5 miles east of Canton. (Dan Shingler)

the way so that they can travel on the Ohio Turnpike or an interstate instead of Route 30. That drives up fuel costs, plus it means it takes longer to get to certain destinations and results in more mileage and wear on his trucks. But it’s still better than having his rigs spend more time on a two-lane road, he said. “Four lane highways — that’s where I want my trucks, because that’s the safest place for them to be,” Nash said. When that’s not possible, they sometimes do use Route 30. But Nash doesn’t like it. “They’re going down this two lane

highway and mixing with school buses and the general population, because that’s the only way they can get to some places … But we all know that’s not acceptable,” he said. The issue is even garnering bipartisan support in a staunchly Republican eastern Ohio. Stark County commissioner Richard Regula, a Republican, is a big proponent of expanding Route 30 and thinks support for the project is building. “We’ve been reached out to by the Trump administration and the Democrats, and they’re all looking for road projects,” said Regula, who said he’s working with colleagues in Car-

roll and Columbiana counties to raise both interest and funding for the project. Regula said the project does not appear to be one the first 50 road projects the Trump administration told him it’s working on, but he’s lobbying hard for it to make the next cut. “I told them: ‘You know where it would start, right? Trump Road in Canton, Ohio,’” Regula said. Brown, a Democrat, said he supports the project, along with infrastructure investment generally. “Rebuilding American infrastructure will put Ohioans to work on projects of local significance, like the Route 30 project and other Ohio infrastructure priorities,” Brown said in an email. “I look forward to working with my colleagues on both sides of the aisle and with President Trump,” he said of infrastructure investment efforts. Of course, words are not money, and no one has yet found a way to pay for the project. It doesn’t help that Ohio and ODOT are strapped for cash, Saunier said. That is why many, including Nash, hope that the election of Trump will help by getting federal funding for the project. “With Trump, he is definitely focused on the right things,” Nash said. “He gets it and he understands this country needs to be spending its money internally on infrastructure.” But Nash also said he’s patient. “I’m not disappointed yet. I realize that these things move slow and there’s a lot of work that has to be done on how you bypass cities and things like that.” “But it needs to be a priority,” he added.

Help for Bridgestone tourney can mean help for region By JUDY STRINGER clbfreelancer@crain.com

Organizers of the World Golf Championships-Bridgestone Invitational teed off a new challenge ahead of this year’s tournament, which takes place Aug-2-6 at Firestone Country Club in Akron. Mayors from Akron, Cuyahoga Falls, Stow, Barberton and Green and Summit County executive Ilene Shapiro will hustle to recruit tournament volunteers from their own ranks, with the winner bringing home the Mayors Cup. The inaugural Mayors Cup Challenge is the latest — and perhaps most vocal — volunteer push on behalf of the Bridgestone Invitational, one of the four PGA World Golf Championships. The five-day event generates more than $1 million annually for Northeast Ohio causes, including grants to anchor nonprofits such as Akron Children’s Hospital, University Hospitals Rainbow Babies & Children’s Hospital, the Ronald McDonald House Charities and the LeBron James Family Foundation. Volunteers make the donations possible, according to John Anderson, executive vice chairman for Northern Ohio Golf Charities, which is responsible for recruiting and managing Bridgestone’s volunteer

Volunteers perform all sorts of duties, including on the course, at the World Golf Championships-Bridgestone Invitational at Akron’s Firestone Country Club. (Contributed photo)

workforce. It takes between 1,000 and 1,200 each go around. Volunteers assist PGA officials in scoring, act as crowd control for the 25,000 to 30,000 daily spectators, dole out concessions, or serve food and drinks in one of the swanky corporate hospitality tents, among a long list of other tasks. “It’s really an amazing family of people that come together for one week every year,” said Glenda Buchanan, administrator of Northern Ohio Golf Charities. Use of the word “family” is not so

far flung. Bridgestone is an annual reunion of sorts. As many as 80% of the volunteers return for a second, third or 10th year. Buchanan says 17 volunteers have more than 40 years or service — long before the PGA event at Firestone became a World Golf Championship. Three have been coming back for 57 years. The impetus behind the Mayor’s Cup Challenge, thus, was less of a cry for help than an attempt to keep the pond well stocked. “The idea kind of took flight when we were having some conversations

with some of our elected leaders, because many of them have staff who volunteer and are there,” Anderson said, “and the thought was ‘Gee, we really need to get behind this and maybe in a way we have not thought of before.’” Beyond the $1 million it puts in the pockets of Northeast Ohio charities, Bridgestone’s annual economic impact is estimated at about $21.4 million. That, according to a 2011 study by Mohr Partners and Cypress Research, is how much it costs to promote and execute the event as well as spending by players, their staff, spectators, media, vendors and tour officials during tournament week. Those bucks don’t stop at the Akron border, Anderson said. They spill into Green hotels. They feed into Cuyahoga Falls restaurants and bars. Moreover, the televised invitational provides worldwide exposure to Akron and its neighbors, which is — cue the Visa commercial — priceless. “I think the elected leaders saw the opportunity to act as a partner in fostering a new era of participation in the event, to maybe shine the light how important it is to the area and get their teams mobilized to have a more dynamic hand in it,” Anderson said. “But, we’ve always been fortunate to have new volunteers entering the tournament.” That is not to suggest recruiting

Bridgestone workers is without challenges. Companies today, for example, are less apt to give employees time off to volunteer at the tournament, according to Anderson. Most working adults who volunteer use vacation or personal days. “There was a time when it was ‘Give us five days or four days.’ Now we have a lot of volunteer committees where the volunteer commitment is two days, and I think that is somewhat reflective of what people can give,” he said. Then there’s the growing popularity of the invitational and PGA events themselves, which begets more of those moving parts. More food options. More cars to park. More corporate hospitality events. Not unlike the NBA playoffs or the World Series, it all plays toward a “more dynamic fan experience,” Anderson said. Both are reasons why Anderson and his team recruit year-round. They call on Northeast Ohio businesses throughout the year, and, Anderson said, some of the most active business partners — from a volunteer standpoint — are the same ones who routinely hold United Way campaigns or collect food for the Akron-Canton Regional Foodbank. These companies, he said, tend to see a correlation between enthusiastic, hardworking employees and a desire to be engaged in the community.

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There are lots of differences in terms of which communities are welcoming and which aren’t, said a Cleveland investor who wished to remain unidentified. “When you hear about a community being open for business, when you hear about someone striking a partnership with someone who wants to bring this to a community,” they said, “people flock to those areas.” The investor is not only looking to finance real estate for marijuana businesses, but is part of another group trying to obtain its own cultivator’s license. Being publicly connected to both could “muddy the waters,” he said, and is something he was advised by legal counsel to avoid. The license applications are quite rigorous and carry significant financial barriers. It’s $20,000 alone just to apply. Each application is tied to a potential piece of property, and applicants are expected to disclose on their applications if a city has a moratorium in place, even though those are locations businesspeople are unlikely looking at now anyway. The state’s intent there is to give cities local control over the industry. “Because those licenses are tied to property — and the state will start spinning out those licenses in May through July — if you don’t have the option to buy or control that, you’re flailing, and you’re not ready to do your application,” the investor said.

What governments think Where local governments stand right now is quite varied. Cleveland still has a moratorium in place until September. Lakewood recently extended theirs through June, while Lyndhurst extended one through September.

Lakewood Mayor Michael Summers said the reason for the extension there is to allow more time for the city to analyze where businesses could be allowed. Per state law, nothing can be located within 500 feet of a school, church or library. That, in addition to Lakewood being highly residential, already makes it very difficult for any marijuana operations to go there. Summers said the city has probably 10% or less of its commercial corridor along Detroit and Madison avenues that could accommodate retail. And on the growing side, there’s simply not many facilities or sites large enough that are available to accommodate those operations. “That ‘take us now or we’re not coming back’ is a salesman’s approach: embrace us or forget us,” Summers said. “If that’s the choice, we are going to do what’s best long term. If we miss out on this opportunity, that’s OK. We understand that.” Akron has a ban in place, but is considering changes in zoning rules to allow the businesses in commercial districts. “We aren’t slamming on the brakes to keep these businesses out of Akron entirely, but we also aren’t putting the pedal to the floor to allow them anywhere and everywhere in our community,” said Ellen Lander Nischt, Akron’s assistant director of law. She said the city “surely” isn’t in the business of turning away legitimate tax revenue. But the city is still taking its time in developing local rules. “Some businesses may prefer to go to a city where they have no additional regulation at all, and that’s fine,” Nischt added. “We have been approached by some interested businesses, both local and some from outside the region, expressing interest in Akron. We will see what kind of response we get in the coming months as state applications for cultivation licenses go live.”

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Eastlake, Parma and South Euclid have ended their moratoriums, but are showing different levels of interest. Eastlake has agreed to sell the former Eastlake JFK Senior Center to Big Game Capital of Chagrin Falls for a greenhouse (contingent on their license approval). Both Parma and South Euclid are considering zoning rules to regulate where those operations can locate in town, while the latter has even proposed more stringent standards on where retail shops could go. Parma city council removed its moratorium recently to be more hospitable to the coming industry. The city has been approached about potential operations in its myriad industrial sites, said Mayor Timothy DeGeeter, particularly in those just off Interstate 480 on its north side, an area that has been appealing to aspiring businesspeople. He men-

tioned the city’s potential consideration of variances for properties outside those and referenced the interest in getting a cultivator or processor — which have scientists and higher-paying jobs compared to dispensaries. “We’d be remiss to not look at this because if it doesn’t come to Parma, it could go next door to us. Those jobs have to go somewhere,” he said. “We had a number of cuts from the state. It’s harder and harder to keep doing safety services and rebuild infrastructure. So why not take a look at this?” South Euclid has its next public meeting May 8 to discuss zoning regulations limiting marijuana businesses to manufacturing districts. Those rules were proposed by atlarge councilman Jason Russell, who happens to be a commercial real estate developer and city planner by trade. He lauded the state for giving communities local control — something that can be a rarity in government. “It’s not too often the state gives you the ability to regulate commercial uses,” he said. “In a climate where state usually takes away home rule, we were granted the ability to regulate this. So why don’t we?” He said his personal opinion is residents should have access to medical marijuana. “But if our community says they don’t want it here, then that’s what the residents want,” Russell said. “The tax revenue is important. But I would argue that what residents want is more important.”

Missing the boat Some cities are being cautious, but with the intent of having local rules in place late this year. Yet, a slow approach will very likely preclude them for receiving any cultivators, let alone

NETWORK AND LEARN FROM OTHER NEO FAMILY BUSINESSES. KEYNOTE: JANE GROTE ABELL

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other marijuana businesses. Rules are still being finalized. But the state has proposed allowing 25 processors and 60 dispensaries in addition to its two tiers of cultivators. Typically, the stigma is that dispensaries, which are often required to deal in cash because of banks’ reluctances to work with them, draw smoking, loiterers, crime and general ne’er-do-wells, said Kevin Murphy, a lawyer with Walter | Haverfield working with marijuana businesses. That’s not always the case, though: In Colorado, one of 29 states today that allow marijuana either medically or recreationally, marijuana-related crimes made up less than 1% of all offenses in the four years following the state’s passage of recreational laws in 2012, according to a report by The Denver Post. Regardless, the cities still evaluating rules today may only be able to accommodate dispensaries considering the aspiring cultivators and processors aren’t standing by for local governments to settle on their laws. “Initially, I would advise clients that if (a city) has a moratorium, then move on,” Murphy said. “Timing is limited. You only have until the end of May, and you want a city that supports you. If you’re dealing with a city or a member of a city council who doesn’t like this, it’s just not worth it.” So despite a city's best efforts, if they’re hoping to draw medical marijuana businesses, but are lagging in developing local rules, they’re more likely to miss out on the medical cannabis market that was globally valued at $11.4 billion in 2015 and expected to be worth $55.8 billion by 2025, according to a recent report by California analyst Grand View Research. “And if a city is saying no,” Murphy said, “for the foreseeable future, this isn’t going to happen for them.”

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Source Lunch Rick Batyko

Senior vice president, Team Northeast Ohio Team NEO is a regional economic development nonprofit that leads the region’s business attraction efforts and works with chambers of commerce and other business support organizations to encourage existing businesses to stay and grow in an 18-county region. It’s been Rick Batyko’s job at Team NEO for the last decade to run the Cleveland Plus campaign, the effort to market that region — originally 13 counties that included metropolitan areas that had competed against each other for new businesses — as a single economy. The goal is for site selectors and growing businesses to see Northeast Ohio as one economy, not a patchwork of smaller metropolitan economies. As part of the job, Batyko regularly visits the offices of media outlets, such as The New York Times, The Wall Street Journal, CNBC and The Economist, to keep them up to date on the region and its economy. That’s gotten a little easier since the region has basked in the warm glow of the Republican National Convention and the national exposure of the Cavaliers and the Indians. — Jay Miller

Five things Favorite Cleveland restaurant “Guarino’s, because it has old-school Italian fare in a converted family home with Victorian decor,” Batyko said. “It reminds me of growing up in an Italian-American culture.”

What book are you reading? “Unmarketing: Everything Has Changed and Nothing is Different,” by Scott Stratten.

Best movie ever “It changes, but currently it’s ‘American President,’ directed by Rob Reiner and written by Aaron Sorkin. It then morphed into my favorite TV show, ‘The West Wing.’ ”

Favorite local landmark “The Terminal Tower. It is the iconic image of Cleveland — strength and longevity — and recently renovated.”

Favorite spot in Northeast Ohio “Hanging out with my wife at the rocks at Edgewater Park.”

Lunch spot Cibreo Italian Kitchen 1438 Euclid Avenue Cleveland

The meal One had the walleye special, the other salmon with lentils and wild rice.

The vibe It’s in Playhouse Square across Euclid Avenue from the theaters. So it’s a little well-dressed and formal, but comfortable with efficient, unobtrusive service.

The bill $ 43.79 with tip

Until Team NEO came along, no one was looking at Northeast Ohio as a single economic region. In fact, there was resistance to it, especially since your branding, “Cleveland Plus,” doesn’t include the other metropolitan areas in the region. How do you think it’s working? It’s a hard region to knit together. You have Cleveland, Akron, Youngstown, Lorain-Elyria — they all used to compete to attract businesses. But my opinion is we’ve made good progress, the economic development system is working together. Our marketing strategy is to market directly to decision makers in what we call driver industries (Team NEO’s driver industries are: aerospace and aviation; automotive; banking and financial service technology; biohealth; food processing; headquarters and professional services; information technology; instruments, controls and electronics; metal production and fabrication; oil and gas; and polymers). And now, with the Cleveland Foundation, we’re embarking on research on the workforce and the mismatch between the supply and demand for workers in the region. And now you’re diving into digital marketing. What’s that about? The challenge we have is that digital marketing is new to economic development. We primarily market to site selectors, so we don’t know what company that may be representing. But that doesn’t mean people in the companies they represent aren’t looking at our website. Now we can track those companies. One of the most vocal opponents was longtime Akron Mayor Don Plusquellic. How did you win him over, to the extent he was won over? When we went to him, we said, “Don, you’re not going to like this, but Cleveland has the brand equity.” He said, “I hate it,” but he didn’t have a better idea. Your background is in public relations. What attracted you to that field? I went to Ohio University with the intent to get a journalism degree, back when Carl Bernstein and Bob Woodward were uncovering

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MARKETING, ADVERTISING & EVENTS INSIGHTS.

Today’s Tip: A great way to raise awareness of your brand is through sponsored content.

Watergate. But Ohio U.’s journalism program included public relations, and I got to know people there and the work sounded very interesting to me, though I didn’t know anyone in the field. So where did you start your public relations career? At Rio Grande College in southern Ohio. I was hired by the president, Clodus Smith (a one-time vice president at Cleveland State University). Then I followed Smith to Lake Erie College. After that, I worked at Babcock & Wilcox Co. (at its nuclear-equipment-division plant in Barberton). At the time, the president was Walter Boomer, a former Marine Corps general. It was really valuable working for a general. Then I went to Honeywell International’s Bendix plant in Elyria. From there, I went to Honeywell’s corporate office in Morristown, N.J. And then? I got a call from the Cleveland Foundation. They were looking for an officer-level communications person. They were mounting a brand campaign after Fidelity Investments began to compete with community foundations like the Cleveland Foundation to manage donor-directed funds. All of that early work in all those places really helped me when I took this job in January 2006. And you’ve gotten involved in public relations beyond your day job. Yes, I’m very passionate about my field. Since January, I’ve been on the board of the Public Relations Society of America. I’m very excited about that. PRSA has 30,000 members. Also, I’m an adjunct at Kent State University in their online public relations program. I really wanted to get deeper in my field. And I’ve been writing chapters in books about the field. I’m in the middle of editing a book, “The Digital Revolution: An Encyclopedia of the People, Organizations, Places, and Issues behind the Great Technological Innovations of the Information Age.” It’s going to be done in October. And then there’s that job you had in college, at Ohio University. Yes. I delivered three babies as a paramedic with Athens EMS.

While sponsored content is not meant to be overly promotional or to make a hard sell, it is intended to help show off your expertise or put your company in a positive light. And, if done right -- through the use of interesting content that’s clearly labeled as sponsored -- readers will willingly and positively engage with your brand.

Amy Ann Stoessel Managing editor, custom and special projects Crain’s Cleveland Business astoessel@crain.com

How Crain’s can work for you: Crain’s Cleveland Business offers sponsored content opportunities in all of its email newsletters, from the Morning Roundup to the Manufacturing Report. Content is clearly labeled as sponsored, but it is incorporated among Crain’s Cleveland Business content. For more information on how to engage with our newsletter audience, contact Nicole Mastrangelo at 216.771.5158 or nmastrangelo@crain.com.

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