Crain's Chicago Business by crainschicago

RUSSIA: McDonald’s fears are realized as Kremlin introduces ‘Uncle Vanya.’ PAGE 3

OFFICES: Lenders taking control of two big Loop buildings. PAGE 4

CHICAGOBUSINESS.COM | MARCH 21, 2022 | $3.50

This builder goes where others won’t

Bucking the trend, Onni pumps billions into downtown projects, figuring the Loop has nowhere to go but up BY DANNY ECKER

A fight over the future brews in South Shore

With the Obama Presidential Center seen as a catalyst for renewal, anti-gentrification forces are squaring off with homeowners hoping for some long-awaited upside I BY A.D. QUIG AND CORLI JAY

outh Shore is shaping up as the next battlefront in Chicago’s ongoing gentrification and development war. The Obama Presidential Center, set to open in Jackson Park in 2025, is catalyzing a dispute over the neighborhood’s future. The center is expected to spur redevelopment, a possibility some residents welcome and others dread. Advocates for low-income renters want new protections from the city so they can afford to stay. Area homeowners, by contrast, See SOUTH SHORE on Page 20

ALTHOUGH SOUTH SHORE ISN’T A GENTRIFICATION HOT SPOT, THERE ARE SIGNS OF GROWING INTEREST IN THE NEIGHBORHOOD.

See ONNI on Page 21

Navistar revs up driverless trucks

Road test goes well, but more hurdles loom as truck maker jockeys for position in autonomous technology BY JUDITH CROWN

One day in late December, a Navistar truck delivered a load of freight from a rail yard in Tucson, Ariz., to a distribution center in Phoenix, an 80-mile run that took about an hour and 20 minutes. Sounds routine, but the test run was remarkable: There was no human driver in the cab. Lisle-based truck manufacturer Navistar is at the center of a race to develop and commercialize driverless, or “autonomous,” trucks—technology that uses GPS and sensors to navigate the

NAVISTAR

Carol Adams is a 50-year South Shore resident and founder of South Shore Works.

JOHN R. BOEHM

Ask Duncan Wlodarczak why his real estate firm is betting more than $1 billion that downtown Chicago is poised for a big comeback from the pandemic, and he turns the question around. “Why wouldn’t you invest here?” says the chief of staff for Onni Group, the Vancouver, British Columbia-based developer. “It’s one of the greatest cities in the world, it has all the right fundamentals, it has a great work-

force population. . . .Chicago is a great long-term bet.” While COVID, crime, fiscal instability and rising property taxes have made many real estate investors wary of channeling money into the city’s core, Onni expects big returns from downtown and its environs. The familyowned company is forging ahead with plans to transform the southern tip of Goose Island with a mixed-use complex featuring

roads and promises to reduce costs, smooth supply chain disruptions and ease the shortage of long-haul truckers. See NAVISTAR on Page 19

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ROBERT FEDER

THE TAKEAWAY

The noted media columnist now appears in Crain’s each week. PAGE 4

This executive is on a mission to revive the Mag Mile. PAGE 6

3/18/22 3:37 PM

2 MARCH 21, 2022 • CRAIN’S CHICAGO BUSINESS

This battle is nasty even by Chicago standards

apportionment never goes down easily in any jurisdiction, since it’s the ultimate game of musical chairs. But this one is especially down and dirty, given the fact that no one really is in charge anymore at City Hall. As I reported the other day, it now appears almost certain that Chicago voters will get to decide in a June 28 referendum between two maps. Both sides have Black, Latino and white aldermen in their camps, but one side includes all but one of the City Council’s WITH NO ONE IN CHARGE AT CITY HALL, African American aldermen, and the THE WARD REMAP FIGHT GETS UGLY. other all but one of the Latino aldermen. In the dominant position is the of a fluke in the law. And driving Black group, which has attracted it all are some pretty sharp permore white supporters than the sonal clashes, the likely reason Latinos, but only has 33 of the 50 why one key alderman would aldermen on its side—short of get a string-bean new ward the 41 needed to avoid a referenthat’s barely two blocks wide but dum. Their map was put together would stretch nearly across the by Rules Committee Chair Ald. entire width of the city. Michelle Harris, 8th, and was filed Welcome to Chicago ward a few days ago with the city clerk. remap, circa 2022. Decennial rehere’s the battle over whose ward gets to be home of Cardinal Blase Cupich’s mansion. Not to mention similar squabbles over control of the Cabrini-Green public housing complex and the Lincoln Yards megadevelopment. Black aldermen win under one plan, Latinos under another. Key white liberal groups have thrown in with one side but may not be able get what they want because

Latino aldermen, pointing to rising population numbers, actually struck first. Under the leadership of their caucus chairman, Ald. Gil Villegas, 36th, they filed their map about a month ago and subsequently reached a deal in which reform groups, including Change Illinois, promised to back that map at referendum time in exchange for some changes in it. But then a problem arose in Illinois’ notoriously complicated election law. The problem: Having filed one map, Latinos are not allowed to change it, even as part of a deal with civic-minded groups. At this point, the only way to change it is for the City Council to pass its own map before mid-May, which would allow the Latinos to refile a changed version. But to do that, Villegas, et al., will need either 11 defections from Harris’ group or for Harris to put her own map to a vote, something she notably has ruled out. If nothing happens, the original Latino map and the Harris map will go to voters—barring

GREG HINZ ON POLITICS

any surprise decision from the sometimes unpredictable Cook County judiciary. That will leave Change Illinois with a tough choice: Back one map it considers a back-room product that’s unfair to voters, or another that isn’t what it was promised. Underlying all of this are other political and personal tensions. For one, Villegas and his Black Caucus counterpart, Ald. Jason Ervin, 28th, repeatedly have jostled. It doesn’t help that some partisans have mumbled that Villegas is just trying to score points for his ongoing race for Congress in the new 3rd District, or that the Harris map would give him a ward that’s better than 5 miles long. Just a coincidence, right? For another, Alds. Michele

Smith, 43rd, and Brian Hopkins, 2nd, continue to battle over which ward Lincoln Yards will call home. That squabble lately has extended to whose ward will get Cardinal Cupich’s stately home, which is historic but, by some accounts, is being eyed for redevelopment. And lots of other disputes abound, like 27th Ward Ald. Walter Burnett’s desire to keep Cabrini-Green in his ward. Cabrini just happens to be the political base of Burnett’s political patron, Illinois Secretary of State Jesse White. Sounds like a mess, right? Maybe Change Illinois chief and Crain’s contributing columnist Madeleine Doubek is right, that we ought to just let the voters figure it out in June.

Why economic shocks hurt Illinoisans more

nyone who drives knows how expensive it is to fill up your tank lately. Only 12 days after the Russian invasion of Ukraine, oil prices surged above $100 per barrel, rising to their highest level since 2008. Not only are Ukraine and Russia major oil and gas exporters, but together they also account for nearly 30% of the world’s traded wheat. That goes a long way in explaining why grain prices are also climbing. Price increases related to the international conflict come on top of higher-than-expected U.S. inflation—the highest in 40 years—that had already resulted in a decline in real household income. The increase in commodity prices will only push food and energy prices even higher. With the average gas prices faced by U.S. consumers and

economic downturns than its neighbors. Take gasoline, for example. In 2019, Gov. J.B. Pritzker signed a bill doubling Illinois’ gas tax, and the tax goes up each year. Illinois is one of just seven states where drivers pay layers of both general sales taxes and special excise taxes on gasoline at the state and local levels. In Chicago, drivers pay nine different taxes on gas. This makes a significant difference, especially for lower-income families, when the price of gas goes up. According to data from the American Petroleum Institute, the state and local tax burden on gasoline purchases in Illinois was already the third highest in the country before the COVID-19 pandemic. In addition, Illinois consistently ranks toward the bottom for its high cost of doing business. Illinois’ public policy decisions result in IN THIS STATE, LAYERS OF TAXES ARE relatively higher for consumers IMPOSED ON VARIOUS COMMODITIES. prices and higher input costs for businesses, worsening the squeeze on Illinois businesses already surpassing families and businesses. $4 per gallon, and some states Most important, during times seeing gas prices exceed $7 per of economic uncertainty, state gallon, further increases in food and local policy should be able and energy prices pose the latest to respond quickly to changing risk to U.S. economic growth. economic conditions. In Illinois, Every American is feeling the this is nearly impossible. pain of increased costs. But in So, what’s preventing Illinois Illinois, we feel it more acutely from being nimble in a crisis? because of the layers of taxes imThe astronomical increase in posed on various commodities, pension costs that constrains such as gas. state and local budgets. The risWhile state governments have virtually no influence over mone- ing cost of pensions prevents taxand-spending adjustments that tary policy or commodity prices, could provide relief to consumers their actions can still exacerbate and businesses. As a result, taxes some of the pain of economic rise even when relief is necesshocks. sary to help families cope with Unfortunately, Illinois’ policy economic shocks. Fortunateclimate is one of the reasons the ly, the legislative fix is simple: state often experiences worse

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Illinois should act immediately to remove its public employee retirement provisions from the state’s constitution. But another constitutional amendment is on the November ballot, and this one is more dangerous than the income tax hikes voters rejected on the 2020 ballot. Amendment 1 would grant unelected government union bosses the ability to demand whatever they want from state and local governments, virtually guaranteeing a higher cost of government and the higher taxes that go along

ORPHE DIVOUNGUY ON THE ECONOMY

with it. This would add another roadblock to more active policymaking that is responsive to the needs of Illinois residents. Voters should reject this new amendment that would further restrict the state’s ability to

reduce the economic and social costs caused by global geopolitical and economic turmoil. Crain’s contributor Orphe Divounguy is chief economist at the Illinois Policy Institute.

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CRAIN’S CHICAGO BUSINESS • MARCH 21, 2022 3

JOE CAHILL ON BUSINESS

Illinois’ pot market isn’t up to snuff

Prenosis CEO Bobby Reddy Jr.

Venture-capital gap hurts Chicago biotech Despite the city’s efforts to become a hub of the fast-growing new industry, we’re lagging behind other cities in startup funding I BY KATHERINE DAVIS

espite growing efforts to make Chicago a biotechnology hub, venture-capital money coming to local startups lags behind many other U.S. cities, a deficit that could hamstring the city’s growth in the hot sector. Since 2010, local biotech companies have raised about $340 million across 34 deals, according to PitchBook data provided to Crain’s. Chicago ranks No. 13 among U.S. cities that have raised the most biotech funding over the last 12 years. Chicago trails not only biotech epicenters San Francisco and Boston, which raised $17 billion and $14 billion, respectively, but also places like Durham, N.C., with $810 million, and Minneapolis, with $350 million. Chicago’s ranking hasn’t improved much recently, rising as high as No. 5 in 2019 before falling out of the top 20 in 2020 and clambering back to No. 14 last year.

“THERE IS LESS VENTURE CAPITAL HERE COMPARED TO AUSTIN OR SAN FRANCISCO. IT SEEMS LIKE THERE’S LESS OPPORTUNITIES.” Bobby Reddy Jr., co-founder and CEO, Prenosis

See BIOTECH on Page 21

McDonald’s Russia fears are realized: Meet ‘Uncle Vanya’s’ When McDonald’s shuttered its Russian stores, worries arose that they’d be reopened under far different management. Apparently those worries were well-founded. BY ALLY MAROTTI Step aside McDonald’s. Uncle Vanya is ready to step up to the griddle. Since the Chicago-based fastfood giant shuttered its nearly 850 stores in Russia recently amid the war in Ukraine, fears have circulated that Russian parties might try to infringe on McDonald’s trademark. It didn’t take long. An application was filed in recent days with the Russian government to trademark a logo

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for a restaurant chain that turns McDonald’s signature Golden Arches brand on its side, along with the words “Uncle Vanya.” Trademark experts had begun discussing the potential that Russia might reopen shuttered McDonald’s locations. Russia’s Ministry of Economic Development had said earlier this month that it was considering lifting restrictions on trademarks for companies that had stopped doing business there. It also essentially legalized patent theft from parties affiliated with

“unfriendly” countries. The debacle threatens 30 years of brand-building in Russia by McDonald’s. Theoretically, the reopened restaurants could sell burgers branded as Big Macs, but it would not be the same food. Experts say that could confuse consumers, and that confusion could continue when McDonald’s reopens its stores or takes control of them again. Trademark lawyer Josh See McDONALD’S on Page 19

PHOTOS BY STEVE JOHNSON

llinois’ marijuana industry needs a shot of adrenaline. After a strong start, legal pot sales in the state have slowed recently. Figures released by the state show total sales dropped 14.6% to $117 million in January 2022 from $137 million in December 2021. Of course, you might expect January sales to slow from holiday-boosted December results. And sales were up 32% from January 2021. Yet this is the first December-to-January decline since Illinois legalized recreational marijuana sales in 2020. It comes on the heels of slowing month-to-month growth, which dropped into single digits between August and November last year, before rebounding 14% in December. And while combined sales of medical and recreational pot surged 73% to $1.78 billion last year, according to marijuana information site Leafly and Whitney Economics, my colleague John Pletz reports the firms project growth will slow this year to 58%. To some extent, the slowdown reflects a maturing industry moving beyond the initial hyper-growth phase. Pot sales also are coming off a pandemic-induced high in 2020, when lockdowns limited recreational opportunities. But there’s another big factor holding back the growth of this new industry in Illinois. Legal challenges have stalled the issuance of new retail pot licenses. Some 185 licenses are on ice, essentially freezing the number of pot stores in the state at 110. New store openings drive growth in any retail business. Until more pot stores open in Illinois, sales here likely will plateau. Slowing sales mean the economic benefits Illinois expects to reap from legalized marijuana sales will be delayed, if not lost altogether. The state is counting on the industry to generate jobs and tax revenue, while also rectifying the disparate impact of the war on drugs in some communities. So far, the industry has created nearly 29,000 jobs. Tax collections from recreational pot sales exceeded $300 million in fiscal 2021, state revenue data shows. Illinois needs to maximize those economic benefits as quickly as possible. Yet there’s no way to predict when the logjam on new retail licenses will break. Plaintiffs in the lawsuits raise thorny issues that

go to the heart of the state’s processes for issuing licenses. Observers expect no resolution before the end of the year. Other states, meanwhile, are racing to capture the full potential of legalized marijuana. Michigan, which legalized recreational sales about the same time as Illinois, has issued more than three times as many licenses. As a result, Michigan racked up slightly more total sales than Illinois last year, even though its population is about one-quarter smaller. Imagine how much more Illinois’ marijuana industry would be generating in sales, jobs and tax revenue with three times as many stores. Imagining it is all we can do until the litigation holding up 185 new licenses plays out. The lawsuits focus on the cumbersome process Illinois created for doling out precious retail sales licenses. Aiming to favor applicants affected in some way by drug enforcement policies many consider discriminatory, the state came up with a lengthy application and a complex scoring system, hitched to a lottery. Merely completing the form could cost thousands of dollars, with no guarantee of making it into the lottery for a chance at a license. Not surprisingly, some rejected applicants sued the state. That’s what happens when government micromanages an industry as Illinois has tried to orchestrate the retail marijuana market. No matter how well-intentioned, policies that give some businesses preference over others invite legal challenges. Illinois would have been better off creating a simpler, faster application process focused on a few basic qualifications, with a goal of issuing as many licenses as possible as quickly as possible. Such an approach is working well for Michigan. Illinois’ restrictive licensing scheme does more than slow the industry’s growth. It artificially restricts supply, driving up prices. Illinoisans pay the highest prices in the country for marijuana, and more than twice as much as Michiganders. In a hopeful sign, Illinois is moving to streamline its application process. New rules under consideration would require only a short application form and a $250 fee from applicants before they’re selected to participate in the lottery. That’s a step in the right direction. But Illinois’ marijuana market has a big gap to close.

3/18/22 3:38 PM

4 MARCH 21, 2022 • CRAIN’S CHICAGO BUSINESS

As ‘Judge Jerry’ adjourns, what’s Springer’s next role?

same audience with me in a different role, but a role that I believe people can accept.” Added Springer: “I love doing (‘Judge Jerry’) because it’s the first grownup job I’ve had in 30 years. I have to do research and I have to remember what I learned in law school and practicing law. I really do my homework.” If Springer’s three decades in daytime syndication are coming to an end, there’s talk the former Cincinnati mayor and progressive radio host could segue into some sort of commentary role, perhaps with a cable network or new digital platform. No matter what, Springer will always be remembered for his monumental role in Chicago TV history. For 17 of its 27 years, “The Jerry Springer Show” originated from NBC Tower here before moving to Connecticut. Its outlandish and sensational topics combined with the mindless mayhem it unleashed epitomized the worst excesses of trash TV. Although it actually surpassed hometown colossus “The Oprah Winfrey Show” in the NO MATTER WHAT, SPRINGER WILL ALWAYS ratings at one SpringBE REMEMBERED FOR HIS MONUMENTAL point, er’s freak show was ranked ROLE IN CHICAGO TV HISTORY. as “the worst TV show of all time” by TV Guide—a designahost in 1991,” wrote Chicago’s tion the show’s producers took T Dog Media blogger Terence as a compliment. Henderson, reporting “Judge In 1997, at the height of Jerry” as one of three syndicated Springer’s notoriety, he apshows whose cancellations were peared as a news commentator announced recently. (The others on NBC-owned WMAQ-Chanwere “The Nick Cannon Show” nel 5, prompting lead news and “The Good Dish.”) anchors Carol Marin and Ron Since the announcement, Magers to resign in protest. NBC Springer has not commented 5’s ratings plummeted and stapublicly about his plans. But the tion management was replaced. thought of retirement can’t be In Chicago, “Judge Jerry” far from his mind. airs at 8 a.m. Monday through “Honestly, at 75 I thought I’d Friday on Weigel Broadcasting be retiring,” Springer told the WCIU-Channel 26. New York Post’s Michael Starr in 2019. “NBC had been talking to Robert Feder has been covering me for years about doing somethe media beat in his hometown thing else, and they thought since 1980. His column is pubthe judge show was a natural fit lished in Crain’s under an agreebecause I started out as a lawyer ment with the Daily Herald. and it’s a daytime audience—the he news that NBCUniversal Syndication Studios will cease production of Jerry Springer’s daytime court show at the end of its third season has TV industry watchers wondering what the longtime host will do Robert Feder when he hangs up his robe for good. Springer has been hosting “Judge Jerry” since 2019, adjudicating cases filed in small-claims courts around the country from a courtroom studio in Stamford, Conn. Drawing on his 1968 Northwestern law degree, the series followed his 27-year run as ringmaster of “The Jerry Springer Show,” the raucous daytime talk show that made him famous. New episodes of “Judge Jerry” are expected to air through September, while reruns of “The Jerry Springer Show” (with more than 5,000 episodes in the can) may continue well beyond. “This likely marks the end of 77-year-old Springer’s television career, started at WLWT Cincinnati as a news anchor in 1982, and becoming a talk show

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The repossessions show the ongoing financial carnage some landlords are facing amid the COVID-19 pandemic BY DANNY ECKER Lenders are taking control of a pair of massive-but-outdated Loop office buildings in two high-profile examples of downtown office distress during the COVID-19 pandemic. In one of the largest bank repossessions of a downtown property over the past two years, a venture of Toronto-based Brookfield Asset Management has transferred the 1.4 million-square-foot building at 175 W. Jackson Blvd. to special servicer LNR Partners, according to Bloomberg data tied to Brookfield’s $280 million loan on the property. Miami Beach, Fla.-based LNR was overseeing the loan, which was packaged with other loans and sold off to commercial mortgage-backed securities investors. Separately, New York-based AmTrust Realty is negotiating a deed-in-lieu of foreclosure agreement for its mostly vacant, 1.3 million-square-foot office building at 135 S. LaSalle St., according to Bloomberg data tied to AmTrust’s $100 million CMBS loan on the property. The agreement with loan servicer Torchlight Investors would mean that AmTrust could avoid a foreclosure suit by handing over the property to Torchlight. The moves highlight the scope of the financial carnage inflicted on the downtown office market over the past two years and the shaky outlook for future demand as companies adjust to the rise of remote work. Shrinking tenant footprints have outpaced new leasing, draining revenues for landlords and making it more difficult for many owners to make loan payments.

FALLOUT

The fallout has included big foreclosure lawsuits against the owners of the Civic Opera Building and the office condo at 208 S. LaSalle St., while the owners of properties at 300 W. Adams St. and 65 E. Wacker Place walked away from their buildings rather than face a legal battle with their lenders over loan defaults. In another massive case of distress, the owner of the adjacent Loop buildings that are losing BMO Harris Bank’s U.S. headquarters is set to hand over the properties to its lender, which is now marketing the debt on the buildings for sale and teeing up a likely financial blow to both parties. Brookfield’s move comes a few months after it stopped making loan payments on its 175 W. Jackson loan, a move it told local brokers was intentional to begin negotiations with LNR about restructuring its debt. Brookfield had a long-term vision to breathe new life into the 22-story building and was underway with a renovation plan that included the addition of

a new rooftop deck, a redesigned lobby and gym, and two new move-in-ready offices totaling more than 50,000 square feet. But the loan discussions with LNR appear to have been fruitless, as Brookfield has now surrendered the property. A spokeswoman for the property declined to comment, and LNR did not respond to requests for comment.

FINANCIAL PAIN

Walking away from the building will sting financially for Brookfield, which paid nearly $306 million for it in 2018, according to Cook County property records. It’s unclear how much money it has spent since then renovating the property, which was roughly one-third vacant when Brookfield bought it. Brookfield assumed the mortgage from the previous owner, New Yorkbased Extell Development, who was also struggling to make loan payments at the time with the property’s cash flow sinking well below its debt service, according to Bloomberg data tied to the loan. But the public health crisis clotheslined Brookfield’s effort to lease up the building. Downtown office vacancy reached an all-time high last year, creating an expensive street fight for tenants among landlords with large blocks of space to fill. Brookfield notched a leasing win in October when it inked a 35,000-square-foot deal with logistics tech firm Loadsmart. But it has struggled to lure other tenants to the building, which was 63% leased as of November, Bloomberg data shows. The largest tenant in the building is online lender Enova International, whose lease for nearly 170,000 square feet runs through August 2027, loan data shows. The property generated $6.1 million in net cash flow last year, far less than Brookfield’s $18.2 million total debt service payments, according to the Bloomberg data. AmTrust signaled late last year that it would hand the LaSalle Street building over to its lender when it announced plans to spread $100 million in new investments into five other Chicago office buildings, but not 135 S. LaSalle. AmTrust’s revenue at the 88-year-old building was gutted last summer when Bank of America’s lease for almost 830,000 square feet expired, and the owner said the building’s cash flow was no longer sufficient to cover its debt service payments, according to a Bloomberg loan report. The building was recently appraised at $130 million, suggesting AmTrust still had a lot of equity in the property. But it appears the firm has no interest in committing the substantial amount of capital likely required to renovate and lease up the building at a challenging time for downtown office landlords.

COSTAR GROUP

NBCUNIVERSAL SYNDICATION STUDIOS

Two big Loop office buildings being seized by their lenders

175 W. Jackson Blvd. AmTrust bought the building from Bank of America through a $188 million sale-leaseback transaction in 2008, financing that deal with a $100 million loan, according to Cook County property records. AmTrust then replaced that loan with the current one in 2015, keeping the same low leverage even though the property’s appraised value had spiked to $330 million. While it didn’t cash out through the refinancing, AmTrust pulled in substantial profits from the building over the past decade. The building’s net cash flow was close to $18 million annually, dwarfing the $3.3 million annual debt service AmTrust paid, according to Bloomberg loan data. An AmTrust spokeswoman declined to comment. Both Brookfield and AmTrust have had more leasing success recently with other downtown projects. Brookfield has drawn lots of tenant interest in its redevelopment of the upper floors of the landmark Marshall Field building on State Street. Despite completing the transformation of the 650,000-squarefoot space above the Macy’s flagship store just as the pandemic set in, Brookfield landed leases with consumer-insights company Numerator and, more recently, online ticket marketplace Vivid Seats. New Yorkbased Industrious also operates co-working space in the building. Brookfield is also said to be in the running to land investment research firm Morningstar as its anchor tenant in the building with as much as 250,000 square feet. Morningstar’s lease across the street at 22 W. Washington St. expires at the end of next year, and the building’s owner recently began marketing the space as available to new users beginning in January 2024. AmTrust is dealing with a thinning bottom line at Illinois Center, the 2.1 million-square-foot office complex in the East Loop. But it has inked three sizable lease expansions with tenants in recent months including law firm Taft Stettinius & Hollister, Traffic Tech and Tyree & D’Angelo Partners.

3/18/22 2:50 PM

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6 March 21, 2022 • CRAIN’S CHICAGO BUSINESS

THE TAKEAWAY

Kimberly Bares Bares is CEO of the Magnificent Mile Association, which promotes businesses on North Michigan Avenue. Raised in upstate New York, Bares, 53, has a master’s degree in planning and policy from the University of Illinois Chicago. She has worked in affordable housing and community and economic development and ran her own consulting business before joining the Mag Mile Association in 2019. She played a key role on a technical assistance panel formed last year by the Urban Land Institute to explore ways to revive the shopping strip. Bares, a trombone player, lives in Lincoln Square with her daughter and girlfriend and their mini-goldendoodle and bichpoo. I By Alby Gallun

> It’s been a rough few years for North Michigan Avenue. A lot of people are asking, how do you turn it around? The (Urban Land Institute) panel has drafted a report that focuses on four different areas: technology and infrastructure, people, place and experience. Those are the building blocks for the next 100 years. We’re thinking about things like what the next evolution of retail is.

Such as? Do you need to go into a store to try on clothes? What about trying clothes on virtually? We’ve thought about connectivity, not just within our district, but to O’Hare and Midway, to Ogilvie, Union Station. We don’t do a particularly good job of capturing data. We don’t capture pedestrian counts, but we’re also not capturing visitation counts.

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CRAIN’S CHICAGO BUSINESS • MARCH 21, 2022 7

Citadel Securities lifts veil after record year The $7 billion haul is reason to celebrate. But it also points up a problem: The bigger it gets, the bigger the target on its back. So the Chicago firm is cracking open its previously sealed doors to respond to its naysayers. I BY KATHERINE DOHERTY

ULTRA-AMBITIOUS

As a market maker, Citadel Securities facilitates trading by stepping in as a buyer or seller, earning tiny profits on price differences often within milliseconds. The business Griffin built from a small group adjacent to his hedge fund has expanded into one of the biggest trading houses in the world, handling about 40% of all U.S. retail trading volume and one in every four U.S. equities trades.

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BLOOMBERG

itadel Securities LP was thrust into the spotlight in 2021, with day traders, lawmakers and regulators all scrutinizing the firm at the center of one of the U.S. stock market’s wildest periods. They’re about to learn that amid the uproar, the financial giant had its best year ever. Billionaire Ken Griffin’s stocktrading powerhouse posted record revenue of $7 billion, as frenzied bouts of volatility helped drive up earnings. The figure, disclosed by people familiar with the matter who declined to be named discussing private information, topped the firm’s previous record of $6.7 billion in 2020, when the pandemic upended global markets. Inside Citadel Securities, the haul is reason to celebrate. But it also highlights an emerging problem that senior executives seem acutely aware of—the bigger it gets, the bigger the target on its back. With ambitions to grow even more, the company is starting to crack open its previously sealed doors to respond to its naysayers. In over a half dozen interviews, top managers addressed concerns that the firm is too dominant, discussed rumors of a possible initial public offering and hinted at plans to expand into businesses that have long been controlled by Wall Street banks. “You get to a point where staying under the radar is no longer an option,” Chief Executive Officer Peng Zhao, 40, said from the company’s Chicago headquarters. “We want to be able to tell our own story, rather than having the story told about us.” There are many seeking to frame the Citadel Securities narrative. U.S. Securities and Exchange Commission Chair Gary Gensler has questioned whether retail investors are being disadvantaged because equities trading is so concentrated among Citadel Securities and a small group of rivals. After the firm’s starring role in last year’s meme-stock frenzy, Griffin was hauled in front of Congress where one lawmaker likened Citadel Securities to a casino and later, another called it a shark. Just this month, comedian Jon Stewart threw some jabs on his new streaming show.

Ken Griffin But even that isn’t enough for the ultra-ambitious Griffin, who is said to frequently check that Citadel Securities remains atop a ranking of market-making rivals like Virtu Financial Inc. and Susquehanna International Group, people familiar with the matter said. Griffin, with a net worth topping $30 billion, has a reputation for driving an intense, competitive culture. Zhao recalls how he was in his second year at the firm as a low-level quant in 2007 when Griffin drafted him to help build out mortgage models. What Zhao thought would be a few hours of work turned into a three-month sprint with Griffin physically moving into Zhao’s office. “For many weeks Ken was looking over my shoulder, hovering above my keyboard, putting out statistical analysis, models and graphs,” said Zhao, a child math prodigy with a PhD in statistics from the University of California, Berkeley, speaking in his first ever in-person interview with a news organization. Now, the company plans to add business in Europe and Asia, and wants to be a major liquidity provider in the exploding cryptocurrency market, a goal underscored by the $1.15 billion it recently received from two prominent Silicon Valley investors. That deal, valuing the firm at $22 billion, could also herald an initial public offering—propelling it onto the very stock markets it now dominates. As a designated market maker, the firm handles trades for more than 60% of listed names on the New York Stock Exchange, where employees still occupy two booths on the trading floor, decked in royal blue jackets with

Citadel Securities logos. In interviews throughout February, Citadel Securities executives didn’t dismiss an IPO though said a listing wasn’t on its immediate agenda. Still, the step would help it build on its expansion particularly with institutional clients who typically route their orders through Wall Street banks, Chief Operating Officer Matt Culek said. The firm has already signed 250 clients to the institutional equity options business it launched in 2020 under former Deutsche Bank AG executives Dave Silber and Jason Roelke. Customer volumes in the group soared 90% in the fourth quarter from a year earlier. That has investment banks worried. After ceding retail market-making share to Citadel Securities, unable to compete on technology and hamstrung by rules from after the financial crisis, they’re staring at a fresh threat to the business they typically handle from clients like hedge funds and pension investors. The firm is also unsettling Wall Street’s efforts to retain its best talent. Citadel Securities poached top trader Etienne Lussiez from Citigroup Inc. in January. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon listed Citadel Securities among “tough competition” in June. Goldman Sachs Group Inc. executives identified the company as a bigger threat than its long-established European rivals at an internal trading division meeting last year. Griffin is said to revel in poaching employees from Goldman, having wanted to build a competitor to Wall Street banks, another person familiar with the matter said. A spokesperson for Citadel

Securities said it does not revel in hiring talent from Goldman Sachs or anywhere else and “attracts world-class talent from across finance, technology and academia.” “They have won so profoundly,” said Paul Rowady, director of research for Alphacution Research Conservatory. “Banks and smaller rivals have not been able to compete at the cutting edge of technology and attracting talent—that train has already left the station.”

BIGGER THREAT

Expansion is bound to draw more scrutiny to the firm. Its market presence is so critical it could pose a threat to financial stability if its systems falter, some say. Much of the meme-stock controversy centered around an often-attacked practice that allows retail brokers like Robinhood Markets Inc. to offer zero-commission trading. Under the payment-for-order-flow model, Citadel Securities and other market makers pay brokers to execute their retail orders, making them key to the rise of trading apps that fueled last year’s Reddit-inflamed short squeeze. This market setup has drawn critics including Senator Elizabeth Warren, who said the company profits at the expense of customers during periods of extreme market turmoil—much like the swings set off recently by Russia’s recent invasion of Ukraine. Gensler alluded to the possibility of banning PFOF, saying it puts investors at an information disadvantage and may not get them the best deal. Griffin has defended the practice, saying it helps democratize finance and that it’s actually a “cost” to the firm.

When put to some of the Citadel Securities executives in February, they zoom out from some of the controversy’s thornier issues. They speak of misconceptions about the firm and echo Griffin’s comments on the benefits PFOF affords small-time traders. “All of a sudden we find our name on venues and getting mentioned in places we weren’t mentioned before—it’s something we weren’t planning for,” said Zhao, when pressed about the meme-stock craze. “We are focused on making the best decisions, regardless of whether our name is being mentioned or not.” Retail investors get better prices and brokers get better economics because of how the market is set up, said Joe Mecane, head of execution services at the firm. Restricting PFOF could hurt investors and wouldn’t curb the order flow Citadel Securities receives, he said. “There is a big disconnect between what we do, what the message should be about what we do, and what the public perception ends up being,” he said. At its offices on the 37th floor of the Citadel Center in downtown Chicago, display cases exhibit artifacts dating from long before the algorithmic trading era Citadel Securities helped drive: ticker tape from the Wall Street crash of 1929; a green jacket dating to the 1980s, when traders endured the boisterous pits of the Chicago Board of Trade. There’s an Xbox and a chess board. “The Devil in the White City,” about the 1893 Chicago World’s Fair, shares a shelf with “Moneyball.” From its original focus on equities and options, the company has expanded, including into interest-rate swaps and Treasuries, two businesses that were largely dominated by banks, COO Culek said. On those trades, the firm has winnowed down the speed of liquidity—how long it takes to get trade prices back to clients—to a 10th of a second. It takes banks three to five seconds, Culek said. The firm said it executed approximately $26 billion of Treasuries volume per day in 2021. It also handled $11.4 billion in notional average daily volume across Treasuries and interest rate swaps for clients last year, a 150% jump from 2019. Executives say more is to come. “There is still a very large percentage of the world’s asset classes that don’t trade electronically. Many banks provide liquidity in those products—over time more of those things are going to go electronic—and we are going to become a key liquidity provider,” said head of business development Jamil Nazarali. “Most of our growth is ahead of us.” Bloomberg News

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8 MARCH 21, 2022 • CRAIN’S CHICAGO BUSINESS

Living in an apartment in downtown Chicago will be more expensive this year After rising more than 30% in 2021, rents in the area are poised to increase at least another 5% this year. “A lot of people are absolutely priced out of the market.” BY ALBY GALLUN If you’re on the hunt for an apartment in downtown Chicago this spring, brace yourself for some sticker shock. The net rent at high-end, or Class A, apartment buildings rose 32% last year, while the net rent at less-expensive Class B properties jumped 34%, according to the Chicago office of Integra Realty Resources, a consulting and appraisal firm. After plunging in 2020, rents rebounded from a low base, but they have recovered everything they lost and even hit new highs. Tenants who could afford a downtown apartment a year ago may have to expand their search to cheaper neighborhoods. A hypothetical 1,000-square-foot Class A apartment in downtown Chicago rented for $3,370 per month at the end of 2021, up from $2,550 a year earlier, when desperate landlords were offering bargain deals. “A lot of people are absolutely priced out of the market,” said Integra Senior Managing Director Ron DeVries. DeVries expects downtown rents to rise at least 5% in 2022, fueled by strong demand and a slowdown in development that will limit the increase in supply. COVID-19 put a scare into downtown landlords, but it didn’t last very long. Demand for apartments sagged in 2020 as the economy slipped into recession and downtown professionals worked

from home. Untethered from their offices, they could live anywhere. Downtown lost its appeal for many of them as restaurants, bars and museums closed and rioting and looting erupted in the city. The downtown apartment occupancy rate dropped to 86.5% at the end of 2020 from 93.3% a year earlier, according to Integra. But tenants quickly returned in 2021, drawn in first by landlords offering deals on rent and later by expectations that they would return to the office as the pandemic eased. By the end of the year, the downtown occupancy rate had risen to 94.7%. “We just had this big pothole we went through and came out the other side,” DeVries said. “We’re back on trend.”

OPTIMISM

The recovery continued even as the delta and omicron variants swept through Chicago, delaying plans by companies to bring employees back to their downtown offices. With COVID case counts back down and many pandemic restrictions lifted, more people are returning to the office. Optimism that downtown Chicago will regain its footing is growing. Leasing is well ahead of schedule at One Chicago, a recently completed two-building residential development in River North, said Jim Letchinger, the project’s developer. Rents, originally forecast at $3.98 per square foot, are “well above that” today, he said. “Across the board, it’s the best

A rendering of new apartments planned at 1454 W. Randolph St. time to be in business,” said Letchinger, founder and CEO of Chicago-based JDL Development. Confident the boom will continue, JDL is getting ready to break ground on its first two buildings in North Union, a $1.2 billion, 2,700-unit development on the Near North Side. It plans to begin construction this month on a 236-unit multifamily structure at 920 N. Wells St., with a 410-unit building at 878 N. Wells getting underway in a couple months, Letchinger said. Developers put the brakes on new projects during the early days of the pandemic, one reason Integra projects they will only complete 1,263 units downtown this year, down from 2,693 in 2021. A decline in supply, combined with strong demand, means landlords still will have pricing power this year, DeVries said. The market could shift in tenants’ favor in 2023, when developers complete about 5,500 units downtown. Absorption, a key measure of

demand that reflects the change in the number of occupied downtown apartments, rose to a record 7,084 units in 2021, according to Integra. The market essentially caught up from 2020, when absorption totaled -238 units, the first year of negative absorption since 2005. DeVries expects absorption will fall to 2,600 this year, mainly because of the decline in development. It will rise in 2023 to 3,200 units, a more normal level, but still well short of the 5,500 apartments developers will complete downtown, according to Integra. DeVries doesn’t foresee a long-lasting glut, but the surge in supply will affect the market. “We’re going to be oversupplied for a short period of time,” he said. “There’s going to be some short-term pain” for landlords. Developers are especially busy in the Fulton Market District. Marquette, a Naperville developer, is wrapping up two projects

there with 520 apartments. Four other buildings totaling 1,000 units will open in the neighborhood in 2023, according to Integra. Many more are in the works. Developers will keep building as long as rents keep breaking records. The net Class A downtown rent rose to $3.37 per square foot in the fourth quarter, up from $2.55 a year earlier, but just shy of the all-time high of $3.41 in second-quarter 2021, according to Integra. Net rent factors in the value of concessions like free rent. As high rents push more apartment hunters out of downtown, properties in places like West Town or along Milwaukee Avenue could be an appealing alternative for many. In some cases, rents in outlying neighborhoods are 20% lower than those downtown, DeVries said. “People that can’t afford the best of the best downtown can afford some pretty nice units in that first outer ring,” he said.

Rent inflation in the U.S. reaches new heights All major metro areas saw increases, but the Sun Belt region experienced by far the biggest gains BY ALEXANDRE TANZI U.S. rent inflation reached yet another record in January, fueled by red-hot markets such as Miami. Single-family rental prices jumped 12.6% from a year earlier, according to the latest CoreLogic Single-Family Rent Index. All major metropolitan areas saw increases, but the Sun Belt experienced by far the biggest gains, with Miami’s asking rents up almost 39%. All indicators show that the renting market is heating up, as would-be buyers of houses increasingly turn to rentals because they can’t find—and

P008_CCB_20220321.indd 8

can’t afford—their dream houses. Institutional investors have jumped on the opportunity, buying a record share of U.S. houses last quarter, according to data compiled by RedFin Inc. That will likely push rents even higher in the coming months, as tenants renew their leases or move to a new place. “Single-family rent growth extended its record-breaking price growth streak to 10 consecutive months in January,” Molly Boesel, an economist at CoreLogic, said in a statement. Rents in Orlando, Fla., and in Phoenix rose 19.9% and 18.9%, respectively, in January,

according to CoreLogic, which tracks rental prices in almost 100 metro areas. Housing has fueled overall consumer-price inflation in booming cities in the South, with Phoenix cracking the double-digit barrier last month—and Miami getting close. Chicago, with an increase of 8.8%, ranked 15th on the list of 20 major metro areas. The Washington, D.C., area recorded the lowest rent inflation with a 5.6% rate—which is more than the average salary increase of 3% planned this year for the area’s federal government workers. About 15% of workers in the area are employed by the federal government.

SUNBELT SURGE Miami sees year-over-year increase of 38.6% in single-family rents in January Miami Orlando Phoenix Las Vegas San Diego Austin Boston Dallas Atlanta Tucson Charlotte Houston Los Angeles Seattle Chicago Honolulu Philadelphia New York St. Louis Washington, D.C.

40%

Source: CoreLogic

Bloomberg News

3/18/22 4:11 PM

CRAIN’S CHICAGO BUSINESS • MARCH 21, 2022 9

How to turn products and customers into promoters Center for Entrepreneurship & Innovation after already spending a year or more building their new product. Only when the product is “ready” do they approach me and ask: How do I get the word out? They’re way too late. Marketing should have been considered before they ever started building the product, because they should have built it in. Now that I’ve brought up this approach, you’ll begin to notice examples of similar tactics everywhere. Steve Jobs designed Apple laptops so the logo would appear upside-down to customers and right-side up to everyone else. Every open Apple laptop becomes a billboard. The icon on my laptop lights up, so that even darkness doesn’t thwart an advertising opportunity for Apple. This tactic works for service businesses, too. When you get an oil change, what does a mechanic leave behind in your car? A sticker with the company’s logo reminding you of the date or mileage at which to bring your car back. As part of the service, you’ve let a mechanic put a billboard in your car. Such cleverness predates the digital age. When you buy a book, what is almost always printed inside the front and back covers? A list of all of the author’s other books.

Melissa Harris is an entrepreneur-in-residence at the University of Chicago’s Polsky Center for Entrepreneurship & Innovation. She also is CEO of marketing and creative agency M. Harris & Co.

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

And in serialized fiction, the end is no end at all; it’s the first chapter of the next book, which, of course, ends in a cliffhanger. Works on me every time. Entrepreneurs still have to execute the usual tactics—social media, content marketing, public relations, etc. But with budgets tight,

EVERY OPEN APPLE LAPTOP BECOMES A BILLBOARD. your product itself has to help carry the load. And don’t worry if your idea isn’t original. Apple stole the automaticsignature idea from Hotmail. (“P.S. I love you. Get your free email at Hotmail.”) Hotmail’s founders got the idea from their first venture-capital investor, Tim Draper. Whether your product is tangible or virtual, permanent or temporary, this strategy can work. When Chicago chef Curtis Duffy launched his new restaurant Ever in 2020, critic Phil Vettel described

MOHAMED M / UNSPLASH

f you don’t futz with the defaults on a new iPhone, this phrase magically appears at the bottom of every email you send: “Sent from my iPhone” What does that turn every email sent with an iPhone into? An ad for an iPhone. Does Apple pay one cent for that ad? No. In fact, we pay Apple for the privilege when we pay for the phone. Now, is adding that automatic signature a product or a marketing decision? Trick question. It’s both. Because, yes, someone invented it for marketing purposes. (Not someone at Apple, by the way.) But in order to execute the idea, Apple had to code that sentence into its software. It had to build the product with marketing in mind. It’s ingenious, and it’s why I ask every startup I coach two questions: How can you build marketing into your product? And how can you turn your customers into your marketers? These two questions are essential because startups and small businesses can’t afford to spray the world with TV ads and billboards. They have to be more clever. But too often startup founders arrive at my office hours at the Polsky

the first course as “an absolute show-stopper: A shallow bowl of vivid-green cucumber gelee … vertical spirals of pickled-cucumber strips, osetra caviar atop a medallion of crab leg …” Our client’s dish was so gorgeous—it was a Monet but in food—customers couldn’t help but snap a photo and post it on Yelp, Instagram, Facebook, etc. And stenciled right in the middle of the dish, in thickened coconut milk, was a single word: “ever”

2022

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Nominate at ChicagoBusiness.com/NotableManufact To view Crain’s Notable Executives nomination programs, visit chicagobusiness.com/notablenoms.

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10 MARCH 21, 2022 • CRAIN’S CHICAGO BUSINESS

EDITORIAL

McDonald’s made the right choice

BLOOMBERG

eputational damage can cut a number of ways. In McDonald’s case, the potential downsides of continuing to do business in Russia after the invasion of Ukraine forced a tough decision: abandoning the Chicago fast-food giant’s 30-year brand-building investment in the Russian market. As the war intensified, causing immeasurable pain and suffering for Ukrainian civilians, McDonald’s correctly calculated that it could no longer afford to be seen doing business with the Russian regime, shuttering its nearly 850 Russian stores—84% of which are company-owned—and giving up a business that amounts to roughly 9% of its annual revenue, or about $50 million a month. That decision, however, opened up another type of reputational risk for McDonald’s, as Vladimir Putin’s regime signaled it’s likely to remove restrictions on the use of intellectual property—like, say, the McDonald’s trademark—and allowing franchisees in the country to reopen the shuttered restaurants. In other words, the Kremlin has essentially legalized patent theft from those affiliated with “unfriendly” countries, and McDonald’s—a Western icon if ever there was one—is apparently at the top of the list. As Crain’s Ally Marotti was first to report, a flood of Russian entrepreneurs are seeking permission to sell burgers branded as Big Macs and chicken branded as McNuggets even though it’s very likely not going to be the same food—a move that threatens to significantly weaken the McDonald’s brand in what was, until recently, an important overseas market.

CAN ANY WESTERN COMPANY DEDICATED TO FREE ENTERPRISE AND RESPECTFUL OF THE RULE OF LAW OPERATE—AND PAY TAXES—IN PUTIN’S KLEPTOCRACY AFTER THIS? Applications filed with Russia’s Federal Service for Intellectual Property propose a range of newfangled interpretations of McDonald’s name and logo. The most attention-grabbing one turns McDonald’s famed Golden Arches logo on its side and

transforms it into what English speakers would think of as a “B,” the first letter in the proposed new moniker for the restaurant chain: “Uncle Vanya’s.” Other bidders for a slice of McDonald’s Russia business have also popped up: One pitch calls for

rebranding the restaurants as “McDuck,” which apparently is Russian slang for McDonald’s. Another less creative applicant simply seeks permission to call the restaurants “McDonald’s.” Trademark lawyers expect to see more of this sort of thing. As Crain’s explored the McDonald’s-related filings, for instance, an application for permission to appropriate the Starbucks name also turned up. If Potemkin Village-style McDonald’s outlets do open up across Russia—and so far there’s no evidence it’s happened, though the patent applications are a likely first step—then McDonald’s decadeslong effort to cultivate its reputation in the country for good food at fair prices in clean restaurants will take a direct hit. It will also make it that much more difficult for McDonald’s to rebuild its business in Russia when the hostilities in Ukraine cease. The truth is, it’s impossible to know when or even if such a return to a pre-invasion normal is in the cards for McDonald’s and scores of other U.S. enterprises, even if the guns were silenced today and by some miracle the Putin regime withdrew from Ukraine. Can any Western company dedicated to free enterprise and respectful of the rule of law operate—and pay taxes—in Putin’s kleptocracy after this? Despite the significant setback that McDonald’s and other companies are experiencing by withdrawing from the Russian market—and the prospect that the lost business will never be regained—it still must be said: It was the right thing to do. It wasn’t the easy thing, but it was the right thing.

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would have massively increased hicago residents are their police staffing decades paying a high price for ago. The solutions to crime are all the games our electcomplex and all of the science ed leaders are playing points to dealing with root causwith police staffing. Mayor Lori es when looking for long-term Lightfoot, like all those who solutions. Unfortunately, decame before her, has not moved manding long-term solutions to have the Chicago Police Dedoes not get a mayor wannabee partment conduct a transparent on the nightly news or in the manpower study, because she daily papers. would rather play politics with Tracy Siska is execAs I wrote in Crain’s seven this issue than be forthright with utive director of Chicago’s communities. This has the Chicago Justice years ago, Chicago desperateleft a vacuum for immoral poli- Project, a nonprof- ly needs politicians to stop the politics and put the interests of ticians and police union leaders it organization Chicago’s communities ahead to wage an unrelenting war of focused on justice misinformation around staffing system transparen- of their own ambitions. Given that Chicago has a number for their own political benefit. cy in local justice Despite what you see on so- systems around the of alderpeople facing federal charges or who have been recial media and hear from many country. cently convicted of crimes, I egomaniacal politicians in Chicago, there is no direct causal link between understand just how big an ask this is. We more cops and less crime. If it were only simply will never be able to deal with the that easy, urban areas all over the world root causes of crime if every time crime

increases, we throw billions of dollars at the police department without having the evidence to substantiate that investment. Rising crime numbers is not sufficient evidence to hire more cops.

TRANSPARENCY NEEDED

If Lightfoot is serious about seeking another term, her main promise to the people of Chicago must be to conduct a transparent manpower study so we can bring evidence-based decision-making to the CPD’s manpower question. Residents of Chicago will not trust any internal study that is not released publicly, because the Chicago Police Department, and Superintendent David Brown himself, are not worthy of that trust. For decades, police union leaders, supported by their unscrupulous political supporters, have exploited crime and violence occurring in Chicago to push for more and more officers to be hired. If you ask them for the number of officers the CPD actual-

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

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ly needs and how those officers should be allocated to each district, they simply have no idea. This is the exact opposite of how Chicago should be creating public policy and running the second-largest police department in the country. The war over this issue is not one being fought with science and facts, but instead has devolved into an ideological battle that serves only the political interests of those involved. To build resources to deal specifically with the root causes of crime and violence in Chicago, we have to have empirical evidence to support a specific staffing level for the CPD so that any excess resources can be allocated to building capacity within communities to address their long-term goals. Absent this empirical evidence, police union officials and their unprincipled political supporters will keep poisoning the public discourse with baseless accusations about needing more police officers, despite making no effort to know how many officers Chicago actually needs.

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

3/18/22 2:58 PM

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CRAIN’S CHICAGO BUSINESS • MARCH 21, 2022 11

LETTER TO THE EDITOR

Who’s to blame for docs’ premium hikes?

recent article (“Illinois docs see big increases in liability premiums,” Health Pulse, March 11) states Illinois physicians will soon be faced with some of the largest insurance premium hikes in the nation. Cited as drivers for these increases are “deteriorating underwriting results, lower loss reserve margins and lower returns on investments,” according to an American Medical Association analysis. A Modern Healthcare article contended medical malpractice verdicts and settlements are the drivers for the coming higher insurance premiums. Historically, when liability insurance companies lose money, they blame outside factors, such as Illinois juries, rather than their own poor investment or business

strategies. On cue, ISMIE Mutual Insurance Co., the state’s largest medical malpractice insurer, is now claiming they somehow lost money during the pandemic. Every Illinois citizen should recall the government-ordered shutdowns due to COVID-19 included courthouses throughout the state. In every county, jury trials in civil cases were either completely absent or significantly delayed. These actions suspended the ability for injured parties to have their day in court. As a result of these adjournments, medical malpractice insurers were allowed to retain their premium dollars and investments on those funds for far longer time periods. Based on ISMIE’s own data filed with the Illinois Department of Insurance, they made

only 51 indemnity payments (settlements or satisfaction of verdicts) in all of 2020. This represents the fewest number of annual payments on record. Additionally, the total amount of indemnity dollars paid in 2020 represented a 40% decline from 2019 levels. The defense costs (attorney’s fees and expenses paid to defend a claim) fell more than 25% from 2019 expenditures. The data from 2021 shows a continuation of this trend. Paid claims in 2021 were below the previous record-low payment levels of 2020. Analyzing indemnity payments and defense costs for 2021 identifies historical lows dating back to 1994, when the Illinois Legislature first required ISMIE to make such figures public. Over the last several years, ISMIE has also

been expanding nationwide and is now writing medical liability policies in 18 states. This business expansion coupled with poor investments are the likely true culprits of their stated operating loss. Any possible losses are clearly not attributable to defending or paying malpractice claims, which their own data shows to be lower than at any time in the last 25 years. The malpractice insurance industry is known for bamboozling doctors, raising rates, denying and delaying claims, all while lobbying for laws that strip away the legal rights of our citizens. ISMIE is doing what they always do, blaming everyone but themselves. J. MATTHEW DUDLEY President, Illinois Trial Lawyers Association

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12 MARCH 21, 2022 • CRAIN’S CHICAGO BUSINESS

YOUR TURN

Lawsuit sweepstakes: Lawyers and secret investors win. Consumers lose. A bill speeding through the halls of Springfield with little debate exacerbates an alarming trend in lawsuit abuse that preys on injured Illinoisans

lawyers and investors seeking bill speeding through to profit off of their misfortune. the halls of SpringThe scheme allows private field with little deinvestors to intervene in conbate exacerbates an sumers’ injury lawsuits and fialarming trend in lawsuit abuse nance legal costs and medical that preys on injured Illinoisbills on their behalf, while they ans. Democrats who control wait for their cases to move the General Assembly need to through the court system. But slow this so-called “reform” bill the financiers charge predatonow before it harms the conry interest rates for the “lendstituents they claim to protect. ing,” then slice up settlement Senate Bill 1099, which was Claire Howard is senior dramatically amended and vice president, general proceeds and leave unknowpassed in the Senate with- counsel and corporate ing plaintiffs with little to show in hours earlier this month, secretary of the Ameri- for their years of court battles. The bill in Springfield is beaddresses what is known as can Property Casualty third-party litigation financ- Insurance Association. ing presented as a reform bill, but it actually would allow ing. The dangerous lending practice allows secret and even foreign in- lenders to charge interest rates of 18% evvestors to line their pockets with the pro- ery six months for nearly four years. That ceeds from consumers’ injury lawsuits, alone could wipe out claims entirely of robbing the injured of long-awaited settle- the injured. The bill also does not require ment money they need to pay medical bills proper disclosure that other states have enacted in these cases, and it does not reand make up for lost work time. It is a rapidly growing business for inter- quire lenders to report on their business national financiers and Wall Street compa- activities. That should raise alarm bells for lawnies that has found its way to Illinois and local courthouses. Unknowing consumers makers who, in the past, have cracked are being used as poker chips by big-time down on predatory lending schemes in

Illinois. Here’s another one flying through the House and Senate with no brakes. Reforms are needed. But Senate Bill 1099, supported by trial lawyers’ associations whose members benefit from the outside funding and drawn-out court cases, is not reform. It is a disguise.

MASSIVE COSTS

All across America, consumers are already increasingly burdened by the impact of legal awards that impose massive additional costs each year on every household. According to the Institute for Legal Reform, the average Illinois household already pays more than a $1,049 “tort tax” annually due to unnecessary and abusive litigation. The obscure groups who look for injured parties are often composed of international hedge funds, special purpose investment funds, and even foreign entities. They pour capital to plaintiffs’ attorneys and medical providers to prolong lawsuits and build up damages that might not be medically necessary otherwise, leading to negative medical outcomes for injured parties in some cases. In other cases, these investors may make settlements harder to achieve and leave injured individuals with

reduced damage awards, which is particularly egregious when an early settlement might have been more beneficial. Third-party litigation financing is estimated to be an $11-12 billion industry in the U.S. Even the Harvard University endowment has invested more than $500 million to finance third-party litigation. According to the Geneva Association, by 2019, close to 70% of lawyers were very familiar with litigation finance, a significant increase from 50.3% only a year earlier, and its use has reportedly risen by 105% since 2017. The U.S. legal system is meant to provide justice to those who have been harmed. Instead, our civil justice system is being turned into a commodities market. This commercialization of our courts places more control of litigation into the hands of unknown third parties and distorts our civil justice system. The Illinois Legislature should defeat SB 1099 and consider common-sense rules to provide transparency to third-party financing. Shining the spotlight will help the Illinois courts and, more important, consumers identify abusive practices and serve up justice, not profits.

Fulton Market Metra station needs fast-tracking Chicago should leverage the growth and momentum of the West Loop to benefit adjacent emerging markets, job seekers and students on the city’s underserved West Side and the area at large

tra and CDOT to frame viable xponential corporate, infrastructure improvements commercial and resithat include a new Metra stadential growth in and tion to serve the FMID. Extenaround Chicago’s West sive studies led to a proposed Loop/Fulton Market District station located at Ogden, Ashover the past decade has poland and Kinzie—OAK—and sitioned this downtown subinclude a flyover rail line with market as the economic engine high-speed, nonstop service of our city. With new plans in to and from O’Hare Internaplace to expand these neighbortional Airport. hoods and the Fulton Market OAK would bring commutInnovation District, or FMID, ers from four existing Metra which was first established in Armando Chacon is lines directly into the west end 2014 and encompasses areas president of the West of Fulton Market. This projust west of Fulton Market, the Central Association. vides a more walkable option future looks even brighter for Chicago to continue its growth as a national than coming from the Loop’s Ogilvie or Union Stations for commuters whose jobs hub for innovation-driven companies. There is great opportunity here for all reside in Fulton Market, which is the new Chicagoans, each of whom deserve easi- downtown center for corporate headquarer access to the many well-paying jobs in ters, technology, life sciences, design and these neighborhoods. Creating transpor- more. For those living in Fulton Market, tation solutions to help remedy unequal which is on a trajectory for continued, fastaccess to the city’s highest concentration paced residential growth, the Metra lines of employment opportunities would be a served by the OAK station would better step toward furthering the intent of Chi- connect them to growing regional employcago’s 2020 ETOD—Equitable Transit-Ori- ment centers throughout the metropolitan ented Development—policy plan and area, such as those on the far west side of the city and in the western and northwestMayor Lightfoot’s citywide plan. Since 2017, the West Central Associa- ern suburbs, including O’Hare. But more notably, the OAK location tion, or WCA, which serves as the Chamber of Commerce to West Loop/Fulton Market will be a convenient connection point to and 11 other adjoining neighborhoods high-capacity CTA bus routes 9 and X9 west of downtown, has partnered with Me- along Ashland Avenue. Commuters exit-

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ing at OAK can easily catch a bus to quickly reach the growing light manufacturing, health industry employment centers and educational institutions west of Ogden Ave., in the neighboring Kinzie Industrial Corridor, Illinois Medical District, the University of Illinois Chicago, and United Center. There are hundreds of jobs available in these areas across multiple industries, including medical, technology, and hospitality with more anticipated to come in the next three years.

PROVIDING RESOURCES

The proposed OAK Metra station is within the 30-year-old Kinzie Industrial Corridor Tax Increment Financing, or TIF, District, set to expire this year. The TIF is designed to enhance the corridor, which is part of the FMID, by providing financial resources for public infrastructure improvements, often in conjunction with private development. The WCA supports the city’s proposal to extend the life of the Kinzie TIF district and believes TIF funds, in conjunction with new federal and state funding, should be earmarked to help build the OAK station and the proposed flyover to alleviate congestion from nearby commuter rail hubs. While there are several transportation projects throughout the Chicago region that can be prioritized with newly announced federal and state infrastructure funds, only the OAK station provides

public-transit solutions for (1) better connecting underserved neighborhoods on the city’s West Side, such as Garfield Park and Austin, to employers throughout Fulton Market and the FMID and (2), better connecting the FMID to O’Hare with the creation of an express line. To remain on par with other world-class destination cities, the new heart of downtown—the place where future-driven companies, the best talent and top labor meet daily—must connect directly with its major international airport, just as the Loop connects to O’Hare via the CTA Blue Line. Thus far, there is tremendous support for bringing a new Metra station to Fulton Market, but the proposed timeline for taking the plan from vision to funding needs to be shortened. State and local government have the ability in the next few months to advocate for and earmark available funds toward the building of the new OAK Metra station and accompanying O’Hare flyover, which addresses the need for broader access to available jobs, labor demands from companies in the WCA service areas, and the expectations of businesses and residents in these neighborhoods. Our city should leverage the growth and momentum of West Loop/Fulton Market to benefit adjacent emerging markets, job seekers, and students in the city’s underserved West Side neighborhoods and metro Chicago at large. Let’s act today to get this started.

3/18/22 3:02 PM

CRAIN’S CHICAGO BUSINESS • MARCH 21, 2022 13

PEOPLE ON THE MOVE

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

ARCHITECTURE

CONSTRUCTION

EXECUTIVE SEARCH

LAW

NON-PROFIT

Lamar Johnson Collaborative, Chicago

Pepper Construction, Chicago

Slayton Search Partners, Chicago

Levenfeld Pearlstein LLC, Chicago

Pepper Construction Group is proud to promote Keri Ames to Vice President of Marketing. In her new role, Keri will partner with Pepper’s offices throughout the Midwest to evolve their marketing pursuit strategies. Keri’s 19-year legacy at Pepper in marketing and establishing the company’s content strategy will impact sales by aligning Pepper’s expertise and thought leadership to each pursuit and improving overall processes. In addition, she will continue developing technical content.

Slayton Search Partners is proud to announce the newest addition to the team, Kevin Strohl, who will be filling the role of Vice President & Principal. Kevin will be focused on supporting Slayton partners with executive searches within the finance function. His significant experience in executive search at a number of top tier organizations will reinforce Slayton’s commitment to excellence in the client experience.

LP is delighted to welcome Jared Cloud as a partner in the firm’s Trusts & Estates Group. Cloud represents clients in trust, estate, and family business disputes. His trust and estate litigation experience includes representing fiduciaries and beneficiaries in controversies involving will and trust construction, contested accountings, trust reformation, probate claims, and breach of fiduciary duty. He also represents clients in numerous types of family business conflicts.

The Chinese American Service League, Chicago

Lamar Johnson Collaborative (LJC) welcomes Mark E. Spencer, AIA to the firm as Principal. Mark will oversee LJC’s technical delivery and quality review processes. For over 35 years, Mark has delivered and provided oversight for small- and large-scale commercial, educational, cultural, mixed-use, single- and multi-family residential, and hospitality projects. Mark is a proud graduate of the Illinois Institute of Technology (B.Arch).

The Chinese American Service League (CASL) congratulates Kim H. Tran on being accepted onto our Board of Directors. Mr. Tran is the Chief of Staff for the Office of the President at Chicago State University, the only U.S. Department of Education-designated four-year predominantly Black institution in Illinois. Mr. Tran serves as the senior advisor to the University President, overseeing operations for a leading public university that is proud to educate and support diverse student populations.

FINANCIAL SERVICES PNC Financial Services Group, Inc., Chicago

ARCHITECTURE / ENGINEERING Ardmore Roderick, Chicago

CONSULTING

Ardmore Roderick (AR), one of Illinois’ largest minority-owned infrastructure engineering firms, welcomes Sam Boye, Jr. as Vice President of Buildings and Facilities. Boye has over 23 years of experience across multiple regions, in aviation, K-12, cultural centers, higher education, commercial and multifamily facilities. He earned an MBA in real estate investment and finance from DePaul University and a bachelor’s degree in civil engineering from the University of Illinois at Urbana-Champaign.

HealthScape Advisors, Chicago HealthScape Advisors is pleased to welcome David Sann as its new Principal. David brings 25+ years of experience as a health plan executive leader and advisor, specializing in transforming and optimizing operations, implementing large-scale programs and launching innovative healthcare delivery models. His expertise spans from clinical operations and compliance to customer service, government affairs and more. David joins HealthScape from UnitedHealth Group where he held several executive roles.

Daryl Newell was appointed senior vice president and market manager for PNC Community Development Banking. He will support community and economic development efforts through loans, investments and educational programs for underserved neighborhoods in Illinois, Missouri, Wisconsin and the Kansas City region. Newell has over 30 years of experience in financial services including retail banking, lending, wealth management and operations. He recently, he served as market president for Seaway.

LAW Much, Chicago Much, a full-service law firm based in Chicago, has announced the promotion of Nicholas McIntyre to principal in the firm’s Real Estate group. Nick counsels clients on real estate tax matters related to commercial, industrial, residential, and mixed-use developments. He works with owners in the Chicagoland area to minimize the assessment and real estate taxes on their properties, and has deep experience with incentive classifications, tax exemptions, and tax increment financing.

REAL ESTATE @properties Christie’s International Real Estate, Chicago Leading real estate brokerage and technology firm @properties Christie’s International Real Estate welcomes Denise Tazelaar as vice president of education. In her role, Tazelaar will draw from her nearly two decades in real estate to help implement the company’s industryleading education and training programs. Tazelaar is a member of the National Association of REALTORS®, the Illinois Association of REALTORS® and the Mainstreet Organization of REALTORS®.

LAW BANKING First Bank Chicago, Skokie

CONSULTING

First Bank Chicago, a Division of First Bank of Highland Park, proudly welcomes Mary Hadzalic to our team as Assistant Vice President, Treasury Management Advisor. Mary is responsible for supporting our growth strategy by developing the Commercial Banking portfolio and building Treasury Management depository relationships in the Chicago marketplace. Mary brings over 17 years of banking expertise and comes to us from Byline Bank.

Treacy & Company, Chicago Boutique growth and innovation consulting firm Treacy & Company has named Joshua Coleman as Managing Partner. Coleman has over 15 years of experience advising senior executives on issues related to growth and innovation. Based out of the firm’s Chicago office, Coleman has helped companies with corporate strategy, marketing strategy, organizational design, and innovation program development. Coleman joined the firm in 2014 after working with Monitor Group and Monitor Deloitte.

BANKING First Bank of Highland Park, Northbrook As one of the five largest privately held banks in Chicago, First Bank of Highland Park is pleased to announce Steven Russo has been promoted to Senior Financial Analyst. Steven is responsible for supporting our growth and expansion strategy by focusing his efforts on the monthly/quarterly reporting and forecasting processes, analysis of assets, and annual budget planning. Steven has 5 years of accounting and banking experience and joined the First Bank team in 2016.

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LAW

Nixon Peabody LLP, Chicago

Benesch Law, Chicago

Nixon Peabody LLP is pleased to announce that Sharone Levy has joined the firm as counsel in our Project Finance and Public Finance Group. She represents various parties in municipal financings, including counseling clients regarding business, tax, and securities compliance risks. Her interest in public finance stems from prior experiences working in state and local government and as a credit rating analyst. She currently serves as president of the Chicago Chapter of Women in Public Finance.

Julie Loftus has joined Benesch as an associate in the firm’s Litigation Practice Group. Julie has represented clients in a wide range of complex commercial disputes including business torts, Loftus breach of contract, judicial commercial foreclosures, and other commercial and financial litigation. Brooke Rogers has joined Benesch as an associate in the firm’s Litigation Practice Rogers Group. Brooke focuses her practice on commercial litigation, including real estate matters, breach of contract, UCC, and insurance disputes; product liability, including, warranty claims; and environmental law.

ENGINEERING / CONSTRUCTION Burns & McDonnell, Chicago Burns & McDonnell, a 100% employee-owned engineering, architecture and construction company, welcomed Weston Trestler as a project manager to their pipeline team in their Chicago office. With over 15 years of experience in project and program management in the energy sector, Trestler will focus on serving natural gas clients nationwide.

LAW Croke Fairchild Morgan & Beres, Chicago Croke Fairchild Morgan & Beres welcomes Rob Isham as a partner to help lead the growth of the firm’s finance practice. Rob advises clients from various types of credit facilities on a wide range of debt financing transactions. He also practices in the developing cryptocurrency and digital asset space. Rob is based in Denver and serves clients nationwide.

NON-PROFIT

REAL ESTATE Darwin Realty/CORFAC International, Elmhurst Nick Krejci has been promoted to Vice President. Nick specializes in tenant/buyer & ownership representation, acquisitions/disposition services, built-to-suit, sale-leasebacks, and investment deals primarily in the Central DuPage, O’Hare, and I-88 submarkets. Since joining Darwin in 2016, Nick has completed over 2.7 million SF of transactions totaling more than $138 million, including over $65 million in 2021. He graduated Fordham University’s Gabelli School of Business with a degree in finance.

AARP Illinois, Chicago Philippe Largent has been named State Director of AARP Illinois, taking over from Bob Gallo, who retired after 15 years. Philippe has spent the last 25 years advocating for greater access to quality, affordable health care and other issues central to the well-being of Illinois residents. As AARP IL State Director, Largent will be the lead spokesperson for the state’s largest non-profit, non-partisan organization dedicated to improving lives of those 50+, also filling the top executive role.

REAL ESTATE Darwin Realty/CORFAC International, Elmhurst Patricia Liston has joined as a property manager. Her responsibilities include communicating with tenants, enforcing leases, coordinating building maintenance, developing budgets, and reporting regularly to the management about the state of assets. Patricia earned her bachelor’s degree at Purdue University and will graduate in 2022 with her MBA from DePaul University.

3/15/22 9:42 AM

14 MARCH 21, 2022 • CRAIN’S CHICAGO BUSINESS

What baseball’s new on-uniform ads mean for brands and the league New MLB labor deal brings sponsor patches for the first time. Teams eye a ‘blank canvas’ and millions in new revenue, but it could hurt fan perception, experts say. I BY JON SPRINGER

PLAYING CATCH-UP

In allowing sponsors onto its jerseys for the first time, baseball is catching up to rivals in professional basketball and hockey, not to mention soccer and auto racing, where advertising on uniforms and other equipment is already deeply entrenched. It also

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“FANS STAY LOYAL TO THE BRAND, THAT LOGO, AND TO THAT UNIFORM NO MATTER WHO IS WEARING IT.” Paul Lukas, sports marketing writer

DUBYA DESIGN

LB players this season will wear sponsored patches on their uniforms for the first time in the game’s 146-year professional history. The on-uniform ad opportunities come as part of a new collective bargaining agreement reached between MLB owners and players this month that ended a 99-day lockout and tackled contentious competitive and financial issues that had threatened the season and its $1 billion advertising opportunity. People familiar with the agreement say the new patches are conservatively expected to deliver revenue in the range of $3 million to $10 million a year for teams, but don’t arrive without questions or controversy. The move could easily strike out with fans who tend to see their team’s uniform as a sacred branding element of its own, and are concerned about interfering with that purity. It’s also possible that some partnerships could stray from the best interest of the game, its teams, and its fans. “Jerry Seinfeld famously said, ‘We’re all just rooting for laundry’ and what he meant by that was that rooting for a sports team is an unusually powerful form of brand loyalty,” said Paul Lukas, a freelance writer who has written extensively on sports uniforms and marketing at Uni-watch.com and other publications. “Brand loyalty usually has something to do with the quality of the product. I really like Cheerios but if they changed the Cheerios formula, my brand loyalty is only going to go so far. That’s what Coke learned with New Coke.” “With sports, the content of the product, and the quality of that product, is always changing as the players come and go, but fans stay loyal to the brand, that logo, and to that uniform no matter who is wearing it,” Lukas continued. “That is completely irrational, but also why it’s so powerful and so special. To my way of thinking, that should not be sullied or watered down by competing brands. The uniform already stands for a brand, a brand that we as consumers have a particularly powerful and irrational attachment to.”

leaves the NFL—long considered the most corporate of the major sports leagues—the only game whose uniforms promote only the teams. For the NBA, which began placing small logos on the left chest of its jerseys as part of a three-year experiment in 2017, brand logos are now an accepted part of the game and will deliver an estimated $225 million to its teams this year, said Adam Holt, senior VP of sales and partnerships of FanAI, a software company helping brands measure return on sports marketing investments. Holt notes that the pool of sponsor money isn’t necessarily equally distributed. Powerful teams with strong records and star players are likely to command more for a placement than a less successful franchise in a smaller city. But the uniform is also a more versatile medium than outfield fences and other sponsored elements of the game. “Jerseys are the only commercial asset that travel with the teams, so they’ll be on both home and away broadcasts,” said Matt Balvanz, senior VP of analytics and innovation at Navigate, a data-driven consulting firm in sports and entertainment. For some teams in leagues that have allowed advertising—such as the NHL, where ads on helmets began appearing in 2020— brands aren’t always represented. In a recent game between the Edmonton Oilers and Calgary Flames, neither team skated with a sponsor logo, Lukas noted. Sev-

eral NHL teams have more than one helmet sponsor. A representative for MLB said details of its program—the size and placement of patches, along with the possibility they would appear on helmets and not jerseys—were still in the planning stages. Among the issues likely to be occupying the league’s attention would be limits on the kind of brands that would be welcome to advertise. The MLB Players Association did not respond to a request for comment. Online sportsbooks—which today dominate sports broadcasts—are currently prohibited from advertising on NBA jerseys. However, the NHL, whose teams will begin placing ads on team sweaters beginning next season, is another story. The first team to announce a deal, the Washington Capitals, will carry the Caesar’s Sportsbook logo. Terms of that deal were not disclosed. MLB’s team-based sponsorship deals would appear to be destined only to the regular season, said Tony Ponturo, a former Anheuser Busch sports marketing executive who today is a sports marketing consultant. He said brands could potentially come into conflict with official sponsors on nationally broadcast playoff games—and at other times, with players who maintain separate marketing deals with brands. Budweiser for example at one time owned branding for the courtside scorer’s table at most NBA arenas, but its marks were removed in deference to Miller

Lite’s rights as an official league sponsor once the postseason began. (Bud owner AnheuserBusch InBev is now the official MLB sponsor.) Teams will also need to keep an eye on reputational issues that can arise in sports that are not likely in other environments. “I’ve always felt if I put a Budweiser patch on the Red Sox and they came to New York, then I would have the home fans saying they won’t drink Budweiser,” Ponturo said. “If you’re upsetting 15% to 20% of the fans because they don’t approve of the sponsor, you have to ask whether it’s all worth it.”

EXPERIMENTS

MLB has previously included ads on its batting helmets and/ or uniforms only in select games played outside of the U.S., like series held in London, Tokyo and Mexico City. And umpires began wearing patches in the middle of last season, sponsored by the cryptocurrency trading company FTX. “Those experiments resulted in strong visibility of the patch on broadcasts, and no real complaints from the teams, so [they were] successful overall,” Balvanz said. Balvanz estimated that baseball teams could realize new revenue of “anywhere between seven and eight figures,” depending on the team, market, competition for the patch, and other details of the deal. MLB has historically guarded the purity of its uniforms: In 1976, when Atlanta Braves owner Ted Turner, who also controlled the team’s

broadcasting rights, swapped the last names used on uniform nameplates in favor of nicknames. Pitcher Andy Messersmith, who wore No. 17, was nicknamed “Channel” in reference to channel 17, where Braves’ games aired locally. The stunt was quickly thrown out by National League President Chub Feeney. Any conflicts arising with the new on-uniform ads will require teams to educate fans on the benefits of sponsorship, experts said. “They will undoubtedly be packaged with other community initiatives such as the patch brand supporting local charities, passing hospitality along to ambassadors, and oftentimes, improving the fan experience overall through B2B relationships with the teams and venues themselves,” Balvanz said. One test of the limits will likely come from the New York Yankees, whose large fan base, long record of success and wide-reaching broadcasts would command a premium price but who also take the field in one of sport’s most iconic uniforms; the franchise has resisted trends among rivals to participate in periodic logo revamps and color adjustments or league-wide promotions in special uniforms, like last year’s City Connects debut spearheaded by the equipment provider Nike. Such evolution is long thought of as an inevitability. It wasn’t long ago that outfield fences were free of ads, Ponturo noted. Brands today would appear to see the uniform as the “blank canvas for the future,” in spite of fans who’d prefer they’d leave well enough alone, said Ponturo. “If you’re pro-ad patch from a management or advertising standpoint it’s in your interest to have fans thinking that was inevitable because it becomes a self-fulfilling prophecy,” said Lukas. “And one of the sad things about this is that it contributes a growing cynicism among sports fans where they say, ‘I know this sucks, but what are you going to do?’ You give your heart and soul to a game that doesn’t really love you back. You feel helpless.” Jon Springer writes for Crain’s sister publication Ad Age.

3/18/22 3:00 PM

CRAIN’S CHICAGO BUSINESS • MARCH 21, 2022 15

How direct sales enticed Rivian to Georgia A willingness to consider an exemption for the electric vehicle maker’s business model helped the state land a new $5 billion assembly plant Last year, electric vehicle startup Rivian Automotive had a proposal for the state of Georgia. Like many states in the union, Georgia has dealer-friendly laws that prohibit factory direct-toconsumer sales. But Rivian, with a factory-direct business model, asked Georgia legislators to exempt the new company. Legislators balked. Late last year, Rivian said it will spend $5 billion to construct one of the world’s largest auto plants about 30 miles outside Atlanta, hiring 7,500 workers. While no one suggests that Rivian selected Georgia as a factory site purely to have its way with state dealer laws, the company’s sudden new prestige in the state certainly won’t hurt. “I can’t tell you we’ve had great success with the automobile dealers,” said Rep. Chuck Martin, a co- sponsor of House Bill 460, which seeks to allow new EV-only companies to sell direct in Georgia. “They have a monopoly, and they want to keep it.” The Rivian investment—the largest in the Peach State’s history—has gotten the attention of lawmakers, who are considering three bipartisan bills that would allow new-line EV manufacturers to sell direct in the state. Rivian’s factory creates buzz for the startup and raises the profile of electric vehicles in Georgia, Martin said. “There are a lot more Braves fans after they won the World Series than there were before,” the legislator mused. HB 460 founderd in the 2021 legislative session but remains on the docket this year. Meanwhile, two new Georgia Senate bills introduced in 2022 seek to expand a 2015 exemption granted specifically to Tesla. James Chen, Rivian vice president of public policy, said the automaker is “supportive” of the direct-sales bills in the Georgia Legislature. “We believe that this is the right direction for our business model, and these bills would help us pursue that business model appropriately,” Chen said. But Georgia’s auto dealers have a different perspective. While the state’s carve-out for Tesla was limited to just one manufacturer, the new bills are broadly written to include new EV manufacturers and their parent corporations and subsidiaries, noted Ben Jordan, senior director of governmental relations for the Georgia Automobile Dealers Association. Rivian is backing legislation in Georgia that would allow newline electric vehicle makers to sell direct to customers. Rivian says the direct-sales model promotes consumer

P015_CCB_20220321.indd 15

choice and competition. Georgia’s franchised dealers say they are well equipped to sell and service EVs and that the factory-direct model would cost jobs and hurt local businesses. “The universe of manufacturers and their related entities [that the new bills apply to] is essentially boundless,” Jordan said. “The barn door is being left open much wider.”

LOBBYING

Nearly half of U.S. states allow manufacturers to sell directly under certain circumstances. Seven states allow an exception to dealer franchise laws to a single manufacturer. But bills that seek to allow direct vehicle sales have been introduced in at least 10 states, backed by EV startups but opposed by franchised dealers. Rivian, which began producing its R1T pickup just last year, has been lobbying Georgia lawmakers for the past two or three years. “This is a battle of sound appropriate policy versus political influence,” Chen said. “It’s about consumer choice, access to technology, open competition, versus the fact that dealers are in every city, state, small town. “In many cases, they’re often the legislators.” Butch Miller, Georgia’s Senate president pro tempore, is also a Honda dealer in Gainesville, Ga. But $5 billion and thousands of new jobs could help Rivian counter the dealer lobby’s clout. Chen said that Georgia’s willingness to consider direct sales was an “important consideration” in Rivian’s site-selection decision. “One of those factors was whether the state was open to our business model, or what they were willing to do to work with us on our business model,” he said. “We certainly did get a very forward-leaning reception from the governor’s office.” But Chen insisted that Rivian has received no assurance it will prevail in the General Assembly. “It’s not a tit-for-tat type of deal,” the lawyer said of the factory investment. “It’s not a quid pro quo.” Martin concurred: Rivian advocated for HB 460 but “never tied the legislation, or the passage of it, to any investment in Georgia.” While Rivian distances its lobbying efforts from its siteselection decision, North Carolina’s Triangle Business Journal reported the automaker might have dropped that state as a potential factory site after efforts to push for direct sales there failed to get traction. Like Georgia, North Carolina bans automakers from selling direct to consumers but has exempted Tesla. While negotiating with North Carolina over potential incentives for the factory, Rivian also lobbied for a bill that would level

RIVIAN

BY URVAKSH KARKARIA

Inside Rivian’s plant in Normal, Ill. the playing field with Tesla by allowing it to sell directly to customers, the business publication reported March 4, citing records obtained through a Freedom of Information request. But the bill was never introduced. On May 4, 2021, Rivian told the state that “the foundation of our business model is direct-tocustomer sales and service.” “Unfortunately, North Carolina’s law as it currently stands would prohibit us from being able to do that,” the automaker wrote the state. “This issue alone is making it very hard for us to dive deeper.” According to the report, by July 30, Rivian told the state that a “commitment to leveling the playing field” was the only way to move the project forward. Chen maintains that, without or without a factory investment, Rivian’s direct-sales model is good for Georgia. It is about “giving Georgians the right to be able to purchase the vehicle how they want,” he said. “I’m optimistic ... legislators will have the political courage to vote for policy that helps support and promote local businesses wishing to invest in the state.” But Georgia’s franchised dealers say Rivian’s big-dollar investment in the state does not warrant a change in state law meant to protect consumers. Dealer agreements and franchise laws ensure consumers “get the best product, backed by good service, and if anything goes wrong, there’s protection for them,” said Jimmy Ellis, president of Atlanta-based Jim Ellis Automotive Group. Dealers argue that they are perfectly capable of selling and

servicing EVs as their legacy franchises also pivot toward electrification. Currently, there are 31 all-electric models available to purchase in the U.S., with at least 10 more expected by year-end, according to Guidehouse Insights.

EXISTENTIAL THREAT

Dealers invest millions of dollars in training, equipment and charging infrastructure to sell and service the next-generation vehicles, said Ellis, whose group operates 20 stores representing 17 brands. “We’re all about electric vehicles—we know how to do it, and we will be the absolute rock stars when they really start rolling out,” he said. “There’s just simply not a need for a separate distribution, sales and service channel for motor vehicles, especially when they’re riskier and don’t offer the efficiency and effectiveness of the franchised network system.” Ellis, a state dealer association board member, points to Tesla’s well-documented struggles with service capacity as a potential challenge automakers face when they take on the retail side of the business. “You got customers waiting days to get repairs,” he said. “If your endgame is to give the customer a great ownership experience, then that to me hasn’t been improved.” Rather than mimic the Tesla model, Ellis has this suggestion for Rivian’s board: “I’d start looking at what’s about to be a tidal wave of competition, and I’d be knocking on Jimmy Ellis’ door saying, ‘Look, I’m rethinking now—you might be the best person to get me a hot start out of the gate in Georgia.’ ” Dealers view direct sales as an

existential threat, and some see legislation such as what Rivian is proposing in Georgia as a slippery slope. “Pretty soon, the legacy manufacturers are saying, ‘Well, all of them got in, why not us?’ That is the heart of the concern,” Ellis said. “It’s death by a thousand cuts, except it won’t take a thousand cuts.” The wariness is not unfounded. Last year, Volvo Cars said it planned to sell its battery-electric vehicles through an online model, delivering customers’ preordered vehicles to dealerships rather than having retailers stock hundreds of new cars. Meanwhile, Ford wants to craft a new set of operating standards for EV sales that would include the most popular aspects of the direct-sales model popularized by Tesla. Dealer associations say encouraging direct sales will cost jobs and hurt local businesses. But according to the Michiganbased Mackinac Center for Public Policy, traditional auto sales and dealer revenue have increased nationwide since 2012 when Tesla introduced the direct-sales model—with sales climbing 52% and employment growth of 18%. States that are partially or fully open to direct sales outperformed the national average, with sales growth of 58% and employment growth of 21%. “It shows the doomsday scenarios that the dealers are portraying aren’t factually based,” Rivian’s Chen said. “Competition is a good thing versus protectionism, which is essentially what the dealers are arguing for.” Urvaksh Karkaria writes for Crain’s sister publication Automotive News.

3/18/22 2:59 PM

16 MARCH 21, 2022 • CRAIN’S CHICAGO BUSINESS

‘Don’t kill me’: Carjacked Amazon drivers speak out against company policy More say they want to know a delivery’s destination before taking the gig. A deliveryman shot on the South Side says that information would help drivers decide if $30 an hour is worth the risk. I BY SPENCER SOPER AND JACKIE DAVALOS

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Most drivers working for Amazon’s gig-style Flex service receive assignments via a smartphone app that tells them how much they can earn and about how long the trip is expected to take. But drivers don’t know specifically where they’re being sent until they get to the delivery station to gather their packages. If they decline a route, Amazon penalizes them, which can mean they get less work or no further work at all. The delivery station from which Hunt usually works, in Country Club Hills just south of Chicago, has signs posted to remind drivers that they can’t decline routes or ask for new ones.

‘ROUTE REFUSAL’

“If you choose to not take a route based on location, it is considered a route refusal and appropriate action will be taken,” reads a sign in the station, according to a photo reviewed by Bloomberg. Amazon spokeswoman Maria Boschetti said the company has a “rigorous process” to evaluate dangerous incidents so it can prevent them from happening again, but she declined to reveal any details. Drivers taking delivery blocks don’t know their destinations in advance because the routes haven’t been assigned yet, she added. “We’re committed to the safety of drivers and the communities where we deliver, and we work hard to ensure Amazon Flex delivery partners feel safe on the road while making customer deliveries,” Boschetti said. “If a driver arrives at the delivery location and does not feel safe, they are not expected to deliver their route and will not be penalized for refusing. At Amazon, safety is our top priority, and we want to ensure all Flex [delivery partners] feel safe delivering their routes.” Amazon isn’t the only delivery service providing limited information about destinations. DoorDash Inc. couriers can see the minimum pay and distance of a delivery, but not the specific address until the order is accepted. At Lyft Inc., drivers can see the distance to a pickup location, but not a passenger’s destination before accepting a trip. In the lead-up to Proposition 22, a California ballot measure exempting gig companies from a state law requiring them to classify workers as employees, Uber Technologies Inc. let drivers set their own prices for rides and see passengers’ destinations before accepting a trip. The ride-hailing company later revoked the feature, saying drivers turned down too many rides. Since then, Uber has been exper-

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eorge Hunt took two bullets in a botched carjacking while delivering packages for Amazon in Chicago. Now he’s pushing the e-commerce giant to notify contract drivers in advance about the neighborhoods they’ll be traveling to so they can decide if $30 an hour is worth the risk. Hunt left his 2015 Volkswagen Jetta running just before 5:30 a.m. on Feb. 23 to make a delivery on East 87th Place on the South Side. While running up to the stoop to drop off a package, he was startled to hear his engine revving. He turned around to see a man emerge from his car and point a gun at him. The gunman popped off several shots as Hunt ducked for cover. One bullet struck him in the shoulder and lodged in his back. Another passed through his left thigh and grazed his right leg. Hunt only realized later it was a carjacking gone awry, and the would-be thief most likely abandoned his car because he didn’t know how to drive a stick shift. “While I’m on the ground, I’m not being a hero,” said Hunt, 32, who also owns a car detailing business in Indiana with his brother. “I’m screaming ‘Don’t kill me. I’ve got a baby on the way. I didn’t see shit. Just go. Just go.’ ” His was the third and most extreme incident affecting Chicago contract delivery drivers over two days last month. Hours after the attack on Hunt, a 69-yearold Uber driver was carjacked. The following day, two armed men demanded van keys from a 36-year-old Amazon delivery driver and stole the vehicle full of packages, according to police. Chicago is the epicenter of a spike in carjackings plaguing big cities around the U.S., leaving gig workers who spend their days ferrying meals, people and packages particularly vulnerable. Vehicular hijackings in Chicago jumped 30% in 2021 from the previous year. The city created a task force to fight the rise, and police have announced a string of arrests. New York, Philadelphia and New Orleans are among other big cities that have reported a rise in carjackings, often used by gangs to test the gumption of young recruits. Hunt’s shooting is galvanizing drivers who want more information about their destinations and caught the attention of U.S. Rep. Jesus “Chuy” Garcia, a Chicago Democrat. “Companies like Amazon rely on independent contractors to dodge responsibility for wages, benefits and workplace protection,” he said. “I call on Amazon to do right by its workers and on Congress to fix these oversights in our labor law.”

George Hunt says “Amazon intentionally leaves off where you’re going because they know if they put up routes for certain neighborhoods, they wouldn’t get picked up.” imenting with versions of the policy, giving drivers more visibility again in 24 U.S. cities. Previously, such information was reserved for drivers who accepted a certain number of rides. Drivers simply want the same information supplied to most independent businesses, said Lenny Sanchez, director of the Illinois chapter of the Independent Drivers Guild, which advocates for drivers’ rights and has about 250,000 members around the country. “Allow us to make an intelligent decision on whether we want to accept an assignment rather than making it a big gamble every time we hear a beep on our phones.” Drivers have voiced concerns about being sent to Chicago in the early morning when it’s still dark given the number of shootings and robberies in the area, but Amazon hasn’t listened, they said. Some drivers have resorted to carrying weapons, even though it’s against company policy. “Amazon intentionally leaves off where you’re going because they know if they put up routes for certain neighborhoods, they wouldn’t get picked up,” Hunt said. “Do I feel bad for the people in those neighborhoods? Absolutely. But not so bad that I should have to go out there and get shot and be expected to go back to the same neighborhood the next day.” Any company that offers to deliver just about anything, anywhere, at any time will struggle to navigate crime-stricken areas. Amazon can stop dispatching drivers to specific addresses if they report aggressive animals or customer harassment. But ceasing or

even limiting operations in entire neighborhoods—especially those with large minority populations— can run afoul of the federal Civil Rights Act of 1964, which prohibits the withholding of services based on race. If Amazon shared destinations up front, drivers could demand more pay to go to neighborhoods they perceive as dangerous, driving up costs. “On the one hand, withholding information reinforces the grip algorithmic management has on workers,” says Lindsey Cameron, an assistant professor of management at the Wharton School of the University of Pennsylvania. “On the other, one of reasons you’re able to get drivers into these lower socioeconomic status neighborhoods, is because there’s no visibility. I don’t know if there’s a simple way to regulate this.”

CRIME STATISTICS

Domino’s Pizza Inc. in 2000 signed a consent decree with the U.S. Justice Department following complaints that it discriminated against Black people by providing limited delivery in some neighborhoods. The decree required Domino’s to base such decisions not merely on an employee’s perceptions but on crime statistics that demonstrated certain areas to be dangerous. In 2016, Amazon agreed to expand its sameday delivery service to minority urban neighborhoods in Boston, New York and Washington after a Bloomberg investigation revealed the company excluded some predominantly Black ZIP codes in several big cities. Hunt started delivering for Amazon regularly in January after learn-

ing his wife was expecting their first child. His detailing business suffered during the pandemic, and he wanted to earn extra money. He typically took four-hour routes that begin as early as 3:30 a.m. and pay about $120. His destination each day is random, and he can find himself 40 miles in any direction from the delivery station. After getting shot, Hunt waited a few minutes on the ground, then jumped in his car and sped off. He parked in front of a drugstore a few blocks away and called the police, then phoned his brother who helped him stay alert until help arrived. He spent about 12 hours in the emergency room, his wife waiting outside due to COVID-19 restrictions. Hunt wears a sling to help heal a broken scapula and said doctors told him it will be months before he can use his left hand again, which he needs for the detailing business. His lawyer submitted a claim for worker’s compensation, and his brother is overseeing the business in the meantime. Hunt hasn’t received a hospital bill yet, but said he has insurance and hopes his portion of the bill doesn’t exceed a few thousand dollars. Hunt said he won’t deliver Amazon packages again for fear he wouldn’t survive another shooting. But he says even if some drivers refuse to accept gigs in certain neighborhoods, Amazon knows hundreds more will take the risk. Once his wounds heal, Hunt plans to visit Washington to speak with any lawmaker who’ll listen. “We don’t have any power,” he said. “Amazon’s gonna get us killed.” Bloomberg News

3/18/22 2:57 PM

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18 MARCH 21, 2022 • CRAIN’S CHICAGO BUSINESS

Traders skip sleep as wheat market is roiled BY KIM CHIPMAN, ALLISON NICOLE SMITH AND MICHAEL HIRTZER With famed open-outcry trading pits long since closed in Chicago and Kansas City, most of the shouting during wheat’s great blowup of 2022 came on social media or in the private confines of a home office. James Neville, who’s been trading wheat and corn for 38 years, now prefers working from home in Fairway, Kansas, in front of five computer screens, where there’s no risk of getting spit on or stabbed with a pen, a notuncommon occurrence on the trading floors of yore. He says he never seen a market moving faster than this one. Wheat prices soared as much as 54% to a record of $13.635 a bushel in the wake of Russia’s invasion of Ukraine. The conflict led to a halt in shipments of wheat in the Black Sea hub where the two countries account for over a quarter of global exports. The war has also killed thousands and raised the risk of hunger for Ukrainians. Citizens in Africa and the Middle East dependent on grain from the Black Sea are also facing skyrocketing prices and a lack of food. Extreme volatility in crop markets is exacerbating the situation. Surging futures had farmers

eager to sell, while buyers at flour mills and bakeries have so far been balking at the higher costs. Gains in wheat have outstripped those in the crude oil market, although they trailed the moves in nickel. “There is so much money pouring into these commodities markets now that it’s overwhelming the contracts,” Neville said by phone. “We don’t have a shortage of wheat in this country. We have a shortage of futures contracts,” he added, explaining that with everyone loading up on one side of the market, people can get trapped. “I’ve seen this happen before. This one was just worse.” Neville, who witnessed people throwing up in the bathroom during 1987’s Black Monday market crash, said he now makes sure to take his goldendoodle for a walk when things get too stressful. Still, he remains glued to his phone most days.

EXTREME VOLATILITY

Wheat prices had cooled a bit after hitting a record March 8. However, without a resolution to the war, spring plantings for farmers in Ukraine are in doubt, which could drastically reduce the world’s supplies of wheat, corn and sunflower. For commodity traders, that

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‘We don’t have a shortage of wheat in this country. We have a shortage of futures contracts.’

means monitoring markets nearly around the clock. “Being around my computer at 7 o’clock Sunday night is absolutely necessary,” said Ryan Ettner, a commodity broker at Allendale Inc. in Illinois. “Markets are so volatile, people just want that information right now.” Ettner worked at ArcherDaniels-Midland Co., one of the world’s biggest crop traders, in 2008 when wheat had a similar move during the global financial crisis. Trading floors made it

easy to see when big players were buying or selling. Now, he’s just getting a lot of late-night phone calls. Even though rallies today lack the “rush of noise” you used to get from the trading pit, Ettner said, “This is the craziest time to be a trader since then.” Lane Broadbent, president of commodity futures brokerage firm KIS Futures in Oklahoma City, said he had one client who missed out on the wheat rally in 2008 and now he’s determined to

stay in the current market. When overnight shelling sparked a fire at Ukraine’s Zaporizhzhia nuclear power plant this month, Broadbent fielded as many as 35 calls from panicked traders. He had been at a local basketball game at the time and stepped outside to put in trades. Stressed-out clients told him, “I can’t sleep. I can’t concentrate. All I can think about are my futures markets.” Bloomberg News

Fifth Third’s lending numbers don’t back up positive story BY STEVE DANIELS Fifth Third’s commercial lending presence continues to erode in Illinois, more than two years after its acquisition of Chicago’s MB Financial. Commercial loan balances in Illinois dropped to about $7.7 billion at the end of 2021 from $9.7 billion the year before, according to Securities & Exchange Commission filings. The Cincinnati-based bank showed a similar 21% decrease in Illinois commercial loan exposures—the lines of credit available to customers including amounts not yet tapped. The numbers fly in the face of the positive tale Fifth Third is telling Wall Street about how it’s doing in Chicago following the $3.6 billion buyout of MB Financial in 2019. “From a regional middle-market perspective, we generated strong production (last) year in several markets including Chicago,” CEO Greg Carmichael said in a Jan. 20 conference call with analysts. “Chicago led all Fifth Third regions with 50 new quality middlemarket relationships added in 2021, nearly double the next best

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among Fifth Third’s regions,” spokesman Larry Magnesen says in an email. “In middle-market lending, Chicago production increased about 50% from 2019 to 2020, and increased a further 15% from 2020 to 2021.” The bank projects a 13% increase in Chicago middle-market production this year, according to an investor presentation. The question then is whether Fifth Third is losing so many Chicago business customers that it’s overwhelming the success the bank says it’s having in winning new business. First, Magnesen says, the yearover-year loan-balance reduction appears worse than it was. Of the $1.9 billion in lower loans, $900 million was due to the forgiveness of federally backed Paycheck Protection Program loans tied to government COVID aid to small businesses. He attributes some of the remaining $1 billion decline to customers paying down their debt. Fifth Third increased its Chicagoarea deposits by $1.6 billion last year, he says, and $600 million of that was from business customers. “Our clients have a high degree

of liquidity and have paid down credit lines,” he says. Other contributors to the decline include a bankwide reduction in commercial real estate lending. Finally, he says, “We have continued to allow clients with exposure categorized as ‘criticized’ (special mention, substandard, or doubtful)—which is derived from standard regulatory rating definitions—to exit the bank.” In other words, many of these are customers the bank is happy to see leave.

CUSTOMER EXODUS

That’s a standard explanation bankers give for the exodus of customers following a culturechanging merger. Competing bankers typically cock an eyebrow and say deals like Fifth Third’s, where an out-of-town bank acquires a well-known local institution, are the “gifts that keep giving.” Despite Fifth Third’s explanation, $1 billion in a single year is a lot by any measure, given the size of its Illinois loan book. In addition, other local business banks experienced nothing similar last year. Rosemont-based Wintrust Fi-

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Commercial loans in Illinois fell more than 20% in 2021. The bank says there are reasons for that, which mask the gains it’s making here two years after buying MB Financial.

nancial, for example, saw commercial loans grow by 12% last year, to $17.6 billion from $15.6 billion, according to SEC filings. The majority of Wintrust’s loan business is in the Chicago area. Those figures don’t include PPP loans. Even Chicago-based First Midwest, arguably distracted by its own deal to sell to Evansville, Ind.-based Old National, announced in May, managed to eke out a small commercial loan increase last year—to $9.9 billion from $9.8 billion. In addition, Fifth Third held its own on its home turf. In Ohio, total commercial loan balances dropped 7% to $7 billion from $7.6 billion in 2020. That perhaps reflected PPP forgiveness.

But total loan exposure in Ohio—meaning commercial credit available to customers, whether they use it or not—grew 5% to $15.9 billion. Ohio now well exceeds Illinois as Fifth Third’s biggest commercial market by that measure. Illinois was easily Fifth Third’s largest market following the MB deal. At the end of last year, Illinois accounted for just 9% of Fifth Third’s total commercial loan exposure. Ohio was 12%. California and Texas were right behind Illinois, at 8% each. Fifth Third doesn’t even have retail branches in California and Texas. Of the 11 states where it does have retail locations, Illinois has the second most—behind Ohio.

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Navistar races to develop, manufacture autonomous trucks, despite concerns This will change every part of the trucking industry in some way, says Chris Gutierrez, chief engineer of Advanced Driver Assistance Systems, or ADAS, at Navistar. “It isn’t just the truck itself. It’s how we sell a truck and maintain it. How a company brings the truck into its logistics business.” The technology won’t be adopted without a fight. Unions fear the loss of driver jobs. And there are safety concerns—the nightmarish visualization of a runaway truck on a mountain downhill—as well as transparency in the reporting of testing and how these trucks will be regulated. The Arizona test was run by Navistar technology partner TuSimple, an autonomous trucking startup based in San Diego that went public last year. The partnership, established in 2020, aims to develop selfdriving semi-trucks for production by 2024. Navistar and its parent company—Volkswagen’s heavy-truck business, Traton Group of Germany—each own minority stakes in TuSimple.

CROWDED FIELD

The Navistar-TuSimple alliance is part of a crowded field that has upstart tech firms retrofitting current operating trucks and also working with original equipment manufacturers to build new driverless trucks. Bellevue, Wash., truck maker Paccar last year teamed with Pittsburgh-based Aurora, another autonomousdriving tech firm, and FedEx to launch a commercial pilot. Other tech firms in the competition are San Francisco-based Embark Trucks and Cupertino, Calif.-based Plus. Shippers are hedging their bets. Ohio-based DHL Supply Chain, part of Germany’s Deutsche Post, last year reserved 100 Navistar-TuSimple trucks as well as 100 autonomous trucks from Embark. It’s also collaborating with an OEM, says Jon Cox, senior director of solutions design at DHL Supply Chain. “We want to work with as many (companies) as possible because we don’t know what it’s going to end up looking like,” Cox says.

JOHN R. BOEHM

NAVISTAR from Page 1

Navistar’s Chris Gutierrez, left, and Sudha Veerapaneni “Everyone is going after the same thing but coming at it from different angles.” About 40 states have designated certain corridors for testing of autonomous vehicles. But interstate shipping won’t be possible until the U.S. Department of Transportation establishes regulations governing the technology. And the process is sure to be contentious. The Teamsters and Transport Workers unions, as well as the Missouri-based Owner-Operator Independent Drivers Association, or OOIDA, have raised questions about safety, transparency, the loss of jobs and the potential to drive down hourly rates for independent drivers. Doug Bloch, political director of Teamsters Joint Council 7, testified at a February hearing before the U.S. House Committee on Transportation that lawmakers should help ensure that American workers aren’t left behind and that safety of drivers and the motoring public is protected. “The impact that automated

vehicles will have on workers is still unknown,” Bloch said. “Congress has an opportunity to mitigate these impacts before they happen, and possibly shape better outcomes.” OOIDA is asking that regulators require manufacturers to disclose results of their testing and deployment process, not just after a crash occurs. “Before we put this technology on an 80,000-pound truck, let’s make sure it works on a 3,000-pound car,” says William “Lewie” Pugh, executive vice president at OOIDA. Boosters of driverless technology say the trucks will be designed with emergency backup systems and can be controlled by humans remotely.

TRANSFORMING THE SUPPLY CHAIN

The introduction of remote controllers has analysts considering whether those controllers, the technology company, the manufacturer or the truck owner will be liable for accidents. Insurance companies will have to develop policies that address

technology errors and omissions, cyber-liability and other issues. TuSimple is working with Liberty Mutual Insurance to create a coverage product. For its part, Navistar is building its prototype from the ground up, “to build the ideal house,” Gutierrez says. Navistar engineers are interviewing fleet customers to evaluate which features to retain. Some may want to experiment with one or two trucks, and others may want to convert entire routes to autonomous, says Sudha Veerapaneni, product management director of ADAS and technology at Navistar. TuSimple is taking reservations for the Navistar self-driving truck, but it won’t accept actual orders until a production date is set. In disclosing the Arizona test, TuSimple said the truck “successfully navigated surface streets, traffic signals, on-ramps, off-ramps, emergency lane vehicles, and highway lane changes in open traffic while naturally interacting with other motorists.” It has since run additional auton-

omous outings on public roads. The Navistar truck is being designed with a cab so that shippers can use it with or without a driver. “From 50 feet away, it looks exactly like today’s truck—a long hood and even a sleeper configuration for some,” Gutierrez says. These autonomous trucks are being designed for mediumand long-haul trips where there are fewer human touchpoints. “From a political and regulatory standpoint, that’s where it will be most palatable and where the driver shortage is most acute,” Cox says. However many years away, autonomous trucking will surely transform the supply chain. “If there’s no driver, there’s no limit on hours, so you can run 24/7,” Veerapaneni says. While there’s been national attention on the possibility of driverless passenger cars, autonomy could take hold in freight sooner because there’s an economic need, Cox says, adding, “There’s impetus to solve the supply chain crisis.”

McDONALD’S from Page 3 Gerben tweeted about the Uncle Vanya’s application. He notes the words “Uncle Vanya” accompany the McDonald’s logo in the application. McDonald’s opened its first location in the then-Soviet Union in Moscow’s Pushkin Square in January 1990. Tens of thousands of people lined up for hours to get their first taste of the West. As such, many say the Golden Arches have become a proxy of sorts for America and

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globalization. Some had predicted McDonald’s might fall victim to antiAmerican sentiment even before Russian President Vladimir Putin invaded Ukraine late last month. The Chicago-based company shut down its 108 stores in Ukraine in short order after the war began, but it held on to its Russian stores even amid mounting pressure. Sales at those locations in both countries represent about 9% of the company’s overall revenue, so closing them was a hit to the com-

pany’s top line. McDonald’s continues to pay the salaries of its workers in Ukraine and its 62,000 Russian employees. Executives have since said the company will lose $50 million each month the Russian stores are closed. Experts have wondered how long it might take McDonald’s to regain Russian consumer trust once—and if—it reopens its locations in the country, 84% of which are company owned. If Russia does lift trademark restrictions, that question is further complicated.

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Uncle Vanya’s aims to replace McDonald’s stores

3/18/22 3:36 PM

20 MARCH 21, 2022 • CRAIN’S CHICAGO BUSINESS

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hope to see their property values rise and want the city to encourage homeownership. Investors, meanwhile, fear any new red tape will curtail the neighborhood’s ascent. There’s politics at play, too: Ald. Leslie Hairston, 5th, believes one of the leaders of the push for tenant protections intends to challenge her in the 2023 elections. In other areas where gentrification fears have escalated—like Pilsen and near the western end of the 606 trail—the city has passed rules designed to protect longtime residents from being priced out, including new fees on developers. In Woodlawn, just west of the Obama Presidential Center, a “community benefits agreement” reached between organizers and the Chicago Department of Housing imposed affordability requirements for housing built on city-owned lots. The department also set aside $4.5 million of its own money and identified $5 million from other loan programs to help pay for rehabs. Now the Obama Community Benefits Agreement Coalition has turned to South Shore, holding town halls, protesting and testifying at City Council meetings. They want a similar CBA arrangement requiring the city and developers to prevent gentrification from displacing low-income residents. Yet the Housing Department has less direct influence over South Shore’s future than Woodlawn’s. The city owns half as many vacant lots as it did in Woodlawn, and most are far from the presidential center site. Instead of empty lots, South Shore has a lot of vacant and abandoned buildings, with some owing back taxes, fines and fees that make them costlier to rehabilitate. Although South Shore isn’t a gentrification hot spot, there are signs of growing interest in the neighborhood. The area is appealing not only for its location near the lake, Jackson Park, public transit and the presidential center, but also for attractive housing not unlike the North Side lakefront. The median price of a single-family home in South Shore has surged 150% to $186,000 since plans for the presidential center were announced in 2015, quadruple the rate of increase for homes citywide.

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Fight for South Shore’s future

Meanwhile, rental supply is falling. The number of rental units in South Shore that cost less than $900 per month—a standard measure of affordability—dropped by 32% between 2010 and 2019, according to the DePaul Institute for Housing Studies. South Shore also ranked first in eviction filings in 2019, with rates 137% higher than the city overall, according to the Lawyers’ Committee for Better Housing. Dixon Romeo, a lifelong resident of South Shore and lead organizer with the CBA coalition, says his family is one of many feeling affordability pressure. “I’ve had to help my mother pay property taxes on our house; there was a lien on my house because we could not afford the rising property taxes.” To help preserve affordable housing in South Shore, Romeo’s

group wants the city to enact a series of new rules for landlords and developers. These include a requirement that developers make 60% of new units affordable for people earning 30% of the area’s median income, and caps on various fees paid by tenants. The group also wants the city to create a $15 million rental relief pool and set aside all vacant land it owns for affordable housing development. For homeowners, the coalition seeks $22 million in grants for down payments and rehab costs, but it does not specify where the money would come from. Such measures could curb investor interest in the area, warns Noah Birk, a partner at Kiser Group, a brokerage that has sold several South Shore apartment buildings in recent years. “Developers might look at red tape—obstacles to building or renting a unit—and they’ll say it’s not worth my time. What ends up happening is not as many units come online, and the units that are there end up becoming more expensive because there’s not as much available.”

PROTECTING HOMEOWNERS

Some area homeowners worry that their interests will be overlooked in the push to block gentrification. They’ve organized as the South Shore Community Compact, a confederation of groups including the South Shore Chamber of Commerce, the Neighborhood Network Alliance and South Shore Works. “There are a lot of long-term homeowners here whose interests need to be protected,” says Carol Adams, a 50-year South Shore resident and founder of South Shore Works. “We just insist on speaking for ourselves and not being used for a different kind of agenda.” That “agenda” is Romeo’s political aspiration, says Hairston, who is working with Adams and others in the compact. She says he “wants to run for office” against her in the 2023 aldermanic elections. Hairston notes that Romeo is a director with United Working Families, a group founded with the help of the Chicago Teachers Union and a service employees union that has backed progressive candidates in other elections. Romeo denies any plans to run for the City Council. Dismissing what she calls displacement “theater,” Hairston says South Shore has plenty of affordable housing. A more urgent threat, she argues, is to older condominium and co-op unit owners facing deconversion into more expensive rentals. The city’s Housing Department agrees: On March 11, it announced a pilot program to help condo owneroccupants with repairs and to provide loans to homeowner associations for deferred maintenance. The department also worked with Ald. Greg Mitchell, 7th, who represents the southern portion of South Shore, on an ordinance allowing the city to essentially cancel city debt from building violations on vacant and abandoned homes. The goal is to cut rehab costs and get those homes “into the hands of an owner who can renovate it or rent it out affordably,” city Housing Commissioner Marisa Novara says.

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Ambitious investments show that Onni sees ‘brighter days ahead’ for Chicago close to 2,700 apartments and to revamp a mostly vacant 31-story office building in the Loop, a pair of projects that will likely cost close to $1 billion combined. Meanwhile, it is building a new 373-unit apartment tower in River West and paid around $63 million in January for the Ace Hotel in the Fulton Market District, which it has rebranded as the first of a planned nationwide chain of boutique inns. The firm is also honing plans to develop another mixeduse building at 357 N. Green St. in Fulton Market that could be nearly 700,000 square feet. The ambitious collection of projects flies in the face of Chicago’s sullied reputation in the broader real estate world. Onni’s investments show that some developers see bright days ahead, even as others redline Chicago in favor of other faster-growing markets. Sure, Onni’s gamble could go badly if crime in the heart of the city doesn’t subside, and especially if the rise of remote work keeps people away from downtown on a regular basis. But none of those worries have scared off the firm from what it sees as a compelling market for commercial real estate. “It’s easy for people to buy into a lot of the negativity,” Wlodarczak says. “But we launched new buildings during the pandemic and people moved in. It just shows that Chicago is incredibly resilient.” Onni didn’t own anything in Chicago before 2012, but it became one of the most active developers in the city over the past decade as downtown thrived with jobs and residents poured in. Today, it owns office towers at 200 N. LaSalle St. and 550 W. Van Buren St., and made major inroads into the apartment market with the

dramatic expansion of the Atrium Village development in Old Town (now called Old Town Park) and the development of a 356-unit apartment tower at 369 W. Grand Ave. in River North that opened last year.

BIGGEST INVESTMENT TARGET

Formed in the 1990s by Italian immigrant Inno De Cotiis (Onni is his first name spelled backward) as an offshoot of a wide-ranging family real estate business, the company has invested and developed in a handful of major U.S. cities, including Seattle, Phoenix and Los Angeles. De Cotiis died in September 2020 and four of his sons—Rossano, Morris, Paolo and Giulio—oversee Onni’s 18.4 million-square-foot portfolio of owned and operated properties today. Roughly 20% of its portfolio, including projects in development, is in Chicago, according to the company. Chicago has been among its biggest investment targets in part because the company isn’t looking for a quick cash-out, Wlodarczak says. Over three decades in business, Onni has never sold a U.S. property. “That mindset allows you to look at the cycles we’re in a little differently” and discount negative short-term trends in markets with long-term promise. Onni executives counter concerns about rising crime and property taxes in the city by pointing to favorable factors, such as downtown’s population growth revealed by the 2020 census or Site Selection magazine’s recent report that the Chicago area drew more corporate relocations last year than any other metropolitan area. The market’s strength shows through Onni’s 2,100 downtown apartment units, which the company says are almost fully leased,

TODD WINTERS

ONNI from Page 1

Brian Brodeur oversees Onni Group’s development work in Chicago. including recent activity at rents that surpassed pre-pandemic levels. Chicago has real problems that should not be minimized, but it also has a public relations problem that keeps some investors away, says Brian Brodeur, who oversees Onni’s development work in Chicago. “Are we the most dangerous city in America? No. Do we have the highest crime rate in America? No, not even close. So why is the national and international news narrative always about Chicago’s crime and violence?” Brodeur says. “The world needs exposure to our best and brightest.” Yet many developers aren’t as bullish about downtown’s real estate prospects. Chicago ranked 20th in the nation last year by volume of purchases by commercial real estate investors new to the market, dropping from an average

of fifth between 2015 and 2019, according to data from research firm Real Capital Analytics.

GUTSY WAGERS

Onni stands out from a swath of real estate investors struggling to make financial sense of new projects today, given new affordable housing rules and rising taxes, says Armando Chacon, president of the West Central Association, which evaluates development proposals on behalf of several different communities in the city. Chacon says major projects like Onni’s could help remind investors about the deep pool of tech-savvy talent and other advantages that drew developers to the city in the first place. “Onni sees that there is something very special happening here,” he says. Wlodarczak says Onni has concerns—like many other developers—with Cook County Assessor

Fritz Kaegi’s move to shift more of the local property tax burden onto commercial properties. “That could put a real damper on business,” he says, adding praise for Metropolitan Water Reclamation District Commissioner Kari Steele as a promising Kaegi challenger in an election later this year. Steele’s husband, Maze Jackson, is registered as a lobbyist for Onni, according to public records. Nevertheless, Onni continues to make gutsy wagers across different types of properties, even those that don’t look good at the moment. Despite record-high vacancy in the downtown office market and cloudy post-pandemic demand for workspace in the Loop, the firm paid more than $166 million in December for the outdated landmark office building at 225 W. Randolph St., with a plan to spend another $150 million-plus renovating it and leasing it up.

Here’s the big obstacle to Chicago’s biotech dreams: Funding for startups BIOTECH from Page 3 Over the last several years, many facets of Chicago’s business community, from real estate developers to the entrepreneurial community to the city’s research institutions, have invested time and money in biotech. They’re hoping Chicago can carve out a place in a fast-growing industry that’s creating important new drugs, therapies and tools for improving health while also generating big investment returns and high-paying jobs. “Without venture funding, and without seed and Series A funding that we need for the companies that are coming out of the universities, there’s no way we can build a cluster large enough to attract more and larger company investments. It’s the No. 1 issue that we’ve had here,” says Michelle Burbea Hoffmann, executive director of the Chicago Biomedical Consortium, which recently launched an entrepreneurial fellowship designed to

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keep more university biotech spinouts in Chicago. Prenosis, a biotech spinout from the University of Illinois Urbana-Champaign that’s making artificial intelligence-powered products to detect sepsis and other critical acute conditions, is among the latest local biotech startups raising capital. The Chicago-based company announced March 9 that it raised funding from Pace Healthcare Capital, an early-stage health care and biotech investment firm in Chicago. Prenosis co-founder and CEO Bobby Reddy Jr. won’t disclose exactly how much the firm invested but says it brings the company’s total financing raised to more than $20 million. Other funding has come from Foxconn, Roche Diagnostics and the U.S. Department of Defense.

LOCATION BENEFITS

Early on, Reddy says he considered moving Prenosis to the coasts for better opportunities but decided to remain in Illinois to be

close to partners and clients. “There is less venture capital here compared to Austin or San Francisco,” Reddy says. “It seems like there’s less opportunities.” Yet Reddy hopes to raise another $20 million to $30 million in Chicago this year. Prenosis primarily works out of an incubator at the Illinois Institute of Technology but also rents a desk at Fulton Labs, a life sciences laboratory development in Fulton Market. “We initially moved (to Illinois Tech) because that was one of the only places in the city that we were able to find wet lab space for a company of our size,” Reddy says. “That has been a big problem in Chicago for many years. But it’s something that’s starting to get better now.” A shortage of lab space has historically been one of Chicago’s three major weaknesses in biotech, experts say. Another is the lack of academic tech transfer programs on par with the likes of Harvard and Stanford universities. The city

also lacks the deep pools of entrepreneurial talent and investment capital available in places like Silicon Valley and Boston.

LAB SPACE

A futile search for adequate lab space is one reason why Pyxis Oncology, a biotech spinout from the University of Chicago, moved to Boston in 2019. “We didn’t have the lab space to launch (in Chicago),” says co-founder John Flavin. “And the natural place, given that our VCs were based in Boston, was to go there.” While most of the Pyxis team left Chicago, Flavin has remained in the city as he looks to help foster the next crop of local biotech companies. In 2020, he launched Portal Innovations, a biotech investment and incubation program in Fulton Market. “What I saw from that in many ways was the germinating elements for Portal,” Flavin says. “If we had lab space, if we had a seed fund … I could create a

portfolio of Pyxises.” In exchange for equity, the program provides its 12 companies funding from local investors like Joe Mansueto, Michael Polsky and AbbVie Ventures, as well as crucial lab space. Just last month, Portal Innovations tripled the amount of space it offers. Currently, more than 5 million square feet of lab space is under construction or planned for Chicago, according to data from World Business Chicago, signaling that the real estate industry is banking on the success and proliferation of local biotech companies. But Hoffmann worries some of the space will stay empty if the city’s biotech companies can’t attract more venture capital, which helps pay rents at places like Fulton Labs. “There’s a big question of how are we going to fill all of this lab space,” Hoffmann says. “Real estate is only one leg of the stool. It’s certainly necessary if we can get our funding levels and company creation levels up.”

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22 MARCH 21, 2022 • CRAIN’S CHICAGO BUSINESS

State tells auto insurers to disclose COVID windfalls The Illinois Department of Insurance will make insurers’ quarterly profits public as lawmakers press for more refunds to drivers who worked from home in the pandemic BY STEVE DANIELS How much did your auto insurer rake in during the pandemic lockdown when you were stuck at home? State regulators are making sure you can find out. The Illinois Department of Insurance is mandating that auto insurers provide quarterly information on their profits and costs in the state from the beginning of 2019 until the end of 2021. Insurers must respond by May 15, and the department will make the information public no later than June 30, according to a March 16 letter sent to insurers. “This interrogatory is an information gathering request to provide consumer transparency related to the quarterly performance results of the immediate time frame surrounding the outbreak of the COVID-19 pandemic,” the department’s letter stated. The move is in response to a petition from 16 state senators in January and comes as most insurers are hiking auto rates at levels not seen in decades. COVID has whipsawed auto insurers in ways that industry executives say they’ve never seen before.

The sudden disappearance of rush hour in 2020 and into 2021 generated what some termed a windfall for the industry. Many insurers responded by providing temporary premium rebates, but they still generated profits that were well above average. Others, like Bloomington-based State Farm, the largest auto insurer in the country, deeply cut their rates.

COSTS SOAR

Starting in mid-2021, though, driving levels began to come back and claims costs soared, thanks to used-car and auto-parts inflation as well as more severe accidents with a surge in reckless driving. Instead of earning windfall profits, many auto insurers began losing money on their policies. That led to steep rate hikes. Northbrook-based Allstate, Illinois’ second-largest auto insurer, raised auto rates on average by 12% in February. Progressive, the third-largest insurer in the state, followed with increases ranging from 8% to 10%, which also took effect in February. Even State Farm, which so far has refrained from dramatic price

increases, is boosting Illinois auto rates by 5% on average next month. Its rates will remain below where they were when the pandemic struck. For the state’s Insurance Department, it’s a rare instance of taking action opposed by the industry. With giants State Farm and Allstate both headquartered here, Illinois traditionally has been friendly territory for insurers. State regulators have virtually no say under state law over what insurers charge. But they can do what they’re doing here and force the industry to come clean on how much it’s been making in Illinois. Consumer advocates’ hope is that companies will be shamed into more rebates if their policyholders see excessive profits from the lockdown era. “We applaud the Department of Insurance and Pritzker administration for today’s action,” Abe Scarr, director of Illinois PIRG, said in a release. “If the data show, as we expect, that insurers made windfall profits during the pandemic, we’ll call on them to issue additional customer refunds.” The roundup of state senators to sign the letter urging department action was spearheaded by Sen.

Jacqueline Collins, D-Chicago. “The Illinois Department of Insurance has shown its commitment to bettering our financial systems and defending the wellbeing of policyholders, and for that I am grateful,” she said in the release. “However, there is still much work that needs to be done if we are to effectively and successfully preserve public interests.” An industry spokesman didn’t immediately respond to a request for comment. But when the state senators first made their letter public, the Chicago-based American Property Casualty Insurance Association issued a response arguing that more one-time refunds would be counterproductive.

LOSSES RISE

“After the stay-at-home orders were relaxed, losses rose far more rapidly and strongly than anyone expected,” the industry group wrote. “So, using the concepts propounded by the legislators and activists, if we are to be required to provide refunds based on shortterm loss reductions, then we should be allowed to now impose surcharges to cover the ensuing and unexpected loss increases, such as we saw in 2021. This highlights why it is important for regulators and insurers to maintain a

long-term perspective regarding driving and loss trends. The resulting volatility of responding to short-term trends would create instability both for consumers and insurers.” Of course, insurers already have spent a lot of that cash from the good times. For example, Allstate bought back $3.3 billion worth of its own stock in 2021, nearly twice the $1.7 billion it spent on share repurchases in 2020, according to Securities & Exchange Commission filings. Insurers don’t generally disclose state-by-state information on profits and losses. With investors focused on restoring profitability in auto insurance, Allstate has begun providing monthly updates on how many statewide rate hikes it’s imposed. In a conference call March 17 with investors, though, the company was asked directly about its experience in California, which has far greater authority over rate-setting than Illinois. “We don’t give out state-by-state combined ratios,” Allstate CEO Tom Wilson said, referring to the industry’s term for underwriting profitability. Apparently, that’s going to change in Illinois—at least for three of the most turbulent years in the industry’s history.

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Check out this 1920s version of a man cave

n the tower of a Lake Forest mansion that just sold, a fourthfloor room is decorated with murals in a Byzantine-influenced style, painted in the 1920s by a Russian immigrant who created sets for Chicago ballet companies and catalog covers for Marshall Field’s, and went onto a career as noted set designer for Hollywood movies. The five-bedroom, 6,400-square-foot house on Mayflower Road sold March 10 for $1.8 million. It had been on and off the market several timers since 2010, when the sellers, Craig and Eva Quackenbush, were asking $2.8 million. By the time of the sale, they were asking $1.95 million. The house, designed by architect David Adler in an L shape with the five-story tower at the corner, was originally built as garages for a grand estate, first called Villino San Nicolo and later called Centaurs. The tower room was the man cave for Alfred Hamill, a Chicago investment banker who built the estate with his wife, Clarisse. Nicolai Remisoff, whose name is spelled differently in some historical articles, painted the immersive murals, which include figures from Greek mythology, zodiac signs and painted-on drapes, in about 1928. Remisoff was a fascinating figure in Chicago’s arts scene in the 1920s. Born into a family of actors in Russia in 1887, he fled to Ukraine after the Bolshevik Revolution in 1917 and moved to Paris and New York before arriving in Chicago. He painted sets for the Ruth Page ballet troupe, the Chicago Grand Opera Company and others; painted murals in the Sears Roebuck building at the 1933 Century of Progress World’s Fair; decorated State Street with oversized characters atop the streetlights for Thanksgiving 1931; and designed catalog covers for Marshall Field’s. Remisoff also painted murals in the Lake Forest public library. Remisoff left Chicago after a decade and became a designer of stage sets and movie sets in California. For his first movie, “Of Mice and Men,” released in 1939, he re-created the banks of California’s Salinas River in a soundstage. He designed the sets of at least two dozen more movies, ending with “Ocean’s Eleven” in 1960, and continued designing for Ruth Page productions until around that time. Remisoff, who also designed sets for the first two seasons of the TV series, “Gunsmoke,” died in Palm Springs, Calif., in 1975. Several old newspaper articles about Remisoff’s sets for California theatrical productions describe them as “brilliant” and him as a genius of design.

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The tower of this North Shore mansion contains murals painted by an artist who went on to become a noted Hollywood movie set designer. The home just sold for $1.8 million. I BY DENNIS RODKIN

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