Crain's Chicago Business by crainschicago

LAW: Mayer Brown’s new boss looks to grow at home as the world changes. PAGE 3

CRAIN’S LIST: Taking the pulse of the area’s big physician groups. PAGE 7

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LONG COVID

HOW A PANDEMIC CHANGED CHICAGO BUSINESS CRAIN’S ILLUSTRATION USING GETTY IMAGES

As the virus recedes and restrictions fall away, the lasting economic effects of a two-year contagion are coming into view I STORY BEGINS ON PAGE 8

A BROKEN

LIFELINE

New spending on rails, buses and mixeduse development could change inequities on the South and West sides. PAGE 15

Allstate transforms without growing Policies plateau as the insurer shifts from company agents to independents and direct sales channels BY STEVE DANIELS Tom Wilson’s campaign to transform the traditional Allstate agent from mainly a servicer of customers into a sales machine has led to a steep decline in agencies nationwide. Meanwhile, the number of independent agents—those who

sell policies from an array of insurers based, usually, on the lowest rate offered—who are now offering Allstate insurance nearly equals the number of Allstate agents. There are just 9,300 Allstate agents operating in the U.S., according to a Securities & Exchange Commission filing last

Allstate CEO Tom Wilson

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month. That’s the lowest number in memory and down 14% from 10,800 just two years ago, according to filings. Accompanying that decline is a sharp increase in independent agents selling for Allstate. They now total 7,800, more than double See ALLSTATE on Page 22

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NEIGHBORHOOD INFRASTRUCTURE

JOE CAHILL

REAL ESTATE

War threatens to usher in a new era of uncertainty for business. PAGE 3

Black homeowners benefit the least in the hot housing market. PAGE 4

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2 MARCH 14, 2022 • CRAIN’S CHICAGO BUSINESS

Illinois hotels seeking $1,500 per room in Pritzker’s budget

Backers of ‘The Hotel Jobs Recovery Plan’ are hoping $250 million in relief for hotels gets lumped into the governor’s budget. They say it has bipartisan support.

The Ararat Park Hyatt in Moscow, one of five Russian properties operated by Hyatt Hotels.

Why Hyatt-branded hotels are still operating in Russia Hyatt and its fellow big U.S. hotel chains have been relatively quiet, while other consumer-facing firms have cut off ties. Here’s what they may be weighing. BY DANNY ECKER The growing list of corporations severing ties to the Russian economy doesn’t include Hyatt Hotels so far. Whether that changes in the days and weeks ahead will make another high-profile statement about the reputational risk of associating even remotely with the country’s invasion of Ukraine. Chicago-based Hyatt and its fellow major U.S. hotel chains have all been relatively quiet in recent days, while other wellknown brands, including Visa, Mastercard, McDonald’s, Starbucks and Apple, among others, have taken meaningful steps to at least temporarily shut down their business in Russia. Hyatt posted on its website a humanitarian-focused statement on the situation on March 4, noting the company is “heartbroken over the devastation unfolding in Ukraine and the mounting tragedies resulting from military actions, loss of life and the dislocation of hundreds of thousands of people. Our immediate focus is on the safety and well-being of our colleagues and guests in both Ukraine and neighboring countries who face these unconscionable challenges.” The company followed that with a March 9 statement that it will “suspend our development activities and any new investments in Russia, effective immediately,” but stopped short of saying it would pull out altogether. “We will continue to evaluate hotel operations in Russia, while complying with applicable sanctions and U.S. gov-

RELATED: How Kraft Heinz, Mondelez and other local firms are reacting. PAGE 26 ernment directives as we hope for a resolution to this crisis,” the statement said. In a separate statement to Crain’s, a Hyatt spokesperson confirmed the company’s relatively small footprint in the country: Hyatt operates—and does not own—five hotels in Russia, most notably the Ararat Park Hyatt luxury hotel in Moscow. But with every well-known American brand name that distances itself from Russia, the pressure mounts on Hyatt and its competitors to weigh the implications of following suit and cutting off business there against the backlash they could face if they don’t. It’s a tricky calculation for Hyatt, says Scott Antel, a hospitality industry-focused attorney who lived in Russia for 22 years until 2015 and continues to consult with Russian hotel investors in the country. On one hand, no hotel company wants the optics of being affiliated with the aggressor in an unprovoked war, the same reason other major brands have shuttered Russian operations—even at the expense of big revenue lines. Hyatt could step away while only sacrificing the fees it receives from hotel owners, at least in the near term. But removing a name and management service from a hotel also impacts hundreds of employees

GREG HINZ IS ON VACATION

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See HYATT on Page 6

Still reeling from a slowdown in convention business and visitors, the Illinois Hotel & Lodging Association is backing a bill that would give one-time grants of $1,500 per room for every hotel in the state—a total of $250 million the organization proposes should come from the state’s leftover American Rescue Plan Act funding. The Hotel Jobs Recovery Plan— designed to help hoteliers hire back employees in the ramp up to higher summer occupancy—is being carried by Illinois House Majority Leader Greg Harris (HB 5690) and Elgie Sims in the Senate (SB 4184). Its main sponsors are hoping the proposal gets lumped into Gov. J.B. Pritzker’s budget proposal, and they say it’s one of few measures this session with bipartisan support. That $250 million represents 3% of the total American Rescue Plan funding the state received, and would nearly match the $300 million “Back to Business” program included in Pritzker’s last budget. That budget also included $10 million for tourism grants, and nearly $124 million directly to convention spaces and visitors bureaus across the state. Michael Jacobson, president and CEO of the Illinois Hotel & Lodging Association, said at a press conference last week that while hotels received help through “Back to Business” and “Business Interruption Grant” programs, the industry has been among the

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The Kimpton Hotel Monaco Chicago at 225 N. Wabash Ave. slowest to recover and has been left out of some of the Chicago’s relief plans. Now, hotels are at risk of foreclosure and being swept up by real estate trusts. “We’re seeing the pace of foreclosure pick up,” Jacobson said. “The leash is getting tighter.”

OCCUPANCY

For the week ended Feb. 26, Chicago ranked last in occupancy— at 42.7%—compared with other big cities, like Washington, D.C. (45.2%), Los Angeles (65.8%), New York (59.4%) and San Francisco (48.7%). Pre-pandemic, occupancy in Chicago hotels for the same week was 30% higher, at 60.8%. Under the current proposal, 80% of the funding would be required to be used for payroll costs, like wages and benefits for

employees. Businesses owned by women, veterans, the disabled and minorities would get priority during the grant process. Proponents argue the bill wouldn’t only help hotels hire back workers, but would help drive up tax receipts for state and local governments. Overall, hotel receipts paid to the state’s comptroller for 2021 were down 73% compared to 2019, according to the Illinois Department of Revenue’s annual reports. “You have to look into the revenue it generates and the jobs that it generates,” said state Sen. Sara Feigenholtz. “I’m not sure people understand the number of jobs that have been lost when we lost those conventions. The ball rolls downhill. This (pandemic) has really impacted families across the state.”

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Jon Van Gorp, chair of Mayer Brown

JOE CAHILL ON BUSINESS

New Mayer Brown boss seeks growth at home

How global expansion has put an old-line Chicago law firm in the middle of rising geopolitical tensions BY STEVEN R. STRAHLER

ayer Brown is among Chicago’s oldest, largest and internationally best-positioned law firms, with more than 200 lawyers in China alone, the most of any U.S. law firm. But Russia’s brutal war in Ukraine highlights the risk of doing business in autocratic states that covet neighboring territory, a profile that fits China under Xi Jinping. Last fall, democracy advocates pilloried Mayer Brown when the University of Hong Kong, a client, bowed to pressure from the Chinese government and removed a sculpture commemorating victims of the 1989 Tiananmen Square Massacre. Jon Van Gorp, Mayer Brown’s chief since last summer, was already working to catch up with competitors like Kirkland & Ellis and Sidley Austin, in part by emphasizing U.S. growth after mergers in the 2000s expanded Mayer Brown’s reach in Europe and opened the door to Hong Kong.

“DOING BUSINESS IN CHINA IS COMPLEX. DOING BUSINESS GLOBALLY IS COMPLEX.” Jon Van Gorp

See MAYER BROWN on Page 21

How Rivian’s missteps have angered its fans Rivian sharply increased prices on its R1T pickup and R1S SUV, angering preorder buyers. CEO R.J. Scaringe backtracked, but only for existing customers. BY LAURENCE ILIFF It’s Rivian’s turn in the penalty box after sharply raising prices for its R1T pickup and R1S SUV in response to soaring supply chain costs. Rivian, the Amazon-backed electric vehicle startup that produces its vehicles in downstate Normal, joins dealerships, legacy automakers and even Tesla as the object of consumer wrath over the steady rise of vehicle prices. While some auto dealers are adding on $10,000 “market ad-

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justments” to popular vehicles, Rivian is hiking prices by 17% to 20%, which can add $12,000 or more to the brand’s original pricing for its launch vehicles. While Rivian was forced to backtrack on the increases for existing preorders and acknowledge the public outcry, new customers will still see their configurations move significantly closer to six figures. Before the price hikes, the quad-motor R1T with the large battery pack and 314 miles of estimated range started at $67,500

before shipping. Now that’s up 18% to $79,500. The R1S has a similar price increase. “This a definitely a pay-up or move-on statement,” popular YouTube content creator Jon Rettinger said in response to the updated prices for his family’s R1T and R1S orders. “Not sure what’s worse, this or dealer markups from legacy automakers,” he wrote on Twitter. Rettinger publicly documented a Mercedes-Benz dealer’s See RIVIAN on Page 21

JOHN R. BOEHM

A new era of uncertainty for business No sooner did COVID-19 start to fade than another deadly and unanticipated global crisis erupted. Vladimir Putin’s unprovoked and inhuman attack on Ukraine shatters hopes of a return to anything resembling normalcy with the ebbing of a virus that killed millions and upended economies around the world. Like COVID, the invasion is first and foremost a humanitarian catastrophe. More than 2 million Ukrainians have been driven from their homes, and the death toll climbs daily. Putin’s aggression also opens the door to future conflicts that would kill untold numbers of innocents. And like COVID, the attack on Ukraine also is an economic disaster. COVID cost companies revenue, choked off supply chains and triggered inflation. Similarly, the war in Ukraine threatens sales, brand images, supply chains and growth prospects. Multinational companies expecting a strong rebound as COVID cases and related restrictions decline now face the loss of access to markets they spent decades cultivating. Already, a parade of companies, including local giants Boeing, Caterpillar and McDonald’s, have withdrawn from Russia or suspended operations there. The revenue impact can be substantial, ranging as high as 8% for Caterpillar and 9% for McDonald’s. Yet the brutality of Putin’s invasion, captured in televised images of murdered civilians and bombed-out houses, left executives with little choice but to distance themselves from the aggressor. It’s hard to envision any justification for returning to Russia any time soon, barring an unlikely popular uprising that ousts Putin. After all, companies that do business in Putin’s country abet him in at least a couple of ways. The presence of globally recognized brands in Russia confers an undeserved legitimacy on a regime that deserves only condemnation. More directly, companies operating in Russia pay taxes there, helping to finance his bloody campaign. Corporate executives tempted to overlook that uncomfortable reality should consider the likely backlash against their brands in markets around the world, where apparent indifference to Putin’s crimes has sparked outrage. Before McDonald’s decided to close its Russian and Ukrainian stores temporarily, images of the golden arches superimposed over a bloodstain circulated on social media. Also undeniable is the likelihood that success in Ukraine

would embolden Putin to inflict similar aggression elsewhere as he pursues his dream of reconstituting the old Soviet Bloc. Western firms operate in many countries on his likely hit list. An even broader and more sobering prospect for business leaders to contemplate is the impact of Putin’s actions on the “rules-based” international order that has prevailed since the end of World War II. Respect for international borders and the principle that major countries resolve disputes through diplomacy and negotiation, rather than warfare, created the generally stable global economic environment that enabled companies to expand around the world. Putin just tossed the rulebook aside. If he gets away with it, companies can expect more of the same, not only from him, but from despots everywhere with swollen egos and expansionist ambitions. Among such totalitarian states is China, which has attracted flocks of Western companies to its vast markets. Yet the torrent of foreign investment hasn’t curbed the authoritarian impulses of wouldbe president-for-life Xi Jinping. His regime perpetrates unspeakable crimes against China’s Uyghur minority while openly coveting Taiwan. The war in Ukraine demonstrates the far-reaching economic effects of unbridled aggression by large countries. Western nations responded to Putin’s invasion with sanctions that have stanched the flow of Russian oil into global markets, driving up energy costs for consumers and companies worldwide. Among the hardest hit have been airlines like Chicago-based United, which have seen fuel costs rise and new travel restrictions take effect just as travelers were starting to return after hunkering down during the pandemic. Wheat prices are rising, too, as the war threatens supplies from Ukraine and Russia, both major producers. That means higher costs for grocery shoppers and big food makers, like Chicago’s Mondelez, Kraft Heinz and ConAgra. Other companies are losing access to critical materials, such as the titanium that Chicago-based aircraft manufacturer Boeing has been forced to stop buying from Russia. Beyond these quantifiable effects is a more corrosive and wide-ranging impact on global commerce. Geopolitical instability casts a pall of uncertainty over international affairs. Nothing deters investment and stifles growth like uncertainty, in this case the worry that today’s promising market could be tomorrow’s deadly war zone.

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4 MARCH 14, 2022 • CRAIN’S CHICAGO BUSINESS

New reports show that Black homeowners are the least likely to build household wealth as home prices soar BY DENNIS RODKIN At a time when a soaring housing market is pumping up homeowners’ household wealth, Black homeowners are the least likely to be benefiting, several new reports show. The Black homeownership rate nationwide was 43.4% in 2020, below where it was a decade earlier, according to the National Association of Realtors’ “2022 Snapshot of Race & Home Buying in America,” released in late February. In Cook County, where Black residents make up less than 24% of the population, only 8% of new mortgages went to Black households in 2020. That’s according to local data provided by the Dearborn Realtist Board, a Chicago-based association of Black real estate professionals, as a supplement to a national report, the “State of Housing in Black America,” also out in February from the National Association of Real Estate Brokers, a Black industry group. Against this backdrop of low Black homeownership and mortgage borrowing, Black Knight, a Florida-based data analytics firm for the mortgage industry, reported in early March that thanks to rising home values and low interest rates, U.S. homeowners took $1.2 trillion in cash out of their homes via refinancing their mortgages in 2021. The figure was just 1% shy of the record cash-out year:

2005, Black Knight reports. Black Knight could not provide a Chicago-specific figure. For homeowners who didn’t take cash out, the increased value of their homes bolstered their household income; and for those who traded homes, the increased value made it easier to afford taking a step up to something bigger. In all of those scenarios, Black people, who have the lowest homeownership rate of all racial groups, were the least likely to be the beneficiaries. “We’re not at the same starting point,” said Gwendolene Newton, president of the Dearborn Realtist Board and an agent with Century 21 S.G.R. in Chicago.

‘HUGE DISPARITY’

Decades of discriminatory hiring, lending and housing policies, Newton said, “kept African Americans farther behind on building up savings and credit. The lack of savings and the lack of disposable income is significant in the community.” As a result, Newton said, “there’s a huge disparity in terms of purchasing power, in terms of the starting point” on the path of building household wealth through homeownership. Lesser wealth is not only because of a lower rate of homeownership, but because of “the continuing devaluation of Black property,” said Pete Saunders, a Chicago-area urban planning re-

searcher and blogger. “Black residents aren’t reaping the benefits of homeownership in the way that whites do,” Saunders wrote in a late-February report. Disinvestment in Black neighborhoods, a deficit of retail and dining amenities, and well-documented patterns of under-appraisal of Black-owned homes all contribute to the devaluation. “Even when Blacks are able to get into homeownership,” Saunders told Crain’s, “sometimes they don’t get the return on investment that others do.” The impact of reduced participation in the current run-up of home equity is that the Black community will be “falling farther behind,” Saunders said, “not being able to build up that equity that is passed down as generational wealth.” One important tool for boosting Black homeownership is education on its financial rewards, said Robert Johnson, chief economic inclusion officer for YWCA Metropolitan Chicago, who manages the organization’s Economic Empowerment Institute. “If you come from a line of renters or people who lived in subsidized housing, owning a home is daunting,” he said. People who did not have homeowners as role models when they were growing up might have no idea that on top of making a monthly mortgage payment, “you need to be able to maintain the house, pay the utilities, be responsible for other costs.” The institute has set a goal of “getting 1,000 people into homes by 2025,” Johnson said, with a

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Black people benefit least in hot housing market

companion initiative to get 1,000 people into growth-sector jobs, although the two groups will not necessarily be the same people. Helping them get into homeownership entails credit and financial education and making connections with accredited lending institutions.

POLICY CHANGES

Newton, of the Dearborn Realtist Board, said beyond education programs, “if we’re going to make strides in Black homeownership, we need institutions to make up for the policies that have kept the Black community in arrears.” Newton wants to see policies adopted that aim at increasing Black homeownership. Among them are methods of evaluating borrowers’ creditworthiness that take

into account obstacles to Black wealth and increased down payment assistance. Like Evanston’s reparations program that attempts to compensate for past Black residents’ losses, “we need some sort of restorative justice pool of down payment money,” she said. Historical practices like redlining, the use of property deed language to codify segregation and numerous other measures were intentional choices that severely limited Blacks’ access to a wealth-building tool that has been effective since the homeownership boom of the post-World War II years, Newton said. “We’re still reeling from the repercussions of all that,” Newton said. In her eyes, it’s time for “an intentional effort to help Blacks build generational wealth.”

Illinois moves closer to remedying bias in home appraisals BY DENNIS RODKIN Legislators in Springfield are moving toward setting up a state task force to investigate racial bias in home appraisals, an issue that has gained currency in recent years as Black homeowners and industry groups have documented widespread examples of the problem. HB 4410, which passed the Illinois House on March 4 and will now go before the Senate, would create a “real estate evaluation task force” that should investigate whether there is a pattern of racial bias in appraisals and recommend ways to correct it. It would also try to determine whether there are barriers to entry for people of color in the appraisal industry, which would be helping to perpetuate unconscious bias among appraisers. Lowball appraisals of Blackowned homes are “directly connected to the disinvestment, the poverty and the lack of interest” in majority-Black communities, said Rep. Lamont Robinson, D-5th, one of five House sponsors of the bill. “We need to figure out how we

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can have parity of appraisals in communities like Chatham, Englewood, Washington Park and Woodlawn,” said Robinson, whose district cuts through a broad swath of the South Side to 79th Street. Home appraisals establish the value of a property, a figure that lenders use to determine the mortgage amount they’ll provide on the property.

FEDERAL MOVES

The Biden administration already has a federal task force studying the issues of property appraisal and valuation equity, or PAVE. Mortgage lending is regulated at the federal level, while the appraisal industry is subject to state licensing. In the past few years, numerous scholarly studies and news reports have demonstrated that racial bias contributes strongly to lower home-value appraisals on Black homeowners’ property. In October, Illinois Realtors released a study that showed “there’s a significant relationship between race and whether the person gets a

low appraisal,” as one of the study’s authors told Crain’s at the time. Representatives of the banking and appraisal industries both endorse the idea of a state panel on racial bias. Jody Bishop, president of the Chicago-based Appraisal Institute, a national association based in Chicago, said in a statement that the group supports the plan and expects the task force “to ensure that all stakeholders in the appraisal ecosystem are represented by appointing professional real estate appraisers as members.” The question of racial bias “definitely needs to be looked at,” said Ben Jackson, executive vice president of government relations for the Illinois Bankers Association. “There are concerns from many (people) that biases and discrimination are baked into mortgages.” In February, Lending Tree released results of a survey that found about 58% of Black homeowners believed they had been lowballed on an appraisal, based at least in part on their race, sexual orientation or other protected

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A bill now in front of the state Senate would create a task force to look into what many believe is a pattern of lowballing appraisals of Black-owned homes

Lenders use a home appraisal to determine the mortgage amount they’ll provide on a property. demographic. That’s compared to 14% of white homeowners. Not everyone agrees that racial bias is endemic in the appraisal business. The authors of a 2019 statistical study by the American Enterprise Institute concluded that “contrary to media allegations, racial bias by appraisers is uncommon and not systemic.” It’s impossible to know now what a task force will end up recommending, but two possibilities that are often discussed in the industries are: Moving toward a more com-

puterized model for appraising homes, to reduce the interference of personal bias. Adopting changes in appraiser licensing standards that would encourage more people of color to enter the business. New appraisers are required to apprentice with veteran appraisers, which some observers have said tends to perpetuate sameness in the business, as seniors tap juniors they’d like to work with. The Appraisal Institute is a partner in the Appraiser Diversity Initiative, an effort to attract more non-whites to the profession.

3/11/22 3:02 PM

WE’RE KEEPING ILLINOIS LEARNING, WORKING, AND THRIVING. NOT BAD FROM A LITTLE DROOL. When the pandemic began and our state was faced with the question of how and when our workforce and students could safely return to in-person activities, the University of Illinois System got to work on an answer. As part of our mission to serve the people of Illinois, we knew we could help by developing a network of labs and an advanced logistics operation to provide statewide access to our innovative saliva-based COVID test. By helping limit the pandemic’s spread, SHIELD Illinois, in partnership with public health leaders, revolutionized how our state navigated its way through a difficult time. Together, we’re continuing to keep Illinois in schools and at work, and all our communities thriving. Just what we all need.

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6 MARCH 14, 2022 • CRAIN’S CHICAGO BUSINESS

How the top practices are dealing with burnout

The organizations atop the latest ranking of the area’s largest physician groups told Crain’s they’ve had to grapple with the mental health of the people on the front lines of the COVID crisis BY SOPHIE RODGERS care costs of nearly $979 million due to physician turnover. Nearly $260 million of that total is attributable to burnout. Fortunately, the Chicago area doesn’t have to worry too much about physician turnover in its largest physician groups. This year’s top 25 organizations saw a 3.2% increase in number of physicians from 2020.

ADDRESSING WELL-BEING

Overall, general employment in physician groups is on the rise, too. According to the U.S. Bureau of Labor Statistics, the Chicago metro area saw an increase in employment in physician offices throughout 2021, even compared to pre-COVID times. The metro area saw a dramatic 7.85% decrease in employment from March 2020 to April 2020. As months went by, though, employment slowly grew. The Bureau of Labor Statistics reports that as of December 2021, there were approximately 55,500 employees in physician offices—a 2.4% increase from December 2020. This is the largest number of employees in physician offices in a decade. For the organizations topping Crain’s list of the area’s physician groups, providcounseling “WHEN YOU DON’T HAVE A SUSTAINABLE ing services has WORKFORCE, THE PEOPLE WHO FEEL IT been key to addressing employees’ well-being. ARE PATIENTS.” Amita Health Steve Nelson, CEO of Duly Health & Care Medical Group, No. 11 on this COVID, burnout is a hot topic. year’s list with a net revenue Health care is an inherently of $299 million and 700 phystressful industry. “It doesn’t sicians, implemented support take a lot for there to be pres- sessions for its staff in response sure. Drop COVID into it, and to the compounding stresses it’s suddenly talked about,” he from COVID, according to Olga said. Solares, associate vice president Burnout is costly, too. Ac- of communications and media cording to a recent study led by relations at Amita Health. Chicago-based American Med“These anonymous sessions, ical Association, the U.S. econo- initially offered several times my incurs annual excess health a week, ensured the emotion-

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t’s been two years since Chicago issued its first shelterin-place order, and since then, health care workers have carried the brunt of the pandemic’s physical and emotional repercussions. Organizations on this year’s list of Chicago’s Largest Physician Groups told Crain’s how they are addressing their staffers’ mental health in the wake of a pandemic that’s strained the industry. Failing to address health care workers’ well-being puts patients’ health and trust on the line. “When you don’t have a sustainable workforce, the people who feel it are patients,” said Steve Nelson, CEO of Duly Health & Care (formerly DuPage Medical Group), which is No. 2 on our new list. He notes that like in any customerfacing profession, patients can tell if staff is tired, having a hard day or don’t want to be there. The stakes become much higher when it comes to people’s health. “Burnout is not a new issue, but has to be addressed,” said Nelson. The CEO has been in health care for nearly 34 years and notes that burnout was discussed in his classrooms even back in the 1980s. But now with

al needs of our physicians and staff were being addressed, given the stress and many unknowns of the pandemic. These virtual support sessions continue today‘,” she said in a written statement. Northwestern Medical Group, No. 3 on this year’s list with a net revenue of $1.2 billion and 1,874 physicians, created the Physician WellBeing Program, which offers a physician-to-physician peer support network and recuperation rooms. “The physician-to-physician network provides additional peer support services for physicians experiencing occupational and pandemic-caused stressors,” said Christopher King, chief media relations executive of Northwestern Medicine. Recuperation rooms are equipped with heated massage chairs, dimmed lighting and meditation guides. King notes these

enhancements “shifted our primary lounge from a community workspace to a space for recovery and refueling.” Duly Health & Care takes a holistic approach in addressing health care’s underlying issues. Nelson notes there are four tactics the group takes to tackle burnout: Establishing a strong platform environment for listening and honest feedback where staff can have open conversations about the topic. Providing real resources to support balanced efforts, such as mindfulness or nutrition-focused apps. Giving physicians more ammunition to help patients, such as adding 24/7 nurse triage services. Making sure staff and patients are safe, such as by mandating vaccines. “If our staff can’t stay healthy to save people, no one can,” said Nelson.

The group saw a 27.3% increase in net revenue, earning a total of $1.4 billion in 2021. Duly also saw a 37.3% increase in its number of physicians, employing a total of 1,020 physicians this past year—though the group’s growth is mainly attributed to purchasing South Bend Clinic in September and Quincy Medical Group in December. As Chicago continues navigating life and business with COVID still present, Nelson contends that to get health care in a better place, we all must take accountability. “I do have hope,” he said. “I do have hope that a lot of smart and dedicated people are coming together to make health care better.” The full Excel version of the list features 28 physician groups. The list includes 2021 net revenue, number of physicians, outpatient visits and other exclusive data.

Here’s what Hyatt and rivals may be weighing as they keep operating in Russia HYATT from Page 2 Hyatt has helped train that could then be out of work. They and future guests might harbor ill will toward the brand, which could make it difficult for Hyatt to resume business in the country. “People remember these things. It’s just not good,” said Antel, who now lives in Dubai and is a member of the International Society of Hospitality Consultants. “Customer goodwill takes a long time to rebuild.” It’s unclear who owns Hyatt’s hotels in Russia, though Antel said the vast majority of hotels in the country are owned by various Rus-

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sian investors and entities. If any of the owners are hit with sanctions from the U.S., Hyatt would abruptly pull out of the country to avoid penalties at home, he said. Hotel analyst Michael Bellisario of Robert W. Baird said he is surprised the major hotel brands have said little publicly about the Russia-Ukraine situation, while other big global brands have taken bolder steps. One possible explanation is that Hyatt and other hotel brands may not be able to terminate or violate management contracts without substantial financial penalties and could be negotiating with their ownership partners on next steps.

“How do you, the franchisor (such as Hyatt), appease an owner that might not want to close the hotel? There’s a profit impact there,” Bellisario said. For now, the Hyatt (backed by the Pritzker family) and its competitors are downplaying the impact of the Russian invasion on their business.

MONITORING

Speaking March 8 at the Raymond James Institutional Investors Conference in Orlando, Hyatt Chief Financial Officer Joan Bottarini said the company is watching the Russia-Ukraine situation “extremely closely” but “we hav-

en’t seen any material impacts.” Marriott International Chief Executive Officer Tony Capuano said March 7 during the JPMorgan Gaming, Lodging, Restaurant & Leisure Management Access Forum in Las Vegas that the company has 28 managed and franchised hotels in Russia, which collectively represent less than 1% of the revenue it gets from fees. Russian travelers, he said, also account for less than 1% of all nightly hotel room bookings around the world. “We are very focused on the safety of our associates and the safety of our guests in those markets. But from a materiality per-

spective in terms of the company’s financial performance, (it’s) not particularly significant,” Capuano said of Russia. As for whether the invasion will impact hotel business in Europe at large, Capuano said it’s too soon to say. “Recovery around the world has largely been driven by traveler confidence. And depending on how the situation evolves in Ukraine, could that have an impact on traveler confidence to Europe? Of course.” Shares of Hyatt closed March 10 at just under $91 apiece, 5% higher than the company’s stock price a year earlier, but down 5% year to date.

3/11/22 2:45 PM

CRAIN’S CHICAGO BUSINESS • MARCH 14, 2022 7

CRAIN'S LIST PHYSICIAN GROUPS Ranked by 2021 net revenue. e = Crain's estimate (in gray). 2021 RANK

FY 2021 NET REVENUE (MILLIONS); 1-YEAR CHANGE

PHYSICIANS; 1-YEAR CHANGE

BOARDCERTIFIED PHYSICIANS

HOSPITAL INPATIENT ADMISSIONS

OUTPATIENT VISITS

MANAGED CARE CONTRACTS

CAPITATED OR COVERED INDIVIDUALS

ORGANIZATION TYPE

PHYSICIAN GROUP

PRACTICE ADMINISTRATOR

ADVOCATE MEDICAL GROUP

Dr. Jeffrey Bahr Chief medical group officer

$1,505.0

1,752 -2.5%

1,752

97,823

4,312,000

120

215,772

Nonprofit corporation

DULY HEALTH AND CARE 1

Steve Nelson Co-chairman, CEO

$1,400.0

1,020 37.3%

984

26,000

4,370,000

90,000

For-profit corporation

Dr. Howard Chrisman President

$1,206.2

1,874 2.9%

1,764

59,823

2,060,315

143

1,164

Nonprofit corporation

NORTHWESTERN MEDICAL GROUP

NORTHSHORE UNIVERSITY HEALTHSYSTEM MEDICAL Dr. Joseph Golbus President GROUP

$707.9

1,008 7.5%

1,005

46,657

1,194,130

49,700

Faculty practice plan

LOYOLA MEDICAL GROUP

Dr. Richard K. Freeman Regional chief clinical officer

$363.6

788 6.3%

788

40,393

1,542,014

32,593

Faculty practice plan

RUSH UNIVERSITY MEDICAL GROUP

Shannon Driscoll Vice president, practice operations

$363.0

750 -5.2%

699

29,276

612,959

—

Nonprofit corporation

SWEDISH MEDICAL GROUP

Luciana Costa Associate vice president

$355.7

107 -31.4%

107

—

For-profit corporation

UNIVERSITY OF CHICAGO PHYSICIANS GROUP

Aytekin Oto Dean of clinical affairs

$346.7

1,093 6.5%

963

34,214

706,092

119

14,161

Faculty practice plan

ILLINOIS BONE & JOINT INSTITUTE LLC

Andre Blom CEO

$329.0

164 4.5%

157

—

For-profit corporation

NORTHWESTERN MEDICINE REGIONAL MEDICAL GROUP

Dr. Patrick Towne President

$307.5

718 12.0%

682

43,485

1,296,390

143

27,683

Nonprofit corporation

AMITA HEALTH MEDICAL GROUP

Drew Palumbo Chief operating officer

$299.0

700 1.2%

670

30,220

1,914,948

131

30,897

Nonprofit corporation

CHILDREN'S HOSPITAL OF CHICAGO FACULTY PRACTICE PLAN

Dr. John Walkup President

$226.0

1,056 -2.8%

1,003

9,681

731,148

—

Faculty practice plan

EDWARD-ELMHURST MEDICAL GROUPS

Dr. Daniel Sullivan Chief physician executive and executive VP, physician and ambulatory network

$221.2

411 10.8%

411

63,727

1,122,864

33,324

Nonprofit corporation

UNIVERSITY OF ILLINOIS AT CHICAGO MEDICAL SERVICE PLAN

Dr. Heather Prendergast Interim executive director, physician group

$220.9

846 3.7%

728

17,445

547,125

215

23,227

Nonprofit association

ILLINOIS GASTROENTEROLOGY GROUP

Michael Cline Chief operating officer

$119.0

83 9.2%

48,716

209,382

300,000

Partnership

NEPHROLOGY ASSOCIATES OF NORTHERN ILLINOIS/ INDIANA

Brian J. O'Dea CEO

$110.0

129 -2.3%

127

43,000

59,000

9,800

For-profit corporation

NORTHWEST COMMUNITY HEALTH MEDICAL GROUP 2 Deb Korff 3040 W. Salt Creek Lane, Arlington Heights 60005 847-618-3475; NCH.org/MedicalGroup

Executive director, business development and quality

$101.6

174 -22.7%

174

20,000

350,000

—

Nonprofit corporation

ERIE FAMILY HEALTH CENTERS

Caroline Hoke Chief clinical officer

$98.2

141 9.3%

117

2,672

349,161

27,000

Nonprofit corporation

HUMBOLDT PARK HEALTH PARTNERS 3

Dr. Abha Agrawal Chief medical officer

$72.4

137 33.0%

131

—

Nonprofit corporation

SINAI MEDICAL GROUP

Dr. Christopher D. Sprowl President

$66.5

234 -32.0%

174

16,031

109,351

—

Nonprofit corporation

CARDIAC SURGERY ASSOCIATES

John Barakat Chief financial officer, chief operating officer

$41.0 e

31 0.0%

—

For-profit corporation

PEDIATRUST

Kathleen McTigue CEO

$38.1

65 14.0%

—

205,105

—

Partnership

MIDWEST CENTER FOR WOMEN'S HEALTHCARE

Heidi J. Spears CEO

$37.1

50 0.0%

5,135

158,249

—

Partnership

ILLINOIS DERMATOLOGY INSTITUTE LLC

James Wonnacott CEO

$30.0

21 16.7%

170,000

—

Partnership

SHIRLEY RYAN ABILITYLAB

Joan Berta Director, physician practice

$27.6

76 1.3%

3,631

34,800

—

Nonprofit corporation

3075 Highland Parkway, Suite 600, Downers Grove 60515 630-572-9393; AdvocateHealth.com/AMG 3010 Highland Parkway, Suite 800, Downers Grove 60515 630-469-9200; DulyHealthandCare.com 211 E. Ontario St., Suite 1600, Chicago 60611 312-926-8400; NMG.NM.org

1301 Central St., Suite 301, Evanston 60201 847-570-5272; NorthShore.org 2160 S. First Ave., Maywood 60153 708-216-9000; LoyolaMedicine.org

1725 W. Harrison St., Suite 364, Chicago 60612 312-942-5000; Rush.edu 5145 N. California Ave., Chicago 60625 773-878-8200; SwedishCovenant.org 5841 S. Maryland Ave., Chicago 60637 773-702-6400; UChicagoMedicine.org

900 Rand Road, Suite 300, Des Plaines 60016 847-375-3984; IBJI.com

25 N. Winfield Road, Winfield 60190 630-933-2374; RMG.NM.org 200 S. Wacker Drive, Chicago 60606 844-366-0610; AmitaHealth.org

225 E. Chicago Ave., Box 118, Chicago 60611 312-227-6413; LurieChildrens.org 4201 Winfield Road, Warrenville 60555 630-527-3000; EEHealth.org

1919 W. Taylor Ave., Suite 823, Chicago 60612 312-413-1350; Hospital.UIC.edu

1415 S. Arlington Heights Road, Arlington Heights 60005 312-331-0927; IllinoisGastro.com

120 W. 22nd St., Oak Brook 60523 630-573-5000; NephDocs.com

1701 W. Superior St., 3rd floor, Chicago 60622 312-666-3494; ErieFamilyHealth.org 1044 N. Mozart St., Suite 100, Chicago 60622 773-292-8200; HPH.care

1500 S. California Ave., Suite F105, Chicago 60608 773-257-2273; Sinai.org 2650 Warrenville Road, Suite 280, Downers Grove 60515 630-324-7900; OpenHeart.net 2215 Sanders Road, Suite 105, Northbrook 60062 224-330-6300; PediaTrust.com 2801 Lakeside Drive, Suite 209, Bannockburn 60015 847-562-1410; MCWHC.com 903 Commerce Drive, Suite 333, Oak Brook 60523 847-769-3528; IllinoisDerm.com 355 E. Erie St., Chicago 60611 312-238-1000; SRALab.org

-5.0%

27.3%

19.1%

15.1%

7.6%

12.4%

-2.2%

10.5%

17.5%

31.8%

11.4%

12.4%

7.4%

48.0%

26.2%

7.0%

21.1%

27.4%

3.3%

12.1%

2.5% e

21.0%

1.8%

20.0%

8.9%

Research by Sophie Rodgers (sophie.rodgers@crain.com) | To qualify, groups must be located in the seven-county area of Cook, DuPage, Kane, Lake (Ill.), Lake (Ind.), McHenry and Will counties. Net revenue is net of contractual allowances, bad accounts, and charity care. “Covered individuals” is the number of people for whom an amount is paid to cover medical services over a specified period. NOTES: e. Crain's estimate. 1. Formerly DuPage Medical Group. 2. On Jan. 1, 2021, Northwest Community Healthcare became a subsidiary of NorthShore University HealthSystem. 3. Formerly Norwegian Physicians Group.

Get 28 groups in Excel format. Become a Data Member: ChicagoBusiness.com/data-lists

P007_CCB_20220314.indd 7

3/11/22 2:41 PM

8 MARCH 14, 2022 • CRAIN’S CHICAGO BUSINESS

LONG COVID

HOW A PANDEMIC CHANGED CHICAGO BUSINESS As the virus recedes and restrictions fall away, the lasting economic effects of a two-year contagion are coming into view

P008-P010_CCB_20220314.indd 8

ROUGH RIDE Chicago-area employers quickly cut their payrolls when COVID-19 arrived two years ago but started hiring workers back almost immediately. CHICAGO-AREA EMPLOYMENT 4.0 million

3.62 million December 2021

3.8 3.6 3.4 3.2 3.0 ALYCE HENSON

t was supposed to “flatten the curve”: Close schools and all but the most essential businesses and send people home, into a virtual world of Zoom, Amazon and Peloton. Some thought it would last just a few weeks, but investors were already bracing for the worst: By March 20, 2020, the day Gov. J.B. Pritzker issued his stay-at-home order, the S&P 500 already had slipped well into bear market territory, down a nauseating 33% in just over a month. Two years, millions of shots and more than 21,000 local deaths later, the Chicago business community is finally emerging from the darkness, optimistic that the COVID-19 threat is fading but resigned to the fact that it’s probably not gone for good. State and local governments have rolled back mask mandates and other restrictions. Hiring has picked up, and more companies are nudging their employees back to the office. Though the pandemic laid waste to some sectors of the local economy—hotels and shopping malls were among the hardest hit—many businesses adapted to its disruptive forces. Some lucky ones were able to capitalize on new growth opportunities. One of the biggest winners: Amazon. The e-commerce giant opened so many warehouses in the city and suburbs over the past two years that it’s now the largest private-sector employer in the Chicago area, with about 27,000 workers here. The pandemic has left a lasting mark on local businesses. Many are still coping with shortages of labor, parts and raw materials. Global supply-chain bottlenecks continue to delay production schedules and drive up costs. Inflation is not going away. The war in Ukraine could push it even higher. As Chicago-based United Airlines and other carriers try to recover from a devastating drop in travel during the pandemic, the war has created another problem: soaring jet fuel prices. The pandemic also accelerated fundamental changes in the way people and companies buy and sell goods—and do business. With consumers confined to their homes, online shopping hit a new growth trajectory two years ago. After a wave of store closings and retail bankruptcies, many retail landlords continue to struggle with high vacancies, but business has never been better for the owners of warehouses filled with all those products bought online. The health crisis pushed the Illinois unemployment rate to 17.4%, even higher than its prior peak in the devastating recession of the early 1980s. But it dropped

BY ALBY GALLUN

Dr. Allison Arwady, Chicago’s public health commissioner. back down to 5.1% at the end of 2021, and many businesses are having a hard time filling job openings. As they raise wages to attract workers, price hikes on their products or services could follow. The pandemic also has given workers, especially white-collar professionals, more say in where they work and how they work. Broadly speaking, the work-fromhome experiment succeeded. Companies that embrace remote or hybrid work schedules permanently could save millions of dollars annually that they previously spent on office space, while making themselves more attractive to workers looking for flexibility. But many are trying to coax their employees back to the office, convinced that the cultural and collaborative benefits are essential to their success. The coming months will reveal whether their workers are willing to go along. The pandemic affected key Chicago industries in ways both predictable and surprising. Here’s how:

HEALTH CARE

A shortage of labor is the No. 1 challenge facing hospitals and other health care organizations. The sector has lost thousands of workers due to burnout, vaccine mandates and other factors, exactly when they have been needed most—in a pandemic. “There’s just a disconnect between demand and supply in the labor force,” says Keith Parrott, president and CEO of Amita Health, which operates 19 hospitals in the Chicago area. “We have dramatic inflation—primarily labor—and we don’t have a way to quickly recover that through increased pricing.” In Illinois, the number of hospital workers dropped about 4%, from about 241,500 in March

2020 to 232,700 in December 2021, according to the U.S. Bureau of Labor Statistics. Many of the workers leaving include registered nurses, respiratory therapists and other clinical staff. Now the focus is recovering some of the talent lost. At Amita, that’s meant offering higher salaries and bonuses and fostering a positive and healthy workplace culture as it tries to stand out from rivals vying for the same workers. Other Chicago-based hospital chains, including Advocate Aurora Health and Rush University Medical Center, also offered employees bonuses recently. Aside from the labor issues, many hospitals are also financially weaker after the last two years. The pandemic made thin margins even slimmer for hospitals as it brought in COVID-19 patients and postponed profitable elective procedures. “We typically lose money on a long-stay medical patient,” Parrott said. “And that’s really what the pandemic has created. It’s a lot of medical patients who are in the hospital for several days.” While hospitals are now faced with finding lost revenue and beefing up their staffs again, many are finding long-term revenue opportunities in telemedicine as insurance companies expand their coverage for virtual care. At Northwestern Memorial Hospital in Streeterville, physicians began using telemedicine to reach patients remotely during the pandemic, says Dr. Clyde Yancy, chief of cardiology at Northwestern Medicine. Virtual care enabled overwhelmed health care facilities to keep many patients from taking up scarce space or possibly contracting COVID-19 in a health care setting. A 2021 McKinsey & Co. analysis found that telehealth use increased 38 times from the pre-

2.8

M 2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

b re 20 ac fi

CHICAGO-AREA UNEMPLOYMENT RATE 20%

4.2%

December 2021

cl re m o h ye w o

12 8 4 0

2011

2012

2013

2014

Source: U.S. Bureau of Labor Statistics

2015

2016

2018

2019

2020

2021

re h ra w th

Note: For the Chicago-Naperville-Arlington Heights Metropolitan Division

COVID-19 baseline. Telehealth is here to stay. While virtual appointments are rarely more lucrative than seeing patients in person, they can still bring in meaningful revenue for hospital systems. Patients have become more comfortable with them, too. “Within days, we went from about 5% telehealth appointments to 100% at a very large health care enterprise, which is remarkable,” Yancy says. Katherine Davis

GOVERNMENT

2017

COVID had a significant fiscal impact on city, county and state governments, with a plunge in economic activity and tax receipts throughout 2020 and 2021. But after facing a 2021 budget gap of $1.2 billion, Chicago’s fortunes reversed with the arrival of $1.9 billion in federal American Rescue Plan relief—equal to roughly a fifth of the city’s total annual appropriations for the previous year. In fiscal 2022, the city spent $1.3 billion of that to close budget gaps for the three previous years and canceled a planned round of borrowing that would have cost future taxpayers tens of millions of dollars in debt service. Instead of cuts, the city is planning hundreds of millions in new spending on infrastructure and social programs. It’s a similar story for the state,

whose revenues have recovered so well that the governor proposed setting aside $500 million in supplemental pension contributions and $800 million over two years for the state’s rainy day fund. Still, COVID didn’t erase long-term pension and debt burdens at the city and state. Perhaps the bigger change has been to politics. The past two years have been characterized by tense debates—including legal battles, protests and work stoppages— over COVID mitigations that will certainly continue through elections this year and next. Chicago’s public health commissioner, Dr. Allison Arwady, says her home is guarded by police because of threats she’s received. Arwady says politics always play a role in outbreaks, but the way they’ve “gotten tied up in people’s identities is just really sad to see. It means we’re going to continue to see unnecessary deaths, probably, moving forward.” A.D. Quig

b ca th re ra th & N to ti

te d n D w 10p3.4553h in ci ta A h d

RESTAURANTS

COVID-19 permanently scarred Chicago’s dining scene, and many restaurants expect to nurse wounds for some time. Pandemic restrictions forced Chicago restaurants to halt indoor dining for about five nonconsecutive months in 2020 and early 2021, driving scores out of

3/11/22 3:25 PM

m ra in gh p o st o

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as rs se s, — ill co’s Dr. me of

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CRAIN’S CHICAGO BUSINESS • MARCH 14, 2022 9

TODD WINTERS

Michelle Durpetti, Gene & Georgetti’s third-generation owner. business. In 2020, 855 Chicago restaurants closed, up 60% from 2019, and 661 shut down in 2021, according to market research firm Datassential. Industry insiders expect more closures. Hope of rebuilding revenue last year was dashed at many establishments when the omicron variant hit during the holidays, forcing them to cancel year-end parties and close during what is typically their busiest time of the year. The whiplash from changing regulations and rising variants has become the norm for restaurant operators. But many remain wary, wondering what will hit them next. “People are fatigued right now by this pandemic, and I get it because no one is more fatigued than those of us working in restaurants and owning restaurants,” says Michelle Durpetti, third-generation owner of Gene & Georgetti’s steakhouse in River North. “I don’t think we’re going to be out of this for quite some time.” The result is an irrevocably altered dining landscape. To-go orders are a mainstay at restaurants now and likely will remain so. Downtown dining continues to wait for workers to return. Steak10p3.4553houses, a quintessential Chicago institution, have dwindled in the city as tastes shift toward more takeout-friendly dishes like pasta. As such, pizza and sushi places have gained ground in the city’s dining scene. Restaurant openings also remain down. In 2019, 579 restaurants opened in the city, according to Datassential. Excluding ghost kitchens—the mostly pandemic-driven phenomenon of serving to-go food without a storefront—only 341 restaurants opened in 2020 and 335 in 2021. The roadblocks to restaurant survival extend far beyond COVID restrictions. Staffing remains a challenge amid a tight labor market. Inflation is forcing operators to raise menu prices. “These numbers show how

P008-P010_CCB_20220314.indd 9

difficult it’s going to be to open a restaurant and stay open over the next 12 to 18 months in Chicago,” says Datassential analyst Mark Brandau. “Consumer demand for dining out is strong after these past two years of living in a pandemic, but people have to contend with higher prices for everything, including gasoline and food.” Ally Marotti

RESIDENTIAL REAL ESTATE

The future of urban living looked bleak in the summer of 2020. With the pandemic confining people to their homes and civil unrest alarming many Chicago residents, sales of downtown condos fell while home sales boomed in the suburbs, breathing new vigor into once-moribund places like Lake Forest and Barrington. But the trend didn’t last. The downtown market bounced back quickly. By the end of 2021, home sales in the city rebounded more than enough to compensate for the dip in 2020. A new report from the Harvard Joint Center for Housing Studies confirms that nationwide, there was no exodus from cities during the pandemic, only continuations of pre-pandemic trends in the flow of households into and out of cities at various stages of life. It’s a good time to be a seller.

BANKING

Before the pandemic struck, banks were moving to shutter branches as more customers gravitated to remote banking. But, with a large group of mainly older holdouts still handling basic transactions in the branch, bankers worried about being too aggressive in their cost-cutting. COVID removed the last vestiges of that fear. Many banks temporarily closed most of their locations during the worst of the pandemic. Only some of those reopened. In the interim, those customers who weren’t comfortable banking online or over the phone learned some new tricks. They had no choice. Expect more branch closures in the future. In the six-county Chicago area, the total number of bank branches as of June 30, 2021, was at its lowest level in two decades. “The cost of brick and mortar is punishing to banks,” says Roberto Herencia, CEO of Chicago-based Byline Bancorp, which has been one of the more aggressive local closers of branches. But office space, too, will shrink with remote work here to say, he says. The most important thing the industry learned from the pandemic years was that much of its workforce had no need to be at the office, at least not most of the time, he says. “We know we can reduce our office space by 50% in the next two years, and we’re moving in that direction,” Herencia says. Steve Daniels

PANDEMIC PRICING The S&P CoreLogic Case-Shiller Chicago Home Price Index, which tracks single-family home prices, rose more than 19% from March 2020, when the initial COVID lockdown began, to the end of 2021. HOME PRICES Chicago 300

Top 10 metro areas

250

TECHNOLOGY

For many tech companies, COVID boosted business. “The market for IT services and data analysis accelerated because of COVID,” says Chris Gladwin, CEO of Ocient, a startup that makes data-analytics software. “More things went virtual—and that’s IT. Ordering goods, usage of mobile devices, collaboration. You could see it in every part of the industry.” But the pandemic fundamentally changed tech companies— from how they hire to how they raise money. Most say life will never be the same. Before the pandemic, Ocient had 40 employees, almost all in Chicago, Gladwin says. Now the company employs 110. Half of its new employees don’t live in Chicago. “COVID took off limitations of where people have to live and work,” he says. “I was able to bring some people to Chicago from California, which I wasn’t able to do before. We also have been able to hire people in California who were able to stay there.” Gladwin saw no decline in productivity. “Working at home worked,” he says. “You can’t make the argument that we have to go back to the office now.” Ocient’s lease will be up in a little more than a year. The company, which has about 20,000 square feet of office space in the Boeing headquarters building at 100 N. Riverside Plaza, figures he’ll need just 10% of the office space he would have required before COVID for a company that’s doubling headcount every year.

JOHN R. BOEHM

In 2021, more homes sold in the Chicago area than in any year since at least 2000. But buyers won’t find any bargains: The S&P CoreLogic Case-Shiller Index of single-family home prices for the Chicago area rose 12.2% last year. With the rise of remote working during the pandemic, being close to work is less of a priority for many homebuyers today. “They are not as tethered to a specific area and it has opened them to new possibilities,” says Diane Glass, CEO of Berkshire Hathaway HomeServices Chicago. The pandemic has also changed what buyers are looking for in a home. Glass says homes with rooms that can be used as offices are in high demand, as are those that can accommodate multiple generations. Dennis Rodkin

Chris Gladwin Ocient’s spending isn’t likely to decline all that much, however. Much of what the company saves on office space will instead be used to bring all its employees to Chicago for a week twice a year, as well as getting specific teams together quarterly. Gladwin says the company now has to make a conscious effort to instill its culture in employees who don’t see each other every day, a change from pre-COVID times. “When everyone’s in the same room, culture just happens,” he says. “There’s a training program now.” Gladwin also found that faceto-face contact isn’t necessary to raise capital. A veteran tech industry fundraiser, he recalls hundreds of in-person meetings for a single financing round in years past. Last year, Ocient held all but one investor meeting for a $40 million funding virtually. “That never would have happened before COVID,” Gladwin says. John Pletz

REAL ESTATE AUCTION APRIL 26, 2022 TIME LONG- RATE O P R O S C DIRECT OWNER ALE S

180,000 SQ. FT. PREMIUM INDUSTRIAL WAREHOUSE

OPPOR TUN ZO ITY INVEST NE MENT

120 E. CLARK ST.

FREEPORT, ILLINOIS $2,000,000 plus in property renovations in the last several years including HVAC, office areas, parking lot and more. Food grade warehouse, sprinkled, 20,000 sq. ft. Class A office space, two incoming fiber internet connections for redundancy, backup generator. Opportunity zone.

Previously Valued Over $4,500,000 Suggested Opening Bid $1,000,000 On-site inspections Noon to 2pm April 5, 13 and 21

200 BROKER PARTICIPATION INVITED

150 100 50 0

2000

2002

2004

Source: S&P Dow Jones Indices

2006

2008

2010

2012

2014

2016

2018

2020

FOR INFORMATION CONTACT

Rick Levin & Associates, Inc. | since 1991 312.440.2000 | www.ricklevin.com IN CONJUNCTION WITH KW COMMERCIAL

3/11/22 3:25 PM

10 MARCH 14, 2022 • CRAIN’S CHICAGO BUSINESS

COMMERCIAL REAL ESTATE

The impact of COVID on commercial real estate ranges from pinch-me good to downright horrendous. In the office market, the pandemic has widened the gap between the haves and have-nots. Companies now trying to motivate their employees to show up rather than work remotely are flocking to newer and recently renovated buildings, while the owners of many older and outmoded buildings are facing foreclosure or handing the properties over to their lenders. For companies that have a good handle on their workspace needs, it’s a great time to be hunting. Downtown vacancy hovers near a record high of 20%, up from 14% when the pandemic began. “It’s going to be a tenant’s market in Chicago for quite a while,” says Eric Feinberg, vice chairman in the Chicago office of tenant rep brokerage Savills. More companies are rethinking how they will use offices in the future, prioritizing collaboration space over individual desks for work now proven to be efficiently done from home. But it’s still far from clear whether office needs have changed for good, Feinberg says. While most companies have recognized that five days a week in the office isn’t necessary, “five days a week at home doesn’t work either, in the long run.” Local hotels, meanwhile, are struggling to recover from a staggering drop in demand during the pandemic. Visitors tied to business travel and conventions and trade shows have yet to come

P008-P010_CCB_20220314.indd 10

MANUFACTURING

GETTY IMAGES

INSURANCE

The pandemic took auto insurers on the ride of their lives. Almost overnight, driving levels plummeted, and major insurers like Northbrook-based Allstate and Bloomington-based State Farm had to decide quickly what to do with the windfall from the commensurate plunge in car accidents. Almost as soon as they’d figured out what tack to take—temporary refunds versus rate cuts or sometimes both—driving levels rebounded in early 2021, and soaring used-car prices inflated insurers’ claims payouts. Most of them quickly moved to hike rates with varying degrees of resistance from regulators in huge states like California and Texas. Actuaries had never seen anything like it and are still struggling to project loss costs in the near future. “The pandemic has exposed a lack of agility in the system that regulates auto insurance rates,” says Joseph Lacher, CEO of Chicago-based Kemper, an auto insurer for drivers with checkered driving records. “That flaw impedes the ability to respond to extraordinarily rapid changes in loss frequency or severity and the subsequent impact on profitability.” Lacher says the industry will need to work with regulators to address the problem, or a similar shock to the system in the future could well bankrupt some sizable insurers. Steve Daniels

The Palmer House Hilton back in a meaningful way, devastating hotel property values and pushing several owners—including those of the Palmer House Hilton, JW Marriott Chicago and Conrad Chicago—into foreclosure. Chicago-area hotels are recovering more slowly than the rest of the nation, too. Revenue per available room, a key metric that accounts for both occupancy and room rates, was down 40% last year compared with 2019, while it was just 17% lower nationally, according to hospitality data and analytics firm STR. The pandemic dealt a devastating blow to many retail landlords that were already struggling before March 2020. An online shopping trend that was well underway accelerated when consumers hunkered down at home. Retail bankruptcies and store closings jumped, pushing malls like the Lincolnwood Town Center and Louis Joliet Mall into default. With demand for retail space expected to shrink further, mall owners are adapting, spending big sums to add apartments and other uses to their properties. And the pandemic has made clear that North Michigan Avenue, the city’s biggest shopping district, needs to reinvent itself. About a quarter of all Magnificent Mile retail space is vacant today, up from 15% in 2019, according to Cushman & Wakefield. But the rise of e-commerce is a big reason the industrial real estate market is on fire. E-commerce companies, retailers and logistics firms are gobbling up warehouse space as they retool their supply chains, pushing the local industrial vacancy rate down to 5.44%, close to its all-time low of 5.39% in 2000, according to Colliers. “In my 37 years, this is as good as it’s been,” says Jim Clewlow, chief investment officer of CenterPoint Properties, an Oak Brookbased industrial developer.

EMPTY CUBICLES A measure of office-building employee occupancy compiled by security company Kastle Systems shows that only about a third of employees in Chicago office properties are coming in to work, though the numbers have risen since early January. Chicago 100 %

Top 10 metro areas

80 60 40 20 0

Apr. 2020

July

Oct.

Source: Kastle Systems

Jan. 2021

July

Oct.

Jan. 2022

Note: Data gathered from key-card swipes in office buildings with Kastle security systems. Kastle systems are installed in 2,800 buildings in 138 cities.

He expects the good times to continue for at least a few more years. After being caught by supply-chain disruptions due to the pandemic, companies are carrying more inventory these days to protect themselves, and they need more space to store it, Clewlow said. A rise in domestic manufacturing could boost the market, too. The local apartment market should keep on rising, too. While that will make landlords happy, it’s bad news for renters, who can expect some hefty rent hikes in 2022. Danny Ecker and Alby Gallun

PACKAGED FOODS

Apr.

The pandemic has been a steroid for Chicago’s food giants, as consumers’ eating habits continue to evolve. School, office and restaurant closures drove people toward packaged foods, and sales surged at Mondelez, Kraft Heinz and Conagra in the early pandemic days. Consumers craved nostalgic brands from childhood, like Oreos and Kraft Macaroni & Cheese, and the companies gained new customers. But it hasn’t been all sunshine. Meeting demand has been a challenge amid COVID outbreaks at

factories, and lingering supply chain problems are burdening food processors with shortages of items like cream cheese. The tight labor market has been a battle, too, as has inflation. Oreo maker Mondelez hiked U.S. prices 6% to 7% in January and expects to take them higher. Similarly, Kraft Heinz executives said they might push prices up again, after an increase in the fall. Conagra warned in January that it expected gross inflation to hit 14% this year. The maker of Duncan Hines cake mix raised prices multiple times in 2021. Through it all, however, sales at Chicago’s packaged-foods behemoths have been strong. Mondelez’s 2021 net revenue was up 11% over 2019, Kraft Heinz’ was up 4.3% and Conagra’s was up 17.3%. “Retail brands were able to really re-entrench themselves and show their value to their retail partners and end consumers,” says Erin Lash, director of consumer sector equity research at financial services firm Morningstar. “Leading brands had the resources to a greater extent than smaller (companies) and private labels to meet the outsize demand that is surfacing.” Ally Marotti

The pandemic taught manufacturers a painful lesson about the downside of running lean and squeezing costs out of the supply chain. COVID-induced supply chain disruptions are still reverberating through the economy, and Russia’s invasion of Ukraine has only underscored the volatility of commodity markets. “There’s a shift in mentality,” says Illinois Manufacturers’ Association CEO Mark Denzler. “Before it was just-in-time. Now it’s just-in-case.” Companies are diversifying their sourcing and sometimes bringing it back home. They’re learning the necessity of keeping raw materials and finished goods on hand. At the start of the pandemic, manufacturing employment in Illinois plunged by 48,000 jobs to a low of 532,400, according to the Bureau of Labor Statistics. Companies idled plants with the assumption that demand would vanish, and then ramped up only to discover their supplies were sitting on a ship off Long Beach, Calif. Many manufacturers had never bothered to learn that there were tiers beyond their immediate supplier. “Maybe you ordered a compressor from a Chinese supplier, but you didn’t know they buy their nuts and bolts elsewhere,” says Brian Pacula, a director at the consultancy West Monroe Partners. “Now you can’t get your compressor because the supplier can’t get the bolts.” When earnings expectations are missed because container costs have gone up or the right chips aren’t available, that gets the attention of the C-suite very quickly, Pacula adds. With supplies disrupted, companies often missed revenue targets. More nimble companies that found alternative sourcing could raise prices, maintain earnings and emerge from the COVID dip faster. Illinois manufacturing employment has rebounded but was still 20,000 jobs below pre-pandemic levels at the end of 2021. That’s in contrast to neighboring states Indiana and Wisconsin, where manufacturing employment has surpassed pre-pandemic levels, BLS data shows. Output in Illinois and nationwide has grown, thanks to more automation. Small and midsize companies avoid the high capital cost by renting robots, Denzler says. Some public companies took hits in 2020 but rebounded last year. Illinois Tool Works last year posted a 15% revenue gain and a 28% increase in earnings after declines the year before. Tenneco recovered from a 2020 loss and grew revenue 17%. Manufacturers will become more cognizant of their endto-end sources, Pacula says, adding, “They’ll make sure they have redundancy and resiliency. That’s the only way to compensate for the probability of disruption.” Judith Crown

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here’s perhaps no more politically sensitive economic metric than the price of gasoline. Presidents’ approval ratings reliably rise and fall in tandem with the upward and downward movement of the price of a gallon of gas at the pump. Events well beyond any local elected official’s control are currently driving prices to nosebleed levels here in the U.S. and particularly in Chicago, which traditionally has among the highest gas prices in the nation in part due to federal environmental standards that mandate we use a special—and pricey—blend to cut pollution. War in Ukraine has driven the average price of regular unleaded gasoline in the U.S. to above $4.33 a gallon, levels not seen since the financial crisis of 2008. In the city of Chicago, the AAA says that average stood at $4.83 as of March 11, up from $4.27 the previous week and $3.92 a month ago. A price swing of that magnitude—nearly a buck a gallon in a year’s time, and just for regular gas, never mind premium at $5.68— creates real pain for working families after the economic hardships of a pandemic that’s dragged on for two years. For people at the lowest rungs of the economic ladder, higher gas prices mean tough choices: Fill up the tank to get to work, or cut back on groceries for the family, or risk being late on a rent payment, or patch together a route to work that involves hopping from bus to bus or train to train. Even for people of greater means, the cost of a fill-up is an attention-grabber. A new survey by AAA finds that two-thirds of Americans felt gas prices were too expensive just a few weeks ago. Now, 59% say they are contemplating lifestyle changes. Driving

BLOOMBERG

Yes to a gas-tax holiday

less, of course, is one option—and one we all would normally applaud in a world beset by climate change. But other trade-offs are also in view: Less shopping. Less dining out. Less travel. Spending shifts like these can have tangible and negative effects on the economy at a time when retailers, restaurants, hotels, museums, convention centers and more are just beginning to shake off the aftershocks of the pandemic. The pricing of oil is an intricate, global fan dance that involves geopolitical factors such as the relationships between one oil-producing state and another, not to mention corporate governance decisions such as how much value an oil producer’s board has pledged to deliver to shareholders. That said,

as a practical matter, there are things elected officials closer to the ground can do to mitigate the pain constituents are feeling at the pump and protect the local economy from the harm that could be caused as that pain radiates out to nearby businesses. In a March 10 conversation with Crain’s editorial board, Chicago Mayor Lori Lightfoot indicated her administration is considering some sort of suspension of the gas tax in an effort to take some of the sting out of the recent price spike. The mayor raised the gas tax in 2021 by 3 cents a gallon to its current 8 cents, a levy that’s forecast to generate $65 million in revenue for the city this year. That 8 cents represents just a small slice of the tax load carried by Chicago drivers, however. The

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sales tax also applies to gasoline. In Chicago, that’s more than 10% of the before-tax price at the pump. In addition, Cook County levies a gas tax of 6 cents, and the state of Illinois imposes a 39-cent tax. In fact, according to the American Petroleum Institute, Illinoisans pay the second-highest gas taxes in the nation, after California. At the federal level, Republicans and Democrats alike are pushing the Biden administration to get behind a suspension of the federal gas tax as the Ukraine situation roils global oil markets. Closer to home, Lightfoot is right to contemplate a gas-tax holiday of some sort, too. Even if she lifted the Chicago tax tomorrow, however, those 8 cents wouldn’t do much to help local drivers. Better still, she should get together with Cook County President Toni Preckwinkle and Gov. J.B. Pritzker to consider a broader move. Yes, we’re aware that lower gas prices usually encourage more driving and thus more pollution, and we realize that gas taxes fund the maintenance of driving-related infrastructure. And Americans have been surprisingly supportive of price-inflating sanctions against Russia, expressing a willingness to pay more at the pump if it helps bring a swifter end to the invasion of Ukraine. But not all of us have the privilege of that kind of magnanimity. A lot of Chicagoans need their cars to get to work in places not accessible by public transit. They need to get their kids to school or baseball practice or ballet classes. They need to get to the grocery store to feed their families. And the cost of doing all these things is increasingly out of reach for many of our fellow Chicagoans. Our elected officials can do more to help our neighbors bear the burden.

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Budget points Illinois in the right direction for the governor and the General Assembly to develop and implement a comprehensive plan to improve the state’s finances on a long-term basis and achieve substantive improvements in the state’s credit rating over the next five to seven years. Without such a plan, the Illinois economy will continue to underperform its potential. It’s also worth noting that since the proposed budget was released, projected state revenues are up a total of nearly $1.2 billion dollars in fiscal years 2022 and 2023. We urge the governor and General Assembly to use these funds to continue to address the state’s fundamental fiscal sta-

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stabilize state finances through here is much to like in Gov. a combination of spending reJ.B. Pritzker’s proposed ductions, revenue increases, a fiscal year 2023 budget. If stronger rainy day fund, reduced it passes along the lines of what bill backlogs and a new pension is proposed, Illinois will fully funding plan. We called for putfund planned increases in K-12 ting more money into pensions education, provide more money to reach the “tread water” level for low-income people to attend so the state’s unfunded liability college, fund pensions above stops growing. Due to high inwhat is required by law, keep paying down bills and set aside Kelly Welsh is pres- vestment returns, Illinois is now at tread water, but pensions still money for a rainy day. Rating ident of the Civic agencies, which recently gave Il- Committee of the make up about 20% of the state linois its first credit-rating boost Commercial Club budget and continue to crowd out essential services. in two decades, are taking notice. of Chicago. The governor’s proposed budThere also are state and federal funds to rebuild our infrastructure, and get includes full funding of the required there are a couple of short-term tax breaks annual pension contribution of $8.7 bilto help families and small businesses cope lion, plus $500 million in supplemental with inflation. The open question is wheth- contributions that could save taxpayers an er this budget represents the first step in estimated $1.8 billion over time. Neverthea long overdue journey towards fiscal re- less, despite the positive direction of the sponsibility or only a temporary departure proposed 2023 budget, the state will confrom decades of financial mismanagement. tinue to have the lowest credit rating of any Three years ago, we published a plan to state in the country. It remains important

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bility—reducing legacy costs like pensions and other debt—after the COVID relief funds are gone. We also need responsible pension funding strategies at the local level, where un-

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CRAIN’S CHICAGO BUSINESS • MARCH 14, 2022 13

YOUR VIEW Continued funded liabilities also run into the tens of billions of dollars. It’s concerning to see Springfield dabbling with new and proposed laws that would significantly increase local pension costs. For example, last year the state sweetened pensions for Chicago firefighters, adding $850 million in costs for city taxpayers over the next three decades. A proposed companion bill for Chicago police would add an estimated $3 billion to Chicago’s pension tab. Meanwhile, the Illinois Municipal League is pushing two bills for downstate police and firefighter pensions that cut contributions today, but ultimately increase costs to taxpayers. We urge lawmakers to reject them both. There is also one unaddressed issue in

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the governor’s proposal: the $4.5 billion Illinois owes the federal government for the Unemployment Trust Fund loan, which comes due in November. Presumably, the solution will include some significant share of the unspent American Rescue Plan dollars ($3.3 billion) to reduce the impact on taxpayers, as has been done in several other states. That said, Illinois is poised for growth and progress on several fronts. Our universities and research centers are world-class, we have a talented and well-educated work force, a diversified and sophisticated economy, and our transportation infrastructure remains one of Illinois’ top competitive advantages. Illinois’ transportation and infrastructure capital program could now total as

much as $54 billion, including both state and federal funds. To generate the greatest economic impact, however, the state has to set the right priorities for investing these dollars. At the top of our list is the 75th Street Corridor Improvement Project, which would unclog one of the largest freight rail bottlenecks in the country. We also hope Chicago proceeds with the Union Station master plan, which would better link Metra with the Chicago Transit Authority and could enable connections to McCormick Place and O’Hare Airport. O’Hare, of course, is the economic engine of the region and is also on track for growth. O’Hare recently completed a 20year runway improvement program to increase capacity and reduce delays. The

next step is to modernize terminals and improve rail access. Finally, to help complete infrastructure projects on time and on budget, we urge Springfield to pass a law allowing for “design-build procurement.” This approach brings together construction and design teams at the start of a project, rather than having separate design and construction contracts. Illinois is one of just four states that does not allow design-build. In an election year, Springfield could have dedicated one-time federal COVID relief funds to politically popular projects. Instead, the governor’s proposed budget invests in long-term fiscal stability and economic growth. Let’s hope the Legislature takes his lead and uses this opportunity to put Illinois on a better and stronger path.

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ACCOUNTING

CONSULTING

LAW

NON-PROFIT

REAL ESTATE

ORBA, Chicago

Bluedog Design, Chicago

Jewish United Fund, Chicago

Focus, Chicago

ORBA is pleased to announce the appointment of Markus Richter as the firm’s Chief Operating Officer. He brings more than ten years of experience helping professional service firms develop and manage performance models, business operations and human capital needs to facilitate growth, stability and innovation. Prior to joining the firm, Markus held similar positions at financial planning and public accounting firms.

Marketing and growth consultancy firm Bluedog Design appoints Jake Taylor as the new Vice President, User Experience & Design Thinking. Jake leads consumer and B2B companies in increasing the speed and ROI of their customer experience development. Taylor’s 20-year career includes experience in the manufacturer and consultancy sectors with fast-moving consumer goods. His natural curiosity has propelled him to design winning experiences and products that have created and sustained market growth.

Croke Fairchild Morgan & Beres, Chicago

Community leader Steve Miller, renowned for his commitment to Jewish life, has been named Chair of the 2022 Jewish United Fund Annual Campaign. JUF’s Annual Campaign enables life-transforming services for 500,000 Chicagoans of all faiths and two million Jews worldwide. A longtime JUF board member, Miller has served on virtually every board committee, and has chaired the JUF Breakthrough Fund, Holocaust Community Services and TOV Volunteer Network Committees.

David Hanner has been appointed Director, Preconstruction. Having been with the firm for nearly 6 years, Hanner has shaped the company’s approach to preconstruction and innovative construction practices. In his new role, Hanner is responsible for identifying & managing the necessary resources required to complete an estimate. He will continue to manage all bidding, cost exercises and participate in design development of Focus projects. Hanner will analyze risks, identify value engineering for construction cost savings, explore new construction systems and manage the entire preconstruction staff. Hanner studied civil engineering at the University of Illinois Urbana – Champaign and in his spare time coaches youth sports in his community.

Croke Fairchild Morgan & Beres welcomes Cameron Robinson as a partner to help lead the growth of the firm’s intellectual property practice. Cameron advises clients ranging from startups to multinational companies on technology transactions and intellectual property, data privacy and complex commercial matters. He has particular experience with trademarks, copyrights, trade secrets and data protection. Cameron is based in Chicago and serves clients nationwide.

NON-PROFIT

ARCHITECTURE Wight & Co., Darien

FINANCIAL SERVICES

LAW

Wight & Company is pleased to announce the promotion of Scott Steffes as Principal, Chicago Architecture Leader. He will manage and support architectural teams in our Chicago office in our private, public and international markets. Scott will continue to lead clients on complex integrated projects and support local initiatives impacting the south and west communities in Chicago. As well as maintain his involvement in mentoring students, serving as studio critic at IIT, and the Architectural Advisory Council at Iowa State University.

Lakeshore Financial Group, Chicago

Fragner Seifert Pace & Mintz, LLP, Chicago / Austin

BANKING / FINANCE

Lakeshore Financial Group is pleased to announce Mike Relyea as a new Managing Director. He comes to us with 25 years of experience in asset management and life insurance. Mike is looking forward to building and leading a team of advisors. Securities and investment advisory services are offered solely by Equity Services, Inc., Member FINRA/SIPC, 123 N. Wacker Drive, Suite 600, Chicago, IL 60606, (312) 236-2500. Lakeshore Financial Group is independent of Equity Services, Inc. TC125686(0222)1

Busey Bank, Chicago

FINANCIAL SERVICES

Rick Chang joins Busey Bank as Senior Vice President of Commercial Real Estate. He brings over 20 years of experience providing CRE loans to middle-market Chang real estate investors and developers for a variety of property types. Rick works closely with his clients, customizing banking solutions to meet their day-to-day needs and overall goals. Busey Bank welcomes Thomas Porzak as Porzak Senior Vice President, Commercial Relationship Manager. With over 35 years of experience, Tom specializes in financing investor-owned Commercial Real Estate for a range of property types. Through his careful analysis and honest feedback, he works alongside clients to meet their unique needs on each project.

RMB Capital, Chicago RMB Capital, an independent investment advisory firm with more than $10.8 billion in assets under management, announced that it has named Amber Hickory as the firm’s chief marketing officer. Hickory has more than 20 years of experience in marketing, business and leadership, most recently serving as executive director of marketing and communications for the Leeds School of Business at the University of Colorado Boulder. At RMB, she will lead all brand and marketing initiatives across the firm.

Partner, Robert Mintz is a highly experienced corporate lawyer with a background in accounting, finance and business, who advises clients on a wide variety of matters including the creation of new businesses and business acquisitions, dispositions and liquidations. In his corporate transactional practice, he represents domestic and international banking and financial institutions, privately and publicly held businesses, international companies with U.S. business interests and venture capital funds.

LAW Nixon Peabody LLP, Chicago Nixon Peabody LLP is pleased to announce that Andy Kaplan has joined the firm as an associate in our Government Investigations & White Collar Defense group. He represents clients facing False Claims Act lawsuits and DOJ, SEC, and other government enforcement matters. He is also experienced in advising clients on regulatory and compliance matters, including anti-corruption, anti-bribery, sanctions risk, and fiduciary duty litigation. In addition, Andy maintains an active pro bono practice.

HEALTH CARE

Northern Builders, Inc., Schiller Park Northern Builders, Inc. is pleased to announce the promotion of Kevin M. Daniels to General Superintendent. In his new role, Kevin oversees all field operations for Northern’s construction projects including safety, coordination, and scheduling. Kevin works closely with Northern’s project managers to keep the projects on time and under budget. Kevin brings over 30 years of construction experience to the Northern team.

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NorthShore University HealthSystem (NorthShore) has named Mohammed M. Minhaj, MD, MBA, FASA, FACHE, as the Harris Family Foundation Chair of Anesthesiology, Minhaj and Leslie Mendoza Temple, MD, ABOIM, as the inaugural holder of the new Owen L. Coon Chair of Integrative Medicine. Dr. Minhaj is the Chairman of the Department of Anesthesia at NorthShore. Dr. Temple is the Temple Medical Director of the NorthShore Integrative Medicine Program. She holds the academic title of Clinical Associate Professor of Family Medicine at the University of Chicago Pritzker School of Medicine.

As a key part of its community-wide security initiative, Daniel Godsel has been named Security Director at the Jewish United Fund. At a time of accelerating antisemitism and attacks against Jewish institutions, Godsel leads the expansion of JUF’s security services across the Chicagoland Jewish community. He joins JUF after 29 years with the Chicago Police Department, including at the highest levels of the CPD, promoting reform, overseeing training, and commanding diverse districts.

NON-PROFIT TASC, Inc., Chicago

NorthShore University HealthSystem, Evanston CONSTRUCTION

Jewish United Fund, Chicago

PROFESSIONAL SERVICES Brilliant®, Chicago Chris Rowan joins recruiting/consulting firm Brilliant as the Director of Training and Development. With 20 years of experience, Chris excels at coaching teams in the areas of instructional design, employee engagement, and recruitment and sales strategies for small to mid-size to Fortune 500 firms. Chris was hired to help position Brilliant for future success by accelerating the team’s personal and professional goals. Previously, he spent 10+ years at Manpower, and most recently, Diversant.

TASC, Inc. (Treatment Alternatives for Safe Communities) is pleased to announce two promotions: Audrey Walker, MBA, has been named to TASC’s Executive Team as Walker Vice President of Human Resources, responsible for employment policies, compensation, benefits, training, and staffing activities for TASC’s 230 staff across Illinois. Alicia Osborne, MA, has been named Senior Osborne Director of Development, responsible for developing and executing strategies for business development, corporate and foundation support, and government funding. TASC offers assessment, treatment, and specialized case management for people with substance use and mental health disorders, serving people in justice, health, and family service systems.

WEALTH MANAGEMENT BMO Wealth Management, Winnetka BMO Wealth Management welcomes John Ward, as Director, Private Wealth Advisor in Winnetka. In his role, John serves as a lead advisor and relationship manager to high-net-worth individuals, families and organizations, including closely-held and family-owned businesses. He works with clients to gain a complete understanding of their lifestyle, career, philanthropic and wealth planning goals. John has over 20 years of experience in the financial services industry.

REAL ESTATE Focus, Chicago Aisha Johnson has been appointed Director, Accounting. Since starting with Focus in 2017, Johnson has been responsible for oversight of the accounting department and maintaining the financials for Focus. In her newly elevated role, Johnson will develop the company’s financial strategy and will direct the fiscal functions of the firm, including financial reporting, forecasting, budgets, and cashflows. Additionally, Johnson will help to analyze potential projects to ensure they benefit the company’s fiscal positions. Aisha studied accounting at Eastern Illinois University and is a licensed certified public accountant. She is a founding member of Professional Women in Construction Chicago, where she also serves as Treasurer.

REAL ESTATE Focus, Chicago Vicky G. Lee has been appointed Senior Vice President, Development. She has been with Focus for nearly seven years where she’s lead real estate acquisition, development, and architectural design activities on multiple projects. Lee will continue to autonomously lead multiple, complex real estate development projects from inception through completion & in addition, Lee will be responsible for leading Focus’ foray into new markets as the company continues to expand. Vicky studied architecture at the University of Notre Dame & business at Cornell. She is also involved with ULI Chicago on multiple councils, the Cornell Real Estate Council where she is on the leadership team and serves on the associate board for Teachers Supporting Teachers.

3/9/22 9:52 AM

CRAIN’S CHICAGO BUSINESS • MARCH 14, 2022 15

PLANNING PAYS: Calumet Park pilot program offers an example of how to make progress. PAGE 16 CLIMATE CHALLENGE: An equitable clean energy infrastructure matters. PAGE 18

CRAIN’S CHICAGO BUSINESS NEIGHBORHOOD INFRASTRUCTURE

GETTING AROUND: Transit spending must address mobility disparities, advocates say. PAGE 19

A BROKEN

LIFELINE Inequities in neighborhood infrastructure leave Chicago South and West Side residents at a disadvantage. New spending on rails, buses and mixed-use development could change that. | BY JUDITH CROWN

JOHN R. BOEHM

TO OPPORTUNITY

Melvin Thompson, executive director of the Endeleo Institute, stands near the Red Line station at 95th Street and the Dan Ryan Expressway, which received a $280 million upgrade, completed in 2019.

n early 2019, the Chicago Transit Authority reopened its Red Line station at 95th Street and the Dan Ryan Expressway with some fanfare. The $280 million upgrade with North and South terminals featured a bright mezzanine, pedestrian bridge and bike racks and was touted to be the largest construction project in CTA history. “The station landed like a spaceship,” recalled Melvin Thompson, executive director of the nonprofit Endeleo Institute, which aims to revitalize the 95th Street corridor in the Washington Heights neighbor-

hood. “The community was in awe.” But the station hasn’t transformed the disinvested neighborhood as some had hoped that it would. It’s surrounded by fast-food drive-thrus rather than pedestrian-friendly retailers. And few, if any, amenities like benches or restaurants around the station encourage people to linger and socialize. “People get off the train and go home,” Thompson says. “There was no comprehensive plan to redevelop the land once the station was built and no crossdepartment collaboration like you see

in other communities.” Activists like Thompson hope advanced early planning and coordination among public agencies will enable future infrastructure investments to benefit their surrounding communities. Illinois is preparing for an influx of nearly $18 billion from the federal Infrastructure Investment & Jobs Act, with an opportunity to leverage billions more from competitive grants. About $4 billion is expected to be used for public transit improvements. Transit-oriented development—the creation of pedestrian-oriented mixed-use

communities close to mass transit—is needed to spark development on the South Side, particularly as the $2.3 billion extension of the Red Line is launched, activists say. But the region’s rail lines only go so far. Other transit is needed to make it easier for residents of South and West Side and South Cook communities to gain access to jobs outside the Loop, West Loop and other business districts. Without a car, it’s difficult to get to growing logistics operations in the See LIFELINE on Page 16

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Jennifer “Sis” Killen is superintendent of the Cook County Department of Transportation & Highways. “The winners should be the people who’ve been losing,” says Olatunji Oboi Reed, CEO of nonprofit Equiticity, a social enterprise focused on advancing racial equity. “The losers should be the people who’ve been winning.”

THE PRIVILEGE OF TIME

The federal infrastructure bill passed in November goes far behind transit. More than half of the funds are slated for highway projects. At least $100 million would be used to expand broadband coverage and also aid low-income families in gaining internet access. Mayor Lori Lightfoot has placed a priority on replacing lead service lines—nearly 400,000 Chicago homes are connected to the city’s water mains by lead pipes that can leach a dangerous chemical into drinking water. And low-income neighborhoods

are clamoring for repairs to streets and sidewalks as well as local bus stops. “We have broken sidewalks and viaducts crumbling,” says Rochelle Jackson, chair of the transportation and infrastructure committee of the North Lawndale Community Coordinating Council. “We’d like to be a priority because we have not been a priority for years.” Beyond basic repairs is the problem of mobility—getting to jobs that aren’t served by established CTA and Metra routes. Many jobs, especially in the fast-growing logistics hubs in southwest Cook and Will counties, are hard to get to without a car. A 2020 study co-authored by UIC professor Kate Lowe found that many good-paying suburban jobs are inaccessible because there are no nearby transit routes or the schedules don’t align with work

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The Harvey Transportation Center shifts. Workers interviewed for the survey said that because Pace service is limited or nonexistent overnight and on weekends and holidays, it was nearly impossible to accept a job with irregular hours.

Another hindrance: A Metra route could get a worker close to a suburban company, but there’s no way to get from the station to the job site. Unlike flexible white-collar jobs, most hourly jobs require that

Calumet Park got beyond ‘surviving day to day’ The Cook County suburb developed a long-range plan and won $6 million in grants through a CMAP program BY JUDITH CROWN Disinvested communities in southern Cook County have a common dilemma. They’re in dire need of funds to repair and renovate roads and infrastructure and spur economic development. But with bare-bones budgets, they can’t afford a full-time planner or economic development director, much less the full departments common in affluent municipalities. In the course of long-term planning, staff members at the Chicago Metropolitan Agency for Planning considered how they could better help these struggling governments. Three years ago, the planning organization launched

P015-P019_CCB_20220314.indd 16

WEST

PHOTOS BY JOHN R. BOEHM

southwest suburbs, especially when evening or weekend connections are required. Public transportation can offer upward mobility, but the current configuration also serves as a buffer and keeps people trapped, says Gwendolyn Purifoye, a professor at North Park University who researches transit ridership. The pandemic underscored the disparity as white-collar workers on the North and Near West sides worked from home, while essential workers from the South and West sides depended on transit to get to jobs in health care and other public services. Transit agencies moved more resources to those neighborhoods in the past two years of the pandemic, but more permanent shifts are needed. Signs of progress are in view. The CTA says the federal funding will enable it to finally move ahead on the long-anticipated southern extension of the Red Line from 95th Street to 130th Street, with an addition of four stations. Construction could begin by 2025 and be completed in 2029. The agency worked with community groups to win a federal grant to plan for transit-oriented development surrounding the 95th Street station, announced in late January. The CTA converted four pilot bus routes serving the South and West sides to permanent status. Metra is starting the second year of a pilot project that reduces fares on its South Side Electric and Rock Island lines, opening accessibility to city and South Cook residents who rarely used the suburban rail service. And Metra plans to renovate South Side Electric Line stations, many of which are in poor condition. Still, community activists worry. Will the current round of investment compensate for past inequities? And will the communities be meaningfully included in the planning process?

NORTH

Continued from Page 15

a pilot program with the village of Calumet Park. CMAP Senior Planner Patrick Day embedded himself at the village hall and helped Calumet Park develop a long-term plan and win $6 million in grants. “We focus on surviving day to day,” says Mayor Ronald Denson. “A small town like ours can’t afford a planner. People look to the mayor to make decisions.” The village of 7,026, located 16 miles south of the Loop, is 87% African American. The median household income between 2015 and 2019 was $48,092, according to the U.S. Census, and per capita income in that period was $25,121. More than 17% of the population lives in poverty, according to

the census. The median value of owner-occupied housing units in the same period was $106,600. Starting in 2019, Day started showing up in Calumet Park two days a week and spent another day on village business, interviewing and going out to lunch with the staff. Day says he took the first six months to get to know the community. “Too often planners come in fully loaded and tell communities what they need to do next” he says. “You have to take time to listen.” At first, the staff was a bit surprised. “They thought I would go hide in a cubicle somewhere and pop up every once in a while, drop off paperwork and then disap-

pear,” Day recalls. He worked with village staff to identify the biggest needs, draft a comprehensive plan and then apply for grants. In the past, it was all the village could do to muster annual state funding of $400,000 for street maintenance. Denson recruited Jonathan Shaw, the village’s parks and recreation director, and former deputy clerk Teri Raney, who is now village administrator, into the planning process. Day helped the team apply for and win state funding for a transitoriented development near the Ashland Avenue Metra Electric station. The $1.5 million grant is being used to make the 6-acre site of a former trailer park “shovel

ready” for a developer. A second project landed $1.5 million in county and state funds for a flood-control project on a stretch of Winchester Avenue between 124th and 127th streets. Additional funds are being used for road repair and repaving throughout Calumet Park and also will create the village’s first dedicated bike lane. CMAP considers the pilot a success and is expanding the program to University Park, Harvey, Lansing and Sauk Village. Day won a promotion to principal planner and is overseeing the expanded initiative. Denson says he was amazed by the progress, adding, “It’s one of the best things to happen to me since I’ve been mayor.”

3/11/22 2:33 PM

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CRAIN’S CHICAGO BUSINESS • MARCH 14, 2022 17

CTA LARGE-SCALE INFRASTRUCTURE PROJECTS ($10 MILLION-PLUS) OVER THE LAST 10 YEARS

Project Belmont Blue Line station rehab

Year 2018

Cost $17 million

Wilson station; complete rebuild

2018

$206 million

Clark/Division station rehab

2015

$59.6 million

“Your New Blue”: station and track upgrades from Grand to O’Hare

2015-present

Red Line north: seven station rehabs

2013

Green Line south track renewal

2019

95th Street station; complete rebuild

2018

Garfield Green Line (includes rehab of original Garfield station house)

2017

51st/Cottage Grove/Halsted/Kedzie station rehabs

2017

Cermak-McCormick Place; new station

2015

Red Line South reconstruction: 10-mile stretch of track and eight stations

2013

Damen Green Line; new station

Getting underway

Austin Green Line—first station of All Stations Accessibility Program

To start by year’s end

Austin bus turnaround/eBus charging station

2020

$7.3 million

Green/Pink Line track improvements

2019

$30 million

Illinois Medical District Blue Line station; near-complete rebuild

2018

$27 million

Green Line track/signal work

2016

$17.9 million

UIC-Halsted station rehab

2015

$16 million

Morgan; new station

2012

$492 million $86 million $44 million $280 million $42 million $12 million $50 million $425 million $67 million $25 million

$38 million

Note: Forest Park Branch Blue Line reconstruction is currently in design; cost to be determined. Source: Chicago Transit Authority

workers clock in at precise times, Lowe says. People with the biggest transportation burdens face the most rigidity in the workplace, she adds. “Some allocate two hours each way,” she says. “They arrive early because they can’t deal with the consequences of being late.” With telecommuting and hybrid schedules becoming the norm for white-collar workers who live predominantly on the North and Near West sides, more transit resources are needed for workers in health care and other essential services who live on the South and West sides, says Erin Aleman, executive director of the Chicago Metropolitan Agency for Planning. The agency forecasts that 15% to 20% of area residents will work remotely on an average weekday. In some neighborhoods, that will be more than 35%, she says. Although the federal infrastructure dollars are meant for new equipment, transit agencies could use the opportunity to expand suburban service, and perhaps work with companies to establish shuttles between stations and job sites. “You already have the buses and the roads,” says Audrey Wennink, transportation director at the Metropolitan Planning Council. “You can get a lot for your money.” The CTA in February announced it was making permanent four bus routes serving the South and West sides that were part of a pilot project. The routes haven’t met ridership targets, but it’s clear that there’s demand for this service, says CTA spokesman Brian Steele. Because the Illinois General Assembly during the pandemic temporarily waived the requirement that transit agencies get half of their revenue from ticket sales, the agency isn’t

P015-P019_CCB_20220314.indd 17

limited to serving the most highly traveled routes, he says. Community activists would like the region to move ahead with plans for Bus Rapid Transit, where buses travel on dedicated lanes and don’t have to pull in and out of traffic. Even more express routes would be helpful, they say. “Who gets the privilege of time?” says North Park’s Purifoye. “When I’m on the bus for a long ride, I’m not in my community, I’m not at an after-school event, I’m not working with my children on homework.” As a researcher, Purifoye travels mass transit and documents poor conditions on the South and West sides that are barriers to access, such as disrepair and debris at bus stops. Transit advocates say that while they are included in planning, the process could be enhanced. Roberto Requejo, executive director of the five-year-old nonprofit Elevated Chicago, says public agencies should set aside 10% of their planning budgets for community orga-

PHOTO BY JOHN R. BOEHM

WEST

PHOTOS BY JOHN R. BOEHM

SOUTH

NORTH

The $2.1 billion Red & Purple Modernization is rebuilding northern portions of the Red Line from Belmont to Howard and the Purple Line from Belmont to Linden in Wilmette. It involves a bypass and the rebuilding of four stations. Construction started in 2019 and is to be completed in 2024. The Red Line Extension is a 5.6-mile project that will extend the line from 95th Street to 130th Street and add four stations. The federal infrastructure law is making the project a reality. Construction could begin by 2025 and be completed in 2029.

anticlimax. It wasn’t the transformative project that the Washington Heights community had hoped for, says Thompson of the Endeleo Institute, which is part of the Trinity United Church of Christ. Revitalization efforts have been under way since 2014 with support from CMAP and the MacArthur Foundation. The community got a boost with the 2018 renovation of the Carter G. Woodson Regional Library, which houses the largest collection of African American history and literature in the Midwest. The neighborhood enjoys a high rate of homeownership, Thompson says. But retail hasn’t followed rooftops, and the community loses nearly $200 million a year as residents travel elsewhere to shop, according to CMAP data. The Corporate Coalition of Chicago helped Endeleo develop a business plan for a combined coffee shop and laundromat at 95th Street and Harvard Avenue, due to open in the fall. A city transit-oriented development pilot program in December award$20,000 for THE CURRENT CONFIGURATION ALSO SERVES ed the developAS A BUFFER AND KEEPS PEOPLE TRAPPED. ment of a community-owned nizing and engagement. That’s a grocery store—a site hasn’t yet been priority of the Strong, Prosperous & secured, Thompson says. Resilient Communities Challenge, Going back to 2019, the CTA has the nonprofit’s national network. met with Endeleo, Elevated ChicaPublic agencies invite communi- go, MPC, Chicago State University ty members to collaborate but don’t and other public agencies on plans compensate them for their time, Re- to develop parcels the agency acquejo says. He suggests that some quired as part of the station overdollars go to community organi- haul. “The station reconstruction zations to manage and implement took two years, but overall property projects. development takes much longer to come to fruition,” says Steele of the CTA. A VISIT FROM MAYOR PETE When an opportunity to apply The reopening of the 95th Street CTA station was a bit of an for a Federal Transportation

Work continues on the CTA’s Red & Purple Modernization program. Administration planning grant became available last year, the CTA sponsored the application. Transportation Secretary Pete Buttigieg visited the 95th Street station last summer to highlight the promise of the federal transportation bill. Thompson says he was able to grab a few minutes to sell his vision to Buttigieg, the former mayor of South Bend, Ind., known as “Mayor Pete.” The $800,000 award, announced in January, will be used for planning transit-oriented development along the 95th Street corridor. South Side activists hope planning for transit-oriented development for the four stations along the Red Line extension will be the spark that enhances disinvested communities. That will require a new style of coordination among transit, housing and economic development departments as well as with community organizations. “CTA is a transit agency, not a land development agency,” Steele says. “But we know that transit can be a catalyst for any neighborhood.” South Side and South Suburban commuters have been gaining another transit option as Metra begins to court city riders by lowering fares and renovating city stations. Although the pandemic caused ridership to plummet, one bright spot was the South Side Electric and Rock Island lines, which turned out to be convenient for health care and other essential workers. “It was a huge asset going unused,” says Reed of Equiticity. “I used to live in South Shore a few blocks from the Metra station, but it didn’t register as a form of transportation for me and my family.” The biggest hurdle was the higher fares compared to CTA. But Cook County Board President Toni Preckwinkle

had advocated for a pilot program that reduced fares, and the Fair Transit South Cook Pilot is starting its second year of a three-year initiative. Under the program, the county is subsidizing Metra for 50% reduced fares on the Electric and Rock Island lines. It’s also subsidizing Pace suburban bus service for expanded service on Halsted Street between 95th Street and Chicago Heights. The two lines carry more passengers compared with systemwide averages, says Jennifer “Sis” Killen, superintendent of the Cook County Department of Transportation and Highways. Meanwhile, Metra is rehabbing long-neglected stations in the city. The service is adding a new station at Auburn Park on the Rock Island line and rehabbing stops in Blue Island and Harvey. Renovation designs for seven city stations on the Electric line are underway, with work expected to start within two years, says Metra spokesman Michael Gillis. The commuter rail service has allocated $200 million for systemwide station upgrades through 2025. Transit experts support standardizing fares so that commuters don’t have to buy separate cards for Metra and CTA. This involves changing long-established pricing structures at the rail systems that historically didn’t cooperate. “It should be standardized. You should be able to put $100 on a card and transfer among the three systems,” Killen says. CMAP’s goal is to double transit ridership by 2050, which will reduce traffic congestion and help the environment, says Aleman. “Enabling people to get to jobs,” she adds, “is essential for growing the economy and household wealth.”

3/11/22 2:33 PM

18 MARCH 14, 2022 • CRAIN’S CHICAGO BUSINESS

CRAIN’S CHICAGO BUSINESS

ESSENTIALS

Raze old barriers with new spending on infrastructure

G sh

I Helene D. Gayle is president and CEO of The Chicago Community Trust. The Chicago Community Trust is a sponsor of Crain’s Equity.

nfrastructure, by definition, should help bring us together. After all, we’re talking about roads and bridges, ports and rail lines, and, in today’s world, high-speed internet. Infrastructure can make our world smaller and more connected—particularly for people and communities too often left out. Unfortunately, this hasn’t been our history in Chicago, where infrastructure has been used to keep communities isolated. The best example is our major highways—the Dan Ryan and Eisenhower Expressways—which served to wall off Black and immigrant communities. We are suffering the economic and social consequences today. A major focus of The Chicago Community Trust is addressing the racial and ethnic wealth gap. Billions of dollars in federal infrastructure money will soon be flowing into our region, providing an unprecedented opportunity to redress the income disparity that holds back our progress. We will only succeed, however, if we reverse those past practices of building barriers between communities instead of creating connections. Infrastructure is a vehicle for building wealth for individuals and communities. The greatest source of wealth for most people is the value of their home.

That value is determined to a large degree by the amenities that exist in its surrounding community, including access to and quality of streets, sidewalks, transit, parks and other active living spaces. Without an adequate foundation of these essential public amenities, my chances of economic success are limited. That goes for my community, as well. To make progress in better connecting all our people and communities, it is imperative that we do things differently than before. This means challenging past practices in how money and projects are distributed to provide more equity and new opportunities. Such steps should include: Moving away from set formulas in distributing infrastructure dollars. These often lock in historic disparities, embed biases and fail to reflect changing demands. Creating funding priorities based on actual needs by involving affected communities directly in the planning process. Making connections between new infrastructure and other neighborhood priorities, such as land use, community safety, affordable housing and small-business development. Insisting on better coordination

among the agencies involved in new infrastructure projects, including the city planning, water and transportation departments as well as the state and county transportation departments, the RTA and the CTA. It’s important to note that a significant portion of the new federal infrastructure funds will be distributed through competition among jurisdictions nationwide. This requires that the Chicago region and its communities have strong plans. The city of Chicago is in the midst of a three-year process to create a comprehensive plan for its future—the first one since 1966. (The Chicago Community Trust helped fund the preplanning process.) While federal infrastructure funds will start flowing before that plan is completed, it should help guide Chicago’s infrastructure spending far into the future—ensuring more equitable distribution of capital resources in our region’s largest city and improving its connections with surrounding

communities. Better connecting our historically disinvested communities through future infrastructure investments isn’t just good for those communities; it is essential to our region’s overall success. In our increasingly global economy, people won’t choose to live in places that are isolated and disconnected. Young people won’t move there, and new businesses won’t form there. Without the physical amenities required for wealth-building, a community and its residents cannot compete. Just as important, in an era of labor shortages, better connections made possible by sound infrastructure investments will create value from untapped opportunity and talent. In the fight for economic growth and opportunity, Chicago doesn’t have a person or a community to spare. That’s why we must use the infrastructure dollars flowing into our region to forge new connections and overcome the destructive barriers of the past.

ENVIRONMENT AND ECONOMY

Climate & Equitable Jobs Act is a game-changer

T Delmar Gillus is chief operating officer of Chicago nonprofit Elevate, which provides services focused on clean and affordable heat, power, and water in homes and communities.

he clean energy economy has experienced a boom of growth over the last decade, especially in the Midwest. Before COVID-19 hit, the clean energy economy was growing at five times the rate of the rest of the economy. It’s an exciting time for those of us working on climate action, with big investments like the federal Infrastructure Investment & Jobs Act coming through to support our work. I’m often in rooms talking about these opportunities with others in the industry, and I always find myself coming back, again and again, to the importance of equitable investment. In Chicago, a historic disinvestment in infrastructure for Black and Brown communities has left these communities more vulnerable to the escalating effects of climate change. Research has long shown that pollution disproportionately affects Black and Brown communities, largely due to infrastructure, such as heavily trafficked roads and pollution-emitting powerplants in those neighborhoods. Similarly, disinvestment in Chicago’s housing has

P015-P019_CCB_20220314.indd 18

left Black and Brown communities with homes that haven’t seen as many updates to include weatherization, air conditioning and removal of health hazards, like lead service lines. This all leaves these communities more at risk of extreme heat and cold, power outages, water safety, and other climate challenges that we are facing more and more often. When working toward climate action, a solution that only helps some isn’t a solution at all. We all drink the same water, and we all breathe the same air. With more investment coming in solar infrastructure, a smarter electric grid and home weatherization, it’s essential that we learn from our history and put equity at the front of our climate investments. If we don’t make sure Black and Brown communities are involved in all aspects of climate solutions—the policy, planning, implementation and support of the work—it’s all too easy for us to be left behind again. In Illinois, advocates for an equitable climate future are working together to find a better solution. Last year, Illinois

passed the most progressive clean en- projects and jobs created by Illinois’s ergy bill in the country, the Climate & investment in the clean energy econEquitable Jobs Act. As a member of the omy. These commitments will make posIllinois Clean Jobs Coalition, I was one of the lead negotiators working with sible the solutions that these commulegislators, the governor’s office, labor nities already are working on, by fundunions and other advocates to design ing them and giving them a voice in the the legislation. Notably, I was the one climate future of Illinois. What we did with the Climate & Eqof the first African Americans to be on the negotiation team of an environ- uitable Jobs Act is exceptional, but it’s also replicable. Other states can and mental bill in Illinois. The Climate & Equitable Jobs Act is should follow Illinois’s lead by putting unique because it puts equity at the equity first in climate and infrastruccenter, not as an afterthought. The leg- ture investments. It’s all about listenislation invests millions of dollars into ing to communities, building trust and Illinois’s solar, power grid and electric engaging community assets. vehicle infrastructure, and directs 40% of those investments A SOLUTION THAT ONLY HELPS SOME to communities on the frontlines of climate change. Additionally, ISN’T A SOLUTION AT ALL. it will bring thousands of jobs to We can’t afford to leave some comBlack, Brown and environmental justice communities through the creation munities behind like we’ve done in the of statewide job training hubs, support past. By investing in an equitable clean services, inclusive capital, project in- energy infrastructure for all communicentives, and accountability measures ties, we can set ourselves on the path to to ensure underserved workers and a successful climate future for generacontractors are getting access to the tions to come.

3/11/22 2:33 PM

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CRAIN’S CHICAGO BUSINESS • MARCH 14, 2022 19

MOBILITY

Getting around Chicago shouldn’t be inequitable

racialized policing to inhibit bicyver a million Chicagoans get cling. We found that Black commuto their jobs, schools, health nities had less bicycling infrastruccare appointments and ture and higher rates of citations meetups with friends and family by for bicycling on the sidewalk. While walking, biking, and rolling every infrastructure alone won’t fix racist day. Yet safely getting around Chipolicing, our analysis showed that cago by these and other forms of more equitable bicycling infrastructransportation is highly inequitable ture might reduce police citations for the city’s Black and Brown popand, hence, police interactions that ulation. can turn violent. The city’s own Vision Zero analyOur focus group based-research, sis shows that Black and Latinx resiwith primarily Black and Latinx resdents are more likely to die in traffic idents and job seekers, found addicrashes relative to white residents, tional challenges to biking, walking creating conditions for what some and rolling. Along with traffic and have called vehicular violence. police violence, interpersonal vioWhile recently announced bike lane lence discourages active forms of expansions will address some ineqtransportation. Plus, many residents uities, existing bike lanes are unfairsaid key destinations, like grocery ly distributed and in many places do stores and well-paid jobs, were not not adequately protect users from sufficiently close by. Focus group busy roads that bisect many comparticipants had several solutions, munities of color. such as bringing more stores and On top of higher risks of traffic well-paid jobs directly into their crashes, the Chicago Department of communities. Public Health’s mapping visualizes We need to expand our idea of the South and West Side conceninfrastructure to include soft infratrations of air and health risk factors structure like community building that pedestrians, cyclists and rollers events, housing, education, health face. The number of freight vehicles care, youth development and the lois growing on the city’s West, Southcation of key destinations and amewest and South sides, increasing the Kate Lowe is an risk of dangerous vehicle collisions associate professor nities within Black, Latinx and other even more. in the Department communities of color. Numerous orOur research shows interconnec- of Urban Planning ganizations are doing this work, but they need more investment, money tions between the “hard infrastruc- & Policy at the in line with what the formally recogture” of transportation—that is, University of Illipavement and concrete—and criti- nois Chicago. Ola- nized transportation sector receives. Community building and develcal context that compound to make tunji Oboi Reed is mobility even more inequitable president and CEO opment and anti-violence work are mobility-justice issues. One example for the most marginalized. Under- of the Equiticity of this work is Equiticity’s Commustanding walking, biking and rolling Racial Equity nity Mobility Rituals, which includes in context highlights the need for Movement. Jesus community bicycle rides, neighbormore investment in “soft infrastruc- M. Barajas is an ture,” such as the social links that tie assistant professor hood walking tours, public transit us together, and in communities to in the Department excursions, group scooter rolls and Ciclovía-style open street festivals. make it safer to get around without of Environmental a car. Science & Policy at Equiticity refers to these mobility events as rituals, given they have Certainly, a tremendous shift to the University of these elements in common: rhythmake streets equitable is needed California, Davis. mic frequency, priority on socialto reduce traffic risk, from barrierprotected bicycle lanes and accessible side- ization, focus on racialized healing, reduced walks to roads better designed to prevent barriers to participation, natural development speeding and safer intersections. The city and of shared customs, active disruption of the stathe state have an immense opportunity with tus quo, and the collective ownership of “our” the new federal bipartisan infrastructure law to space. Equiticity’s Community Mobility Rituals pivot toward equity and safety through hard in- seek to create more vibrant streets to attract frastructure. But concrete alone won’t address increased retail, leading to greater job creation the racialized inequities in the right to walk, and reduced violence in our neighborhoods. Neither soft infrastructure nor hard infrabike and roll safely across Chicago, because structure can be overlooked, and both merit barriers run deeper than the streets. Our Biking Where Black research shows how significant investment for equitable biking, inequities in hard infrastructure combine with walking and rolling across the city.

OME

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P015-P019_CCB_20220314.indd 19

COMMUNITY VOICES

Upgrading infrastructure can solve other problems

Chicago have never been equal am a resident of Chicago’s or fair. Whenever there is a budNorth Lawndale communiget cut, Black and brown comty—born, raised and still remunities are always the first to side here. I have seen the comsuffer major cuts, while funds munity change over the years, are shifted to appease the more especially after the assassiaffluent neighborhoods. We get nation of Dr. Martin Luther the Band-Aid and downtown King in 1968. In the aftermath, gets the whole emergency room. many businesses were burned The time is long overdue for the and destroyed, and the business owners who lived in the Rochelle Jackson government to stop overlooking underserved and blighted community left and took their is chair of the communities and change how businesses with them. Left be- North Lawndale hind were residents with no Community Coor- the funding for projects gets recourse, as the mayor during dinating Council’s disperse evenly. The infrastructure disparities that harm our that time vowed not to rebuild Transportation/ communities must end. anything in not just my com- Infrastructure New and improved inframunity, but other communities Committee. structure is a critical necessity like it. Fifty-plus years later, we for the inner-city parts of Chicago, not are still trying to rebuild from the ashes. New and improved infrastructure is a just downtown and on the Gold Coast. must. For too long, infrastructure in un- The heart of the city needs healing, jobs, derserved Chicago communities hasn’t transportation, infrastructure, better edbeen a priority when it comes to trans- ucation, economic development, new amenities in our parks as well. We want portation, walking, driving or biking. Bus stop and train station infrastruc- our government to find equitable ways to ture (especially the Blue Line stops in build better in our communities and not North Lawndale) is decades old and cut funding where it’s needed most. Havneeds to be modernized, especially ing quality infrastructure in the blighted now. It has never been handicapped accessible. In some places, sidewalks are crum- THE INFRASTRUCTURE DISPARITIES THAT bling or missing altogether. The HARM OUR COMMUNITIES MUST END. streets are in constant need of repair, especially after a snowstorm. Street lights and traffic signals as area’s of the city would bring major transwell as street signs are in need of repair formation. Improving neighborhood infrastrucand replacement. There are no mobility hubs in the community that encourage ture can help have solve other probwalkability, cycling or other forms of lems—gang violence, mental health istransportation that don’t involve a car. sues and low school attendance. It would The good news is that residents now are also help create jobs. More jobs lead to an increased ridership on public transworking to create one. On the other hand, I would love it if portation, which supports transportation transportation and infrastructure agen- sustainability. Updating infrastructure cies would put boots on the ground and problems will also improve the quality be more present in communities before of life for Chicago residents who for dethey make life-changing decisions that cades have not had the resources needed impact underserved communities men- to thrive like residents in other areas of tally and physically, rather than looking the city. Making sure that communities like at digital and satellite maps to determine what federal, state and local govern- North Lawndale receive funding for ments want to give communities. Work long-neglected and such basic infrawith those communities to learn what structure needs is crucial. Funding for highways like I-290? Well, that’s a converthey really need. Infrastructure and transportation in sation for another day.

3/11/22 2:33 PM

20 MARCH 14, 2022 • CRAIN’S CHICAGO BUSINESS

Congress Theater to receive $20 million subsidy The tax-increment financing would reboot a major redevelopment of the Logan Square property, which landed in foreclosure in 2020 The city of Chicago has agreed to provide a $20 million subsidy to finance a major redevelopment of the Congress Theater in Logan Square, reviving a project that wound up in foreclosure two years ago. A venture led by Chicagobased developer Baum Revision plans a $70.4 million renovation of the historic movie palace at 2135 N. Milwaukee Ave. that opened in 1926 and closed in 2013, swamped by a wave of building code violations. Baum and its partner, AEG Worldwide, plan to transform its 2,900-seat auditorium into a live music venue, and they are counting on $20 million in tax-increment financing to pay for it. “It’s a magnificent property,” said David Baum, managing principal of Baum Revision. “It needs a lot.” It would be the biggest TIF grant for a private real estate development since Mayor Lori Lightfoot took office in 2019, not including an environmental clean-up on the site of the former Michael Reese Hospital in Bronzeville, city records show. It’s also more than twice as much as the $9.7 million in TIF that the city approved in 2018 to finance another developer’s rehab of the property. But that project ran aground in 2020, when the project’s lender filed a $24 million foreclosure suit on the property. The lender, AEG, is a Los Angeles-based entertainment and sports promoter, whose holdings include the Los Angeles Lakers and the Coachella Valley Music & Arts Festival. AEG, which obtained a fore-

closure judgment on the property last June, plans to see the project through as the operator of the theater, while Baum will handle the development and construction part. “A lot of the heavy lifting has been done by the previous development team,” said Baum Managing Principal Scott Goldman. “We were kind of able to step right into a process they started.”

CONTROVERSY

Saving the Congress has been a priority of the city and Logan Square Ald. Daniel La Spata. The theater is both a Chicago landmark and listed on the National Register of Historic Places. Baum has experience with old buildings, converting the old Cooper Lamp Factory next to the Kennedy Expressway into the Green Exchange office building. Baum is also working on a $28 million of the historic Ramova Theater in Bridgeport, assisted with a $6.8 million TIF subsidy from the city. The city’s TIF program has attracted controversy over the years, with critics arguing that it sucks property tax dollars away from schools and government services and into the pockets of developers. Just before Lightfoot took office, the city approved $2.4 billion in TIF subsidies for two megadevelopments: The 78 in the South Loop and Lincoln Yards on the Near North Side. When the city creates a TIF district, property tax assessments within the district’s boundaries are locked. Any taxes generated from the existing assessed levels go the city, county, school district and other taxing bodies for traditional programs and services. But taxes generated by rising

DANIEL X. O’NEIL/FLICKR

BY ALBY GALLUN

The Congress Theater at 2135 N. Milwaukee Ave. assessments—the increment— are set aside for discretionary purposes, including infrastructure and real estate development. Developers and other TIF supporters say many projects with civic importance would never happen without the funding mechanism.

FUNDING SOURCES

Chicago’s Community Development Commission approved the TIF proposal for the Congress at a meeting March 8, a key step in the approval process that ends with a City Council vote. Though the Congress redevelopment will cost only slightly more than Moyer’s proposed

The Baum executives did not respond to a follow-up question about the funding shift. They aim to begin construction later this year. In addition to restoring the theater, the developer will rehab existing space in the building into at least 20 apartments, with 14 set aside for lower-income residents, according to the report. Though the live music business has suffered greatly during the COVID-19 pandemic, Goldman believes the Congress has a bright future—because of the pandemic, not despite it. “People have a greater appreciation for the power of gathering together and sharing an experience,” he said.

project, the Baum venture has shifted its funding sources, resulting in a bigger TIF request. Moyer planned to finance his project with $9.7 million in TIF money, $8.6 million in equity, $29.4 million in debt and $22.3 million in historic tax credits and other financing, according to a 2018 report. The Baum venture, meanwhile, is only seeking $9.2 million in historic tax credits, with the $20 million TIF subsidy making up much of the difference, according a recent staff report. Other funding sources comprise $7.8 million in equity, $28 million in debt and a $5.5 million deferred developer fee.

Work begins on long-stalled hotel in the Medical District BY DANNY ECKER As Chicago developer Elzie Higginbottom prepares to start leasing up a new apartment building in the Illinois Medical District, he has begun construction on a long-stalled hotel next door. A venture of Higginbottom’s East Lake Management & Development is finalizing a nearly $19 million construction loan to build a 135-room Hampton Inn & Suites at the Gateway, a 10-acre mixed-use project at the corner of Ogden and Damen avenues, according to East Lake and its lender, Republic Bank of Chicago. The $28 million-plus project is another big step forward for the Gateway development, which was mostly stagnant for five years as Chicago developer Jack Higgins struggled to secure financial

P020_CCB_20220314.indd 20

backing. Higgins sold his stake in the venture that controls the project to Higginbottom in early 2020. Now Higginbottom has lined up financing for the hotel portion of the Gateway, even though the local hotel market is still reeling from the COVID-19 pandemic. It’s a testament to the upside that some real estate investors see in the Illinois Medical District, a 560-acre swath of the Near West Side anchored by multiple hospitals and academic centers that collectively create a strong mix of demand generators for a hotel.

GATEWAY DEVELOPMENT

“Hotels are a little tough to finance today, but that location and the proximity to the density there—it’s our belief it will do well,” said Dave Livingston, executive vice president and senior

EAST LAKE MANAGEMENT & DEVELOPMENT

The developer has landed financing for the project, despite the city’s still-reeling hospitality market

A rendering of the 135-room Hampton Inn & Suites at the Gateway. lending officer at Oak Brookbased Republic Bank. East Lake began construction last month and expects the hotel to be completed by summer 2023, with Chicago-based Maverick Hotels & Restaurants tapped to manage the property, said East Lake President Eileen Rhodes. In the meantime, East Lake is slated to wrap up work on a new 161-unit apartment building this summer next door

at 2050 W Ogden Ave., a project meant to serve medical workers, students and faculty who work within the IMD. The residential building will be the second finished piece of the Gateway, following Higgins’ development of a pair of singlestory retail buildings on the site. Those buildings are almost fully leased to a mix of retailers, including Starbucks, Chipotle and Five Guys, among other users.

Another vacant parcel along the Gateway site’s north end is tentatively slated for an office development, though it’s unclear whether that plan will change given the rise of remote work softening office demand. Hotels in Chicago have been slower to recover than those in other major markets, a product of the city’s heavy reliance on business travel and conventions and trade shows that have yet to come back in a meaningful way. Revenue per available room at Chicago-area hotels in 2021 was 40% below 2019 levels, compared with a 33% average among the nation’s 25 largest markets, according to hospitality data and analytics firm STR. East Lake’s Hampton Inn would follow another recent IMD hotel project by Chicago developer John Murphy, who transformed part of the former Cook County Hospital into a 210-room Hyatt House & Hyatt Place hotel.

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CRAIN’S CHICAGO BUSINESS • MARCH 14, 2022 21

Mayer Brown’s big presence in China puts it amid rising geopolitical tensions MAYER BROWN from Page 3 Now, China—which has long threatened Taiwan’s sovereignty, as Russia has Ukraine’s—is again out front. A festering U.S.-China trade war hurts prospects on the mainland, while a crackdown on dissent in Hong Kong, where most of Mayer Brown’s lawyers in China are based, forces companies and their expat executives and families to flee. “It’s an issue he needs to work on,” says Jason Kravitt, a former Mayer Brown co-chair and Van Gorp mentor, wondering how a law firm maintains its integrity while working in China. Van Gorp says he doesn’t see parallels between China and Russia, where Mayer Brown has no

10, to 22nd, of law firms ranked by revenue. Van Gorp was a Crain’s 40 Under 40 in 2008, when the financial crisis turbocharged his career as a capital markets lawyer. His background in lucrative transaction work now powers his growth strategy, which includes expanding in California’s tech sector and New York’s financial district. Although litigation remains the firm’s single biggest practice, its growth has been flat since 2017, while banking, bankruptcy and real estate added the most lawyers. “He wants to energize the firm and make sure we are competitive in areas that are hot,” says partner Ty Fahner, who once led the firm. There are signs the approach

AS CORPORATE CLIENTS CLAMOR FOR MORE DIVERSITY AT LAW FIRMS, MAYER BROWN HAS A REPUTATION FOR ELEVATING WOMEN AND PEOPLE OF COLOR. offices. “This does not change our strategy in China at all,” he says. But Rachel Stern, a University of California at Berkeley law and political science professor who tracks the Chinese legal market, contends that, depending on how many law firms leave Russia, “it may reshape perceptions of the risk of doing business in authoritarian states more broadly.”

GROWTH STRATEGY

Van Gorp, 52, took the reins when Mayer Brown had started to accelerate but still achieved only a third of Kirkland’s profitability. Between 2005 and 2020, Mayer Brown slid out of the top

is paying off. In a good year for big law firms, Mayer Brown, with 1,875 lawyers, performed better than most in 2021. Revenue rose 21% to $1.84 billion, Van Gorp says, compared with an average increase of about 14% for U.S. law firms sampled by two consultancies. China isn’t Mayer Brown’s first bump in the road. In 1984, it suffered twin blows with the collapse of Continental Bank, a client accounting for as much as 30% of revenue, and a power struggle that led top partners to start a Chicago office for Wall Street deal adviser Skadden Arps Slate Meagher & Flom. May-

er Brown rebounded and broadened its client base but had to lay off lawyers in the late 2000s. Tragedy struck in 2018, when Stephen Shapiro, the founder of Mayer Brown’s appellate practice, was murdered. As corporate clients clamor for more diversity at law firms, Mayer Brown has a reputation for elevating women and people of color. It named Debora de Hoyos managing partner in 1991. Women have led its two biggest offices, here and in London. Mayor Lori Lightfoot and Yusef Jackson once practiced at Mayer Brown.

CAREER PATH

Van Gorp joined in 1997 after graduating from Southern Methodist University’s law school and spending three years at a Texas firm. The only child of Denver schoolteachers, he considered pursuing an MBA but became intrigued when dealing with lawyers as a student government official. He was wooed by Kravitt, the godfather of Mayer Brown’s structured finance practice, which became a huge fee generator. In 2012, Van Gorp succeeded Kravitt as co-chair of the practice. Instead of seeking mergers, Van Gorp aims to get the firm on more “panels”—285 so far—that big companies use to pick firms for recurring assignments. In private equity, he believes Mayer Brown can leverage expertise in areas such as mortgage securitization, insurance, consumer finance, energy, infrastructure projects and fintech. Since 2017, the firm’s lawyer headcount in California has

gone from 60 to nearly 100. In January, the firm opened an office in Salt Lake City with 10 lawyers (target: 25) on the socalled Silicon Slopes of the fastest-growing state. The share of Mayer Brown lawyers based in the U.S. is climbing to 60%. On his way to the top, Van Gorp studied management texts and passed along career guidance, such as improving digital body language on Zoom calls or putting more warmth into emails. He draws workplace advice from books, including “The Seven Habits of Highly Effective People” and “The 80/80 Marriage: A New Model for a Happier, Stronger Relationship.” “I’ve always been very much of a soft-touch guy, but I’ve worked hard to be perceived as what I really am,” he says. To build rapport, he conducts two internal podcasts—a biweekly skill-building tutorial, “Tools of the Trade,” and a monthly chat with London-based Managing Partner Jeremy Clay, which Van Gorp calls “two guys talking about the firm.” Van Gorp professes no regrets about his role in the mortgage securitization frenzy and meltdown, including representing subprime lenders, that contributed to the Great Recession. “I think lawyers helped solve a lot of challenges that were created by other means,” he says.

OPPORTUNISTIC ATTITUDE

He seems to be taking the same opportunistic attitude toward China, where other firms, like McDermott Will & Emery, withdrew after struggling to make money. He remains bullish on Hong Kong: “It’s still the

gateway for capital in the U.S. to China. That business has done well, and it’s important to us.” China’s effort to force domestic companies to abandon Western stock exchanges and relist in Hong Kong benefits firms like Mayer Brown with capital markets expertise. But on the mainland, where Mayer Brown has 15 lawyers, the number of international law firms shrank to 185 from a 2013 peak of 232 amid a trade war dating to the Trump administration, according to Stern. “There just isn’t as much cross-border activity,” she says. “Even post-Trump, there’s still momentum behind decoupling.” Mark Steffensen, a client of Mayer Brown at retrenching bank HSBC, says, “That’s a math problem none of us have figured out to any degree of certainty,” adding that Hong Kong is “a challenge for Mayer Brown, because, quite frankly, it’s a challenge for us.” That’s Van Gorp’s message, too. “Doing business in China is complex,” he says. “Doing business globally is complex.” Ann Lau, a Californian who organized protests over Mayer Brown’s role in the Hong Kong statue controversy, says, “It’s extremely sad that an American firm will kowtow to the government of China—an American law firm that spoke a lot about human rights, especially in the Black Lives Matter issues.” Van Gorp says, “We ceased representing the university in that matter, but we continue to represent them as a long-standing client.”

How Rivian angered its early adopters by hiking prices and then backtracking surprise $50,000 markup on an EQS electric sedan he ordered last year. Rettinger rejected the Mercedes surcharge and instead bought an electric Air sedan from Silicon Valley startup Lucid. On Rivian forums last week, outraged early adopters posted screenshots of their canceled R1T and R1S orders after the price increase. Some with preorders said they felt betrayed after supporting Rivian as it struggled to ramp up production, while others said the additional cost was just too much for their budgets. Rivian said in December that it had 71,000 customer orders. That number had climbed to about 83,000 as of March 8, the automaker said in its fourth-quarter earnings report last week.

BACKTRACKING

In response to the wave of bad publicity, CEO R.J. Scaringe partially backtracked two days after announcing the hikes, saying the automaker would

P021_CCB_20220314.indd 21

respect the original prices for customers who ordered before March 1. Rivian delivered 920 vehicles last year after starting production in September. “Earlier this week, we announced pricing increases that broke the trust we had worked to build with you,” Scaringe wrote in an open letter to customers. “We wrongly decided to make these changes apply to all future deliveries, including pre-existing configured preorders.” “We also didn’t manage communications well,” he wrote. “We didn’t give you enough insight into what was driving these decisions. The most important aspect of what we are building is our relationship with all of you.” In addition to the price rollback for reservation holders, the Rivian CEO said the automaker would reinstate orders canceled on or after March 1, with the original configuration, pricing and delivery timing — for customers who request it. Scaringe also explained Rivian’s rationale for the price

hikes, given fast-rising costs that have affected all automakers. “Everything from semiconductors to sheet metal to seats has become more expensive,” Scaringe wrote last week. “And with this, we have seen average new-vehicle pricing rise more than 30 percent since 2018.”

NEW CONFIGURATIONS

Rivian did attempt to placate early adopters by announcing new configurations of the R1T and R1S last week, with two motors instead of four, and with a smaller battery pack in order to respect the original price points. But Scaringe acknowledged that the company underestimated customers’ reactions to the choice of a price hike or a vehicle downgrade. “It was wrong and we broke your trust in Rivian,” he said in the letter. Even Tesla CEO Elon Musk got involved in the fracas, writing on Twitter that Rivian’s “negative gross margins will be staggering” in response to a news article on R1T and R1S pricing. But that opened a fresh pub-

BLOOMBERG

RIVIAN from Page 3

Rivian CEO R.J. Scaringe partially backtracked two days after announcing the price increases. lic debate on Tesla’s own highly anticipated, and repeatedly delayed, Cybertruck. Musk had said it would start at just under $40,000 when the pickup was unveiled in 2019, but Tesla has since removed pricing guidance from its website. Asked directly by a Twitter user to address Cybertruck pricing, Musk demurred. “Our primary challenge is af-

fordability,” he wrote. “Creating an expensive truck is relatively easy. If it’s extremely hard to do so for Tesla, despite our much greater economies of scale & better technology, then it is damn near impossible for others.” Laurence Iliff writes for Crain’s sister publication Automotive News.

3/11/22 4:07 PM

22 MARCH 14, 2022 • CRAIN’S CHICAGO BUSINESS

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To place your listing, contact Claudia Hippel at 312-659-0076 or email claudia.hippel@crain.com www.chicagobusiness.com/classifieds CAREER OPPORTUNITIES

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Agents frustrated with new business model ALLSTATE from Page 1 3,400 two years ago. Wilson, Allstate’s CEO, only has offered clues as to what’s behind the dramatic changes. A company spokeswoman didn’t respond to a request for comment. In fact, Wilson’s recent comments have appeared to understate the decline in Allstate agents. At a Feb. 15 investor presentation, he said, “Right now, we have a little over 10,000 agents selling for us. There’s probably 35,000 people in total selling for us every day through those agencies.” The SEC filing just three days later said the number of agents was 9,300 and the number of employees in their agencies was 21,700. That totals 31,000. Wilson and other Allstate executives have said repeatedly that they allow independent agents to sell Allstate brand policies only in areas not served by an Allstate agent. That isn’t true, according to agents around the country. A number of them, speaking on condition of anonymity, say they are independent agents who are permitted to sell Allstate policies in areas where there are Allstate agents. Some have spouses who run Allstate agencies nearby, enabling the family to hang onto customers who decide to switch from Allstate. Agent sources say the drop in Allstate agents is due to unhappy people leaving and forming independent agencies or simply retiring. Wilson says the company temporarily paused new agent appointments as it was changing its business model. Wilson hasn’t publicly explained the big increase in independent agents. It’s possible the company wants more salespeople nationwide hawking its policies to compensate for the drop in traditional Allstate agents. The situation matters to Allstate agents because they aren’t allowed to offer any other insurer’s policies. If independents can compete with them—and are paid considerably more to sell and service the policies—they believe that reduces the value they offer.

AGENTS’ ANGST

Connect with Claudia Hippel at claudia.hippel@crain.com for more information.

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The issue is a key allegation in a lawsuit by the National Association of Professional Allstate Agents against the company for what it contends are multiple breaches of Allstate’s contracts with its agents. “The course of dealing between Allstate and its (agents), as well as statements by Allstate representatives, have created a reasonable expectation on behalf of (agents) that their . . . agreement with Allstate includes a prohibition on independent agents being authorized by Allstate to sell policies in areas served by an (Allstate agent),” according to the agents’ complaint, filed in Cook County Circuit Court. Allstate responded in court that agents’ territories aren’t exclusive under their contracts, according to filings. The Cook County Circuit Court judge’s January opinion denied Allstate’s motion to dismiss that part of the lawsuit, as well as several other counts alleged by the agents. A major cause of agents’ angst is Wilson’s move to substantially reduce the commissions they collect

w DYING BREED? The number of Allstate agents in the U.S. has dropped noticeably in recent years, while the number of independent agents allowed to sell Allstate policies has risen dramatically. Allstate agents

Independent agents authorized to sell Allstate policies

12,000

9,300

10,000

7,800

8,000 6,000 4,000 2,000 0

2018

2019

2020

2021

2022

Source: SEC filings

when customers renew policies. Renewal commissions have long made up the overwhelming bulk of agents’ revenue. Although Wilson boosted agents’ commissions for new policies, he gave customers an incentive to circumvent agents by pricing policies sold directly by the company online or over the phone 7% below the price of policies purchased through agents—a linchpin of what he called his “transformative growth” plan. The changes haven’t yet boosted new policy sales by Allstate agents, which fell to 2.5 million policies in 2021 from 2.6 million the year before. An increase in online and phone sales helped make up the difference to generate a 0.7% increase in Allstate brand auto policies. “Allstate has been pivoting away from its reliance on captive agents looking to grow its direct distribution channel,” Paul Newsome, an analyst with Piper Sandler, wrote in a Feb. 3 report. But gaining more new customers means you’re just running in place if you’re losing more of your existing customers. Allstate’s retention of existing customers fell to 87.0% in 2021 from 88.6% in 2019—its worst performance in at least two decades. The net result: a lot of transformation and little growth. Total Allstate brand auto policies in 2021 were 21.97 million, up a fraction from 21.91 million in 2019. (Esurance, an online brand Allstate operated in 2019, since has been converted to the Allstate brand and is included in the 2019 figures.)

TAKING SHAPE

Allstate’s old model counted on agents to keep customers in the fold, even if the policies were pricier than major rivals, like Geico and Progressive. Part of Wilson’s plan

is to rely more on call centers to provide service to customers. The 22% reduction in renewal commissions was designed to spur agents to concentrate on new customers, while also making Allstate’s rates more competitive. But, now, Allstate is aggressively hiking rates throughout the country to cope with fast-rising auto repair and replacement inflation. Wilson also is enlisting more new agents who work from their homes or in an office with another agent. There are 12% fewer of the familiar blue Allstate storefronts around the country now than two years ago, according to SEC filings. But Wilson contends those will grow as his plan continues to take shape. “We’re starting to expand those, and we’ll put as many of those in the market as we can,” Wilson said Feb. 15 of the agents working from home. “I think they’ll both go up, but you won’t see the existing neighborhood office with three people in it grow as much as you will the (work-from-home agents).” In the meantime, Allstate’s archrival State Farm continues using its army of agents to grow. The number of State Farm agents nationwide was 19,400 as of the end of 2021, up from 19,000 two years before. That’s more than double Allstate’s sales force. But State Farm’s earned auto premiums are just 1.7 times the Allstate brand’s: $41.2 billion last year vs. $24 billion. The Allstate brand added a net 163,000 auto policies last year. Bloomington-based State Farm’s total policy count—auto, home and life—grew by more than 2 million. State Farm doesn’t separate the different types of insurance it offers, but more than 60% of its premiums come from insuring vehicles.

3/11/22 3:21 PM