Crain's Chicago Business, January 15, 2024

CHICAGOBUSINESS.COM I JANUARY 15, 2024

AbbVie will lay off megadeals for a while

THE HIGH COST OF CREATING AFFORDABLE HOUSING

Execs predict the acquisitions of Immunogen and Cerevel will help the drugmaker reverse revenue declines by 2025 as Humira fades

By Katherine Davis

Inflation, administration fees and a byzantine tax credit system add layers of expenses as the city’s need for affordable housing rises

GEOFFREY BLACK

PAGE 11

After announcing two large acquisitions in as many weeks, AbbVie executives say the drugmaker will take a break from big deals, predicting the company will return to “robust” growth as early as 2025 despite falling sales of its longtime flagship drug, Humira.

North Chicago-based AbbVie is paying steep prices for a pair of Boston-area drugmakers. On Nov. 30, the company said it would buy ImmunoGen for $10.1 billion. At $31.26 per share, the buyout price represents a 95% premium to the cancer drug maker’s stock market value before the deal was announced.

AbbVie announced on Dec. 6 an $8.7 billion deal to acquire Cerevel Therapeutics for $45 per share, a 73% premium to the neuroscience company’s market price before its stock started rising on takeover talk this week.

The deals come as AbbVie has struggled with revenue declines as Humira, its drug approved to treat arthritis and other conditions, began facing biosimilar competition in the U.S. for the first time this year.

On an investor call today, CEO Richard Gonzalez said demand for drugs in AbbVie’s current

WHO’S WHO IN CHICAGO BUSINESS 2024

Richard Gonzalez

portfolio, like Skyrizi and Rinvoq, as well as a key drug it will acquire in the ImmunoGen deal, will help drive near-term growth, without giving specific figures.

While Cerevel doesn’t yet have any drugs approved, Gonzalez said its “multibillion-dollar” sales opportunity will help support growth into the next decade.

“The acquisition of Cerevel, together with the ImmunoGen transaction we announced last week, and our existing assets and pipeline will create one of the most attractive growth portfolios in the industry,” Gonzalez said.

“Our near-term prospects are extremely strong. We are positioned to return to robust growth in 2025 and deliver top-tier

Now online at ChicagoBusiness.com/WhosWho2024 Originally published: Dec. 11, 2023

Crain’s exclusive Who’s Who is back with over 400 names you should know. From esteemed chefs to lawyers, real estate magnates to educators, philanthropists to entrepreneurs and everyone in between.

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RICH GETTING RICHER IN ILLINOIS New tax data show a massive surge in those earning more than $500,000. PAGE 3

See ABBVIE on Page 19

BOOTH INSIGHTS Building a winning culture should be a key part of your intentional business strategy. PAGE 7

Benefits company inks big sublease at Willis Tower It’s a rare example of a company beefing up its workspace while the remote work movement prompts others to shed it

By Danny Ecker

An employee benefits consulting company has subleased more than 100,000 square feet at Willis Tower from the skyscraper’s namesake tenant, a deal that brings both good and bad news to owners of downtown office buildings as they wrestle with record-high vacancy.

Atlanta-based OneDigital subleased the space from Willis Towers Watson, according to people familiar with the deal, taking multiple floors from the London-based insurance company that has held the naming rights to the 110-story building at 233 S. Wacker Drive since 2009. OneDigital will move to the new office from 303 E. Wacker Drive, where it subleases about 44,000 square feet today on a deal that expires this year.

It’s a rare example of a company beefing up its workspace while the remote work movement pushes others to shed it. That’s welcome news for landlords amid a wave of downtown office buildings falling into distress from weak demand and higher interest rates. Yet Willis’ drastic downsizing — the sublease offloads close to two-thirds of Willis’

space at the tower — is a reminder of the space-shedding trend that has been giving building owners big headaches for the past three years.

Other tenants including law firm Gordon Rees Scully Mansukhani, renewable energy company Invenergy and insurance broker Lockton have also recently expanded their downtown footprints, but those have been more than offset by big cutbacks from other companies.

Big users that have recently signed deals to scale down their workspace include Aon, tech company Relativity and law firm Skadden Arps Slate Meagher & Flom.

A OneDigital spokeswoman said in a statement that the relocation “is part of our proactive approach to accommodate the anticipated expansion of our Chicago-based personnel.” In part through acquisition of other companies over the past five years, OneDigital has grown to “several hundred” employees in Chicago, more than 300 of whom are part of the company’s Advanced Health consulting team and will be relocating to Willis Tower, according to the spokeswoman.

“OneDigital anticipates significant growth of our OneDigital Ad-

vanced Health teams in the next 3-4 years,” the statement said.

OneDigital also announced in October that it had opened a small office for its Chicago-based employee benefits team at 8700 W. Bryn Mawr Ave. in the Presidents Plaza office complex near O’Hare International Airport.

A Willis Towers Watson spokesman did not respond to a request for comment.

A spokeswoman for EQ Office, the office division of New Yorkbased Willis Tower owner Blackstone Group, said in a statement that Willis Towers Watson “is an important tenant, and we look forward to providing OneDigital with the same quality of service and support we do all our tenants.”

Pricey modernization OneDigital is moving to Willis Tower after Blackstone spent hundreds of millions of dollars modernizing the city’s tallest building with a slew of new amenities, updated elevators and a massive retail addition around the skyscraper’s lower floors.

OneDigital, which provides consulting services for companies

and individuals on things like employee benefits, insurance and human resources, subleases its existing office at 303 E. Wacker from information technology and consulting company DXC Technology. Terms of the new sublease with Willis Towers Watson were not immediately clear, but Willis Towers Watson’s lease in the skyscraper runs through March 2030, according to data from real estate information company CoStar Group tied to Blackstone’s mortgage on the property.

Sublease offerings that have hit the market over the past few years have proven to be attractive to prospective tenants as many look to avoid the costs of building out new offices from scratch and still try to gauge how much their employees will use offices in the future.

Online health care insurance marketplace GoHealth recently subleased about 89,000 square feet at the Merchandise Mart from software provider VelocityEHS, and online-deal company Groupon last month signed a relatively short-term 25,000-squarefoot deal for a new headquarters at

Willis Tower | COSTAR GROUP

35 W. Wacker Drive, space it is subleasing from media conglomerate Publicis Groupe.

CBRE broker Brady Wolfe negotiated the Willis Tower sublease on behalf of OneDigital. CBRE’s Jon Milonas, Ellen Zalatoris and Peter Livaditis represented Willis Towers Watson.

CoStar News first reported that OneDigital had leased the new office at Willis Tower.

Chicago Fire soccer team signs jersey sponsorship with Carvana

By Danny Ecker

After a year without a corporate sponsor on the front of its jerseys, Chicago Fire FC has landed a new one.

The Major League Soccer franchise on Dec. 12 announced a multi-year partnership with Carvana that makes the online used-vehicle retailer one of the club’s top sponsors and includes its logo on the front of the Fire’s uniforms. The Fire went without a so-called front-of-kit partner this year after its previous deal with Motorola Mobility expired following the 2022 season.

It’s the club’s first new jersey sponsorship since moving its home games back to Soldier Field from suburban Bridgeview in 2020, a relocation meant to help it reconnect with fans in the heart of the city and raise its profile among corporate partners.

The company that puts its logo on the front of an MLS team’s uniform is often the club’s biggest local sponsor, making the deal with Tempe, Ariz.-based Carvana a point of validation for the Fire’s relevance in Chicago’s crowded pro sports landscape.

“Carvana is an innovative company that has changed the automotive industry, and we’re excited to launch this partnership and to explore creative and unique ways to fully integrate our brands to best service our wonderful fans and the greater Chicago community,” Chicago Fire FC Owner Joe Mansueto said in a statement.

Terms of the deal were not disclosed.

Carvana is buying into a franchise that has struggled on the 2 | CRAIN’S CHICAGO BUSINESS | JANUARY 15, 2024

pitch, making the playoffs just once in the past 11 seasons. The club has also struggled with ticket sales in recent years, consistently ranking near the bottom of the league. But the Fire’s average paid attendance this year rose 15% from 2022 to 15,848 fans per game, according to Soccer Stadium Digest. That was the Fire’s highest average attendance since 2017 and outpaced the 5% increase across the league.

The Fire also stand to gain exposure from a growing MLS, which will expand to 30 teams in 2025 and now includes global superstar Lionel Messi. The FIFA World Cup is also coming to North America in 2026, an event that stands to bring promotional firepower to soccer in the U.S. in its lead-up.

The club is “a team with a rich history in the MLS and is doing great things both on and off the field,” Carvana co-founder and Chief Brand Officer Ryan Keeton said in the statement. “Carvana has served Illinois customers for almost a decade and this new partnership underscores our commitment to the Chicagoland area.”

jersey sponsor from 2019 through 2022.

In addition to the jersey placement, Carvana will also have its brand involved with the Chicago Fire Youth Soccer Club system and will be the presenting sponsor of Chicago Fire Discovery Centers, which is meant to identify young players for the Chicago Fire Academy talent development program.

Carvana opened one of its wellknown glass tower car vending machines in Oak Brook in 2019, its first in the Chicago area. The company opened another in Schaumburg last year.

Carvana has made its share of headlines in Illinois over the past couple years. The Illinois Secretary of State’s Office temporarily blocked its dealer’s license in May 2022, alleging the company failed

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to properly transfer titles for vehicles it sold and wasn’t properly issuing out-of-state temporary registration permits. After some legal tussling, the two sides settled the dispute in January.

Separately, Carvana backed and won legislative support in 2023 for a bill that codifies vehicle home delivery and online auto sales procedures across Illinois.

The new law took effect Jan. 1.

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Fifth partner Carvana becomes the fifth front-of-kit partner in the club’s history. Though the team began play in 1998, it didn’t have its own jersey sponsor until 2008, when Best Buy signed on for a deal that ran through 2010. The club had no jersey sponsor in 2011, then Quaker Oats struck a deal that gave the brand the club’s front-ofjersey rights from 2012 through 2015. Paint brand Valspar followed from 2016 through 2018 and Motorola Mobility was the

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The rich are getting richer in Illinois New tax data show a massive surge in those earning more than $500,000 a year during the early pandemic rebound

By John Pletz

New report shows how inequities in household wealth build on one another

By Dennis Rodkin

See RICH on Page 16

ILLUSTRATION BY CLAY RODERY FOR PROPUBLICA

The initial recovery from the COVID-19 pandemic and the stock market rebound that followed were very good for those at the top of the economic ladder.

The number of Illinois taxpayers making more than $500,000 in 2021 surged 32% from the year before, according to the most recent income tax data from the Department of Revenue.

The jump was more than three times as big as any annual increase seen in the previous five years.

The pool of those earning above $500,000 grew to 93,655 people, or about 1.7% of Illinois residents who filed re-

turns. In 2020, there were 70,958 taxpayers making over a half-million dollars, or 1.2% of the total.

Nationally, the number of taxpayers topping $500,000 rose 35% in 2021, according to preliminary data from the Internal Revenue Service.

“It was driven by a post-pandemic economy combined with an inflationary period that drove up prices. Executives got significant raises; owners of smaller businesses took home more money,” says Ralph Martire, executive director of the Center for Tax and Budget Accountability.

The data reveal the extent to which the wealthiest Illinois residents prospered in

Black wealth gap linked to lack of home equity

a year that featured an unusual combination of government spending, strong economic growth, a raging stock market and high inflation.

The S&P 500 was up 27%. GPD grew 5.7% and inflation was 7%.

“The types of income increasing most were categories concentrated among higher-income individuals: dividends, interest, capital gains, income from private business,” says Jacob Robbins, an assistant professor of economics at the University of Illinois Chicago.

In Illinois, the total amount of adjusted gross income reported by those making over $500,000 swelled by 51% in 2021, compared with a 19% increase the state as a whole, according to Department of Revenue data.

Inside the notorious gun shop linked to hundreds of Chicago guns The story of one Indiana store demonstrates how the more than 60,000 gun retailers in America have little financial incentive to say no to questionable buyers and face limited penalties for failing to prevent illegal transactions

By Vernal Coleman, ProPublica

E

arly one morning in June 2022, Earl Westforth sat down at a small table inside a hotel conference room in northwest Indiana and began defending his life’s work.

Fourteen months earlier, the city of Chicago had sued his namesake Westforth Sports Inc., alleging that the outdoor- and sports-equipment shop was negligent in how it screened gun buyers and had become an epicenter for the unlawful purchase of guns, which were flooding into the violence-wracked city.

Over 50 years, Westforth had helped grow the Indiana business into one of the

Far more Black homebuyers had a small down payment than the general population of buyers in the Chicago area in 2022, a difference that speaks loudly about the intractable racial gap in household wealth.

The Woodstock Institute’s latest Community Lending Fact Book compiled data from 2022 mortgage disclosures for the seven-county metropolitan area.

One of the many data points in the report is the proportion of homebuyers who put down 10% or less at purchase time.

Among all homebuyers, just under 15% put down one-tenth or less of the purchase price in 2022; but among Black buyers, 39% put down one-tenth or less, according to Woodstock’s data.

The figures show clearly how inequities in household wealth build on one another, said Amber Hendley, Woodstock’s director of research. One of three authors of the Fact Book, she has previously written about how Black households generally carry higher debt loads than other groups.

One clear result, Hendley told Crain’s, is that they “have less to bring to the table” when buying a house. With a smaller down payment, they pay higher interest rates. The Fact Book also documents a far larger drop in higher-interest Federal Housing Administration-backed loans for all racial groups than for Black buyers, “which takes away from their affordability,” Hendley said.

Black households often buy in neighborhoods where the majority demographic is people of color “and they see lower appreciation rates,” Hendley notes.

Together, these points mean that Black borrowers come in with a smaller down payment, pay more in financing costs along the way, and emerge with less growth in their home equity if and when they sell.

“The system is failing Black people,” Hendley said. “With homeownership being so important to build wealth in See WEALTH GAP on Page 16

“It’s totally legal. Maybe the guy just likes guns.”

— Earl Westforth, owner of Westforth Sports, about a customer who repeatedly purchased guns, several of which were recovered by police in Chicago state’s most successful gun retailers. Operating from a squat building located just a few miles from the Illinois border on land set between downtown Gary and its richer suburbs, Westforth Sports raked in millions selling ammo, fishing gear and, most notably, guns.

See GUNS on Page 18

In Chicago, 53.6% of Black homebuyers had a 10% or less down payment, compared to 32.8% of all buyers. | SAMUEL LOVE/FLICKR

JANUARY 15, 2024 | CRAIN’S CHICAGO BUSINESS | 3

Review: Google’s ‘new’ Thompson Center and the perils of 21st-century architectural preservation Plenty of architects would have been fine with its demise and replacement, but thankfully a new generation rallied behind the building’s cause to save it from the untimely demolition that has felled many of Chicago’s more noteworthy buildings

By Edward Keegan

Google has released updated information about its renovation of the James R. Thompson Center in the Loop. Designed by Jahn, the successor to Helmut Jahn’s firm responsible for the original building in 1979-85, Google’s new home is demonstrating the perils of 21st-century architectural preservation.

The building has two distinctly original features that make it memorable to architect and layperson alike: an unusual convex form that opens its 17-story-tall atrium to a plaza on the block’s southeast side and a fancifully colored glass curtain wall that features keystone patterns across its north and west faces.

The overall mass will thankfully remain; alas, the glass will not.

The unusual massing is a formal nod to the building’s relationship with the County Building and Chicago City Hall (built 1911) to the south and the Richard J. Daley Center (built 1965) to the southeast. It creates a remarkable urban composition with those very different buildings to express an idea about the openness of government and its continuity across jurisdictions and eras. It was this feature that formed the building’s most important architectural asset, and it’s ironic that it will be the best preserved, since the building’s privatization will strip the functional purpose that drove its conception.

Architects almost always have a fraught relationship with the recent past, and this is true here. The

A rendering of Google’s plan to refurbish the Thompson Center | GOOGLE

building is new enough to still be remembered by many when it was bright, shiny and controversial, but old enough to have acquired the dull veil of age and atrophy.

Plenty of architects would have been fine with its demise and replacement, but thankfully a new generation of architectural historians and preservationists rallied behind the building’s cause to save it from the untimely demolition that has felled many of Chicago’s more noteworthy buildings.

Built on a budget The original building was built

on a budget, a budget that wasn’t sufficient to realize Helmut Jahn’s high-tech aspirations for the structure. While eventually completed for about twice the cost initially proposed, it probably would have cost twice as much more (or four times the initial budget) to build it as Jahn conceived it. Thus, the original glass curtain wall has always seemed a bit cheap because, well, it was a bit cheap.

According to Google, the new facade will incorporate triple-pane glass to create a more sustainable building envelope than the 1985 original, which famously suffered

from poor energy performance throughout the life of the building.

And the replacement of the building’s glazing will be startlingly different. This isn’t the first large structure in Chicago to be reskinned. The Aon Building’s original marble facing was replaced with granite between 1990 and 1992. While the stone is different, the building’s bright white color was retained, even enhanced, by a selection of stone that was sensitive to the original aesthetic.

Google reports that the southeast face of the building will have three “covered terraces.” Although

light on details (as we’re forced to speculate on less than specific renderings), these appear to be carved from the face of the building on three levels of that face that are not currently sloped. These seem likely to provide amenities for the building’s occupants rather than the general public.

Questions remain.

The limited renderings imply that Google’s version of the Thompson Center will replace the colored spandrel glass with clear glazing. Given the mixed reception that the original color scheme had received, it may well be an improvement. But will it drain the building of its jaunty 1980s vibes?

How public will the ground level be? Access through and around the building during its four decades as the state’s building was open, for both the ground level and the basement. Will there be as many shops and food vendors?

How open will they be? It’s possible these areas may become more accessible, as many of the earlier tenants did little if any late-hours or weekend business.

The devil is always in the details.

Stripped of its public status, the former James R. Thompson Center may evolve into a privatized version of the public life. Might the building ultimately appear as a ghost of its former self, its outlines preserved but its exterior expression sufficiently muted as to become dull and lifeless?

Crain’s contributor Edward Keegan is a Chicago architect and a contributing editor to Architect Magazine.

Marshall Field building lands new tenant

By Danny Ecker

The developer that turned the floors above the Macy’s State Street flagship into offices has landed another tenant, highlighting the trend of companies flocking to the newest and most-updated workspace they can find.

Specialty insurance company Argo Group signed a long-term lease for about 20,500 square feet on the ninth floor at 24 E. Washington St., according to a statement from Brookfield Properties, which owns the property. New York-based Argo will move its Chicago office early this year from 225 W. Washington St., where it occupies just under 19,000 square feet today.

The deal is in line with the socalled “flight to quality” movement that has shaped the downtown office market over the past few years. Companies trying to 4 | CRAIN’S CHICAGO BUSINESS | JANUARY 15, 2024

compel employees to work from the office rather than remotely have sought space in buildings that are new or have been modernized with trendy tenant perks.

‘Excellent location’ While remote work has weakened demand for downtown office space since the start of the COVID-19 pandemic, top-tier — or Class A — properties have outperformed the rest of the market.

Move-ins have outpaced moveouts among Class A buildings in the heart of the city for the past eight quarters, according to data from brokerage CBRE. “”We strive to create dynamic office workspaces that cultivate collaboration, employee engagement and foster team building,” Argo Group Director of Property Services Christian Vargas said in the statement. “The 24 E. Washington space presents us with an

excellent location and stylish amenities that create a best-inclass employee experience.”

Another factor may have played a role in Argo Group choosing the landmark Marshall Field building: The company was recently acquired by Brookfield Reinsurance, a sister company of the one that redeveloped the building.

Brookfield Properties completed its transformation of the sixfloor, 650,000-square-foot office condo just as the COVID-19 pandemic set in, making it a difficult time to try to lease up the space.

But it has gradually notched a series of leasing wins, including most recently a 15-year deal with Singapore-based Olam International for nearly 80,000 square feet.

The property today is 61% leased, according to real estate information company CoStar Group, with tenants including secondary ticket marketplace Vivid Seats,

COSTAR GROUP

A specialty insurance company is joining the list of companies working above the Macy’s flagship store on State Street

The offices at 24 E. Washington St. are above the Macy’s Chicago flagship store.

consumer-insights company Numerator, third-party logistics firm Spot and candy maker Ferrero North America.

Argo is vacating a building at 225 W. Washington that is 67% leased today, according to CoStar. That is lower than the 76% average for downtown office buildings as of the end of September, CBRE data shows.

The 28-story building is owned by a venture of Miami-based Agave Holdings — the real estate arm

of the family that makes Jose Cuervo tequila — which bought the property in early 2022 for just under $83 million, according to Cook County property records.

A spokesman for Agave did not respond to a request for comment.

Jones Lang LaSalle brokers Jeff Miller and Corey Siegrist negotiated the new lease for Argo Group. Brookfield was represented by Jack O’Brien and JD Parcheta of leasing agency Telos Group.

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Preservation board blocks a Hinsdale teardown, but it may not last

By Dennis Rodkin

A Hinsdale village commission declined to vote last month on an application to demolish a vintage home and build a new one, potentially setting up a showdown with the builder.

It’s the latest skirmish in preservationists’ effort to hold back the flood of teardowns that has been going on in pretty Hinsdale for three decades. The board’s inaction may not last, but does stall the property owners’ plans.

On Dec. 6, John Bohnen, who chairs the village’s Historic Preservation Commission, declined to call for a vote on the application by owners of a 1930s Colonial Revival house on Eighth Street in the Robbins Park Historic District. The application is in two parts: demolition of the current house and “appropriateness” of a proposed house on the site.

Bohnen wouldn’t disclose his reason for refusing to call a vote, saying only that “it was very obvious to me and everybody on the commission who looked at it that this house designed in a modern fashion cannot be built in the historic district.” Bohnen is also the managing broker at Better Homes & Gardens Real Estate County Line in Hinsdale.

Refusing to hold a vote appears to short-circuit procedures laid out in Hinsdale’s village code.

The code says only that projects

in the historic district can’t receive permits “without the rendering of a final decision by the commission.” It doesn’t say permits are contingent on an affirmative vote, only on a vote. The code also stipulates that the preservation commission’s judgment is only advisory, not binding.

Hinsdale’s village board makes the final call on permits. Still, Bohnen’s maneuver holds up the project, if only temporarily.

The proposed home’s builder said she plans to encourage other village officials to require the commission to vote, either yes or no.

Bohnen “didn’t follow the rules” governing the commission and public meetings in general, said Julie Laux, principal of J. Jordan Homes, the firm that would build the proposed home. “There was only one side that was allowed to be heard at that meeting,” she said, meaning people who oppose the project. “He has no right to do that. We went to the village attorney with this and we’re waiting to hear what they’ll do.”

Lance Malina, a partner at Chicago-based law firm Klein Thorpe & Jenkins who acts as village attorney for Hinsdale, did not respond to a request for comment.

The property owners, Jeff and Nicole Cantalupo, also did not respond to a request for comment. The couple bought the house on a little under 1.2 acres in September 2022 for a little over

COLDWELL BANKER REALTY

The head of the village’s preservation board declined to have his group vote on the plan, but the builder says she’ll insist they follow the rules and vote, for it or against it In place of the existing 8,650-square-foot house pictured above, the owners of the property propose a house that is about 9,060 square feet. The proposed design, seen in the rendering, is about three-quarters of what zoning would allow.

$2.5 million, using a land trust that conceals their name in public records. Jeff Cantalupo is the founder and managing partner of Listen, a venture capital firm focused on consumer brands.

Also not responding: Rob McGinnis, Hinsdale’s building commissioner and director of community development, and Michael Abraham, whose Clarendon Hills firm Michael Abraham Architecture designed the proposed new house.

In place of the existing 8,650-square-foot house, seen at the top of this article, the Cantalupos propose a house that is about 9,060 square feet, or about three-quarters of what zoning would allow. The proposed cost to build the house was not made public.

The design, seen in the rendering below that was provided at the Dec. 6 meeting, is two large volumes with peaked roofs and tall windows, with an all-windows center piece connecting them.

Of the 204 properties in the historic district, “we only have one or two modern houses, and they were built before we designated it historic” in 2002, Bohnen said.

The existing house, designed by Chicago firm Schmidt, Garden & Erickson with a red brick facade punctuated by white wood trim,

black shutters and a trio of rooftop dormers, fits in among the mix of Tudors, Victorians and other historical styles in the neighborhood.

But “this isn’t about whether we approve demolition of that house,” Bohnen said. “The issue is that we don’t approve of building the new one.”

Two-part process The two parts of the process, demolition and building, are yoked together because “you don’t want to have somebody tear down a historical house and then not build the new one,” said Jim Prisby, a member of the historic preservation committee. Prisby, an architect who has designed a few dozen homes in the village, is principal of Hinsdale firms Caprio Prisby Architectural Design and Arbor Pointe Artisan Homes.

As a proposed new-construction project, the Eighth Street property is not subject to the program that Hinsdale devised in 2022 to provide financial incentives for the owners of historical homes to rehab rather than demolish them or sell them as demolition candidates.

When it was advertised for sale in August 2022, the home’s listing described it as being “well built (with a) great floor plan, a once in a lifetime opportunity for the

ultimate renovation,” and that it had been “maintained at the highest level.” Listing photos show formal rooms trimmed with handsome woodwork, a slightly out-of-date kitchen, and a pool and tennis court on the grounds.

Bohnen said the Cantalupos’ proposed new house “absolutely can’t be built in our historic district. It doesn’t fit with what’s there.”

The question of what presentday designs and materials fit among historical homes “is subjective. It’s always subjective,” Prisby said. He declined to say whether he likes the design by Abraham that the Cantalupos submitted.

By not calling for a vote, Prisby said, Bohnen “delayed the project” submitted by the Cantalupos.

Laux said she does not expect the delay to kill the project. She said she expects pressure from village officials to result in the historic preservation commission voting one way or the other.

“They need to vote in favor or against it,” she said, “but they need to vote,” she said. Until the village attorney weighs in, she said she would not speak of other steps that might be taken.

“It’s really up to my homeowners what they’ll do,” Laux said.

UChicago medical device startup raises $2M

By Katherine Davis

A local medical device startup with roots at the University of Chicago has raised $2 million as it prepares to bring its blood clot treatment to market.

Flow Medical, spun out of UChicago last year, is developing a catheter to dispense medication in patients with acute pulmonary embolism, which can block blood flow to the lungs. The startup raised the pre-seed round from the Harvard Business School Angels of Chicago, Lofty Ventures and other individual investors, the startup announced today.

The device was conceived in 2020 by two UChicago associate professors, Dr. Jonathan Paul and 6 | CRAIN’S CHICAGO BUSINESS | JANUARY 15, 2024

Dr. Osman Ahmed, who wanted to provide targeted and precise treatments for their own patients at the university’s affiliated health system.

In August, Jennifer Fried, a Chicago health care entrepreneur who sold her last company — which also had roots at UChicago Medicine — to Global Healthcare Exchange, joined as co-founder and CEO of Flow Medical.

“I spent six months advising (Flow Medical) and really digging into the market,” Fried says. “And as I did that, I fell in love with the opportunity. I don’t think I’ve seen a more compelling opportunity in med-tech in my entire career.”

Flow Medical’s thrombolytic catheter represents a “break-

through,” the company said in a written statement, referring to its minimally invasive and effective treatment of pulmonary embolism, a condition that can be life-threatening and affects about 900,000 Americans every year, according to the American Lung Association.

“Flow Medical’s device has the potential to transform (pulmonary embolism) therapy with its personalized approach to treating each patient,” Alex Meyer of Harvard Business School Angels of Chicago said in a statement.

The majority of the new financing will go toward research and development as the company works to test the efficacy of the device in clinical trials and re-

ceive key U.S. Food & Drug Administration approvals. Funding will also pay for intellectual property initiatives, Fried says.

To date, Flow Medical has raised more than $3.5 million. The startup previously landed grants from the National Institutes of Health and UChicago’s George Shultz Innovation Fund.

Flow Medical will need to raise more funding as soon as next year, Fried says, but notes how difficult the fundraising market has been amid a broad venture capital downturn.

“It is a really tough environment,” Fried says. “People just aren’t very liquid and that’s a very real contributing factor.”

Fried said it’s too soon to say

exactly how much Flow Medical would sell its catheter for but said similar catheters are being sold for $7,000 to $12,000 per patient.

“It’s a meaningful revenue opportunity per patient,” Fried says.

Fried was previously co-founder and CEO of Explorer Surgical, a health tech company that grew to about 30 employees. She declined to share how much Explorer Surgical sold to Louisville, Colo.-based GHX for in 2021 but said it was a “positive outcome” for investors and shareholders.

Fried also has a background in health care investing. From 2014 to 2016, she was a vice president at Palo Alto, Calif.-based Park Lane Ventures, a health care-focused venture-capital firm.

CHICAGO BOOTH INSIGHTS

Building a winning culture should be a key part of your intentional business strategy In my experiences of building health care organizations, our culture was key to driving our business success. We encouraged collaboration and teamwork among our employees. We emphasized transparency and over-communicated to ensure everyone knew what our goals were and how we planned to achieve them. My colleagues were not afraid to bring me “bad news.”

And above all, we valued integrity. When I learned our top sales representative was overpromising the capabilities of our products to customers, I had to make a tough decision. Realizing this team member would never be a good fit with our culture, I had to terminate him, despite the potential impact on our revenue. But, to my surprise, that termination increased the engagement and commitment of the rest of the team who were equally concerned about his behavior. It reinforced the importance of living our values.

I believe the pandemic also demonstrated examples of the strength, or weakness, of company cultures. At one company, where I served on the board of directors,

GETTY IMAGES

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e have all heard the terms “toxic culture” and “hostile work environment” or, alternatively, “great culture” or “great place to work.”

But how does one build a company with a winning culture that not only attracts the best employees, but also motivates, engages and retains them?

This question becomes even more critical when you consider the results of a recent Glassdoor survey that found 77% of workers consider a company’s culture before applying and 65% of employees say culture is one of the main reasons they stay in their job.

As the leader of a business, you can shape its culture. Organizational culture represents the values, beliefs and principles of the company. It is the behaviors we adopt to get things done; it’s how we engage with our employees and our customers. It’s important to ask yourself: Is this a competitive culture or a collaborative culture? Do we reward individual performance or team performance? How much do we empower our employees to make decisions and take actions?

Ellen Rudnick is a senior adviser and adjunct professor for entrepreneurship at Chicago Booth and served as the initial executive director of the Polsky Center for Entrepreneurship & Innovation. She was chairman of Pacific Biometrics, CEO of Health Care Knowledge Resources, vice president at Baxter Healthcare and president of Baxter Management Services Division.

our business was heavily impacted by the pandemic. We always treated our team members as our most important asset, and to protect as many members as possible from layoffs, our senior management team and board agreed to take significant pay cuts. Additionally, employees were offered extra services and benefits to assist them with the challenges they were facing working from home and managing family responsibili-

ties. It was clear to them that their health and safety were our No. 1 priority. This resulted in more committed and engaged team members, and our retention rates have been far higher than industry benchmarks.

As you consider the type of culture you need to be successful, consider the behaviors you want your team members to emulate.

As you recruit and develop talent, assess their ability to be a cultural

Advice for small businesses and entrepreneurs in partnership with the University of Chicago Booth School of Business.

fit. A wrong fit can often have far-reaching consequences for the organization. To quote Jack Ma, founder of Alibaba Group: “You need the right people with you, not the best people.” By being proactive in shaping your culture, you are building the foundation from which your business should be positioned for success.

NOTABLE LEADERS IN SUSTAINABILITY Nominate a leader who leads sustainability initiatives at an organization and makes an environmental impact.

NOMINATE BY FEB. 23 ChicagoBusiness.com/NotableNoms

JANUARY 15, 2024 | CRAIN’S CHICAGO BUSINESS | 7

LET

Th

EDITORIAL

Johnson can’t afford to let this leadership void linger McCormick Place

COSTAR BROUP

I

t took a long time to recruit Lynn Osmond to lead the city’s tourism arm, Choose Chicago, back in 2022. Now, just two years later, the Johnson administration finds itself on the hunt for her replacement.

Crain’s Danny Ecker, first to report the news of Osmond’s exit, notes that the search for a new Choose Chicago CEO is a bellwether for the city as a place top industry leaders want to promote.

The timing of Osmond’s departure is hardly opportune: She’s heading for the exits as the city prepares to strut its stuff on the world stage in August, when the Democratic National Convention comes to town — an event that represents the most important opportunity in years to shore up Chicago’s reputation as a destination for big events.

Her farewell also comes as the Johnson administration grapples with a leadership void at another of the city’s most important outward-facing agencies, World Business Chicago, where Michael Fassnacht, who served as the city’s chief marketing officer since the Lightfoot era, is stepping down, as are Vice Chair Mellody Hobson and longtime board member and tech industry cheerleader Mark Tebbe.

Of course, Chicago’s business and civic community have a lot riding on the DNC going well. Mishaps of any kind during the convention — from transportation breakdowns to security lapses — will only fur-

ther damage Chicago’s already scuffed-up global image. But the gaping hole at the top of two organizations that tout Chicago to the world is a problem that extends beyond the DNC. A lack of that leadership

now — coming as the mayor is also struggling with the migrant crisis and looking to fill other key vacancies atop important city departments — threatens to undo a lot of the good that was done during Osmond

and Fassnacht’s tenures.

Indeed, much of the uncertainty around post-pandemic tourism and other factors that might have made the Choose Chicago CEO job unappealing two years ago have faded somewhat. Hotel occupancy is up, conventions and trade shows are on the rebound, and more people are coming downtown for work nowadays — all factors that are helping to make certain corridors of the city feel livelier and safer than they did during the worst days of the COVID downturn.

But Brandon Johnson’s administration can’t count on those trends continuing without intelligent and experienced leaders and smart investment to keep the momentum going. Chicago spends significantly less than its primary competition — New York, Orlando and Las Vegas — to promote tourism. Does Johnson see the value in upping the ante? Only time will tell. And this is a moment when the mayor’s less-thanwarm relationship with the local business community is a particular disadvantage.

The first priority for both Choose Chicago and World Business Chicago should be to bring in seasoned professionals with relevant industry experience — a task that would be made easier if the mayor had better connections to corporate Chicago.

Johnson needs the right people — and he needs them quickly — to fill these important roles. The moves he makes next will be a telling test of his abilities.

PERSONAL VIEW

Chicago’s restaurant industry has never faced such a hostile business environment

I

business over the edge. The people ’ve worked in restaurants for 30 who enter this industry do it beyears; ups and downs are inhercause they love people and their ent in this business. But the community, not to get rich. restaurant industry has never faced The last few years have been esan operating environment as hospecially difficult for the restaurant tile as we are navigating in Chicago. community due to the coronavirus As a teenager, I worked as a pandemic, soaring inflation and part-time server at Johnny Rockcrime. No doubt, President Joe ets. I instantly found my place in Biden’s Paycheck Protection Prothe world in an industry geared gram and Mayor Lori Lightfoot and toward bringing people together. Scott Weiner This love took me to college, is co-founder of Gov. J.B Pritzker’s efforts to support businesses helped my team keep where I studied hospitality man- the Fifty/50 the lights on, keep people emagement and cooked at local es- Group, vice ployed and feed our neighbors. tablishments to hone my skills. chairman of Since Mayor Brandon Johnson After graduation, I took a man- the Illinois took office, support for local busiagement job with Lettuce Enter- Restaurant nesses has all but disappeared. The tain You, one of the largest restau- Association rant operators in the city. Within a and a member mayor ran on a platform of collaboration, representing everyone and few years, I took the leap and of Crain’s 40 ensuring everyone has a seat and a opened a restaurant on Division under 40 class voice. Our experience has been Street in West Town. of 2019. quite the contrary. We have no seat, My business has grown to over 20 establishments, employing over 800 peo- we have no audible voice, and we all suffer as relationships between the city and longple and hiring from every corner of the city.

Restaurants are complex businesses with standing businesses continue to degrade.

Instead of seeing businesses as partners in razor-thin margins, sometimes as low as 1% or 2%. One lousy month, an unexpected ex- building a strong and vibrant community, pense or a regulatory shift can throw our the mayor and his team have vilified our

work and place in Chicago’s neighborhoods.

Mayor Johnson’s rhetoric compares us to the Walmarts and Amazons of the world.

Mayor Johnson pushed through legislation eliminating the tip credit. This policy enabled servers — many of whom view hospitality as a career, not a job — to earn substantial wages. Then, the mayor and the City Council passed legislation dramatically expanding leave policies. Sadly, both legislative pushes shut the restaurant industry out of substantive negotiations.

In the few instances we received a call, dissenting viewpoints were met with name-calling or veiled threats. The fear of retaliation has made several restaurant operators, including myself, reconsider additional investments in the city.

Most important, the mayor was personally absent from the few discussions we were part of. Refusing to engage directly, and only through intermediaries, has fostered a sense of alienation in the business community and has created a lack of trust.

As a former hourly and tipped worker, I learned that employees drive business, and as a business owner, I know that happy employees drive the bottom line, along with managing costs when margins are thin.

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Chicago Business, 130 E. Randolph St., Suite 3200, Chicago, IL 60601, or email us at letters@chicagobusiness.com. Please include your full name, the city from which you’re writing and a phone number for fact-checking purposes.

8 | CRAIN’S CHICAGO BUSINESS | JANUARY 15, 2024

Staying alive is the name of the game, and striking a balance through compromise is critically essential. The Johnson administration isn’t interested in this nuance.

For context, I expanded my businesses in Chicago under mayors Daley, Emanuel and Lightfoot, and I have served on the board of the Illinois Restaurant Association for much of the last 15 years. Over those years, the city has increased its minimum wage and codified paid sick leave and fair scheduling.

Yet before each policy passed, there was a willingness to engage businesses and my association — always directly. Business owners always had a voice and felt valued by those in power, even if they disagreed with the ultimate policy decision.

Chicago’s business community — especially restaurant owners — seeks constructive collaboration with the mayor. Independently owned restaurants like mine enhance neighborhoods, making them more pedestrian-friendly, creating an anchor for more retail and hospitality. We are the building blocks for economic development.

We hope that in 2024, Mayor Johnson and his administration will engage in a more inclusive and collaborative approach, because Chicago deserves it.

Sound off: Send a column for the Opinion page to editor@chicagobusiness.com. Please include a phone number for verification purposes, and limit submissions to 425 words or fewer.

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LETTER TO THE EDITOR

This is why Chicago still needs United Way

A

lmost six years ago, Crain’s Chicago Business published an article asking, “Does the world still need United Way?” (April 6, 2018). It questioned the decades-old model of a fundraising intermediary, concluding that it was no longer necessary in the face of widely accessible online charity trackers that empower individual donors to do their own research to find worthy organizations to support.

While we disagree with this characterization of United Way’s historical role, Crain’s was right that United Way needed to evolve. Five years later, under the leadership of President and CEO Sean Garrett, the new United Way of Metro Chicago has an entirely new model and is making a tangible impact across the region. The new model aligns high-level corporate philanthropy and workplace giving programs with United Way’s deep expertise as a convener and strategist, developing new ways to address our region’s most significant and systemic community challenges.

Today, United Way is a multiplier of impact. It unites business leaders, individual donors, corporate partners, philanthropic organizations, government resources and community organizers to make meaningful progress.

Look no further than the recent catalytic investments in Austin — like the Aspire Center for Workforce Innovation and the new Build community hub — as well as the expansion of the Auburn Gresham Healthy Lifestyle Hub & Campus and new community centers in Little Village and Brighton Park. Look at community investment partnerships with BMO, ITW and Nicor Gas. Each of these efforts is strengthening neighborhoods by meeting local needs and creating economic, workforce and employment opportunities. And most important, all are community-led initiatives supported by United Way but run by experts who know their communities best.

Following the successful execution of one of the nation’s largest COVID-19 response funds, where United Way partnered with The Chicago Community Trust to raise $35 million in support of more than 400 nonprofits, a critical gap in the health and social service sectors surfaced.

In January 2023, United Way partnered with the city of Chicago and Cook County to launch 211 Metro Chicago, a free 24/7 helpline that connects county residents with a vast network of health and social services organizations. The United Way-operated 211 helpline provides a critical resource for our most vulnerable neighbors struggling to secure housing, feed their families or keep up with utility bills. To date, 211 resource navigators have fielded more than 100,000 contacts and are critical

connectors to resources that help residents solve their immediate problems and get on the road to lasting security.

In fiscal 2023-24, United Way will provide more than $21 million to support place-based transformation across the region. This includes $8 millionplus in basic needs impact grants that will provide unrestricted support to more than 140 local nonprofits that address a variety of critical basic-needs gaps, such as Metropolitan Family Services,

Enlace, DuPage Health Coalition and Deborah’s Place. United Way is directing $7 million-plus to our Neighborhood Networks, which span 17 communities across the suburbs and the South and West sides, and another $6 million-plus to the operation and optimization of 211 Metro Chicago.

These strategic investments are about more than direct funding. United Way and its partners collaborate with community leaders to ensure they have the

resources they need to achieve critical long-term goals and support neighborhood-level transformation across the Chicago region. From helping Chicagoans and Cook County families find secure food and housing to helping remove systemic barriers, United Way’s goal is to ensure that all individuals and families can meet their basic needs and that community leaders can build neighborhoods that are stronger and more equitable.

So, as you peruse online

charity trackers and consider where your charitable donations should go in 2024, remember that no one organization can solve the systemic issues that too many of our communities face.

That is why the world — and Chicago — still needs United Way. LINDA T. COBERLY Chair, United Way of Metro Chicago board of directors; partner and chair of appellate and critical motions practice, Winston & Strawn

From top talent to top employers, Crain’s Career Center is the next step in your hiring process or job search.

Connecting Talent with Opportunity.

Get started today ChicagoBusiness.com/CareerCenter

JANUARY 15, 2024 | CRAIN’S CHICAGO BUSINESS | 9

Advertising Section

PEOPLE ON THE MOVE

Willkie Farr & Gallagher LLP, Chicago

To place your listing, visit www.chicagobusiness.com/peoplemoves or, for more information, contact Debora Stein at 917.226.5470 / dstein@crain.com

ACCOUNTING

ENGINEERING / CONSTRUCTION

LAW

LAW

ORBA, Chicago

V3 Companies, Woodridge

Latham & Watkins LLP, Chicago

Latham & Watkins LLP, Chicago

ORBA, one of Chicago’s largest public accounting firms, welcomes Andy Bonnot and Lucas Garcia Bennett to the firm. Andy began his ORBA career as a Tax Bonnot Group intern, gaining experience completing individual and business tax returns and assisting with high-net-worth clients. He is also a small business owner where has extensive experience in financial planning, inventory management, Bennett packaging, shipping, bookkeeping and customer relations.

Lucas joins the firm as an Associate in ORBA’s Audit Group and will be providing clients with budgeting, inventory and resource allocation expertise.

V3 Companies welcomes Zaida Morillo, P.E., S.E. as Vice President of Structural Engineering. In this role, Zaida will lead the Chicago Region’s Structural Group and will be responsible for helping the multidisciplined consulting firm continue its growth and expand upon its existing strengths and reputation. She will also leverage her 20+ years of expertise in the design of highway, movable, and railroad bridges to serve as V3’s firmwide technical leader for structural engineering projects.

Kevin Jakopchek has been elected a partner at Latham & Watkins LLP in Chicago, effective January 1. A member of the Complex Commercial Litigation Practice and Litigation & Trial Department, he represents public and private companies, private equity portfolio firms, and others in litigation involving contract disputes, fiduciary duty and fraud claims, IP matters, and class actions.

Jana Kovich has been elected a partner at Latham & Watkins LLP in Chicago, effective January 1. A member of the Emerging Companies & Growth Practice and Corporate Department, she advises startups and venture capital investors on a range of transactional and operational matters across the company lifecycle, including business formation and structuring, corporate governance, equity financings, and exit strategies.

LAW

LAW

Latham & Watkins LLP, Chicago

Latham & Watkins LLP, Chicago

Sean Parish has been elected a partner at Latham & Watkins LLP in Chicago, effective January 1.A member of the Mergers & Acquisitions and Private Equity Practice and Corporate Department, he advises public and private companies, private equity sponsors, and portfolio companies on complex corporate transactions, including M&A, leveraged buyouts, strategic investments, carveouts, and joint ventures.

Matthew Wynne has been elected a partner at Latham & Watkins LLP in Chicago, effective January 1. A member of the Investment Funds Practice and Corporate Department, he advises US and global private capital sponsors across investment areas and asset classes on fund formation, investment structuring, and other complex transactional matters, including GP-led secondary transactions, co-investments, and internal sponsor arrangements.

LAW

LAW

Latham & Watkins LLP, Chicago

Latham & Watkins LLP, Chicago

Katherine Stork has been promoted to counsel at Latham & Watkins LLP in Chicago, effective January 1. A member of the Banking Practice and Finance Department, she represents financial institutions, corporate borrowers, and private equity sponsors in a variety of financing matters, including secured and unsecured credit facilities, acquisition financings, and recapitalizations.

Laura Waller has been promoted to counsel at Latham & Watkins LLP in Chicago, effective January 1.

A member of the Executive Compensation, Employment & Benefits Practice and Tax Department, she advises clients on employment-related matters in corporate transactions and counsels employers on day-to-day legal issues, including hiring practices, personnel issues, employee separations, and restrictive covenants.

MARKETING / MEDIA

REAL ESTATE

Eicoff, Chicago

ML Realty Partners, Itasca

Eicoff, an Ogilvy performance agency, has made company history. It named Delia Marshall president, the first woman to hold this position in the agency’s 60-year history. She takes the reins from Bill McCabe, who is retiring.

Marshall, a nearly 20-year veteran of the company, will oversee the agency’s strategic direction, operations, business development and growth.

Eicoff, part of Ogilvy’s Experience network, focuses on driving sales for brands via performance and DRTV, digital video and audio.

Nicholas LeVeque has joined ML Realty Partners as Valuation Director.

LeVeque will oversee the quarterly valuation process and reporting for ML Realty Partners.

LeVeque brings with him nearly a decade of experience in the valuation role, and his depth of knowledge and management capabilities will complement the firm’s growing team. LeVeque was previously employed with Deloitte as Valuation and Modeling Manager. He holds a Bachelor of Arts degree in Economics from Michigan State University.

ACCOUNTING Tri-Merit Specialty Tax Professionals, Schaumburg Randy Crabtree, CPA, Co-Founder of Tri-Merit Specialty Tax Professionals has been named to Accounting Today’s 100 Most Influential People in Accounting.

In addition to expertise in complex tax issues, Crabtree is a leading advocate for change in the industry by focusing on mental health wellness. He hosts the Unique CPA podcast, which ranks among the world’s 5% most popular programs, contributes articles to accounting publications, and has launched the annual Bridging the Gap Conference.

BANKING First Bank Chicago, Westchester First Bank Chicago, one of Chicago’s top 5 privately owned banks, commends Christina Bavery for her appointment to the Board of Directors for the Better Business Bureau Board. Bavery, SVP/Managing Director, Commercial Banking, is one of many employees giving time, talent and resources to our community and neighbors as part of our bank-wide culture of caring. We applaud Christina’s contributions in assisting the BBB in fulfilling their mission of creating a community of trustworthy businesses.

To order frames or plaques of profiles contact Lauren Melesio at lmelesio@crain.com

P010_CCB_20240115_v4.indd 1

ENGINEERING / CONSTRUCTION V3 Companies, Woodridge Stuart Dykstra has been promoted to Water Strategy Leader for V3 Companies, a multidisciplinary consulting firm celebrating 40 years of excellence. As an industry recognized Hydrogeologist who has lead stormwater, ecology, wetland permitting, wetland banking and restoration projects across the United States and internationally, Stuart’s wide-ranging experience and technical expertise will help him lead the firm’s strategic water goals heading into 2024.

FINANCIAL CONSULTING Wintrust Private Client, Chicago Alicia Gohdes, CFP, serves as the lead advisor and relationship manager to high-net-worth individuals, families, and organizations, including closely held and familyowned businesses. She has over 14 years of experience in the financial services industry and recently joined Wintrust Private Client in 2023. Alicia earned an MBA from Purdue University, a BA in Business Management from Moravian University, and obtained her CERTIFIED FINANCIAL PLANNER™ certification in 2019.

FINANCIAL SERVICES Broadstreet Impact Services, Chicago Broadstreet Impact Services welcomes Chris Rakers as managing director of fund administration.

He has 15+ years of experience leading tech-enabled fund operations for alternative investment managers.

Chris most recently served as director of investment operations for a multibillion-dollar family office, where he built and led investment operations for several investment strategies that include private equity, credit, and public market investing.

LAW FIRM

Tyler Born has been elected to partner in the Corporate and Financial Services Department of Willkie Farr & Gallagher.

Tyler counsels private equity sponsors, publiclyheld and privately-owned U.S. and multinational clients with structuring, negotiating and managing the legal aspects of complex business transactions, including public and private mergers, stock and asset acquisitions and divestitures, corporate reorganizations, joint ventures and related governance and securities law matters.

LAW FIRM Willkie Farr & Gallagher LLP, Chicago Willkie Farr & Gallagher has announced that Sarah Haddy has been elected to partner in the Executive Compensation & Employee Benefits Department. Sarah works with employers to administer qualified and non-qualified retirement plans and health and welfare plans.

She offers counsel on plan and compliance disputes and benefit litigation. She also represents clients in DOL and IRS audits and advises on benefit plan design, restructuring and administration.

LAW FIRM Willkie Farr & Gallagher LLP, Chicago Ren-How Harn has been elevated to partner in Willkie Farr & Gallagher’s Intellectual Property Department.

Ren-How’s litigation experience includes extensive experience before the Patent Trials and Appeals Board in post-grant proceedings. Ren-How counsels clients in a wide array of technologies and provides guidance with competitive patent portfolio analyses. In addition, Ren-How is also a co-chair of the office’s Chicago Affinity Group and was an LCLD fellow in 2023.

LAW FIRM Willkie Farr & Gallagher LLP, Chicago Willkie Farr & Gallagher has announced that Samir K. Patel has been elected to partner in the Corporate & Financial Services Department.

Samir represents public and private companies and private equity firms on a broad range of U.S. and cross-border mergers and acquisitions, complex carve-outs and divestitures, strategic partnerships, joint ventures, minority investments and corporate reorganizations.

Samir also advises clients on corporate governance and securities laws matters.

LAW FIRM Willkie Farr & Gallagher LLP, Chicago Willkie Farr & Gallagher welcomes Gina Oderda as Counsel in the Chicago Private Clients Group. Gina’s practice focuses on estate and tax planning for high-networth individuals, estate and trust administration, charitable planning and planning for family-owned businesses. She has extensive experience in wealth transfer planning, family business governance and succession planning, and the oversight and administration of trusts, estates and charitable organizations.

1/12/24 8:28 AM

UNAFFORDABLE AFFORDABLE HOUSING

THE HIGH COST OF CREATING AFFORDABLE HOUSING

GEOFFREY BLACK

David Block, director of development at Evergreen Real Estate Group, at Encuentro Square, the new affordable housing project on the west end of The 606 trail.

Inflation, administration fees and a byzantine tax credit system add layers of expenses as the city’s need for affordable housing rises I By Judith Crown

E

ncuentro Square, Evergreen Real Estate Group’s latest affordable housing project at the west end of The 606 trail, includes attractive amenities such as a teaching kitchen, children’s room, lounge and courtyard. It also rings up at $766,350 for each of the 89 apartments, a quarter of a million dollars more than a typical “luxury” apartment in River North or Lincoln Park.

“That’s really expensive,” acknowledges David Block, Evergreen’s director of development. But as he and most other builders of affordable housing will tell you, the system of funding is not exactly rational.

Costs are driven by the byzantine rules of the federal tax credit system that require builders to assemble a “capital stack” of funders, each with sets of fees and requirements. On top of that comes ever more rig-

orous government standards for accessibility, sustainability and design. Developers and their architects win points from public agencies awarding the projects by striving for net zero carbon emissions by using materials such as solar panels, triple-pane windows and upgraded insulation.

“If a Martian dropped down from the sky and looked at how America develops affordable housing, they would think we’re nuts,” says Hipolito “Paul” Roldan, CEO of the nonprofit Hispanic Housing Development Corp. “They would be right.”

Affordable housing provides essential financial security and stability for lowerincome families.

It’s intended to keep low- to moderate-income households from spending no more than 30% of their gross income for housing costs, including utilities. When

government subsidies come into play for larger and more complex affordable housing projects, there’s a complex web of financing vehicles and associated expenses that make it an increasingly expensive undertaking, an irony that is not lost on developers and housing advocates in Chicago.

Demand has risen since the start of the COVID pandemic while the supply of affordable rentals has shrunk. The DePaul University Institute for Housing Studies estimates that Chicago is short nearly 120,000 units. On top of that is the influx of thousands of migrants who are scrambling for housing and sleeping in public shelters, churches and tents.

Much of the rising expense of affordable housing is due to pandemic-era inflation in material and labor — costs that are also born by market-rate builders. On

the one hand, it’s hard to argue against the merits of building sustainable and accessible apartment buildings. But could some of the bells and whistles be set aside in order to fund more apartments?

“You can complete a project that’s on the cover of Architectural Record that houses 200 people and costs $800,000 a unit,” says Chicago architect Mike Jerabek, a partner at WJW Architects. But could an additional 100 people be accommodated in a more modest, but still high-quality building?

The high cost to build an affordable apartment doesn’t mean tenants pay more.

Rents are tightly regulated and capped based on family income. In Chicago, a family of four with an income of $55,000 would pay between $1,200 and $1,300 a month for See HOUSING on Page 12

SPONSORS

JANUARY 15, 2024 | CRAIN’S CHICAGO BUSINESS | 11

UNAFFORDABLE AFFORDABLE HOUSING

HOUSING

Developments run the gamut of size and cost

From Page 11

Chicago Department of Housing affordable housing projects in 2023

a three-bedroom apartment, depending on utilities.

New York Times columnist Ezra Klein has diagnosed the conundrum as “everything-bagel liberalism.” Government sometimes tries to accomplish so much within a single project or policy that it ends up failing to accomplish anything at all, Klein wrote in an April opinion piece. If you add too much to the bagel, it can become a black hole from which nothing, least of all government’s ability to solve hard problems, can escape. “And one problem liberals are facing at every level where they govern is that they often add too much,” he wrote.

Another reason for the higher costs: Federal resources haven’t kept up with inflation, Block says, making financing more complex and expensive. Evergreen and its nonprofit partner LUCHA, or Latin United Community Housing Association, split the Encuentro Square project into two legal components and employed two categories of tax credits. It took nearly four years to get the project financed. Legal fees are more than $600,000, three times the cost of a market-rate apartment tower, Block estimates.

But developers are long accustomed to navigating this world. “As a developer, I’m an instrument of broader public policy,” Block says. “I can help implement urban redevelopment policy that a mayor or council proposes. It’s not for me to say this is good or bad use of public money. At the end of the day, I’m trying to get a project built.”

Project name

Neighborhood

Developer

Fifth City Commons Units: 43

East Garfield Park

POAH

Encuentro Square Units: 89

Hermosa, Logan Square, Humboldt Park

LUCHA-Evergreen

Cost pressures This cost equation pressures developers in all large U.S. cities. The primary tool for funding affordable housing is the Low Income Housing Tax Credit, a political compromise of the Ronald Reagan era that took from Congress the power of appropriating funds. Instead, the Treasury Department issues tax credits to government housing authorities that award them to local developers.

The developers then work with syndicators, or middle men who locate the tax credit investors who supply the equity of the deal, usually banks or big corporations.

That’s not the end of the journey.

Developers fill out the capital stack with other financing, such as federal loans, city tax-increment financing funds and multiple mortgages.

(Mayor Brandon Johnson’s administration plans to issue bonds for affordable housing, replacing funding from TIF districts that are set to expire over the next five years, Crain’s has reported. The TIFs were considered an inequitable source because they are located only in certain parts of the city.) There could be 10 funders, each with fees, requirements and reviews.

The current labyrinth is a mechanism to pay lawyers, administrators and everybody else, says Roldan, whose organization is close to completing a 64-unit building in the gentrifying East Humboldt Park neighborhood. Instead of the gov12 | CRAIN’S CHICAGO BUSINESS | JANUARY 15, 2024

Cost per unit $898,837 $766,350

4715 N. Western Apartments Lincoln Square Units: 63

The Community Builders

Thrive Englewood Units: 62

Englewood

DL3 Realty

Sarah’s on Lakeside Units: 28

Uptown

Sarah’s Circle/ Brinshore

Grace Manor Apartments Units: 65

North Lawndale

Grace Manor

43 Green Phase II Units: 80

Bronzeville

P3 Markets-Habitat

Westhaven Park Phase IID Units: 96

West Town

Brinshore-Michaels Organization

$521,605

Roosevelt Taylor Units: 406

Near West Side

Roosevelt Square Affordable I, Related Midwest

$425,472

Irene McCoy Gaines Units: 150

Garfield Park

Chicago Housing AuthorityMichaels Organization

$395,867

Churchview SLF Units: 86

Gage Park, West Lawn

Greater Southwest Development Corp.

$312,611

$764,778 $644,679 $630,486 $621,797 $559,294

Source: Chicago Department of Housing

ernment directly funding this type of housing, “we have to go to the equity markets to raise capital,” he says. “We need all these bureaucrats to participate.”

The use of tax credits is a costly process. “Yes, absolutely it is,” says Marisa Novara, city Housing Commissioner during former Mayor Lori Lightfoot’s administration and now vice president of community impact at The Chicago Community Trust.

“Frustration about this cost plays out locally, but it’s important to understand this is a national decision,” she says.

It would be far cheaper for the federal government to directly fund construction of affordable housing, experts say. But there’s no guarantee that a polarized Congress would appropriate the money. A generous interpretation of the federal policy is that it avoids fights in Congress that would be inevitable if direct appropriations were required, Novara says. The consequences of national policy to fund affordable housing indirectly through tax credits are incredibly high transaction costs, she adds.

Projects with public subsidies represent only about 30% of affordable housing construction or rehabs. Much affordable housing is built and preserved by independent contractors who rehab two-, four- or six-flats, what commonly is referred to as naturally occurring affordable housing, or NOAH. They operate without public money and can typically upgrade apartments in the range of $200,000 to $300,000, thus enabling them to keep rents low.

If they don’t use public funds, they can charge a combination of market-rate and lower rents, and eventually sell the building if they don’t have a mission to preserve the housing as affordable.

One nonprofit that develops and preserves affordable housing

mostly without public dollars is Chicago Metropolitan Housing Development Corp., or CMHDC, which has redeveloped more than 700 units in city neighborhoods over the past few years. The average cost is around $200,000 per apartment, says CEO and Executive Director Rafael Leon.

CMHDC focuses on neighborhoods in transition, such as Uptown, Ravenswood and Hermosa, where property values are rising.

“It’s important to retain affordable housing in areas that are changing, otherwise there won’t be affordability,” he says.

“Granted we’re not doing brandnew construction or a gut rehab,” Leon says. The buildings don’t have amenities such as a gym or computer room. “But we’re providing a decent unit, in a safe neighborhood with all the necessities.”

Features once associated with upscale apartments, such as stainless-steel appliances and granite countertops, have become the norm, he says. On the other hand, many families would prefer to forego those add-ons and pay $200 a month less, Leon says.

There’s not a choice to be made between rehabbing four-flats and using subsidies to build new projects as both are needed, experts say. “It’s not either-or,” Novara says.

“We have buildings that need to be rehabbed and should be part of the NOAH stock. That’s important work. But we also have vacant land (and older buildings in disrepair) that we can turn into assets using tax credits.”

Above and beyond You can call it everything-bagel liberalism, but when it comes to dispersing public funds, cities attach strings in the interest of the public good. One priority is building affordable housing in gentrifying neighborhoods so that residents

aren’t priced out.

Planners want to get away from the institutional design of infamous public housing projects, such as the Robert Taylor Homes and Cabrini-Green. While these 1960s-era buildings aren’t directly comparable to today’s scaleddown affordable projects, there’s a priority to design buildings that look like they’re part of the neighborhood, architects say.

“The city wants the building to fit in. It shouldn’t be distinguishable from the rest of the neighborhood,” says Jeff Bone, a partner at Landon Bone Baker Architects. “That way people won’t be stigmatized.”

New affordable housing projects also can be vehicles for revitalizing depressed neighborhoods. When that happens, there’s often additional infrastructure work to be done. The Fifth City Commons, previously called Garfield Green, in East Garfield Park, required sidewalks, an alley and utility poles because the site had been long vacant, says William Eager, senior vice president for the Midwest region at the Preservation of Affordable Housing, or POAH. That additional work contributed to a cost per apartment on the high end of the scale, at $898,837. But the project presents an opportunity to drive investment in the neighborhood, Eager says.

Fifth City Commons is the most expensive of 11 affordable Chicago Housing Department projects that closed last year. Perhaps more typical is DL3 Realty’s $40 million Thrive Englewood project at $644,679 per apartment, and 43 Green Phase ll in Bronzeville, a joint venture of P3 Markets and The Habitat Company at a perunit cost of $559,294 — still higher than many market-rate projects.

When it comes to construction, durability is tantamount since

buildings designated for affordable housing are supposed to last 30 years or more, experts say.

That can mean thicker drywall, masonry facades and stormwater detention.

“When you use housing tax credits, you’re developing for the long term,” says Joy Aruguete, CEO of the nonprofit developer Bickerdike. “You’re making sure the systems can endure for decades.” Because there’s not a lot of money generated through rent and rent increases, it’s necessary to frontload the project financially, adding reserves for repairs and replacement, she adds. “We take a portion of rent and add that to our replacement reserves, but it’s never going to be enough for the large capital work you need to do 20 years down the road,” Aruguete says. Total costs for two pending Bickerdike projects are more than $700,000 per unit, up from another building it completed in 2022 for $397,887.

Chicago’s push for environmentally sound buildings has added another dimension: an “arms race” among developer and architect teams to wow city planners judging the merits of their projects. Teams often go substantially above and beyond the city code to win tax credits and other funding, says Block of Evergreen Real Estate. Such add-ons can help save utility and operating expenses for tenants and managers, but the difference between a silver and gold LEED-certified building is negligible, he says.

Developer Peter Holsten, president of Holsten Real Estate Development, adds, “There is a lot of architectural ego that goes into these developments. They’re pretty high-profile.”

One project that showcases the state of the art in sustainability is POAH’s Fifth City Commons, which dates back to former Mayor Rahm Emanuel’s administration. The city at the time solicited projects that could be showcased in C40 Cities, a global initiative of urban centers that are striving to confront the climate crisis.

The 43-unit Fifth City Commons building, which is 25% complete, employs an energy-efficient passive house design, including all-electric mechanical and appliances (no fossil fuels), high-grade insulation, triple-pane windows and solar panels.

Those green amenities contribute to the building’s eye-popping cost of nearly $900,000 per unit.

“It’s a showcase. It sets an example of what you can do,” Eager says. “Do you do it every time?

Probably no. But over time, green design, like the passive house, will become a lot more standard,” he says.

Chicago and most U.S. cities have departed from the drab institutional designs that used to be the rule in affordable housing, which is a good thing, experts say.

But has the pendulum swung too far? “If we keep adding scope and requirements that increase costs, there will be fewer units produced,” says architect Jerabek.

“Where do you draw the line?”

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UNAFFORDABLE AFFORDABLE HOUSING

Politics can intrude on city housing policy and reshape projects Objections forced a transit-oriented development to stray from its original, less expensive plans

By Judith Crown

A city of Chicago policy aims to spark investment in compact, efficient residential and commercial developments near Chicago Transit Authority and Metra stations.

But sometimes politics and community opposition get in the way.

The Transit-Oriented Development, or TOD, ordinance encourages investment near train stops in disinvested communities and strives to prevent displacement in gentrifying neighborhoods. TOD places a priority on dense development with affordability and reduced parking near transit, says Marisa Novara, city housing commissioner during former Mayor Lori Lightfoot’s administration and now vice president of community impact at The Chicago Community Trust.

For example, the $45 million 43 Green Phase ll at the 43rd Street Green Line CTA Station in Bronzeville is slated to add 80 apartments at an average cost of $559,294.

The joint venture of The Habitat Company and minority-owned P3 Markets is billed as an example of equitable TOD that should increase transit ridership, reduce traffic and

Rendering of 43Green phase II (front) by Moody Nolan | MOODY NOLAN

create a more walkable community.

When a joint venture of Evergreen Real Estate Group and Imagine Group in 2021 proposed a five-story building with 62 apartments for Auburn Gresham as part of Lightfoot’s Invest South/West initiative, it looked like a textbook TOD. It was only a few blocks from a new $35 million Auburn Park

Metra station at 79th Street.

But neighborhood residents pushed back, objecting to the height of the building, the density and the lack of parking.

“It caught us a little off guard,” says David Block, director of development at Evergreen. The joint venture pivoted and proposed two smaller buildings that would be

more acceptable to residents: a three-story, 28-unit building at the original site, and a five-story, 30unit building on a vacant cityowned lot two blocks to the east.

“Much to the administration’s credit, they accepted it, even though they knew it was going to be a lot more expensive,” Block says.

Maurice Cox, city commission-

er of planning and development at the time, said, “If this is what it took for the community to believe in it, it’s a success story.”

But the price of the project more than doubled to nearly $49 million from $19.4 million, and with four fewer apartments. The original proposed building was more efficient with a single foundation, a single set of heating and cooling equipment, and two elevators.

Now there are two sets of each.

The price per apartment is $829,799, on the high end for affordable housing projects and Invest South/West projects.

The revised project with its lower density doesn’t adhere to the spirit of the city’s TOD policy, which has been strengthened three times since it was first enacted, Novara says. “Should we be relitigating these features each time a development near transit is proposed?”

Block argues that the investment is transforming the neighborhood, pointing to the Metra station and the Healthy Lifestyle Hub that opened in 2022. Auburn Gresham at one time was the economic heart of the South Side, and “it can be that again,” Block says.

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UNAFFORDABLE AFFORDABLE HOUSING I COMMENTARY

C h

Low-income housing doesn’t have to be this complicated

T

Crain’s reported that he need for affordconstruction costs are able housing has rising faster in the Chicanever been more go area than in other big dire. Nationwide, homemetropolitan areas. lessness has surged to the But affordable housing highest level on record. In developers also must find Illinois, there is a shortage and utilize additional fiof over 293,000 affordable nancing sources, manage rental homes for those Allison additional governmental most in need. Solving this Clements approval processes, and crisis requires an urgent is executive absorb the costs of addicommitment to creating director of the tional building and design more affordable homes.

Illinois requirements — all of The primary resource to Housing which increase producdevelop affordable rental Council. tion costs directly and housing is the federal Low Income Housing Tax Credit, which through additional timing delays.

The Housing Credit program rehas financed over 113,000 affordable homes across Illinois. With- quires layering additional sources out the Housing Credit, building of financing to cover the full cost affordable apartments for low- of development. The added time income residents is financially in- to secure multiple funding sources results in additional carrying feasible.

There is a huge gap between costs, such as loans for land acquiwhat housing costs to construct sition and pre-development. Time and maintain and the rents people is especially costly in a high interest rate environment. Requirecan afford to pay.

Today, affordable housing de- ments for these funding sources velopers are facing many of the often shift from year to year.

Scarce resources and a state same challenges as their marketrate colleagues: higher interest policy that caps the amount of rates and the surging costs of ma- Housing Credits per project limits terials and labor. Earlier this year, developers to producing smaller

developments and fewer homes. A Housing Credit investor recently pulled data for 155 new construction developments completed in the last five years across the country and found that the smallest buildings cost 23% more per unit than the largest.

In Chicago, affordable housing must meet additional architectural and construction standards that are more stringent than the city’s building code — mandating larger units, storage requirements and more expensive construction materials. Multiple city departments participate in design review. Developers are asked to redesign their project, requiring additional architectural fees, holding costs for the land and a building design that may be substantially more expensive than what was originally proposed.

City-imposed construction management policies add significant paperwork and time, cause delays in payment to subcontractors and increase construction costs. That payment lag may require dipping into lines of credit to pay suppliers and worker salaries.

These policies drive qualified sub-

A

The Lathrop Community Partners are working with the Chicago Housing Authority to redevelop this campus into over 1,100 mixed-income apartments, with retail and community space along the riverfront. | ILLINOIS HOUSING COUNCIL

contractors away from bidding, reducing competition and the ones that remain often build that cost into construction bids.

Fortunately, many of these complexities are within our control. Mayor Johnson’s recently announced executive order to streamline approval of housing and remove bottlenecks is a promising first step to increase efficiencies and reduce costs.

But we will not streamline our way out of the housing affordability crisis. More resources are also

needed to increase production.

There are immediate steps our elected officials can take. Congress can include production provisions from the Affordable Housing Credit Improvement Act in any tax legislation that advances. The Illinois General Assembly can pass the Build Illinois Homes Tax Credit Act to leverage additional private equity to fund affordable housing.

Talk is cheap. The time for talking is past. The affordable housing crisis requires immediate action.

Affordable housing shortage is a ‘$10 billion problem’

C

for a $10 billion probreating more affordlem. By scaling this proable, quality housgram to $100 million a ing is one of the year over the next 10 most pressing issues facyears, with a third of the ing Chicago. funding each coming According to the Defrom government, busiPaul Housing Institute, a ness and philanthropic massive, growing shortage of 120,000 affordable Leon Walker is sources, we can start to see real progress. housing units in Chicago CEO of DL3 Besides assisting exists. On top of that is Realty Advisors. homebuyers, this 10-year the yearly incremental increase due to unemployment, ris- program should include building ing rents, property assessments on vacant lots acquired through the and subsequent increasing prop- Cook County Land Bank, scavenger erty taxes paid by tenants, low sales and foreclosures, as well as supply and now a growing migrant rewarding revitalization of vacant crisis. This complex problem has and distressed properties. Streambeen building for decades, and lining this program under effective there is no single solution to elim- third-party, nonprofit management inate the backlog and stem the could prove advantageous.

Federal COVID relief money algrowing shortage.

However, there are three actions lowed the city in 2022 to fund 24 we can take immediately to tackle developments, creating over 2,400 units. One of the few that broke this crisis: ◗ Create a public/private partner- ground is our 62-unit Thrive Enship to supercharge existing hous- glewood project, which is the first new mixed-use, multifamily ing incentive programs ◗ Expand tax credit programs for housing development to be built private investment in affordable in this neighborhood in over 50 years. There should be more. housing ◗ Reform the city’s contractor se- Mayor Johnson’s recent executive lection process to match the more order and new bond proposal offer hope that the balance of apefficient private-sector model.

Mayor Brandon Johnson’s proved units will be delivered “Building Neighborhoods and Af- quickly.Expanding the Low-Infordable Homes” program is a come Housing Tax Credit profoundation we should build upon. gram (LIHTC) is also necessary.

The homebuyers’ assistance pro- We can follow the lead of more gram is available citywide, but than 20 other states that have creonly $10 million is being allocated ated a companion state tax credit

14 | CRAIN’S CHICAGO BUSINESS | JANUARY 15, 2024

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The 62-unit Thrive Englewood project is the first new mixed-use, multifamily housing development to be built in this neighboorhood in over 50 years. | THRIVE ENGLEWOOD

to supplement the federal LIHTC program. The Build Illinois Homes Tax Credit proposed last year by state Rep. Dagmara Avelar (D-Bolingbrook) would attract new private equity to support the development of 3,500 affordable units each year across the state, a big step toward meeting the growing annual need.

However, as Crain’s reported last year, construction costs for affordable housing projects fre-

quently exceed high-end market-rate projects in and around downtown. Like private developers and some homeowners, affordable housing developers should be able to choose their architects and general contractors at the beginning of the design process to reduce costs. Taxpayers can still be protected by having the subcontractor opportunities competitively bid. A serious discussion on a building code that puts safety

and affordability first and foremost would make an impact as well.

Chicago’s housing crisis took generations to develop and won’t be solved overnight. Public, private and philanthropic leaders must work together to address this crisis. Creating housing is good for the economy, stabilizes neighborhoods afflicted by crime and poverty, and is critical to equity and justice in our city.

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Congress has the power to strengthen, expand housing credit that puts more supply in pipeline

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fecting the cost of capital cross the country, and squeezing margins millions struggle to to razor thin for investors find affordable who want to help, comhousing as growing debined with the postmand exponentially outCOVID hangover that led paces supply. In Illinois to supply chain issues, alone, there's a shortage of timeline delays, connearly 300,000 homes for struction cost and insurfamilies making 30% of ance rate increases, have the average income or Matt Reilein is all shone on a light on the less. Nationwide, for every president and question, “How can af100 such families, only 33 CEO of the options exist.

National Equity fordable housing truly be These families and Fund, where he affordable today?”

There is no question individuals are often leads a team of that we are in the eye of forced to make impossi- 200 professionthe perfect storm and that ble choices. Many spend als working to it will take a sustained more than half their in- finance affordcommitment from legiscome on rent, sacrificing able housing lators, investors, develophealthy food or health across the ers and communities to care just to keep a roof country. right the ship. But there is over their heads. Without intervention, some inevitably face a path forward: the Low-Income eviction, trapped in a cycle of pov- Housing Tax Credit (LIHTC).

LIHTC is our nation’s most sucerty until and unless the market dynamics, or their own financial cessful tool for encouraging pricircumstances, change significant- vate investment in affordable rently.The unprecedented demand is al housing, creating millions of further compounded by the eco- safe, quality homes nationwide. It nomic headwinds of the past sev- benefits not just investors and deeral years that slowed the produc- velopers, but families seeking station of new housing and deepened bility and a chance to thrive. Since the need to preserve our critical 1986, LITHC has led to the creand tenuous existing affordable ation of 3.7 million units of affordhousing stock to avoid displacing able housing, serving more than 8 current residents.

Sustained million low-income households. high-inflation and interest rates af- Homes financed with housing

credits are generally required to stay affordable to low-income families for at least 30 years, giving families a platform to build brighter futures.

In addition, due to strong private-sector oversight stemming from LITHC’s public-private partnership model, properties are built to durable, high-quality standards, can be built in all types of communities and have a high occupancy rate over 97%. Notably, LITHC also supports 6.33 million jobs for one year, $257 billion in tax revenue generated, and $716 billion in wages and business income generated.

It's true that leveraging the tax credit is not without its challenges, including the inherent cost tied to asset management requirements for monitoring the compliance over three decades. However, engaging key partners like nonprofit syndicators as mediators can make the process extremely manageable, and the benefits far outweigh the burden.

Though tax credits are claimed by private-sector investors, the primary beneficiaries are the residents, including seniors, people with disabilities, veterans and hard-working families. In addition, economic- and impact-motivated investors earn a long-term

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UNAFFORDABLE AFFORDABLE HOUSING I COMMENTARY

stable tax break and developers are empowered to create safe, stable, high-quality housing in their communities. Yet, the current funding is insufficient.

A temporary 12.5% increase in the amount of housing credits created as part of the 2017 tax reform package has now expired. That means that as inflation has increased the cost of building new affordable units, there is also less subsidy than there was five years ago, which will result in fewer affordable units being produced, all while demand for affordable housing increases each day. We

need Congress to expand the housing credit.

Currently, the bipartisan Affordable Housing Credit Improvement Act has been introduced in Congress and would help finance nearly 2 million additional affordable homes over the next decade.

Virtually no new affordable rental housing can be built without the housing credit because it is financially infeasible to do so. We need to expand and strengthen the housing credit to provide more affordable homes across the country and put supply back in line with demand.

Homeownership benefits not just for those who buy a house

T

redlining, discriminahe Chicago region tion in mortgage lendhas one of the largest ing, and denying veterracial and ethnic ans of color access to wealth gaps in the United federal VA home loans States. This matters for are just a few. those families who cannot But other challenges save for college or retirepersist today, including ment or help their children to buy a home or start a Marisa Novara, mortgage lending rates business. It also matters to former Commis- in majority-Black and -Brown communities the entire city and region sioner of the that are abysmal comwhen generations of resi- Chicago pared to majority-white dents can’t reach their full Department of potential. Simply put, we Housing, is vice areas; appraisals valuing homes in majorityall do better when we all do president of white areas over those better. community in majority-minority For many, the greatest impact at The ones; and the highest single contributor to house- Chicago interest rates in two dehold wealth is homeowner- Community cades and a 30% inship. Passing along a home Trust. crease in construction or the proceeds from its sale can be one of the most effective costs since 2019. A recent study for ways to grow assets over genera- The Chicago Community Trust tions. At least, that’s how it’s worked found that the affordability gap for for generations of white Americans. a family of four with an annual inFor Black and Latinx buyers, the come of $88,250 attempting to purchase a newly constructed picture is more complex.

To start with, Black and Latinx house is about $160,000 — a huge families in Chicago own homes at a barrier to overcome.

With all these barriers, how can much lower rate than their white counterparts, and those that do of- homeownership become a means ten have less equity in their homes. of building wealth for Black and Some of the reasons are historical: Latinx potential buyers? Fortu-

nately, many Chicago-area entities, including the Trust, are working on strategies to make homeownership possible for more Chicagoans of color as well as ways to build equity in these homes. Some of these include: ◗ Shifting to modular home construction to lower costs. A recent report for the Trust found that a modular home built on cityowned land reduces costs by $76,000 or 17% compared to traditional construction on unsubsidized land. ◗ The mayor’s office recently announced a “Cut the Tape” initiative to reduce bureaucratic barriers and increase the pace of development, creating more stock and reducing costs. Zoning reforms could create options for more buyers, such as ending the ban on three-flats near transit in high-cost communities. ◗ The Trust is exploring with financial institutions a flexible, affordable lending product with a capped, below-market interest rate targeted to homebuyers unable to secure conventional financing. These bank-issued loans could increase purchasing power

Black and Latinx families in Chicago own homes at a much lower rate than their white counterparts, and those that do often have less equity in their homes. | GETTY IMAGES

for prospective homebuyers by about 33%. Coupling it with a loan loss reserve that eliminates private mortgage insurance could add another 10%. ◗ Continuing to invest in the full continuum of ownership from pre-purchase to ensuring that existing homeowners can age in place, including through the expansion of legalized additional dwelling units.

Combining these solutions with generous assistance programs, such as the Chicago Department of Housing’s down payment subsidies of up to $100,000, could help thousands of Chicago families

purchase a home for the first time.

Many more, who might not be a fit for a newly constructed, singlefamily house, could benefit from other options, such as a rehabilitated two- or three-flat or a share in a cooperative building. These alternatives could dramatically reduce the cost of entry to homeownership.

Placing more Chicagoans on the road to household wealth through homeownership will help close our profound racial and ethnic wealth gap — an outcome that would benefit those families, their communities and the entire Chicago region.

JANUARY 15, 2024 | CRAIN’S CHICAGO BUSINESS | 15

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Those high-earners also paid $3 billion more in total taxes than they did a year before, contributing $8.4 billion to state coffers in 2021.

“It’s good news for Illinois,” Robbins says. “Rich guys paid 53% more in taxes in a single year.”

As a result, they shouldered more of the total income-tax burden. Overall, 35% of the tax revenue collected from Illinois residents in 2021 came from those making more than $500,000, up from 28% the year before.

Individual income taxes are the state’s largest source of revenue, and the boost in payments from the most wealthy helped boost the state’s fortunes, allowing Gov. J.B. Pritzker and the General Assembly to offer $1.8 billion in tax cuts in the following fiscal year, Martire said.

The question is how long the good times lasted for those at the top. New York reported a 21% increase in people making over $1 million in 2021. Amanda Hiller, the state’s acting tax commissioner, said last month that she’s expecting a decline in millionaires in 2022 because of the 19% drop in the stock market.

WEALTH GAP From Page 3

Connect with Suzanne Janik at sjanik@crain.com for more information.

16 | CRAIN’S CHICAGO BUSINESS | JANUARY 15, 2024

America, it’s not building wealth for everybody the same way.”

Although he did not have a role in the report, John Petruszak, executive director of the South Suburban Housing Center in Homewood, concurs with Hendley. In his south suburban territory, “we see a drastic gap in the amount of wealth that people are generating by owning their homes,” he said.

Black buyers may have a smaller down payment at two crucial stages in the life cycle of homeownership.

As first-time buyers, it’s often true that “they don’t have savings, didn’t inherit money,” Petruszak said.

As move-up buyers selling a

The rich get richer in Illinois The number of taxpayers in the state reporting incomes over $500,000 in 2021 soared sharply, and so did the taxes they paid.

Total income of residents with incomes over $500,000 $150,000,000,000

$100,000,000,000

$50,000,000,000

$0

Tax paid $8,000,000,000

$6,000,000,000

$4,000,000,000

$2,000,000,000

$0 Source: Illinois Department of Revenue

house in an area that didn’t appreciate as fast as a home in a higherflying neighborhood, they wouldn’t have as much built-up equity to put into the down payment, Petruszak and Hendley agreed.

The Woodstock data uses mortgage industry parlance, categorizing these borrowers as people whose mortgages are at least 90% LTV, or loan to value. That is, the lender’s stake is 90% or more at the time of purchase.

The small down payment pattern is consistent across the metropolitan area. Woodstock broke the data down for the city, for each county and for the directional chunks of Cook County (for example, north and northwest). In all of them, the share of small down payments was at least 10 percentage points higher

for Black buyers than for the overall population of buyers.

In Chicago, 53.6% of Black homebuyers had a 10%-or-less down payment, compared to 32.8% of all buyers. In Cook County, it’s 40.6% of Black buyers compared to 16.4% of all buyers.

The biggest gap is in DuPage County, where 26% of all buyers put down 10% or less, while 54% of Black homebuyers did. The gap is 28 percentage points.

The report also breaks down Chicago’s 77 community areas, but Crain’s didn’t crunch the numbers for all of them, relying instead on the citywide figure.

The seven counties covered by the Woodstock Institute report are Cook, DuPage, Kane, Kendall, Lake (Illinois), McHenry and Will.

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GUNS From Page 3

Over eight hours, lawyers representing the city peppered Westforth with questions about how he and his staff handled situations in which a customer tried to purchase a gun for illegal use or resale on the underground market. Westforth explained how he looked for signs of bad intent: cash being exchanged between two customers, or a customer who clearly was drunk or high.

But as he said time and again, often the decision came down to something less tangible.

“Gut feeling is one of them,” he said at one point.

“It’s a gut reaction,” he said at another.

And: “You just feel like something’s not right.”

He later elaborated: “The way their — eye movement, who they’re with, nervous.”

If customers did raise suspicion, the store’s process for keeping track of them was far from precise: Employees wrote notes with their observations and suspicions, then posted them at the store’s cash register. How long the notes remained there varied.

Sometimes, the notes were discarded at the end of the day, Westforth said. If the customer was someone an employee wanted to keep track of beyond one day, the note was moved to a back office.

“Certain ones we keep,” Westforth testified, “depending on how we feel.”

But there was no guarantee that his employees would check the back office for a note if the customer returned, he acknowledged. No rules for how long to keep those notes. No rules for maintaining what he called the “be on the lookout” list. No comprehensive system at all for spotting problem customers.

More than 60,000 retail stores and pawn shops sell firearms in the United States, according to the most recent federal data. This glimpse inside one, as provided by Westforth himself in the 2022 deposition and in other records, puts in stark relief the weakness of government safeguards designed to keep guns from slipping into illicit markets and into the hands of criminals.

Guidelines set by the Bureau of Alcohol, Tobacco, Firearms and Explosives, the federal agency that oversees gun retailers, expects licensed owners like Westforth to act as the first line of defense in stopping the flow of illegal guns into vulnerable cities and towns. But with little financial incentive to forgo transactions and limited administrative penalties for failing to prevent illegal ones, some retailers have proven incapable or simply unwilling to play gatekeeper.

Earl Westforth personally has remained silent over the years even as he faced legal battles, scrutiny from federal agents and heaps of public criticism. Ultimately, he was able to leave the gun-selling business on his own terms, announcing his retirement over the summer. He did not respond to repeated requests from ProPublica for comment.

In his deposition, the details of which have not previously been re18 | CRAIN’S CHICAGO BUSINESS | JANUARY 15, 2024

Westforth Sports sold thousands of guns a year, according to this document submitted as an exhibit in Chicago’s lawsuit against the company. | CREDIT: CIRCUIT COURT OF COOK COUNTY

ported, Westforth portrayed himself as a well-intentioned business owner who adhered to the letter of the law. He said that over the years, he and his employees went “overboard” to prevent illegal sales and keep guns out of the wrong hands,

Darryl Ivery Jr., an Indiana resident who in 2020 purchased 19 firearms from Westforth, spending over $10,000 in just six months. Ivery, who later pleaded guilty to making false statements on federal background check forms in relation to the 2020 purchases, took most of those firearms about 12 miles west of Westforth’s shop and across the state line to Chicago, selling them illegally for profit.

Despite Ivery regularly purchasing multiple guns and paying with cash — red flags for straw sales and gun trafficking, according to law enforcement — Westforth and his employees welcomed Ivery’s business again and again.

Asked in the deposition whether Ivery’s string of purchases should’ve raised concerns inside his store, Westforth hedged, pointing out that retailers are not required to determine someone’s intent before selling them firearms.

“It’s totally legal,” he said. “Maybe the guy just likes guns.”

It’s impossible to know how

With little financial incentive to forgo transactions and limited administrative penalties for failing to prevent illegal ones, some retailers have proven incapable or simply unwilling to play gatekeeper. many times rejecting potential customers.

But in the deposition, Westforth was forced to address how his methods failed to prevent straw sales — where a firearm is purchased with the intent to resell it, most often to someone who is prohibited by law from purchasing guns.

One notable example involved

many guns trafficked by Ivery may still be in circulation. But several that have been recovered reveal a pattern that begins at Westforth Sports and ends on the streets of Chicago, where retail gun shops have been effectively prevented from opening inside city limits.

City police confiscated one 9 mm handgun purchased by Ivery from a teen found breaking into a South Side apartment. They collected another 9 mm from a man accused of brandishing the gun at a motorist during a traffic dispute. Officers responding to reports of a March 2020 shooting found a teen in possession of a .40-caliber handgun purchased

by Ivery, this one bought at Westforth Sports less than 30 days before.

All three were arrested and charged with illegal possession of a firearm.

For years, Chicago officials have loudly complained about the gun retailers in nearby Illinois and Indiana towns whose shops are the source of illegal guns they say continue to fuel the crime and gun violence that have long plagued the city.

Studies by the University of Chicago found that Westforth Sports

was the third-largest supplier of guns recovered by Chicago police.

The research, which was conducted in cooperation with the city and focused on 2009 to 2016, linked just over 850 such guns to Westforth.

“These eye-popping numbers are not the result of bad luck or coincidence or location,” Chicago alleged in the complaint explaining its case.

“They are the natural and predictable outcome of a business model that maximizes sales and profits by facilitating straw purchases and other illegal gun sales.”

The ATF views retailers as partners empowered with the discretion to decline any potential transaction they find suspicious, according to the agency’s best practices guide for retailers. That approach, as demonstrated by the transaction history of Westforth Sports and other retailers, has not halted gun trafficking.

At least 53 people, including Ivery, were indicted on federal gun trafficking charges over guns purchased at Westforth Sports between 2011 and 2021, according to a filing in the suit, which sought to compel Westforth to tighten store policies and pay unspecified monetary damages.

In May, less than a year after Westforth’s deposition, a county judge dismissed the suit, ruling that the Indiana business could not be sued in Illinois. The city has since appealed the court’s decision.

A decade ago, the ATF came close to forcing Earl Westforth to shut his doors.

After Westforth barely avoided losing his license a year earlier, a 2012 inspection found lingering problems. Agency interviews with Westforth employees, along with a review of the shop’s sales records, revealed repeated clerical errors and several serious breaches of federal gun laws.

Among them: After a customer failed a federally required background check, the shop allowed a person accompanying him to purchase the gun on his behalf.

In response, inspectors recommended revoking Westforth’s license — just as they had in 2011.

But a more senior agency official again opted for a “warning conference” to help correct Westforth’s lapses and ordered a follow-up inspection.

As part of the conference — one of three that ATF has required for Westforth since 2007 — Westforth’s employees, at his request, underwent a two-hour training session provided by the ATF covering proper record-keeping to prevent straw purchases. Yet the shop continued to rack up violation after violation in the following years.

Those violations led to citations and harsh words from the agency, including letters warning that “future violations, repeat or otherwise, could be viewed as willful and may result in the revocation of your license.” But the agency continued to grant Westforth additional chances.

In 2017, inspectors determined that Westforth was keeping incomplete records and had made a sale without conducting a background check or verifying the customer’s identity, as required. Then, in 2021, inspectors found a wide range of violations.

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port concluded, had again violated federal guidelines by failing to report to the ATF sales where customers purchased multiple guns — a key component of the agency’s anti-trafficking efforts. As they combed through the shop’s records, inspectors found the source of the problem. Westforth employees had been submitting the forms by fax, which had led to several failed submissions. The inspectors later urged Westforth to submit the forms by email.

Westforth employees also continued to have problems fulfilling their role as caretakers of federal records. ATF agents witnessed an employee “rip up and discard” two purchasing forms containing customer information after a sale fell apart because buyers were using a credit card with someone else’s name. Information on those potential buyers could have been useful to agents trying to trace straw sales or guns intended for crimes.

Westforth initially denied that his employees were discarding the forms, which federal guidelines require retailers to maintain. Then ATF agents audited the shop’s records and found that additional forms were missing.

Meanwhile, sales at Westforth’s shop had reached a high. He told ATF inspectors that in 2020, as the pandemic peaked and civil unrest over police misconduct spread, customers began to “line up out of the store, across the parking lot and down the block” to purchase guns.

That year Westforth’s annual sales of about 3,500 guns nearly doubled.

Agents remarked how the store was always busy. “The parking lot was always full and numerous customers were always present at any given time,” the ATF report said.

“There were always vehicles present with out of state, Illinois, license plates.”

Westforth also described in his deposition how he handled an important task required by ATF — socalled “trace” requests, or instances where a law enforcement agency asks the ATF to track down the source and purchase history of a gun. This is potentially important information if in fact the person who police confiscated the gun from was not the one who initially purchased it.

But instead of researching in re-

sponse to the requests, Westforth’s employees typically answered without consulting records, he said.

Memory sufficed, Westforth testified. And later, if that same buyer of the traced gun walked into the shop and wanted to buy another firearm, Westforth wasn’t particularly concerned.

“A trace, as explained to us by the ATF, could be for numerous reasons,” he said. “It doesn’t mean he’s a bad person.”

Multiple guns purchased by such a person wasn’t a concern either, despite federal guidance saying gun retailers should be on alert for customers who purchase several guns

ABBVIE

migraine treatment Qulipta and antipsychotic drug Vraylar.

“We looked very carefully at the FTC risk before we proceeded forward,” Gonzalez said. “And I can tell you, this acquisition is not anti-competitive.”

If and when the deals are approved, AbbVie intends to rely on its commercialization and research and development expertise to support the development and regulatory approval of Cerevel and ImmunoGen drugs.

Chief Medical Officer Dr. Roopal Thakkar told investors AbbVie has strong research and development capabilities for neuroscience drugs, supported by a research center in Cambridge, Mass., and a discovery site in Germany, which should help the company conduct clinical trials for early-stage Cerevel and ImmunoGen drugs.

“We’ve made tremendous prog-

From Page 1

financial performance through the end of the decade.”

AbbVie’s stock was up less than 1% today, trading at about $147.

AbbVie now plans to scale down its acquisition strategy, Chief Operating Officer Robert Michael told investors. While the company will continue to pursue small, early-stage deals, Michael said he doesn’t anticipate more megadeals for the “foreseeable future.”

AbbVie and analysts don’t expect much regulatory opposition to the ImmunoGen deal, and Gonzalez said he doesn’t anticipate antitrust obstacles on Cerevel, either. The Cerevel assets are still in development and have limited overlap with AbbVie’s neuroscience portfolio, which includes

retailers typically only face penalties if they knowingly allow straw purchases, and proving that is difficult. Plus, scrutiny of retailers is limited by a shortage of ATF compliance inspectors, he said.

The shortfall represents a “substantial challenge,” the ATF acknowledged in its statement. The agency employs about 800 inspectors. That’s not enough to meet the agency’s own goal of inspecting each licensed gun seller every three years, it said.

Moreover, said Forcelli, straw sales have been considered a low priority by some federal prosecutors. “It’s a jacked-up system,” he said, “but we can’t put it all on retailers.”

Gun dealers rarely lose their licenses. In fiscal year 2022, the last year for which there is complete data, less than 1% of the nearly 7,000 compliance inspections of federal licensees resulted in a revocation.

Vowing to get tougher on lax retailers, the Biden administration in 2021 announced a far stricter policy in which even one serious violation would result in the ATF moving to revoke a license. Multiple inspection reports on Westforth Sports include a violation that fits that description.

Chicago was’t the first city to sue Westforth Sports seeking remedies to gun crime and violence.

In 1999, the city of Gary filed a sweeping suit against gun manufacturers and local gun shops, including Westforth Sports, claiming the retailers chose to overlook obvious straw purchasers. Gary’s suit has wound its way through the state’s court system and continues to this day.

But cases against retailers and manufacturers are difficult to prove — in part because while retailers may make questionable sales, it can be difficult to show that those actions were intentional or negligent.

Westforth Sports and the city came to an undisclosed settlement in 2008, so the retailer was dropped from the case. Still, attorneys for Gary continue to hold up the shop’s sales history as evidence of industrywide negligence in preventing gun trafficking.

A 2004 analysis commissioned by the city of Gary examining a decade

of sales records identifies over 100 Westforth customers who engaged in sales that exhibited red flags associated with straw purchases.

More recently, the sides continue to battle in court over what records can and should be disclosed, with the city requesting more recent gun sale information from Westforth and other area retailers.

For its suit against Westforth, Chicago enlisted the help of Everytown for Gun Safety, a national nonprofit, and compiled a roster of straw buyers like Ivery who had purchased from the shop.

By 2021, with the city’s headline-grabbing lawsuit in full swing, Westforth had begun weighing retirement. He confessed as much to ATF agents during an inspection of the shop conducted that same year.

He’d taken over the shop, which opened in 1955, from his father, and had planned to pass it on to his sons, he told inspectors. But one of his sons had already left the company, and in the wake of the lawsuit and deluge of bad press that followed, the business had become “radioactive.”

By then he had already made one concession following the complaints from Chicago. Westforth Sports was no longer selling guns to Illinois residents.

He said in his deposition that after being sued by Chicago, he had changed policies. “Just too much going on up there,” he said.

In the back-and-forth with the lawyer for Chicago, Westforth explained, “Well, when you hear about the shootings, you see the stuff on the news.”

And then he elaborated: “No more guns will come up there.

Hopefully not from me. I’m not going to do it anymore.”

Ultimately, just as he told ATF he would, he shut down his business.

Chicago lawyers hailed it as a victory for public safety. Westforth touted it as an opportunity for customers, announcing a “retirement sale” to liquidate the shop’s remaining inventory.

“Don’t miss these amazing deals,” the announcement read.

“Once they’re gone, they’re gone forever.”

ress advancing our neuroscience R&D programs,” Thakkar said.

for neurological disorders has proven difficult for the scientific community broadly and none of Cerevel’s drugs have regulatory approval yet.

“While the neuroscience treatment potential is very large given the high unmet medical need, the risks remain elevated as the scientific community is still in the earlier stages of fully understanding most neurological disorders,” Conover wrote.

In the near-term, Cerevel is expected to dilute AbbVie’s adjusted earnings per share by approximately 19 cents in 2024 and 41 cents in 2025, due to research and development spending and operating and interest expenses. However, after the drug hits the market, which AbbVie predicts will be in 2026, the company expects it to start boosting earnings per share beginning in 2030.

“No more guns will come up there [to Chicago]. Hopefully not from me.”

— Earl Westforth, in a 2022 deposition in one transaction. “A customer can buy as many as they want,” he said, adding, “It’s not our job to tell him no.”

That’s up to the ATF, Westforth said. But, in fact, the ATF does rely on gun retailers to assist by providing accurate paperwork and, in some cases, denying sales when there are clear signs or a reasonable belief of illegal intent.

ProPublica asked Edgar Domenech, a former ATF chief operating officer, to review Westforth’s deposition and his inspection record. He was taken aback.

“His license absolutely should have been revoked back in 2011,” said Domenech, whose 25-year stint at the ATF spanned both Democratic and Republican presidential administrations. “What he’s saying, the processes he talks about, they’re sloppy at best. This was a golden opportunity to correct his bad behavior, but the agency fumbled it.”

The ATF declined to comment on its inspections of Westforth Sports or their outcomes.

“ATF’s core mission is to protect the public from violent crime, particularly crimes involving the use of firearms,” it said in a statement to ProPublica. Enforcing federal laws and regulations is “critical” to that mission, the agency said.

But Peter Forcelli, a former ATF deputy assistant director, said that

Promising schizophrenia drug Cerevel is developing various drugs that treat Parkinson’s disease and mood disorders, but Emraclidine, its most promising therapy that treats schizophrenia, has shown in clinical trials that it is more effective and safer than other types of antipsychotic drugs, executives said.

Emraclidine is expected to significantly contribute to AbbVie’s growth in the 2030s, with Morningstar’s Damien Conover projecting the drug could hit peak annual sales above $1 billion. He also notes in a report that Emraclidine’s patent extends into the early 2040s, providing protection from competitors.

But the Cerevel deal is not without risks, as developing treatments

Vernal Coleman is a reporter for ProPublica’s Midwest newsroom.

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