Crain's Chicago Business

KITCHEN CONFIDENCE

Criminal probe adds to Abbott’s formula woes

Prosecutors’ investigation of contamination at Michigan plant could lead to nes or even jail time

BY KATHERINE DAVIS

A year after safety lapses at Abbott Laboratories’ baby formula plant in Sturgis, Mich., triggered a nationwide formula shortage, potential criminal liability hangs over the company and its executives.

Following infant illnesses and deaths, whistleblower complaints, a formula recall and eventually a plant shutdown, the U.S. Department of Justice opened a criminal investigation into conduct at Abbott’s plant. Since the formula saga began, Abbott has taken much of the blame for the

shortage, had plant safety issues exposed and has seen a steep decline in formula sales. But the DOJ investigation could deepen the damage from an episode that has already hurt the company’s bottom line and brand name. If prosecutors bring criminal charges, potential penalties include steep nes for Abbott, as well as nes and even jail time for company executives. Food safety law experts say the DOJ is likely assessing whether Abbott and individual executives broke provisions in the Food, Drug &

See ABBOTT on Page 19

Labor faceoff menaces Chicago hotel recovery

Another strike would devastate city’s convention and tourism industry as it starts to come back from COVID

BY DANNY ECKER

Chicago hotels nally started to regain their footing last year after being knocked down by the pandemic. Now comes a new threat to their recovery: union labor contract talks.

Collective bargaining agreements covering thousands of workers at more than two dozen large hotels in the city expire late this summer, teeing up their rst labor negotiations since COVID-19 thumped the hospitality industry. It’s also the rst

time that labor leaders and operators of the city’s biggest hotels will square o at the bargaining table since a historic 2018 strike disrupted weeks of crucial late summer tourism and frustrated corporate meeting and trade show attendees. is time around, the two sides will need to nd common ground in the wake of a public health crisis that fundamentally changed the way hotels operate and sharpened union demands,

See HOTELS on Page 20

Stephanie Hart of Brown Sugar Bakery

Another perplexing plot twist in the casino quest

Much as the Lightfoot administration would prefer that we all move on and celebrate her great victory before electing her to a new term, the questions keep coming about why she was in such a rush to select Bally’s to run the city’s prized casino.

e questions, many of them about apparent favoritism, have circulated for the last year. Now, in recent days, comes another set of questions surrounding when Bally’s will be able to move the current tenant out of its River West site — the Tribune printing plant — and how much it might have to put on the table to induce such a relocation.

e story, broken by my colleague Danny Ecker with a little help from me and a few others here, is that the Chicago Tribune’s owner, Alden Global Capital, is holding out for a big, big check in the manner of rapacious hedge funds worldwide. e longer that stando drags on, the greater the odds that Bally’s will not be able to open the gambling palace by its scheduled 2026 date, forcing the city to wait for tax revenue

it’s counting on to pay o old pension debt, Crain’s reported.

e response from the city and Bally’s is that there’s nothing to worry about, that the parties will work something out and that, if need be, Bally’s can start construction on other portions of the former Tribune property while the haggling continues.

O cials point to, among other things, a clause in Bally’s contract with the city that, under certain conditions, appears to require it to compensate the city for up to 85% of tax revenue lost to a late opening.

Maybe. is Chicago homeowner would like to see fast action on anything that will keep my property taxes from leaping again.

But wishes are not always granted. Are the city’s promises of what’s to come consistent with the reality of what’s actually out there?

For instance, one thing the city doesn’t talk about is a littlenoticed section in its March 2022 report narrowing down the list of casino nalists to ve. Here’s what that section, on Page 17, said about Bally’s control of the River West site: “Bally’s has control of the proposed property through a

GREG HINZ

ON POLITICS

purchase option agreement. Bally’s has indicated that it expects the Tribune Publishing plant will be able to relocate within six to nine months of the Host City Agreement” between the city and Bally’s nalizing the casino deal is signed.

at agreement was signed last June. Six to nine months later (eight to be exact), not only is a relocation agreement not in hand, but the unmoved plant remains in place and in full operation, pumping out my morning newspaper. I guess that March 2022 wording is obsolete. A second for-instance: A source

close to the matter says the contract between Bally’s and Alden has not an eviction, but rather a relocation, clause. To move out the Tribune, the clause says Bally’s either has to o er three alternate sites, or come up with some kind of nancial buyout. What that means is that Alden has leverage; it can stall and delay and hold out, however much people at City Hall or Bally’s headquarters hold their breath until they turn blue. Bally’s doesn’t want to talk about any of that. Its spokesman atly declined to comment. Nor

See HINZ on Page 7

How the Fed could undercut racial equity in housing

The current economic expansion is putting a dent in inequality, cutting into persistent racial employment and wage gaps. at’s helped by wage growth for lower-income workers outpacing that of top earners. But if a more hawkish Federal Reserve misreads the current economic environment, it could undo much of this progress.

e Federal Reserve’s work to bring down in ation already led to a deep freeze in the housing market last year, a necessary cooling is healing the housing market — albeit very slowly. e end of bidding wars and the recent improvement in housing a ordability have created an opportunity for families with the means to a ord a home but who were repeatedly outbid by cash buyers during the pandemic boom.

would result in job loss, killing the hopes of homeownership and wealth building for many workers.

e Fed is still raising interest rates and unwinding $95 billion worth of Treasury and mortgage-backed securities each month. at’s already caused in ation to slow rapidly and in ation expectations to fall. With rent in ation — one-third of the consumer price index — likely to ease further, a more aggressive central bank would be a surprise to many market watchers. is month, Duke University Professor Campbell Harvey — well known for being rst to show that an inverted yield curve was a reliable signal for forecasting recessions — led a chorus of experts pointing out that further Fed action could be a historic mistake, an “own goal.”

higher than initially estimated in 2022, but still in ation is trending down from its 40-year high last summer, prompting many economists to continue their re-examination of the Phillips Curve. is is because the relationship between in ation and unemployment can change a lot over time.

However well intentioned, a broad increase in layo s would, without a doubt, push the U.S. economy into a recession that could have been avoided. e result, sadly, would be an end to a labor market that has improved the bargaining power of workers, and especially improved the labor market outcomes of Black workers and all those who historically had been left behind.

ORPHE DIVOUNGUY ON THE ECONOMY

On one hand, the Federal Reserve’s intervention to bring down in ation is necessary. But while stubbornly rising in ation is a huge threat, too much tightening will also disproportionately hurt U.S. households and businesses, especially lower-income and younger families.

Monetary policy tools are blunt and di cult to use with a great deal of precision. e medicine

shouldn’t cause more harm than the disease. An economic downturn would hurt everyone, once again disproportionately leaving Black workers behind.

Crain’s contributor Orphe Divounguy is a senior economist at ZillowGroup and former chief economist at the Illinois Policy Institute. His views do not necessarily re ect those of his employers.

During last year’s slowdown, the share of rst-time buyers rebounded from the year before. And though a large share of potential rst-time home buyers are Black, Black families continue to face higher barriers to housing than any other group. e result is a growing racial homeownership gap — a key driver of wealth inequality that costs the U.S. economy nearly $3 trillion annually.

Unfortunately, Black Americans experience much less upward wealth mobility and much more downward wealth mobility than white Americans, conditional on the same initial wealth level. As a record number of homes under construction nally hits the market and mortgage rates stabilize, a strong labor market means more Black Americans could hop on the rst rung of the homeownership ladder. But an overly hawkish central bank risks pushing the U.S. economy into a recession that

e bulk of empirical evidence points to a long lag between a monetary policy action and its impact. A slew of leading economic indicators already point to a weakening U.S. economy. is is because household consumption — which makes up roughly twothirds of gross domestic product — is falling rapidly. In the last quarter of 2022, in ation-adjusted nal sales to domestic purchasers were nearly at, rising by only 0.8%.

Despite the slowdown in consumer spending, credit card debt rose by nearly 19% during the same period, according to Chicago-based credit rating agency TransUnion, suggesting that both high prices and a sharp increase in interest rates are rapidly eroding consumer nances.

e U.S. labor market remains the only bright spot in this uncertain economic environment, but it is rmly in the Fed’s crosshairs. Some central bankers believe that the unemployment rate has to increase in order to further bring down in ation. Recent revisions by the Bureau of Labor Statistics show the labor market and in ation were

BALLY’S STANDOFF WITH TRIBUNE RAISES ANOTHER ROUND OF QUESTIONS.

MONETARY POLICY TOOLS ARE BLUNT AND DIFFICULT TO USE WITH GREAT PRECISION.

JOE CAHILL ON BUSINESS

Arlington Heights never got the ‘no poaching’ memo

Remember the no-poaching pledge?

A month ago, political leaders across metropolitan Chicago were touting a new era of collaboration in economic development. Rather than swiping businesses and jobs from each other in a zero-sum scramble, they would work together to expand the economic pie for everyone.

What qualifies as a local job? Suburb pushes back.

Schaumburg thought it scored an economic development win when it inked tax break deals with Zurich and Motorola Solutions to keep them — and their jobs — in town. Then COVID happened. Then a volley of lawsuits. I

BY

Schaumburg thought it scored an economic development win several years ago, when it inked tax break deals with Zurich North America and Motorola Solutions to keep two of the village’s biggest employers — and thousands of high-paying jobs — in the suburb and provide an anchor for an ambitious o ce, residential and retail development.

en came the pandemic, severing the link between job and o ce. Suddenly, the economic ripple e ects that local o cials imagined when tax breaks were rst dangled — a steady stream of o ce workers stepping out for lunch in the village each day, dropping o their dry cleaning, lling

See JOBS on Page 22

Baxter International shakes up leadership as it restructures

Two board members retire while the medical equipment manufacturer also appoints four new division heads ahead of revamp that aims to cut costs

BY KATHERINE DAVIS

Baxter International, the Deer eld-based medical equipment manufacturer, disclosed a variety of board and executive changes as it embarks on a major restructuring of the business that’s designed to cut costs and streamline operations after a turbulent 2022.

Two Baxter board members, omas Chen, a former Abbott Laboratories executive, and Albert Stroucken, the former CEO of Owens-Illinois, will

retire from their positions, effective April 28, according to a ling with the U.S. Securities & Exchange Commission.

Chen, who noti ed Baxter of his retirement Feb. 13 and was 72 as of March 2022, has been on the board since 2012. As a result, Baxter board member Cathy Smith will become chair of the board’s nominating, corporate governance and public policy committee immediately after Chen’s retirement, according to the ling.

Stroucken, Baxter’s lead inde-

pendent director, is leaving after the company decided not to nominate him for re-election in accordance with the company’s mandatory retirement age of 75, according to the ling. Baxter board member D. Brent Shafer will succeed Stroucken as lead independent director. Stroucken has been on Baxter’s board since 2004 and became lead independent director in February 2021. As Stroucken departs, Baxter board member Peter Wilver will

e idea makes sense. Tax break-driven competition among local municipalities that reshu es investment within the region leaves everybody worse o . A cooperative approach that brings in new money from elsewhere bene ts the region and state as a whole.

If you missed it, you’re not alone. Village o cials in Arlington Heights apparently didn’t get the regional unity memo. Or maybe they just don’t feel the new “we’re all in this together” spirit.

Leaders of the northwest suburb are “excited” to be luring a high-profile company with lots of jobs away from a nearby municipality. I’m talking about the Chicago Bears, of course. Team officials finally closed Wednesday on the longanticip ated purchase of the shuttered Arlington Park racetrack and surrounding acreage, where they plan to build a new stadium.

CONFIDENCE

e McCaskey family wouldn’t fork over nearly $200 million unless they were highly condent Arlington Heights would provide the tax subsidies they want to help nance a mixeduse entertainment district next to the stadium. Actions and public statements by the village board, mayor and manager suggest the McCaskeys’ con dence is justi ed.

You couldn’t ask for a stronger signal that the “no poaching” pledge is a dead letter. When it comes to economic development in northeastern Illinois, the operating principle is still “every burg for itself.” Any time one local municipality sees a chance to snag jobs and investment from another, o cials will spare no taxpayer expense to grab it.

Not that it’s surprising. Local o cials are local politicians answerable to local voters. And few things impress local voters like landing big-name companies and jobs, no matter where they come from.

Still, a win for Arlington Heights over Chicago isn’t a win for the region or the state. Neither is any other corporate move

within greater Chicago. Illinois and the region win only when jobs and investment come in from another state or country.

State lawmakers should keep that in mind when a municipality asks for help in raiding its neighbors. at’s the kind of help Arlington Heights is seeking with a bill introduced in Springeld this month. State Sen. Ann Gillespie, a Democrat representing Arlington Heights, is sponsoring a measure authorizing a new kind of tax break the town could o er the Bears.

SPECIAL TREATMENT

Called a payment in lieu of taxes, or PILT, the new subsidy is similar to tax increment nancing, with a couple of key wrinkles: Initial tax payment amounts would be negotiated between the company and local taxing bodies rather than tied to property appraisals, and it would be available only for investments of $500 million or more. e Bears’ proposed project is estimated at $5 billion.

Some argue PILTs will help Illinois municipalities land major investments that will create tons of high-paying jobs — like maybe an electric vehicle battery plant. Others say they’re open-ended giveaways to rich companies.

Illinois legislators and Gov. J.B. Pritzker will have to decide if the pros of PILTs outweigh the cons. As they evaluate Gillespie’s bill, they should remember that their duty is to advance the best interests of the state. ey should pass it only if it bene ts Illinois as a whole.

And a bill that gives Illinois towns and cities a better tool for poaching nearby jobs does not bene t the entire state. at doesn’t mean lawmakers must reject PILTs altogether. If they decide Illinois needs this new economic development tool to attract jobs from out of state, they could pass the bill with a carve-out barring PILTs for business moves within the state.

Lawmakers put a similar exclusion — clearly aimed at the Bears’ potential move — in a business recruitment fund they authorized last year. Enabling legislation prohibits use of any money from the fund to facilitate the move of a professional sports team within the state.

Such an exception, worded more broadly to rule out any intrastate moves, could be included in PILT legislation.

Arlington Heights’ pursuit of the Bears shows that local ocials won’t stop poaching across municipal borders. e state shouldn’t help them do it.

COSTAR GROUP

“THIS IS GOING ON WITH HUNDREDS OF JURISDICTIONS, BUT IT’S HAPPENING QUIETLY.”

Mike Grella, a former Amazon site-selection executive

JOHN PLETZ

The size of the City Council isn’t the problem

CRAIN’S POSES A FAIR QUESTION IN ASKING, “Does the city that works really work?” Of course, we all have complaints about how the city is working, but let us not fall into the trap of thinking that efficient operations is the only goal or of believing the false premise that a smaller government is necessarily more efficient. Giving residents a voice in how the city works is perhaps even more important.

In its Feb. 6 story, “Chicago’s City Council: How it works and why,” Crain’s questioned whether 50 alderpersons is too many for e cient governance. But the story ignores several relevant factors.

Crain’s rightly noted that each Chicago alderperson represents fewer people than city councils in every other one of the nation’s 10 biggest cities by stating, “Chicago’s 50 aldermen each represent, on average, 53,931 people . . . and in Los Angeles it’s 256,620 people per council member.” But here it omits a crucial piece of the Los Angeles political landscape: Los Angeles has more than 90 neighborhood councils, each serving about 40,000 individuals.

ChicagoBusiness.com/OneCity50Wards

city charter mandates that each neighborhood council “may present to the Mayor and Council an annual list of priorities for the City budget.”

at is one city’s answer to the tension between democracy and e ciency.

THE PEOPLE OF MY WARD HAVE A CONNECTION TO ME THAT THEY — AND I — BELIEVE HAS GREAT VALUE. THE MORE PEOPLE I HAVE TO REPRESENT, THE HARDER THAT WOULD BE.

e councils are city-certi ed and city-funded local groups, made up of people who live, work, own property or have some other connection to a neighborhood. ese neighborhood councils must be consulted in the budget process. e

Another argument is that under Chicago’s current practices, alderpersons have too much responsibility for ensuring each ward gets its share of city services, preventing them from paying close attention to citywide issues. However, this argument does not have anything to do with how many City Council members we have. Many of us would welcome a change that puts that burden of providing basic city services on a city manager or some other part of the administration, thereby allowing us more time for working on policy and legislation. But we have to be careful that unelected bureaucrats do not get more powerful at the expense of elected alders who can more easily be held accountable to the people they serve.

And then there is the debate about how development gets done. Given Chicago’s history, I believe we would bene t from limits on aldermanic prerogative. We do not need alderpersons using their positions to line their own pocketbooks. A recent allegation that one of our colleagues was extorting a business that sought a permit to remodel a Burger King brings shame to all of us.

BEST PRACTICES

Certainly we can look at other cities for best practices. I do that myself. But the people of my ward have a connection to me that they — and I — believe has great value. e more people I have to repre-

sent, the harder that would be.

As economist Paul Krugman noted recently, although the e cient functioning of many companies took a hit when the Occupational Safety & Health Act was put in place in the 1970s, workplace illnesses and injuries declined. at is a lesson we can draw from as the city’s conversation proceeds on what reforms we make in the name of good government. We should de nitely have that conversation, but there is no single measurement we can use to make those decisions.

ere are a lot of good things going on in our 50 wards. So let us listen to the people and the alderpersons who are helping to make that happen.

NU catches up with an important recruitment perk

Northwestern will no longer be the only school in the Big Ten without a name, image and likeness collective representing its student athletes

BY BRANDON DUPRÉ

Northwestern University will no longer be the only school in the Big Ten without a name, image and likeness collective representing its student athletes.

TrueNU, the first NIL collective to represent Northwestern University athletes, publicly launched Feb. 15 with plans to represent athletes from all 19 of the school’s sports, a move that Jacob Schmidt, executive director of the collective and former director of football operations at NU, believes will set them apart.

that we are the only collective in the country supporting athletes from every varsity sport.”

MAKING MONEY

In 2021, the NCAA reversed course on a long-standing policy that prevented college athletes from capitalizing off their fame and popularity. Collectives supported by deep-pocketed donors and alumni soon popped up all over the country offering student-athletes a chance to make money off their brands for the first time.

strong NIL support, which can tip the scales when deciding between schools.

“You can’t be the only school in the Big Ten to not have a collective supporting your efforts because it matters and we’re playing catch-up,” said Schmidt, adding that he thinks the delay did not hurt the school “too negatively” in recruiting efforts.

“We want to be different in this collective space, and so we will support athletes from all 19 of our varsity programs,” he said. “I can very confidently say

TRUENU LAUNCHES AS NORTHWESTERN IS WORKING ON A PROPOSAL FOR A REPORTED $800 MILLION STADIUM PROJECT TO REBUILD RYAN FIELD.

Now TrueNU will need to get up to speed quickly to catch up to rival schools that launched shortly after the NCAA’s decision, giving them an advantage in the crowded and competitive eld of college recruiting. While NIL collectives aren’t allowed to participate in the recruiting process, per NCAA rules, student-athletes are often aware of which programs have

Schmidt says that part of the delay was proving the NIL collective concept to donors and alumni, and another part of it was just the Northwestern way. “Historically Northwestern is slow to sort of adapt, and we sometimes sit and watch and see what’s happening and learn from others,” he said.

FUNDRAISING

Since the quiet launch in the fall, the collective has already raised nearly seven figures, said Dean Kelley, a TrueNU board member and president of Abb ott Land & Investment. The goal is to raise $3 million to $4 million annually for Northwestern athletes through corporate

and charitable partnerships, as well as donations from the alumni base. The collective has already brokered NIL deals with athletes from three of the school’s varsity sports teams.

TrueNU launches as Northwestern is working on a proposal for a reported $800 million stadium project to rebuild Ryan Field. The timing of the collective’s public launch isn’t lost on Kelley, who says it’s part of an effort “to protect our investments in these facilities.”

The collective’s next focus will be to quickly onboard the

football team as it looks to turn around a disappointing season that saw the Wildcats finish 1-11 and last place in the Big Ten West. In order to compete in the Big Ten, which recently inked a broadcasting deal worth $1.1 billion, the collective will need to show potential recruits and transfers why they should come to Evanston.

“Everybody’s been asking, ‘What’s Northwestern doing?’ And up until three months ago it was not much, but we’re here now and we’re going to make a huge difference,” Schmidt said.

An ongoing collaboration between Crain’s Chicago Business and the University of Chicago’s Center for E ective Government.

ALAMY TRUENU

Ald. Michael Rodriguez represents Chicago’s 22nd Ward.

Investor could make billions in grocer megamerger

Chicago real estate investor Hersch Kla , who once bid on the Chicago Cubs, could see a massive payout if the Kroger-Albertsons deal is allowed to proceed

BY ALLY MAROTTI

A Chicago real estate investor who once bid on the Chicago Cubs could see a big payday if the proposed $24.6 billion merger of grocery store giants Kroger and Albertsons goes through.

Hersch Kla , founder and CEO of Kla Realty, rst invested in Idaho-based Albertsons back in 2006, long before the Jewel-Osco parent had reached the size and dominance it has today. Over the past 17 years, a group of investors that includes Kla Realty has shuttered stores, bought additional chains (including Jewel), taken Albertsons public and grown it into the third-largest grocery chain by dollar share in the country, according to data from market research rm Numerator. If the deal proceeds, the combined grocer will have almost 17% of the market.

Kla Realty is in a three-way tie as Albertsons’ second-largest shareholder, with 10.9% of shares. If regulators allow the merger with No. 2 grocer Kroger to proceed at the proposed buyout price of $34.10 per share, Kla Realty’s more than 58 million shares could be converted into almost $2 billion. e merger agreement states that such shares will have the right to be converted into cash.

Kla also sits on Albertsons’ board of directors. He owns more than 6,700 restricted stock units worth about $229,000, according to a securities ling. ose will be converted into Kroger stock, according to the merger agreement.

Kla Realty stands to receive almost $398.2 million as part of a contentious $4 billion dividend,

which Albertsons began paying out to shareholders in January after a months-long court battle paused it. Albertsons has said that dividend will be paid out regardless of whether the merger with Kroger proceeds.

State regulators around the country had fought to halt the payment during a review of the merger. ey were concerned that if the payout occurred pre-emptively and the deal fails, Albertsons would be at a competitive disadvantage with other grocers. Albertsons said it planned to borrow about $1.5 billion and expend company cash to pay the dividend of $6.85 per share.

Whether Kla will make money o his investment in the company can only be surmised. Albertsons did not go public until 2020. Financial details surrounding the 14 years of portfolio reshaping Kla was involved in before that are not public, and he did not respond to requests for comment. Albertsons declined to comment.

INVESTMENT INTERESTS

A South African native who moved to Chicago in the 1970s, Kla ew mostly under the radar until he bid on the Cubs in 2008. His investment interests have been largely focused on real estate, with an eye toward distressed retailers that had potential lurking in their brick-and-mortar holdings. Kla was outbid for Toys R Us in 2005, and he told the Chicago Tribune in 2014 that he was eyeing distressed retailer Sears Holdings.

Kla Realty was part of an investor group led by New York-based Cerberus Capital Management that joined forces in 2006 with CVS

and grocery chain Supervalu to acquire Albertsons. e Cerberus-led group got 661 mostly distressed Albertsons stores in ve markets that included Northern California and the Rocky Mountains. Cerberus’ portion of the bill amounted to $350 million, according to Bloomberg. It reported last fall that Cerberus’ rate of return is about 200% over the life of the investment, citing a person familiar with the situation. It is unclear how much Kla Realty invested in 2006.

After the acquisition, the investor group set to work shuttering some underperforming stores and sprucing others up. An executive from Kimco, another investor involved in the group, told the Wall Street Journal in 2012 that Kimco had made ve times its money on the 2006 deal. It is unclear how much it invested initially.

e business was valued at $3.5 billion, including debt, by 2012, according to Bloomberg. Fast-forward to 2013. e Cerberus-led group that includes Kla Realty bought 877 grocery stores from Supervalu, including Albertsons, Jewel-Osco and other chains.

e Cerberus group paid $100 million and assumed $3.2 billion in debt to buy the stores. e deal included 178 Jewel stores, which were mostly in the Chicago area.

e company that owned Albertsons was called AB Acquisitions and was controlled by the Cerberus investor group that included Kla . In early 2015, it closed a more than $9 billion deal to buy Safeway.  e investors tried to exit after that, ling paperwork to go public in 2015, but it postponed and eventually withdrew its plan.

Albertsons nally debuted as a public company in 2020, though Bloomberg said at the time that it was “with a whimper.” Its shares didn’t take o after an initial public o ering in which the company raised $800 million.

REGULATORY HURDLES

e proposed merger with Kroger is facing steep regulatory hurdles, as lawmakers around the country raise concerns over what a larger grocer would mean for prices in an in ationary environment.

Mariano’s parent Kroger and Albertsons have said the merger will give them more buying power from food makers, which will allow them to cut costs to the tune of $500 million. e companies also said they are willing to o oad stores to ease concerns, spinning them out into a company called SpinCo. If SpinCo is used, common stock that is rolled into the new company could be paid out to shareholders, according to the merger agreement. How much depends on the num-

ber of stores spun out. ere are other moving parts that would a ect Kla ’s ultimate payday from the deal. e owners have signed agreements barring them from o oading stock during a certain period.

To be clear, Kla ’s payday will not come if the deal does not go through (except for the dividend). omas Lys, professor emeritus of accounting at Northwestern University’s Kellogg School of Management, calculates that the market believes there is a less than 1% chance the deal will be approved. He used a formula he developed that computes probabilities from market prices.

Albertsons’ recent share price of $21.07 represents a 26% drop since news about the proposed merger broke in October.

“Roughly speaking, the market is betting this thing is dead in the water,” Lys said. “While it would be interesting to know how much money (Kla ) would make, he’s not going to make it.”

Carmine’s prepares to close for Gold Coast rebuild

The project is expected to take about 15 months and is among new changes being ushered into the area of the neighborhood once known as the Viagra Triangle

BY ALLY MAROTTI

Italian restaurant Carmine’s Chicago plans to temporarily close after dinner service Feb. 26 so the Gold Coast building it occupies can be torn down and rebuilt.

The project is expected to take about 15 months and cost $4 million, according to a news release from Rosebud Restaurant Group, which operates Carmine’s.

The building at 1043 N. Rush St. that houses Carmine’s was sold last year to Chicago-based L3 Capital, which is knocking it down and building anew. Carmine’s signed a long-term lease with L3 to reopen in a bigger, more open space in the new two-story building, Rosebud Chief Operating Officer Nick Lombardo told Crain’s last fall.

Carmine’s employees will be transferred to other Rosebud locations while the restaurant is closed.

Carmine’s new space will have a very open feel, Lombardo told Crain’s. There will be a first-floor bar, and the upstairs will house a “monster terrace” that overlooks Rush Street, the main restaurant, another bar and a private dining space. The news release said the dining area will occupy 10,000 square feet.

UPHEAVAL

The change is part of an upheaval in the corner of the Gold Coast that surrounds Mariano Park. The area has a storied restaurant history, and most of the establishments operating there have been around for the better part of three decades. It

tended toward old-school Italian joints and steakhouses. In the next decade, the area would earn a nickname of the “Viagra Triangle” for the older men who flocked to the restaurants to court younger women and vice versa.

But restaurant owners in the area contend that’s not the vibe so much anymore. It’s out with the old and in with the new.

The building next door to Carmine’s, which housed Tavern on Rush for 25 years, is getting a new restaurant, and it’s not going to be a steakhouse. The landlords at 1031 N. Rush St. plan to open a contemporary American restaurant called The Bellevue this spring. Renovations are underway.

Rosebud founder Alex Dana said in the release that the group is fortunate to continue

growing amid the changes and challenges the restaurant industry has faced over the years.

Rosebud opened its first restaurant in 1976 and has grown to nine locations.

“Unfortunately, we’ve seen many of our greatest competi -

tors struggle to overcome these challenges, and it’s with great admiration and respect to them that we approach new projects,” he said.

Carmine’s expects to open its new iteration in the summer of 2024.

A rendering of the rebuilt Carmine’s Chicago in the Gold Coast.

Ex-Bear closer to getting $10M subsidy for project

Israel Idonije is poised to get a tax-increment nancing grant for his $63 million proposal to redevelop the historic Hudson Motor Building on Motor Row

BY DANNY ECKER

Former Chicago Bears defensive end Israel Idonije is a key step closer to turning a historic Motor Row building into a mixed-use complex after a city panel signed o on a $10 million public subsidy for the project.

e city’s Community Development Commission Feb. 14 unanimously approved the tax-increment nancing grant for Idonije’s planned revamp of the landmark Hudson Motor Building at 2222 S. Michigan Ave. If the taxpayer grant and a corresponding redevelopment agreement are nalized by the City Council, it would help nance a nearly $63 million transformation of the 100-year-old building with 38 residential units, 18 hotel rooms and a series of other elements including a restaurant, event space, a speakeasy and a rooftop pool and bar.

e TIF money could help Idonije move forward with one of the largest redevelopment projects on Motor Row, a historic Near South Side thoroughfare that began drawing more real estate investors several years ago as former Mayor Rahm Emanuel sought to turn the area near McCormick Place into a more dynamic entertainment district.

FOOT TRAFFIC

Some of that momentum was stalled by the COVID-19 pandemic, but Idonije’s project could help bring more foot tra c to the area even when the convention center campus is quiet. Mayor Lori Lightfoot’s administration also wrapped up an $11 million project last summer that included widening Motor Row’s sidewalks and adding new landscaping, among other improvements.

“Being the biggest building on the (Motor Row) block, we think we can be a really important part of that acceleration of growth,” said Idonije, who spent most of his 11-year NFL career with the Bears and bought the vintage auto showroom building in early 2018 for $10 million.

Idonije’s joint venture in the project with Tustin, Calif.-based real estate investor Kelemen Caamano Investments plans to nance the project with more than $9.8 million in equity, almost $38 million in debt and about $5.1 million in proceeds from the sale of historic tax credits, in addition to the money from the Michigan/Cermak TIF district, according to Department of Planning & Development records.

MORE: Israel Idonije was a Crain’s ‘40 Under 40’ honoree in 2010

TIF districts accrue property tax revenue above a baseline number in a designated area for a period of 23 years, with proceeds designed to support projects in blighted areas that wouldn’t be redeveloped without the TIF assistance. e mayoral-appointed members of the Community Development Commission review and recommend action on proposed uses of TIF money to assist private development projects, often a controversial use of taxpayer dollars.

e panel justi ed the TIF contribution in part because the redevelopment would create 150 temporary construction jobs and another 150 permanent jobs, according to the Planning Department.

Idonije said the TIF money was a crucial piece to completing its nancial puzzle and aims to begin interior demolition at the

three-story building “as soon as possible,” with the goal of completing construction by midsummer 2024. He called the project a “watering hole for the South Loop” and likened the project to the Fulton Market District’s Hoxton Hotel, o ering a mix of hotel rooms, workspace and other amenities, but with the addition of apartments.

“And then beyond us, our hope is to be champions for that block . . . all those empty retail spaces, as soon as we can ll all those up with restaurants or pubs and bars, that quickly becomes a hot spot of the South Loop.”

CO-WORKING

Idonije’s project will also include his FBRK (pronounced “fabric”) co-working brand, which he launched in 2019 with a nonprofit-focused location in the Loop.

e Motor Row project was also originally dubbed FBRK when Idonije and fellow investor and former Bears teammate Julius Peppers proposed it in 2018, and included co-working space as well as a 109-room hotel. Peppers remains involved in the project as an investor, Idonije said.

Idonije pivoted from that vision early in the COVID-19 pandemic and even hired a real estate brokerage to sell the building, but it never struck such a deal.

e building at 2222 S. Michigan opened in 1922 as an auto dealership and the home of the Hudson Motor Co. e property, which has been vacant for more than two decades, is part of the Motor Row District, which was designated as a Chicago landmark in 2000 and listed on the National Register of Historic Places in 2002.

Idonije has other real estate investments in the area, including a boutique gym called RSTR. He also leads a custom comics producer company called Athlitacomics.

Bally’s Tribune standoff raises more questions

is the company willing to produce a copy of the contract with Alden so that the people of Chicago can determine for themselves how big the threat is to a project critical to the city’s bottom line. City Hall, meanwhile, is saying only that it’s con dent things will get resolved between these two parties.

So add these questions to a long list of others suggesting that either the city failed to do due diligence on a critical deal, or that it tilted the playing eld to Bally’s advantage when picking the winner in its casino sweepstakes.

Remember the story about how Bally’s got a $300,000 gift from the city, as City Hall required it to pay only once for two casino bids but made competitor Neil Bluhm pay $600,000 for

his two bids? Or the story about how the city let Bally’s quietly change the terms of its bid after submission, dropping a clause that would have allowed it to buy out minority partners whether they wanted to be bought or not? Or the tales about how both the city’s casino law rm and its casino revenue consultant also happened to be working for, um, Bally’s? Or the fact that the city held just one “public hearing” in River West before nalizing its choice of the Tribune property, a hearing in which the publicnally got to speak after two hours of a city sales pitch?

en there’s chatter about how Bluhm’s proposal on e 78 property in the South Loop supposedly was rejected because he didn’t control the site, needing a deal with Metra to relocate

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rail lines and approval from the Army Corps of Engineers. Neither supposed encumbrance holds water, literally, especially in the case of the Corps, which has no apparent authority over a dryland project. But then, maybe the idea of giving Bluhm the prize after he roughed up Lightfoot in a ght over city sportsbooks just didn’t sit well with the mayor.

I can’t tell you how many people who know City Hall well have told me in recent months that the city’s stampede to select Bally’s just doesn’t feel right — that there are too many loose strings.

So, now we have more questions. And more questions. I want to believe it’s all hunky dory. I really do. But, sorry, gang. I’m from Chicago.

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A rendering of the rooftop deck at the redeveloped Hudson Motor Building on Motor Row.

Israel Idonije

As egg prices soar, so does backyard chicken trend

With egg prices up 60% year over year, raising live poultry at home looks more enticing

BY CORLI JAY

Supply chain issues, high feed costs and an outbreak of avian u have all been linked to the soaring prices of eggs. Eggs prices in December were 60% higher than a year earlier, according to the most recent Labor Department data.

ose hikes have many considering raising live poultry in an e ort to combat prices at the grocery store. And that’s meant big business for the shops that cater to urban farmers.

Home improvement and agricultural retail chain Tractor Supply projects it will sell 11 million chicks this year, compared with 10 million last year, as consumers turn to raising their own ocks.

“We’ve seen a major uptick in the demand for backyard poultry, and a lot of that has had to do with obviously a lot of focus on health and wellness,” said Chief Merchandising O cer Seth Estep. “We’ve seen a lot of people do this as kind of like a new hobby that they kind of do together. But what I would say is with the uptick in egg prices, we have seen very strong demand this year already, similar to the last couple years.”

Estep, who has been with the Tennessee-based company for 18 years, said the last three years have been the busiest he’s seen for live poultry sales. He credits “rural migration” during the pandemic, when many people moved out of cities to suburban areas. Tractor Supply has ve locations in Kankakee, Will, DuPage, Kane and Lake counties.

Estep said this trend was head-

ed upward even before the cost of eggs rose. Price hikes sealed the deal for many who may have been putting o the decision.

STRICT PROTOCOLS

Pennsylvania-based Rent e Chicken, which caters to those interested in backyard farming without the year-round commitment, also reports a boom. Starting at $995 and topping out at $1,395, package deals o er Chicago-area spring delivery and fall pickup of coops, feed and two to four egg-laying hens. Co-founder Jenn Tompkins said sales saw a 50% increase in business from 2020 to 2021, and she expects a greater increase this year.

Both Tractor Supply and Rent e Chicken say they have not had to raise their prices like many large, commercial farms, as their stock was not impacted by the bird u. Tompkins and Estep cited their attention to biosecurity for the reason they weren’t hit by the outbreak.

“We’ve always had very strict protocols to ensure the health and safety of the birds and our team members and our customers,” said Estep. “We have always required our hatcheries to be certi ed with what’s called the National Poultry Improvement Plan.”

According to the Animal & Plant Health Inspection Service, an agency of the U.S. Department of Agriculture, the National Poultry Improvement Plan “is a voluntary state-federal cooperative testing and certi cation program for poultry breeding ocks, baby chicks, poults, hatching eggs,

hatcheries and dealers.”

Tompkins said managing smaller ocks makes it easier to dodge outbreaks.

“We have less people coming in and out compared to a huge facility, and so we really can limit the chances of (avian u) coming to us,” she said.

COST EFFECTIVE

In November, the U.S. Centers for Disease Control & Prevention reported a record number of birds hit by avian u. Since early last year, more than 49 million birds in 46 states have either died or been killed after exposure, the agency said.

But is backyard farming more cost e ective than stocking up at the grocery?

Estep said that the price of raising poultry isn’t too high, and it’s worth it. “ ere obviously are some startup costs to it,” he said — including feed and equipment like waterers and feeders, “and

you got to make sure that the birds stay warm and healthy.”

A recent Daily Herald report pegged the poultry farming startup costs for one Kane County family at $3,000, though $1,000 could cover the initial setup.

Stephanie Dunn, executive director of Star Farm Chicago, a nonpro t urban farm in the Back of the Yards neighborhood that maintains chickens, said the economic bene ts of backyard poultry are situational.

“It depends on the individual’s economy,” Dunn said. “I would say for some individuals who have the uency and the daily capabilities, like the time costs of maintaining and raising chickens, absolutely (it’s cost effective). Because farming is an industry and it is a career, but it is also one of the rare industries and careers that’s also considered a lifestyle choice.”

Still, there might be some relief in sight. While the Bureau of

Labor Statistics said its food at home index rose 11.8% in 2022 — and for food groups that contained eggs, the increase was as much as 15.3 % — the USDA reports wholesale prices are easing: “Consumer demand for shell eggs fell to average for the rst time since August of 2022 as resistance to record high prices in grocery outlets across the country grows.”

Even with the possible downturn, Tompkins has high hopes for the backyard poultry trend.

“I think it’s going to continue to grow, honestly,” said Tompkins. “People are seeing that they can have more control over their food sources. So whether they’re planning for a garden, or they’re getting backyard chickens, I think that the impact of this ination and, in some cases, lack of eggs in areas, it’s helping people to make di erent decisions.”

Bloomberg contributed.

Typical Chicago worker spends $2,387 less near office

BY NICK GARBER AND JACK GRIEVE

e impact of work-from-home on Chicago’s downtown business district is obvious to anyone who sees the restaurants in the Loop closed during lunch and the plethora of retailers who have permanently shut their doors. But a new study also puts a dollar gure on that economic impact: $2,387 per worker, per year.

e nding comes from a report released Feb. 12 by WFH Research, a group of economists who have conducted regular surveys on changing work arrangements since early in the COVID-19 pandemic.

Compared to 2019, the average Chicago o ce worker is spending $2,387 less on meals, shopping and entertainment near their workplace, the researchers found. at drop is smaller than many other U.S. cities, including

New York City ($4,661), Los Angeles ($4,200), Washington, D.C. ($4,051), and Atlanta ($3,938), among others.

INCHING UP

Chicago workers are spending 26.8% fewer days in the ofce now than in 2019, according to the study. at ranks ninth among the studied cities, with Washington, D.C., seeing the highest in-o ce decline, at 37%.

e WFH Research group is made up of academics a liated with the University of Chicago, Stanford University and Instituto Tecnológico Autónomo de México in Mexico City. It has conducted multiple surveys of U.S. workers since May 2020, most recently in January.

Overall, o ce occupancy has shown signs of inching up across the country. Last month, the national average for days spent

working at home dropped to 27%. at number was in the mid-30s at the same time last year. Still, Chicago’s retail vacancy rate in the Loop rose again last year to 28.3% from 27.4% at the end of 2021, according to a report

from Stone Real Estate, a Chicago retail brokerage. at’s nearly double what it was in 2019, before the pandemic.

e reduction in spending may be felt most acutely by the once-busy retail businesses that

line downtown city blocks. But the rise of remote work has also stoked deeper fears among Chicago’s leaders that empty o ces could fuel lower property tax payments and pose a long-term threat to the city’s nances.

Home improvement and agricultural retail chain Tractor Supply projects it will sell 11 million chicks this year, compared with 10 million last year.

The drop is less steep than in other big U.S. cities but is still a big hit to downtown businesses, a new study shows

The reduction in spending may be felt most acutely by the once-busy retail businesses that line downtown city blocks.

BLOOMBERG

Fake it till you make it? Four keys to doing it right.

Almost every rst-time entrepreneur is encouraged to “fake it till you make it.” Understanding how to do this can be the di erence between fame, zzle and fraud. At Chicago Booth, I teach my students four key fundamentals to nd the right balance: set realistic expectations, network and then leverage your network, sell vision but don’t lie, and be patient.

Set realistic expectations

First-time entrepreneurs feel pressure to identify a multibilliondollar market hidden in plain sight, promise numbers that justify the return on investment venture rms want, and exude the con dence of today’s celebrity billionaire tech founders. But investors have long memories. If you do succeed in gaining the venture investment, they will hold you accountable to what you say. e best plan is to be con dent, but realistic. Don’t change your story on the whim of investor feedback; change the pool of investors in your network.

Network and then leverage your network

When we started Snapsheet, we didn’t have any connections in the insurance industry. rough cold LinkedIn outreach we landed a meeting with the CFO at one of the largest insurance carriers in the country. We then somehow convinced the president of the largest

body shop chain in America to attend that meeting and vouch for us. His presence gave us the dash of credibility we desperately needed.

I always encourage my students to network with the critical vendors of potential clients, attend trade shows and realize that, while you are planning to disrupt an industry, you will be a part of that industry for many years if you are successful. It pays to be mindful of this fact.

Sell vision but don’t lie

In that same CFO meeting we were asked to give a demo. I only had screenshots of an app our designer created and subtly swiped my nger from picture to picture to make it look like it was a live app.

e “fake it” moment worked, and we won the deal. However, we knew contracting would take at least three months and we had plenty of time to build a working product, which became the foundation of what Snapsheet is today. Had we failed to execute, we would have been faced

CJ Przybyl is co-founder and CEO of Reserv and an associate adjunct professor of entrepreneurship at the University of Chicago Booth School of Business. He previously co-founded Snapsheet, which makes claims-management software.

with the ethical decision that eranos, FTX or Outcome Health faced: hide the reality to support your story, or pivot the story to match reality. e answer should be easy!

Be patient

Xochitl Gonzalez recently pub-

lished an excellent article in e Atlantic explaining the core tenets of social climbing. Building a startup is a long and drawn-out social climb. Venture investors and corporate executives have capital and social resources; many rst-time entrepreneurs do not. While your idea may be revolutionary, you will not be trusted until you have earned the right to be trusted. Don’t let con dence turn into cockiness be-

fore you’ve proven yourself. By far the hardest part of faking it till you make it is exuding con dence while remaining humble. VCs and the industry you are disrupting are small communities with long memories.  If you are mindful of these four fundamentals from the beginning, then you can more easily navigate the exhilarating early days of your startup and tee yourself up to “make it.”

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

What do the Bears really want?

The Chicago Bears are now the proud owners of a 326-acre property in the bustling suburb of Arlington Heights.

What they do with the parcel next is far from certain. Will it become the home of a gleaming new domed stadium? Will it be an asset the McCaskeys & Co. tuck into their back pockets and treat as a future real estate development prospect?

Or will this high-stakes gamble on finally owning a football arena, instead of leasing one, be the Hail Mary pass that forces the Bears’ current owners to sell to someone with pockets deep enough to get the job done?

Under ordinary circumstances, the path forward wouldn’t be this mysterious. If this were any other team, the owners’ intentions, based on their statements and actions, would be pretty clear: We want to own our own stadium. We bought a spot we think will work. We’ll put the money together and build it.

But this is the Bears we’re talking about. Not exactly famous for their free-spending ways, the McCaskeys say they’re planning to construct a mixed-use project — including a domed stadium — that could cost up to $5 billion to build. e price tag for the land acquisition alone was $197 million.

e Bears don’t have that kind of pocket change — and their calls for public subsidies to help close the gap have been met with the sort of icy reception they deserve in Spring eld, as well as by school districts and other taxing bodies closer to their would-be home.

The High School District 214 and elementary Community Consolidated School District 15 school boards, for instance, plan to retain a lobbyist to oppose — or at least revamp — recently filed state legislation that would take a cut of their future property tax revenues and give the Bears a significant tax break at Arlington Park. Meanwhile, state Sen.

Ann Gillespie, who represents Arlington Heights, filed a bill that would freeze the team’s property assessment for up to 40 years. And “I love the Bears,” said Gov. J.B. Pritzker, “but it is a private business, and I honestly do not think the public has an obligation to fund, in this major way, a private business.”

As this page has argued before, the Ar-

lington International Racecourse property represents a unique opportunity to redevelop a relatively close-in parcel of suburban land that’s roughly the size of Chicago’s Loop — with or without a football stadium. If the Bears can’t figure out how to make the most of that opportunity on their own — or with the help of a deep-pocketed partner — then perhaps they should stand aside and allow someone else to draw up a game plan instead.

WHAT’S REALLY CHANGED IS THAT

Where the Bears’ acquisition of the Arlington Heights land leaves us is pretty much where we were before the deal was closed: with a team that may or may not really have the wherewithal to build or borrow on its own, and proposals on the table to give the Bears at least some of what they want — a dome, if not ownership — at its existing lakefront location at Soldier Field.

What’s really changed is that the team’s self-imposed gag order on negotiating with the city appears to be over now. This represents a real opportunity for Chicago’s mayor — whether it’s Lori Lightfoot or, in a few months, someone else — to negotiate in earnest on a deal to keep the Bears on Chicago soil.

Idea of a city-owned bank merits discussion

While murder and mayhem — and talk of how to stop it — is justi ably the top concern of the mayor’s race, an intriguing economic development idea is also bubbling up that merits greater discussion and exploration. at concept: a Chicago-owned bank.

Ja’Mal Green and Paul Vallas, two mayoral hopefuls who disagree on mostly everything, both see value in starting a bank that’s owned and operated by the city, akin to O’Hare International Airport or the water department. Green even has a name for it — the Bank of Chicago — while Vallas recently told the City Club of Chicago that his municipal bank game plan would echo a concept backed by former Ald. Ameya Pawar, a longtime local advocate of municipal banks and a failed 2019 candidate

for local treasurer.

For the city that works, this banking model screams with potential, especially when it comes to serving minority and women borrowers that history has demonstrated don’t always get a fair shake at traditional lenders. Starting and running the bank, however, requires deft management — not always in abundance in city government — and will undoubtedly face some high hurdles, including dogged opposition from thenancial services industry and Chicago’s reputation for creative corruption.

But if executed properly, a city-owned or “public” bank could prove invaluable in bankrolling needed but di cult-to-commercially- nance neighborhood projects, primarily on the South and West sides. As de facto lender of last resort, a municipal

bank could back low-income housing, create or restore small-business districts, even acquire vacant lots with an eye toward returning them to community use and the tax rolls.

One key question is how would a municipal bank be funded on a sustained basis. Startup costs could be a couple of billion dollars, say experts, and capitalization is the lifeblood of any nancial institution.

Well, an argument can be made that the cash is already hiding in plain sight in the form of monies generated from tax-increment nancing proceeds, the city treasurer’s portfolio, government linked deposits and municipal pension fund investments.

ere is also speculation that a city-owned bank could take in deposits from the burgeoning legalized marijuana business, which would require legislative and regulatory approval, and a cut of casino and sports-betting returns.

Pawar, now a cannabis industry entrepreneur and senior fellow at the nonprof-

it Economic Security Project, adds that philanthropy and corporate giving pledges — funding devices frequently used to supplement speci c city-backed or public-private e orts — could help bolster a municipal bank.

Even if funds are loaned out at lower-than-market rates, the bank can “leverage up,” earn money and increase its asset base, he asserts.

Moreover, it’s important to realize that there is a fundamental philosophical di erence between public and private banks.

Primarily, private institutions are around to make money for its shareholders and are expected to turn a regular buck; public

Robert Reed, a veteran Chicago journalist, is a former editor of Crain’s Chicago Business.

IF THE BANK IS RUN CORRECTLY, IT WOULD PROVIDE AN ESSENTIAL SOCIAL DIVIDEND TO TAXPAYERS.

THE TEAM’S SELF-IMPOSED GAG ORDER ON NEGOTIATING WITH THE CITY APPEARS TO BE OVER NOW.

The A rlington International R acec ourse property

banks are designed to serve stakeholders, who want to service a community or address a speci c need like a ordable housing. Both have to manage risk, but a public bank’s mission can be satis ed by making enough money to keep its operations going and growing.

And those who think this is a radical or anti-capitalist notion should be comforted in knowing there is precedent that public banks can work. ey have been around in one form or another since the 19th century, often as state-owned institutions with distinct missions, such as serving farming or agricultural interests. Presently, there’s a grassroots state-by-state campaign to create more of them.

CRAIN’S CHICAGO BUSINESS

President/CEO KC Crain

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Cassandra West

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Reporters

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e Bank of North Dakota, started in 1919, is a bellwether of public banking. It’s professionally managed and run by an independent board; it’s prevailed through fat and lean years. Deposits are backed by North Dakota, not the Federal Deposit Insurance Corp.

I don’t know anything about North Dakota, but in Chicago, new ideas are usually confronted with tough opposition from the defenders of the status quo. In the case of a public bank, expect resistance from entrenched banking and nancial services interests opposed to having a publicly sanctioned lender in their vicinity.

Ironic, isn’t it?

e commercial business and mortgage

lenders that had been ignoring or redlining underserved neighborhoods for decades would feel threatened if the city set up shop in those communities.

en there’s the deserved reputation of Chicago politicians sticking their hands into the till. e opportunity to take advantage of a bank, with all that cold hard cash coursing through it, may prove too much of a temptation for our more nefarious public servants.

e best recourse is applying the same guardrails that dominate commercial banking. Maybe going a little further.

Strict rules and regulations, distinct boundaries, aggressive oversight and hiring credible people. Yes, even with all

those defenses, something could happen — it surely occurs in the commercial lending world — but running a tight ship can cut the odds of corruption occurring.

A public bank won’t solve every inequity or problem. But it could provide a vibrant alternative to those in need of a little more help getting a home loan, opening a small business or funding community-oriented nonpro ts.

If the bank is run correctly, it would provide an essential social dividend to taxpayers. It’s critical that discussion of a Chicago-owned bank is surfacing during this tumultuous mayoral campaign. Let’s hope it doesn’t end when the stumping for high o ce is over.

PEOPLE ON THE MOVE

ARCHITECTURE

Perkins&Will, Chicago

Global architecture and design rm Perkins&Will announces the hiring of Todd Accardi as Senior Medical Planner and Associate Principal to its growing regional Healthcare Practice. Todd began his career at Perkins&Will where he spent thirteen years working on projects for clients including Rush University Medical Center, H.N. Hospital & Research Centre, and The Johns Hopkins Hospital. Accardi brings extensive experience in sustainable patient, caregiver, and family-centered design.

ARCHITECTURE / DESIGN

Kahler Slater, Chicago / Milwaukee

Kahler Slater is pleased to announce Riley Atlas has joined as Creative Director of Brand Design. He will lead the design rm’s continued growth, evolution, and positioning of their Environmental Branding team across all market sectors. In his role, Riley will build upon the rm’s strong portfolio and foster experimentation, innovation, and design creativity. He brings over 16 years of experience in building brand awareness and boundary-breaking experiences.

BANKING

American Community Bank & Trust, Arlington Heights

Jeff Armstrong joins American Community Bank & Trust as Senior Vice President, Commercial Banking, bringing a thirty-year track record of proven success in the Chicago market. Jeff builds and manages strong client relationships with a specialty in middle market commercial banking. Based in Arlington Heights, Jeff will continue his success assisting businesses and entrepreneurs with all aspects of their banking needs with the goal of providing creative lending solutions and unparalleled service.

CONSTRUCTION

DSI South, Tampa, FL.

Development Solutions Inc., is pleased to welcome Richard Swindasz, as Director of Construction for DSI South, in Tampa FL. As a Florida market leader, Richard will lead all pre-construction efforts, assist in the growth and staf ng for the of ce and support operations and business development initiatives. He brings over 15 years of concentrated, commercial construction experience, most recently working for one of the largest publicly traded REIT’s in the United States.

HEALTH CARE

Thresholds Health, Chicago

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

REAL ESTATE

Miller, Can eld, Paddock and Stone, PLC, Chicago

Edward Murphy (MBA, MPH) is now the rst CEO of Thresholds Health, a new full-service health center that focuses on integrating primary, behavioral health, and substance use care for Chicago’s west side. With nearly two decades of experience in health leadership across the U.S, Edward leads Thresholds Health’s mission to be a place that welcomes people regardless of their ability to pay. He is certi ed in Leadership Development and the Principal and Senior Consultant of Murphy Associates, LLC.

Principal Attorney Andrew Warnecke has joined the Chicago of ce of Miller Can eld, an international law rm serving businesses and individuals for more than 170 years. Andrew’s practice focuses on patent, copyright, trademark and trade secret matters, with extensive litigation experience in matters involving medical devices, computer software, consumer electronics, automotive manufacturing systems, microchip technology, and the arts, music and publishing.

Roetzel & Andress, Chicago

NAI Hiffman, Oakbrook Terrace

NAI Hiffman is pleased to announce that Steven Bass has been promoted to Shareholder. With 24 years of commercial real estate experience, Steven focuses on assisting clients with strategic real estate planning, nancial analysis and market research throughout the Chicagoland market. Bass started with NAI Hiffman in 2019 in the role of senior vice president with the industrial services team.

REAL ESTATE

NAI Hiffman, Oakbrook Terrace

ARCHITECTURE / DESIGN

Solomon Cordwell Buenz (SCB), Chicago

SCB, a national architecture, interior design, and planning rm, has promoted Joseph Dietz, AIA, LEED AP BD+C and Andrew Monaghan, NCIDQ, LEED AP to Associate Principals in the rm’s Chicago of ce. Joe is a studio leader and project manager with an extensive portfolio of work in urban mixeduse developments and multifamily residential.

Joe’s solution-focused management style fosters a strong and collaborative team approach to designing and delivering successful large-scale projects. Andrew is a design director in the rm’s interiors studio, with 15+ years of experience in workplace and of ce design. With a thoughtful approach to design, Andrew is focused on creating impactful spaces that integrate people, place, brand, and function.

CONSULTING

Ramsey Historic Consultants, Inc., Chicago

Emily Ramsey and Lara Ramsey with Ramsey Historic Consultants, Inc. (RHC) are delighted to announce that John Cramer has joined RHC as a Director overseeing historic tax credit applications, historic designations, regulatory reviews, and business development. John brings over 15 years of experience in the architecture and preservation elds. Since 2014, Chicago-based RHC has helped developers seek federal and state historic tax credits and other incentives for historic rehabilitations.

ENGINEERING / CONSTRUCTION

Milhouse Engineering and Construction, Inc., Chicago

Wendolyn Johnson, MBA, has been promoted to Vice President of Finance at Milhouse.

To order frames or plaques of profiles contact Lauren Melesio at lmelesio@crain.com or 212-210-0707

Wendy has taken large strides in building up the nance and accounting operations while focusing on process improvements. Her experience has led Milhouse to high levels of performance across the organization. She ensures that all nance and accounting functions are performed consistently and establishes strategies that ensure long-term nancial health and growth of Milhouse.

LAW

Fox Swibel Levin & Carroll LLP, Chicago

Fox Swibel is very pleased to announce Michael Strong has joined the rm as a Partner and Chair of the newly established Energy Law group. Michael has over 15 years of experience in the Energy Law domain working primarily with developers and long-term asset owners in the solar industry and retail energy providers helping navigate the complex regulatory frameworks impacting revenue streams. Michael received his A.B., cum laude, from Dartmouth College and his J.D. from the University of Michigan.

Roetzel & Andress welcomes shareholder Hillard M. Sterling Sterling joins the Business Litigation Group and will focus on building the rm’s Technology & Cyber Law Group. A veteran litigator with over 30 years of experience, Sterling litigates a variety of commercial-litigation matters; however, his focus is on technology and cyber-related work.

Jeffery Ramirez joins Roetzel & Andress as a shareholder in the rm’s Estate Planning Group. Adding to the rm’s well-established planning, probate & trust administration, trust & guardianship litigation, and wealth transfer services, Ramirez represents individuals, families and businesses in a variety of estate and trust matters.

NON-PROFITS

DuPage Foundation, Downers Grove

DuPage Foundation, DuPage County’s philanthropic leader, announces Michael R. Sitrick, JD, CFRE, as its new President & CEO.

Holland & Knight, Chicago

Matthew Petersen and Morley Fortier III have joined Holland & Knight as partners in the rm’s Corporate, M&A and Private Equity practice.

Mr. Petersen will serve as head of the Chicago Corporate, M&A and Private Equity practice.

Mr. Petersen’s practice focuses on mergers and acquisitions, corporate nance, complex commercial contracts and strategic counseling.

Petersen Fortier

Mr. Fortier’s practice concentrates on domestic and cross-border mergers and acquisitions, private equity transactions, equity nancing matters, corporate governance issues and general corporate law matters for private equity funds and independent sponsors, their portfolio companies and other privately-held businesses. They joined the rm from Reed Smith.

Mike most recently served as the Foundation’s Executive Vice President for Advancement and has held multiple roles with the organization dating back to 2003. After a hiatus to study and practice law, he returned in 2013. He received his Juris Doctor from Loyola University Chicago School of Law, has been active on many boards and has won awards for his community service.

PHILANTHROPY

Jewish United Fund, Chicago

Carey Cooper has been named Chair of the 2023 Jewish United Fund Annual Campaign. With a decades-long leadership track record in the Jewish community and beyond, Cooper will spearhead this collective community effort which funds a network of 100+ human service agencies, educational institutions, and community-building initiatives in Chicago, in Israel and worldwide. A hallmark of Cooper’s leadership is his unwavering support for inclusion programs and experiences for people with disabilities.

NAI Hiffman proudly announces that Jack Brennan has been elevated from Vice President to Shareholder. Brennan specializes in private and institutional tenants and owners with leasing, acquisition, disposition, and development of industrial and land assets in Chicago’s western suburbs. Brennan has compiled six years of experience in the industry after his start with the Oak Brook Terrace-based company in 2016.

REAL ESTATE

NAI Hiffman, Oakbrook Terrace

NAI Hiffman is thrilled to recognize Michael Freitag in his promotion from Vice President to Executive Vice President. With seven years in the CRE industry, Michael assists private companies, owners and individuals, investors and developers in acquiring, disposing and leasing industrial assets and land. His focus is on creating thoughtful and strategic solutions, often exceeding the goals of his clients. Freitag has been with NAI Hiffman since 2015.

TECHNOLOGY

BlueHour Technology, Chicago

Robert Dvorak has launched and is President and Chief Executive Of cer of BlueHour Technology, a data-driven enterprise technology and advisory rm that helps organizations create meaningful change by blending modern approaches with traditional business values to drive in nite agility. Dvorak has more than 25 years of experience in executive leadership positions focused on serving clients. Most recently, Dvorak was Chief Executive Of cer, President, and Chairman at SilkRoad Technology.

Sterling Ramirez

Dietz Monaghan

FOOD AND HOSPITALITY

KITCHEN

CONFIDENCE

A lot is going on inside the old Cupid Candies factory in Chicago’s Auburn Gresham neighborhood. Chocolate mixers are whirling and cans of evaporated milk are stacked knee-high. One worker is unwrapping brick-size sticks of butter, and someone is giving a decades-old piece of equipment the “old Fonzie nudge.”

e most exciting part for Stephanie Hart isn’t the candy: It is the construction. e nearly 70-year-old facility is on its way to a second life, and Hart is giving it breath.

Hart, the owner of Brown Sugar Bakery, bought the factory in late 2020 to expand her cake-making operation, which had outgrown its storefront on 75th Street on Chicago’s South Side. Hart took on the candy-making, too, to expand her business and keep some longtime workers employed.

“ is is going to, at minimum, (quadruple) my capacity to make cake,” Hart said, standing behind trays of chocolate turtles.

“My hope is I’ll be able to grow to meet that capacity.”

CORE INGREDIENTS: Getting the basics down before going big. PAGE 14

GROWING BUSINESSES: Lenders must learn to be more creative. PAGE 14

STIRRING IT UP: Black chefs expand into nontraditional cuisines. PAGE 17

BY ALLY MAROTTI

Hart calls this stage “escaping mom and pop” as she takes her business to the next level. Brown Sugar launched online sales in 2021 and now ships its famous caramel cakes nationwide. It’s key to building wealth and paying her employees sustainable wages — and it was more than 20 years in the making.

Hart is among a growing number of Black entrepreneurs in Chicago’s food and hospitality industry, and across the country, who are positioning their business-

es for growth. ey say it’s time to move beyond the kitchen and mostly menial restaurant and food service jobs, a stigma they’re working to erase as they seek increased economic mobility. And they are taking advantage of capital opportunities that opened up after public outcry over the murder of George Floyd in 2020 exposed the depth of the racial wealth gap. Recently, for example, Uber Eats an-

See KITCHEN on Page 16

Chicago’s Black food entrepreneurs are trying new business models and developing their own recipes for nancial success

Stephanie Hart, owner of Brown Sugar Bakery, bought a candy factory and expanded her product line.

FOOD AND HOSPITALITY

Scaling up rst requires getting the basics down

Everyone wants to figure out how to become an overnight success or a millionaire tomorrow. Especially smallbusiness owners, or those who have the mentality of one. I define a small business the same as the Small Business Association does: a firm with revenue ranging from $1 million to $40 million and between 1 and 1,500 employees.

I’ve run a variety of small businesses over the last decade, but the one people ask me about the most is Moon Meals, which I started in my 20s. Moon Meals began with my experimenting in my kitchen with plant-based grab-and-go meals. After my products ew out the door of a South Loop co ee shop, I scaled distribution from a handful of mom and pop cafes in Chicago to hundreds of locations across multiple states, raised a round of capital from angel investors and family ofces, and built a supply chain from scratch.

I stepped away early during the pandemic to help other entrepreneurs achieve their dreams by scaling up, particularly those of color on the South and West sides of Chi-

MISSION DRIVEN

cago. Of the business owners I’ve counseled, I advise them to focus on ve core areas, outlined below. ese are critical to expanding, growing revenue and sustaining a business.

Customer satisfaction: You don’t have a business if you don’t have customers. Focus on customer retention and prioritize a happy customer over pro tability. If that means hiring more sta or spending more time training your sta , do it. Convert rst-time customers into lifelong customers, so you won’t have to work so hard on getting new customers.

Operations: Automate as much as you can. Anything you can’t automate should have standard operating procedures clearly spelled out. Having documented instructions assures product consistency no matter who’s in the kitchen or overseeing production. You can’t grow a business by performing key tasks all by yourself.

Team: Your management team is critical.

You will need them to keep things humming while you focus on other details. If you haven’t hired capable employees who can handle the core areas of your business and meet growing demand, you won’t, well, grow.

Capital: You cannot make money without any money. While you’ll likely invest your own money initially, you will eventually need to line up capital partners to cover operating expenses that investments need for scaling. If a signi cant opportunity presents itself and you’re not able to handle it because you lack the cash to scale up your operation to meet the need, that could be a major setback. From day one, keep good nancial records and build relationships with investors and bank lending

o cers. It can be challenging to get funding quickly that will allow you to seize an opportunity if you don’t have these things already in place.

Marketing: What’s the point of a great product or service if no one knows about it? Get a marketer on your team. With a background in marketing, I knew this was something I had to focus on to get Moon Meals in front of customers. In my case, I was the in-house expert, not a role I would advise for everyone. If you don’t have a strong marketing pro on your team, get one.

is is but a short list of the key areas that I believe every business owner in the food space needs to keep in mind. Let it be part of your recipe for scaling up.

Lending knowledge and capital to rewrite history’s inequities

For Black entrepreneurs, the playing field is not and has not been leveled. Past and present systemic racial practices and policies — from enslavement and sharecropping schemes to redlining and predatory lending — have contributed to today’s racial wealth gap.

Born and raised on Chicago’s South Side, I know this story all too well. My family had to drive outside of our community to buy quality groceries and other essentials or to simply enjoy recreational activities. Our communities did not have the same amenities as in other parts of the city. My neighborhood was marked by vacant lots and storefronts, maybe a liquor store, or corner store establishments where we could purchase candy and maybe canned or frozen foods. If lucky, we’d have a gas station with a convenience store where we would also buy a few things. Seeing all of this, I knew that I needed to do something to improve the conditions of people who look like me and with similar experiences.

I went into banking, starting my career as a teller at a community bank in Oak Park. After working for over a year, I was promoted to

credit analyst and later commercial loan o cer at one its a liate banks, Park National Bank, formerly named Pullman Bank. at’s where I was introduced to community and small-business lending and learned how capital investments empower communities, which lead to economic growth, the creation of new businesses and opportunities for building wealth and equity. is work ful lled me. I was able to empower entrepreneurs with the tools necessary to start businesses, own assets, employ others and improve communities.

roughout my banking career, I’ve seen the barriers that Black and low- to moderate-income individuals face when attempting to gain access to capital. Many barriers weren’t a direct result of actions by the applicant but so often a result of historical systems and policies and the circumstances that followed. Barriers like insu cient assets or insu cient equity in those assets that could help leverage debt; higher expenses because of where a business is located, which means lower pro ts relative to industry standards; lower credit scores because of unequal pay; underdeveloped communities without the

proper infrastructure to encourage new business; and transportation systems that don’t encourage tra c to commercial corridors.

As a commercial lender at a community bank, I worked as best as I could with the tools I had to educate and empower entrepreneurs and help them overcome barriers and to access conventional bank capital. Now, as the leader of a community development nancial institution, Greenwood Archer Capital, I have the ability to remove some of those barriers by creating nancial solutions that provide equitable access to capital.

Greenwood Archer Capital, a non-for-pro t 501(c)(3), community development nancial institution founded in 2012, catalyzes economic development throughout greater Cook County by providing low-cost small-business loans up to $200,000 to Black and other underserved entrepreneurs. Over 90% of the businesses served by GAC are owned by Black and other minorities and/or fall within low- to moderate-income classi cations.

Greenwood Archer Capital’s mission is to lend its knowledge and capital to lessen the impact of institutional racism; grow independent, vibrant Black communities; and create an environment led by purpose.

An example of GAC’s loan products is its Healthy Living and Healthy Financing loan. is loan program provides innovative solutions to local food growers, purchasers

or other entities that support the local food ecosystem. is program incentivizes businesses to source food that is locally grown, enabling them to provide healthier food options and reduce food deserts in Black and low- to moderate-income communities.

At Greenwood Archer Capital, we work to decrease racial wealth gaps and create generational wealth through the deployment of capital. Since inception, GAC has funded over $21 million in loans and grants, helping to start, sustain or propel the growth of over 1,700 small businesses in Chicago and the greater Cook County area.

Its diverse portfolio of clients includes restaurants, grocery stores, food and beverage rms, manufacturing companies, transportation service companies, child care facilities, construction service companies and other professional service providers. e businesses funded by Greenwood Archer Capital create jobs, deliver much-needed goods and services, often to other underserved communities, and contribute to wider community revitalization e orts. is month we are celebrating the many contributions that Black Americans have made to this country. rough my work in lending, I will continue to work to ensure equitable access to capital and wealth-building opportunities that grow independent, vibrant Black communities.

LaForce Baker is vice president of community impact for World Business Chicago and former CEO of Moon Meals.

Erica L. King, president of Greenwood Archer Capital, a non-forpro t community developmentnancial institution, has more than 20 years’ experience in community and small-business lending and underwriting.

How lenders can expand their nancing menu

Entrepreneurs from majority Black and Latino neighborhoods in Chicago often have a harder time starting and growing food and beverage businesses because they are likely to live farther from health care providers and they are likely to have less equity in their homes compared to entrepreneurs from majority white neighborhoods.

Wait, you ask: Why do the proximity to health care services and the value of residential dirt have anything to do with success in the food business? ey shouldn’t, obviously, yet they do. And the reason, no surprise, is money.

Starting and running a restaurant or any other food or beverage business is one of the most capital-intensive forms of entrepreneurship, with very high startup costs relative to most other industries. To nance these upfront expenses to create food-grade space, you typically must have access to your own money, your own network of friends and family investors, or debt. e wealth gap between entrepreneurs of color and white entrepreneurs is well documented, as is the disparity in investor networks.

at leaves borrowing. And to borrow signi cant funding from traditional lenders, you must have a good credit score and valuable collateral. erein lies the problem.

Your credit score is calculated via the proprietary algorithms of the three main credit bureaus. While we don’t know exactly how that math works, we do know that if you have a medical emergency and cannot pay large unplanned expenses that your insurance won’t cover, that bad luck can wreck your credit score even though that scenario tells a lender nothing about your typical repayment habits. Worse access to quality health care, on average, leads to worse health outcomes, which leads to worse credit scores. And Chicago, unfortunately, o ers very unequal access to health care as residents in majority Black and Latino neighborhoods are typically less well served than residents in majority white neighborhoods.

Your personal collateral is typically calculated using the value of your home. e problem here is well documented: Decades of redlining have signi cantly depressed

the value of land in nonwhite communities, such that a home in Englewood is worth signi cantly less than a similar home in Lincoln Park because of the di erence in the underlying parcel’s value.

e result of these two problems, which are compounded by other forms of historical racism, is that entrepreneurs from communities of color will typically nd it harder to nd the funding they need to start and grow successful businesses, particularly in the food industry, in which paying for FDA-compliant space requires such high investment. But it doesn’t have to be this way.

At Allies for Community Business, or A4CB, a nonpro t community development nancial institution, we have eliminated credit score and the value of personal collateral from how we evaluate entrepreneurs for credit. Instead, we machine-read the underlying data on the entrepreneur’s credit report to evaluate how consistently they have repaid recurring debts, ignoring one-o situations such as medical debt and ignoring the value of a home or car. Since changing our credit policy over two years ago, we have observed that write-o s for loans underwritten this way have performed comparably to loan requests evaluated more traditionally, with losses hovering around 5% of originations. We still have

much to learn about what subtle factors reliably predict successful repayment for entrepreneurs from diverse communities, but we are con dent that lenders can do better than relying on the traditional criteria that for too long have restricted access to credit. Money is necessary to start and grow a successful food business, but it is not sufcient. at is why A4CB also co-founded e Hatchery, the largest nonpro t food and beverage business incubator in the country, based in Gar eld Park on Chicago’s West Side, through which we provide private and shared kitchens, industry-speci c training and community building. In addition, A4CB leads the Neighborhood Entrepreneurship Lab, a cohort-based program through which we provide the capital, coaching and connections entrepreneurs need to grow great businesses that create jobs and wealth in their communities.

A4CB believes that entrepreneurs from any background can start and grow businesses that create generational wealth for their families and communities. As we provide the loans and coaching that diverse entrepreneurs need to start and grow food businesses throughout Chicagoland and beyond, we encourage other lenders to o er more nancing more creatively to founders who will invest it well.

Brad McConnell is CEO of Allies for Community Business, a nonpro t that provides the capital, coaching and connections entrepreneurs need to grow great businesses in their communities.

FOOD AND HOSPITALITY

KITCHEN

Continued from Page 13 nounced the launch of an investment program that will provide growth capital to Black restaurant owners. Community development organization Local Initiatives Support Corp. will administer the new Black Restaurant Fund.

Chef Erick Williams of Virtue Restaurant & Bar in Hyde Park, who last year won a coveted James Beard Award, built on that success and recently opened two more restaurants. Food Network regular Dominique Leach is launching retail products out of her Pullman barbecue restaurant, Lexington Betty Smoke House. A new generation of Black hospitality professionals is in training at establishments like Bronzeville Winery. But such successes have been hard won, and owners tell stories of the inequity they have weathered — and still do endure.

“I always knew I had to run faster, jump higher, be better and humble at the same time,” says Hart, who didn’t get her rst traditional loan until 2021, coming 19 years after she launched Brown Sugar. She mused recently on that experience as she made the 10-minute drive between her candy factory and bakery. “I don’t know if people should have to want it that bad.”

TIES TO THE FOOD INDUSTRY

Black Chicagoans have long been integral to the city’s restaurant and food industry. As migrants streaming from the South to Chicago by the thousands in the years following the Civil War and during the Great Migration, many found work in restaurants and other areas of the food industry.

e new residents brought with them a rich food culture, but segregation and discriminatory practices kept them from gaining a foothold in Chicago’s culinary economy. Employers took advantage of Black workers in service jobs, and a stigma developed. e line between service and servitude became too thin.

While restaurant ownership remained largely elusive, some Black food entrepreneurs developed a culinary culture around Southern-style cooking, establishing well-known franchises like Lem’s Bar-B-Q and Harold’s Chicken, both of which started in the 1950s and continue today.

In Illinois, 9% of restaurants are Black owned, according to 2017 data from the National Restaurant Association, the most recent available. e state’s Black population was 14.7%, according to a 2021 U.S. Census Bureau estimate. Food industry experts say the numbers are likely even more out of proportion in Chicago, where 29.2% of residents are Black and where most of the state’s restaurants are located.

e lack of data is a concern. If the issue isn’t measured, how can it be xed? ose numbers also fail to capture restaurants that

closed due to the COVID-19 pandemic, which studies show hit Black-owned businesses harder than white-owned rms.

e roots of the problem reach through the many levels of discrimination in the American economy, particularly in lending markets, experts say. e fact that Chicago is one of the most segregated cities in the country has made matters worse. Restaurants are inherently risky businesses, with low margins and high failure rates. Many traditional lenders avoid backing such businesses anywhere, let alone in neighborhoods that have suffered long-term disinvestment.

e U.S. Small Business Administration puts it in stark terms: Minority-owned businesses are more likely to be denied credit, less likely to receive the full credit amount requested and more likely to be discouraged from applying for credit. As a result, securing a loan to capitalize a restaurant can be nearly impossible for Black entrepreneurs.

“You do it yourself, and it makes it that much harder,” says Baron Waller, a Culver’s franchisee who used his life savings to open his rst location in 2011. “ at’s part

Food Network regular Dominique Leach is launching retail products out of her Pullman barbecue restaurant, Lexington Betty Smoke House.

PHOTOS BY JOHN R. BOEHM

Baron Waller used his life savings to open his rst Culver’s franchise in 2011.

of the wealth gap. Most of us have to do it ourselves.”

Waller knows he’s an outlier in that regard. But he has also received grants, found partners and tapped into city funding to open additional locations. By the end of this year, he’ll have 10 restaurants.

Borrowing money got a little easier after he had a couple of years under his belt at the rst location, he says.

THE FUNDING FACTOR

While some equity is needed to secure a loan, the racial wealth gap illustrates how much less a Black borrower might have compared to a white borrower. As of last June, Black families had 25 cents for every dollar of white family wealth, according to the Federal Reserve.

Historical discrimination in labor markets means Black workers are often paid less, said Isaac Hacamo, associate professor ofnance at Indiana University’s Kelley School of Business. And segregation in housing markets means residents in Black communities likely have lower-valued homes, or do not own a home at all. Homeownership is the standard way Americans build wealth.

“To borrow money, you need to have a little skin in the game,” Hacamo said. “Historically, minorities — Blacks, Hispanics — always came in with a lot less wealth.”

To start a restaurant, entrepreneurs typically borrow money via loans from traditional lenders, raise money from family and friends, or seek equity nancing from investors. Black entrepreneurs typically have less access to all three methods than their white counterparts.

Brookings Institution reports illustrate the vicious cycle. In 2019, the banked and underbanked rates were highest for Black adults, making it more di cult to accumulate wealth and pushing them toward alternative lenders like payday loans. Such predatory loans had an average interest rate of 391% that year, compared to 10.3% for the average personal loan from a commercial bank. Relying on such high-interest loans can hurt credit, which makes it harder to get a traditional loan. Black people had the lowest average credit score by race in 2021, at 677. Scores range from 300 to 850. e average credit score was 745 for Asian Americans and 734 for white people.

“In the Black community, we’re not just born into understanding what an 800 credit score is,” said Cecilia Cu , co-owner of Bronzeville Winery. “We don’t have Roth IRAs, we don’t have retirement funds; that’s not something we were taught. We’re working within our own community to change that, but we’re not there yet because it’s hundreds of years of disinvestment.”

Cu and business partner Eric Williams (unrelated to Virtue’s Erick Williams) went to 20 lenders trying to raise capital to open their business and were told “no” each time, she says.

e gantlet of denial was perplexing for Cu . She had spent a decade opening Hyatt hotels and resorts and owns another restaurant in New Mexico. Eric Williams has owned e Silver Room art and retail space in Hyde Park since 1997. at experience should have counted for more, she says.

Eventually, the duo won a $250,000 grant from Mayor Lori Lightfoot’s Invest South/West program. at gave them momentum to open Bronzeville Winery for $1 million. ey brought on investors and were approved for a loan through a BMO Harris Bank initiative that launched in 2020 and relaxes credit standards to better provide access to capital in communities of color.

In the restaurant sector, in particular, banks need to be intentional and focus on purpose when assessing loan applications, says Eric Smith, vice chairman at BMO Harris. Banks might view restaurants as risky, but Bronzeville Winery is one of the only ne-dining spots in Bronzeville, a historic district known as a hub for Black business and culture.

“Banks have to recognize the important role that small businesses play in our local community and be willing to make that sort of bet,” Smith says.

GOING BEYOND FOOD

Bronzeville Winery is doing more than just feeding people. It launched a program that teaches employees and community members about bank accounts, credit scores and business wellness. It also includes a 20% gratuity on checks, to ensure employees have stability.

ere are also development programs for workers. Bussers can be trained to become managers, and dishwashers can work their way up to sous chef. e restaurant also pays for skill-set training, like a sommelier class or a collegiate-level vegan cooking class. Cu estimates she’s spent four times more on training at Bronzeville Winery than she has at her previous ventures. But this is how the restaurant industry becomes more diverse, she says.

Already, she’s had one employee work his way up from being a dishwasher to a line cook, a move that allowed him to come o governmental aid.

“You’ll never get over the nish line if you don’t have a base to build on,” she says.

At Virtue in Hyde Park, owner Erick Williams also focuses on hiring minority employees whose resumes aren’t as robust as other restaurant employers might want. He has line cooks who were once dishwashers in food halls, and workers leading the line who previously couldn’t tell a chive from a sprig of thyme.

“We are trying our best to open the door as wide as we can,” says Erick Williams.

It’s a big investment, one that most restaurants aren’t willing to make. But training employees gives them a vested interest in the

community and industry, which could eventually translate to ownership, he added. Locating in the South Side was a similarly measured decision.

“You can’t un-feel the fact that a Black server took care of you while Black music is playing and you’re eating Black food in an environment that can compete with any of the restaurants of our scale of any culture,” he says. “It’s a way of advocacy.”

It’s a proof of concept, and people recognize it’s working. Erick Williams won the James Beard Award for Best Chef in the Great Lakes region last year. He now owns four restaurants.

His path to restaurant ownership was long and unconventional. He grew up among working-class families in the Lawndale and Austin neighborhoods and started working at restaurants as a means to an end. He ended up falling in love with it. He landed at MK Restaurant in River North and worked there for 18½ years, becoming the longest-standing chef at the now-defunct restaurant.

roughout those long years in the kitchen — unconventional for most restaurant owners — he built relationships with patrons and their children, many of whom would later become investors in Virtue, which opened in 2018.

“ at gives me a level of access or a level of resources that I wouldn’t have necessarily gotten from my direct community,” Erick Williams says.

ere are two food industries in this country, says Leach, owner of Lexington Betty Smoke House.

ere’s the Black food industry and the food industry.

Leach trained at Michelin-starred Spiaggia, under Chef Tony Mantuano. But she’s not so sure customers would seek out Italian food from a Black chef. She launched Lexington Betty — named after her grandmother, who was from Lexington, Miss. — as a food truck that she nanced herself. Her goal was to win over the Black community rst, then expand from there.

“It’s hard enough to get the attention of the Black community, but to be seen as a Black chef and small-business owner outside the Black community, you gotta stand up straight, you gotta be thorough, you gotta make sure you’re crispy clean,” she says. “But, most of all, you have to be con dent in yourself.”

Now Leach is using her Pullman restaurant to launch wagyu beef products that will be sold online and in Mariano’s locations, and she sees big possibilities. e situation is changing for Black restaurant owners, she said recently, as she prepared to head to Canada to lm her third Food Network show.

“ ere was a time when we were willing to play the game by the rules that were already put in place, but we are done with that,” she says. “We are done with the validation that we thought we needed, and we’re just ready to put our stamp on the world.”

Beyond soul food: Black restaurants are breaking the mold

Owners introduce diners to a wider choice of cuisines

BY ALLY MAROTTI

Taylor Mason is a Black woman slinging Mexican-style tacos. She admits it’s an unexpected combination.

“I get crazy looks,” she says. “But someone has to do it.”

Black restaurant owners are introducing Chicago diners to cuisines beyond the well-worn soul food dishes synonymous with Southern cooking. Some restaurant operators say it’s still a struggle to convince consumers that Black chefs can cook Italian or French food, or have ne-dining chops. As such, Black chefs say progress is slow — but it is steady.

Evidence is emerging all over the city. Mason, co-owner of Taylor’s Tacos, is preparing to open her rst brick-and-mortar location on the Near West Side selling Mexican street-style tacos with a soul food twist. Majani Restaurant sells vegan soul food in Chicago’s South Shore neighborhood. Bocadillo Market in Lincoln Park is a Spanish restaurant that takes inspiration from Chef James Martin’s trips to visit family in South Carolina.

Sommelier Derrick Westbrook owns a wine shop called Juice @ 1340 in the West Loop. And the list continues to grow.

“You think about a Black restaurant as just a soul food restaurant, and it has chicken, collard greens and mac and cheese, and that’s it,” says Gerry Fernandez, president and founder of the Multicultural Foodservice & Hospitality Alliance. “It’s gone beyond that now.”

e relationship Black hospitality workers have with soul food is a nuanced one. Some say it is intrinsic to who they are, and

they feel an obligation to infuse their work with the culture that soul food carries. But Black chefs like cooking other food, too, and not every Black patron just wants to eat at soul food restaurants all the time.

“I want an Italian restaurant, and I’m not Italian,” says Le’Qoinne Rice, co-owner of For e People Hospitality, the parent company of rotating-menu restaurant e Duplex in Logan Square. “We’re stepping outside the boundaries of what Black people are supposed to create. . . .I don’t want to be pigeonholed into a space just because I’m Black. I want to do French food.”

Rice’s restaurant group is preparing to open an AmericanFrench fusion restaurant in Lincoln Park called Good Times. It’ll have funky colors and mismatched tables and chairs. Rice says he is fascinated with French cuisine — ”I’m a big fan of butter,” he says — and worked at hospitality group Lettuce Entertain You Enterprises’ now-closed Paris Club. But For e People Hospitality also has a speakeasy-style cocktail bar in Wicker Park called Revolver, and it plans to open additional spots that are not soul food related.

“I love food, I love good cocktails,” Rice says. “Everybody loves to dine. I just want to create a space for people like me to be comfortable.”

ere’s no need for Black owners in the hospitality industry to be pigeonholed, says Chrishon Lampley, who founded the wine brand Love Cork Screw about 10 years ago.

“My product is just as great as anybody else’s,” she says. “People drink Love Cork Screw and have no idea I’m a Black woman.”

The Duplex

As remote work continues, Loop retail vacancies rise

Many empty Loop storefronts won’t ll up again until there’s ‘a belief among retailers that density is going to come back,’ says a retail broker

BY ALBY GALLUN

Landlords with retail space in the Loop are su ering from a bad case of long COVID.

e Loop retail vacancy rate rose again last year to 28.3% from 27.4% at the end of 2021, according to a report from Stone Real Estate, a Chicago retail brokerage. e vacancy rate has nearly doubled since 2019, just before the COVID-19 pandemic rolled into town, and stands at its highest level since 2002, when Stone began tracking the Loop market.

Retailers and restaurants suffered as the Loop emptied out in the rst months of the pandemic, and many are gone for good. Landlords are struggling to nd new tenants to replace departing ones because of another problem: remote work. Loop professionals haven’t returned to the o ce in su cient numbers to give merchants — restaurants, especially — the condence to rent storefront space.

“For the Loop retail market to really get velocity, there has to be a belief among retailers that density is going to come back,” said Stone Principal John Vance.

ough tourists have returned and downtown residents continue to support local Loop businesses, many restaurants and retailers can’t survive without a healthy downtown o ce population. ey need o ce workers to shop in their stores and eat and drink at lunch and happy hour.

SLOW RETURN

With the pandemic fading, many professionals are back in the o ce two or three times a week, but that’s not enough to solve the problem. Only about 50% of the Chicago-area o ce population is coming to the ofce these days, according to Kastle Systems, a Falls Church, Va.-based security company that tracks swipes when employees enter its buildings. at’s up from about 30% a year ago.

“ e people who are working from home a lot have to return to the o ce signi cantly and consistently enough so that retailers can project future revenue,” Vance said.

e State Street corridor, the heart of the Loop retail market, continues to struggle after the loss

of retailers including Old Navy and DSW. But it took a step in the right direction with discount chain Five Below opening a store on the strip and the return of Saks O Fifth. ough the north end of State Street is holding up, the stretch south of Monroe Street is awash in empty space.

e vacancy rate for the central Loop, which includes State Street, rose to 24.8% last year, up from 23.4% at the end of 2021, according to Stone.

e vacancy rate along the Michigan Avenue corridor also rose, to 25.9% from 22.3%, after CVS closed a pharmacy at 55 E. Monroe St. and storefront space became available in a new apartment tower at 300 N. Michigan Ave., according to the report.

“In general, this part of the Loop has largely avoided the closures that other parts of the (central business district) experienced due to the continued presence of tourists,” the report said. e LaSalle-Wacker corridor had the highest vacancy in the Loop, at 34.5%, but the rate actually fell from 35.7% at the end of 2021. e opening of Color Facto-

ry, an immersive museum, in the Willis Tower o set closures of CVS and Walgreens stores nearby. But most of the stores and restaurants at the James R. ompson Center have closed in preparation for a major redevelopment of the state o ce building for the arrival of Google in 2025.

SOME HOPE Google’s decision to open ofces in the ompson Center offers some hope to landlords who own Loop retail space. So does a push by the city to encourage the

conversion of several vintage ofce buildings along LaSalle Street into housing. More residents in the Loop could transform the retail market by boosting demand for stores, services and restaurants nearby, Vance said.

Vance believes better days are ahead for the Loop retail market and doesn’t expect a meaningful decline in the vacancy rate this year.

“I think 2023 is going to be a period of everyone getting stable and, hopefully in 2024, more people are coming into the o ce,” he said.

ALBY GALLUN

The vacancy rate for the central Loop, which includes State Street, rose to 24.8% last year, up from 23.4% at the end of 2021.

What the baby formula criminal probe means for Abbott and its executives

Cosmetic Act of 1938, which prohibits the sale of poisonous or unsanitary food and ingredients, as well as preparing and packing of food in unsanitary conditions.

Investigators could charge the company and employees with misdemeanors, or with felonies carrying more severe penalties. It’s also possible the DOJ will close the investigation without bringing any charges.

Misdemeanors are easier to prove, says Bill Marler, a Seattle-based food safety attorney who represented victims in food poisoning cases against Chipotle, ConAgra and Jack in the Box. Prosecutors would only need to prove Abbott produced formula in unsanitary conditions, a reality already documented in FDA reports.

An inspection in January 2022 found bacteria on machinery that comes in direct contact with formula, as well as on the oor and doors of the plant. And FDA chief Dr. Robert Cali  told federal lawmakers that the agency found “egregiously unsanitary conditions” in Abbott’s plant during inspections, including standing water, a leaking roof and damaged equipment susceptible to bacteria growth.

“It’s a layup for a misdemeanor charge against Abbott and/or particular executives who were in charge of that plant,” Marler says.

Felonies would be harder to prove, requiring evidence that the company and leaders intended to defraud or mislead consumers and regulators, or that Abbott is a repeat o ender.

Potential penalties for misdemeanors vary, depending on whether a violation caused a death. A misdemeanor that does not cause death comes with a ne of up to $100,000 and a year in prison for an individual, and a ne of up to $200,000 for a corporation, according to the FDA website. A misdemeanor that results in death, or a felony, is punishable by a ne of up to $250,000 and up to three years

in prison for an individual, and a ne of up to $500,000 for a corporation.

Because the U.S. Centers for Disease Control & Prevention was unable to de nitely link Abbott to four reported illnesses and two deaths of infants who consumed the company’s formula, the company and executives appear unlikely to face steeper nes and longer jail time.

e DOJ declined to comment about the investigation. Abbott did not respond to Crain’s multiple requests for comment but told Bloomberg News it is cooperating with the investigation.

HIGH-PROFILE CASES

Recently, federal prosecutors have shown a willingness to charge executives with crimes. High-pro le cases include criminal fraud prosecutions of eranos founder Elizabeth Holmes, FTX CEO Sam Bankman-Fried, the founders of Chicago-based

Outcome Health and former high-level executives at Chicago’s Commonwealth Edison. Holmes was convicted and sentenced to 11 years in prison. Bankman-Fried, the Outcome founders and the former ComEd executives have pleaded not guilty.

“ at’s the way to deter this type of behavior,” says Peter Pitts, co-founder of the Center for Medicine in the Public Interest and former associate commissioner of the FDA. “When an executive recognizes that it’s going to be more than the company paying a ne — that (they) might go to prison — I think that is an important deterrent.”

In other food safety cases, the DOJ led criminal charges against Texas ice cream company Blue Bell Creameries and its former CEO in 2020 following a listeria outbreak tied to deaths and illnesses. e company agreed to pay a $19 million ne and plead guilty to two mis-

demeanor charges. e former CEO, who was charged with a scheme to cover up shipping of contaminated products, pleaded not guilty. After an initial mistrial, a second trial has been scheduled for later this year.

In 2015, Peanut Corp. of America owner Stewart Parnell was sentenced to 28 years in prison after being convicted of covering up contaminated peanut products that led to a deadly salmonella outbreak.

SALES PRESSURE

e DOJ investigation into Abbott comes as the company works to recapture lost formula sales. Its nutrition business, which includes formula, saw sales drop 10% to $7.5 billion last year. As of Feb. 14, Abbott’s stock was down 13% from a year earlier, while the S&P 500 Healthcare Index was up 2.5%.

CEO Robert Ford told investors last month Abbott is working to

get formula back on shelves and begin growing the nutrition segment at a “pre-pandemic” level between 4% and 6% annually. Abbott dominated U.S. infant formula sales until its products came o shelves and the FDA allowed more foreign suppliers into the market.

Additionally, some analysts worry that permanent changes to the Special Supplemental Nutrition Program for Women, Infants & Children, or WIC, program, which has fostered market concentration in many U.S. states, could hurt Abbott’s ability to regain market share, too, as state governments spread contracts among more manufacturers to reduce the risk of future shortages.

“Future state WIC contracts could be at risk which could keep share recapture e orts elusive over the next several years,” Mizuho Securities analysts wrote in an October report.

Baxter shakes up board, executive leadership amid major restructuring plan

BAXTER

be appointed chair of the board’s audit committee, and Smith will become chair of the nominating, corporate governance and public policy committee.

With Chen and Stroucken departing, Baxter’s board shrinks from 12 to 10 people. Baxter spokeswoman Lauren Russ declined to comment on whether the company intends to replace the two departing board members or provide any further information on the leadership changes.

Morningstar analyst Julie Utterback told Crain’s in a statement that the retirements aren’t unusual, adding that it’s

possible Baxter replaces the two departing board members later this year.

The board shake-up comes as Baxter implements a restructuring plan that includes spinning off its renal care business and reorganizing itself into three vertically integrated global business units, each focused on broad therapeutic areas. Alongside the board changes, Baxter announced leadership over each new division in the SEC filing.

NEW OPERATING MODEL

Cristiano Franzi, Baxter’s senior vice president and president of Europe, the Middle East and Africa, will be interim head

of the renal care business while Baxter continues a search for a permanent new president. Meanwhile, Heather Knight will be executive vice president and group president of medical products and therapies, Reaz Rasul will be executive vice president and group president of health care systems and technologies, and Alok Sonig will be executive vice president and group president of pharmaceuticals.

Baxter said in the filing that it intends to complete the design of its new operating model by early in the second quarter, with an updated reporting framework expected to be implemented during the second

half of 2023.

The restructuring plan, revealed in January, came shortly after Baxter completed a $10.5 billion acquisition of hospital bed maker Hillrom and later disclosed to investors that it overpaid for the company and was forced to take a $3.1 billion impairment charge on the deal. The charge stemmed from declining sales of Hillrom’s front-line care, patient support systems and surgical solutions businesses.

COST-CUTTING

Baxter CEO Jose Almeida has said supply chain constraints hurt Hillrom and Baxter’s ability to manufacture and sell

items. Baxter reported losing $2.4 billion on $15.1 billion in sales in 2022. As of Feb. 16, Baxter’s stock was down 53% over the last year.

As part of the forthcoming restructuring, Baxter disclosed in its first-quarter earnings call this month that it would lay off up to 5% of its staff. The layoffs, restructuring and other cost-cutting moves are expected to expand the company’s margins and deliver more than $300 million in savings in 2023. Despite any possible savings, Baxter still told investors it anticipates sales declining about 3% in the first quarter. For the full year, Baxter expects sales growth of just 1% to 2%.

ABBOTT from Page 1

An inspection in January 2022 found bacteria on machinery that comes in direct contact with formula, as well as on the oor and doors of the plant.

Chicago hotels’ latest threat: Contract talks

HOTELS from Page 1

against a backdrop of in ation and recession fears. At stake are not only the pro ts of hotels and the pocketbooks of their workers, but also the fortunes of Chicago’s pandemic-bitten convention and tourism industry, which can’t afford an embarrassing and costly work stoppage as Chicago works to recapture its share of slowly recovering business travel.

Along with typical wage and bene t issues, negotiators also will likely debate how hotels should be run in the wake of a pandemic that shook the industry’s foundations.

COVID-19 “forced hotel operators to think di erently about the business, and exibility is important to helping their pro tability. But union agreements don’t necessarily provide (much) exibility. at’s going to be a big point of contention,” says Romy Bhojwani, director of hospitality market analytics at real estate information company CoStar Group.

e upcoming labor negotiations come as the arrow points up for downtown hotels, which recently put up their best numbers since the pandemic began. Average revenue per available room — a metric that accounts for both occupancy and room rates — matched or topped comparable 2019 levels in three of the last six months of 2022, according to hospitality data and analytics rm STR.

But the recovery is far from complete. While leisure demand surged and group bookings came on strong last year, downtown hotel stays tied to business travel — a key segment for Chicago — were still at just 75% of pre-pandemic levels, Bhojwani says. e lack of clarity on when or if business travel will ever be as strong as it was before COVID adds more uncertainty to labor negotiations.

Hotel managers may argue they don’t need as many workers to run their properties with the COVID-fueled advent of new practices like mobile check-in and more guests opting out of daily room cleaning. Owners — many of whom are still trying to recoup hefty losses from 2020 and 2021 — may also balk at union payhike demands as higher costs of supplies and other goods squeeze their pro ts.

FINANCES

Net cash ow last year through October at the Sheraton Grand Chicago, for example, was running at just more than half of its 2019 level, while the W Chicago in the Loop posted similar numbers during the 12 months ended in September compared with its full-year 2019 gures, according to Bloomberg data. Spokesmen for both hotels did not respond to requests for comment.

Yet labor leaders will likely negotiate from a position of strength because many hotels still can’t

nd enough workers for housekeeping and other service-related jobs. A September survey of 200 hotels by the American Hotel & Lodging Association found that 87% of respondents were experiencing a sta ng shortage. Many workers left the industry for other jobs when the pandemic shuttered hotels and have not returned.

Unite Here Local 1, the union that led the 2018 strike and represented more than 3,700 Chicago hotel workers as of 2021, will likely have more negotiating leverage to push for higher wages, increased bene ts and new workplace rules, says Robert Bruno, a labor studies professor at the University of Illinois Urbana-Champaign. But after so much upheaval in the hospitality sector over the past three years, both sides will also have to come to an understanding about the post-pandemic Chicago hotel experience for guests, he says.

“Should there be rst-class room service? Should there be a full catering sta ? Should rooms be cleaned on a daily basis? And how does this compare with other cities? It’s this larger question about what does the industry actually look like, and what does it mean to be a hotel in a global city like Chicago,” Bruno says.

Downtown hotel owners and managers that declined to speak on the record about labor negotiations say tighter work rules would be tougher to accept than increasing bene ts and boosting pay higher than the $23 hourly starting rate for wage-earning workers at most properties.

Several referenced an ordinance passed last summer in Los Angeles that e ectively limits housekeepers to cleaning roughly 10 or 11 average-size hotel rooms per shift as a worrisome precedent. House-

keeping sta , typically one of the largest expenses for a hotel, can clean up to 13 or 14 average-size rooms per shift today at most Chicago union properties, industry sources say. Reducing that number would mean hiring more workers to clean the same number of rooms, potentially adding hundreds of thousands of dollars in annual labor expenses and further pinching hotel pro ts.

A Unite Here spokesman declined to comment. Spokesmen for Hyatt Hotels, Marriott International and Hilton Worldwide, which typically lead labor negotiations for most large hotels in the city, did not respond to requests for comment.

REPUTATION

Avoiding the black eye of a hotel worker strike — or even the possibility that one is on the horizon — will be vital as Chicago works to rebuild its reputation as a top convention hub, says Amelia Roper, managing director at event planning rm HelmsBriscoe.

“It’s hard once you’ve alienated a group (with a work stoppage) to get them back. ey have a lot of choices today,” says Roper, who is based in the Chicago area. “We have other issues that have tarnished us as a meetings destination — let’s not add to it.”

Still, both sides have a powerful incentive to iron out unprecedented issues and help the industry recover, says Russ Melaragni, who spent a decade as vice president of labor relations for Hyatt before becoming CEO of the Chicago-based Hotel Employers Labor Relations Association, which advises major hotels in labor matters.

“In a strike, no one wins,” he says. “Especially the employees that are out of work.”

Striking workers from the Palmer House Hilton demonstrate in front of the hotel in September 2018.

Downtown hotels made a big comeback in 2022 but can’t afford a labor setback as they look to return to pre-pandemic performance levels.

Schaumburg becomes flashpoint over tax incentives in the age of remote work

up at local gas stations or stopping by a nearby grocery store on their way home from work — shrank precipitously as workers stayed home, perhaps for good.

Now Schaumburg wants to rework the deals and stop paying millions to the companies for jobs being done remotely rather than in an o ce park. It’s a dispute that’s now playing out in a volley of lawsuits.  e Schaumburg stando is unusual because it spilled out into the open, but the underlying issues — as governments nationwide rethink their rules and strategies around such incentives — have become a ashpoint for economic development o cials and consultants who advise companies nationwide.

“ is is going on with hundreds of jurisdictions, but it’s happening quietly,” says Mike Grella, a former Amazon site-selection executive who now runs an Atlanta-based consulting rm, Grella Partnership Strategies. “Pre-COVID, no one was thinking about telecommuting. Now everyone is renegotiating deals. It’s uncharted territory for companies and municipalities.”

e nation is awash in incentive bidding wars, mostly for electric vehicle, battery and semiconductor manufacturing. ose deals aren’t the problem, of course, because manufacturing jobs have to be done on-site. For the kind of work that can be done remotely, however, incentive-laden deals with local municipalities are earning new scrutiny — and pushback.

A DEAL WILTS

In 2014, Schaumburg created a tax-increment nancing district for the redevelopment of the longtime Motorola campus at Interstate 90 and Meacham Road that would include a 225-acre development with more than 3,000 housing units, as well as shopping and entertainment, and anchored by corporate campuses.

e village o ered to reimburse Zurich up to $100 million in property taxes over 23 years for building a gleaming $325 million headquarters on a 39-acre campus that would employ a minimum of 1,700 workers. Two years later, Schaumburg o ered Motorola up to $27 million in tax breaks for a planned $141 million renovation of an engineering center that would continue to employ at least 1,100 workers.

e deals kept two of Schaumburg’s marquee employers and thousands of high-paying, white-collar jobs from leaving town. e companies also are major taxpayers: Zurich pays $9 million a year in taxes, and Motorola pays $3.4 million a year.

e companies reported their headcounts and received their tax reimbursements once a year. When Zurich sought reimbursement in fall of 2020, however, Schaumburg proposed renegotiating the deal, according to the company’s lawsuit, which is pending in Cook County Circuit Court.

In early 2021, Schaumburg refused to make reimbursements altogether.

Zurich sued last February, arguing that terms of its deal required jobs be “assigned” to its headquarters, saying Schaumburg’s refusal to pay has cost the company $5.5 million.

In late 2020, the village also refused to reimburse Motorola.

e company sued in December, saying that its agreement also speci es workers be “assigned” to a location. Motorola said in its suit that the village monitored the company’s parking lots in 2020 and 2021 and determined “there were signi cantly less employees working on-site at the Schaumburg campus.”

In reaching the incentive deals, the village estimated that each employee would spend $222 to $361 a week in the suburb, generating nearly $300 a year in annual sales taxes locally, according to court documents.

“If the employees or contractors are not physically present at the property, they will not eat, shop or spend, and the Village does not receive any economic bene t from them,” Schaumburg said in a court ling in the Zurich case.

e companies did not reveal how many of their employees are working remotely, or whether they still live in the Chicago area.

e village and the companies declined to comment.

REMOTE BUT NEARBY

e Schaumburg dispute is unusual, but the problem is not. A survey by consulting rm McKinsey found 62% of Chicago workers have the option to work from home at least part of the time, which is slightly above the national average. Of those given the choice, 82% work from home.

Although some workers have decamped to other parts of the country that are cheaper, warmer or closer to family, most employ-

ees still live close to their workplaces. McKinsey estimates 73% of Chicago-area workers live within commuting distance.

Remote work is most concerning for municipalities, such as Schaumburg, that are o ering local incentives such as rebates of sales or property taxes. States, which do the bulk of the heavy lifting when it comes to incentivizing jobs, cast a wider net.

“States are looking to make sure if employees aren’t in the o ce, they’re still in the jurisdiction,” says Tom Stringer, who leads BDO’s site-selection and incentives practice. “ ey’re still paying taxes, still paying for a turkey sandwich and dry cleaning. ey just might be buying that turkey sandwich closer to their house instead of near their o ce.”

States that are adapting their policies have an advantage, says Jenny Massey, who leads the site-selection and business incentives practice for Sikich. She noted a recent client who wanted to locate a small, mostly remote o ce in one state but went elsewhere because “they couldn’t tell us what the remote-worker policy was.”

“We are addressing it head-on,” she adds. “We are being clear to tell cities and states about it because we don’t want to have any surprises later. Before COVID, we never spelled it out. If it was a headquarters relocation, you’d assume everyone was going to be there.”

e key question is whether jobs are hybrid or fully remote. McKinsey estimates that the tax revenue impact of a worker who doesn’t live in the same geography can be just 10% of a resident.

“Job and resident might be decoupled,” says Ben Safran, a McKinsey partner. “ . . . It’s leading folks to rethink, ‘As we make our investments, should we follow residents and where people live, or should we follow businesses and where people work?’ We’re in

IN 2014, SCHAUMBURG CREATED A TAX-INCREMENT FINANCING DISTRICT FOR THE REDEVELOPMENT OF THE LONGTIME MOTOROLA CAMPUS AT INTERSTATE 90 AND MEACHAM ROAD.

REMOTELY WORKING

More Chicago-area workers have the option to work remotely than those nationally, but fewer take advantage of the opportunity.

a period of experimentation.”

Kevin Kramer, director of economic development for Ho man Estates, says he and his peers already are discussing how to adapt to remote work. “In theory, if the purpose is to have people at a site on a daily basis, from an incentive standpoint we’d be very careful about how we craft that language,” he says.

Grella suggests one possibility is to reduce the amount of the incentives. “If you’re working from home, instead of $10,000 per job, maybe it’s $1,000.”

COMPANIES OR WORKERS?

A number of communities, from St. Joseph, Mich., to Tulsa, Okla., have o ered subsidies of $10,000 or more to entice remote workers to relocate.

“I want to attract that company that’s employing remote workers, and I want to attract that remote worker,” Kramer says. “We’ll end up targeting both.”

Quality of life has always been important to employers and workers. But cities and suburbs will have to focus even more on public safety, quality of schools, recreational facilities and entertainment to attract highly paid work-

ers that companies want to hire.

Companies can also expect increased use of so-called clawback provisions, which require companies to return or forgo incentives if they fail to deliver on their commitments to make investments or create jobs, says Tracy Loh, a fellow at the Brookings Institution.

Arlington, Va., has won praise for its approach in winning Amazon’s much-hyped HQ2 project ve years ago. It required the company to occupy a speci c amount of real estate to qualify for incentives. e funding source for the incentives is a hotel-occupancy tax. Amazon quali es for the subsidy only if hotel taxes increase by a pre-determined amount, something that hasn’t happened because of a reduction in travel caused by the COVID-19 pandemic.

“You’re going to start to see much stronger clawback provisions because of remote work,” Loh says. “Everyone’s aware that telework, whether it’s hybrid or fully remote, gives workers more exibility on location. Terms of deals are going to change, and employers are going to have to whether they want the exibility or the subsidy.”

Look inside a pharmaceutical executive’s $6M

Lincoln Park house with a vegetable garden on top

‘It’s nice to pick dinner,’ says the CEO of Xeris Biopharma Holdings I

BY DENNIS RODKIN

The head of a pharmaceutical firm is asking just under $6 million for a Lincoln Park home that has a full-scale vegetable garden on the roof.

“It’s nice to pick dinner,” said Paul Edick, CEO of Xer is Biopharma Holdings, who said that with his wife, Linda Szyper, he grows six varieties each of tomatoes and carrots, as well as potatoes, sweet potatoes, squash and other vegetables in the 520-square-foot garden atop their Fremont Street house.

Previously listed on an agents-only private network, the four bedroom, 6,600-square-foot house went on the multiple-listing service last week. It’s represented by Compass agents Elizabeth Ballis and Deborah Ballis Hirt.

Designed by Chicago architect Richard Blender and completed in 2018, the house has a limestone, brick and metal exterior. Inside, “it has tremendous light,” Edick said, thanks to a wall of glass next to the staircase, an open courtyard space halfway back on the typical slender city-house footprint, and openings to outdoor spaces on each of three above-ground levels, as well as the rooftop.

The vegetable garden does not appear in listing photos.

The house has a 2,200-bottle wine cellar; five fireplaces, including one outdoors; an outdoor kitchen and a crane for hoisting plants and furniture to the rooftop. It’s on an extra-wide lot — 36 feet, compared to the norm of 25 feet, and the standard 125 feet deep — and has a three-car garage.

COMPASS PHOTOS

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