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March 06, 2015

10 years of blogging Rochester

On March 4, 2005, I wrote my first blog post.Kiger's Notebook blogo 2x

It was my siPhoto on 2015-03-03 at 18.11xth year at the Post-Bulletin. I created the "Heard on the Street" column about three years before the blog began. 

More than 6,200 posts, stacks of columns, mountains of tweets and many gray hairs later, I'm still here writing about business and things vaguely related to business in southeastern Minnesota.

It's you, the readers, who make this career such a fulfilling and entertaining one. Thank you everyone for your feedback, criticism and support over these past 10 years.  

March 05, 2015

Three local biotech start-ups win funding

A regional economic development fund is giving three local medical technology start-ups a financial boost.

Southern Minnesota Initiative Foundation recently announced it's giving funding to three local companies: Ambient Clinical Analytics, a Mayo Clinic spin-off software firm in Rochester; Xcede Technologies Inc., a Rochester company that makes surgical sealants; and Sonex Health, a Byron-based company that markets a carpal tunnel surgery device device called Stealth Microknife.

G_southern-minnesota-initiative-foundation-1395-1410186849.1865SMIF, which typically doesn't release the amounts of its economic development investments, is tapping its new $3 million Southern Minnesota Equity Fund for the capital for these three companies. The fund was created to to invest up to $600,000 per year for five years. The maximum investment is $100,000, according to SMIF.

The fund provides capital and expertise to early-stage and start-up companies. SMIF partners with organizations and individual investors to leverage capital and expertise to grow these companies to provide economic opportunities for Southern Minnesota.

"We're pleased to invest in these high-tech businesses through our newly-created equity fund program. Our Foundation remains committed to providing resources to grow local businesses," stated SMIF President/CEO Tim Penny in the announcement of the investments.

Ambient Clinic: Ambient Clinical is based in the newly opened expansion of the Mayo Clinic Biobusiness Accelerator in the Minnesota Biobusiness Center. It's CEO is Al Berning, who previously led Pemstar, Hardcore Computing and other Rochester companies. Drew Flaada, a former Rochester IBM executive, serves as chief technology officer.

Ambient raised $1.18 million in funding in early 2014.

Xcede Technologies Inc.: Xcede, subsidiary of Watertown, Mass.-based Dynasil Corp. of America, designs, develops and manufactures innovative hemostatic (bleeding prevention) and sealant products for surgical application.

Xcede is based at 1815 14th St. NW. Ambient's Berning was listed as an executive director in 2014.

Dynasil acquired Mayo Clinic technology initially invented by Dr. Daniel Ericson in 2011.

Sonex Health: Sonex Health is the creator of the Stealth MicroKnife. The Stealth MicroKnife is a medical device that allows clinicians to perform carpal tunnel release surgery under ultrasound guidance in the office

Sonex is listed as being based in Byron as well as having a presence in Mayo Clinic Mayo Clinic Biobusiness Accelerator. 

March 02, 2015

Mayo Clinic-linked NeoChord looking to drum up $1.5 million

NeoChord, a medical device firm I first wrote about in 2007, filed with the SEC in February to raise $1.5 million in funding. So far it has pulled in $457,000 or so of that.

I need to give a nod to the intrepid Katharine Grayson of the Minneapolis/St. Paul Business Journal for first pointing this out. I'm always impressed by how closely she tracks Form D filings for financing.Portfolio-neochord-260x138

The Eden Prairie-based NeoChord surfaced locally in 2007, when it licensed technology designed by Mayo Clinic cardiac surgeons Dr. Richard Daly and Dr. Giovanni Speziali. Speziali was named as the company's chief medical officer in 2013. 

Beside licensing its technology, Mayo Clinic has also previously invested in NeoChord. I'm checking to to see if that is still the case.

Neochord deviceThe NeoChord DS1000 device is used to treat a heart condition called mitral regurgitation. Mitral regurgitation means the valve or leaflet that controls the flow of blood from the left atrium to the left ventricle is not working properly.

Treatment typically consists of “cracking the chest,” stopping the heart and doing surgery. NeoChord's approach is much less invasive and can be done on a beating heart.

A tool is inserted between the ribs and into the heart. Then it is used to attach a chord to the faulty valve leaflet, which is tethered to the heart.

The market for less invasive techniques for mitral valve repair has been estimated at more than $2 billion. There are 50,000 surgeries done in the U.S. each year. An estimated 2 million patients are treated due to the risks of surgery.

Since it formed in 2007, NeoChord's lifeblood has been venture capital funding. By 2008, it had raised $3 million. It raised another $5.1 million in 2011 to finance the European clinical trial. In March 2013, it raised $3 million through the sale of its series B-2 preferred stock.

 

February 26, 2015

Rochester senior apartments sell for $1 million

In the wake of the sale of Rochester's Maple Manor Health Care, the senior apartments next door now have been sold for $1.01 million.

The 18-unit Maples Senior Apartments at 1893 19th St. NW was purchased by Kurt Luschen, of Maynard, Minn., on Feb. 17. The Blum family, which owned Maple Manor until it was sold in January, sold the complex.

Maples senior apartmentsPat Blum, the former administrator of Maple Manor, said it made sense to sell it after the sale of the senior-care center.

Having the apartments next door, Blum previously easily could manage the apartments and handle his duties at Maple Manor. Now that he has left Maple Manor, it wasn't practical for him to continue managing the apartments.

"It's a good fit," he said. "I'm happy we found a buyer for it so quickly."

Darci Fenske, of Rochester's Paramark Real Estate, represented the Blums in the deal, while Cory Magnuson, of Edina Realty, represented the buyer.

Luschen, the new owner, also is pleased with the deal.

"It's an investment property for me. I plan to keep it fairly the same," he said. "I think it's good to invest in Rochester. It's a fairly stable community down there."

Luschen is in talks with Pritok Capital, of Skokie, Ill., which bought Maple Manor, about working out an agreement to provide some services to the apartments' tenants. Pritok bought the center at 1875 19th St. NW for $3.5 million in mid-January.

February 25, 2015

City to lease former Mayo Clinic space to Cardio3

This has been in the works for quite a while. It looks like it's now a done deal, at least on the city, RAEDI and DEED side.

We'll see what happens next. After following this for more than a decade, it will be interesting to see how it plays out. I'm particularly fascinated with how the China piece of this, including Medisun and Danny Wong, turns out.

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After amending its original lease, Belgium-based Cardio3 BioSciences is now finally cleared to take over the entire fifth floor C3BS_may_spotlightof Rochester's Minnesota BioBusiness Center.

In December, the Rochester City Council originally approved a five-year agreement with Cardio3 for the 14,963-square-feet of space to use as a prototype manufacturing facility. However, the company then asked for "an early termination provision" in the lease.

The deal is being driven by the city, Rochester Area Economic Development Inc., Mayo Clinic and the Minnesota Department of Employment and Economic Development to make Rochester more attractive to Cardio3, so that the company will build a major manufacturing plant here.

This is the second phase of deal funded by $1.2 million from the city of Rochester's economic development sales tax fund. The first phase was developing little more than 5,000 square feet of unused space on the third floor of the BioBusiness Center to build a special manufacturing lab for Cardio3.

Mayo Clinic and Cardio3 have collaborated for years on the cardiopoiesis technology the company uses to repair patients' hearts by re-programming their own stem cells to regenerate cardiac tissue. Mayo Clinic owned 2.96 percent of the company as of Jan. 21. It's also managing a clinical trial for Cardio3.
FrmReadMail_Attachment-4
On Wednesday, city council members voted to add an early termination provision to the deal that allows Cardio3 to end the five-year lease after just two years in the space. That provision kicks in only if Cardio3 decides to "construct or lease a larger production facility in Rochester" or the clinical trial on its regenerative heart treatment is not successful.

To leave early, Cardio3 will need to notify the city six months ahead of time. Under the modified lease, the earliest that the regenerative medicine firm could pull out is April 30, 2017. Cardio3 would need to pay the city $269,334 if it did leave earlier than five years. That amount equals about one year of base rent.

If Cardio3 does leave before its lease is up, all of the city-funded fixed equipment and improvements will become the city of Rochester's property. The city agreed in the lease to pay for $600,000 in equipment and improvements to the space.

The final version of the lease calls for Cardio3 to pay a rent of $18 per square foot or $22,444.50 a month.

Mayo Clinic, which leases the fourth through eighth floors of the BioBusiness Center, moved its employees out of the fifth floor earlier this year. At one point, Mayo Clinic Global Products' corporate accounts had offices on the fifth floor.

In earlier discussions about this project, RAEDI estimated that Cardio3 will need 30 to 50 employees to staff the proposed prototype manufacturing facility on the fifth floor.

The ultimate goal of this project is to convince Cardio3 to build a 100,000-square-foot manufacturing facility with 350 employees in Rochester. That's what Cardio3 anticipates it will need if the Federal Drug Administration gives it a green light to take its stem cell treatment to market.

RAEDI President Gary Smith calls it "the big enchilada."

February 23, 2015

Delta to end Rochester-Detroit flights in April

Despite their popularity, nonstop flights to Detroit will soon end for passengers using the Rochester International Airport, after only a few months.

5403bad42fa22.imageAfter about six months, Delta Air Lines has notified the airport that it will be pulling the plug on the daily nonstop flights to Detroit on April 9, according the new Airport Director John Reed.

Reed says he received notification from Delta on Feb. 17, his second day on the job. Delta launched the Detroit and Atlanta flights in September with great fanfare with many saying it was needed for the anticipated increase in air travel expected due to Mayo Clinic's Destination Medical Center initiative.

While the City of Rochester owns the airport, Mayo Clinic is contracted to manage it via its Rochester Airport Co.

Delta confirmed Monday that the flights will end with a short statement that said it "has made the decision to indefinitely suspend Rochester service to Detroit to ensure we’re matching capacity with demand."

This is not the first time Delta has ended flights from Rochester to Detroit. It killed a similar flight back in 2011.

While the Detroit will come to an end, Delta did stress that its daily flights to Atlanta and Minneapolis will continue. In fact, Delta intends add another Minneapolis flight as the Detroit one ends, according to Reed.

"Essentially, our seat capacity will remain the same," he said.

Numbers from the airport shows that the new flights did bump up its Rochester passenger numbers in 2014 by 20 percent over 2013. Rochester Airport Co. President Steve McNeill, who works for Mayo Clinic, recently reported that Delta had 120,474 passengers here in 2014. From September through December, the months of service to all three of its hubs, the count was 41,854, an 18 percent or 6,500 increase over the similar period in 2013.

"We're certainly happy with the new, expanded service," said McNeill earlier this month, "and I'm sure Delta is, too." Flight payloads, or occupancy levels, were slightly above expectations, with flights to Atlanta averaging at about the mid-80s percent, and to Detroit slightly lower, he added.

Reed says data shows that the Detroit flights ran about 75 percent filled, most of the time.

"It wasn't that the community wasn't supporting us, because they were," he said.

Mayor Ardell Brede hadn't been notified yet about the change on Monday. He said, if true, it would a loss for Rochester.

"I liked that flight," he said. Brede added that it was full when he recently used it.

Reed and Brede both said that they had heard that a shortage of pilots was one reason that Delta ended the flight.

Another possible factor could be a $950,000 "risk mitigation fund set up to guarantee Delta a profit on the new flights during the first year. The rub is that the fund, made up of federal grants, a city match and private donations, doesn't cover the Detroit flight. It only guarantees a profit for Delta's Atlanta fight.

A Delta media representative didn't know about the fund or if it could have played a part in this change.

The ending of the Detroit flights does cast a pall on the airport's future requirement of airlines, to add flights, like ones to Denver.

In May, a national air service consultant said in a Rochester Area Chamber-sponsored forum that, "Adding Atlanta and Detroit is a game changer."

He followed that by saying that many other airlines will be watching how those flights fare.

"This is an important test case to prove that you can fill the larger airplanes. If they (Delta) have to pull it, it would be a big red flag," Joseph Pickering told the crowd of local business leaders.

February 19, 2015

Forager Brewing Co. on tap for Kutzky neighborhood

Here's some from my article today about a proposed brewery/coffee house/wood fired pizza shop and local market.

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A new project promises to bring a small batch brewery, wood fired pizzas, a coffee shop and more to Rochester's Kutzky neighborhood by this summer.

Foragersketch1The plan is to transform 5,000-square-feet of the former Good Food Store building at 1005 Sixth Street NW into The Kutzky Market. Spearheaded by majority owner Annie Henderson, the concept is to bring together a coffee shop, brewery/restaurant, a leasable commercial kitchen, and a local retail market.

"With everything going on with DMC (Destination Medical Center initiative) and the hype around downtown, we decided to look in the core neighborhoods," said Henderson. "We wanted it to be something community based and neighborhood based, but still walkable from a lot of people's houses."

The building has been empty since the Good Food Store closed in 2013 and merged with the People's Food Cooperative in downtown Rochester.

Kutzky Market has a lot of permits and construction yet to get through before it becomes a reality. She estimates it should be ready to open sometime this summer. Some interior demolition has already started and the hope is for construction to start in earnest in March.

The main piece of this new project is Forager Brewing Co. as well as its daytime counterpart, Kutzky Coffee. Head brewer and part owner Austin Jevne will run Forager, where he will produce small batches of beer using local ingredients. The name of the brewer comes from the fact that many of the ingredients that Jevne uses are foraged from the southeastern Minnesota countryside.

Jevne the brewer and Henderson the visionary were connected by the owners of the Thirsty Belgium bar, where Jevne worked.

"It's kind of a perfect match," she said. "Austin already had that name (Forager) in mind. We thought it was a really cool name and now it's become a big part of our identity.

The conversation started about mid-January and now about month later, Kutzky Market is moving ahead.

Forager will also be a full restaurant with a focus on local, seasonal ingredients. A large wood-fired oven will be used for many of Chef Jordan Bell's dishes, including pizzas. Bell comes to Forager from the popular Nosh Bar & Restaurant in Lake City.

Another owner, Rochester architect Adam Ferrari describes Forager as "the Farmer's Market approach to beer making and pizza."

During the day, the restaurant space will serve as the Kutzky Coffee shop.

Henderson's vision also includes The Kitchen, a commercial kitchen available for lease.

"Say you want to make things to sell at the Farmer's Market. You could lease the Kitchen for that and you could also sell your things in our retail market," she said.

The Kutzky Market will focus on locally created goods, including foods created by Chef Bell.

And then there's the artistic piece. Henderson is very active with various downtown Rochester groups, including the C4 art salon, so she intends to have periodic artists-in-residence as well as three walls for the display of local art.

Forager will also feature a piece of Rochester history. The group purchased the bar from Pappageorge Taverna at the recent auction of the furnishing, art and equipment from Michaels restaurant.

"This is a marriage of all of these different fun, entrepreneurial uses under one roof," said Ferrari of the whole project.

February 13, 2015

Reuters: Hormel's near big buy of organic hot dog, bacon maker

Reuters' Olivia Oran filed an interesting story Thursday about Austin's favorite Fortune 500 company.

363Hormel Foods reportedly is "in late-stage talks" to snap up Applegate Farms. Applegate is in the organic pork biz and makes organic hot dogs, bacon and sausage.

Here's a snippet from the Reuters' piece:

A deal for Applegate Farms could be announced as early as next week and value the Bridgewater, New Jersey-based company at between $600 million and $1 billion, the people said, asking not to be named because the matter is confidential.Spamproducts

This would make a lot sense. Applegate is in Hormel's sweet spot.

It processes a lot of hogs. It would extend Hormel's geographic reach. Plus it would them more deeply into the trendy market of organic meat.

We'll have to see if Oran's insider is right and/or if Hormel can close the deal.

 

February 12, 2015

Prosthetics lab complex sold for $4.51 million

The Rochester commercial complex that houses a prosthetics firm and a veterinarian clinic recently sold for $4.51 million.

02122014prostheticslabcomplexRochester developer Gus Chafoulias sold the 13-year-old building at 121 23rd Ave. SW  to Mace Holdings LLP of Billings, Mont. Chafoulias developed and owned the 28,000-square-foot facility through his company, ACG Second Street LLC.

Prosthetic Laboratories of Rochester, Inc. and Affiliated Emergency Veterinary Service are tenants in the center, which stands in front of the Shorewood Senior Campus along Second Street Southwest. Chafoulias was invested in Prosthetic Labs until it sold to Hanger Inc. last year.

Michael R. Mace, managing partner of Mace Holdings, says the purchase is simply an investment for he and his wife.

"We think Rochester, Minn. is a dynamic community with wonderful people. We just think it's a great place to be doing business," said Mace.

February 11, 2015

Bidding on memories at Michaels auction

Here's the details on Thursday's auction. I have a full story on this in today's paper.

Michaels auction

On Thursday, more than 2,000 lots will be auctioned off by Grafe Auction of Spring Valley and John Kruesel's General Merchandise & Auction Co., at the restaurant at 15 S. Broadway.

FrmReadMail_Attachment-1The schedule:
• 10 a.m.: Kitchen smallwares, dining rooms, bar and offices.
• 1 p.m.: Laundry, locker rooms, meat cutting room, kitchen and scratch bakery.
• 5 p.m. : Artwork, antiques, decor and building effects, including the front doors.

Online: People can bid online before and during the live auction at Grafe Auction's site at www.proxibid.com.

More information: General  and restaurant equipment questions should be directed to Grafe Auction at 800-328-5920. Questions on artwork and antiques should be directed to John Kruesel at 254-1614.