Crain's Cleveland Business

See WIND 8

By CHUCK [email protected]

Gov. John Kasich will have a bigsay over whether wind turbines endup in Lake Erie anytime soon.

A coalition that aims to build asmall wind farm in the lake is workingto convince the Ohio Legislature topass a law that could determinewhether the project can secure financing, said Chris Wissemann,general manager of FreshwaterWind LLC, the project developer.

Hence, project proponents willneed the support of Gov. Kasich, whothis spring is expected to announcethe details of a comprehensive energypolicy for the state.

To win the governor over, thecoalition has held multiple meetingswith his policy advisers over the pastyear, arguing that the state can create jobs and build a leadershipposition in an emerging industry bybuilding the first offshore wind farmin the Great Lakes.

CRAIN’S FILE PHOTO

The new owner of the Old Arcade sees “potential” in converting some ofthe Hyatt Regency’s suites inside the building into apartments.

$2.00/JANUARY 2 - 8, 2012

Entire contents © 2012 by Crain Communications Inc.

Vol. 33, No. 1

07447001032

601 INSIDE

NEW

SPAP

ER Auto sales forecast for 2012brightens with employment, newproduct availability ■■ Page 4

PLUS: COUNTY GOVERNMENT REVIEW ■■PUBLIC CONSTRUCTION REFORM ■■ & MORE

Predicting the outcome for seven Northeast Ohio sectors PAGES 11-15

LOSE: Local government, real estate DRAW: Health care, technologyWIN: Finance, manufacturing, small business

New Arcadeowner eyesapartmentsat Hyatt

Backers oflake turbinefarm seekKasich’s nod

See ARCADE Page 17See CLINIC Page 17

Firm has track record of bringing residentialcomponent at historic sitesBy STAN [email protected]

The quest by Skyline International Devel-opment of Toronto to make a go of thelandmark Old Arcade in downtown Cleve-land includes a possible switch to residen-tial use of part of the building that housesthe 293-room Hyatt Regency Cleveland.

Word of the potential change comes fromSkyline’s majority owner, Mishorim Devel-opment Corp. of Israel, which is traded onthe Tel Aviv Stock Exchange. In a noticeabout the Arcade acquisition to the Tel Avivexchange, Mishorim said, “Skyline plans toconvert 100 of the hotel rooms into resi-dences and sell them, as the company hasdone in other projects.

Clinic pursuesnew revenueby expandinglab operationBy TIMOTHY [email protected]

The Cleveland Clinic is putting thefinal touches on a $75 million buildingthat officials hope will pump newblood into the health care jugger-naut’s revenue stream.

The three-story, 135,000-square-foot building at the intersection of East 105th Street and Carnegie Avenue in Cleveland will house theClinic’s Pathology and LaboratoryMedicine Institute — the arm of theClinic that conducts various forms of

The Cleveland Clinic’s new pathologyand laboratory medicine building

20120102-NEWS--1-NAT-CCI-CL_-- 12/30/2011 9:08 AM Page 1

Average domestic Average domestic Changefare Q2 2011 fare Q2 2010 Q2 2010-11

22 CRAIN’S CLEVELAND BUSINESS WWW.CRAINSCLEVELAND.COM JANUARY 2 - 8, 2012

REGULAR FEATURES

Best of the Blogs ........19Big Issue ......................9Classified ..................18Editorial ......................8From the Editor ............8

Going Places ..............10Personal View ..............8Reporters’ Notebook ..19Tax Liens......................9Year in Review............16

COMING NEXT WEEKPreparing to partner

Audit Bureauof Circulation

Subscriptions: In Ohio: 1 year - $64, 2 year - $110.Outside Ohio: 1 year - $110, 2 year - $195. Single copy,$2.00. Allow 4 weeks for change of address. Forsubscription information and delivery concerns sendcorrespondence to Audience Development Department,Crain’s Cleveland Business, 1155 Gratiot Avenue,Detroit, Michigan, 48207-2912, or email to [email protected], or call 877-812-1588(in the U.S. and Canada) or (313) 446-0450 (all otherlocations), or fax 313-446-6777.Reprints: Call 1-800-290-5460 Ext. 125

Keith E. Crain: ChairmanRance Crain: PresidentMerrilee Crain: SecretaryMary Kay Crain: TreasurerWilliam A. Morrow: Executive vice president/operationsBrian D. Tucker: Vice presidentRobert C. Adams: Group vice president technology, circulation, manufacturingPaul Dalpiaz: Chief Information OfficerDave Kamis: Vice president/production & manufacturing

G.D. Crain Jr. Founder (1885-1973)Mrs. G.D. Crain Jr. Chairman (1911-1996)

Crain Communications Inc.

700 W. St. Clair Ave., Suite 310,Cleveland, OH 44113-1230Phone: (216) 522-1383Fax: (216) 694-4264www.crainscleveland.com

Publisher/editorial director:Brian D. Tucker ([email protected])Editor:Mark Dodosh ([email protected])Managing editor:Scott Suttell ([email protected])Sections editor: Amy Ann Stoessel ([email protected])Assistant editors: Joel Hammond ([email protected])SportsKathy Carr ([email protected])Marketing and foodSenior reporter: Stan Bullard ([email protected])Real estate and constructionReporters: Jay Miller ([email protected])GovernmentChuck Soder ([email protected])TechnologyDan Shingler ([email protected])ManufacturingTim Magaw ([email protected])Health care & educationMichelle Park ([email protected])FinanceResearch editor: Deborah W. Hillyer ([email protected])

Cartoonist/illustrator: Rich Williams

Marketing/Events manager:Christian Hendricks ([email protected])Marketing/Events Coordinator:Jessica Snyder ([email protected])

Advertising sales director:Mike Malley ([email protected])Account executives: Adam Mandell ([email protected])Nicole Mastrangelo ([email protected])Dawn Donegan ([email protected])

Office coordinator:Toni Coleman ([email protected])

Web/Print production director: Craig L. Mackey ([email protected])Production assistant/video editor: Steven Bennett ([email protected])

Graphic designer:Lauren M. Rafferty ([email protected])

Billing: Susan Jaranowski, 313-446-6024([email protected])Credit:Todd Masura, 313-446-6097([email protected])

Audience development manager: Erin Miller ([email protected])

HEADING SKYWARDAverage domestic airfares rose 8.5% to nearly $370 in the second quarter of2011 from about $341 in the like period a year ago, according to new federal statistics. The data cover the 100 largest U.S. airports. All five Ohio airports included in the data saw second-quarter fare increases that were higher than thenational average. Here’s how they fared:

Cincinnati $476.06 $425.67 11.8%

Cleveland 428.26 389.58 9.9

Dayton 370.88 329.86 12.4

Columbus 353.18 315.31 12.0

Akron/Canton 329.67 286.19 15.2

U.S. averages 369.67 340.72 8.5

SOURCE: BUREAU OF TRANSPORTATION STATISTICS; WWW.BTS.GOV

Airport

In our monthly small business section,we look at some of the factors thatshould be considered before going intoa business arrangement with someone.Plus, our new “Getting Ahead” feature debuts.


JANUARY 2 - 8, 2012 WWW.CRAINSCLEVELAND.COM CRAIN’S CLEVELAND BUSINESS 3

INSIGHT

THE WEEK IN QUOTES“By being first, whatyou get is a blueprintfor the second, thirdand fourth to bedone.”— Chris Wissemann, generalmanager of Freshwater WindLLC, which wants to build a windenergy farm on Lake Erie.

Past passed, county looks aheadDeliberate FitzGerald, council see progress in ethics, cost-cutting effortsBy JAY [email protected]

The new Cuyahoga County govern-ment celebrates its first birthday Jan.3 with 365 fewer employees, a morerigorous ethics policy and a plan tostart spending from its $100 millioneconomic development fund.

Both County Executive EdFitzGerald and County Council Pres-ident C. Ellen Connally believe theyhave had a good, if hectic, first yearregaining the respect of citizens andcreating new roles for the restruc-tured government. Both see 2012 as

FILE PHOTO/MARC GOLUB

Then-new Cuyahoga County executiveEd FitzGerald speaks last Jan. 14 at agroundbreaking for Cleveland’s newmedical mart and convention center.

INSIDE: A closer look at how the county’s economic development fund will work. Page 6

a time to begin to look ahead to thefuture of the county.

At the top of the list of priorities ofboth leaders is the county’s neweconomic development fund. The$100 million fund has been undercouncil review since last fall, after anindependent economic developmentcommission last July 26 approved afive-year economic developmentplan. Mr. FitzGerald said he hopesto use the fund to build businessesand infrastructure in downtown

Cleveland that will support the newconvention center and medicalmart the county is building and theHorseshoe Casino Cleveland.

Mr. FitzGerald has laid out a planfor 11 economic development pro-grams that will begin to roll out thismonth and should be completed byApril. The programs are organizedin three categories: support for newcompanies or young innovativefirms that still are developing theirproducts and strategies; money for

new or expanding companies thatneed help with site development orredevelopment; and more traditionallending programs to help with acqui-sitions, business attraction and theretraining of workers.

The administration expects thatmost of the money will go to smallerbusinesses that may end up employing30 people or fewer.

“Large-scale attraction deals areexciting, but they are rare,” NathanKelly, Mr. FitzGerald’s deputy chief ofstaff for development, told the countycouncil Dec. 19. “For the first time, weanticipate having the resources to com-pete for large-scale attraction deals.”

See COUNTY Page 6

See PUBLIC Page 5

SAME FACE,NEW PLACE

Longtime Clevelander Eddie Taylor joinsforces with Oswald insurance brokerage

JANET CENTURY

Eddie Taylor (right), a well-known African-American businessman in Northeast Ohio,has joined forces with Oswald Cos. and chairman and CEO Marc Byrnes to formTaylor Oswald, a new insurance benefits brokerage company.

Public bodies laud new rules governing building processBut some contractors, architects fear the effectsBy JAY MILLER

[email protected]

Public construction contracting inOhio is changing with the new year— a transition that doesn’t thrilleveryone who is involved in thebuilding process.

The budget signed by Gov. JohnKasich last June gives the state andits cities, public universities and mostother public agencies the option touse construction management tech-niques common to the private sectorand now used by public agencies inalmost every other state.

Public agencies appear keen toadd new tools to their repertoireand believe it will save time andmoney. However, some members ofthe contracting community are apprehensive. They fear changes inthe way public agencies design,construct and renovate offices, prisons and other buildings will tiltthe scale — particularly on big pro-jects — to larger and national con-tracting firms.

The new rules do not affect road

and highway construction practicesunder the Ohio Department ofTransportation and the Ohio Turn-pike Commission.

“At the state level it’s very exciting,”said Thompson Hine LLP attorneyJeffrey Appelbaum. “We have these(new techniques) cued up, and it’sactually going to happen.”

Mr. Appelbaum helped guide thechanges that emerged from a reformpanel convened by Gov. Ted Strick-land, a Democrat, in 2009 and that

By MICHELLE [email protected]

One of this region’s most well-known African-American entre-preneurs is lending his leader-ship and name to a new spoke

in the wheel of the Oswald Cos. insurancebrokerage.

Eddie Taylor Jr., also a civic leader, nowis president and majority owner of TaylorOswald, a separate but linked venture ofthe Cleveland-based, employee-ownedOswald Cos. With the addition of TaylorOswald, Oswald counts five distinct busi-nesses, including Oswald Financial Inc.and Oswald Specialty Life.

Like Oswald Cos. itself, Taylor Oswaldis a full-service insurance and benefitsbrokerage firm and will assist clients inobtaining the insurance that most appro-priately fits their businesses and lives, Mr.Taylor said.

Mr. Taylor’s ownership stake makesthe new company minority-owned, whichshould render Taylor Oswald an attrac-tive option for companies, universitiesand other organizations that have diver-sity inclusion goals.

In addition, Taylor Oswald, with fewerthan six employees at present, will chase

See TAYLOR Page 4

found their way into RepublicanGov. Kasich’s 2012-13 budget.

Mr. Appelbaum said estimates ofthe savings the changes will makepossible have ranged from 10% to30% per project. The higher-end figure, he said, was made by officialsfrom Ohio State University, a bigspender, and includes the value of completing large revenue-gener-ating projects such as hospital buildings a year earlier than waspossible under the traditional, so-called “multiple prime” methodof construction.

“I think it’s a wakeupcall to local institu-tions that there’s talent here. There area lot of foundationsand endowments andpension plans lookingelsewhere, and theymight be able to getthe best-in-classmanagers in theirown backyard.”— Kara H. Lewis, president ofWinslow Asset Management.Page 7

“I truly believe it’s going to be a yearwhere we’re still in theprocess of stabilization.… Banks will succeedif consumers andbusinesses succeed.”— Lisa J. Oliver, president of theGreater Cleveland district forCleveland-based KeyBank. Page 11

“I’m not expecting ablowout year. I’m expecting a good,solid year.”— Northeast Ohio Software Association president Brad Nellis.Page 14


Taking the initiativeMr. Jacobs formed a diversity task

force, led by two of the company’sAfrican-American employees, andhad employees undergo diversityand inclusion training. Two years ago,Oswald Cos. recruited Mr. Taylor,bringing him on without a particularrole or title, and in early 2011, it closedon the acquisition of a woman-owned firm, Selvaggio, Teske + Associates in Beachwood.

Mr. Jacobs sought out Mr. Taylorbecause he’d been impressed by theway Mr. Taylor presented to theMetroHealth Foundation board onbehalf of The Presidents’ Council, agroup established to support entre-preneurial and economic develop-ment within the African-Americancommunity. Mr. Jacobs is a memberof the foundation board.

After sitting down with Oswaldexecutives, including Mr. Jacobsand Marc S. Byrnes, chairman andCEO, Mr. Taylor joined the company.

“We didn’t have a slot for him,”Mr. Jacobs said. “We just knew wewanted him on our team.”

Mr. Jacobs cited Mr. Taylor’s civicactivities and his leadership in thecommunity. “Those traits you can’ttrain,” he said.

An Elyria native, the 46-year-oldMr. Taylor has worked in the insur-ance industry for nearly a dozenyears, and even owned a third-partyadministrative firm in Indepen-dence that managed workers’ compensation claims. He has ledseven companies during his career,including Collaborent Group, aGarfield Heights company thathelps government agencies makegroup purchases (of which Mr. Taylorremains an owner and board member), and Beverage DispensingSolutions in Mansfield, the assets ofwhich were sold in 2010.

Mr. Taylor also is board chair forAllegheny College, his alma mater,and is involved with the NortheastOhio Council on Higher Education,University Hospitals Case MedicalCenter and Policy Bridge, amongother civic ventures.

A bevy of resourcesSo, why, when he’s proven his

ability to go it alone, is Mr. Taylorattracted to starting a company under the Oswald umbrella?

Primarily, he said, it’s becausehe’s able to roll out his ideas backedby an experienced firm that canlend resources to him and his employees. Mr. Taylor is excitedabout the doors the new venturewill open within the insurance industry, which he said does not havea deep representation of minorities.

“Anything that can be done tobring more talented minorities intothe industry is a good thing,” hesaid. “Northeast Ohio has a longand proud history of being on theforefront of wonderful innovation.If we can do business together, nomatter our background, no matterour ethnicity or race, the communityis better served.

“This opportunity, in a small way,helps further that ambition that wehave as a community.”

Building Taylor Oswald into acompany of scale and eventuallyopening other offices is the goal,Mr. Taylor said. He said he willgauge his enterprise’s success on itsservice to clients, something he willmeasure by asking clients directlyand by retention and growth. Healso will consider the benefits TaylorOswald affords to employees.

Employees of Oswald Cos. own astake in Taylor Oswald just as theydo Oswald and thus, “we all shareEddie’s growth and Eddie’s success,”Mr. Byrnes said.

Mr. Jacobs, meanwhile, said thenew enterprise will be measured bywhether companies do businesswith Taylor Oswald. ■

“Anything that can bedone to bring more talented minorities intothe (insurance) industryis a good thing.” – Eddie Taylor, president andmajority owner, Taylor Oswald


BRONZE KEY2 1 s t A N N U A L

R E C O V E R Y R E S O U R C E S ’

Helping people triumph over mental illness,

alcoholism, drug and other addictions.

www.recoveryresources.org

GOLD

Austin Powder Company

Martha B. Baker

Laura Bozell

Calfee, Halter & Griswold LLP

Cleveland Clinic

KeyBank

PNC Bank

Reflections Interior Design, LLC

Wells Fargo Advisors LLC, Wells Fargo Commercial Bank, & Wells Fargo, Insurance Services

BRONZE

Dr. Chris Adelman & Dr. Ted Parran

BNY Mellon Wealth Management

Catalyst Consulting Group, Inc.

Exact Care Pharmacy

Ferro Corporation

Fifth Third Bank

Gil & Elle Frey

Robert and Heidi Heltzel

Medical Mutual

Mutual of America Your Retirement Company

Peter Rebar

Pinkney-Perry Insurance Agency, Inc.

SS&G

Ulmer & Berne LLP

University Circle United Methodist Church

SILVER

C. Louis Meyer Family Foundation

Cleveland Women’s Journal

The Giant Eagle Foundation

Kaiser Permanente

Margolius, Margolius & Associates, LPA

McDonald Hopkins LLC

McGladrey & Pullen, LLP

PricewaterhouseCoopers LLP

Southwest General

Stellar Benefits Group

Trend Consulting Services, Inc.

Western Reserve Partners LLC

ADDITIONAL CONTRIBUTIONS AND SUPPORT

AGC

BioPlastics Company

Care Alliance

Emily A. Drake

Kathleen J. Farkas

Hyland Software

Don Kimmel

Jeffrey T. Leitch

Nathan Lutz

MaxPack

Oatey

Staples

Interactive webinars from the Ohio Chamber provide an opportunityto learn and discuss important human resource issues with top expertsfrom the comfort of your desk. This program has been submitted tothe HR Certification Institute for review and also to the Ohio SupremeCourt for CLE credits. Whether you are a human resources professionalor business manager, these webinars will help you further developyour HR expertise and abilities.

Upcoming topics include:

January 11, 10 to 11:30 a.m. – Think Before You Click – Strategies forManaging Social Media in the Workplace. CLE approved.January 25, 10 to 11:30 a.m. – Wage and Hour 101. CLE approved.February 8, 10 to 11:30 a.m. – NLRB – Employer Free Speech and How theNLRB/NLRA Applies to Nonunion Employees. CLE pending.

To register go to www.ohiochamber.com or contactMichelle Donovan [email protected]

or 614-228-4201

HR AcademyWebinars

Sponsored by the Ohio Chamber of Commerce

Volume 33, Number 1 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for com-bined issues on the fourth week of May and fifth week of May, the fourth week of June and first week of July,the third week of December and fourth week of December at 700 West St. Clair Ave., Suite 310, Cleveland,OH 44113-1230. Copyright © 2012 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’sCleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373.

REPRINT INFORMATION: 800-290-5460 Ext. 136

clients Oswald historically hasn’t pur-sued, such as other minority-ownedbusinesses and municipalities.

After participating in 2009 in thecivic education program LeadershipCleveland — specifically, its diversityinclusion component — David C. Jacobs, Oswald’s president and chiefoperating officer, returned to his firmand reflected, “Wow, we’ve got a longway to go here.” While Oswald haddiversity in terms of gender, religionand education, the same could notbe said of minorities, Mr. Jacobs said.

“We did not have enough diversitywithin the leadership ranks,” he said.“We get asked that a lot — ‘What isyour diversity initiative?’ — and wedidn’t have one.”

That has changed.

Taylor: New addition has experience continued from PAGE 3

Forecasters see auto sales uptickMany consumers have put off purchases By JESSE SNYDERAutomotive News

Rising employment, better creditavailability, new products and urgency to replace aging vehicleswill drive U.S. auto sales higher in2012, forecasters say.

Sales predictions from 11 indepen-dent analysts ranged from 13 million light vehicles (forecast byWells Fargo Securities) to 14 million(forecast by Morgan Stanley). Theaverage outlook of 13.6 millionwould be up around 6% to 7% fromthis year’s sales, which are likely tofinish between 12.7 million and 12.8million units.

Crisis-jaded consumers have become less likely to change car-buying behavior based on economicnews, whether it’s good or bad, saidAlec Gutierrez, senior market analystfor Kelley Blue Book. Mr. Gutierreznoticed the change last summerduring the congressional debt-ceilingstandoff that triggered a cut in theU.S. credit rating.

“The Dow fell 1,500 points, andcar sales stayed smooth and consis-tent,” Mr. Gutierrez said. “TheAmerican consumer has seen somuch gone wrong. If they have tobuy a car, they will.”

Forecasters said the recovery ofauto sales, from a low of 10.4 mil-

lion in 2009, likely would continue itsslow pace into 2012. The economicfundamentals most closely tied toauto sales — personal income, un-employment rate and housing starts— are still weak.

But other factors are helping sales,especially the need to replace Amer-ica’s aging vehicle fleet. The averageage of vehicles on the road has risento 10.7 years, up from 8 or 9 yearsduring most of the past decade, saidTom Kontos, executive vice presi-dent of customer strategies and ana-lytics for auto auction house Adesa.

“Americans have gone without fora very long time,” Mr. Kontos said. ■

Jesse Snyder is a senior writer withAutomotive News, a sister publica-tion of Crain’s Cleveland Business.



Some provisions of the reformlegislation officially took effect onJan. 1. But it will take several monthsbefore new state administrativerules are drafted and for standardstate contracts to be approved for use.

The current multiple prime systemrequires public agencies to hire anarchitect to design a project andthen call for bids for as many asfour contracts — typically includingbids for plumbing, electrical, heatingand cooling work, and a catch-allgeneral contract. The agency thenmust accept what is considered thelowest, best bid.

While one contracting firmsometimes can win all four con-tracts, the old requirement of fourseparate major bids with two tofour winning bidders creates ineffi-ciencies and lawsuits among contractors for who is to blame fordelays and failures to perform, according to proponents of thechange. It also puts the burden ofcost overruns on the public agency.

Now, projects can be negotiatedwith a single contracting firm ratherthan bid out and, if desired, can putthe contractor at risk for any costoverruns. Public bodies still can usethe old method of contracting, though.

Cities and school boards can create their own contract documents,but Mr. Appelbaum expects manyagencies to use whatever form thestate Department of AdministrativeServices creates.

However, Cuyahoga County,

which rebuilt its government in thelast year under its own charter, hasadopted its own, similar construc-tion contracting legislation, createdwith Mr. Appelbaum’s help.

Stepping ahead slowlyThe hidebound construction

industry generally is accepting ofthe new project delivery systems, asthey are called, because many arefamiliar with them from work inprivate industry. The AssociatedBuilders and Contractors of Ohio,an association of nonunion construc-tion firms, did not take a formal position on the changes but broadlysupports the concept.

“We agreed that modern deliverymethods common in other statesshould be available in Ohio,” saidBryan Williams, the Columbus-based group’s director of governmentaffairs. “How you get there is wherethe discussion begins.”

Mr. Williams said he hopes stateand local governments use thesenew options judiciously as the contracting community adjusts tothe new landscape.

Of course, the industry can be expected to follow the lead of itsclients. And one of the majorclients, the Ohio School FacilitiesCommission, expects it and theschool districts it assists at timeswill use the new methods.

Contractors that want to workunder the traditional system stillwill have opportunities to operateas they have, especially where a school

district has not been an activebuilder and doesn’t expect to be inthe future, said Craig Weise, a formerstate architect who is working withthe School Facilities Commissionto bring contractors up to speed onthe new delivery methods.

But he expects the new alterna-tives to become commonplace.

“For the future, companies willhave to re-evaluate their businessmodels,” Mr. Weise said. “The peopleI talk to are excited, they’re activelyexploring their options.”

Cost containment’s downsideBut some are less than excited

about how their roles in the con-struction process might change.

“There’s mixed emotions abouthow this might work,” said Cleve-land architect Richard Fleischman.“My colleagues are giving up a lot.”

Mr. Fleischman worries that whena university or city hires a contractorto oversee design and constructionof a project, the contractor, whohas agreed to bring the project inunder an already agreed-to budget,will skimp on architecture, losingany chance at innovative and morecostly design. Some architects alsowill lose the chance to be hired tooversee construction, others note.

“The (general contractors) loveit,” Mr. Fleischman said. “But willthey pick (an architect like world-renowned) Frank Gehry? No way inhell.”

Some contractors also are con-cerned that they will lose out on

business to larger and out-of-statecontractors because of the increasedfinancial risk they’re asked to take.

When a contractor is solely onthe hook for the whole cost of construction and has guaranteed acompletion date and a cost, it raisesits bonding needs. A performancebond to a contractor is like a mort-gage loan commitment from a bankto a home buyer — it’s for a fixedmaximum amount based on a financial history and a balance sheet.

When a contracting firm is one offour prime contractors now, it musthave the financial statement andtrack record to qualify for a bondequal to perhaps one-fourth to one-half the total cost of the project.When it becomes the single primecontractor, it may need bondingcapacity for the entire cost of con-struction, and have bonding capac-ity for a second or third project if itwants to compete for others.

Mr. Williams of the AssociatedBuilders and Contractors worriesthat the Ohio general contractingcommunity isn’t large enough tohave the bonding capacity to handleall the projects that come along.

“That creates opportunities forlarge, out-of-state contractors tomop up all the business,” he said.

Mr. Appelbaum acknowledgedthat bonding is a problem, but saidhe sees it as a broader industryproblem.

“We need reforms in the bondingindustry,” he said. “That’s a contin-uing issue.” ■

Public: Out-of-state competitors loom as problemcontinued from PAGE 3

Full-timehiring in ’12similar to ’11By STAFFING INDUSTRY ANALYSTS

Twenty-three percent of employerssurveyed plan to hire full-time, permanent employees in 2012, according to CareerBuilder’s annualjob forecast. That’s relatively un-changed from 24% for 2011 but is upfrom 20% for 2010.

Seven percent of employers expect to decrease headcount, whichis the same percentage as 2011, thoughit’s an improvement from 9% for2010.

Fifty-nine percent anticipate nochange in their staffing levels. Elevenpercent are unsure whether therewill be change. The survey alsocharted other trends to watch:

■ Sixty-two percent of employersplan to increase compensation fortheir existing employee base, while32% will offer higher starting salariesfor new employees.

■ Thirty-four percent of humanresource managers reported that voluntary turnover at their organiza-tions rose in 2011. Employers citedthe desire for higher compensation andfeeling overworked as the top tworeasons employees gave for resigning.

■ Twenty-nine percent of employers said they will focus on diversity when recruiting to expandtheir employee demographics. ■


With respect to the day-to-dayoperations of county government,Mr. FitzGerald said he believes thatwhile it took a few months for thenew government to begin makinggood on reformers’ hopes for a moretransparent, leaner government, heand the county council moved at“appropriately deliberate speed.”

There were rumblings throughthe early part of the year from somewho thought it was taking too longto make obvious changes — such as pruning staff, especially in theformer county auditor’s andrecorder’s offices — and getting thenew, more aggressive economic development effort under way.

In the early months, the adminis-tration and council found themselvesswamped by the expectations.

“Some people wanted us on DayOne to announce 1,000 jobs” wouldbe cut, Mr. FitzGerald said. But, hesaid, employees had civil service rightsthat required a more measuredprocess.

Cutting staff is expected to saveabout $20 million a year. That is important because of the need tocut the county budget due to a reduction in state assistance and toprovide the money for the economic

development fund. The county nowhas about 7,600 employees.

Grade ‘A’Mr. FitzGerald, Ms. Connally and

other county council members saythe key accomplishments of 2011were the creation of new ethics andprocurement policies; efforts to makethe new county government moreopen and accessible; and transfor-mation of the scandal-ridden Boardof Revision, the agency that hearsrequests for property tax revaluations.

Ms. Connally said she hopes 2012will bring time to look further ahead.

“I hope we’ll be able to get out of(emergency) mentality,” she said. “Ihope we have a chance to work onlong-range plans.”

Both Mr. FitzGerald and Ms.Connally put passing a new healthand human services levy, due on theballot this spring, as a high priority,and both see opportunities for thecounty’s human services operationsto run more efficiently.

Also near the top of Mr. FitzGer-ald’s 2012 to-do list is finding collaborative solutions to the prob-lems facing cities in the county, including an anti-poaching initiative.

Joe Roman, president of theGreater Cleveland Partnership,

gives the new county governmenthigh marks for its first year.

“At the risk of being too kind ateacher, I’d give it an ‘A’ for certainon two or three key scores — restoringconfidence in the government; onstarting to use all of the assets of thecounty to try to think more abouthow to grow the county througheconomic development vehicles;and (on) making the county moreefficient,” Mr. Roman said.

“In 12 months county governmentand its leadership have started toprove it was everything we werehoping for,” he said.

Mr. Roman and the regionalchamber he leads were visible andstrong supporters of the county reform movement that led to creationof the new charter government. OnNov. 3, 2009, 66% of county votersapproved a change to a new chartercounty government. Mr. FitzGeraldand 11 council members were chosena year later to guide the new govern-ment.

Time to work togetherIn an hour-long interview on

Dec. 16, Mr. FitzGerald said he willunveil a community plan for thenext decade in his State of theCounty address before a City Club


County: Officials hoping to develop longer-term planscontinued from PAGE 3 of Cleveland audience Feb. 1.

Mr. FitzGerald said most peoplebelieve county government today ismore efficient and more transparentthan in the past.

“But that isn’t the sum total of theaspirations that I think people havefor county government,” he said.“They also want to know wherewe’re headed in terms of regionalgovernment, what we are going tohave in terms of economic develop-ment, education and housing.”

Mr. FitzGerald said he will be developing plans to use the countyto prod communities to think aboutdoing things regionally.

“Our challenge is going to be, howdo we start to provide packages ofthose services for things the countydid not traditionally do?” he said.

Mr. FitzGerald said he intends totalk about how the county’s 59communities can save money onexpenses such as garbage pickupand information technology.

“Some communities pick up theirown garbage, but most contract” witha trash hauling service, he said. “Whydo you need to have 30 differentcontracts?

Reluctant to signOne hurdle Mr. FitzGerald needs

to clear is to get broader agreementon his anti-poaching policy, which

would oblige communities to notifya community when one of its busi-nesses contacts another countycommunity about relocating.

Mr. FitzGerald started the conver-sation last June 9, and by Septemberhad a policy that would limit bid-ding wars between communities fornew businesses. But so far, only 16county communities have signedthe agreement, even though it doesnot include a contentious revenue-sharing plan.

Among those signing are Parma,Lakewood and Pepper Pike. Bigsuburbs including Highland Heightsand Westlake are among the com-munities not signing. HighlandHeights rejected the agreement because it doesn’t include commu-nities such as Mentor in neighboringLake County.

Another large suburb, Strongsville,is on the fence, mostly because itwould like an exemption that wouldallow it to market its 169-acre busi-ness park more aggressively.

“There are some old attitudes thatare going to take a while to change,”Mr. FitzGerald said. “This area isnot used to working together, andit’s not just cities. It’s medical insti-tutions, it’s school districts, it’s non-profits.

“I think most communities willeventually sign it,” he said. ■

As $100M fund begins, countyshould top prior annual lendingBy JAY [email protected]

The first five of 11 programs to be financed by the new CuyahogaCounty economic developmentfund will be presented to the CountyCouncil next Tuesday, Jan. 10. Allare carryovers of existing programs.The remaining six programs — allnew — will be launched in monthlywaves until April.

The administration of County Executive Ed FitzGerald isn’t settingtargets as to how much of the $100million fund will be doled out —mostly in low-interest loans — inthe opening months, or even duringall of 2012, because the amount lentout will depend on the number ofquality deals brought to the county.

But it’s likely that the dollaramount will be significantly higherthan past annual totals. In 2010, thecounty committed $16.3 million incounty funds for developmentloans and grants.

It should take two to three yearsto exhaust the $100 million, afterwhich time Mr. FitzGerald expectsto continue the programs with loanrepayments.

The first sizable loan for 2012 isset, as the county intends to lend $3million as part of a deal that will enable AmTrust Financial ServicesInc. of New York City to spend $30.5million to renovate the 23-storyKeyBank Center in downtownCleveland. That loan is part of a $20million package of state and local financial incentives.

The 11 programs can be used individually or with other programs,depending on what it’s expected totake to make Cuyahoga County attractive for a particular business toexpand in or enter the county. Thecounty also might partner with the

state and local communities to offerincentives in certain circumstances.

The programs are organized intothree categories:

Innovation development: Fourprograms will focus on new andearly stage companies:

■ microenterprise loans, whichare small loans to businesses toosmall for traditional lenders;

■ a pre-seed fund used by bor-rowers to accelerate growth and attract investors;

■ money for companies preparedfor commercial launch; and

■ a matching funds program fortargeted companies to meet the requirements of state and federalinnovation grant programs.

Commercial property reutiliza-tion, expansion and acquisition:These are three programs that expandon an existing county economic development role:

■ finance the redevelopmentand/or modernization of existingproperties;

■ assist with the environmentalcleanup of sites adjacent to an existingbusiness; and

■ finance the environmentalcleanup of valuable locations thatdon’t have an end user.

Business growth, commercial-ization and attraction: These fourprograms are designed for busi-nesses in targeted sectors that needhelp in growing or to woo largernew businesses to the county:

■ provide traditional financingfor growing small businesses;

■ reimburse companies for 50%of the cost of retraining workers;

■ offer capital for expansion viaacquisition, diversification or entryinto new markets; and

■ provide gap financing and in-centives for large-scale growth andattraction. ■



Chagrin Highlands Ltd. is a joint venture development of The Richard E. Jacobs Group, Inc. and Scott Technologies, Inc.

For leasing information, phone JRES’s John Klayman or Cindy Greiner at 440-871-4800

www.ChagrinHighlands.com

Penske Logistics,a supply chain management consulting firm,

has renewed its lease.

Intellcorp,a comprehensive pre-employment

screening service for employers,

has signed a lease.

We appreciate the participation of

Ryan Jeffers of CB Richard Ellis

Capital Works,a private equity investment funds firm,

has signed a lease.

We appreciate the participation of

Jeffrey D. Cristal, SIOR of Grubb & Ellis.

Penske Logistics,a global logistics and

supply chain management services firm, has renewed its lease.

Leased and managed by:

For leasing information, phone JRES’s John Klayman or Cindy Greiner at 440-871-4800

www.ChagrinHighlands.com

Chagrin Highlands Ltd. is a joint venture development of The Richard E. Jacobs Group LLC. and Scott Technologies, Inc.

The Ohio Chapter of the Turnaround Management Association congratulates our first annual Lifetime Achievement Award winner, G. Christopher Meyer,Partner at Squire, Sanders & Dempsey LLP.

We thank Chris for his leadership and the many contributions that he has made both in the turnaround industry and in our community.

Cleveland Harley specialist on buying spree

Area money managers win OPERS dutyInclusion reflects well on region’s experts

Exhaust maker finds newproducts via acquisition

from 2009, and he believes compa-nies such as SuperTrapp “that havediversified and invested in the futurewill have positive gains in market share.”

Mr. Berger said he financed thelast two acquisitions with some debt,but still has ample capital and avail-able credit to do similar deals. He’slooking for other businesses that willserve SuperTrapp’s core markets.

“We’re not done,” Mr. Berger said.“This is an ongoing process.” ■


Three Northeast Ohio firms haveearned what they deem to be theprestigious job of investing tens ofmillions of dollars for the Ohio PublicEmployees Retirement System.

After what their executives saywas an exhaustive process, WinslowAsset Management in Beachwood,First Fiduciary Investment CounselInc. in Independence and ElessarInvestment Management in Cleve-land were selected as three of 10firms by OPERS for its new programtargeting smaller Ohio-qualifiedand minority-owned managers.

Of 85 firms that expressed interest,OPERS interviewed 25 and selectedthe 10 in November, said MikePramik, an OPERS spokesman. Intotal, four Ohio firms were chosen.

The selection of three NortheastOhio firms reflects well on the region’s money managers, said KaraH. Lewis, president of Winslow AssetManagement.

“I think it’s a wakeup call to localinstitutions that there’s talent here,”she said. “There are a lot of founda-tions and endowments and pensionplans looking elsewhere, and theymight be able to get the best-in-classmanagers in their own backyard.”

Open to money managers withless than $750 million in assets undermanagement, the emerging man-agers program aims to increase OPERS’ use of local and minority investment managers. Collectively,all 10 selected firms will oversee$400 million of the pension fund,which at the end of 2010 counted$76 billion in plan assets.

Investing for OPERS is a first forall three of the aforementioned firms.

Winslow and First Fiduciary willbe allocated $40 million each, andElessar will be allocated $20 million.All three Northeast Ohio firms willbe investing in stocks.

“Elessar, First Fiduciary andWinslow have the qualities, strate-gies and prior performance that wewere looking for,” Mr. Pramik said.

“We believe that these firms have thecharacteristics to become major institutional money managers.”

Being selected adds awareness toa firm’s institutional presence, Ms.Lewis said.

“In many instances, you have tohave a certain amount of public fundassets to win new public fund assets,”she said.

Susan F. Akers, Winslow directorof research, agreed.

“Yeah, no one wants to be thefirst,” Ms. Akers said. She said afirm’s selection by OPERS “just givesyou more clout.”

OPERS provides retirement, disability and survivor benefit programs to public employeesthroughout the state who are notcovered by another state or local retirement system. It serves morethan 953,000 members and providesmore than 171,000 retirees and surviving beneficiaries with month-ly benefits.

“We’re really thrilled,” said MaryAnderson, president of First FiduciaryInvestment Counsel. “It’s a great opportunity to serve Ohio and itspublic employees. ■

now carries; it will use some outsidecontractors for the machining of Jay-Brake products, while it makes FPS’sproducts in house. The oil coolers andradiators that Fluidyne makes entailbasic fabrication and some metalbending, similar to what it takes tobuild SuperTrapp’s exhausts, Mr.Berger said. SuperTrapp has addedfive employees in the last year, bring-ing its total to 54, but the additions arenot due to the acquisitions, he said.

The hope is that the acquisitionswill enable SuperTrapp to sell moreproducts through its existing distribu-tors, while accessing new distribu-tors that previously had a relation-ship with JayBrake or Fluidyne butnot SuperTrapp, Mr. Berger said.

For the love of machinesWhy bet now on markets that rely

largely on customers with disposableincome? Mr. Berger cites two reasons:There are reasonable sellers today,and sales in the power sports businesshave leveled off and even reboundedfor some parts of the market after declining dramatically in 2009.

It’s simply easier to find companiesto buy today than it was in previousyears, when Harley-Davidson dealershad customers lining up to buy theirbikes and sales of both on- and off-road sport vehicles were risingsharply every year, Mr. Berger said.

Still, for his bets to pay off, Mr.Berger will need Americans to keepriding motorcycles, ATVs and otherrecreational vehicles. He isn’t worried.

The companies can operate moreefficiently combined than they didseparately, he said. And while the market might not grow as rapidly as itdid in the 1990s or early 2000s, Ameri-cans still love their machines. That’sparticularly true for the high-end custom market that SuperTrapp andits acquisitions serve, Mr. Berger said.

Bernie Thompson, who relies onlargely the same markets as Mr.Berger as head of the Power SportsInstitute, a school for mechanics andcustomizers in North Randall, saidhe has not seen the power sportsbusiness come back fully. However,Mr. Thompson said it has improved

By DAN [email protected]

SuperTrapp Industries is bettingthat America’s lust for speed and theopen road is more than just a school-boy’s crush lasting a half-dozendecades or so.

The Cleveland maker of perfor-mance exhausts for Harley-Davidsonmotorcycles, as well as for ATVs anda few other vehicles, is doublingdown on the power sports businessit serves with a spate of acquisitionsthat it intends to continue.

“Our goal is to grow,” said KevinBerger, SuperTrapp’s president andowner. “In the economy of the lastthree or four years, our ability to groworganically has been constrained.”

So, Mr. Berger is seeking growth viaacquisitions he believes will add profitable sales immediately while also increasing both its product offeringsand its network of distributors.

At the end of October, SuperTrappannounced it had purchased Jay-Brake, a company in Springville, N.Y.,that makes chromed hand and footcontrols for custom Harleys. That acquisition was followed a month lat-er with a deal to buy Fluidyne Power-sports of San Bernardino, Calif., whichnow operates as SuperTrapp’s FPSRacing unit and makes oil coolers andradiators for the off-road market inCleveland.

Mr. Berger does not disclose SuperTrapp’s revenues and would notsay what SuperTrapp paid for the twocompanies, but said the deals haveadded substantially to the company’ssales. The two additions both weresmaller than SuperTrapp, he said, withJayBrake’s 2011 sales equal to about20% of SuperTrapp’s and Fluidyne’s2011 sales equal to about 15%.

The deals bring both new productsand new distributor relationships toSuperTrapp, but without much elsein tow, Mr. Berger said.

SuperTrapp is taking over themanufacture of the new products it

20120102-NEWS--7-NAT-CCI-CL_-- 12/29/2011 1:56 PM Page 1

oe Cahill, my counterpart at Crain’sChicago Business, was bewildered.

Illinois’ governor, Pat Quinn, hadtold media outlets several weeks backthat officials in Ohio were offering

Sears Holdings Corp. a $400 millionpackage of incentives to convince the retail giant to move its headquartersfrom the Chicago area to theBuckeye State.

Why, Joe wondered in anemail to me in early December,would anyone be willing to giveso much away in tax breaks andother incentives to a companythat is dying?

Good question, Joe. I can’tsay I understand it myself.

As we noted in an editorial on this page early last month,the company Gov. John Kasich and his economic development posse were pursuing hasn’t been in good health fora few years now. The once-mighty Searsand Kmart chains that come under itsbanner have lost their luster and retailmojo to Walmart and Amazon.com. Notthat their decline is a secret to anyone.Nor is it a recent development.

It may seem hard to believe that 23years have passed since Charlie Babbitt,who was Tom Cruise’s character in theOscar-winning movie “Rain Man,” utteredthe now-infamous words, “Kmart sucks,”to quiet down his savant brother Ray-mond, played by Dustin Hoffman. Butthe line got laughs because the home of

the “blue light special” had be-come, even then, something of ajoke to many American shoppers.

Yet there was the Kasich administration, making a run atSears in its quest for 6,000headquarters jobs.

The coy Gov. Kasich neverwould confirm or deny whetherthe incentive package offeredby Ohio was of the magnitudedescribed by Gov. Quinn. And,

fortunately, Sears decided in mid-December to stay put after state officialsin Illinois promised the company a pileof tax breaks.

I say “fortunately” because Sears’ announcement last Tuesday that itwould be closing as many as 120 under-performing stores and would absorb upto $2.4 billion in charges only reinforced

the point that the future of the sagging retailer appears dismal. Investors appar-ently agreed, as they drove the price ofSears’ stock down 27% that day to $33.38;the company’s value now sits more than80% below its April 2007 peak of $191.93.

Against this backdrop, Ohio’s pursuitof Sears is puzzling. It’s also a bit discon-certing.

Is the Kasich administration so eagerto announce jobs coming to or staying inOhio that it’s willing to lavish incentiveseven on companies with extremely ques-tionable futures?

Yes, I know, there are no sure things inbusiness. Apple Computer didn’t alwayslook like the big winner it is today, andfew would have thought 25 years agothat dominant film maker Kodak wouldbe struggling in a digital age to keep itshead above water.

But you don’t need to be an economicdevelopment guru to recognize that thechance of a long-term payoff on somebets is a heck of a lot less than on others.Chasing Sears had “bad bet” written allover it. It makes you wonder how manyother incentive deals the state has madeare in that category, too. ■


Not so hotW

hile we were gone late last month, thestate reported that Ohio’s unemploymentrate fell to 8.5% in November from 9% inOctober. Both the Ohio Democratic

Party and Republican Gov. John Kasich marked theoccasion by issuing press releases that applaudedthe big decline, with the Democrats giving credit toPresident Barack Obama for the decrease and thegovernor’s office observing that the half-point dropwas the largest in nearly 30 years.

Well, we’re sorry to be wet blankets, ladies andgents, but the job numbers upon closer inspection simply are not so hot. We’d even go so far as to saythey’re a darn bit discouraging for being two yearsinto an economic recovery.

Let’s consider first the comparison of state employment data from October to November.

The state reported that the number of unemployedworkers in Ohio was 496,000 in November, downfrom 526,000 in October. The decrease of 30,000 is aseemingly positive development. However, Ohio’snonfarm wage and salary employment from Octoberto November rose by only 6,000 workers.

So, how can unemployment decline by 30,000when only 6,000 people were added to the job rolls?

Because the government, in putting together itsfigures, removes from the ranks of the “unem-ployed” those people who give up looking for work.

To be fair, the number of people who are consid-ered to be in the labor force also can be reduced bypeople who leave the state, retire or die. However,as Ben Johnson, a spokesman for the Ohio Depart-ment of Job and Family Services, told The AssociatedPress, November’s unemployment rate declined inlarge part because a “significant” number of out-of-work Ohioans stopped their job hunts.

One month provides at best a snapshot of the jobmarket. However, when looked at over a 12-monthperiod, Ohio’s employment numbers aren’t anybetter.

In November 2010, 565,000 Ohioans were consid-ered to be unemployed. A year later, that figure wasdown by 69,000 people. However, the number ofOhioans who held jobs was up by just 9,000 in November 2011 from the 5,326,000 that were employed the previous November.

It is an unhealthy trend that Ohio’s labor force hasbeen shrinking for the last five years. It stood at5,968,000 in November 2007, but was down to5,831,000 last November, a drop of 167,000 people.

Fewer people in the labor force means fewer people from which employers can choose to stafftheir operations. That’s bad for economic develop-ment, because companies want to locate their offices and plants in places where the job marketsare robust, not stagnant or in decline.

State job-creation tax credits and low-interestloans only will go so far in keeping and attractingemployers. The best economic development toolwith which a state can equip itself is to create well-educated citizens with the skills they need to secureemployment. Government leaders can’t neglecttheir support of education at all levels. It is the truedifference maker, both for individuals and for thetowns and states where they live.

FROM THE EDITOR

PERSONAL VIEW

MARK DODOSH

So, why chase Sears? Good question

Innovative education can close skills gap By GINA CUFFARI

During a recent Crain’s Ideas atDawn panel discussion on howto build “rock star” employeeteams, there was a fair amount

of discussion among the panelists on thesurprising problem companies are havingin finding qualified candidates to fill theiropen positions. How can it be that com-panies cannot find qualified employeesto hire with unemployment rates thathover in the too-high, 8% to 9% range?

In truth, we are hearing consistent reports from employers about what isbecoming known as a skills gap in all levels of positions, from hourly employeesto skilled professionals. Even formerPresident Bill Clinton is trying to createsolutions for putting America back to

work. At his “Global Initiative America,”Mr. Clinton pointed to the presence of 3million open jobs that remain unfilleddue to a lack of skilled candidates. Justfilling these jobs, Mr. Clinton said, wouldlower America’s unemployment rate byat least three percentage points.

Mr. Clinton is right. In many cases, weare facing a skills crisis, not just a job creation crisis. And the skills imbalanceis not likely to right itself on its own.

According to “The Great Divide: Workerand Employer Perspectives of Current andFuture Workforce Demands,” a studyconducted by the University of PhoenixResearch Institute that surveyed morethan 30,000 employers and workers, the

gap between education and the demandfor qualified workers will continue togrow this decade.

Why the gap in skills? The university’sstudy suggests that the growing work-place skills deficit may be rooted in differences between workers’ and em-ployers’ perceptions in key areas such asthe value of higher education and thestandards for demonstrating skill profi-ciency at work.

Specifically, workers rated the demandfor both bachelor’s and master’s degreeslower than employers did. Workers alsoexpressed greater uncertainty regardingthe demand for higher education in theworkplace.

Another reason may be that althoughnearly three-quarters of high school

PUBLISHER/EDITORIAL DIRECTOR:Brian D.Tucker ([email protected])

EDITOR:Mark Dodosh ([email protected])

MANAGING EDITOR:Scott Suttell ([email protected])

OPINION

Ms. Cuffari is territory vice president for theOhio campuses of the University of Phoenix.

See VIEW Page 9

J



JASON WORTMANFairview ParkNo. It’s just not somethingme and my family do.

➤➤➤➤ Watch more people weigh in by visiting the Multimedia section at www.CrainsCleveland.com.

THE BIG ISSUEThe casino at Tower City is scheduled to open in March. Will you be checking it out when it opens?

JOHNNY LISClevelandYes. … We were talkingabout going opening night,actually.

MARY FLANNERYClevelandI’ll probably check it out atsome point … maybe notnecessarily when it opens.

DON SCREENWestlakeProbably yes … (out of)curiosity.

216.861.7200 | ostendorf-morris.com

Providing more since 1939.No one else can say that.seniors go on to higher education,

many are not as prepared as theyneed to be. Only one-third of students leave high school at leastminimally prepared for college, andthe proportion is much smaller forblack and Hispanic students, according to a February 2011 studyfrom American Enterprise Institute.And national estimates show that atleast half of all students enteringcollege today are required to takesome remedial courses prior tostarting their college courses.

If we are going to be successful atencouraging students to get thetraining needed to solve the skillscrisis, educators have to think moreinnovatively about education. Wemust provide opportunities for stu-dents to strengthen the skills theyneed to work on most throughouttheir course of study, not just at the

beginning in an all-or-nothing, sink-or-swim course.

Solving the skills crisis requireseducational programs that are acces-sible to students and are based ontheir unique needs. It also requiresoffering programs in the job sectorsthat have the most need and themost available job openings likebusiness, education, nursing, crim-inal justice and information systemsand technology.

Solving the skills crisis means using team-based learning environ-ments led by instructors who havehands-on, real-world experience tomake it easier for students to trans-late classroom knowledge into skillsthat can help advance their careers.It means using technologies that allow students to stay engaged bothinside and outside of the classroom.And, when needed, it means pro-viding additional resources and

learning assistance to increase eachand every student’s opportunity forsuccess.

As an employer, what can you doto reduce the effects of this percep-tion gap within your own company?

First, do not assume your em-ployees perceive their performanceat work the same way you perceiveit; clearly communicate your expec-tations for specific skills and out-comes. Second, provide a path andguidance for employees who wantto update their skill sets to meet thedemands of the emerging economy.Consider making use of programssuch as tuition assistance.

While we cannot wave a wandand fill every job opening in an instant, investing in higher educa-tion as a solution to achieving askilled work force clearly deserves ahigh priority in our approaches tolowering unemployment. ■

View: Employers should offer guidancecontinued from PAGE 8

TAX LIENS

Owner exits Beachwood Embassy SuitesHeavy debt befalls213-suite property

The Internal Revenue Service filed taxliens against the following businessesin the Cuyahoga County Recorder’sOffice. The IRS files a tax lien to pro-tect the interests of the federal gov-ernment. The lien is a public notice tocreditors that the government has aclaim against a company’s property.Liens reported here are $5,000 andhigher. Dates listed are the dates thedocuments were filed in theRecorder’s Office.

LIENS FILEDConference Masters Inc.P.O. Box 46069, BedfordID: 34-1782556Date filed: Nov. 1, 2011Type: Employer’s withholdingAmount: $253,496

LIENS RELEASEDAttevo Inc.1375 E. Ninth St., Suite 2500, ClevelandID: 20-4143257Date filed: July 6, 2011Date released: Oct. 20, 2011Type: Employer’s withholdingAmount: $6,690

Euclid Foreign Motors Inc.20020 Saint Clair Ave., ClevelandID: 34-1087596Date filed: July 9, 2010Date released: Oct. 6, 2011Type: Employer’s withholding, unemploymentAmount: $10,908

Family Sauce Inc.7815 Carnegie Ave., ClevelandID: 34-1772940Date filed: May 27, 2008Date released: Oct. 6, 2011Type: Employer’s withholdingAmount: $31,066

GC&E Inc.25440 Miles Road, Bedford HeightsID: 31-1491227Date filed: May 5, 2011Date released: Oct. 6, 2011Type: Employer’s withholding, unemploymentAmount: $17,894

Gala Catering Co. LLC TA PazzosCatering TA Pazzos Grand Ballroom7874 Broadview Road, ClevelandID: 20-2294497Date filed: Oct. 5, 2010Date released: Oct. 25, 2011Type: Employer’s withholdingAmount: $12,827

Kish Culinary Co.P.O. Box 391005, SolonID: 34-1920945Date filed: May 19, 2008Date released: Oct. 20, 2011Type: Employer’s withholding, failureto file complete returnAmount: $13,226

Lanner America LLC4567 E. 71st St., Cuyahoga HeightsID: 20-0024728Date filed: Dec. 21, 2010Date released: Oct. 6, 2011Type: Employer’s withholding, failureto file complete return, partnershipAmount: $16,851

Loves Concrete Inc.17339 Greenbrier Drive, StrongsvilleID: 34-1531864Date filed: Oct. 27, 2008Date released: Oct. 6, 2011Type: Employer’s withholding, unemploymentAmount: $39,996

M.E. Pfahler Construction Inc.100 Pelret Parkway, Suite A, BereaID: 34-1720576Date filed: Aug. 30, 2011Date released: Oct. 6, 2011Type: Employer’s withholdingAmount: $19,333

Peter G. Gordon, D.D.S., Inc.23300 Chagrin Blvd., BeachwoodID: 34-1134403Date filed: Jan. 15, 2010Date released: Oct. 12, 2011Type: Employer’s withholdingAmount: $25,921

Skutter Inc. Eskay Floor1267 W. Bagley Road, BereaID: 34-1628394Date filed: July 13, 2010Date released: Oct. 6, 2011Type: Employer’s withholdingAmount: $5,040

Steven A. Woyat, D.D.S., Inc.2255 Columbia Road, WestlakeID: 34-1731629Date filed: Aug. 2, 2011Date released: Oct. 6, 2011Type: Employer’s withholdingAmount: $19,956

Wrightway Care LLC1081 E. 168th St., ClevelandID: 42-1696536Date filed: July 21, 2011Date released: Oct. 12, 2011Type: Employer’s withholding, unemploymentAmount: $7,350

start of 2011 and had not been repaid. The borrower surrenderedthe property to LNR to satisfy themortgage.

Cuyahoga County assigns the hotel a market value of $16.9 millionfor tax purposes, according to landrecords. Inland carried the asset onits books with a value of nearly $14million, according to a Securitiesand Exchange Commission filing.

An Inland American spokesmanwas not able to provide details onthe decision to hand over the keysby Crain’s deadline.

Vern Fuller, a longtime hotel operator and owner, said the hotelmarket in Cleveland’s eastern sub-urbs remains the best in the areaand any woes at the Embassy Suiteswere likely due to the property car-rying too much debt.

“That hotel is doing well from asales perspective,” Mr. Fuller said.“It’s surely doing 70% occupancyand an average daily rate of more than$100 a night. The whole market hereis flush because of the large numberof businesses located in the easternsuburbs.” Mr. Fuller should know:He is a partner in the StaybridgeSuites Cleveland East in Mayfield

Village, which he said is enjoyingoccupancy of more than 70% thisyear.

The Embassy Suites in Beach-wood isn’t the only local hotel prop-erty to succumb to debt burdens.The Embassy Suites in downtownCleveland also became the subjectof a foreclosure late last year in Cuya-hoga County Court of CommonPleas.

Inland manages hotels that areowned by Inland American RealtyTrust, an owner of hotel, office, retail and apartment properties. Inland American Realty’s websitedescribes it as the nation’s largestreal estate investment trust that isnot publicly traded, although SECrules require it to file certain finan-cial data publicly.

Inland acquired the 1980-vintageEmbassy Suites in Beachwood in2008 as part of a 22-hotel portfoliothat it bought from RLJ Develop-ment LLC of Bethesda, Md., in a$900 million deal, according to anews release Inland issued aboutthe purchase.

The hotel has 213 guest suites, according to the 2011 Crain’s Bookof Lists. ■

By STAN [email protected]

Inland American Lodging Corp., amassive hotel owner based in OakBrook, Ill., has checked out as ownerof the Embassy Suites Hotel inBeachwood.

Cuyahoga County land recordsshow RLJ Beachwood Hotel LLC, thecompany Inland used to hold theproperty, deeded the site Dec. 2 toLNR Partners, a unit of LNR Corp. of Miami Beach, which invests introubled properties and disposes ofdistressed debt for lenders.

The next likely step for the hotel at3775 Park East Drive is an offeringfor sale by LNR Partners. However,the hotel was not posted on the LNRPartners website as a property forsale by last Tuesday, Dec. 27.

LNR sued Oct. 14 in U.S. DistrictCourt in Cleveland to foreclose onthe hotel because a $15.5 million securitized mortgage sold in thebond market had come due at the



GOING PLACESJOB CHANGESEDUCATIONCLEVELAND METROPOLITANSCHOOL DISTRICT: John W.Scanlan to chief financial and admin-istrative officer.RATNER SCHOOL: Larry Goodmanto head of school.

FINANCEFIFTH THIRD BANK, NORTH-EASTERN OHIO: Denise Coyne tovice president, portfolio manager,Fifth Third Private Bank; JonathanIves to managing director, CapitalStrategies Group; Kevin Malick tovice president, private banking relationship manager.WESTFIELD BANK: Edward McGannon to vice president andcommercial banking officer.

FINANCIAL SERVICECREEKSIDE FINANCIAL ADVISORSLLC: Susan Svenson to client manager.

LEGALBENESCH: Ryan S. Quinn andMolly Moran Lukenbill to associates.WESTON HURD LLP: Paul M.Shipp to associate.

MEDICAL EQUIPMENTIMALUX: Michael S. Johnson to senior sales representative.

NONPROFITCAREER TRANSITION CENTER:Bonnie Dick to executive director,marketing and programs; AnnHunter to executive director, operations and finance. HOPEWELL: Amy Mould to marketingmanager; Daniel Ruch to nature-based therapist; Annie Beck to development assistant.

REAL ESTATECRESCENDO COMMERCIAL REALTY: Julie Parsons to real estate manager; Adam Howe to vice president; R.J. Burns to associate.

DOWNTOWN TITLE SERVICES:Jerry Golod to escrow officer.

SERVICEFREEDONIA CUSTOM RESEARCHINC.: John Sherwin to project manager.KNEPPER PRESS: Dena McCall-Crow to vice president, sales.

TECHNOLOGYONOSYS: Kim Sullivan to senior ITresource manager; Dave Hurt to account manager.

BOARDSFAMILY CONNECTIONS: James D.Vail (Schneider, Smeltz, Ranney & LaFond) to president; Trent Meyer-hoefer to vice president; SteveBrunot to treasurer; Dr. ElizabethHagen to secretary. WESTLAKE PORTER PUBLIC LIBRARY: Karen Alfred to president;Carol Welo to vice president;Melanie Alban to treasurer; JenniferCirincione to recording secretary;Dr. Jeanne Bishop to correspondingsecretary.

AWARDSAMERICAN ASSOCIATION FORTHE ADVANCEMENT OF SCIENCE:Alamgir Karim and Chrys Wes-demiotis (University of Akron) werenamed fellows.FINANCIAL PLANNING ASSOCIA-TION: Karin Maloney Stifler (TrueWealth Advisors) received the 2011Heart of Financial Planning Award.HUNGER NETWORK OF GREATERCLEVELAND: Marcia and AndrewMargolius (Margolius, Margolius &Associates) received the 2011 NickOrlando Sr. Award for Giving. INTERNATIONAL TEXTILE AND APPAREL ASSOCIATION: VincentQuevedo (Kent State University) received the Pearson Prentice HallLecturer Award for Exceptional Service.LAKE COMMUNICATORS: Phil Stella (Effective Training & Communi-cation Inc.) received an Apex Awardfor Feature Writing.OHIO HOTEL & LODGING ASSOCI-ATION: Anntoinette Peterson (Inter-Continental Hotel Cleveland) receivedthe Service Superstar of the YearAward.

Send information for Going Places [email protected].

IvesCoyneGoodman

QuinnSvensonMalick

StiflerShippLukenbill


Some will win. Some will lose. Most will find highs and also lows. Here are our best — very educated — guesses on how Northeast Ohio’s

most important industries will fare over the next 12 months.

INSIDE: LOCAL GOVERNMENT/Page 12 ■ MANUFACTURING/Page 12 ■ REAL ESTATE/Page 13 ■ SMALL BUSINESS/Page 14 ■ TECHNOLOGY/Page 14


Remember how the Cleve-land Indians were mediocre— at times, lousy — in 2008,2009 and 2010, and then, to

many fans’ delight, they were incontention for most of 2011?

Banks, says one industry insider,should have a year like that in 2012.

After four years of being a loser,the sector should score a win thisyear, predict many, including Charlie Crowley, who offered thebaseball analogy. Even a not-so-terrible year will feel good in comparison to recent misery, saidMr. Crowley, an investment bankerwith Paragon Capital Group LLC inMayfield Heights.

“It’s been a dreadful few years,”he said.

But now, profitability is back,capital levels are up and nonper-forming assets have declined, Mr.Crowley said. Still, insiders do notanticipate a home run. They citepersistent real estate weakness andthe likelihood of more regulatoryburdens that will be curveballs forthe industry.

“I truly believe it’s going to be ayear where we’re still in the processof stabilization,” said Lisa J. Oliver,president of the Greater Clevelanddistrict for Cleveland-based KeyBank.“Banks will succeed if consumersand businesses succeed.”

Ms. Oliver is one of a few who,when asked whether 2012 will be awin, lose or draw for the sector,picked draw.

An executive with the Ohio CreditUnion League chose the same.Headwinds remain great for the finance sector, said Dave Fearing,the league’s senior vice president forcredit union support, citing highunemployment, stock marketvolatility and depressed housingprices.

“For all of those reasons, I thinkconsumers are in a holding pattern(with regard to) taking on newdebt,” Mr. Fearing said. “And for financial institutions, loan growthis really the engine that drives revenue to the bottom line.”

Outside forcesIf, as some anticipate, bank

profits and revenues grow, accessi-bility to credit should improve.

“If you’re a business and youneed access to funding, those arereally good developments,” saidKevin T. Jacques, who for 14 yearsworked for the U.S. Department of the Treasury and is the BoyntonD. Murch Chair in Finance at Bald-win-Wallace College. “Banks thatare in trouble can’t afford to make

■ Prediction for 2012: Win,lose or draw? A very modestwin. While many industry insidersexpect higher profits and morelending in 2012, they’re hedgingtheir bets because of all the uncertainty that exists, with theEuropean debt crisis still castinga shadow on the global economy.Plus, some anticipate a secondwave of foreclosures.

■ Game changers in 2011:The implementation in October ofa new cap on so-called inter-change fees was a biggie. Theamount that financial institutionscan charge a merchant eachtime a debit card of theirsis swiped was cut roughlyin half, and the impact con-tinues to unfold. The waybankers see it, institutionsthat embrace and excel in relationship banking — notthose that raise fees, cough,

cough, Bank of America — standto win in this era of heightenedregulation.

■ Key players in 2012: TheConsumer Financial ProtectionBureau is expected to create ahost of new rules banks must follow — once it’s up and runningwith a leader. (If contested appointee Richard Cordray is affirmed, the bureau likely will beaggressive, as Mr. Cordray is astaunch consumer advocate.) Forcredit unions, Cooperative Busi-ness Services, which works to

generate business loanactivity for itself andcredit unions, hasbeen growing its foot-

print and membershipin Northeast Ohio, and at

least one credit union advocate believes 2012will be the year when loan

activity begins to take off.

risky loans — in some cases, safeloans.

“Everybody wins in that kind ofscenario, and here’s the reasonwhy: You cannot have a healthyeconomy if the financial system isin trouble,” Mr. Jacques said. “Itjust doesn’t happen. So, you know,as much as we see things like Occupy Wall Street, the fact of thematter is consumers and businessesneed there to be a healthy bankingsystem.”

Judging by decreased bank failures and increased profits,business on the whole is lookingup.

As of Dec. 16, 92 banks nation-wide had failed in 2011, none ofthem Ohio-headquartered institu-tions. Failures were down 41%from 2010, when 157 banks failed,including two in Ohio — BrambleSavings Bank in Milford and Amer-ican National Bank in Parma. Theyear before, 140 banks failed, againincluding two in Ohio — AmTrustBank in Cleveland and PeoplesCommunity Bank in West Chester.

According to data from the Federal Deposit Insurance Corp.,profits of all FDIC-insured banksin Ohio — $16.2 billion as of Sept.30, 2011, the most current dataavailable — have reached theirhighest point since December2010.

Though most predict this yearwill be better for banks, they hedgethat bet on macroeconomic con-

siderations, namely the Europeandebt crisis and the 2012 presidentialelection.

“Until the European crisis is finalized, it’s going to be really a realslow growth mode,” said DanielWalsh, president of HuntingtonBank’s Greater Cleveland region.“Businesses abhor uncertainty.”

More bad news in Europe canaffect worldwide economicgrowth, and local banks won’t beimmune even if they don’t have adime of European debt on theirbalance sheets, Mr. Crowley said.

“The biggest risk to the bankingsector is really that it’s so tied tothe economy,” he said. “What thebanking industry really needs issome reasonable level of worldwideand domestic economic growthand stability.”

KeyBank’s Ms. Oliver expects financial institutions to continue tosee moderate growth in borrowingby businesses for purposes such ascapital expenditures. However, inthe latter half of the year, Ms. Oliveranticipates such borrowing willlevel off as Election Day drawsnear.

“You get very much a wait-and-seeattitude” around elections, she said.

Ms. Oliver does not expect theconsumer, whose disposable income still is limited, to do muchto improve bank balance sheets.Instead, she anticipates the com-petitive landscape of consumer

See FINANCE Page 13 See HEALTH CARE Page 15

By TIMOTHY [email protected]

Uncertainty has engulfedthe health care field inNortheast Ohio and elsewhere as providers

continue to endure intense financialpressures due to dwindling govern-ment reimbursements while copingwith new regulations tied to PresidentBarack Obama’s expansive overhaulof health care.

As 2012 gets under way, the situation isn’t expected to get anyeasier as state and federal govern-ments deal with their own budgetwoes by trying to hold down theirspending on health care. At thesame time, the U.S. Supreme Courtcould overturn the president’s healthcare reform law, potentially undoingmonths of preparation on the partof hospitals and other health careproviders in the region.

“You can never predict what willhappen,” University Hospitals CEOTom Zenty said. “But what you cando is prepare, which is what we dohere every day.”

With political gridlock still consuming Washington, D.C., acoming presidential election withno clear Republican front-runnerand an economy that’s still sluggish,what could happen this year is anyone’s guess.

Still, hospitals in 2012 are expectedto continue to take scalpels to theirbudgets as they attempt to do more with less. Their actions could include the further consolidation ofservices and the cutting of evenmore staff.

“What I would see happening isthe same thing that has been happening — massive institutionalefforts to cut costs and reduce discretionary expenses,” saidMatthew Albers, an attorney in thehealth care group at Vorys, Sater,Seymour and Pease LLP in Cleveland.“As always, any time you need to cutcosts, people are going to be cut.”

On the chopping blockThe political environment in

Columbus and Washington overthe last year has intensified thescrutiny of the big government programs — Medicare and Medicaid— that account for a large chunk ofthe payments to health careproviders. Both these programsdon’t cover the cost of care, andhealth care experts say the environ-ment is only going to get more diffi-cult.

“The reimbursement environmentin health care has already begun tochallenge providers across thecountry,” Cleveland Clinic chief financial officer Steven Glass said in

■ Prediction for 2012: Win,lose or draw? When asked what2012 holds for the health caresector, experts and those workingin the field say it could be a drawgiven mounting uncertainty aboutthe extent to which the governmentwill regulate and reimburse healthcare providers.

■ Game changers in 2011:The U.S. Supreme Court’s decisionto consider in 2012 whether thePatient Protection and AffordableCare Act is constitutional will determine whether millions of people will be added to the insur-ance rolls, which could have a dramatic effect on the reimburse-ments hospitals and health careproviders receive. Also, in 2011,a divided Congress set its sightson getting a hold on the skyrock-eting costs of government andhealth care programs.

■ Key players in 2012: PresidentBarack Obama, the Republicanpresidential nominee and Congress

an email. “Economic challengeshave led the pressure for changeover the past three years. Changesin Medicare and Medicaid paymentsover the next several years will increase pressure on providers, followed by the developing impactof (health care reform).”

Medicare, a federal program inthe crosshairs of many in Congress,is used as the baseline to determinehow much commercial insurers reimburse health care providers forthe cost of care. Expected cuts tothat program and to the reimburse-ments that can be expected from allinsurers already have sent healthcare providers scurrying to reducetheir budgets — moves that likelywill continue this year and beyond,according to Bill Ryan, presidentand CEO of the Center for HealthAffairs, an advocacy group for localhospitals.

In the face of health care reformand likely reimbursement cuts, SummaHealth System in Akron announcedplans in September to cut as muchas $966 million from its budget overthe next 10 years. Cost-cuttingmeasures included consolidating


1122 CRAIN’S CLEVELAND BUSINESS JANUARY 2 - 8, 2012

■ Prediction for 2012: Win,lose or draw? Municipal govern-ment will be a loser because ofthe loss of state Local Govern-ment Funds, the Ohio estate taxand the property tax valuation declines.

■ Game changers in2011: Republicans inColumbus. With Democratslosing the governor’s officeand their majority in theHouse of Representa-tives, Republicanspassed legislation that

targeted public employees andcut spending to local govern-ments.

■ Key players in 2012:Cuyahoga County Executive Ed

FitzGerald, who will have an opportunity to have a signifi-

cant impact with his $100million economic develop-ment fund; and JobsOhio,the new nonprofit, economic

development organizationthat is expected to playa major role in bringingnew jobs to the state.

By JAY [email protected]

After finally paying off thebonds that built its villagehall 17 years ago, OrangeVillage in 2010 bought 10

acres of adjacent land on LanderRoad so it could build a new, much-needed service center.

“But, oh, I guess we can’t,” saidMayor Kathy Mulcahy in a Dec. 20telephone interview.

The stumbling block for Orange,and many other municipalitiesacross the region, is that it has relied on its share of state estate taxrevenue to build village halls andservice centers and to buy equipmentsuch as police cars and snow plows.

But when John Kasich becamegovernor, he pushed through legis-lation to end the estate tax begin-ning Jan. 1, 2013. As a result, MayorMulcahy doesn’t know where shewill find the money to move aheadon the new service center.

“The loss of the estate tax is goingto be felt very hard,” she said. “Idon’t think (residents) are tootuned in to what the estate tax doesfor them.”

Communities now receive 80% ofOhio’s estate tax revenue when aresident dies. The state collectsmore than $280 million in estatetaxes annually, so the amount thatgoes to cities and towns is no smallsum.

Most communities, especiallysmall ones where the amount of theestate tax fluctuates widely, tend touse their estate tax revenue for capital projects rather than day-to-day operations. Orange, for example,collected a total of $224,478 in estate taxes in 2007 and 2008, butonly $2,092 in 2009.

However, in the end, Orange Vil-lage may not need its own servicecenter. Earlier in 2011, Orange and

Efficiency program, has been at theforefront of cost cutting regionallyand Mayor Frank Jackson believeshis city will weather the storm, in part because of a modest construction boom that is raisingCleveland’s income tax take.

The mayor said Cleveland antic-ipated the coming year’s financialshocks with earlier budget cuts. InApril, the city saw a $35.7 milliondeficit looming in 2011 and 2012and moved to cut staff by morethan 30 employees and reduceother expenses at that time, ratherthan waiting for the end of theyear.

Storm clouds on the horizonBay Village Mayor Debbie

Sutherland, though, is concernedabout the long-term outlook forher affluent western suburb. Shesaid that, for now, Bay propertyvalues bucked the downward trendand she sees a manageable$800,000 deficit in her next budget.

“But when 2014 and 2015 hit, it’sgoing to be absolutely devastating,”she said.

At the end of 2015, MayorSutherland foresees Bay Villagewith a $3.2 million deficit on its$11 million operating budget asthe full force of property tax re-evaluations and the state LocalGovernment Fund cuts hit.

“The next five to 10 years formunicipalities will be disruptiveand transformational,” she said.

The good news, if that’s what itcan be called, is that the budgetcrunch has lowered the resistanceof communities to collaboration.

“Cities are in an interesting situation, in that out of desperationcomes the ability and willingnessto sit down with other cities thatthey never would have sat downwith before” to find financial solutions through collaborationand even consolidation, said KevinO’Brien, director of the Center forPublic Management at ClevelandState University.

“Now they are truly sincere

about looking at ways to reduceannual expenditures and makequality an issue,” Mr. O’Brien said.

Towns are talkingMr. O’Brien said he is consulting

regularly with groups of communi-ties that are looking for ways to cutcosts and still maintain or improvethe level of services their commu-nities provide.

Reached by phone Dec. 15, Mr.O’Brien said he had met a day earlier with police officials fromBeachwood, Euclid, ShakerHeights, South Euclid and Univer-sity Heights about creating theEastside Departments Group Enforcement, a mutual aid agree-ment that eventually could see thecities combine police servicesranging from SWAT teams tohostage negotiations to fatal acci-dent investigations.

Likewise, a group of westernCuyahoga County communitiesare looking at reducing the cost offire service, Mr. O’Brien said, asBay Village, Fairview Park, RockyRiver and Westlake move aheadwith something called the WestshoreRegional Fire District.

Bay’s Mayor Sutherland said she believes a merger makes sensefor two reasons. First is the imme-diate financial squeeze, whichpresses on salaries. But she saidthe longer-term cost of keepingfirefighting equipment up to datealso will bring the communities together.

Mr. O’Brien said CuyahogaCounty probably needs only threefire and police departments because, he maintains, few citieswith fewer than 250,000 people financially can justify their ownpolice, fire or service departments.He compared what he sees inNortheast Ohio to Austin, Texas, acity with one police and one firedepartment that successfully covers a 350-square-mile area.Cuyahoga County is 458 squaremiles. ■

■ Prediction for 2012: Win,lose or draw? The year shouldbe a winner, with manufacturersacross most industries sayingthey are confident business willcontinue to improve in the yearahead. That’s barring, of course,a major recession caused bysomething external like a Euro-pean debt crisis.

■ Game changers in 2011: Acontinued economic recoverywas the driving factor behindmost manufacturers’ improvedresults for 2011, which in turndrove demand for automo-biles and other goods. InNortheast Ohio, some ofthe biggest developments,including expansion of steel-making facilities in Lorain,Canton and Youngstown, werebrought about by the growth ofthe shale gas industry bothhere and in Pennsylvania.

■ Key players in 2012: WatchChesapeake Energy this year.The company is by far the biggestplayer in Ohio’s shale gas industry,which could provide continuedfuel for manufacturing’s rebound.Along that same line, watch thearea’s steelmakers, such asTimken and U.S. Steel, which arecontinuing to expand largely in order to keep up with demandfrom Chesapeake and otherdrillers. In turn, that’s helping othermanufacturers who supply the mills.Also, keep an eye on Cleveland’s

Manufacturing Mart.The industry tradegroup that’s set upshop in the Galleria in

downtown Clevelandhopes to expand this

year — and says it mightone day take over thewhole Galleria and turn it

into something like the city’splanned Medical Mart.

By DAN [email protected]

Measured against whatfollowed the Christmaspast of 2008, nearly anynew year looks like a

happy one. But 2012 is coming infull of cheer for many NortheastOhio manufacturers.

About the only thing most manufacturers knock, when itcomes to their current businessoutlook, is wood. They say that’sbecause unless Europe implodesor the U.S. government finds a wayto stop it, the economy hereshould keep gaining steam andkeep local plants humming.

“We’re doing well — we have amillion orders we need to get out,”said Paul Rotman, sales managerfor Midwest Box Co., a maker ofshipping containers in Cleveland.

From his corrugated perch atthe confluence of so many goods,Mr. Rotman sees much of the riverwhen it comes to the flow of theregion’s industrial sector and itslocally made products. His companymakes boxes for at least one company in almost every industry,from consumer goods and auto-motive parts to specialty chemi-

cals and industrial parts. And allthose goods are flowing faster thanat any point in the last three years,with the volume only picking upsteam, he said.

“It seems to be across prettymuch all business segments,” Mr.Rotman observed. “Automotivecame back very strong, retail prod-ucts came back very strong, foodwas very good — although theydidn’t really experience a drasticdownturn to begin with. We alsohave customers who provide rawmaterials to the polymer and rubberindustries, additives for steel orchemicals that go into someoneelse’s product — and we’ve seenbig increases in all of that.”

Out in Solon, Mike Gordon isexperiencing about the same thingat his 50-person metal fabricationcompany, Tendon Manufacturing.

“Things are good — 2011 wasdefinitely continuing an upwardtrend and I don’t see anything industry-specific that would make2012 look bad,” Mr. Gordon said.

Mr. Gordon produces sheet-metal boxes and cabinets, doesmachining and also powder coatingand laser cutting for customers indiverse markets. His products endup in heavy equipment, industrial

machines and precision medicaldevices, he said — and all thosecustomers are increasing their demands for his services. He’ll losesome business due to his longtimecustomer Keithley Instrumentsmoving most of its Solon manu-facturing operations to China, butincreases in volume from othercustomers will more than make upfor it, he said.

“I don’t see any particular segment that’s dragging its feetright now,” Mr. Gordon said.

Encouraging overviewThat’s the consensus of manu-

facturers generally, said DanBerry, CEO of the Cleveland-basedmanufacturing consulting and advocacy group Magnet. Heshares his clients’ optimism.

“Overall, I am encouraged aboutthe prospects for manufacturing in2012,” Mr. Berry said.

Manufacturers who were lookingto Magnet for help in cutting costsare now looking to it to help manage and foster their growth,he said — a good sign that businessis improving. And the improve-ments are broad, with even sectorssuch as automotive, a traditionallaggard, participating, if not leading

three of its neighbors in what usedto be Orange Township — MorelandHills, Pepper Pike and Woodmere,in addition to Orange — said theywould begin to investigate waysthey can work together to savemoney and that they would con-sider merging their communities ifit made sense.

The communities are waiting foran assessment of a variety of alter-natives from the Cuyahoga CountyPlanning Commission before theydecide how to move forward.

The loss of the estate tax is oneof three financial hits NortheastOhio communities are bracing forin the budgets they will preparethis year for 2013. In addition tothe estate tax, communities arelosing state Local GovernmentFund money and are expecting declining property values to causea dip in property tax collections.

With electorates that are expectedto be unwilling to support tax increases in the coming year, thistriple whammy is pushing manymayors and city councils to lookharder than ever before at staffing

levels and the services they canprovide and to be more receptiveto collaborating with neighboringcommunities.

‘We’re playing for keeps now’The Orange Township commu-

nities may be unique in putting acomplete merger on the table. Butmore communities than ever before are contemplating consoli-dating safety and other operationsto maintain service levels as budgetstighten.

“The pressures are moving fromthe abstract to reality,” saidBradley Whitehead, president ofthe Fund for Our Economic Future, a Cleveland-based non-profit that advocates for improvingthe delivery of public services andfor collaboration among govern-ments.

“I believe we’re going to see anacceleration of a total quality management effort in governmentand also collaborations will accel-erate,” Mr. Whitehead said. “We’replaying for keeps now.”

Cleveland, through its Operation

the way.“I think the recovery is going to

continue,” Mr. Berry said. “We’relikely to see some bumps in theroad with the economic problemsin Europe, the continued strugglesin the U.S. housing market, unpre-dictable energy prices and unfore-seen challenges.

However, investments by Fordand GM, along with Jeep in Toledo,to build their manufacturing capacity indicate a brighter futurefor the automotive sector in ourstate and region. This will eventu-ally trickle down through the auto-motive supply chain, which still

See MANUFACTURING Page 15


tions.“A lot of owners are saying, ‘I’ll

take my lumps now and sell thebuilding or lease the space,’” Mr.Garber said. “‘I’ll lick my woundsnow and not look back.’ Times in2009 were tough, in 2010 we muddled through and in 2011 westarted turning toward normalcy. I think 2012 will get us toward normalcy.”

Landlords are starting to negotiate bumps in rent of 2% several years down the road, hesaid, which they were unable to dothe last few years.

National studies show the region’s bearish view. The 2012edition of “Emerging Trends inReal Estate” by the Urban Land Institute Trade Group and thePricewaterhouseCoopers LLP accounting firm found nearly 1,000real estate pros put the Clevelandmarket in the second-lowest posi-tion in the nation, 51st, above onlyDetroit.

The only clear winner amongcommercial property types is theapartment market. As consumerslose homes to foreclosure or delayhome ownership because of fearsof continued sinking home values,vacancy is at a staggeringly lowlevel of just 3.8% according to theNortheast Ohio Apartment Associ-ation trade group.

A December study of global realty investors by PwC lists theCleveland apartment market as inexpansion now and through 2014

while the retail market is in recov-ery mode. The same survey saysthe industrial market in Akron —the only sector PwC reports for thelargest Summit County city — willgo into recovery mode this yearwhile Cleveland’s industrial marketwill remain in recession in 2012and slip into recovery mode nextyear.

Likewise, residential expertshope the decline in existing homesales has been reached and 2012may put the region in positive territory for the first time in years.However, experts believe it will beyears before home values regaintheir footing.

Win some, lose someIn such a market, contractors

and developers are picking nichesto grow.

“Things are better, but still tenuous,” said Peter Snavely, a second-generation contractor anddeveloper who is president of Chagrin Falls-based SnavelyGroup, which recently began con-struction of a $27 million Court-yard by Marriott at University Circle it is developing in a jointventure.

In times past, real estate typescould count themselves among thebig winners in income and oppor-tunities, but privately no longer doso compared to health care andmanufacturing.

Dr. Lahey puts the situation inlong-term view.

Pointing to record-low mortgagerates, and ever-slimmer profit margins by builders and developers,she believes it is unlikely this generation of realty players will experience the wealth of its prede-cessors. ■

By STAN [email protected]

Summing up the situation as the Northeast Ohio realestate industry starts recov-ering from a grueling down-

turn that has lasted for years,Karen Eilers Lahey, who teachesreal estate at the University ofAkron, offers a surprising parallel.

“There is a good analogy in theGreat Depression. I liken (today) to1939 to 1941, when we startedmaking progress again,” said Dr.Eilers, who holds a doctorate in finance. “We’re four and five yearsinto the downturn. Real estate willbe better in 2012, but I don’t thinkwe will ever reach the level of saleswe had in 2006. We don’t needthat. We just need confidence backin housing.”

She finds tea leaves in two things:Sales are up for big-box home retailers, which shows people areinvesting in their homes again andsome level of trust in the value ofhomeownership is starting to revive. Commercial developersalso are scouting new projectsagain, particularly in flex spaceand warehousing.

That will be the grimy reality ofrealty this year even though lots ofpositive news is on the horizon.

A staggering number of new developments, many years in themaking or building, will open thisyear. The $170 million Eaton Corp.headquarters in Beachwood willopen this fall, as will the Uptownapartment and retail developmentby MRN Inc. at University Circle.Things kick off early, with the $75million Greater Cleveland Aquariumopening Jan. 21 at the Nauticacomplex to give the landmarkPowerhouse a fresh start afteryears as a restaurant haven.

And the list goes on. Constructionunder way on the new Goodyearworld headquarters in Akron, the$465 million Medical Mart andConvention Center in Clevelandand the Ernst & Young Tower atthe Flats East Bank Neighborhoodwill alter skylines big-time thisyear, even though they will open in2013.

Beyond the skylineHowever, in contrast to that

backdrop, which is driven by major government and corporateinitiatives, the street-level realityfor real estate remains dour.

Most income-producing propertytrading hands is at steeply dis-counted rates, such as the 800 Superior Ave. office tower acquiredby an affiliate of AmTrust Financial

Services from a lender for $7 million. It traded for $45 millionjust a few years ago.

David Browning, managing director of CB Richard Ellis’sCleveland office, looks forward tomore sales and lease activity in2012 than last year.

“We see things that will clearlyproduce more activity in the market,” Mr. Browning said. “Inthe leasing market, there wasclearly more activity (in 2011). Butwhen all was said and done, it wasa very flat year in terms of vacancyand absorption. A lot of people willsay, ‘Whoop-de-doo. The marketdid not get any better.’”

Likewise, he and others expectmore investment and user-drivensales this year than last. However,some of that change will be due toincreased activity from lenderworkouts of distressed properties,particularly by selling mortgagenotes.

Robert Garber, a principal at Independence-based Cresco RealEstate, surveys the suburbs andasks: “What spec buildings are youseeing built? None. What new(commercial) land developmentsare you seeing? None.”

However, Mr. Garber also saysthe market is stirring as companieslook to spend money again, con-servatively, because the survivingfirms need to expand.

Most realty action amounts tobullet-dodging.

For example, the shuttering ofthe Chrysler stamping plant inTwinsburg put some 4 millionsquare feet of industrial space onthe market.

However, Scannell Properties ofIndianapolis and DiGeronimo Cos.of Independence acquired thestructure and tore down big partsof it. They even began building anew build-to-suit warehouse onthe old plant’s parking lot. TerryCoyne, executive vice president ofGrubb & Ellis Co., said the sell-and-demolish approach was thebest alternative for the massivesoutheast suburban industrialmarket. However, it was againmaking lemonade after gettinglemons.

Getting on with itIn the meantime, commercial

realty owners are biting the bullet,which is producing more transac-

“When all was said and done, it was a very flat year interms of vacancy and absorption (in 2011). A lot ofpeople will say ... ‘The market did not get any better.’”– David Browning, managing director, CB Richard Ellis Cleveland

■ Prediction for 2012: Win,lose or draw? Lose. Until propertyvalues recover, Northeast Ohioreal estate and its associatedbusinesses will suffer.

■ Game changers in 2011:Casino gaming juiced the down-town Cleveland real estate marketwith millions of dollars in propertypurchases, leases and constructionas Horseshoe Casino Cleveland tookform. Akron grabbed momentumwith simple deal-making and man-aged to keep Goodyear’s worldheadquarters in the city. Geis Cos.and MRN Inc. seem to be the biggainers in the down real estatemarket and will need new projectsto keep up the momentum.

■ Key players in 2012: If Gov.John Kasich can keep adding orretaining Ohio jobs, the state’sproperty market will be a big bene-ficiary. Downtown Cleveland inter-ests, from local governments toDowntown Cleveland Alliance andothers, will be center stage as thenew casino and looming conventioncenter promise to reverse down-town decline. Cuyahoga Countyexecutive Edward FitzGerald andCounty Council soon will receive anew efficiency study of county

offices that mayreshape the

central businessdistrict andbring theAmeritrustheadquar-

ters outof limbo.

JANUARY 2 - 8, 2012 CRAIN’S CLEVELAND BUSINESS 13

banking to intensify as banks continue to steal customers fromcompetitors in order to grow theirconsumer business.

Risks exist going forward. Highercapital standards loom on thehorizon, and the Consumer Finan-cial Protection Bureau, a regulatorybody spawned by the Dodd-FrankWall Street Reform and ConsumerProtection Act, is “going to behuge” in 2012, Mr. Jacques said.

Once the bureau gets a leader —former Ohio Attorney General

Richard Cordray is the contested,proposed appointee — the agencycould institute a host of new rulesfor banks to follow.

“Some of our banks are veryafraid of this,” Mr. Jacques said ofNortheast Ohio institutions.

Also, many institutions haveposted profits in recent quarters asthey’ve decreased expenses, particularly the amount they’re setting aside to cover loan losses,but reducing loan loss provisionsonly can improve profits for solong, Mr. Jacques said. ■

continued from PAGE 11


■ Prediction for 2012: Win,lose or draw? Draw for startups,which still will find venture capital,but not a whole lot of it. Win formore established companies thatwill benefit from improved salesand a bigger appetite for acquisi-tions.

■ Game changers in 2011:Several changes were made tothe Ohio Third Frontier economicdevelopment program. It now will focus more on financing tech-nology companies and projectsthat can produce results faster.Excitement builds around an expected boom in oil and gas

drilling, which provides oppor-tunities for some technologycompanies, but the prospect oflower fossil fuel prices could reduce demand for alternative energy technologies.

■ Key players in 2012: Thetechnology commercializationarm of the Cleveland Clinic will bebusy, especially with opportunitiesrelated to information technology.The Ohio Legislature has a keydecision to make regardingwhether to renew the Ohio CapitalFund, which finances venture capital firms that commit to investing in Ohio companies.

1144 CRAIN’S CLEVELAND BUSINESS JANUARY 2 - 8, 2012

By JOEL [email protected]

Pick a study, any study.

As 2011 wound down, thebevy of local and national reports conducted each

month forecasting small businesses’fortunes all were pointing upward.And progress at the state levelseems to indicate a rosier 2012 forsmall businesses statewide and inNortheast Ohio.

“There’s been good news forsmall businesses, and a different attitude in Ohio,” said RogerGeiger, the vice president and exec-utive director of the Ohio chapter ofthe National Federation of Inde-pendent Business. “We’re a diversestate, and not heavily dependent onone sector. Small businesses gener-ally are a leading indicator of recov-ery, and we’re beginning to see thatturn in Ohio.”

The NFIB’s 10-component smallbusiness confidence index — whilestill falling below 2008 levels — rosein November for the third consecu-tive month, with the biggest gainsin real sales and the outlook forbusiness conditions. Unemploy-ment, meanwhile, dipped to 8.5%in November from 9% in October.

Additionally, a unit of Indepen-dence-based CBiz Inc. that trackssmall business employment trendsshowed in November a slight uptickamong the company’s 3,000 clients,a group that includes about 88,000employees.

And Small Business Administra-tion-backed loans also are re-bounding, evidence that a reversalof tradition is taking place, SBANorthern Ohio District head GilGoldberg said: Usually, Ohio andCleveland lag in recoveries. Now,we’re ahead of the curve.

Nationwide, SBA-backed loanvolume in fiscal year 2011, whichended Sept. 30, was up 3% over2010, but in Northern Ohio, it rose38%. In dollar volume, lending hererose 66%. The SBA’s Great Lakes region — which includes Minnesota,Wisconsin, Illinois, Indiana, Michigan and southern Ohio — alsosaw the largest increase nationwidein loan and dollar volume.

“Ever since I’ve been in Cleveland,for 30 years, we were always thefirst to go into recession and neverreally came out,” Mr. Goldberg said.“Here, we’re coming out of it first.”

Different timesThat local recovery is due in part

to a new diversity in the economy,Mr. Goldberg said. Manufacturingalways will be a major employmentsource, but he said restaurants —which banks often have said theywon’t touch, Mr. Goldberg said —have become a hot spot. (In Cleve-land, well-known restaurateurssuch as Zack Bruell and Steve Schi-moler have begun or completednew projects.) SBA loans to freightand transportation companies alsoare up.

“Banks are back in the market,”he said.

That includes KeyBank, whereSBA loan volume is up 40%, saidJohn Moshier, the bank’s nationalSBA segment manager. Some ofthose loans go to create jobs. Butoften, he’s found lately, they’re a result of banks and small businessesworking more closely together tosolve problems.

■ Prediction for 2012: Win,lose or draw? A buzzer-beatingwin. Industry watchers and smallbusinesses are fearful of predictingtoo much brightness, as economicuncertainty still weighs heavily.But indicators ranging from hiringsurveys to progress at the statelevel on job-creation issues por-tend continued progress.

■ Game changers in 2011:Gov. John Kasich’s inclusion ofthe final step of a 21% incometax reduction in his biennial budget, which Roger Geiger,from the Ohio chapter of the National Federation of Indepen-dent Business said was welcomed by small businesses.Gov. Kasich and other Republicanlegislators tout that reduction,and the state balancing itsbudget by overcoming a$6 billion to $8 billionhole, with creating a better business climate; inNovember, the Oakton, Va.-based Small Business &Entrepreneurship Councilseemed to back that up,ranking Ohio seventh in

policy climate for entrepreneurship.

■ Key players in 2012: GilGoldberg, the head of the SmallBusiness Administration’s Northern Ohio district, jokes thatbanks in the past wouldn’t toucha restaurant project. But asNortheast Ohio has gained afoothold in the restaurant world,Mr. Goldberg said those projectsare much more likely to get funding. More evidence: Berea-based Hy-Tek Material Handling,which designs and builds materialhandling systems for warehousingand distribution, has seen itswork with restaurants and fooddistributors increase significantly,according to vice president andgeneral manager Scott Hennie.

Shale gas also will bebig player. Just asthose small businesseswith deep ties to the

auto industry sufferedwhen the Big Three

domestic automakers took hits, it appears thosewith ties to the bustling

shale gas industry will see a boom.

That includes debt restructurings,new mortgage deals and othermoves that might not immediatelyresult in jobs, but are allowingcompanies to retain jobs, improvebalance sheets and position them-selves for future growth.

“Small businesses have gotten alot smarter,” Mr. Moshier said. “Alot of outside forces are creatingthis up-and-down environment,but companies are managingthings smarter.”

Count in that group Cleveland-based marketing agency PR 20/20,where president Paul Roetzer is in“hiring mode,” but in a cautiousway. The company is expectingsignificant growth from its partner-ship with HubSpot, a Cambridge,Mass.-based leader in the inboundmarketing software field, and fromMr. Roetzer’s “Marketing AgencyBlueprint,” a recently publishedbook that outlines, as its subtitlesays, best practices for “buildinghybrid PR” firms.

Still, PR 20/20 wrestles with thesame equation as many othersmall businesses.

“We want controlled growth,”Mr. Roetzer said. “There are limita-tions on the (human resources)side, and we don’t want to lose thequality of service. We don’t haveconcerns with getting the next account, but we want to make surewe have the right infrastructure inplace.”

Wooster-based ABSMaterials,meanwhile, has seen 250% growtheach of the last three years and anticipates a similar trajectory forthe next two years, according toCEO Stephen Spoonamore. Thecompany’s water purification technology has been used in themultibillion-dollar shale gas industry, which is exploding insoutheast Ohio and points east.

Mr. Spoonamore said half thecompany’s growth — it recentlybought the 100,000-square-footformer Bell & Cowell headquartersin Wooster and hopes to have 100

employees nationwide by the endof next year, from 42 currently — isfrom the oil and gas industry. Butnone of that work is in Ohio, Mr.Spoonamore said, as the state hasn’tyet enacted the same quality stan-dards that Alaska, Wyoming andNorway, among others, have.

“We want to see Ohio meet orset the standards for best prac-tices,” Mr. Spoonamore said, noting the Utica and Marcellusshales in Ohio could be the“biggest in the world.”

Policy mattersMr. Geiger, from the Ohio chapter

of the NFIB, said small businessowners have been enlivened by thestate and Gov. John Kasich’s abilityto manage its budget hole, esti-mated at anywhere from $6 billionto $8 billion.

And while Gov. Kasich hasn’t yetcompletely eliminated the state’sincome tax, he did include in hisbudget the last step of a five-year,21% cut to that income tax, the lastportion of which was delayed in2009.

“The state legislature was able toget its house in order, and that’s abig signal to job creators,” Mr.Geiger said.

Yet federal stalemates on taxesand other issues continue to cloudcompanies’ plans. CBiz presidentand chief operating officer JerryGrisko, who despite anecdotal evidence has heard from clientsnationwide that 2012 will be betterthan 2011, said policy uncertaintystill casts a shadow.

To wit: A Federal Reserve reportin November found that in the summer of 2011, the net percentageof small business owners that were hiring would have been sixpercentage points higher withoutpolicy uncertainty.

“There’s so much fog on thehorizon, companies are being cautious about substantial invest-ments before there’s some certaintyin those areas,” Mr. Grisko said. ■

By CHUCK [email protected]

Stephen Haynes will feel a lotbetter about the prospectsfor young technology com-panies in Northeast Ohio if

these two things happen in 2012:First, the CEO of Glengary LLC

hopes his venture capital firm andothers are able to start sellingsome of the local companies intheir portfolios.

Second, he wants the state Legislature to renew the Ohio Cap-ital Fund, a taxpayer-backed vehiclethat invests in venture capitalfirms that commit to financingcompanies within the state.

Though Mr. Haynes and otherofficials who watch NortheastOhio’s technology community believe local tech companies havea lot going for them in 2012, theyalso say venture capital firms hereand elsewhere continue to have ahard time raising money to startnew funds, even as the U.S. econo-my improves.

That’s mainly because the reces-sion made it hard for them to sell thecompanies in which they invested,which in turn makes it tough forthem to attract new investors. Theproblem is made worse by newfederal regulations that preventbanks from investing in venturecapital firms and by state lawmakerswho have yet to renew the $150million Ohio Capital Fund, whichhas invested almost all of its money.

“It would be a huge shame if themomentum we’ve built up overthe last few years would be lost because of those three factors,”Mr. Haynes said, adding that Glen-gary and a few other venture capitalfirms at this point are saving muchof their remaining cash for start-ups already in their portfolios.

Even so, no one expects all thehelium to go out of the balloonthat has lifted the local technologysector.

For instance, several health carecompanies in the region are growingrapidly, said Baiju Shah, presidentof BioEnterprise Corp., which assists health care companies in

Northeast Ohio. He cited three examples: medical diagnostic testing firm Cleveland HeartLabInc., medical implant maker OrthoHelix Surgical Designs Inc. of Medina and Within3 Inc. ofCleveland, which designs onlinecommunities for health care pro-fessionals.

There has been a big increase inthe amount of venture capitalraised by health care companiesover the past seven years, whichhas helped drive some of thegrowth, Mr. Shah said. He said heexpects acquisitions of local healthcare companies to pick up in 2012.

“You’re starting to see firms really climbing the curve now,” hesaid.

The IT ‘hockey stick’Mr. Shah said health care

companies with products on themarket have “bounced back nicely”from the recession. The reboundhas occurred despite lingering uncertainty about how they’ll beaffected by the Patient Protectionand Affordable Care Act of 2010and recent changes in the way theU.S. Food & Drug Administrationregulates medical devices.

There also is a lot of opportunityfor information technology com-panies in the health care space, hesaid.

Hospitals nationwide are in theprocess of implementing electronicmedical record systems, a move-ment that not only stands to benefit companies that sell andservice those systems, but alsothose businesses that figure outways to improve them and makesense of the data they house.

To capitalize on that opportunity,the Cleveland Clinic last Aprilhired Gary Fingerhut to be the firstgeneral manager of IT commer-cialization at Cleveland Clinic Innovations, which helps Clinicemployees turn their ideas intoproducts.

Clinic employees have beensubmitting lots of ideas for newhealth IT products lately, Mr. Fingerhut said. The Clinic expects to

See TECHNOLOGY Page 15


“We are also seeing substantial invest-ments in health care manufacturing, bycompanies like Philips and Steris.”– Dan Berry (right), CEO, Magnet

services, negotiating better con-tracts with vendors and a limitednumber of layoffs, which Summapresident and CEO Thomas Straussnoted wasn’t a major piece of theequation.

To the north, the ClevelandClinic closed Huron Hospital inEast Cleveland and has shiftedmany services at Lakewood Hospitalto Fairview Hospital on Cleveland’sWest Side due to declining patientvolumes. Lakewood Hospital, whichstill operates a full-service emer-gency department, no longer is aLevel Two trauma center.

“As we’ve done over the years,we’re continuing to focus on im-provement in core quality measures,reduction of waste and enhancedcoordinated care, among other areas, to ultimately do what is rightfor our patients,” Mr. Glass said.

Rising levels of uncompensatedcare hospitals provide to thosewho are uninsured or underinsuredalso stand to impact budgets goingforward.

The MetroHealth System, thecounty-subsidized health careprovider, is looking to eliminate orcut back on certain services tocope with financial pressures asso-ciated with a rampant rise in charitycare. For one, the system announcedin September it would cease skillednursing and long-term care servicesat its Senior Health & WellnessCenter in Cleveland’s Old Brooklynneighborhood.

A supreme decision?The biggest “what if” of the year

is centered on President Obama’shealth care overhaul and whetherthe U.S. Supreme Court decides ifit passes constitutional muster.

The court announced last month it would hear oral arguments regarding the law March 26-28.

The high court likely will announce later this year whether the individual mandate to carry insurance in the health care reformlegislation, or perhaps the entirelaw, is constitutional. Regardless ofthe outcome, health care leaderssay the momentum toward buildinga sustainable health care systemwon’t slow.

“Health care reform is not perfect, but it’s a start for us,” Mr.Strauss said. “We think it’s criticalas we start to transition how we reimburse and support health careand move to a real health care system from a sick care system,which is what we have today.”

Regardless of how the SupremeCourt rules, government leadersand health care executives are

expected to continue to developand test different models for carein hopes of improving outcomesfor patients and cutting costs. It’s atricky proposition, they say, butsomething that’s desperatelyneeded.

William Considine, presidentand CEO of Akron Children’s Hospital, said when the economystruggles, his hospital’s primarycare services and emergency roomboom with business. The chal-lenge, however, is figuring out howto pay for that upswing in service.

Though many mechanisms forcare and reimbursement havebeen tested and talked about, whatwill happen over the next severalyears is up in the air.

“In this business anymore, if youcan’t be comfortable with ambiguity, you’re in the wrongbusiness,” Mr. Considine said. ■

“In this business anymore, if you can’t be comfortablewith ambiguity, you’re in the wrong business.”– William Considine, president and CEO, Akron Children’s Hospital

has a major (presence) in our region.”Jerry Zeitler makes much of his

living serving the automotive industry, and car makers still makeup the bulk of his business at Cleve-land-based Die-Matic, a precisionstamping company. The end of theyear normally is a slow time, butnot this year, he said. Almost all automakers are ramping up production, and that’s particularlytrue for some of the Japanese trans-plants, such as Honda, that still aretrying to make up for lost productiontime from last year’s earthquakeand tsunami, he said.

“We’re getting a lot of orders andmaking a lot more quotes than

usual,” Mr.Zeitler said.

Larry Fultonagrees. Like Mr.Rotman, Mr.Fulton sees howa lot of othercompanies arefaring as hiscompany, LefcoWorthington in

Cleveland, makes pallets, cratesand specialized shipping containersand packaging for customers inmany sectors.

“Customers in the automotivesector have warned us to plan for anincrease in demand for wood palletsduring the first quarter of 2012,”Mr. Fulton said. “The shipmentswill be for domestic demand, notinternational, meaning USA con-sumption continues to strengthen.”

But none of this is to say that thenew year is worry-free — far from it.

Fear of the unknownManufacturers are natural-born

worriers, and the past few years onlyhave heightened their sensitivity tohow events seemingly unrelated totheir business — such as subprimemortgages and European sovereigndebt — can affect their operations.

They also worry about how the

JANUARY 2 - 8, 2012 CRAIN’S CLEVELAND BUSINESS 15

license or create companies aroundsome of those products in 2012.

“(Health) IT is very much ahockey stick,” Mr. Fingerhut said,describing the sector’s upward trajectory.

Other IT companies in NortheastOhio also see opportunity in 2012,according to statistics from athird-quarter survey conducted bythe Northeast Ohio Software Asso-ciation.

Only 18% of the 80 respondentssaid they were not hiring at thetime, and 73% said they plan to expand their staffs over the next 12months. That second figure — arecord high for the survey, whichNEOSA has been conducting forabout five years — is up from 53%during the like quarter in 2010.Three-quarters of the respondentsalso expect sales to improve overthe next 12 months, though thatfigure has remained constant forseveral quarters.

NEOSA president Brad Nellis attributes the optimism to improve-ments in the local and nationaleconomy, though he’s still worriedabout how debt troubles in Europe

could affect the United States.“I’m not expecting a blowout year.

I’m expecting a good, solid year,”he said.

Hail shale?If Europe plunges into recession,

startups in clean energy technologymay have cause to worry, saidRichard Stuebi, a managing

director forCleveland venture capitalfirm Early StagePartners.

“When I thinkabout acquirersof clean techcompanies, a lotof them wouldbe European

companies,” said Mr. Stuebi, whofocuses on the clean tech sector.

The big drive to extract oil andgas from shale rock formations inthe United States could drivedown prices for those fuels, whichwould pose a threat to startups developing solar, wind and otheralternative energy technologies,Mr. Stuebi said. However, theshale gas craze poses a big oppor-

tunity for companies that can par-ticipate in it, such as those withtechnologies to clean water pulledfrom oil and gas wells, he said.

Like Mr. Haynes of Glengary,Mr. Stuebi and a few others said ithas been harder lately for venturecapital firms to raise money andcould get harder still next year.

A few successes could help localfirms alleviate that pain. MutualCapital Partners, which invests incompanies that have exceeded $1million in annual sales, closed on a$17 million fundraising round inearly 2011 and expects to close ona second round early next year.The firm’s previous fund investedin a few companies that are doingwell, including OrthoHelix, whichhas made the fundraising processeasier, said managing director BillTrainor.

Mr. Trainor added that the quality of companies seeking capital has “increased markedly”over the past few years, likely because of state and regional efforts to help startups.

“You would have to assume thatthat type of attention would pro-duce results,” he said. ■

continued from PAGE 11 continued from PAGE 12


federal government’s behavior willimpact their business. Mr. Gordonis one who thinks the threat ofhigher taxes, increased regulationand other government policieshave had a dampening effect on aneconomy that could be growingeven faster.

“To be fair, I haven’t seen anybad effects from this health carelaw yet,” Mr. Gordon said, addressingsomething that has been a big concern for him and other employers. “But, to me, thereseems to be a wet blanket overeverything and I think that wetblanket is the federal government.If the government could just get tothe point where they do no harm, Ithink you’d see this whole economybecome unleashed.”

But, while many manufacturerswant desperately for the U.S. government to cut its costs andavoid higher taxes, they also worryabout where those cuts will bemade. Many area manufacturersare involved in defense contracting,and with the failure of the so-calledcongressional super committee tomake its promised budget reduc-tion, $600 billion in defense cutsautomatically could be put inplace between 2013 and 2023.

Defense contractors already are preparing for them.“With all of the emphasis on deficit reduc-tions, I am pretty confident thatdefense spending will either be reduced or be far more carefullycontrolled,” said Rich Peterson,vice president of Astro Manufac-turing and Design in Eastlake, aprecision machining companywith defense contracts.

“We are already seeing somelevel of impact on certain pro-grams that have delayed orders tous,” Mr. Peterson said. “As of yet,they have not been canceled, but

they could be.”

Return of theoptimists

But the positives still outweighthe negatives, say most. Astro, for example, still is forecasting revenue growth of 10% to 20% in2012, regardless of an anticipatedslowdown in defense spending,Mr. Peterson said.

“Medical (devices), on the otherhand, is a growing industry in Ohio— and in the Cleveland area, inparticular,” Mr. Peterson said.

Magnet’s Mr. Berry concurs.“We are also seeing substantial

investments in health care manu-facturing, by companies likePhilips and Steris,” Mr. Berry said.

Even the Precision MetalformingAssociation in Independence,whose members were starting toturn negative in their views on theeconomy in November, sees moreoptimism among manufacturers.When the organization polled itsmembers in December, 40% predicted an increase in ordersover the next three months, whileonly 12% predicted orders woulddecline. That’s a sharp turnaroundfrom the month before, when only21% were expecting an increase insales and 30% forecast a drop intheir near-term business.

Will it be the best year ever?Probably not — but it should stillbe a year of continued improve-ment for a sector that needs it, saidPMA president Bill Gaskin.

“Member companies believetheir customers will ramp up production after the holidays, andthat 2012 will be a year with modest continued growth formanufacturers,” Mr. Gaskin said.

And that, for most, will be a happier new year than the last twoor three they’ve known. ■

Fulton

Stuebi

For daily on-line updates, sign up @CrainsCleveland.com/Daily


THEYEARINREVIEW 16 CRAIN’S CLEVELAND BUSINESS WWW.CRAINSCLEVELAND.COM JANUARY 2-8, 2012

STORIES THAT MATTERED PEOPLE WHO MATTERED

DEALS THAT MATTERED

Things can only get better■ The country no longer is techni-cally in a recession, but in manysectors of the economy, it still feelslike it. There was some improve-ment as the year went on, and employers aren’t shedding jobs atthe scary pace of 2008 and 2009. Butthe economy remains too weak tocreate jobs in a way that wouldspark a robust recovery.

The good with the bad■ The federal government in Januaryselected JumpStart Inc., which invests in and assists startup com-panies in Northeast Ohio, to createa nonprofit called JumpStart Amer-ica that aims to raise $2 billion tofund programs that promote entre-preneurship and innovation in other regions. In March, though,the nonprofit was forced to hold apublic forum to address complaintsraised by some local entrepreneursthat JumpStart spends too much onsalaries, too little on investing andhasn’t created enough jobs.

And now forsomething completelydifferent■ Give him this— Ohio Gov.John Kasich is aman of action,certainly compared with formerGov. Ted Strickland. WhetherOhioans like that action is up fordebate. The first-year governor wasaggressive in offering tax deals tokeep big employers in the state, buthe stepped in it big-time with ananti-union initiative — the infa-mous Senate Bill 5 — that ultimatelywas rejected by voters.

Long-term vision■ Cleveland Mayor Frank Jacksonin November introduced the Con-solidated Downtown Waterfront

Plan, highlighted by a $50 millionall-weather pedestrian bridge thatwould link downtown to the LakeErie waterfront. It could take 20years or more — and much partici-pation from the private sector — toflesh out the broad concept for future development along nearlythree miles of Lake Erie waterfront.

Ready for takeoff■ The merger of United and Conti-nental airlines sparked efforts, coordinated by the Greater Cleve-land Partnership, to encourageNortheast Ohio businesses to steertheir travelers to Cleveland HopkinsInternational Airport in hopes ofpreserving the valuable hub there.The efforts weren’t particularly focused, though, and 2012 will be a big year for showing the mergedairline Cleveland is worthy of a hub.

Quite a ride■ Cedar Fair, the Sandusky companythat operates Cedar Pointand other amusementparks, split its boardchairman and CEO rolesin the wake of a share-holder vote for a changein the company’s leader-ship structure. In June, itnamed Matthew A.Ouimet, a former execu-tive with Walt Disney Co.,as president and said hewill become CEO on Jan.3, 2012, succeeding long-time CEO Dick Kinzel.

Think you have money problems?■ MetroHealth president and CEOMark Moran announced plans tostep down from the helm of thecounty-subsidized hospital, whichin 2011 saw its financial woesmount and faced criticism for payments to consultants and for itsdisclosure practices. In November,

MetroHealth said it would lay off104 employees and eliminate 151vacant positions as it sought to address expected operating lossesof more than $6 million in 2011 and$21 million in 2012 without the cut-backs.

End of an era■ The Cleveland Clinic closedHuron Hospital in East Cleveland,as the 137-year-old institution nolonger generated sufficient patientactivity due to population loss and changing demographics. It wasa vivid example of how hospital systems — even powerhouses suchas the Clinic — are navigating trickyterrain in a health care environ-ment of escalating costs. The Clinicagreed to pay East Cleveland morethan $8 million over five years tooffset lost payroll tax revenue dueto the closure.

You oughta be in pictures■ Ohio’s film tax credit sparked the

shooting of several moviesin Northeast Ohio, includ-ing “The Avengers,” whichbrought big stars and(simulated) destruction todowntown Cleveland. Thequestion for 2012: Will thestate pump more moneyinto the tax credit pro-gram to keep the moviesrolling here?

American idle■ Quality control issuesraised by regulators pushed

Ben Venue Laboratories Inc. in lateNovember to shut down tempo-rarily all manufacturing and distri-bution operations at its Bedfordheadquarters. The pharmaceuticalmanufacturer, which employsabout 1,300, made the decision tostop producing and distributing drugsduring an inspection conducted byregulatory agencies from the UnitedStates, the United Kingdom andFrance.

Ed FitzGerald■ He’s by definition a trail blazer, asMr. FitzGerald is the first person toserve as Cuyahoga County Execu-tive. He kept busy by making strategiccuts to the county work force, implementing much-needed ethicspolicies and mapping out an eco-nomic development strategy for thecounty. (For more on that, see Page 3.)

Chuck Fowler■ Mr. Fowler, CEO of FairmountMinerals CEO, and his wife, Char,gave $17 million to Rainbow Babiesand Children’s Hospital to establisha cancer institute. The gift was madein memory of their daughter, Angie,who died of melanoma at age 14.

Dan Gilbert■ To paraphrase Ron Burgundy,Mr. Gilbert is kind of a big dealaround here. He’s best known publicly as the owner of the Cava-liers, but he’s making an even biggerimprint on Cleveland with thesoon-to-open casino, his growingQuicken Loans business and theBizdom U program that works withpromising startups.

Eric Gordon■ He was named in June as CEO ofthe Cleveland Metropolitan SchoolDistrict, replacing interim chief Peter Raskind. As chief academic officer since October 2007, Mr. Gor-don should be well-versed in theimportant issues facing the district.The region needs him to succeed.

Chris Hodgson■ Cleveland’s ascent as a culinarycity has spread to gourmet foodtrucks, and no one in town took advantage of it like the man behindHodge Podge and Dim and DenSum. He and his partners also cametantalizingly close to winning$100,000 on season 2 of The FoodNetwork’s “Great Food Truck Race”contest.

Beth Mooney■ On May 1, shebecame the firstwoman CEO of a top-20 U.S.bank. Key postedhigher earningsin the first threequarters of theyear than in the correspondingquarters of 2010, and Ms. Mooneyearned a spot on Forbes’ list of theworld’s most powerful women.

Steve Potash■ The CEO of OverDrive Inc. in Valley View is at the center of thedigital media transition. His companybrought library lending to Kindleowners and saw huge increases incheckouts of its materials, both inthe United States and abroad.

Dr. Michael Roizen■ The Cleveland Clinic’s wellness chiefhas emerged as a national spokesmanfor fitness. The wellness evangelismis working well at the Clinic, whichthis year saw inflation-adjusted employee health care costs fall,compared with a 6% rise nationally.

Steve LaTourette■ The veteran House Republican always has spoken his mind and hasn’tbeen afraid to challenge party ortho-doxy. He’s an important D.C. voicein trying to end the budget stalemate.

Eddy Zai■ The Iran native’sCleveland Inter-national Fund expects to provideup to $65 millionof financing toassist AmericanGreetings Corp.

in constructing its new world head-quarters in Westlake. His new $100million Cleveland Bio Fund is targeting companies that want tobreak into the Chinese market.

Connecting the Dots■ Dots, a women’s apparel and accessories retailer based in Glen-willow, was acquired by IrvingPlace Capital, a private equity firmin New York that has invested insuch retailers as Aeropostale andNew York & Co. Dots, founded in1987, has more than 400 stores in26 states, and the new owners haveaggressive growth plans in newmarkets.

A consolidation of influence■ Iron ore producer Cliffs NaturalResources Inc. in January agreedto buy Canada’s ConsolidatedThompson Iron Mines Ltd. for$4.95 billion in a deal that wouldgive the company greater access tointernational markets, particularlyin fast-growing Asia. The dealclosed in May.

What’s a few billion?■ Specialty chemicals companyLubrizol Corp. of Wickliffe inMarch agreed to be bought byWarren Buffett’s Berkshire Hath-away Corp. for $9.7 billion, includingthe assumption of debt. The Oracle

of Omaha’s company paid cash. Ifyou’ve got it …

At least it’s not farewell■ American Greetings Corp. in Mayended the suspense surroundingits headquarters by announcingthat it would move to Crocker Parkin Westlake from its longtimehome in Brooklyn. The move to a700,000-square-foot complex atCrocker is expected in 2014.

Tapping the state’s ATM■ $56 million in state tax incen-tives helped Diebold Inc. decide tostay in Northeast Ohio and expandits headquarters in the Akron-Can-ton region. Counting local incen-tives, Diebold’s aid package could

exceed $100 million. To qualify forthe incentives, Diebold said, it willneed to retain about 1,500 jobs inOhio for 18 years.

To market they will go■ Marketing agencies were activein 2011. Digital agency RosettaMarketing Group, which has a 400-employee presence in Clevelandafter its July 2008 purchase of Brulant Inc., was bought in May by Publicis Groupe SA, a Frenchadvertising company. In October,Marcus Thomas LLC of War-rensville Heights struck a deal toacquire DigiKnow LLC, a digitalmarketer in Cleveland.

Blown off course■ Cardinal Fastener & SpecialtyCo. of Bedford Heights, a maker ofbolts and fasteners that became aposter child for the wind-power industry, ran into financial prob-lems, filed for Chapter 11 bank-ruptcy protection and then in lateOctober was sold to Germany’sWurth Group for just $3.9 million.The new owner’s goal for 2012: Get Cardinal close to where it was

before its June bankruptcy.

Color them pleased■ Polymer producer PolyOneCorp. of Avon Lake in Octoberagreed to buy ColorMatrix GroupInc., a supplier of liquid colorants,additives and fluoropolymers thatis based in Berea, in a $486 milliondeal. The transaction closed in lateDecember. PolyOne CEO StephenD. Newlin said the acquisitionmarked “a significant milestone inPolyOne’s transformation to aglobal, specialty company.”

A sensible gamble■ Forest City Enterprises Inc. inDecember agreed to sell the 206-room Ritz-Carlton at Tower City

Center to a subsidiary of Rock OhioCaesars LLC for a total of $36.5million, which included a $2.5 million payment by Rock Ohio under a previous option agree-ment between the two companies.Rock Ohio Caesars is the joint ven-ture of Caesars EntertainmentCorp. and Rock Gaming LLC,owned by Cleveland Cavaliers majority owner Dan Gilbert, that’screating the Horseshoe CasinoCleveland.

Bargain shopping■ In December, an investor andhotel operator based in Canada acquired the Old Arcade anddowntown Cleveland Hyatt Hotelfor the minimum bid of $7.7 million at a foreclosure auction.Skyline Cleveland Acquisition LLC,formed by Skyline Acquisition In-ternational Inc. of Toronto, wasthe winning bidder for the 1890-vintage Cleveland landmark. TheArcade property was redevelopeda decade ago at a cost of $60 million to accommodate the hotel,but a recent appraisal for the sheriff’s office valued it at $11 mil-lion.


Wisconsin-based Flam-beau Inc. has purchasedPartners in Plastics LLC,

an industrial blow molder inSharon Center, Ohio, for anundisclosed price.

Flambeau completed an assetpurchase of Partners in Plasticsout of receivership from Key-Bank in Cleveland.

“Our intention is to keep (theSharon Center plant) as a goingconcern,” Flambeau presidentJason Sauey said.

Partners in Plastics was foundedin 1993, initially for then-startupStep2 Co., a rotational molder oftoys. Since then, it has grown tobe a large industrial blow molderserving the Midwest and North-eastern United States.

According to the most recentranking of blow molders by Plas-tics News, a sister publication of Crain’s Cleveland Business, Partners in Plastics generated$17.8 million in 2010 sales and employs 174. — Plastics News

medical testing for doctors through-out the health care system.

The lab on the Clinic’s main campus currently conducts about12 million tests a year; about 10% ofthose tests are for health careproviders across the country, andthey’re performed for a fee. Officialswouldn’t disclose how much rev-enue the lab generates, but with theconstruction of the new building,the Clinic hopes to quadruple thatbusiness line over the next five years,according to Dr. David Bosler, headof Cleveland Clinic Laboratories.

The move to expand its laboratoryoperations aligns with the Clinic’soverall strategy — and that of otherhealth care systems throughoutNortheast Ohio — to diversify theirrevenue streams given the uncer-tainty surrounding government reimbursements and a dwindlingpatient base in the region.

“The Clinic has a strong presencein Northeast Ohio. There’s no doubtabout it, and that’s not going tochange,” Dr. Bosler said. “When theClinic looks for growth, there’s onlyso much market share in NortheastOhio. It makes sense to look out-ward.”

The Clinic, for one, has operationsin Canada, Florida, Nevada and, by 2013, Abu Dhabi. However, an expansion of its laboratory andpathology offerings will allow theClinic to reach a broader patientbase — and thus generate more rev-enue — without investing in bricksand mortar across the country orthe world.

“It’s a large market, and even thebiggest hospitals send out sometesting,” said Dr. Kandice Kottke-Marchant, chair of the Clinic’sPathology and Laboratory MedicineInstitute.

The Mayo Clinic — one of theClinic’s top competitors — inRochester, Minn., already runs oneof the largest groups of medical lab-oratories in the country. Accordingto a spokesman, Mayo’s laborato-ries perform 20 million tests a yearand have more than 4,000 clientsfrom all 50 states and more than 60

countries.While Clinic officials wouldn’t

share revenue projections, the ex-panded operations are expected tonet 350 to 400 new jobs in the labsby 2018. The Pathology and Labora-tory Medicine Institute currentlyemploys about 1,400 people, 850 ofwhom are on the main campus.

The hiring is expected to addabout five new sales jobs this year inthe Southeast and along the AtlanticSeaboard. The current sales team ofnine primarily is based in the Mid-west, with additional staff in Floridaand Alabama, Dr. Bosler said.

“It’s much easier for a specimento travel across country than it is for apatient to travel across the country,”Dr. Bosler said.

Advancing the missionThe new building is expected to

serve as the eastern gateway to theClinic’s main campus. It is strewnwith system’s trademark sterilewhite and gray color scheme pre-ferred by its CEO, Dr. Delos “Toby”Cosgrove. It’s also the first buildingDr. Cosgrove has helped developfrom its inception to completionsince he was named CEO in 2004.

Armed with the latest technology,the new building is expected to allow the institute to add to its rosterof 2,200 different types of tests andopen new research opportunities,Dr. Kottke-Marchant said. It alsodoubles the square footage availablefor the institute, which hasn’t hadnew space in 30 years, as some ofthe institute’s staff will continue tooccupy its current space on CarnegieAvenue on the southern portion ofthe Clinic campus.

While patients, for the most part,likely won’t see the inside of thetesting facility, its services will impact the majority of the patientsnavigating the health care system.About 70% of all decisions regardingdiagnosis and treatment rely onmedical testing.

“I really do believe this projecthelps further the Cleveland Clinicmission,” Dr. Bosler said. “It drivesinnovation and creates educationalopportunities.” ■


Anne White, Skyline’s communi-cations director, said in an email response to Crain’s that the company’splans for the property are in their“early days.”

“Any possible partial residentialconversion is just that, a potentialplan — the feasibility, location, timingand format of which will still needto be evaluated and reviewed, inconsultation with stakeholders, including Hyatt,” Ms. White wrotein the email. She noted that Skylinealso will review steps to improve thehotel’s earnings and to repositionthe retail portion of the complex.

Skyline, which owns ski resortsand high-end hotels, has a trackrecord for injecting residential usesinto its hotels and its office-retailproperties.

“Skyline does specialize in evalu-ating and leveraging unique assets,many of them historic, and manytimes that does include a residential

component,” Ms. White wrote in theemail. “The new private residencesin the former unused offices andfashion mart at downtown Toronto’sLe Meridien King Edward Hotelwould be a good example of Sky-line’s expertise in that area.”

Skyline entered the sole bid —nearly $8 million — for the Arcadeat a Dec. 5 Cuyahoga County sheriff’ssale of the property, which hadbeen put into foreclosure by itslender, Bank of America. The previousowner, L&R Corp. of Chicago, hadspent $60 million a decade ago toconvert much of the Arcade to a Hyatt from bargain-basement officesand shops.

A partial conversion of the prop-erty to apartments or condos wouldbe a big change of direction for thecrystal-topped hotel and retail complex. However, an apartmentconversion in particular would makesense, as the apartment market hassurged in the wake of the plunge in



Arcade: Downtown apartment market rebounds

Clinic: Hospital looks pastborders for new revenue

homebuying activity. Apartmentshave fared especially well in down-town Cleveland, where occupancyis above 94% and hits 100% at a fewproperties.

Continuing the evolutionTom Yablonsky, vice president of

Downtown Cleveland Alliance andexecutive director of Historic Gate-way Neighborhood DevelopmentCorp., said replacing Hyatt hotelrooms with apartments would sup-port the continued evolution oflower Euclid Avenue downtown toresidential use from office and com-mercial uses.

The Arcade towers over the T-intersection of Euclid and EastFourth Street, and is just a few feetfrom the East 4th Neighborhood, oneof downtown’s most vibrant loftand restaurant developments.

“Maybe it’s part of their worldview,” Mr. Yablonsky said of Sky-line. “When I’ve visited Toronto,residences in high-end hotels arecommon.”

Conversion of some of the Arcadeto residential use is possible, according to Jonathan Sandvick, theCleveland architect whose firm designed the 2001 conversion of the

Arcade to the hotel. However, henoted the hotel rooms do not havekitchen areas, which is necessary torecast them as domiciles.

Mr. Sandvick said the Euclid Avenue side of the Arcade would besuitable for conversion to apart-ments or condos because it hasmore elevators than its Superior Avenue side. The arcade has two 10-story towers bookending it on bothstreets.

Neither Mr. Yablonsky nor Mr.Sandvick has spoken to Skyline.

Skyline executives Michael Sneyd,president, and Gil Blutrich, CEO,did not respond to two calls and an email each about Mishorim’spossible residential plans for theproperty.

Hyatt spokesman Brian Deckerwas not able to provide commentfor this story by Crain’s deadline.

Hyatt previously has said its leasefor the hotel component of thecomplex would survive the foreclo-sure, and that it wants to maintainthe hotel, which could benefit thisspring from the planned opening inlate March of the nearby HorseshoeCasino Cleveland and the openingin 2013 of the new Cleveland MedicalMart and Convention Center. ■

Wis. outfit buysarea blow molder

ON THE WEB Story from www.CrainsCleveland.com.



REAL ESTATEContact: Toni ColemanPhone: (216) 522-1383Fax: (216) 694-4264E-mail: [email protected]

Copy Deadline: Wednesdays @ 2:00 p.m. All Ads Pre-Paid: Check or Credit Card

FOR SALE

OFFICESPACE

COMMERCIALPROPERTY List your Industrial,

commercial orRetail Space Here!

CCrraaiinn’’ss CClleevveellaanndd BBuussiinneessss’’ ccllaassssiiffiieeddss wwiillllhheellpp yyoouu ffiillll tthhaatt ssppaaccee..

CCoonnttaacctt TToonnii CCoolleemmaann aatt221166..552222--11338833

TTCCoolleemmaann@@CCrraaiinn..ccoomm

RREEAALLTTOORRSS::Now is a great time to promote your

Luxury Properties to high-end prospects

AND

receive reduced rates on

your advertising.

Call 216.522.1383for more details.

For Lease/Sale2,145 sq. ft. I-90 in Avon

7 private offices,reception area and kitchen.

Less than 5 years old.

216.990.0266

CLASSIFIEDBUSINESS SERVICES

For daily on-line

updates, sign up @

CrainsCleveland.com/Daily

15- UsedHyster Forklifts

2000-2001Yr, Quad 83/240, LP,Cushion, 5,000lb. cap, $5,900-7,900

216-641-7897Stys Inc.

www.stysinc.com

FLYNNENVIRONMENTAL

For Assessments(800) 690-9409

www.flynnenvironmental.com

CPA on Call, LLCIndividual & Business Taxes

Bookkeeping - PayrollFree Consultations

Call 440-226-0660

Shopping Center Management35 Years Experience

330.225.2822www.rgnietoco.com

For SaleSurplus Manufacturing

Equipment from RichmondIndustries in Willoughby, Ohio.Please reply for a complete list

[email protected].

CCrraaiinn’’ss EExxeeccuuttiivvee RReeccrruuiitteerrLooking for brains?

CALL CRAIN’SCall Toni Coleman for special Executive Recruitment rates!

(216) 771-5172

Print distributor with a long historyin the Cleveland area has an

opportunity for an experiencedprinting sales professional.Please send resumes to:

Performance Forms5380 Naiman Parkway

Solon OH 44139

JOB SEEKERS:We now post POSITIONS WANTED in the Classified section of

CrainsCleveland.com at

NO CHARGE(Up to 150 words)

E-Mail info to [email protected]

BUSINESSSERVICEOWNERS!

Submit your business card topromote your service and

receive aSUBSTANTIAL DISCOUNT

off your ad price.

To find out more, contactToni Coleman at

216.522.1383

ARE YOU READING THIS?This small ad space could bring BIG BUSINESS.

Contact Toni Coleman at (216) 522-1383

The group’s goal is to get the Legislature to pass a law that wouldforce regulated utilities in the stateto buy power produced by the windfarm at a price set by the PublicUtilities Commission of Ohio, Mr.Wissemann said. They want Gov.Kasich either to insert the law intolegislation related to his coming energy policy or to push the Legis-lature to pass it as part of anotherbill, he said.

Now the coalition — led byFreshwater, a joint venture of twocompanies that want to build thewind farm, and the nonprofit LakeErie Energy Development Corp., orLEEDCo — is waiting for feedback.

The governor’s office plans toprovide a response to the coalitionwithin a month, but the groupshould learn even more when theKasich administration releases itsenergy policy for the state.

The coalition by no means expectsto be a big part of that policy, considering that the five turbines itwants to erect a few miles north ofCleveland would generate onlyone-tenth of one percent of thepower consumed in Ohio, Mr. Wissemann said.

The $140 million project is important nonetheless, he said.Erecting a few turbines in the lake

will help the coalition learn a lotabout how to navigate the regulatoryand technical issues involved in theprocess. That knowledge is intendedto serve as a blueprint that couldbring down the cost of developingoffshore wind farms and could spurprivate developers to build more ofthem in Lake Erie and throughoutthe Great Lakes.

Blueprint for the futureThe coalition’s thinking is that

when developers elsewhere needhelp building offshore wind farms,they’ll come to Ohio to tap the expertise of local developers, engi-neers and construction crews whohave done it before, Mr. Wissemannsaid.

“By being first, what you get is ablueprint for the second, third andfourth to be done,” said Mr. Wisse-mann, who previously was managingdirector of Deepwater Wind, a developer aiming to build offshorewind farms along the East Coast.

The wind farm initiative — startedseveral years ago by the CuyahogaCounty-led Great Lakes Energy Development Task Force — suffereda setback last year when backersfailed in their effort to insert intothe biennial state budget bill wordingintended to increase demand forpower generated by the offshore

wind farm.The wording would have amended

a 2008 state law that requires utilitiesin Ohio to provide at least 12.5% oftheir electricity through renewablesources by 2025. Under the law,utilities earn credits toward thatgoal by generating or buying renewable energy. The amendmentwould have allowed utilities to earnextra credits if they bought powergenerated by the small offshorewind farm.

Shortly afterward, project man-agement firm Bechtel Develop-ment Co. of San Francisco decidedto drop out of the Freshwater Windjoint venture. The loss of Bechtel —which helped build Hoover Damand the Channel Tunnel that connects England and France —reduced Freshwater to two compa-nies: Cavallo Great Lakes OhioWind LLC, part of Houston-basedenergy development and assetmanagement company Cavallo Energy; and Great Lakes Wind Energy LLC, a partnership of indi-vidual project developers formed toparticipate in the effort.

Mr. Wissemann said Freshwatershould have no problem replacingBechtel if the legislation supportingthe offshore wind farm is passed.

The lack of action in Columbusto date will delay the project by a

year: The group now expects to haveturbines up and running by the endof 2014, Mr. Wissemann said.

The coalition no longer expectsto achieve its original goal of building the first offshore windfarm in North America. They stillexpect to build the first one in theGreat Lakes — assuming the pro-ject gains support from the Legisla-ture, Mr. Wissemann said.

“Any delay in policy equals a delay in construction,” he said.

Fighting for attentionThe power produced by the

offshore wind turbines, if sold atmarket rates, would not generateenough cash to pay off loans thegroup would need to build the windfarm. That’s why the coalitionwants the Legislature to force state-regulated utilities to buy the powerat a price high enough to pay forthe project. If the group’s plan isenacted, the PUCO would give theutilities permission to pass the costof the power along to their customers.

If the plan doesn’t become law,the group could pursue other options with the commission.However, its options might be limited: PUCO chairman ToddSnitchler, appointed by Gov. Kasichin March 2011, prefers to have util-ities issue competitive bids when

buying power, said PUCO spokesmanMatt Butler. The wind farm wouldnot be able to compete with otherrenewable energy suppliers, basedon market prices.

Though individual utilities occa-sionally enter contracts to buypower without going out to bid, thePUCO would be hard-pressed toapprove such a plan if it would require consumers to pay far morethan they would for competing renewable energy sources, saidKim Wissman, executive director ofthe Ohio Power Siting Board.

As for Gov. Kasich, he has indi-cated renewable energy will have aplace in his energy plan. However,it will need to compete for his attention: Coal is a cheap source ofenergy that already is used to pro-duce most of Ohio’s electricity, andexcitement is building around natural gas deposits in eastern Ohiothat only recently have become accessible.

Mr. Wissemann said Freshwaterand LEEDCo know that “coal andgas are king.” Still, they say the governor would be smart to helpOhio get a foothold in the offshorewind market now, before the industry develops elsewhere.

“Those of us immersed in the industry are pretty convinced thatit is going to be coming,” he said. ■


Wind: Advocates hope to position Ohio as industry leader


The wired world runsfast through Hopkins■ If you’re in an airport and need Wi-Fi,Cleveland is one of the best places to find it.

PC World magazine recently compiled its“10 Best U.S. Airports for Wi-Fi” list, whichranked Cleveland Hopkins InternationalAirport at No. 4. (Hopkins’ Wi-Fi serviceis powered by OneCommunity, whichworks to expand high-speed broad-band access and adoptionin Northeast Ohio.)

In a related article, PCWorld included Hopkins amongits “20 Best U.S. Airports for Tech Trav-elers.” The ranking was based largely on thestrength of its Wi-Fi service, “which is bothfast and free,” the magazine said.

OneCommunity noted that in the PCWorld tests, the network at Hopkins “deliv-ered average download speeds of 8 mbps andaverage upload speeds of 6.8 mbps.” Themagazine said that’s “more than enough speedto stream movies, and perhaps do a littlevideo chatting with the folks back home.”

He’s at the topof the enemies list■ In case you had any doubts, conservatives

really don’t like U.S.Sen. Sherrod Brown.

The Huffington Postreported that Sen.Brown’s 2012 re-electionrace “is attracting morethird-party spending byRepublicans than anyother Senate contest.”

Outside conservativegroups not officially affiliated with the Republican Party “have spent nearly $2.9

And you think youlike bowl games■ Don’t tell Pioneer Athletics that collegefootball’s bowl season doesn’t mean anything.

The company on Cleveland’s West Side,which manufactures synthetic and naturalgrass field paint and striping equipment,will supply 16 bowl games with paints,stripers and stencils for the extensive fieldmarkings each field undergoes.

The roster includes the BCS NationalChampionship game and the Sugar Bowl,each of which will be played at the Superdomein New Orleans. The former is set for nextMonday, Jan. 9, while the latter will beplayed tomorrow, Jan. 3.

Pioneer Athletics spokesman Chris Bellsaid the company gradually has added morebowl games to its roster over the last decade;the company supplied 11 bowl games last year.

Originally, most of the company’s business was in selling janitorial and otherproducts to schools and hospitals. A nationalsalesman in the early 1970s suggested thecompany add paint and striping equipmentto its sales pitch.

The company has been headquartered inCleveland since 1905. It has spent the last 20years in 100,000 square feet on IndustrialParkway in the city’s Puritas neighborhood.— Joel Hammond

Want a lawyer, fast? Check out this app■ A new app is meant to speed up a potentialclient’s search for a Benesch attorney.

Introduced Dec. 21, a free iPhone appli-

cation cuts the time it takes to find, contactand research the Cleveland law firm’s people.

Once iPhone (and soon, iPad) usersdownload the Benesch corporatedirectory app, they may search attorneys by name, office and practice area. When an attorney is selected, the subse-quent screen allows users, withthe touch of a button, to initiatea phone call, text message orFaceTime video chat with that attorney.

Another button pulls up attor-ney biographies. Photographs ofattorneys are available immedi-ately, too.

As of last Thursday, Dec. 29,the app had been downloaded 55 times.

Initial feedback has been positive, saidZachary Duvall, mobile device specialist/help desk analyst at Benesch who developedthe app with U.K.-based KnowledgeMill.

“People like the ease of being able to findan attorney,” Mr. Duvall said. “They don’thave to click or tap through five differentscreens in order to get to it.” He declined toreveal the cost of development.

This is the second app for Benesch; thefirst one was related to recruiting. —Michelle Park

Javitch takesto Tennessee■ Local creditor representation law firmJavitch, Block & Rathbone LLC is expandinginto Tennessee as part of a geographicgrowth strategy that’s intended to combat

decreased volumes that the firm’s leader saysare the result of banks not doing as muchcredit card lending.

The Cleveland-based firm isopening this month its seventhoffice, in Brentwood, Tenn.,which is south of Nashville. Itwill employ three attorneys andtwo staff members there.

Joel Rathbone, managing partner, says the firm’s debt collection work is falling becausewhen banks extend less credit,there’s less defaulted debt tocollect.

“The law firms that do businesslike we do all are having to create new strategies of where

(they’re) going to get new business,” he said.So, in order to avoid layoffs of Cleveland

back office support staff and to meet clientrequests for new offices elsewhere, Javitch isexpanding into Tennessee. It has expandedinto two other markets — Dallas, Texas, andWestover, W. Va. — in the past two to threeyears.

Unlike the declining debt collection work,Mr. Rathbone said, the firm’s business in insurance subrogation, or recovery of insured and uninsured auto and propertyclaims, is up because insurance companieshave changed focus. (An example of subro-gation work would be an insurance carrierhiring Javitch to pursue a motorist who didnot have insurance coverage to recoupmoney for the insurance carrier.)

Javitch has 417 employees. Its other offices are in Columbus, Cincinnati and Indianapolis. — Michelle Park

MILESTONE

COMPANY: Americhem Inc., Cuya-hoga FallsTHE OCCASION: Its 70th anniversary

Americhem, a global provider of customcolor concentrates and additives for polymer-based products, used its 70th anniversary tolet past and present employees give voice towhat the company has meant to them.

It’s a cool way to mark the anniversary, especially because a number of the peoplewho shared their thoughts have been withAmerichem for more than half its existence.Among them are Bill Fowler, a compounderand 41-year company veteran who has nevermissed a day of work, and Rick Matthew, another 41-year vet who’s serving as a con-sultant following his retirement in 2007. “Theanniversary is a tribute to the hard work andeffort of everyone I knew and loved,” Mr.Matthew said.

Americhem began its life as The CaldwellCo.; it was founded in Akron in 1941 bySylvester S. Caldwell to supply fillers and additives to the rubber industry. The companyadopted its current name in 1959 and movedits headquarters to Cuyahoga Falls in 1965.Today, it operates manufacturing plants notonly in Ohio, Georgia, North Carolina andTexas, but also in Manchester, England, andSuzhou, China.

REPORTERS’ NOTEBOOKBEHIND THE NEWS WITH CRAIN’S WRITERS

THEINSIDER

THEWEEK DEC. 26, 2011 - JAN. 1, 2012

The big story: Moody’s Investors Servicedowngraded MetroHealth’s long-term bond ratingon $191.6 million of debt currently carried by the

health system, which is subsi-dized by Cuyahoga County.Moody’s downgraded Metro-Health’s rating to A3 from A2and revised the system’s out-look to negative from stablebecause of what the ratingsagency characterized as “theuncertainties surrounding Metro-Health’s ability to stabilize and improve financial perfor-

mance without a permanent CEO and CFO inplace.” MetroHealth CEO Mark Moran on Dec.16 announced plans to leave the system once asuccessor was named.

A new place to stay downtown: ThePlayhouseSquare Foundation struck a deal tosell for an undisclosed price the Hanna BuildingAnnex to K&D Group of Willoughby, whichplans to convert the office property into 102apartments. The Hanna Building Annex is aneight-story office building facing East 14th Streetjust south of the Hanna Building, 1401 EuclidAve., and is part of an office complex the foun-dation acquired when it first plunged into realestate ownership and development in 1999.“This is very good news from our perspective,”said Joseph Marinucci, president of DowntownCleveland Alliance, a development nonprofit.

See how they grow: Two of NortheastOhio’s biggest medical technology companiesplan to move a total of 200 jobs to the region,with some help from state and local incentives.Steris Corp. said it is adding 100 positions inMentor, about 75 of which will be at a new fab-rication center that the medical equipment makerplans to build at its Mentor distribution center.Philips Healthcare announced plans to createanother 100 jobs by moving a research-and-de-velopment operation to Highland Heights fromSan Jose, Calif.

Look on the bright side: After dishearteningnumbers the previous month, the PrecisionMetalforming Association in Independence saidits latest Business Conditions Report indicatesa more upbeat outlook among its sampling of 129metalforming companies in the United Statesand Canada. The December report on businessconditions shows 33% of participants expecteconomic activity to improve during the nextthree months, up sharply from the 11% in No-vember that expected improvement in the threemonths ahead. The association said only 10%expect activity will decline, down from 28%.

Material event: The first employee of ABSMaterials Inc. moved into what will be thecompany’s new headquarters in Wooster. Thecompany, which makes what it describes as a“reactive glass” that removes impurities fromwater, is in the process of renovating the 95,000-square-foot plant and adding a 60,000-square-foot high bay behind the building, said CEOStephen Spoonamore. ABSMaterials plans tomove all its Wooster employees and 54 reactorsused to make its Osorb glass into the plant at 1909Old Mansfield Road over the next five months.

OnX on the move: OnX Enterprise SolutionsLtd. finalized plans to take new office space inboth Mayfield Heights and New York City. TheToronto-based company, which last August paid$64 million to acquire the Technology SolutionsGroup of Solon-based Agilysys Inc., said it secured 23,000 square feet of office space inMayfield Heights. OnX, a provider of hardware,software and services for large data centers, alsoannounced the opening of its U.S. headquartersin New York City’s Penn Central Station.

JANUARY 2-8, 2012 WWW.CRAINSCLEVELAND.COM CRAIN’S CLEVELAND BUSINESS 19

BEST OF THE BLOGSExcerpts from recent blog entries onCrainsCleveland.com.

million on the Ohio Senate race, accordingto numbers compiled by a Senate Democ-ratic campaign operative,” The HuffingtonPost reported. Big spenders include the U.S.Chamber of Commerce ($1.5 million), the60 Plus Association ($723,338), CrossroadsGPS ($506,647) and Concerned Women forAmerica Legislative Action Committee($200,077).

He’s the only candidatetargeted by 60 Plus, whichdescribes itself as a “non-

partisan seniors advocacygroup with a free enterprise,

less government, less taxes approach to seniors issues.”

The group’s website indicatesits top priorities are “ending the

federal estate tax and saving Social Security for the young.”

Sen. Brown is likely to be challenged byState Treasurer Josh Mandel, a 34-year-oldRepublican who’s a strong conservative andan aggressive fundraiser.

We also predict Facebookwill be big in social media■ A Forbes.com post offered predictions onhealth care organizations “that are poisedto make big innovations” in 2012, and blog-ger Ken Perlman really went out on a limbby including the Cleveland Clinic on his list.

Mr. Perlman is an engagement leader atKotter International, which is described as“a change company that helps leaders buildthe capacity to drive transformation in theirorganizations.”

No doubt he’s right in putting the Clinicon the list. But face it: You don’t have to bemuch of an expert to write that the Clinic isone to watch in 2012 (or any year, for thatmatter) because it boasts “an InnovationCenter (that) identifies, incubates and oftenspins off new companies based on newtechnologies.”

Moran

Americhem’s Suzhou, China, plant becamethe company’s first Asian plant when openedin 2006.


We’re down to the final week. Don’t miss your chance.

35% OFF

25% OFF

9-3 Convertible9-3 Aero Sedan

Limited Supply When they’re gone, they’re gone!

#1 SAAB DEALER IN OHIO

Saab of North Olmsted 28595 Lorain Road North Olmsted, OH 44070

855-218-1291saabohio.com

Clag

ue R

d.

Grea

t Nor

ther

n Bl

vd.

Lorain Rd.

GREAT NORTHERN

MALL

AIRPORT

Stea

rns R

d.

480

71

SAABof North Olmsted

of North Olmsted

See saabohio.com for details

95 2 available at this price. 11 available at similar savings.

93 1 available at this price. More than 60 available at similar savings.

9-5 Aero Sedan

9-4X Crossover

30% OFF 33% OFF

MSRP $51,385

MSRP $43,630 MSRP $48,600 MSRP $46,515

93 1 available at this price. 6 available at similar savings. 94X 1 available at this price.

6 available at similar savings.

SAVE UP TO

$19,000 $51,385

MSRP

– $19,000 Saab of N.O. Savings

= $32,385 Your Price

SAVE UP TO

$14,400 $46,630 MSRP



SAVE UP TO

$14,580 $48,600 MSRP



SAVE UP TO

$12,500 $46,515 MSRP



First come – first served. Limit of 2 cars per customer. No dealers or

wholesalers allowed. Cars are sold ‘as-is’ with no warranty included, but customers will have

the option to purchase a warranty.

Financing Available – Rates as low as 1.9%

Warranties Available


Crain's Cleveland Business

Documents

Transcript of Crain's Cleveland Business