Crain's Chicago Business, Januar 22, 2024 by crainschicago

JOHN R. BOEHM

CHICAGOBUSINESS.COM I JANUARY 22, 2024

Chicago’s economy in 2024: Slow and steady A break from inflation, and maybe interest rates, will help many sectors. Tourism and hospitality could get a spark from the Democratic National Convention. | By John Pletz

hicago’s economy will keep grinding forward this year, albeit at a slightly slower pace than in 2023. Meh beats a recession, which is the goal of the Federal Reserve in trying to engineer an elusive soft landing for an overheated economy that emerged from the pandemic. Moody’s Analytics predicts Chicago likely will lag the nation, as it has for a while, in output and jobs. Chicago’s output of goods and services is expected to finish 2023 having grown a little more than 1%, compared with the 2.4% pace Moody’s forecasts for the U.S. The gap will narrow in 2024 to 1.1% GDP growth locally compared

with 1.7% nationally. Job growth this year will be closer to 0.5% locally, compared with just under 1% nationally, Moody’s says. In 2023, employment was growing at a 1.5% average pace in Chicago and 2.3% nationally. “Odds are Chicago will be pretty slow, but it will keep advancing,” Sarah Crane, a senior economist at Moody’s, says of the year ahead. “The economy has been resilient so far, and the worst seems to be in the rearview mirror. The risks of recession seem to have diminished. “The baseline forecast is for a soft landing in Chicago, like the rest of the nation. Population is-

How slow will we grow? Forecasts for growth in jobs and economic output. 2023 2024 GDP growth percentage 0.64%

sues will continue to be a drag on growth (in Illinois).” Inflation is waning, giving consumers and businesses a little relief. Now investors and economists are trying to divine whether and when the Federal Reserve will cut interest rates this year. Markets have soared on the prospect, and dealmakers are optimistic. Also looming large in Chicago is the return to the workplace, which has been stubbornly slow. Kastle Systems, which analyzes security-card swipes in offices, estimates that about 56% of Chicago-area workers are back in

Quarter 1 1.64% 1.15% Quarter 2 1.47% 1.4% Quarter 3 0.5% 1.49% Quarter 4

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0.8%

1.2%

1.4%

1.6%

1.8%

Investors are eager to move on from a year largely defined by economic uncertainty, rising interest rates and political change By Danny Ecker and Rachel Herzog JOHN R. BOEHM

After holding its breath for much of the past 18 months, the real estate market may finally get a chance to exhale in 2024. That’s the consensus of real estate experts in both the Chicago area and nationwide, sparked mostly by the Federal Reserve

0.4%

Big commercial real estate stories to watch

Experts across the spectrum weigh in on the effects of low inventory, a shifting interest rate environment and crime signaling in mid-December that it may begin cutting interest rates this year now that inflation has been brought to heel. But there are also worry points that will persist in 2024, including two wars, a high-stakes presidential election and, locally, Chicago’s problem with crime — both real and perceived — and popu-

0.2%

Source: Moody’s Analytics

How will the housing market look in the coming year? By Dennis Rodkin

0.63%

lation loss and the spring referendum on raising real estate transfer taxes on upper-priced property sales. See HOUSING on Page 15

THE JOHNSON EFFECT

While 2023 brought the end of the COVID-19 public health crisis, most people in Chicago commercial real estate are eager to say goodbye to a year largely defined by economic uncertainty, rising interest rates and political change. Here are some key things that happened last year and what to look for this year:

What happened: Brandon Johnson’s election spooked most commercial real estate investors, who overwhelmingly backed Paul Vallas in an April mayoral run-off and feared Johnson’s progressive agenda might threaten their fragile post-COVID recovery. Their concerns started to become reality in the fall, when the mayor pushed See REAL ESTATE on Page 18

ORPHE DIVOUNGUY The Chicago-area economy is cooling too quickly because of several converging challenges. PAGE 2

REAL ESTATE This West Loop condo’s brick barrel ceilings were originally baking ovens. PAGE 4

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The economy in the Chicago area is cooling too quickly

ccording to the most recent employment data available, November 2023 marked the first month when the Chicago metro area finally regained all the jobs lost at the beginning of the COVID pandemic. While this signifies progress, it still falls short of accounting for all the jobs that would have been created in the absence of the pandemic. As of November 2023, the total nonfarm payrolls in Chicago remained approximately 200,000 jobs below that benchmark. In stark contrast, the U.S. labor market has defied expectations, adding jobs at a pace that has remained above pre-pandemic Orphe trend, driven by strong Divounguy largely demand and a surge in labor force participation. Sadly, employment growth in the Chicago metro is already decelerating rapidly, faster than in the rest of the country, and perhaps even the anticipated Federal Reserve rate cuts this year may not be sufficient to help the Chicago area avoid an economic contraction.

Chicago has little margin for error moving forward, necessitating more judicious consideration of local policy proposals. From November 2022 to November 2023, employment here grew a meager 0.8%, compared to the national rate of 1.8% during the same period. It certainly didn't help that ongoing net outmigration continues to have a detrimental impact on population growth in the Chicago area. While the U.S. unemployment rate remained fairly constant at 3.7% in the second half of 2023, the Chicago-area unemployment rate rose to 4.7% in November from 3.9% in June. Perhaps an even more alarming concern is the state of average hourly earnings. While annual nominal U.S. wage growth remains robust at 4.1%, Illinois is experiencing sluggish growth at just 0.4%. In the Chicago metro area, annual wage growth has plummeted by 1.97% over the past year. Although the latest Federal 2 | CRAIN’S CHICAGO BUSINESS | JANUARY 22, 2024

Open Market Committee's summary of economic projections has contributed to lowering interest rates and to raising the possibility of a soft landing, Chicago and the state of Illinois may not be able to evade an economic contraction. Several challenges are converging. First, there are the depleted excess pandemic savings and rising household debt. Second, a significant number of companies face debt maturing this year and will need to refinance at substantially higher rates, affecting future earnings, investment decisions and hiring. Third, the rising number of commercial real estate properties teetering on negative equity and the brink of default poses a significant threat. Chicago ranks among the cities with the most significant shortfalls in office and retail occupancy rates and potential commercial property distress. Distress in the commercial sector would place substantial pressure on regional banks and further tighten financial and credit conditions. Consequently, employers reliant on these bank loans to make payroll could face difficulties, potentially leading to layoffs. In addition to the risk of job loss, turmoil in the commercial sector and the loss of tax revenue from foreclosed commercial properties could result in higher property tax burdens imposed on residential property owners. In the March 2024 primary, voters will decide on whether to approve a change in the real estate transfer tax structure. While the tax proposal has been characterized as a "mansion tax," it would also apply to commercial and industrial properties. Supporters of the tax increase argue the additional revenue will aid the city's efforts to combat homelessness. Opponents point to already low office occupancy rates and disproportionately high commercial property loan distress. The heightened tax burden could further depress property valuations and elevate the risk of delinquency and default. The jury is still out on the potential impact of this tax policy change. One thing is clear: Chicago has little margin for error moving forward, necessitating more judicious consideration of local policy proposals. While a reversal of Fed policy and declining short-term yields in 2024 could provide some relief, that may not suffice. Orphe Divounguy, a senior economist at Zillow and executive adviser at Quantitative Research Group, writes a monthly column for Crain’s.

The first big IPO of 2024 is partly owned by a Walgreens affiliate KKR to share control of BrightSpring Health Services after offering By Michael Hytha, Bloomberg

BrightSpring Health Services filed for a U.S. initial public offering on the first business day of the New Year, listing a phalanx of Wall Street’s biggest banks in its plans. The home and communitybased health-care services provider backed by KKR was planning to seek to raise $1 billion in an IPO, Bloomberg News reported in September. The Jan. 2 filing with the U.S. Securities & Exchange Commission didn’t include proposed terms of the offering, but in an updated filing last week the company said it planned to raise as much as about $962 million if the share price is $16.50. The company plans to sell 53.3 million shares, which could rise to 61.3 million, at an expected price of between $15 and $18 each. After the IPO, KKR and an affiliate of Walgreens Boots Alliance will own about 68% of the company, which will be worth about $3 billion after the offering. In 2019, KKR bought BrightSpring for $1.32 billion with an affiliate of Walgreens taking a minority stake, Crain's sister publication Modern Healthcare reports. As part of the transaction, BrightSpring merged with PharMerica to become a leading provider of home and community-based health and pharmacy services. In a statement at the time, KKR said the merged company had combined revenue of about $4.5 billion. BrightSpring, based in Louisville, Ky., filed for an IPO publicly in Octo-

BLOOMBERG

ORPHE DIVOUNGUY ON THE ECONOMY

ber 2021 and had planned to list later that year. Faced with a souring market for new listings, it put its plans on hold and then withdrew its filing. BrightSpring had a net loss of about $150 million on revenue of $6.45 billion for the nine months ended Sept. 30, according to the Jan. 2 filing. Goldman Sachs Group, Jefferies Financial Group, Morgan Stanley, UBS Group, Bank of America, Guggenheim Securities and Leerink Partners are listed in the top tier of underwriters for the listing. Six banks and KKR itself are also listed in the filing as underwriters.

Only $26B in 2023 IPOs BrightSpring’s filing follows one of the worst years for U.S. listings of the past decade, with only $26 billion raised on US exchanges, according to data compiled by Bloomberg. That was up slightly from 2022 but less than onetwelfth of the record-setting $339 billion raised in 2021, the data show.

Listings last year had a short-lived burst of activity that began with chip designer Arm Holdings Plc in September and ended with sandal maker Birkenstock Holding in October. Those two and two others that went public in between them, Instacart and Klaviyo, all fell below their IPO prices, cutting short the market rebound. Arm and Birkenstock have since climbed and are trading above their offer prices. Since then, an array of companies such as cloud and data security startup Rubrik Inc. and EQT ABowned health-care payments company Waystar Holding have been reviewing their plans, with most looking to 2024 to go public. Others considering going public include Reddit Inc., while Chinese electric-vehicle maker Zeekr Intelligent Technology Holding Ltd. has already filed. Clinical state biopharmaceutical company Cg Oncology also filed publicly Tuesday for an IPO, listing Morgan Stanley and Goldman Sachs among its underwriters.

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Stellantis pulls out of Chicago Auto Show The automaker, a perennial pillar at the event, is re-evaluating its strategy By Vince Bond Jr., Automotive News

Paris Schutz (left) and Brandis Friedman of “Chicago Tonight” | WTTW NEWS

WTTW advisory board’s annual report filled with ‘concerns’ The chairman of the station’s community advisory board said the station’s management has not been transparent, adding that the group was “blindsided” by recent changes | By Corli Jay

he community advisory board for Window to the World Communications’ public broadcast station WTTW-TV/ Channel 11 used its most recent annual report to express concerns over changes to its “Chicago Tonight” program as well as communication issues with management. In the report, which was released on Dec. 19, the 26-member board stated concerns after “observing over the past year the work of the News Department, in general, and the presentation of ‘Chicago Tonight,’ in particular.” Community advisory boards, which are required by law in every public broadcast corporation, have advisory roles and cannot exercise control over management or daily operations of stations, according to the Corporation for Public Broadcasting. The concerns of the advisory board include “numerous changes” See WTTW on Page 15

“The viewing public was blindsided and had to work to find where ‘Chicago Tonight’ was on the schedule. It wasn’t where you expected it to be.” — Joseph Morris, chairman of the WTTW community advisory board

Stellantis is pulling out of next month’s Chicago Auto Show as it reevaluates its approach to vehicle expos. Stellantis, normally a staple at auto shows across the country, said it is assessing its presence on a “case-by-case basis.” “With a focus on preserving business fundamentals to mitigate the impact of a challenging U.S. automotive market, Stellantis is working to optimize its marketing strategy as it relates to auto shows,” a Stellantis spokesman said in a statement. “To be as efficient as possible in our media spend, we are evaluating participation in auto shows on a case-by-case basis, while prioritizing opportunities for consumers to experience our vehicles firsthand.” The automaker, citing last fall’s UAW strike, pulled out of the Specialty Equipment Market Association show and the LA Auto Show late last year in addition to this month’s CES event in Las Vegas to cut costs as part of its strike contingency plan. The Stellantis brands have been a pillar at the Chicago show for decades, said Mark Bilek, the show’s senior director of project management, membership and technology. He said it was one of the first expos to have the Camp Jeep track in 2005. The Camp Jeep setup was

introduced at auto shows in 2004 and has given rides to more than 2.85 million people in the years since, according to Stellantis. “Up until we received the unfortunate news a couple of weeks ago, we’ve approached the brands with different opportunities to make their participation possible,” Bilek said in an email. “In fact, we will always have space for them even if they decide to participate at the eleventh hour.”

The automaker pulled out of the Specialty Equipment Market Association show and the LA Auto Show late last year in addition to this month’s CES event in Las Vegas. Although Stellantis won’t be there, Bilek said the Chicago show “will continue its February tradition of providing a rich combination of cars, trucks and SUVs as well as many indoor test tracks and other interactive opportunities that show-goers have come to enjoy for more than a century.” See STELLANTIS on Page 19

The case of the $500 sandwich and the Lakeview condo board By Dennis Rodkin

On Jan. 1, Lakeview condo resident Bonnie Rubin was to pay the first of 10 monthly payments, $50 each, to cover a fine assessed by her condo building’s board. The $500 offense was perpetrated by her brother, Wayne Miller, when he ate a Jersey Mike’s veggie sandwich on the pool deck at her building over Labor Day weekend. It was a first-time offense. “It’s unreasonable,” Rubin says.

“Nobody slipped on a piece of lettuce, no litter fell in the pool, no one was inconvenienced. I could have parked in a handicapped space for two full days and it would have been the same fine.” The story of Rubin's brother's $500 sandwich illustrates the power a homeowners association wields, sometimes in ways that irk its residents. Rubin doesn’t dispute that the pool regulations at her building, Commonwealth Plaza on Di-

versey Avenue, stipulate that no food is allowed, or that as they entered the pool deck, she and her brother passed a sign that reiterates the rule. “What’s preposterous,” Rubin says, is that “they went straight to the $500 fine, with no warnings.” Rubin, a semi-retired reporter who spent 25 years at the Chicago Tribune, checked with 10 condo buildings and found that in every one, “there’s a series of warnings before you ever get fined, whether it’s for eating by

PROVIDED BY BONNIE RUBIN

A resident’s brother was caught on camera eating a sandwich next to her condo building’s pool. It was a first offense.

Brother and sister Wayne Miller and Bonnie Rubin at the Commonwealth Plaza pool. The security camera image shows a paper sandwich wrapper in Miller’s hand.

the pool, smoking weed in the halls or playing loud music.” Rubin appealed the fine at a Nov. 21 meeting of the Homeowners Association board and a

week later received a reply that the board was holding firm. “No negotiation, no reduced fine,” See SANDWICH on Page 16 JANUARY 22, 2024 | CRAIN’S CHICAGO BUSINESS | 3

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This West Loop condo’s brick barrel ceilings were originally Uneeda Biscuit baking ovens The fifth-floor condo that harks back to the earliest days of the Nabisco food company came on the market priced at $1.7 million | By Dennis Rodkin

4 | CRAIN’S CHICAGO BUSINESS | JANUARY 22, 2024

COLDWELL BANKER PHOTOS

West Loop condo has three rooms with rounded brick ceilings that not only give the space a distinct look but hark back to the earliest days of the Nabisco food company, when the rooms were its ovens. The condominium, about 3,350 feet and three bedrooms in an 1880s Randolph Street building that has a Washington Boulevard address, “isn’t like anything else you’ll see on the market,” said listing agent Melissa Vasic of Coldwell Banker. The fifth-floor condo was listed Dec. 28 at $1.7 million. The seller, identified in Cook County records as Patricia Harris, bought the unit in 1996 from the development firm that converted the old industrial complex of buildings on Washington and Randolph at Carpenter Street to condominiums. Harris has held onto the condo for nearly 30 years “because it’s so special,” Vasic said. Harris could not be reached for comment. Placing the brick-vaulted ovens on the top of the building would have been a safety move, putting the heat and flames above most workers. Two neighboring units on the

fifth floor have one dome each, but Harris’ unit has three, for the living and dining rooms and a bedroom. The two other bedrooms are one flight up, in a space added beneath the building’s roof during the conversion

to lofts. The building, at Randolph and Carpenter, predates Nabsico. Kennedy Biscuit Company built it in 1884, according to a 2014 report to the Commission on Chicago Landmarks. In sub-

sequent years, Kennedy was one of many biscuit companies around the nation amalgamated into the National Biscuit Company by two Chicago attorneys, Adolphus Green and William Moore, and an Ohioan,

John Zeller. According to an article from the American Business History Center, the large combined baking firm modernized the traditional cracker-barrel method of distribution. By 1910, Americans were buying 10 million packages of the company’s Uneeda Biscuits a month, the article says, and by the 1920s, the company “was far larger than such well-known companies as H.J. Heinz, Campbell Soup, Kellogg, Hershey and Wrigley.” In Chicago, Uneeda Biscuits were baked in the brick vaulted ovens on Randolph, part of a complex that grew to include buildings on Washington. Nabisco moved its headquarters from Chicago to New York in 1906 but continued to use the complex of West Loop buildings. In the early 1950s, Nabisco sold the buildings to a textbook wholesaler, J.W. Wilcox & Follett. In the 1990s, the textbook company, by then just called Follett and based in River Grove, sold the buildings to a developer. According to a 1994 article from the Chicago Tribune, the conversion to about 180 lofts was a $44 million project.

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Pru Plaza owner plans big renovation, gets debt relief The owner of the two-tower office complex plans to put more than $50 million into the property over the next few years By Danny Ecker

The owner of the two-tower Prudential Plaza office complex plans to spend tens of millions of dollars renovating the property to compete for tenants in a tough office market, a commitment that has helped buy it more time to pay off its massive loan. Wanxiang America Real Estate Group reached a two-year extension agreement with its lender on the 2.3 million-square-foot complex, pushing the maturity date on its $389 million mortgage to at least 2027, according to a statement. The loan agreement includes options to extend the maturity through 2029. The deal gives the Chicago developer some breathing room to recover from one of the worst stretches ever for downtown office landlords. The remote work movement and higher interest rates have left office building owners with maturing debt in a bind, forcing many into foreclosure and pushing some to surrender their properties to their lenders. Wanxiang still had until August 2025 to pay off its mortgage on Prudential Plaza, which it acquired in 2018 for $680 million. But with rising borrowing costs and many tenants cutting back on workspace, the developer began negotiating with its lender last year to modify terms of its loan, expecting it would need more time — and more capital — to modernize and lease up the property and be in position to refinance. Complicating that effort was that the loan was packaged with other loans and sold off to commercial mortgage-backed securities investors, which often makes it difficult to change loan terms. But Wanxiang was able to strike an agreement with Washington, D.C.-based CWCapital, a special servicer overseeing the loan on behalf of bondholders. "We are pleased with this outcome and remain committed to Pru for the long term," Wanxiang Managing Director Larry Krueger said in the statement. "Our significant infusion of capital into the property will not only allow us to continue to fully fund new and renewed leases but will also 6 | CRAIN’S CHICAGO BUSINESS | JANUARY 22, 2024

allow us to elevate the tenant and visitor experience throughout the buildings." A CWCapital spokesman did not respond to a request for comment. Office landlords typically need to commit new capital to a building to buy more time to pay off such a big mortgage, and Wanxiang is about to begin an ambitious renovation plan in that vein that it hopes will lure more companies to its tenant roster.

Deck will connect buildings The centerpiece of the effort is the rooftop deck on the 11th floor of One Prudential Plaza at 130 E. Randolph St., which Wanxiang will connect with an enclosed glass walkway to the Two Prudential Plaza tower at 180 N. Stetson Ave. The vacant 11th-floor space in Two Prudential will be built out with a 20,000-squarefoot conferencing center and entertainment area with a new bar, lounge and co-working space. On One Prudential's rooftop itself, Wanxiang will add a pickleball court, putting green, more landscaping and a new bar area overlooking Millennium Park. The tenant lounge on the same floor will be expanded and redesigned with co-working space, two golf simulators and a "stateof-the-art podcast room," and the adjacent fitness center will be renovated. The lobbies of both buildings also will be updated with a new coffee bar and lounge seating, Wanxiang's statement said. Krueger estimated the building's ownership will spend at least $50 million over the next four years on the effort to revamp the property, an amount that includes both capital improvements and costs associated with leasing efforts. It's the kind of investment some landlords have been wary of making in their buildings as they see companies downsizing their office footprints and property values falling. But new and updated office properties — and those with owners proving their willingness to put new money into their buildings — have outperformed the rest of the market as tenants hunt for space that will help compel employees to show up. That gives Wanxiang confi-

A rendering of Wanxiang America Real Estate’s planned renovation of the One Prudential Plaza rooftop. Above is the two-tower Prudential Plaza. | WRIGHT HEEREMA ARCHITECTS

A rendering of the redesigned tenant lounge at One Prudential Plaza. | WRIGHT HEEREMA ARCHITECTS

dence in its bet that more dynamic amenities could help it fill up Prudential Plaza, which is close to 78% leased. Wanxiang's wager on the property's future started last year, when it bought out private-equity giant Blackstone Group's preferred-equity portion of a $611 million total debt package that was on the building. A fund managed by Chicago real estate firm Sterling Bay is also a minority investor in Prudential Plaza. Wanxiang also has another big carrot to dangle in front of prospective tenants as it moves forward with the renovation: nam-

ing rights to the property itself. Krueger said his firm recently settled a three-year legal battle with Newark, N.J.-based Prudential over a deal to buy out the financial giant's naming and signage rights at the complex. Prudential owned One Prudential Plaza from its 1955 construction until 2000 and developed the 64-story Two Prudential Plaza tower in 1990.

Renaming now an option As a result of the settlement, Wanxiang can now rename and re-sign the property, which features the Prudential name in illu-

minated letters overlooking Millennium Park. That signage would be replaced if Wanxiang can land a new anchor tenant seeking naming rights, Krueger said. Prudential, meanwhile, is on its way out of the building and adding to the leasing challenge for Wanxiang. The financial company is close to finalizing a lease for about 25,000 square feet at 150 N. Riverside in the West Loop, where it would move its Chicago office from just more than 50,000 square feet at its longtime namesake complex, according to people familiar with the negotiation. As a small consolation for Wanxiang, the firm is part of the ownership of 150 N. Riverside, which was developed by Chicago-based Riverside Investment & Development. A spokeswoman for Riverside did not provide a comment and a Prudential spokesman did not respond to a request for comment. CoStar News first reported Prudential's lease negotiations at 150 N. Riverside. Prudential Plaza joins a short list of big office properties downtown whose owners have inked loan extensions with their lenders. Staring down an imminent maturity, New York-based developer 601W last summer got two more years to pay off a $678 million debt package tied to the Aon Center. 601W also recently got a three-year extension to pay off a $310 million mortgage that was about to mature on the 40-story building at 1 S. Wacker Drive. Wanxiang, the Chicago-based real estate investment arm of Chinese auto parts manufacturer Wanxiang Group, has wagered heavily on downtown real estate projects over the past decade. In addition to Prudential Plaza and its stake in 150 N. Riverside, Wanxiang helped finance the 1.5 million-square-foot BMO Tower next to Union Station, the 76-story One Chicago luxury residential tower in River North, and Sterling Bay's 46-story hotel and apartment tower at 300 N. Michigan Ave., among other projects.

Isley Brothers’ widow lists R. Kelly’s former estate By Dennis Rodkin

A giant south suburban mansion owned first by now-imprisoned recording artist R. Kelly and, after he lost it in foreclosure, by Rudolph Isley of musical group the Isley Brothers, came on the market earlier this month, a few months after Isley’s death. Elaine Isley, Rudolph’s widow, is asking just under $3.5 million for the gated Olympia Fields estate, which has a 21,000-square-foot mansion with seven bedrooms and 12 bathrooms and a waterpark-size pool on 3.7 acres. It’s represented by Alex Wolking of Keller Williams OneChicago. The Isleys bought the Maros Lane mansion in 2013 from the lender that seized it from Kelly in foreclosure several months earlier. At the time, it was “derelict and left to ruin,” Wolking says, with floodwater in the basement and other damage from neglect throughout the house. Kelly bought the property in 1997, the year after his song “I Believe I Can Fly,” which he wrote for the Michael Jordan-Bugs Bunny movie “Space Jam,” propelled him to fame. Kelly paid $1.5 million, the Cook County Recorder of Deeds — later subsumed into the Cook County Clerk's Office — reported at the time, and tore down the 15,000-square-foot home that was

Elaine Isley, Rudolph’s widow, is asking just under $3.5 million for the gated Olympia Fields estate, which has a 21,000-square-foot mansion with seven bedrooms and 12 bathrooms and a waterpark-size pool on 3.7 acres. | KELLER WILLIAMS ONE CHICAGO

on the site. In 2011, JPMorgan Chase launched a foreclosure action against Kelly. By that time, Kelly had been under investigation for more than a decade over reports of his sexual abuse of a minor. In 2022, Kelly was sentenced to 30 years in prison after a New York court found him guilty of eight counts of sex trafficking and one count of racketeering. It's not clear when Kelly vacated the property, but in June 2013 the Cook County sheriff forced surrender of the title, and three months later JPMorgan Chase sold it to the Isleys for $585,000.

Rudolph Isley was one of three brothers from Cincinnati who began performing in the 1950s. Their first big hit was “Shout,” released in 1959. Later hits include “This Old Heart of Mine,” a 1966 release, and the great funk hit “It’s Your Thing,” released in 1969. Rudolph Isley, co-writer of the group’s “That Lady” and other tunes, died in October at age 84.

Purchased ‘as a wreck’ The Isleys bought the property “as a wreck,” Wolking says. Floodwater had ruined the basement, he says, so on that level of the house, “they ripped everything

out and started over.” They also replaced the kitchen and movie theater with newer models, ordered custom-made light fixtures, resurfaced the worn-out sports court and in general “refreshed it all,” Wolking says. One component that was in good condition, according to Wolking, was the swimming pool area, a two-story space designed to look like a jungle oasis with stone walls around the pool and hot tub, artificial palm trees, thatch-roofed huts and a waterfall. Wolking said Elaine Isley declined to comment. The house has a stone-and-log

exterior, with logs for columns and beams on the main interior rooms. A few rooms have a log cabin atmosphere, with wood on the walls and ceilings and a big river rock fireplace hearth. The kitchen has a table that seats 20. The house has an elevator, one bedroom done in a Chicago Bulls theme and a glass-walled exercise room. Elsewhere on the property are an eight-car garage with its own bar and bathroom, a full-sized outdoor basketball court and a pond. In 2022, Crain's reported that the Isleys had one of suburban Cook County’s biggest property tax bills. At nearly $247,000, it was the only residential tax bill in south Cook County on the list of the dozen most expensive. The rest were all in lakefront towns on the North Shore. The $3.5 million asking price is at the extreme upper end for Olympia Fields, where the average price of all homes sold in the past two years is a little under $325,000, according to Redfin. The last time a house sold for more than $1 million in the area was a $10.5 million sale in September 2021, at the height of the housing boom. Nevertheless, specialized estates have been known at times to make their own markets. In 2022, an opulent Homer Glen mansion with its own Barbie museum sold for $5.25 million.

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Kellanova marketing chief talks about what’s next after bizarre Pop-Tarts promo Marketers had a hunch the bowl game stunt would do well. They had no idea it would be the biggest campaign in the brand’s history. By Erika Wheless, Ad Age

Kellanova marketers were pretty confident that its PopTarts Bowl game activation would do well, but even they could not predict that it would become the biggest earned campaign in the brand’s history. The marketing stunt—which involved lowering a smiling PopTarts mascot into a giant toaster where it was turned into a pastry snack for the winning Kansas State football team—set a new standard for bowl game marketing, while drawing the brand widespread attention on social media that it enjoyed after the Dec. 28 game. Kellanova execs did not comment on the strategy in the days following the game, but Ad Age recently caught up with Kellanova Chief Marketing Officer Julie Bowerman to learn more about how the brand rode the wave of virality for its first sponsored bowl game. “There were a couple of things that made this partnership relevant for our brand,” Bowerman said. “First is that we have a long history of being a great snacking brand. And when you think about watching football, that is a snacking event, whether you are at the stadium or at home.” The bowl game followed PopTarts’ “Agents of Crazy Good” campaign launched in July of last year. The creative draws from the “Crazy Good” ads that ran in the 2000s, but now the Pop-Tarts have updated animation. And unlike in the original spots, where the characters ran away from fans trying to eat them, the Pop-Tarts characters in the newer spots put themselves in situations to entice humans to snack on them. “Our ‘Crazy Good’ platform fits nicely into college football,” Bow-

erman said. “It can exemplify the experience in college football, and fans can get a little crazy, have fun at that moment of celebration.” The Pop-Tarts bowl game generated an estimated $12.1 million worth of media exposure for Kellanova as of Dec. 29, according to Apex Marketing Group. For comparison, the Duke’s Mayo Bowl— which in recent years gained notice for dumping mayo on the winning coach in a victorious bath—generated an estimated $8.5 million worth of media exposure for the game, held a day before the Pop-Tarts Bowl. (The bowl game Pop-Tarts sponsored has cost around $2 million in the past, as reported by Sportico’s Eben Novoy Williams. Bowerman declined to give an exact figure on the cost of this year’s game.) Weber Shandwick partnered with Kellanova’s internal marketing team for the creative and Starcomm handled the media buy. Read on for more of Ad Age’s conversation with Bowerman about the planning process, coordinating with Cheez-It and Pop-Tart’s Super Bowl plans. This interview was edited for clarity and length. When we last spoke before the bowl game, you said that the goal was to get folks thinking of Pop-Tarts as a snack, not just for breakfast. Any early sales metrics or KPIs you can share? ◗ We don’t have anything directly on sales just yet, but it’s still pretty early. But I can say that this has been our single biggest earned campaign that we’ve ever seen for the brand. We had over 150,000 fans sign up to bet as part of our pre-game Prop-Tarts betting experience for the chance to win a million toaster pastries. On

The Pop-Tarts Bowl was the brand’s biggest earned campaign ever. | FRONT OFFICE SPORTS VIA PEPPER BROOKS ON TWITTER

game day, we had six times as many people searching for our brand, and three of X’s top trending topics were Pop-Tarts. And then the mascot was ranked by USA Today as the number one mascot during the entire bowl season. That was exciting to see. So our sense is that’s going to all translate to sales for sure. But early metrics are blowing us away, too. The Pop-Tarts Bowl is a multi-year deal. How do you top that next year, or do you let this stand alone? ◗ When you hit a home run, you certainly continue to ride it. I think you’ll continue to see us building off the platform of “Crazy Good,” with mascots, and more fun and humor. Those will continue to be a big part of what we communicate in advertising and experiences. This was not a one-and-done for sure. As it relates to the next bowl game, we haven’t even begun to think about that. I’m sure there will be much that we use and learn from this year to, hopefully, have another star performance next year.

What stood out in the planning process? Were there any ideas that you all didn’t think would be totally brand-safe at first glance? ◗ I have to give a lot of credit to Weber Shandwick and our internal marketing team. A big part of this was listening to our consumer and using the outside-in approach to tell us what was going to resonate and break through culture. The parts that were humorous and maybe perceived as pushing the envelope a little bit, were really grounded in what we know about our consumers. And that gave us confidence in making those decisions. There were a lot of planning meetings where we were just laughing. Someone would bring forward an idea, and we would just all laugh. We knew when that happened, we had a great idea. Any chance we see a Pop-Tarts Super Bowl ad this year? ◗ I can’t comment on what we have planned for the Super Bowl. You’ll be hearing from us soon on what we’re doing for the Super Bowl, so I can’t reveal too

much at this point. Were the Pop-Tarts and Cheez-It Citrus Bowls coordinated? (Kellanova also sponsored the Jan. 1 Cheez-It Citrus Bowl, where a sunglasses-wearing Cheez-It mascot rose out of a giant box of the crackers. But this one held a sign saying, “Non-edible mascot.”) ◗ Cheez-Its has been a partner of the Citrus Bowl for some time now, so we have a lot of great learnings and experiences activation in college football with Cheez-Its. Certainly a lot of those learnings translated into how we designed and thought about the Pop-Tart’s experience. As for the coordination, yes to some extent. The teams work very closely together. The woman who leads experience planning for Pop-Tarts works really closely with the woman who leads experiences for Cheez-Its. So there is cross-sharing and looking for opportunities that can amplify the activation of the other. Erika Wheless writes for Crain’s sister site Ad Age.

Brookfield Property’s debt cut to junk by S&P on real estate concerns By Esteban Duarte and John Gittelsohn, Bloomberg

Brookfield Property Partners LP’s issuer credit rating was cut to junk and put on a negative outlook by S&P Global Ratings as the real estate investors’ credit quality deteriorates amid higher borrowing costs and weak office demand. The credit grader lowered Brookfield Property’s score by two steps to BB from BBB-, the lowest level of investment grade, according to a statement late last month. It remains on negative 8 | CRAIN’S CHICAGO BUSINESS | JANUARY 22, 2024

outlook as the company is pressured by upcoming debt maturities over the next two years. Higher interest rates have hit commercial real estate values in the past few years, with office facing steeper drops as remote work becomes more common. US office prices have fallen 35% and malls have dropped 20% since peaking in the first quarter of 2022, according to Green Street, a real estate analytics firm. “We expect sector headwinds facing commercial office real estate will generally remain in place over the next several years,

with weaker tenant retention, lower occupancy, and heightened incentives (through tenant inducements) to attract new tenants,” S&P analyst Michael H. Souers wrote. The firm’s maturities will increase in 2025 with approximately $2.3 billion of total debt coming due, according to S&P. A lack of progress in addressing these maturities well ahead of their due dates could hinder S&P’s view of the company’s liquidity, the grader said. S&P has a one in three chance of downgrading the debt further in the next 12

months if Brookfield Property fails to refinance upcoming debt or office occupancy weakens further. Brookfield Corp., the parent of the property unit, retains investment-grade rating, which is likely to help the property unit’s position with lenders, according to S&P. “This rating relates to a specific entity within Brookfield’s real estate business and has no impact on either the pricing or ability of Brookfield to access the real estate capital markets,” a spokesperson said in an emailed

statement. “The report makes reference to retail assets having ‘recovered to pre-pandemic levels.’ In fact, the performance is well in excess of 2019 levels, the balance sheet was substantially deleveraged in 2021 and the prospects for these assets has never been more compelling.” Brookfield Property owns approximately $130 billion in total assets, according to S&P. The company’s weighted-average debt maturity shrunk below three years in recent quarters, to 2.6 years as of Sept. 30, 2023, which “poses elevated risks.”

The family behind Tavern on Rush brings a new restaurant — and a pasta lab — to the Far Northwest Side By Jack Grieve

A new quick-service Italian shop and pasta lab from the restaurant group behind Tavern on Rush is set to open on the Far Northwest Side at the end of the month. Stefani’s Bottega Italiana, located at 6075 N. Milwaukee Ave. in Norwood Park on the border with Gladstone Park, will offer authentic dishes from Italy, particularly the Bologna and EmiliaRomagna regions. Menu items will feature handmade pasta, a seven-layer lasagna verde Bolognese, schiacciata sandwiches and Roman-style pizza. Overseeing operations at Stefani’s Bottega is chef Vincenzo Vottero. A Bologna native, Vottero said pasta is like his religion. “I think Chicago needs to try some real traditional Italian food,” he said. Vottero is not cutting any corners when it comes to ensuring authentic, high-quality cuisine. “If you want good food, you have to use first-class material,” he said. “It’s the same mortadella that comes from Bologna. The prosciutto di Parma is coming from Parma. The Parmigiano-Reggiano

The Stefani Restaurant Group is not cutting any corners when it comes to ensuring authentic, high-quality cuisine. | TIM MCCOY VIA STEFANI GROUP

is Parmigiano-Reggiano; it’s not grana padano.” Plans also call for the creation of a “pasta lab” that will showcase vintage Italian pasta machines and workstations where

chefs make dough by hand. The lab will act as a commissary for the group’s other restaurants, providing fresh ingredients to Stefani’s nearby spots. Don’t expect a traditional

fine-dining restaurant at Stefani’s Bottega. It will be a quick-service spot where folks then make their way to a table or take their food home with them. There’s also a grocery element to

the space, and guests can purchase ingredients imported from Italy to stock their own kitchens. The space, which is set to open Jan. 30, will boast an openkitchen model, meaning customers can watch the pasta get made in-house. There will be both handmade and machinemade pasta, and customers can choose depending on their preferred price point. “It’s for all the pockets — we are not a restaurant only for rich people,” Vottero said. “Everything is made with real Italian food concepts and Italian food techniques.” The new spot is just the latest venture from Phil Stefani Signature Restaurants. Other Stefani restaurants include the Stefani Prime steakhouse in Lincolnwood; Bar Cargo, a Roman-style pizza bar in River North; three Broken English Taco Pub locations; and Tuscany Taylor, Stefani’s oldest restaurant still in operation, in Little Italy. The group closed its iconic Tavern on Rush restaurant in the Gold Coast last year but recently signed a new lease just across the street at the corner of Rush Street and Bellevue Place.

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LET

EDITORIAL

The changes that Bally's wants at the Freedom Center site merit public scrutiny

GENSLER

ometimes responsible leaders should do more than what the law requires them to do. The latest case-in-point comes as Bally’s reveals it’s going to have to rethink its plans for a 500-room hotel on the riverside site it’s staked out for its casino and entertainment complex. As Crain’s Danny Ecker reported Jan. 17, the Providence, R.I.-based gambling giant says it must find a new location for the hotel tower it planned to build on the northern edge of what’s now the Chicago Tribune’s Freedom Center campus, citing “unforeseen infrastructure issues.” Apparently there’s concern that foundation work necessary to build the planned 37-story hotel tower on that spot could damage municipal water management pipes below ground. And now Bally’s is seeking signoff from the city’s Department of Planning & Development to redesign the project with a three-story, 100-room hotel atop the casino complex’s northeast corner and a separate 400-room hotel somewhere else on the 30-acre site — though the exact location is yet to be determined. The law may not require Bally’s and the Johnson administration to put proposed changes to the gambling company’s casino plans up for public review. But given the magnitude of this change — not to mention the controversy that’s surrounded the Chicago casino bidding process from the very beginning — the Johnson administration would be wise to cast as much light as possible on this design tweak in a public forum. The selection of Bally’s for Chicago’s coveted casino license and, in turn, the selection of the Freedom Center site as its future home, are moves that have drawn

substantial public criticism — most recently including inquiries from the U.S. attorney's office and Chicago's inspector general — since former Mayor Lori Lightfoot announced in May 2022 that Bally's won a bidding process to develop the casino. Downtown aldermen are among those who have said the Bally's selection lacked proper input from the City Council and alleged that Bally's had received preferential treatment in the bidding process from the Lightfoot administration. Some critics have also alleged city officials underestimated the obstacles Bally's would have to overcome to control the site, such as a deal it had to negotiate with the Tribune's ownership to vacate the Freedom Center. Unforeseen infrastructure issues getting in the way now stand to fan those flames. Many North Branch stakeholders, meanwhile, have lamented the impact that casino traffic would bring to a pocket of the River West neighborhood already grappling with

congestion, prompting discussions among city officials and community stakeholders about how to design the complex to mitigate those problems. Moving a 400-room hotel to a different location merits reopening those discussions. As Jonathan Snyder of neighborhood group North Branch Works notes, the proposal the city approved was largely based on the hotel location. “They’ve done a lot of work to make sure that traffic would get off of Chicago and not necessarily come back onto it,” Snyder told Crain’s. “When you’re talking about a change of that sort, I think it should” get additional review. The review the city currently has in mind involves putting the revised proposal in front of several city departments, including the Department of Transportation. Yet the city-approved planned development that governs the project dictates that only one person, Zoning Administrator Patrick Murphey, has sign-off authority on the hotel change.

The City Council would get another chance to vote on the casino plan only if it required an amendment to the planned development, said Planning Department veteran Eleanor Gorski, who is now CEO of the Chicago Architecture Center. But "given the sensitivity of this project, I don't think it's a bad idea to get some daylight on this," she said, suggesting Murphey could refer such changes to the Chicago Plan Commission or another body to offer feedback. "But that is a political consideration,” Gorski correctly notes. It’s up to Team Johnson, including the mayor’s new Planning Commissioner, Ciere Boatright, to decide how best to proceed. Here’s hoping they recognize the value in giving community stakeholders a chance to see and weigh in on this proposed change. In the meantime, there are other questions to be explored, including how these underground structural issues went unnoticed until now. In 2018, long before the prospect of a casino arose, the property’s previous owner, Tribune Media, won City Council approval for a sprawling, 8 million-squarefoot development on the site dubbed the River District. The water pipes along that stretch of the river shouldn’t have been a surprise because, as Gorski points out, “this site has gone through two planning efforts.” So not only does the future location of the hotel raise concerns about traffic flow through an already congested swath of the city — there are also questions to be asked and answered about how the city missed this important structural detail in earlier stages of the project. And all of those questions are ones that should be asked and answered in the light of day, not behind closed doors at City Hall.

PERSONAL VIEW

Chicago’s path to economic powerhouse: Essential steps

et's step back a moment and look at Chicago for what it is and has been. Our city has always been business-friendly, the unofficial motto of which is "The City That Works." It is blessed being a major transportation hub from which the rest of the country, if not the world, is readily accessible. It is a financial hub. It has a significant and young workforce and is the locus of many world-class corporations. In fact, of any other U.S. metropolitan area, Chicago has the second-largest number of Fortune 500 corporations. Indeed, World Business Chicago was instrumental in attracting to Chicago years ago companies such as Boeing, McDonald's and United Airlines. As recent changes are taking place at World Business Chicago and the city's Department of Planning & Development, there are steps that can be taken to further solidify Chicago as a global business leader. During the past several years, however,

we've seen an exodus of corporations. These losses are not isolated to the city center; Caterpillar decamped from the suburbs. Have we seen an equal number of substantial companies move to Chicago to make up for those that left? It's time to make sure that any reasons for the exodus are reversed and that Chicago has a significant infusion of companies with signed deals to move here. Yes, it took incentives, such as taxincrement finance (TIF) subsidies that sealed some of the past deals. And there is an ongoing debate as to whether the benefits of the companies being here outweighed the cost of the subsidies that were offered. But an argument can be made that the companies significantly expanded the tax base, benefiting all taxpayers and cementing Chicago's reputation as a world business center. Chicago also needs to transform its own internal processes such that small and medium-sized businesses are welcomed.

The city's Planning & Development Department's new head from the private sector needs to examine and recast its bureaucracy into one that makes it easy for businesses to start, grow and thrive here. A recent positive development was Mayor Brandon Johnson's executive order directing all city departments to examine and streamline their processes for businesses wanting to be in Chicago. We are also on the verge of the triennial tax re-evaluation of Chicago properties, both residential and commercial. Regarding the latter, it is suspected that many commercial properties will have lost value based upon the effects of COVID-19, working from home not the least among them. Crucial data will also soon be available to show whether there has been new development throughout the city to make up for the inevitable decreases in valuation. In advance of that data, which in all likelihood will not be favorable, immediate steps can be taken to

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. 10 | CRAIN’S CHICAGO BUSINESS | JANUARY 22, 2024

spur development downtown and throughout Chicago's neighborhood corridors: ◗ Improve coordination between government development activities and the business sector. There are many success stories from when the city and the business community worked together. ◗ Streamline the incentive process. It can take more than a year for a tax incentive to be approved. ◗ Development in the neighborhoods should focus on manufacturing, employment and needed service delivery. ◗ Make economic development inclusive. Far too often, economic opportunities devolve into debates between government and local communities, stalling growth. Reshape the process so that the discussions are constructive, rather than causing great opportunities to not even get started. Congruent with all these objectives is See POWERHOUSE on Page 11

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

Let Chicago TIFs expire, but don't stop there

ust before the holidays, details emerged about the city of Chicago's plan to use anticipated revenue from expiring tax-increment financing districts to fund affordable housing and other development projects via bonds ("Chicago plans to borrow over $1 billion as it weans itself off TIFs," Dec. 20). The Metropolitan Planning Council applauds this proposal and believes it has the potential to secure a dedicated revenue stream for community development at a time when affordable housing pressures deepen for many families. Although this would require new borrowing up front to spur development, letting TIF districts expire and returning the money to the general fund would help repay the debt over time. Equitable community development and affordable housing are identified as key drivers for this proposal, but for this development approach to succeed, there must be absolute clarity, transparency and monitoring around specific equity goals. As the MPC's interactive website makes clear, TIF and other development incentive programs were not designed with equity in mind, which has limited their use in areas with the greatest economic disadvantage. Many development incentives also lack transparency and accountability. The

POWERHOUSE From Page 10

the notion that the city must reduce crime. Regardless of whether the reality is not as bad as it appears, the perception of pervasive crime in all neighborhoods needs to be reversed, and that happens only when it truly is reversed. This is on the city, not World Business Chicago nor the city's Planning & Development Department. Ultimately, though, when development occurs, specifically the relocation of a company to our 606 ZIP codes, all taxpayers benefit as the tax base is expanded. At a time when we are facing reports of emptier and emptier buildings, the data is becoming clear that achievable steps must be taken. In the end, if Chicago is facing an uphill climb to solve its budgetary problem, the results of which are inevitably higher property taxes, not only on commercial properties but on residents to make up the difference, let's start solving this problem now — with World Business Chicago doing what it does best and the city making a real effort to welcome and nurture businesses — and confirm Chicago as an economic powerhouse by taking specific steps to accomplish this.

city's proposal presents an opportunity to provide funding to projects based on clear criteria around equity, in the neighborhoods with the most economic need, and we encourage the city to use robust equity criteria in considering where development funds should be spent. Development projects should align with the goals that are included as part of the citywide plan, the Department of Housing's forthcoming five-year housing plan, the Chicago Climate Action Plan and

the Equitable Transit-Oriented Development Policy Plan, as well as other guiding documents that center equity. Additionally, citydeveloped criteria that are currently used to allocate funding across incentive programs should be reviewed and updated with the support of external and community partners to ensure that accountability and transparency are included as part of the process. This borrowing plan is not a panacea for fixing all of Chicago's neighborhood development

challenges, and it is important for the city to align this strategy with its other incentive programs to achieve the greatest equitable impacts and, perhaps most important, ensure there is strong oversight, evaluation, transparency and accountability across all programs. This includes centering equity in decisions around using funds where TIFs are extended, as not all are expiring. The MPC urges the city to think differently about how funds are spent, namely by shifting reve-

nue to areas that have long been starved of investment. The proposal is encouraging. With the right commitment to equity and transparency, it has the potential to be incredibly impactful and create neighborhoods that provide all residents with the opportunities to thrive. CHRISTINA HARRIS Senior director DAN COOPER Senior director of research Metropolitan Planning Council Chicago

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Dana Levenson is a former chief financial officer for the city of Chicago. Myer Blank is a consultant who focuses on property taxes. JANUARY 22, 2024 | CRAIN’S CHICAGO BUSINESS | 11

UChicago graduate union adds pressure to university’s poor financial position Graduate students at the University of Chicago are asking for a raise — a move that could potentially strain the school’s financials as it faces a budget deficit and a significant debt burden By Brandon Dupré

The University of Chicago’s financial troubles are now impacting negotiations between the administration and graduate students seeking their first union contract after winning an election in March. Graduate Students United, or GSU, which represents some 3,000 graduate students at the university, told Crain’s that UChicago officials are now using its recent public debt issues and a $239 million budget deficit as reasons not to meet the union’s financial demands. GSU wants to raise the floor on graduate student stipends to $45,000, up from $37,000, to keep up with UChicago’s peer institutions. The raise would represent at least an additional $24 million a year paid to graduate students at a time when administrators are planning cuts and will unveil a deficit reduction plan in the spring. Failing to deliver on GSU’s stipend raise demand, however, could threaten the school’s ability to attract the best graduate students in the country. As UChicago graduate student Misha McDaniel put it, why would a topflight candidate choose UChicago if Brown, Yale and Columbia all pay significantly better? “The school put themselves in this poor financial position by paying administrators high salaries and constructing expensive buildings all at the expense of its graduate students who teach and do the research that actually creates the fundamental value of the University of Chicago,” said Valay

The Classics Quad on the University of Chicago campus | JUSTIN KERN/FLICKR

Agarawal, a UChicago graduate student and bargaining committee member of GSU. In an email, University of Chicago spokesman Gerald McSwiggan told Crain's the school continues to bargain with the union in good faith and is making “significant progress on many issues.” “We are working toward an agreement that benefits graduate student employees and is financially sustainable for the university as a whole,” McSwiggan said. GSU won its union election on March 16 in what was a landslide victory, with 92% of those who

voted voting in favor of the union, which is represented by the United Electrical Radio & Machine Workers of America.

National struggle Like other graduate students across the country, GSU is fighting for increased stipends, expanded benefits and visa support for international students, among other items. This was the second time graduate students at the University of Chicago have won a union election. After winning its first election in 2017, the union was unable to agree on a contract with

the administration, which was reported as wanting to delay any official election certifications. After months of negotiations, and nearing the one-year anniversary of its victory in 2023, the union is still without a contract, which experts say is often more difficult to win than the initial election. On average it takes 409 days for a union to negotiate its first contract, according to a study by Bloomberg Law. “Historically employers have always worked hard to try and avoid having to bargain a contract, especially a first contract,” said Robert Bruno, a professor

and director of the labor studies program at the University of Illinois Urbana-Champaign. First contracts, he said, set the precedent for what’s to come and employers don’t like the prospect of more labor contracts in the future. GSU isn’t the only union UChicago is negotiating with. Nurses at UChicago Medicine and facility service workers on campus, two unions that have been fixtures on campus for some time, are also in contract talks. Nontenure-track faculty are set for bargaining later this year. The timing couldn’t be worse for the university. UChicago professor Clifford Ando recently raised alarms over the school’s mounting debt, the result of years of big investments in professional schools and construction. The result, argues Ando, is that the liberal arts core of the university is being hollowed out in pursuit of investments in the professional schools, which have saddled the university with significant debt. And members of GSU believe that, if the school fails to meet its stipend demands, it would be a continuation of that gutting of the school’s core functions. “I think that connection to Ando’s argument is pretty clear,” said Maniza Ahmed, a graduate student in the history department and member of the union’s bargaining team. “The graduate students at the floor, the bare minimum of the stipend, are primarily people in the humanities and social science divisions.”

Settlement resolves suit against former NorthShore Health By Katherine Davis

NorthShore University HealthSystem, now known as Endeavor Health, has agreed to pay $55 million to resolve a 16-year-old consumer classaction lawsuit that accused it of overcharging patients for hospital services after acquiring Highland Park Hospital in 2000. The settlement marks the end of the drawn-out U.S. federal court case, which was first filed in 2007 by individuals who paid for services at NorthShore facilities. Plaintiffs alleged that the organization’s acquisition of Highland Park gave it unfair power to 12 | CRAIN’S CHICAGO BUSINESS | JANUARY 22, 2024

set prices for medical care in its service area. At the time of the hospital deal, the health system was known as Evanston Northwestern Healthcare. The lawsuit was granted class-action status in 2013, and the health system has denied all allegations of unlawful or wrongful conduct. The parties agreed to the settlement after an “extensive discovery” and “hard fought arm’slength settlement negotiations,” according to court documents filed Jan. 17. The all-cash deal, however, is still subject to court approval. Relatedly, the Federal Trade

Commission opened a probe into the acquisition of Highland Park Hospital in 2004 and, a few years later, issued an opinion that the merger was “anticompetitive,” court records say. Since then, the health system has grown substantially, adding new hospitals to its portfolio and rebranding several times. In 2022, what was then NorthShore University HealthSystem merged with Edward-Elmhurst Health, calling itself NorthShore – Edward-Elmhurst Health, before rebranding as Endeavor at the end of last year. “We are proud of the integral role Highland Park Hospital plays in its surrounding community and

MODERN HEALTHCARE ILLUSTRATION/ENDEAVOR HEALTH

Now known as Endeavor Health, the organization reached the agreement with individuals who accused it of overcharging patients after a 2000 hospital acquisition

the contributions we have been able to make as part of our health system,” an Endeavor spokesman said in a statement to Crain’s. “The resolution of this matter allows us to continue focusing on providing exceptional care and a safe, seamless and personal experience for those we are privileged to serve.” Combined, Endeavor serves

nearly 1.4 million patients in the Chicago area across 300 sites of care, including hospitals and outpatient centers. About 27,000 people work for Endeavor, including 7,100 physicians and advanced practice providers, and more than 8,000 nurses. Reuters first reported news of the settlement.

PEOPLE ON THE MOVE

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

ARCHITECTURE / DESIGN

LAW FIRM

PUBLIC RELATIONS

Hoerr Schaudt, Chicago

Croke Fairchild Duarte & Beres LLC, Chicago

Perkins Coie, Chicago

Marshall, Gerstein & Borun LLP, Chicago

Akrete, Chicago / Evanston

Heather Tryggestad has joined Hoerr Schaudt as Controller overseeing the firm’s accounting team. Heather is a CPA with over 20 years of diverse financial expertise working in public accounting, in-house finance within the ad industry, and with a small boutique shop in Chicago. In this new role for the firm, Heather leads the financial operations at Hoerr Schaudt, ensuring accurate reporting, establishing budgets, forecasts, and helping to direct and train members of the accounting team.

BANKING / FINANCE

Croke Fairchild Duarte & Beres welcomes Michael Schierl as partner and Peter White as an associate in the firm’s new Bond Finance practice group. Schierl Michael, a recognized leader in the non-profit financial community, focuses his practice on developing sophisticated “evergreen” conduit bond financing structures that enable the funding of high-impact projects often viewed as beyond White the reach of non-profit organizations. Peter advises clients on a variety of matters, including X/A-B conduit bond financing structure, municipal transactions, and corporate law and contract matters.

Wintrust Commercial Banking, Orland Park Wintrust is proud to welcome Senior Vice President David Nozzolillo to the Wintrust Commercial Banking team. In his new role, David will help grow the bank’s portfolio in the Chicago Southland for Wintrust Commercial Banking and brings 20 years of banking experience working with small and middle market privately held companies.

CONSTRUCTION Berglund Construction, Chicago Jeffrey Nosich joins Berglund Construction as Project Executive, focused on expanding the firm’s presence in the multifamily and hospitality sectors. A licensed architect and 20-year industry veteran, Jeffrey will deliver innovative solutions for clients with complex multifamily housing and hospitality construction projects.

LAW FIRM Croke Fairchild Duarte & Beres LLC, Chicago Croke Fairchild Duarte & Beres welcomes Walter Piecewicz and Terry Criss to the firm as senior counsel in the newly formed Bond Finance Piecewicz practice group. With specialized experience as a tax and business planning attorney, Walter focuses his practice on developing sophisticated, taxfavored financing structures for clients in the insurance, health Criss care, non-profit, and real estate development industries. Terry advises clients on a range of business and commercial matters, with a particular focus on finance, restructuring, sales and acquisitions, and employment and ERISA law.

Benesch, Chicago

Relief Mental Health, Chicago Relief Mental Health welcomes Board-Certified Psychiatrist Bess Levin, MD to its team of mental health providers. Situated in Relief’s Chicago West Loop clinic, Dr. Levin delivers innovative treatments, including transcranial magnetic stimulation (TMS) and SPRAVATO® (esketamine) for depression, obsessive-compulsive disorder (OCD), anxiety and other diagnoses. In addition, she provides psychiatric medication management services. Relief accepts most major insurance plans, including Medicare.

P013_CCB_20240122_v1.indd 1

Emily Wilbur has joined Benesch as an Associate in the firm’s Litigation Practice Group. Emily focuses her practice on complex commercial disputes across federal and state courts. She is Wilbur experienced in multiple aspects of the litigation process, including pleadings, motions practice, brief writing, and discovery. Katie Berens has joined Benesch as an Associate in the firm’s Litigation Berens Practice Group. Katie specializes in handling commercial litigation cases in both federal and state courts. She has experience in various phases of litigation, including conducting critical legal and factual research, drafting motions and briefs, and discovery.

Marshall Gerstein is proud to announce that Michelle Bolos has been elected to partnership. She has developed extensive experience formulating and executing global brand enforcement strategies to facilitate brand protection and expansion for a broad range of clients. She represents clients before the United States Patent and Trademark Office, Trademark Trial and Appeal Board, U.S. Customs and Border Protection, and federal courts.

Akrete, an award-winning, national public relations, content development and marketing firm headquartered in Chicago, announced the appointment of Nicole Stenclik to the newly created role of president. Stenclik will work closely with founder and CEO Margy Sweeney to lead the agency. Her role will focus on delivering exceptional client service, managing Akrete’s team from coast to coast, achieving excellence in daily operations and forging new client partnerships in the firm’s focus industries.

LAW FIRM

LAW FIRM Willkie Farr & Gallagher LLP, Chicago

LEGAL

HEALTH CARE

Perkins Coie announces that Jose A. Lopez, a partner in the Securities Litigation practice, has been named office managing partner in Chicago where he will oversee a growing office of over 235 lawyers and business professionals. Jose joined Perkins Coie in 2012 and focuses his national practice on advising companies, officers, directors, and trustees in complicated securities litigation and enforcement matters, involving both federal and state regulators.

Willkie Farr & Gallagher is pleased to announce that Roni J. Cohen has been elevated to Counsel in the firm’s Private Wealth Group. Roni counsels high net worth individuals and families on complex estate and transfer tax planning, estate and trust administration and charitable giving. He also advises on the formation of private foundations and other charitable organizations. The University of Chicago Law School alumnus is a member of the Jewish United Fund’s Professional Advisory Committee.

Marshall, Gerstein & Borun LLP, Chicago Having joined the firm in 2019, Marshall Gerstein is pleased to announce that Raymond Ricordati has been elected to partnership. With two decades of experience as a patent attorney and litigator, he serves clients in the U.S. and abroad. In litigation, he has extensive experience enforcing IP rights and defending against infringement allegations for clients in a variety of technologies. He has handled matters in federal courts across the country as well as the Federal Circuit, the PTAB, and the U.S. ITC.

REAL ESTATE Hiffman National, Oakbrook Terrace Hiffman National has tapped Bob Assoian, Executive Managing Director, to lead its new Advisory Services group, which offers Lender Services, Project Services and Lease Administration. Assoian, who joined Hiffman in 2011 and oversaw the successful launch and growth of the Hiffman National division to 86.5M+ SF in 27 states, will utilize his proven track record to scale the Advisory Services group. Carrie Szarzynski will succeed Assoian, who previously oversaw the Management Services group.

NON-PROFITS Aurora Institute, Chicago LAW FIRM Willkie Farr & Gallagher LLP, Chicago Samantha Glass has been elevated to Counsel at Willkie Farr & Gallagher in the firm’s Litigation Department. Samantha represents clients in both federal and state courts and has significant experience in high-stakes litigation matters, including securities and consumer class actions, shareholder derivative class actions, contract disputes and ERISA. Her practice includes clients across various industries, including retail, pension consulting, real-estate development and travel.

LAW FIRM Willkie Farr & Gallagher LLP, Chicago Willkie Farr & Gallagher is pleased to announce that Tim Landwehr has been promoted to Counsel in the firm’s Finance Department. Tim works with a wide range of U.S. and European clients in the upper and middle market, including private equity sponsors and their portfolio companies, public and closely-held companies, institutional lenders, direct lenders and special situation capital providers.

Dr. Jilliam N. Joe of Chicago has been named Research Director of the national education innovation organization the Aurora Institute. Dr. Joe joins Aurora with extensive experience managing complex, multi-site research and evaluation projects encompassing diverse settings, from K-12 to adult education. The Aurora Institute’s mission is to drive the transformation of education systems and accelerate the advancement of breakthrough policies and practices to ensure highquality learning for all.

REAL ESTATE NAI Hiffman | Hiffman National, Oakbrook Terrace NAI Hiffman | Hiffman National welcomes Ann Wallin as CFO. With 25 years of experience, Wallin will steer financial strategy and oversee the company’s national finance goals. Prior to joining Hiffman, Wallin was CFO at AllCampus, a higher education services provider. She was previously CFO at Related Midwest and was the CAO at Equity Lifestyle Properties. Wallin received her MBA from the University of Chicago Booth School of Business.

PROFESSIONAL SERVICES

REAL ESTATE

Smithbucklin, Chicago

UrbanStreet Group, Chicago

Smithbucklin, a leading professional services company serving nonprofits and industry associations, named Karen Saverino as Chief Marketing Officer (CMO). She will oversee corporate marketing, business development, and internal communication teams, driving the formulation and execution of brand and marketing strategies to foster growth. She joins Smithbucklin’s corporate management team and is based in Washington, D.C.

UrbanStreet Group welcomes Myles Milek as Chief Investment Officer. His extensive expertise in restructuring debt, securing capital, asset evaluation, liquidation strategies, and portfolio assessments will be a valuable asset to UrbanStreet’s expanding multifamily portfolio. Myles brings to UrbanStreet Group over 25 years of experience in the real estate industry. He previously served as the Head of Equity/Debt/Capital Raising & Deal Originations at Ridgewood Capital.

1/16/24 3:43 PM

ECONOMY the office. The extent to which 600,000 workers return to the Loop is critical to the Chicago economy. “It’s been a slow, steady increase, about 10 percentage points a year,” Farzin Parang, executive director of the Building Owners & Managers Association of Chicago, which represents downtown building owners, says of workers returning to the office. “People don’t think we’re done; it just might be a while.” As for the office real estate market, things may get worse before they get better. “The metrics are bad and still getting worse: Subleasing and vacancies are still going up,” Parang says. “The conventional wisdom is we still haven’t gotten to bottom.” Uncertainty is weighing on employers across industries. LaSalle Network, a staffing and recruiting firm that surveys companies annually on their hiring plans, found that 74% in the Chicago area said they plan to hire in 2024, compared with 84% in last year’s survey. “Companies are acknowledging they’re going to add headcount; it’s just not in volumes like you saw in ’21 and ’22,” says Tom Gimbel, CEO of LaSalle Network. “With interest rates being where they’re at, you’re not going to see companies hiring in huge volume until the economy justifies it.” He expects overall employment growth of 1% to 1.5% in Chicago in the coming year, with the strongest demand in technology and finance jobs. Here’s a look at what’s ahead in several sectors important to the overall direction of the Chicago economy.

Travel/tourism Tourism made strong progress in 2023, but it likely won’t fully recover to pre-pandemic levels in the year ahead. Hotel occupancy is about 63% and likely will be near 67% in 2024 — well shy of the pre-pandemic level of 74%, says Michael Jacobson, CEO of the Illinois Hotel & Lodging Association. But he expects a big summer, starting with a NASCAR race in July, followed by Lollapalooza and the Democratic National Convention in August and one of the city’s biggest trade shows, the International Manufacturing Technology Show, in early September. “These major events are game-changers for us,” Jacobson says. Traffic at O’Hare International Airport improved in 2023 and could finally return to prepandemic levels if corporate and international travel, especially to and from China, is strong, says Jamie Rhee, Chicago’s aviation commissioner. Through October, the number of passengers traveling through O’Hare was 13% below the same 14 | CRAIN’S CHICAGO BUSINESS | JANUARY 22, 2024

BLOOMBERG

From Page 1

IPOs remain anemic The number of U.S. non-SPAC public stock offerings didn’t improve much last year. 397

2021

209

2020

117

2023

2022

the Federal Reserve will begin cutting interest rates, providing strong tailwinds for investors. “For both stocks and bonds, it is risk on,” said Lisa Pollina, an investment adviser at Ares Management. “We should see wonderful lifts for the markets in 2024.” Strong markets help boost trading volumes at exchanges like CME Group and Cboe. Hedge funds and trading firms like Citadel, Balyasny Asset Management, DRW and Jump Trading Group also stand to benefit as investors that have been keeping money on the sidelines due to the uncertainty wade back into the market. But certain wild cards, including elections in countries around the world and ongoing wars in Ukraine and Gaza, could cause disruptions throughout the year. “I do not know that this is an entirely soft landing,” Pollina said. "We are going to see some turbulence as we land. It is not going to be entirely smooth, but I do not think there will be severe collateral damage and I do not think we are going to tip into a recession.”

Banking 0%

100

150

200

250

300

350

400

Source: Dealogic (2023 figure is as of Dec. 22.)

period in 2019. Midway Airport was 7% above pre-pandemic levels. Airlines such as United are back to profitability, but fares are starting to come down. Bloomberg Intelligence analyst George Ferguson says carriers, from discounters to full-service airlines, are planning to increase domestic capacity in 2024, which will put more pressure on fares. “We estimate revenue will grow in 2024 but at a slower rate than we have seen in the past two years,” Cowen analyst Helane Becker wrote in a note to clients. “We are expecting 2024 to be a repeat of 2023 with continued recovery in airline traffic. Leisure travel and U.S. outbound international travel should exceed pre-pandemic levels. International inbound travel to the U.S. probably remains below preCOVID levels. “Corporate travel is also below 2019 levels. The declines appear to be mostly in same-day trips with companies looking to manage costs and individuals concerned about canceled flights. We believe if the industry is successful in improving reliability for a prolonged period, trust will return, and these trips will return as well.”

Retail/restaurants If interest rates start to come down and inflation stays near historic levels, consumer spending could get a much-needed lift, especially grocery and auto sales, says John Melaniphy, president of retail consultant Melaniphy & Associates. Chicago restaurants will face stiff headwinds from a new law that will double the number of paid days off from five to 10 per year and another regulation that gradually will move workers such as servers to a minimum wage from a combination of wages

plus tips. The new laws take effect in July. “Restaurants are resilient, but those are two increases to the bottom line,” says Sam Toia, president of the Illinois Restaurant Association. “Food costs are still high; labor costs are going up; rent and property taxes are going to go up.” Suburban restaurants won’t be hit by the same costs, which will give them more opportunity for growth.

Health care Hospitals are still rebounding from the pandemic, squeezed between contracts that haven’t yet risen with inflation and labor costs that have. Advocate Health, formed by the 2022 merger of Advocate Aurora and Charlotte, N.C.-based Atrium Health, says it turned a 0.8% operating loss last year into a 2% profit margin with higherthan-expected cost-cutting. CommonSpirit Health saw a 5.8% year-over-year decrease in overall outpatient visits and a 1.6% drop in outpatient surgeries during its fiscal 2023, ended June 30. Inpatient surgeries fell 0.6%. Dealmaking could rebound if interest rates drop. Nathan Ray, a partner at consulting firm West Monroe, says he expects consolidation and acquisitions by health care providers in areas such as behavioral health and women’s health. “With all the interest rate increases, everyone became a little risk-averse and backwardlooking,” he says. “With everyone having used the last 18 months to build new strategies, hopefully it charged the market to really come back.”

Investment banking A strong surge in stocks to close the year could further thaw the IPO market. The number of

traditional initial public offerings in the U.S., excluding blankcheck IPOs, or SPACs, rose to 117 this year from just 87 in 2022, according to Dealogic. But it’s still far below the 397 deals in 2021. “No one could define 2023 as normal,” says Steve Maletzky, head of capital markets for William Blair. “We’re seeing an increase in confidential resubmissions (of prospectuses) and people dusting off S-1s that are on file.” He also says there has been an uptick in companies picking investment-banking teams to handle IPOs. “The expectation is it will lead to increased IPO volume next year,” he says. But, “We won’t be anywhere near where we were in 2020 and 2021.” Private-equity funds, wrestling with high interest rates and low valuations, are likely to remain on the sidelines, research firm PitchBook says. Companies in private-equity portfolios have been there an average of 6.4 years, the first time since 2015 that it's been above the six-year mark. "With interest rates expected to stay elevated for the foreseeable future, we expect PE firms to continue to postpone selling and extend portfolio company holding periods in the process," PitchBook says. Venture-capital investment is likely to remain weak as well, PitchBook says. Valuations of startups have fallen, especially in tech, and many investors are trying to keep existing companies going while taking a more cautious approach to new deals.

Markets After posting sharp gains to close out 2023, financial markets should continue to rally in 2024, with an improving inflationary outlook and expectations that

The improving macroeconomic environment also will help banks, allowing them to lower their deposit rates, which should help improve profit margins in 2024. “That’s the real bull case that is out there today and appears to be more believable,” said Terry McEvoy, banking industry analyst at Stephens. Activity in the banking sector slowed throughout 2023 as the implosion of Silicon Valley Bank spooked dealmakers. But months of relative stability has bolstered confidence, and falling interest rates could spark activity in mergers and acquisitions as big banks look to get bigger and leverage their advantages. “If rates continue to drop and unrealized losses diminish, that will be a catalyst for more deals,” McEvoy said.

Manufacturing Manufacturing employment in the Chicago metro area dropped 1% through October from the prior year, although overall employment rose 1%, according to state data. “We’re in a high-interest-rate environment that pushes down demand for manufactured goods that you have to borrow for,” says Thomas Walstrum, a senior economist with the Federal Reserve Bank of Chicago. “That’s a reason to think that manufacturing growth is going to be on the weaker side in the coming few years, but the long-term outlook is for manufacturing to be an important and solid industry in the longer run.” One potential growth engine is the new Gotion battery plant in Manteno, which will draw workers from the south suburbs. The company is expected to begin staffing up as it looks to get the plant open by fall. Plans call for the company to employ 1,600 workers when the first phase is completed and an eventual payroll of 2,600. Crain's Mark Weinraub contributed.

HOUSING

Chicago area include years-long population decline, which gradually reduces the overall demand for housing. Crain’s John Pletz reported last month that while the latest population loss is smaller than in past years, it’s still a continuation of the pattern.

From Page 1

Rates more than doubled, rising from the low 3% range to 7%, in the past two years as the Fed tried to stifle rampant inflation. If interest rates soften, “that will be a huge part of what entices people back into the market” in 2024, said Drussy Hernandez, president of the Chicago Association of Realtors and vice president of brokerage services at Coldwell Banker Realty.

Crime and perceptions

'Devastatingly low inventory' As interest rates rose, buyers held back as the cost of financing skyrocketed, and sellers held back rather than trade the low mortgage rate they have on their present home for a higher one on whatever they would buy. The result is that “we’re in a devastatingly low inventory situation,” said Tim Ryan, a managing broker at Real People Realty in Mokena and president of the Mainstreet Organization of Realtors, which covers the suburbs. December’s delivery of potential rate cuts suddenly made the 2024 forecast brighter. “Sellers will be more comfortable moving,” Hernandez said, “and buyers will be more confident.” It can’t happen overnight, as getting a home ready for market

December’s delivery of potential rate cuts suddenly made the 2024 forecast brighter. | KEN MAGES/UNSPLASH

come, Daniel McMillen wrote in a report for Illinois Realtors accompanying data that highlighted the depth of the shortage of homes for sale. A professor of real estate at the University of Illinois Chicago College of Business Administration, McMillen wrote that “the recent trends toward lower inflation, interest rates and unemployment rates can be expected to lead to a rebound in the market if trends continue.” For now, McMillen wrote, “lower sales should continue through the winter.”

Of 100 markets in the Realtor.com study, only two are forecast to see more home sales this year than their norm for the last three pre-COVID years. takes time, both mental prep time for the sellers and cleaning time, particularly in a winter climate that makes exterior work difficult. Nevertheless, if the economy keeps improving, a thaw should

WTTW From Page 3

in the time slots of the "Chicago Tonight" broadcast occurring at different times of the day, which the board alleges have occurred "without any reason apparent to the CAB."

A sweet gap In the interim, there’s likely to that the move was due to more local viewers watching news programming at 10 p.m. The show changed time slots again in May, moving to 5:30 p.m. with reruns at 10 p.m. In an interview with Crain's, Joseph Morris, chairman of the WTTW community advisory board, said the station's manage-

Last January, “Chicago Tonight” was moved from the 7 p.m. time slot, which it had held since 1986, to 10 p.m. and was slashed from an hour to 30 minutes. The show changed time slots again in May. Last January, "Chicago Tonight" was moved from the 7 p.m. time slot, which it had held since 1986, to 10 p.m. and was slashed from an hour to 30 minutes. WTTW News Director Jay Smith said at the time

ment has not been transparent and has been ignoring their questions for data on program viewership, adding that they were "blindsided" by the changes in the time slot as well as the time frame

be a sweet gap that opportunists can seize, Ryan said. As Ryan sees it, better interest rates will quickly spur prepared buyers to go house hunting again, and if they get out there soon enough, they’ll beat the competition. Competition is likely to nudge prices upward because even if sellers start to bring their homes to market, “we still won’t have enough” inventory to go around, Ryan said. “It will be a long time before we do.” Lots more competition for a few more houses will push prices up. “There will be that sweet spot,” Ryan said, though acknowledging that timing one’s jump will be difficult. It’s hard to imagine the number of home sales getting back to the level of peak year 2021.

In the first 11 months of 2023, home sales were running about 65% of 2021. But even compared to the “normal” years 20172019, Chicago-area home sales this year will be down by nearly 37%, according to a forecast from the economics team at Realtor.com. Chicago’s not alone in that. Of 100 markets in the Realtor.com study, only two are forecast to see more home sales this year than their norm for the last three preCOVID years. Clouding the horizon for all 100 of them are the two seemingly intractable wars going on and a November presidential election in which many voters on each side believe that only their guy can properly steward the U.S. economy. Clouds that are specific to the

of the show. "The viewing public was blindsided and had to work to find where 'Chicago Tonight' was on the schedule. It wasn't where you expected it to be," Morris said. "And that was a puzzle. We shouldn't make it hard for the people of Chicago to find our programs; we should make it very easy." Morris says the concerns all stem from making sure that "Chicago Tonight" can remain the flagship program for the station. "We wonder: what's the staffing, what are the budgets, what are the time allocations and so forth? And if we have those data, say so and we'd be able to draw for some analysis that it might be helpful." Other concerns mentioned in the report include: ◗ Giving viewers an advisory of when content is prerecorded ◗ Retained concerns about fair-

ness and objectivity, as well as "eroding the lines between global and local news" ◗ Responsiveness of the news department to requests from the advisory board

‘We love the place’ Speaking on the board's involvement with the station, Morris said that in the past the board's recommendations were adopted. The rebranding of the journalistic operations as WTTW News and updating the title of executive producer of "Chicago Tonight" to director of the WTTW News Department were examples given in the report. Morris added that experimentation can be good but says the board just asks for more transparency from the station. "We felt a need to publicly say we feel a little bit ignored, hear what's going on. This is not a good way to use the talent that has

There’s also Chicago’s ongoing struggle with crime and the perception of crime, which is even worse than the reality. Two prominent people in Chicago real estate, a high-end developer and a luxury-level agent, both told Crain’s recently that the crime issue is playing a big role in holding down the sales of new downtown condos. One more thing that looms is the March referendum on a proposal to boost the city’s real estate transfer tax on sales of properties at $1 million or more. The increase applies to both residential and commercial properties, and while commercial represents a far larger dollar amount, residential buyers at $1 million or more may feel the city is “punishing people for making an investment and buying a home,” as Jennifer Ames, the broker and owner at real estate brokerage Engel & Volkers, told Crain’s in August. At that time, Mayor Brandon Johnson had just agreed to a compromise version of the plan before it headed to the City Council for the approval needed to get it on the spring ballot. A heated battle over the concept is likely to dawn soon after the new year. Crain’s Justin Laurence reported last month that supporters recently received $200,000 to fund their effort. Real estate groups haven’t yet unveiled the next steps in their campaign against it, but Hernandez said the groups are going to push hard against the increase. Even so, “due to the transfer tax’s potential negative impact on investment in our city,” Hernandez said, the Chicago Association of Realtors “will remain opposed to the increase.” been assembled in this advisory board," he said. In the report, the community advisory board alleges that WTTW management has denied them the right to review programming. The CAB cited the federal Communications Act, which states that the board "shall be permitted to review the programming goals established by the station, the service provided by the station, and the significant policy decisions rendered by the station." The board also asks the station management to reveal the annual budget for "in-house production" and seeks improved communications from WTTW management as well as its trustees. "We're asking for transparency because we love the place . . . we love the people who work there, we want them to succeed," said Morris. WTTW management declined to comment. JANUARY 22, 2024 | CRAIN’S CHICAGO BUSINESS | 15

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Rubin says. She was able to set up a payment plan, $50 a month for 10 months, beginning with the new year. Two members of the building’s HOA board, Paul Waitz and Virginia Harding, did not respond to Crain’s requests for comment. Waitz may be the board president. The board list is not available publicly. Also not responding was Lea Relias, who manages the building under the HOA’s contract with Community Specialists, a Chicago firm. The size of the fine “is absolutely out of keeping with who we are as a community,” says Susan Coty, another resident of Commonwealth Plaza and a friend of Rubin. Retired from running a travel agency, Coty has lived in the building for 29 years and says she’s never been fined by the HOA. For Rubin’s infraction, Coty says, “I think a warning or a $25 fine might be a good start. Certainly $500 was beyond punitive.” Illinois condo law gives HOA boards the authority to assess fines, says Michael Delrahim, managing partner and a condo law specialist at Chicago law firm Brown Udell Pomerantz & Delrahim, “and there is a requirement that the fine must be reasonable.” But “reasonable” is in the eye of the beholder. All the condominium law requires is that “the board members agree what is a reasonable fine,” Delrahim says. In his experience, other Chicago condo associations have charged $500 fines for violating the guidelines on how to use elevators when moving in or out, or for breaking the no-pets rule. Delrahim is not involved in the Commonwealth Plaza dust-up and commented for Crain’s independently. Rubin says she doesn’t plan to sue. The law is not necessarily on Rubin’s side on the question of giving a warning before assessing a fine, Delrahim says. In a condo association’s own voted-upon rules, there might be a requirement that warnings be given first, or there might not, he says. Crain’s could not determine whether Commonwealth Plaza’s rules require a warning. Rubin said

Bonnie Rubin at the Commonwealth Plaza pool terrace recently. | DENNIS RODKIN

when she requested a list of past fines, without names attached, building management denied her request. After living in Flossmoor, where they raised their two kids, for over 30 years, Rubin and her now-deceased husband, David Rubin, moved into the Commonwealth Plaza condo in April 2021. They bought it from her brother, Wayne Miller, who had lived there for 16 years. Cook County records don’t show what they paid for it. David Rubin died in August 2022, and on Labor Day 2023, Bonnie Rubin held a memorial service near where David is buried in the northern suburbs. When she and her brother returned to her condo later that day, she had some sandwiches from Jersey Mike’s left over, and “I told Wayne to bring one with him down to the pool,” she says. That was Sept. 4. On Sept. 20, Rubin received a letter informing her of the $500 fine. Included with it was a screenshot from the building’s security tapes showing her and Wayne sitting by the pool with the paper wrapper of the sandwich clearly visible in his hand. The photo is on page 3. “This photo is creepy,” Rubin says. “There’s a more neighborly way to address what happened.” When younger neighbors have been playing loud music at night, she says, “I knock on the door and say, ‘Hey, would you mind turning it down?’ That’s how adults do things.” Rubin doesn’t know who told the

building management about the sandwich, or who went to the security tape for proof. She’s visibly annoyed by the notion of being watched by her fellow residents. “We’re neighbors,” she says, “not informants.” Delrahim says the reality is that “if you live in a condo association and you know there are security cameras, you should assume you’re being watched.” When she appeared before the HOA board in November to appeal the fine, Rubin says, “I could see I had already lost them. They thought I was wasting their time.” Coty, who attended the meeting, says “they gave her time to present her case, but I don’t think it would have made any difference.” Another longtime resident of Commonwealth Plaza, who asked not to be identified because of relationships in the building, said “this is a Miesian building, and the board acts like it. They’re strict.” Commonwealth Plaza is a pair of tightly gridded 28-story high-rises designed in the late 1950s by Ludwig Mies van der Rohe in his characteristic hard-edged style. The swimming pool is outdoors in the “L” created by the pair of towers. Rubin says she has been told several times during this contretemps that the size of the fine is commensurate with what the association would have to pay to drain the pool if food or a food wrapper fell in and clogged the drain. Mike Claffey, a spokesman for the Illinois Department of Health, emailed a statement to Crain’s saying that in the state’s Swimming Facility Code, “there is no rule that the pool must be drained if food enters or is dropped into the pool, but the code does indicate that no food or drink is allowed in public pools.” The $500 fine is on top of the roughly $1,200 in monthly assessments and $245 a month for parking. Rubin, who was one of many Tribune staffers who took a buyout in 2015 and is now on a fixed income, says she can’t afford to pay the fine all at once. Family and friends suggested she move out of the building after this episode, but “I like the neighborhood,” she says. “I like the people I’ve met in this building, and I like the view” south over Lincoln Park to the downtown skyline.

REAL ESTATE

THE INDUSTRIAL PARTY STARTS TO WIND DOWN

From Page 1

◗ What happened: Industrial

through a proposal to hike the tax on large commercial property sales that will head to a referendum vote in the spring. Many developers are still trying to get a read on Johnson’s approach to public-private development partnerships, as the mayor has yet to provide clarity on whether he’ll continue Lightfoot holdover initiatives like the LaSalle Street Reimagined program and Invest South/West. But Johnson recently scored some points with developers by appointing a local real estate executive, Ciere Boatright, as the new commissioner of the Department of Planning & Development. ◗ What to look for this year:

Commercial property owners and Johnson will battle publicly in the run-up to the transfer tax referendum in March. Meanwhile, most will be watching for the mayor to take a stance on the Lightfoot initiatives. Will he continue the strategy of Invest South/West to spur private investment in commercial corridors? With the vibrancy of the Loop at stake, will he sign off on hundreds of millions of dollars in tax-increment financing being doled out for vacant LaSalle Street buildings to be converted into apartments? Will he take a less aggressive approach, betting that Google’s overhaul of the James R. Thompson Center will naturally bring companies back to the heart of downtown? So far, Johnson’s biggest TIF-related move has been declaring the largest-ever surplus, leaning on the blight-fighting money to balance the city’s budget.

The newest and most updated buildings — and those with landlords willing to keep investing in their properties — are expected to outperform the rest of the market as companies look for offices that compel workers to show up. | GETTY

dated buildings — and those with landlords willing to keep investing in their properties — are expected to outperform the rest of the market as companies look for offices that compel workers to show up. But if office foot traffic has topped out and never returns to pre-pandemic levels, vacant retail space downtown will have a harder time getting refilled. That complicates the challenge for city officials in trying to reclaim the vitality of the central business district.

How much more office downsizing is on the way? There are still many large office users that could drastically change their footprints. Some expansions, like the one inked recently by clean energy producer Invenergy on Wacker Drive, are promising for landlords. But more big cutbacks like the ones undertaken this year by Aon and Relativity could offset any gains. The newest and most up18 | CRAIN’S CHICAGO BUSINESS | JANUARY 22, 2024

eyes are on the Fed, which signaled that it may drop interest rates. That could make for a rosier outlook for investors, though experts still expect the foreclosure wave to continue throughout the year.

◗ What happened: Cook County

◗ What happened: The official

◗ What to look for this year:

◗ What to look for this year: All

KAEGI VS. LANDLORDS

RETURN-TO-OFFICE UNCERTAINTY end of the public health crisis and a softening economy seemed to help companies get employees back into regular in-person work. But weekly foot traffic in the urban core is still well below pre-pandemic levels, and big companies with expiring leases have continued a space-shedding trend that drove the downtown office vacancy rate to a new record high of 23.7% as of September. Companies including Tyson Foods, Meta, Salesforce and Publicis Groupe flooded the market with workspace available for sublease. Even brokerage Jones Lang LaSalle, which makes money off of helping other companies lease office space, recognized it doesn’t need as much and listed about 30% of its East Loop headquarters on the secondary market.

ing sale in September ended a roughly 14-month stretch without a large office property sale in the city. A number of high-rise apartments — where demand has been strong — have sat idle on the market or traded at disappointing prices for the sellers.

1 N. State St. | GOOGLE

INTEREST RATES AND THE FORECLOSURE WAVE ◗ What happened: The Federal

Reserve’s campaign to raise interest rates to combat inflation added to the deep pool of distress plaguing the downtown office market. Buildings at 161 N. Clark St. and 111 W. Jackson Blvd. were part of the latest wave of foreclosures, while a number of owners handed over their keys to their lenders. Trouble also spilled over into the retail sector: The owner of the retail portion of 1 N. State St. was hit with a $50 million foreclosure lawsuit, while the retail property at the Palmer House Hilton was seized by its lender. Led by the office sector’s pain, the Chicago area had $7.3 billion worth of distressed commercial real estate as of the end of the third quarter, up 71% over the past year, according to data from research firm MSCI Real Assets. Meanwhile, higher borrowing costs effectively brought commercial property sales to a halt. A Loop office build-

Assessor Fritz Kaegi shook up the usual valuation process by reassessing about 200 large downtown properties outside of the triennial cycle, aiming to reverse appeals granted by the Board of Review that knocked down 2022 assessments. It was the latest shot in a battle between Kaegi and commercial property owners, who argue Kaegi drastically overestimates the value of their properties and unnecessarily forces them into a costly appeal process to bring them down. Kaegi recently assessed the James R. Thompson Center for the first time ever, pegging it at more than double the price it sold for last year — a case that shows the disconnect between his analysis and what landlords believe properties are worth.

◗ What to look for this year:

Kaegi will assess all of downtown in 2024, which might shed some light on how much the values of commercial properties have fallen. A recent analysis from the Mansueto Institute for Urban Innovation and the Center for Municipal Finance at the University of Chicago indicates that it could be a lot — the study predicted that the property tax bill paid by the average Chicago homeowner could rise by hundreds of dollars a year as office tower owners pay less because of the depressed value of their property. It’s also possible that turnover on the three-person Board of Review — which has two new members — will lead to an appeals panel that’s more supportive of Kaegi’s valuations.

developers last year shattered the annual record of new warehouse space built in the Chicago area, a product of companies clamoring during the pandemic for space to store and distribute goods bought online. But a pullback in consumer spending throughout 2023 has slowed demand, a key reason that the industrial vacancy rate just saw its largest single-quarter jump since the heart of the Great Recession. Still, relatively low vacancy is prompting plans from developers to transform vacant or outmoded office campuses into industrial parks — and putting pressure on suburban municipal officials to weigh the impact such redevelopments would have on their towns. North suburban Deerfield drew the most headlines for such a battle, as residential pushback played a key role in blocking Chicago developer Bridge Industrial’s proposal to turn the Baxter International headquarters campus into warehouses.

◗ What to look for this year: Af-

ter they couldn’t build warehouses fast enough to meet demand during the pandemic, industrial developers may now need to pull back to avoid a glut. Barring an unexpected surge in demand, new supply in the pipeline will keep pushing up the industrial vacancy rate. That could mean smaller rent escalations for tenants and more concessions from landlords like free rent and cash to build out their space. In the meantime, will more suburbs embrace industrial uses? Developers will continue to eye opportunities to redevelop empty office properties.

ber at the Medinah Temple property in River North. The gambling giant also got a green light from the Illinois Gaming Board for a permanent casino on what is now home to the Chicago Tribune’s Freedom Center printing plant. Bally’s resolved a thorny issue over the Tribune’s control of the land, a surprising loose end that lingered well after Mayor Lori Lightfoot awarded the casino deal to Bally’s. The Tribune is slated to vacate the Freedom Center by July.

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Medinah Temple | JACK GRIEVE ◗ What to look for this year: At

a difficult time to finance major developments, how soon will Bally’s actually begin building its 1 million-square-foot casino and hotel complex? Skeptics wonder how motivated the company will be to get started while it enjoys a lucrative temporary location. In the meantime, both the U.S. attorney’s office and Chicago’s inspector general are looking into the process by which Bally’s won the Chicago casino license, people familiar with the matter say. The nature and outcome of those inquiries could become more clear this year and shape the future of the permanent casino plan.

LINCOLN YARDS IN CRISIS ◗ What happened: Crain’s re-

porting showed that the North Side megaproject has stalled and developer Sterling Bay is scrambling to find new capital partners to jump-start it. An unlikely overture to the Chicago Teachers’ Pension Fund didn’t pan out, a largescale example of the difficulty many developers are having getting institutional investors to believe in Chicago commercial real estate. Sterling Bay completed its first building on the 53-acre site, a 320,000-square-foot life sciences lab building at 1229 W. Concord Place that remains empty.

◗ What to look for this year: In

addition to hunting for its first tenants — a badly needed point of validation — Sterling Bay will keep searching for what it hopes will be a single, large financial backer to bankroll infrastructure and other development work at the megaproject. The project stands as a high-profile bellwether of deep-pocketed investor sentiment about Chicago’s future.

BALLY’S OPENS CHICAGO’S FIRST CASINO ◗ What happened: Bally’s opened

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BEARS WEIGH STADIUM OPTIONS What happened: The team closed on its $197 million purchase of the shuttered Arlington International Racecourse property, a big step toward its plan for a $5 billion stadium and entertainment complex on the site. At the top of its wish list to move ahead with the project is the ability to pre-negotiate future property taxes on the campus, a setup that requires state legislation. Meanwhile, talks haven’t gone well between the Bears and school district officials in the northwest suburb about how much those taxes might be, prompting the team to say it’s exploring options in other suburbs as well as in the city.

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◗ What to look for this year: The Bears and Arlington Heights school district leadership need to get on the same page about what the Arlington Park site is worth to make the proposed state legislation relevant. The school districts recently offered their valuation of the now-vacant site, and the Bears are expected to say it’s worth a lot less. In the meantime, Bears CEO Kevin Warren has been in contact with the Johnson administration as he explores potential stadium sites in the city. Will the franchise make any progress toward one future stadium option or another in 2024? The development of a new stadium anywhere in the area would have major commercial property implications.

ChicagoBusiness.com President and CEO KC Crain Group publisher Jim Kirk, (312) 397-5503 or jkirk@crain.com Editor Ann Dwyer Managing editor Aly Brumback Director, visual media Stephanie Swearngin Creative director Thomas J. Linden Director of audience and engagement Elizabeth Couch Assistant managing editor/enterprise Joe Cahill Assistant managing editor/special projects Ann R. Weiler Assistant managing editor/news features Cassandra West Deputy digital editor Robert Garcia Associate creative director Karen Freese Zane Digital design editor Jason McGregor Art directors Kayla Byler, Carolyn McClain, Joanna Metzger

HOTELS KEEP RECOVERING

Copy editors Todd J. Behme, Beth Jachman, Tanya Meyer

◗ What happened: Strong lei-

sure travel kept downtown hotels on the path toward pre-pandemic levels of business. Revenue per available room downtown finally hit 2019 levels, though it still has ground to make up when accounting for inflation. Chicago also saw the opening of its new most expensive hotel — the St. Regis Chicago — which was sold for $134 million. Perhaps the most important development of the year was a new three-year labor agreement that downtown hotels struck in August with Unite Here Local 1, averting a work stoppage that could have rivaled a historic one in 2018 and embarrassed Chicago ahead of next summer’s Democratic National Convention.

◗ What to look for this year:

The DNC stands to re-establish and reinforce Chicago’s reputation as a destination for big meetings and events. That event will follow the return of NASCAR’s Chicago Street Race and Lollapalooza, making hotel owners salivate more than usual for summer. The two biggest shows that McCormick Place regularly hosts are also on the calendar for 2024. The hospitality sector will want to see attendance figures at conventions and trade shows return to preCOVID levels.

THE MALL EVOLUTION CONTINUES ◗ What happened: Several large suburban malls took steps for-

Political columnist Greg Hinz Notables coordinator Ashley Maahs Newsroom (312) 649-5200 or editor@chicagobusiness.com SENIOR REPORTERS Ally Marotti, John Pletz, Dennis Rodkin REPORTERS

Brookfield’s refinancing of Oakbrook Center showed that there can be a nice payoff. The firm closed this year on a $700 million mortgage that allowed it to pocket $220 million in equity. | ENJOY ILLINOIS

ward in their plans to bring new life to the properties. Brookfield Properties gained approval for a master plan for Northbrook Court that includes building housing on a now-demolished Macy’s site, and the owners of Fox Valley Mall in Aurora have built more than 300 luxury apartments and have hundreds more in the pipeline to replace shuttered department stores. Old Orchard Mall in Skokie and Hawthorn in Vernon Hills added new tenants amid their repositioning efforts. Brookfield’s refinancing of another mall it owns, Oakbrook Center, showed that there can be a nice payoff if they succeed. The firm closed this year on a $700 million mortgage that allowed it to pocket $220 million in equity.

department store with about 360 apartments.

MAG MILE, STATE STREET WOES ◗ What happened: A distress

signal for the Magnificent Mile came from near the top of the former John Hancock Center in September, when the longtime operator of the Signature Room closed the restaurant due to economic issues tied to the corridor’s slow recovery from the pandemic. The closure was the latest gut punch to North Michigan Avenue, where the retail vacancy rate has hovered around 30%, about double what it was in 2019. On State Street, Old Navy was the latest in a string of painful retail closures.

APARTMENT MARKET COOLS — FOR NOW What happened: Downtown Chicago tenants got a break in the third quarter of 2023 as rent growth slowed down after big increases in 2022 and 2021. Net monthly rents at top-tier, or Class A, apartment buildings downtown recorded their first year-over-year decrease since 2021 last quarter, falling 0.84% from the same period in 2021, according to the Chicago office of appraisal and consulting firm Integra Realty Resources. ◗ What to look for this year:

◗ What to look for this year:

2024 will be a test of how much commercial lenders will be willing to fund those redevelopments, with both Brookfield and URW aiming to secure financing to move forward with their plans. URW aims to break ground on the first phase of its plans to replace an empty Bloomingdale’s

Former Mayor Lori Lightfoot commissioned recommendations on how to improve the performance of the Mag Mile and State Street in 2021; it remains to be seen whether Mayor Brandon Johnson’s administration will put a focus on helping revive the shopping corridors.

Experts expect rent growth to stay slow in 2024. But a major slowdown in new supply is on the horizon in 2025, due to the impact of high borrowing and construction costs on the development pipeline. That means tenants will be hit with rent spikes, which could mean a welcome positive impact on values for apartment investors.

show is an outdoor ride and drive for some vehicles, said RoShelle Salinas, executive vice president of the Houston Automobile Dealers Association that organizes the event. Salinas said the ride and

drive is executed by an experiential company in direct relation with Stellantis, not its dealers. Stellantis also won’t have a display at the North Texas Auto Expo in Dallas in late February. Show organizers plan to work with dealers to ensure that at least Ram and Jeep models will be represented. “We are all disappointed by their decision,” Salinas said in an email. “However, we are grateful we had their participation for so long and are empathetic to their situation after the strike. We hope they will return in full force in 2025.” Vince Bond Jr. writes for Crain’s sister publication Automotive News.

STELLANTIS From Page 3

Eight brands will be participating in the Chicago Drives Electric indoor EV track this year, up from five in 2023. Bilek said the show will again feature outdoor test drives where consumers can get behind the wheel on city streets. The company’s reevaluation isn’t limited to the bigger events. Stellantis is scaling back at smaller regional shows in the U.S. as well. The Houston Auto Show confirmed that Stellantis won’t have a static display. The popular Camp Jeep and Ram test tracks, where

All eyes will be on the two streets as barometers of the health of the city’s retail sector.

professional drivers take attendees through obstacle courses to highlight the capabilities of the vehicles, won’t be there either. The only demonstration Stellantis will have at the Houston

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