Crain's Chicago Business by crainschicago

NOTABLES: Executives of color in construction and commercial real estate. PAGE 23

PUBLIC HEALTH: City department braces for budget crunch. PAGE 3

CHICAGOBUSINESS.COM | MAY 2, 2022 | $3.50

Hotel rates rise as rooms sit empty

FORUM

With costs up and labor scarce, owners see no profit in filling rooms at lower prices BY DANNY ECKER Visitors looking for hotels in Chicago this year have plenty of choices from a roster of inns with lots of rooms available. They just shouldn’t expect to find bargains. While occupancy at downtown hotels so far this year is still close to 25% below pre-pandemic levels, the average rates guests are paying for rooms has surpassed 2019 figures each of the past four months, according to data from hospitality data and analytics

PROPERTY TAX REFORM

FINDING THE BALANCE Given competing interests and complicated calculations, a property tax system in Cook County that satisfies all parties may be asking the impossible | PAGE 13 FIND THE COMPLETE SERIES ONLINE

Portillo’s stock sags on profit worries Fast-growing chain lags rivals in raising prices, sparking concern soaring costs will mash margins BY ALLY MAROTTI Portillo’s CEO Michael Osanloo is testing Wall Street’s patience six months after the restaurant chain’s IPO. Portillo’s stock lost half its value after a sharp initial run-up, largely on concerns that it isn’t raising prices enough to keep pace with increased costs from inflation. Like other chains, Portillo’s is paying more for meat, labor and construction of new stores. On a quarterly earnings call March 10, See PORTILLO’S on Page 35

THE CHICAGO CASINO BIDDING PROCESS GREG HINZ Lightfoot adviser raised money for one bidder. PAGE 2

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See HOTELS on Page 35

JOHN R. BOEHM

GWEN KERAVAL

firm STR. March data on the downtown hotel market showed guests paid an average of nearly $174 per night, up 12% over the same period in March 2019. This surprising aspect of the comeback for COVID-battered hotel owners signals a dramatically different recovery path than the industry’s trajectory after the Great Recession, when occupancy in Chicago took three years to return to normal and room rates

JOE CAHILL All three possible sites come up short. PAGE 3

EDITORIAL Time to choose from three less-than-ideal options. PAGE 10

4/29/22 4:03 PM

2 MAY 2, 2022 • CRAIN’S CHICAGO BUSINESS

Casino adviser raised money for one of the bidders

hicago aldermen have a lot to sift through in the increasingly contentious and murky process of selecting a company to operate the city’s proposed casino. Here’s something else for them to ponder: Whether the company the Lightfoot administration has relied on for key financial analysis has at least a potential conflict of interest, one that the administration hasn’t disclosed to aldermen—or anyone else. The company is Union Gaming Analytics, a division of Union Gaming. A well-known, Las Vegas-based firm that previously worked for the state, it reviewed the five bids Chicago received to build the casino and concluded that one from Bally’s on the Tribune printing plant site at Chicago Avenue and Halsted Street would provide the most tax revenue for the city treasury. Mayor Lori Lightfoot repeatedly has suggested in recent weeks that money may well be the determin-

ing factor in her decision as to which of three casino finalists she’ll recommend to the City Council. What her administration hasn’t talked about is that Union Gaming not only provides financial analysis but investment banking and other fundraising help for gambling companies—and that Bally’s has been a client within the last year. In a recent pitch to clients, Union Gaming, terming itself “the industry bank,” discusses in detail its work in debt, equity, private credit and other financial markets. The first example it offers: Work for Bally’s in raising $696 million in a 2021 offering. An item on Bally’s corporate website confirms that. It says Union Gaming was a co-manager on an April 2021 common stock offering, one of several companies involved in the project. Union Gaming referred all questions to the city. The city, in a statement, said only that Union

Gaming Analytics “has worked for virtually all of the largest gaming operators in the U.S., which gives it the credentials to be an expert in the field of gaming revenue.” Moreover, said the city, among its clients in the last year have been not only Bally’s but the other two finalists, Hard Rock and Rush Street Gaming. The city wouldn’t say whether that work involved more than data analysis. But either way, Rush Street says the city is greatly exaggerating its relationship with Union Gaming. “Rush Street has never paid Union Gaming for anything,” said a spokesman. Union Gaming did do a “small” free job for the company in New York a year ago in hopes of winning business, but never was hired, the spokesman added. Hard Rock didn’t have a response. Bally’s declined to comment. But one person who is talking is Ald. Tom Tunney, 44th, who heads the special City Council committee reviewing the three finalists.

GREG HINZ ON POLITICS

Aldermen should have been told about Union Gaming’s ties to Bally’s and anyone else, says Tunney. “In this era of transparency, everything should be out there,” he said. “This casino is such a big deal for the city that transparency has to be at the top of the list.” Yet the only disclosure was this cloudy sentence at the end of the company’s evaluation report to the city: “Union Gaming Analytics LLC also prohibits its research analysts from being compensated for involvement in investment banking transactions except to the extent that such participation is intended to benefit the investors.” Tunney expressed no opinion on whether the seeming conflict

of interest is real or apparent. The Lightfoot administration won’t say whether it was aware of the Bally’s work and, if so, why it didn’t disclose the connection to aldermen and the public. But after previous disclosures that Bally’s was able to quietly change a provision giving it the option to buy out minority investors whether they wanted to sell or not, and that it got a two-for-one deal that saved it $300,000 in application fees, the latest news will only spur increasing chatter at City Hall that Bally’s has the inside track with the mayor. Like Alice said, this one gets curiouser and curiouser. Justin Laurence contributed.

Big-time college athletes are not amateurs

n 1985, Indiana University basketball star Steve Alford sat out an NCAA-imposed one-game suspension after posing for a calendar an IU sorority created to raise money for charity. Alford didn’t seek or see a dime, but no matter— the NCAA determined who made money off college athletics, and it wasn’t the athletes. In 1994, Utah Coach Rick Majerus was reprimanded for buying breakfast for basketball player Keith Van Horn while the heartsick freshman waited for a flight home to Los Angeles—his father had died of a sudden heart attack the night before. This little act of compassion was deemed an improper benefit, and the “violation” went on Majerus’ permanent record. The NCAA has been so high-handed and autocratic in setting and enforcing rules that it has been rather refreshing to see college sports’ governing body get slapped around in the courts since an unfavorable decision in the Ed O’Bannon case two years ago. Nobody, though, was prepared for the Wild West chaos that followed—more than 2,000 football and basketball players changed schools through the “transfer portal” before the 2021-22 academic year; the number is expected to be higher in the coming year. But the issue that prompted the O’Bannon suit—that athletes are entitled to a share of the proceeds if their name, image or likeness (NIL) is used for commercial purposes—is what has really set college athletics on its ear. Whereas factors such as playing time, professional prospects, facilities, TV exposure and (occasionally) academics figured into a recruit’s

choice of schools in previous years, now it’s all about cashing in on NIL opportunities. Consider: Nijel Pack, an All-Big 12 guard, recently announced he was leaving Kansas State for Miami, accompanied by a twoyear, $800,000 endorsement deal with Life Wallet. At $400,000 per year, he’ll make not quite half the NBA’s first-year minimum salary (for not quite half as many games) and more than 10 times what a high-end G-League player gets. Notre Dame has always positioned itself above the moneygrubbing fray that’s as much a part of college sports as pep rallies, but even the Irish have three ships navigating the NIL world: Former ND quarterback Brady Quinn is behind the FUND Foundation—Friends of the University of Notre Dame—that intends to solicit donations to various charities, then pay ND athletes a stipend for the appearances they make or the work they do on the charities’ behalf. The Irish Players Club says it will return 75% of the revenue it generates from memorabilia sales and the like to participating athletes. NBC Sports, Notre Dame’s television partner since 1991, has created “Athletes Direct” to give athletes from Notre Dame, Vanderbilt and Temple an opportunity “to monetize their names, images and likenesses through a trusted marketplace while receiving financial wellness advice (from CNBC experts) and NIL best practices,” according to a news release. “The chance to work with one of the leaders in the media space is one we couldn’t pass up,” said Claire VeNard, an associate athletics director at Notre Dame. The possibility of a future

contract with World Wrestling Entertainment was among the enticements that prompted former Northwestern defensive lineman Joe Spivak to sign an NIL agreement with WWE last year. Heisman Trophy winner Bryce Young has a deal worth a reported $800,000 with Cash App. Louisiana State University gymnast Olivia Dunne, a social media megastar, is said to be getting $1 million to endorse activewear brand Vuori. Former running back Eric Dickerson must be smiling as he takes all this in. Dickerson’s recruitment was ground zero for the cheating scandals that led to the dissolution of the Southwest Conference 40

DAN McGRATH

ON THE BUSINESS OF SPORTS years ago. The school that landed him was inviting NCAA sanctions. Southern Methodist University, the “winner,” was found to be so chronic and so flagrant in its disregard for recruiting rules that it was assessed a two-year “death penalty,” the first in college football. Dickerson moved on to the L.A. Rams, where he was a contract holdout during his rookie year

training camp. “Eric’s not being unreasonable,” a friend who was an administrator at a rival SWC school told me then. “He just doesn’t want to take a pay cut.” Crain’s contributing columnist Dan McGrath is president of Leo High School in Chicago and a former Chicago Tribune sports editor.

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4/29/22 4:16 PM

CRAIN’S CHICAGO BUSINESS • MAY 2, 2022 3

JOE CAHILL ON BUSINESS

ALYCE HENSON

Dr. Allison Arwady, the city’s public health commissioner

Chicago health department braces for a budget crisis

Federal emergency dollars that flooded the agency’s coffers during the pandemic will soon start drying up, raising the specter of deep cuts I BY KATHERINE DAVIS

he Chicago Department of Public Health faces a financial reckoning as COVID-19 ebbs and federal pandemic relief funding that accounted for nearly 80% of its 2022 budget fades away over the next three years. About $775 million in COVID assistance from Washington helped quintuple the agency’s 2022 budget to more than $1 billion from $177 million in 2019, according to city budget records and CDPH. Much of the funding was provided in the form of temporary grants from the Federal Emergency Management Agency, the $30.5 billion American Rescue Plan and the $2.2 See CDPH on Page 34

“THIS IS THE FIRST TIME I’VE EVER HAD THE RESOURCES TO ACTUALLY DO WHAT IS NEEDED FOR THE WHOLE HOST OF PUBLIC HEALTH ISSUES THAT WE DEAL WITH.” Dr. Allison Arwady

Power market turmoil puts ComEd customers at rate risk For the first time ever, the state couldn’t negotiate a price it was willing to have Chicago-area ratepayers shoulder for electricity during peak summer months BY STEVE DANIELS Households and small businesses that get their power from Commonwealth Edison may be unprotected from commodity price spikes in the high-demand summer months. For the first time in the 14 years since the state took over the job from utilities of negotiating with power generators, the Illinois Power Agency was unable to reach an agreement on an electricity price in northern Illinois

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for the entire months of July and August, as well as part of June. Some power deals are in place for that time period from auctions in previous years, but the lack of a deal now means that roughly half of the kilowatt-hours needed for the hottest time of year will have to be purchased at market prices at the time. The IPA conducted its usual auction for the summer in April. Although it was able to find satisfactory terms for power needs beginning next September, it

couldn’t for the summer. Summer traditionally is when demand peaks are highest, as air conditioners hum during highhumidity Midwestern heat waves. But the IPA said April 26 that it will try again, taking bids from power generators this month, with final bids accepted May 16. The Illinois Commerce Commission will finalize the results on May 20, just 11 days before the June 1 start date. See COMED on Page 34

Chicago bets on the wrong casino sites

he outpouring of opposition to the three proposed sites for a Chicago casino may sound like typical NIMBY sentiment, but it underscores other problems with the final candidates chosen by Mayor Lori Lightfoot’s casino team. Each location appears to have serious shortcomings when it comes to delivering the greatest possible benefits from a long-awaited city casino. In the short run, Lightfoot is eager to get a casino up and running, in order to start collecting a projected $200 million a year in gambling taxes for the city’s woefully underfunded employee pension plans. And it’s a safe bet that a casino located pretty much anywhere in the general vicinity of downtown Chicago would draw enough gamblers to generate sizable tax revenues in short order. But that’s not the full measure of success for a city casino. A real winner would be a net economic plus for Chicago and the region as a whole. It would expand the pie, rather than carving out another slice for city tax coffers. That means bringing in new money from outside metropolitan Chicago, dollars that wouldn’t otherwise be spent here. Unfortunately, the history of legalized gambling in Illinois shows that it’s mostly a local market. Illinois casinos are filled with Illinois gamblers. Sure, some folks drive across the border from neighboring states to place bets in Illinois. Maybe a glitzy city casino would lure a few more Hoosiers and cheeseheads. But Indiana, Wisconsin, Iowa and Missouri all have plenty of casinos, limiting the potential market of day-trippers. The risk is that Chicago’s casino will merely siphon spending away from existing Illinois gambling sites and other recreational opportunities in and around the city. Baseball fans might opt to spend an afternoon betting for (or against) the Cubs at the casino, rather than cheering (or booing) them at Wrigley Field. Couples might spend date nights at the roulette wheel, rather than taking in a show at the Chicago Theatre. Picking the best spot for a Chicago casino can reduce that risk of economic cannibalization. The ideal location would maximize the amount of money pulled in from out-of-town visitors while minimizing inconvenience to local residents. The gambling mecca of Las Vegas offers some clues to what makes a good casino location.

Chicago will never rival Las Vegas as a gambling destination, but it can apply some of the principles that draw gamblers to Sin City from around the world. Las Vegas casinos are concentrated along the famed Strip, which is also packed with hotels, restaurants and everything else visitors need. What you won’t find on the Strip is a lot of homes—most Las Vegas residents live in other parts of town, away from the tourist hordes. In choosing a casino location, Chicago likewise should look to areas that already attract tourists and business travelers. A casino would be most successful in close proximity to restaurants, hotels, theaters, shopping and other amenities. The ideal location also would have good transportation infrastructure to handle casino traffic, and relatively few nearby residents whose lives would be disrupted. Unfortunately, none of the three finalists Lightfoot has chosen fit the bill particularly well. None are anywhere near Chicago’s main tourist hub on Michigan Avenue, likely owing to the difficulty of finding a large enough site there. All have triggered vehement opposition from local aldermen based on backlash from residents who don’t want to live in a gambling district. The apparent front-runner, Bally’s proposal for the Chicago Tribune printing plant site at Chicago Avenue and Halsted Street, is more than a mile from Michigan Avenue in a congested area where streets can barely handle current traffic levels. A proposal from Neil Bluhm and Related Midwest would put the casino in a planned high-density residential development south of downtown. Hard Rock chose a site across from Soldier Field in the largely residential South Loop, and its proposal is tied to a larger development that won’t go forward without $6.5 billion in state backing that Gov. J.B. Pritzker seems disinclined to provide. For reasons that haven’t been adequately explained, the city rejected proposals to put a casino in or adjacent to McCormick Place’s underutilized Lakeside Center, near a cluster of hotels and restaurants serving the convention trade. A casino in that area would be well positioned to tap an existing pool of out-oftown dollars among conventioneers, with less disruption for residents. Maybe Lightfoot should reconsider the rejects.

4/29/22 3:46 PM

Sou

4 MAY 2, 2022 • CRAIN’S CHICAGO BUSINESS

What’s next for the Reader on road to nonprofit status? Co-publisher Tracy Baim talks about what will change—and what won’t— now that the alternative publication is clear to make an existential shift

Jerry Bryant

After 38 years, TV music icon Jerry Bryant still has big plans to rock on

neighborhood. But now that Bryant says he is cancerfree and close to fully recovered from heart surgery, he’s eager to secure a new production home for his labor of love. “My goal is to rebuild JBTV with a state-of-the-art performing arts studio with a naming sponsor to help with costs,” he told me. “There are so many local and global bands that want to perform on JBTV—a one-ofa-kind experience to a small 150-person audience that pays nothing to see the new music at JBTV. “This has been a life-changing five years, losing the JBTV studios, draining all my funds, plus massive medical bills with help from donations on GoFundMe. . . .Now at 70, is it possible to rebuild JBTV? I have the ener“I HAVE THE ENERGY, TALENT gy, talent and neverattitude. It is AND NEVER-GIVE-UP ATTITUDE. give-up hard to find investors IT IS HARD TO FIND INVESTORS to rebuild JBTV, but I guess time will tell.” TO REBUILD JBTV, BUT I GUESS Bryant’s archive includes more than 5,500 TIME WILL TELL.” programs and more than 2,000 interviews— Jerry Bryant all waiting to be converted from videotape to digital. (at 10:30 p.m. Mondays and The multiple Emmy Thursdays). Award-winning Bryant was While keeping the show on inducted in the Silver Circle the air, Bryant, 70, has spent of the Chicago/Midwest the last five years in and out of chapter of the National Acadhospitals—first for treatment emy of Television Arts and of Stage 4 colorectal cancer Sciences in 2014. and multiple surgeries to remove tumors from his colon Robert Feder has been and lung, and more recently covering the media beat in for a coronary bypass. his hometown since 1980. In the midst of all that, the His column is published in COVID-19 shutdown forced Crain’s under an agreement Bryant to close his JBTV stuwith the Daily Herald. dios in Chicago’s River North espite health challenges and financial setbacks that might have brought down the curtain on anyone else, Chicago TV legend Jerry Bryant isn’t finished yet with “JBTV,” the longest running music television show Robert Feder in the country. Since 1984 Bryant has been the genial host of the weekly showcase he founded for presenting live performances and in-studio interviews with emerging artists, including some of the biggest names in modern rock history at the start of their careers. “JBTV” still airs multiple times each week across several platforms, including YouTube, VPOD TV Channel 59.3 (at midnight Fridays and Saturdays), and Chicago Access Network Channel 19

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After years of sometimes contentious preparation, the Chicago Reader is now clear to transition to a nonprofit in the coming weeks. The move will mean changes in how the 50-year-old publication is funded, how it is run and, in some cases, what it covers. What happens next at the alternative weekly involves logistical steps necessary for the co-owners to transfer ownership to the Reader’s nonprofit entity. It also involves an existential shift, signifying another swell in the wave of change rocking Chicago’s legacy newsrooms. The Reader will also be joining the Chicago Sun-Times, the Hyde Park Herald and other area publications making the switch from for-profit to nonprofit organizations. They are all betting that supplementing revenue streams with grants and donations will help ensure long-term viability, as the old ways of sustaining newsrooms via advertising dollars diminish. There are now nonprofits representing nearly every niche and strata of news coverage in Chicago—from a big daily to hyperlocal outlets. “Right before our eyes, the entire business model of local news in Illinois is being remade,” said Tim Franklin, senior associate dean at Northwestern University’s Medill School of Journalism. “This really is a kind of historic transition that’s underway in the city.” However, switching to a nonprofit does not mean the challenges facing news publications will vanish. The Reader lost ground during a standoff with one of its owners, Len Goodman, that ended last week. The paper initially applied for nonprofit status two years ago and was set to make the final transition on Jan. 1. But an impasse stemming from a November column Goodman wrote delayed the process. “There’s a lot of heavy lifting that is still going to need to be done, and they basically lost four months during the course of this controversy,” Franklin said. “They now have the task of going around raising funds from foundations, donors, investors, and they’re going to need to make the case that they’re a long-term viable operation. . . .That’s not necessarily going to be an easy process.” Here’s more about what is coming next for the Reader: How will the ownership structure change?

Goodman and Elzie Higginbottom bought the paper in 2018 for $1, and have collectively invested more than $2 million since then. They will sell the Reader’s assets to the newly formed nonprofit entity,

JOHN R. BOEHM

BY ALLY MAROTTI

Tracy Baim, co-publisher of the Chicago Reader co-publisher Tracy Baim said. The for-profit entity that owns the paper will dissolve. Baim said the sale will involve a token amount—likely $100—and neither owner is expected to make money off the deal. Can the Reader start fundraising again?

The Reader had to pause fundraising the past four months during the impasse, Baim said. That meant there were no fundraising events or donor solicitations and several grants were paused. Baim said she started the process of rebooting the grants last week, when she got word the deal was moving forward. How far behind is the Reader on fundraising?

Baim estimates the Reader is about half a million dollars behind where it should have been this year in fundraising, had the transition occurred as planned on Jan. 1. The publication ran through most of its cash reserves during the impasse. The sales side also started the year strong, which helped compensate, Baim said. She is optimistic about the donations the new nonprofit will be able to raise going forward. “We’re ready, though. Our team has been literally like a racehorse waiting for the gates to lift,” she said. “The opportunities ahead of us are very strong.” Will the Reader still be able to make money from ad sales?

Yes. This is an issue that held

back legacy news organizations from transitioning to nonprofits in the past. The IRS now recognizes that news organizations want to diversify their revenue streams, not cut any off. Ad revenue is simply taxed differently. What about the Reader’s coverage will change?

Nonprofit news publications cannot endorse candidates, per IRS rules. They can still editorialize on topics, said Rick Edmonds, media business analyst for the Poynter Institute, a Florida-based nonprofit that includes a journalism school and owns the Tampa Bay Times. Sometimes when a news organization becomes nonprofit, moving away from owners can give it the freedom to cover topics it hasn’t before, he said. Additionally, funding from certain grants will allow the Reader to expand its coverage in some areas. Baim said it already has a grant funding for a racial justice reporting project, and wants to expand its freelance work and arts coverage. Does that mean the Reader will add staffers?

Yes. The Reader plans to post a job soon for a senior editor for the racial justice reporting project, a hire that the impasse delayed. There are also two other positions the publication delayed hiring that Baim expects to open soon. “Depending on what grants we get, those will dictate how we grow.”

4/29/22 2:49 PM

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6 MAY 2, 2022 • CRAIN’S CHICAGO BUSINESS

TECH TAKEAWAY

Jeff Meredith

Continuous Innovation.

Meredith is the new CEO of Chamberlain Group, the Oak Brook-based maker of smart garage door openers for residential and commercial use. In November, private-equity firm Blackstone bought the firm for $5 billion from Duchossois Group. Meredith, 53, and his wife live in Oak Brook and have three grown children, ages 19, 21 and 23. I By Laura Bianchi

What’s new and exciting at Chamberlain? The integration of a camera into our new Secure View garage door opener. For example, we can now alert a parent that their child opened the garage door at 3:30 p.m. after school and provide a video of that.

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Worst job ever? When I was 16, I spent a summer salvaging whole bricks from a large mental hospital that had been torn down in Louisville, where I grew up. I had to beat the mortar off of them with a hammer and stack them on a pallet. I earned $40 per pallet, which took at least a full eight-hour day. My hands got completely beat up, and it was miserably hot and humid.

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CRAIN’S CHICAGO BUSINESS • MAY 2, 2022 7

Former Cinespace CEO buys Fulton Market property

After selling the Near West Side studio business for more than $1 billion, Alex Pissios plans to start a new family office venture out of a building in the heart of the trendy former meatpacking district BY DANNY ECKER After selling Cinespace Chicago Film Studios for more than $1 billion, Alex Pissios has picked up a property in the heart of the Fulton Market District as a home base for the next phase of his career. A venture led by Pissios paid $11 million in April for the property at 232 N. Carpenter St. in the former meatpacking neighborhood, according to Pissios and Cook County property records. The Pissios entity bought the low-slung brick building and an adjacent parking lot at the corner of Fulton and Carpenter streets from a venture of Hartshorne Plunkard Architecture, property records show. The design firm recently relocated from the building to a new office on the city’s Near North Side. The deal comes just a few months after Pissios cashed out of Cinespace, the Near West Side film studio he and his family developed and grew into a sprawling complex that put Chicago on the map as a major TV production center. The studio and company were recently sold to San Francisco-based private-equity firm TPG in a deal said to be valued at more than $1 billion. Pissios said the roughly 10,000-square-foot property will serve as workspace for a new venture he is forming to focus on charity and other investments.

W. Fulton St. Google also has a big office immediately south of Pissios’ property at 210 N. Carpenter St. Hartshorne Plunkard becomes the latest longtime property owner in Fulton Market to cash out as developers pay huge sums for development sites. Property values in the trendy corridor have soared as companies clamoring for office space there have driven up rents to some of the

highest levels in the city, even with new office leasing activity sluggish elsewhere downtown during the COVID-19 pandemic.

HOTEL PLAN

The architecture firm floated plans in 2019 to redevelop its property with a 12-story hotel and six-story office building, according to a zoning application it filed with the city. But the firm never moved forward with the

project. A Hartshorne Plunkard spokesman did not respond to a request for comment. Pissios has a history with real estate development, though it’s one he might like to forget. He led a development firm that built residential condos near the United Center before the Great Recession clobbered demand, eventually leading Pissios and his wife to file for bankruptcy. Pissios then jump-started his

career through Cinespace Chicago with the help of his uncle, building what would eventually become a soundstage for major TV shows including “Empire,” “Chicago Fire” and “The Chi.” The former studio head also drew a spotlight in recent years as details emerged about his role as a mole that helped federal prosecutors build a case against longtime Chicago Teamsters boss John T. Coli Sr. Coli pleaded guilty in a 2019 extortion case, admitting he had taken hundreds of thousands of dollars in secret payments from Cinespace.

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PHILANTHROPY

“My long-term vision is to build a family office and hire some smart people to help me manage it,” Pissios said, adding that his philanthropic work will likely focus on helping children with special needs as a nod to his father, who he said was a special education teacher with Chicago Public Schools. He said he also aims to create a new foundation to help kids in disinvested West Side neighborhoods similar to the CineCares program that offered internships at Cinespace to local students. Pissios said he had been hunting for office space to launch his next venture when he came across the opportunity to buy in Fulton Market. “I really love the Fulton Market area. I’m excited about being in that neighborhood,” he said. Pissios said he has no plans to knock down the existing building, even though the site was a prime redevelopment candidate, given the transformation of Fulton Market into a bustling mix of major corporations and upscale restaurants and hotels. The property is flanked to the west by a recently completed 150,000-square-foot office building at 1045 W. Fulton St. and is kitty corner from Google’s Midwest headquarters at 1000

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8 MAY 2, 2022 • CRAIN’S CHICAGO BUSINESS

Bar Siena, other eateries may land at O’Hare BY JOHN PLETZ AND ALLY MAROTTI Chicago restaurants Bar Siena, The Hampton Social and Butcher & the Burger could be coming to O’Hare International Airport later this year. The City Council is being asked to approve deals for new food, beverage and retail options in Terminal 3 and Terminal 5, plus a service for travelers to order food through their phones for gateside delivery. For several years, the airport has aggressively sought ways to expand O’Hare’s relatively limited retail footprint to increase concession sales, which are an important passenger amenity as well as an important source of revenue that helps reduce the landing fees paid by airlines. Local brands are a key part of the strategy. Bar Siena, a West Loop Italian restaurant from DineAmic Hospitality, would open in Terminal 5 later this year, said partner Luke Stoioff. He said he’s watched other operators succeed at O’Hare and is excited to join their ranks. “We have been interested in

pursuing a brand there for a long time,” he said. “The people of Chicago and the people of the U.S. that travel through O’Hare have been enjoying Bar Siena for many years, and we think it’ll be a nice addition to the whole renovation of Terminal 5.”

EXPANSION

DineAmic, which also operates Prime & Provisions, Siena Tavern and Lyra, is planning to open another Bar Siena location this summer at Old Orchard in Skokie. Bar Siena is among eight new restaurants and retailers that could come to O’Hare as part of concessions contracts for the new gates at Terminal 5 that will be home to Delta Air Lines, as well as new retail space created in existing terminals. Bar Siena will be operated by Chicago Hospitality Partners, a joint venture between AirBrands, a Chicago airport concessions company; Balton, a Chicago restaurant-supply distributor; and Master ConcessionAir, an operator of airport restaurants based in Coral Gables, Fla. The joint venture also will operate an outpost of restaurant The

Hampton Social in Terminal 5, as well as a FarmAir’s Market. The Hampton Social, which has locations around the country, got its start in Chicago. HMSHost, which operates retail concessions in O’Hare’s domestic terminals, won contracts to operate Butcher & the Burger and Sparrow Coffee in Terminal 5, which has long been the airport’s primary international terminal but also is home to Southwest Airlines and other domestic carriers. Butcher & the Burger has a location on Armitage Avenue near Sheffield Avenue, and Sparrow Coffee is the roaster for many of Chicago’s Michelin-starred restaurants. Marshall Group, an airport concession operator based in Las Vegas, will operate retail shops ChiBoys and Six Points Market in Terminal 5, and Boulevard and Branch in Terminal 3. The new concessions contracts, announced April 27, must be approved by the City Council.

DELIVERY

The city also proposed awarding a contract to provide mobile food ordering and delivery to custom-

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Mayor Lightfoot introduced an ordinance to the City Council asking for approval to bring the West Loop Italian restaurant and other Chicago brands—including Sparrow Coffee, a favorite of Michelin-starred chefs—to the airport

The West Loop’s Bar Siena is among Chef Fabio Viviani’s 35 restaurants across the country. ers at the gate to Grab Chicago, a joint venture among Cursus Technologies, Hyde Park Hospitality and URW Airports, along with subcontractor AtYourGate. Midway Airport introduced ordering from the gate about 18 months ago. Though many restaurants that operate in airports lost massive amounts of business during the pandemic, Stoioff said the op-

portunity presented by being at O’Hare outweighs any concerns that traffic might drop off again. Many restaurant operators in Chicago still have not recouped revenue lost amid COVID-19 closures, but they cannot be paralyzed, he said. “We need to get busy moving forward, and we’ll cross that bridge hopefully never,” he said.

Neiman Marcus building on Mag Mile is sold BY ALBY GALLUN A Texas investment firm has acquired the Neiman Marcus building on North Michigan Avenue, a deal that signals the luxury department store will remain a fixture on the Magnificent Mile for a while. Houston-based Silvestri Investments bought the 196,000-squarefoot store at 737 N. Michigan Ave. from UBS Realty Investors, according to a statement from Jones Lang LaSalle, the Chicago-based firm that brokered the sale. The home of Neiman Marcus since 1983, the four-story building went up for sale last fall, with some observers wondering whether a developer would buy the property and clear it for a high-rise project. But Silvestri, a shopping center investor, isn’t a developer, and the structure of the deal and language in JLL’s statement strongly suggest that Silvestri aims to preserve the status quo. “Neiman Marcus is one of only eight trades on Michigan Avenue within the last decade and was highly sought after by both domestic and international capital due to the rare flagship offering on one of the world’s most renowned and proven high-street corridors,” JLL Managing Director Amy Sands said in the statement. It’s unclear what Silvestri paid for the property. Sands didn’t return a phone call, and a JLL

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spokeswoman declined to disclose the price. Representatives of Silvestri and UBS did not respond to requests for comment. Silvestri doesn’t own any other properties in Illinois, according to its website. Shopping centers and other retail properties in Texas and Florida comprise most of its portfolio.

RETAIL RISK

The Magnificent Mile has become a risky place for retail property investors over the past several years, especially since the COVID-19 pandemic swept into town in 2020. Nearly a quarter of Mag Mile retail space is vacant after the loss of chains including Gap, Uniqlo and Macy’s. The owner of the Water Tower Place mall just two blocks north of the Neiman Marcus store recently handed the property over to its lender, and an investor in the Shops at North Bridge mall recently took a loss after transferring its stake in the property to its partner. But the Neiman Marcus store has weathered the storm, according to a JLL marketing brochure for the property. As of last fall, the Mag Mile store was the chain’s second most-profitable location, and its sales year-to-date were 5% higher than they were for the same period in 2019, according to the brochure. The store was on track to post sales

of $123 million, or $629 per square foot, in 2021, the document says. As the chain’s new landlord, Silvestri will collect rent from Neiman Marcus, though it’s unclear how much time remains on the retailer’s current lease, an important factor in the price Silvestri paid for the property. Even in stormy markets, a property with a tenant locked into long-term lease can be a relatively safe bet— and command a high price—because the tenant is legally obligated to pay rent over the term of its deal. Investors typically will pay less if a lease is set to expire in the near future, to account for the risk that the tenant won’t renew. Silvestri acquired the Neiman Marcus property through a socalled 1031 exchange, a transaction that allows investors to defer capital gains taxes on the sale of one property if they reinvest the proceeds in another one. Buyers in 1031 exchanges will often re-invest their money rather conservatively, and almost never in risky real estate developments.

LOAN LENGTH

Silvestri also financed the acquisition with a seven-year loan, according to JLL, one clue that Neiman Marcus still has several years left on its lease. Few lenders would provide a loan on a single-tenant property that extends beyond the term of the lease, wary of the risk

JONES LANG LASALLE

The deal and the buyer suggest the luxury department store isn’t going anywhere

The four-story building has been the home of Neiman Marcus since 1983. that the tenant might not renew. Cushman & Wakefield broker Greg Kirsch interpreted the sale as “good news for the avenue,” a sign that a key anchor tenant will “yield stability over time” on the Mag Mile. The loss of Macy’s at Water Tower Place last year and closure of the Barney’s store at Oak and Rush streets in 2019 has fueled speculation about more department store closures in the neighborhood. But Neiman Marcus probably made out by picking up some customers who used to shop at Macy’s and Barney’s, Kirsch said. “Even if sales go down in the aggregate, you lose some competitors,” said Kirsch, executive managing director in Cushman’s Chicago office. The real estate services firm wasn’t involved in this deal.

But being a department store’s landlord has been a risky business for a while. The sector, in decline for years, suffered badly during the pandemic. Dallas-based Neiman Marcus Group restructured in Chapter 11 in 2020 and closed multiple department stores, but none here. But chain is healthier today; its sales have rebounded over the past year. The company continues to operate stores at Oakbrook Center and Northbrook Court malls. Hartford, Conn.-based UBS had owned the Neiman Marcus store since 1998, paying $104 million for the property and office space in the adjacent Olympia Center tower, according to Cook County property records. In June 2020, UBS split up the office and retail properties. UBS still owns the office space.

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10 MAY 2, 2022 • CRAIN’S CHICAGO BUSINESS

EDITORIAL

Where we are as a murky casino process closes

CRAIN’S PHOTO ILLUSTRATION / GETTY IMAGES

ools’ taxes are nothing new. Lottery ticket sales have been a major source of state revenue for decades. And though this page has always taken a dim view of funding government by leveraging people’s willingness to throw away their money at a local casino, that ship has sailed, so to speak—or at least it’s about to leave the dock. Chicago is set to get a casino, like it or not. The challenge now is figuring out which of the three finalists in the running for the license is the best one for the job. Actually, “best” is probably the wrong word to use in this context. Let’s say “least bad,” because we are now in the late stages of a casino development process that’s been problematic from the start: Crain’s first raised doubts way back in 2019 that onerous taxes built into the casino law could make a Chicago casino unattractive to top-flight operators. Nevertheless, enough bidders eventually stepped forward to pitch for the license, and the process lumbered ahead. Now Chicagoans have three plans to consider. All three have their individual flaws. Having witnessed three separate town hall-style presentations—each of which was long on salesmanship and short on actual community input—we now know what the bidders want us to know about each of the proposals: Hard Rock’s vision for the One Central development near Soldier Field; Bally’s idea to transform the Tribune plant property at Chicago and Halsted; and Rush Street Gaming’s offer to build on Related Midwest’s neighborhood-in-the-making, The 78. And yet, beyond the glossy brochures and manicured PowerPoint presentations on display at public hearings and community events, inconvenient details of the less-than-transparent bidding process and the doings of some of the bidders themselves have managed to come out into the open, largely through the work of Crain’s political columnist Greg Hinz. As he reports in this week’s issue, there are now serious questions about whether a key city consultant on

City Hall’s casino effort had a conflict of interest and why the Lightfoot administration didn’t disclose that reality to aldermen. That revelation follows Crain’s April 20 report that Bally’s received some special treatment from the Lightfoot administration: an undisclosed two-for-one deal that saved it $300,000. Five different groups submitted bids, but only four paid a required $300,000 application fee. Bally’s was involved in two of those bids but only paid one application fee. Earlier still, the city let Bally’s, in low-key fashion, drop a clause in its contract with minority investors giving the company the unilateral right to buy out the minorities at a predetermined price. On April 11, meanwhile, Crain’s revealed that even though one of the rejected proposals—from the Rivers Casino group, seeking to build at McCormick Place’s Lakeside Center—was jettisoned on grounds that the ag-

ing facility was needed for convention business, McCormick Place is now preparing to seek its own bidders to repurpose the very same Lakeside Center for “entertainment” or other use. And then there was the news, revealed by Crain’s on April 26, that the Lightfoot administration is upping the ante for the three finalists, asking them to agree to pay tens of millions of dollars upfront to the city if they win the prized gambling rights. Sources say the mayor is seeking $40 million now plus $2 million a year down the road—or a total of $75 million if all the money is paid now. Some see it as a late-stage stickup; others see it as a proper effort to wring maximum cash out of a lucrative asset, which perhaps it is— as long as it doesn’t prompt bidders to walk away altogether. So it’s fair to say the bidding process has taken some strange twists and turns. But

then there are more practical matters to consider. All three site proposals would create major traffic challenges and transform the surrounding areas in ways that neighbors have made clear they do not like. In fact, as Ald. Brendan Reilly pointed out on a recent episode of Crain’s A.D. Q&A podcast, each of these plans has sparked so much opposition that getting any one of them through the City Council for approval will be an uphill battle. Setting aside the behind-the-scenes drama regarding its application fees, its treatment of minority investors and more, the Bally’s plan is particularly problematic as a neighborhood development, existing as it would within a slice of the city that’s already congested and lacking convenient access to train and highway connections. Similarly, the Hard Rock proposal near Soldier Field has weathered NIMBY pushback and opposition from the local alderman. Hard Rock’s team—a joint venture between the majority owners, the Seminole Tribe of Florida and a collection of investors that includes Bob Dunn’s Landmark Development and Black-owned Loop Capital—hopes to convince the city that it can move forward with the casino even if the $6.5 billion in state assistance needed for the larger, controversial One Central development doesn’t materialize. Pardon the pun, but that seems like a gamble the city shouldn’t take. Which leaves The 78 as perhaps the least objectionable of a trio of less-than-stellar options. Yes, traffic will be an issue at this site, which skirts the Chicago River just south of the Loop. But this is a neighborhood largely being built from scratch, so the NIMBY concerns, while not entirely invalid, are less dire than in the River North area near Bally’s site. Another plus of The 78, which Hard Rock can’t tout: It’s away from the lakefront, reducing fears of souring our park-like shoreline with an Atlantic City-style facade. It’s not ideal, but it’s as close as Chicago is likely to get under the circumstances.

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YOUR VIEW

A generational opportunity in affordable housing

OVID and civil unrest disrupted Chicago’s real estate market. Office space vacancy in Chicago is hovering around 20%, an all-time high. Before COVID-19, dated office buildings were already challenged by technology and regulatory risk, but noted commercial real estate economist Randall Zisler believes now that economic obsolescence is the key risk, saying, “Up to 30% of office space is economically unfeasible to upgrade.” Landmarks of the Chicago skyline like the Civic Opera building, Illinois Center, 175 W. Jackson, and 181 W Madison are in foreclosure or distress. This disruption William M. Bennett is a professor of real estate at Northwestern University’s Kellogg School of Management.

of the old order is a generational opportunity for Chicago to address affordable housing by converting aging office stock into homes. If 20% of Chicago’s central business district office stock was converted to apartments, it could produce up to 60,000 units of housing. This transformation would meet the needs of half the shortage of 120,000 units of affordable housing according to Marissa Novara, commissioner of Chicago’s Department of Housing. Problem, meet solution—right? Wrong. While many of these older buildings already serve as homes for tens of thousands of Chicago’s residents today, they were grandfathered in prior to zoning and building code changes. The cost to renovate decades-old buildings from when

they were zoned and constructed to comply with present building and zoning code is often a multiple of what office buildings facing obsolescence are worth. As a society we are choosing that affordable housing stock is good enough for our residents to live in, but only the latest and greatest improvements will do to create new housing for those in need. A way to reconcile this inconsistency is through a public-private partnership to fund the difference between what is already acceptable to live in versus what is now acceptable to build. A budget is an economic expression of values which attempts to answer the timeless societal question, “Where should we invest our scarce resources?” A plethora of studies reveal that housing is an import-

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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ant social determinant for educational attainment, economic outcomes, health and well-being. Just under 0.2% of Chicago’s 2022 total budget was devoted to affordable housing. What does it cost Chicago to not provide affordable housing in terms of adverse health, economic drag, and bad outcomes? Habitat for Humanity, a leader in the creation of affordable housing, guides us to the benefits: “Greater tax generation, creation of jobs, opportunities for economic development, increased job retention and productivity, and the ability to address inequality.” While there are many needs facing Chicago, seizing the generational opportunity to address affordable housing is an chance too big to let pass.

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.

4/29/22 4:14 PM

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CRAIN’S CHICAGO BUSINESS • MAY 2, 2022 11

LETTER TO THE EDITOR

ComEd story misses the big picture

rain’s recent story about Commonwealth Edison’s rate request (“Here’s what that big ComEd rate hike is really paying for,” April 25) is misleading. Your readers should have the facts. First, there is no such thing as “guaranteed profits” for ComEd under state law. We have to show that our costs are reasonable, prudent and support service to customers before they go into rates at all, let alone produce a penny of profit. The Illinois Commerce Commission, which regulates utilities, reviews our costs in an eight-month public process in which the Illinois attorney general, consumer groups and other advocates actively participate. Moreover, if we fail to deliver for

customers on any of several service quality targets, we face financial penalties. For the last 10 years, families served by ComEd have seen their power bills remain steady, thanks in part to rate decreases. Now, ComEd is requesting an increase in delivery charges for 2023 to support $2.9 billion of investment that helps advance the goals of the Climate & Equitable Jobs Act passed in Illinois to address climate change, create clean energy jobs, ensure equity and prioritize a just transition to a green economy. By focusing narrowly on the year-overyear change in ComEd’s proposed rates, Crain’s misses the big picture: The investments include critical infrastructure en-

hancements needed to support both reliability and resiliency in the face of more severe weather events, to meet increased demand and to support the transition to 100% clean energy as more wind and solar energy, electric vehicles and battery storage come on the grid. There also will be significant offsets on customers’ bills from decreases in other bill components, from accelerated credits of tax benefits to customers and from carbon mitigation credits. The story also refers to the “true up” that occurs when regulators review the utility’s actual costs from the prior year, such as ComEd’s work to restore service to customers after a major storm or other severe

weather event. This true up adjusts rates where actual costs differ from forecasts. This comparison ensures that costs in rates are accurate, but is also no guarantee. Regulators must confirm that those costs were prudent and reasonable before they can be included in rates. Utilities can’t decide for themselves to increase rates to make up shortfalls. We are working harder than ever to both meet the state’s energy needs and build the faith and trust of our customers, and that includes making sure they know what our investments are for. GIL QUINIONES CEO, Commonwealth Edison

CRAIN’S CHICAGO BUSINESS

Chief executive officer KC Crain Group publisher/executive editor Jim Kirk Editor Ann Dwyer Creative director Thomas J. Linden Director of audience and engagement Elizabeth Couch

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GENERAL COUNSEL BREAKFAST

Art director Joanna Metzger Copy chief Scott Williams Copy editor Tanya Meyer Contributing editor Jan Parr Political columnist Greg Hinz Senior reporters Steve Daniels, Alby Gallun, John Pletz Reporters Elyssa Cherney, Katherine Davis, Danny Ecker, Corli Jay, Ally Marotti, A.D. Quig, Dennis Rodkin, Steven R. Strahler Contributing photographer John R. Boehm Researcher Sophie H. Rodgers Senior vice president of sales Susan Jacobs Vice president, product Kevin Skaggs Sales director Sarah Chow Director of research Frank Sennett Events manager/account executive Christine Rozmanich Marketing manager Cody Smith Production manager David Adair Events specialist Kaari Kafer

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PEOPLE ON THE MOVE

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ARCHITECTURE / DESIGN

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PROFESSIONAL SERVICES

FGM Architects, Chicago

HBR Consulting, Chicago

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Cory Kamholz, AIA, LEED AP, CPHC, has joined the Chicago office of FGM Architects as Design Principal focused on Higher Education and Municipal practices. Previously, Cory was a designer at Holabird & Root before joining Harley Ellis Devereaux (HED) in 2016 as Chicago Design Leader and Associate Principal. His experience includes design for Higher Education, Science & Technology, Healthcare, Housing and Workplace environments. Cory received his M. Arch. degree from University of WI-Milwaukee.

Marc Allen has been named practice group leader of the Legal Technology practice within the Advisory business at HBR Consulting. Marc has spent his career working with large law departments on improving operational efficiency and optimizing their legal operations through a focus on people, process and the technology that supports them. Marc also helps HBR’s law department clients establish alternative legal operations delivery models through HBR’s managed services offerings.

Jose M. Pariente has joined HBR Consulting as a managing director within its Advisory business. Jose has deep experience providing strategic sourcing strategy and expense management solutions for large-scale clients to streamline operations and enhance profitability. Jose works with clients to enhance their financial performance through process improvement with optimal technology in a managed services framework. Prior to joining HBR, Jose was the Chief Procurement Officer at White & Case, LLP.

Elevate, a nonprofit focused on equitable climate action, has appointed MeLena Hessel as its Associate Director of Policy. MeLena will lead Elevate’s Illinois policy initiatives and ensure state agencies implement the recently passed Climate and Equitable Jobs Act robustly. MeLena previously worked with the Environmental Law & Policy Center in Chicago, focusing on clean energy development and clean transportation initiatives.

Rick Powers has been promoted to Senior Partner, Operations Excellence. He defines clients’ strategic visions by identifying tactical and achievable outputs. An open and transparent communicator, he has served as a project manager for over 50 ERP implementations and consistently provides advisory services into appropriate resourcing, timeline, and costs to successfully complete these efforts. He joined West Monroe in 2016. PROFESSIONAL SERVICES West Monroe, Chicago

PROFESSIONAL SERVICES

CONSULTING ARCHITECTURE / ENGINEERING Wight & Company, Darien Wight & Company welcomes Nicole Slightom as Director of Human Resources. Nicole will recruit and develop our most valuable assets – our Slightom people. With over 20 years of experience, Nicole knows people are the heart of an organization’s culture. Her appreciation and understanding of this tenant underscore the importance of strong human resources to our Sternberg continued success. Wight also welcomes Shawn Sternberg, Director of Marketing & Communications, to lead our efforts for submittals, collateral, and media/ PR. With 25 years of experience in integrated marketing, branding, and strategic storytelling, Shawn collaborates across the organization to ensure consistent messaging and quality deliverables in our pursuit to create meaningful impact.

BANKING Wintrust Commercial Banking, Chicago Wintrust is proud to announce the hiring of Michael Sperling as senior vice president of commercial banking. Michael brings extensive commercial lending expertise to his new role to help business owners get the personalized, locally informed support and guidance they need. Michael graduated from Western Illinois University and has based his career in the Chicagoland area ever since, making him an expert in the unique needs of the people who make this area special.

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

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West Monroe, Chicago

HBR Consulting, Chicago Jonathan Kash has been promoted to Senior Director, Product Management, at HBR Consulting (HBR), where he works with members of the Advisory business to identify market opportunities and manage the product lifecycle, including roadmap management, concept development, product design, and input into technical implementation. As a tech founder, his background includes extensive full-stack technology and product experience.

CONSULTING HBR Consulting, Chicago Sarah Luiz has joined HBR Consulting as vice president of information security. In her role, Sarah leads the HBR and Keno Kozie information security department, which is tasked with cybersecurity, privacy, compliance, governance, and risk management. A Certified Information Security Manager and an Air Force veteran, Sarah has a wide range of information security experience spanning multiple industries, including legal, gaming, financial, government and professional services.

CONSULTING HBR Consulting, Chicago Kris Martin has been promoted to managing director in the Strategic Sourcing + Business Optimization practice within the Advisory business at HBR Consulting. Kris leads the Research + Information Solutions team and has over 20 years of experience consulting law firms on cost savings, vendor governance, library, and process improvement. Kris uses proven expense and change management methodologies to deliver innovative solutions for clients across a variety of industries.

CONSULTING HBR Consulting, Chicago Chris Ryan has been promoted to senior vice president of client development at HBR Consulting. Chris works closely with HBR’s leadership and clients across the Advisory and Managed Services businesses to ensure HBR delivers consistent value, while deepening and enhancing those relationships. Chris has 20 years of strategic and operational consulting experience across a variety of industries, focusing on transforming service delivery and business operations while improving financial performance.

Colleen Campbell has been promoted to Senior Partner, Operations Excellence. She leads the Chicago-based Operations Excellence practice which includes Financial Management; IT Strategy and Business Process; Organizational Management, Productivity & Process Optimization; Program & Portfolio Management and Supply Chain teams. She has 32 years of experience leading successful accounts, directing largescale business transformations and building trusted client relationships. She joined West Monroe in 2018.

PROFESSIONAL SERVICES West Monroe, Chicago

FOOD & BEVERAGE Rōti Salads. Bowls. Pitas, Chicago Fast Casual Mediterranean restaurant Rōti, expands their growing team with the appointment of Christopher Gumprecht as VP of Technology and Matthew Fallon as VP of Finance. After 20 years Gumprecht at Lettuce Entertain You Restaurants, Christopher will be responsible for Rōti’s technology and digital infrastructure and will lead innovation relating to digital platforms, tech stack, insights-driven data and Fallon all other business systems. Matthew comes to Rōti having served in lead finance roles with Kraft Heinz and will use his expertise in both finance and consumer marketing to build robust analytics, reporting, accountability and performance across all Rōti restaurants and operations, as well as drive the company’s administrative infrastructure.

Danny Freeman has been promoted to Senior Partner, Energy & Utilities. He provides leadership and counsel to large utilities undergoing high-impact grid modernization initiatives. He applies strategic and financial acumen to develop detailed business cases and financial models to support program design, implementation, and benefit delivery to guide clients’ complex programs. He joined West Monroe in 2007.

PROFESSIONAL SERVICES West Monroe, Chicago Brad Haller has been promoted to Senior Partner, Mergers & Acquisitions. He specializes in highly complex mid-market transactions and leads the firm’s extensive capabilities in due diligence, post-close merger integration, and value capture for strategic and financial buyers. He has advised private equity firms and strategic buyers on more than five hundred transactions in the last decade across many industries, including healthcare, manufacturing, and software. Brad joined West Monroe in 2010.

Brad Ptasienski has been promoted to Senior Partner, Technology. He delivers sustainable and transformational data solutions by leveraging the right technology to drive growth. From performing data assessments in support of M&A to implementing leading-edge analytics technology, Brad is a proven strategist and leader in the data engineering and analytics space. He joined West Monroe in 2007. PUBLIC RELATIONS Aileron Communications, Chicago Aileron Communications, a clean energy, innovation, and technology PR firm, is pleased to announce the promotion of Peter Gray to Senior Vice President. Since Gray joining the firm in 2014, he has diversified Aileron’s client roster and strengthened its services in design and community relations. David Jakubiak has been promoted to Vice President. Since joining the firm in 2021, David Jakubiak has delivered exceptional public relations work for wind energy, solar power and battery storage clients. TECH / DIGITAL / STRATEGY Dialexa, Chicago Dialexa, a digital product consulting firm, expands into Chicago with the hiring of Jonathan Williams as market lead. Jonathan has over 20 years’ experience leading Williams transformation and product development with today’s most innovative companies. Jonathan will partner with companies and the Chicago community to turn ideas into reality. In his spare time, Jonathan is dedicated Aimiuwu to mentoring local youth and developing the next generation of leaders. Ehi Aimiuwu joined Dialexa as Senior Quality Engineer. She comes to Dialexa having worked at Thoughtworks as a Quality Analyst where she analyzed software and built the right teams to deliver the best value to the end user. Ehi started in the tech industry with the i.c.stars training program.

4/26/22 3:41 PM

CRAIN’S CHICAGO BUSINESS • MAY 2, 2022 13

BOOM AND BONANZA: Real estate development helps lift property tax collections. PAGE 14 OLD BILLS: Taxpayers remain on the hook for services already delivered. PAGE 16

GWEN KERAVAL

PROPERTY TAX REFORM

4 SOLUTIONS: Ideas to reform the property tax system are already on the table. PAGE 20

FINDING THE BALANCE Given competing interests and complicated calculations, a property tax system in Cook County that satisfies all parties may be asking the impossible | BY ALBY GALLUN FIND THE COMPLETE SERIES ONLINE

ChicagoBusiness.com/CrainsForum

Fritz Kaegi has done what he said he would do, but the job of reforming Cook County’s property tax system is far from over. Since taking office in 2018, the Cook County assessor has sharply hiked assessments on commercial properties, shifting the property tax burden away from homeowners and onto landlords and their tenants. Kaegi has fulfilled a primary campaign pledge to reset commercial values, arguing that the man he defeated four years ago, Joseph Berrios, had lowballed them. Now, with a primary election about two months away, Kaegi is defending his own

record as assessor. He’s taking fire from the real estate industry. Contending that Kaegi has overshot commercial property values, landlords and brokers warn about the unintended consequences, saying he’s driving away investors and undermining the city’s fragile recovery from the COVID-19 pandemic. The evidence so far is murky at best. But if Kaegi’s push has shown anything the past few years, it may be that the county assessor—who performs a difficult, but narrow job: valuing every property in the county—has See BALANCING on Page 18

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4/28/22 5:20 PM

14 MAY 2, 2022 • CRAIN’S CHICAGO BUSINESS

Apartment boom could be a tax bonanza for Chicago

BY ALBY GALLUN Property owners like to gripe about rising assessments, but they’re not all bad. They can be a good thing, when they reflect true growth in property wealth created by development of office buildings, hotels, warehouses and apartments. Apartments stand out as the engine driving the expansion of the tax base in downtown Chicago over the past several years. Some downtown high-rises that didn’t exist a few years ago are now worth hundreds of millions of dollars—property value that can be taxed, reducing the burden on existing taxpayers. “Development is wonderful, because it expands the base and spreads the cost of government amongst more people,” says Cook County Assessor Fritz Kaegi. In the three Chicago townships that include downtown—West Chicago, South Chicago and North Chicago—Kaegi’s office last year assessed 136 apartment projects that were built one to three years earlier. Their combined value: $5.5 billion, or a quarter of the total value of all commercial property

in the three townships. It’s not clear how much the collective value of the properties rose from its pre-development total, but the properties probably were worth only a fraction of what they are currently. Many development sites are vacant land, parking lots or properties with low-rise buildings of such little value that they’re demolished. One of the biggest buildings added to the Cook County tax rolls is Nema Chicago, a 76-story, 800unit skyscraper at the south end of Grant Park completed in 2019. Kaegi’s office valued the apartment building at $191 million last year, up from about $4.9 million in 2018, when it was still under construction. The huge increase reflects the property’s rental income, though the assessor probably undervalued the building by a long shot. Nema’s developer, Miami-based Crescent Heights, refinanced the tower with $345 million in debt last year, implying a much higher value. Real estate development is hardly a source of free money for local governments. Depending on the property type, development

can impose additional costs on city police and fire departments. If new residential buildings attract families with school-age children, local schools might need more teachers and space to accommodate more students. But many apartment buildings—especially big, expensive downtown highrises—tend to appeal to households without kids. Office development has increased the city’s property tax base, too. Kaegi’s office valued Bank of America Tower, a new 55-story office building at 110 N. Wacker Drive, at $500 million last year. Back in 2015, when a lowrise office building stood on the site, the property was valued by the assessor’s office at just $28 million. But Kaegi’s new value is still low: The high-rise recently changed hands in a deal that valued it at more than $1 billion. If there’s any place development has moved the assessment needle in Chicago, it’s in the Fulton Market District. The West Loop neighborhood’s construction boom started with projects like Google’s Midwest headquarters several years ago, and it has

COSTAR GROUP

Development creates wealth that generates revenue for government coffers

Nema Chicago gained momentum in recent years with hotel, multifamily and more office developments. Developers plan more than 6,000 apartments in Fulton Market in the coming years, according to Integra Realty Resources, an appraisal and consulting firm. All the recent construction has transformed Fulton Market from a gritty meatpacking district into the

city’s hottest neighborhood. It also has fueled a big jump in property wealth: In West Chicago Township, which includes Fulton Market, the total value of all nonresidential property jumped 116% last year from 2018, the last time it was reassessed, according to Kaegi’s office. It was the biggest increase by far among all eight Chicago townships.

Tax increases push Chicagoans to their financial limits Residents’ discontent with taxes and fees could lead to even more people deciding to leave the city property tax issues. Fewer want the state government (40%) or priWith rising inflation and soar- vate parties (16%) to take the lead. ing gas prices, Chicagoans feel the However, local leaders are adding strain on their wallets. Now, more to residents’ tax burden rather than ever, residents are pushing than relieving it. In 2022, Chicago back against the city’s leaders plan to increase high property taxes. the city’s property tax According to The levy by $76.5 million. Harris Poll’s 2021 This follows raising MetroPoll report, 55% property taxes by $94 of Chicago residents million in 2021. Last (vs. 40% of all U.S. year, leaders instated adults) are concerned an automatic escalator about their city’s taxes that adjusts property and fees. Property taxes taxes in step with the are a particular area of William Johnson Consumer Price Index. tension. Illinois has the is CEO of The HarOf this year’s $76.5 second-highest proper- ris Poll, a global million increase, $22.9 ty tax rates in the coun- public opinion, million can be attributtry (2.27%), behind only market research ed to the automatic esNew Jersey (2.49%). and strategy firm. calator. Some aldermen Median annual property taxes in Illinois stand at $4,419. are calling for its repeal, citing This exceeds median annual growing constituent frustration. Most area homeowners (74%) property taxes in 45 states and the and renters (68%) believe that ChiDistrict of Columbia. Beleaguered residents are look- cago property taxes are worse than ing to local leaders for a solution. property taxes in other U.S. cities. Almost half (45%) believe lo- Frustration often precedes action. cal government should manage According to the U.S. Census Bu-

BY WILLIAM JOHNSON

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w WEARY AND WORRIED Across the taxpaying public, concerns are growing about how people will be able to afford the ever-increasing cost of living in Chicago. ARE YOU CONCERNED ABOUT TAXES AND FEES IN YOUR CITY? Chicago-area residents All U.S. adults

55% 40%

79%

of Chicago-area residents say high property taxes are hurting the local economy

OVERALL, DO YOU THINK PROPERTY TAXES IN CHICAGO ARE BETTER, WORSE OR ABOUT THE SAME COMPARED TO OTHER CITIES IN THE U.S.? Worse

About the same

Better

Chicago residents Homeowners Renters

72% 74% 68%

23%

20%

28%

Source: MacArthur Foundation/The Harris Poll

reau, the Chicago metro was estimated to have lost more than 90,000 residents between July 2020 and July 2021. Some fear that rising property taxes will push even more residents to leave. It is unsurprising that homeowners are more skeptical of Chicago’s property tax situation than renters. Homeowners see the increases on their tax forms, while

renters are often unaware of the changes. However, renters are not immune to the increased costs. Landlords may pass on tax hikes to their tenants through increased rent. All Chicagoans feel the effects of rising taxes, with low-tomiddle income households being especially vulnerable. Local leaders and residents are at an impasse. Seventy-nine percent of Chicagoans agree that high property taxes are hurting the local economy, given the relationship between taxes and affordability. Residents have real concerns about the

cost of living, but local leaders are simultaneously concerned about the city’s $38 billion debt burden. In 2022 alone, Chicago will owe $2.3 billion to city pension funds. Chicago leaders should re-evaluate using tax increases to manage the city’s debt. Increasing taxes could push out residents, leading to a diminished tax base and even greater economic instability. Instead, they can look to reform the state’s unsustainable pension system and focus on more fiscally responsible spending as a long-term plan for growth.

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CRAIN’S CHICAGO BUSINESS • MAY 2, 2022 15

BEYOND THE POLITICS

Here’s what commercial building owners want

COSTAR GROUP

of the assessor’s latest damage uns Chicago attempts to retil after the election. The blundered cover from COVID, our rollout of a new database has decounty assessor is deterlayed final assessments by several mining assessments through pomonths. This delay will likely result litical ploys that are rocking our in late tax bills and municipalities local businesses. How else can having to secure emergency loans you explain giving homeowners to cover missing revenue, racking an across-the-board “COVID” reup avoidable fees and interest for duction while the pandemic cretaxpayers. ated a surge in home values? The Property taxes are not a zerotactic was extraordinary—though Farzin Parang is sum game. While homeowners national assessment-standards executive director may think they’re avoiding tax inorganizations cautioned against of the Building creases at commercial buildings’ guessing the pandemic’s impact Owners & Managexpense, closed or underperformon real estate, the assessor made ers Association of ing businesses mean lost jobs and up an entirely new, unsanctioned Chicago (BOMA/ lost tax revenue—and homeownassessment system to benefit Chicago). ers ultimately pay the difference. homeowners, followed swiftly by Homeowners and businesses need to reccampaign-style mailers. We are unaware of ognize that we are in this together, and both anything similar across the nation. The assessor is dramatically increasing must thrive for our communities to prosper. assessments on commercial properties Commercial buildings subsidize homeownthroughout Chicago—many by triple digits, er property taxes with a higher assessment despite record vacancy levels and the well- rate, so we need to strike a balance that proknown struggles businesses have endured. motes commercial investment and makes Even buildings that surrendered keys to the taxes more manageable for everyone. Finding that balance would benefit from bank saw drastic increases, all in service of the assessor’s divisive rhetoric to pit home- several tasks. First, we should evaluate owners against their own business commu- whether we can simplify Cook County’s property tax process. Between our unique nity. The public will not have a complete picture classification system, the equalizer, tax-

increment financing districts and the many government agencies involved, it’s nearly impossible for the public to understand property tax policies. Without clarity, there are too many opportunities for officials like the assessor to develop dubious policies without any accountability. We also need greater transparency into the assessment process. The average taxpayer would be surprised to learn how much subjectivity the assessor has to determine commercial property tax assessments, especially in down markets with few transactions like the current market. We cannot achieve an objective assessment process if assessors are allowed to unilaterally fabricate new assessment methods, like Assessor Fritz Kaegi’s “COVID” reduction. We should design a robust system, with necessary oversight, to ensure assessment policies meet national standards, use quality data and are free of political motivation. Finally, we should review the disproportionate distribution of the property tax, through which businesses pay more than their fair share of the burden and subsidize residential taxpayers. Every dollar of commercial property value relieves $2.50 of tax burden from residential properties, but we cannot optimize that subsidy without understanding how it limits business growth.

Remember that tenant businesses pay a commercial building’s property taxes, and 90% of them are small businesses—even downtown. As that burden increases, those tenants leave or stop growing, reducing the benefit of the subsidy for all taxpayers. Chicago’s commercial property taxes are now the second highest in the nation, behind only Detroit, and are a prominent weakness for Cook County’s investment pitch. Rather than shying away from property taxes for politics’ sake, we should review the business subsidy of the property tax system regularly and make periodic adjustments to ensure strong economic growth. Though property taxes have become a hotbed of political drama, we conduct similar exercises for other industries without too much fuss. The state’s tax credits to lure extra film production here, for example, create new jobs and investment that we would not have otherwise had. Most importantly, we need to move beyond political rhetoric that seeks to turn us against ourselves. At BOMA/Chicago, we can speak for downtown’s office buildings: Our industry members go to work every day to recruit investment and grow jobs for our entire region. They do not ask for special treatment, only that we create a property tax system that’s transparent, equitable and designed with intention to promote growth.

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16 MAY 2, 2022 • CRAIN’S CHICAGO BUSINESS

RETROGRADE

Taxpayers still on the hook for old debt obligations

H A

GETTY IMAGES

recent property tax increases is the ook County Assessor Fritz need to pay the ballooning pension Kaegi’s latest assessments obligations of the city of Chicago have brought substantial inand the Chicago Public Schools, creases in valuations for many comwhich together account for about mercial properties, causing great 75% of all property taxes levied in consternation in Chicago’s real Chicago. Worse still, most of the estate industry and business compayments are not going to support munity. The concern is warranted. pensions for current workers but to According to a recent report from cover unfunded liabilities from the the Lincoln Institute of Land Policy, Chicago has the second-highest Christopher Berry past. Today’s taxes are paying for yescommercial property tax rate is a professor and terday’s services. This is not a good among large U.S. cities, second only the director of the value proposition for prospective to Detroit—and that was before the Center for Municfirms, or anyone else. recent reassessments. Business ipal Finance at Many taxpayers may not underowners, along with many ordinary the University of stand that the city’s property taxes Chicagoans, are increasingly ask- Chicago’s Harris don’t pay for operating expenses. ing a fundamental question: What School of Public They are used to pay for pension is the line between a reasonable tax Policy. costs, libraries and various debt serand one that harms a city’s business vice obligations. In 2015, the city of Chicago environment? To answer this question, we cannot look at passed the largest property tax hike in its hisproperty taxes in isolation. We must consider tory, primarily to cover increasing payments the total value proposition to taxpayers, which to pension funds. In fact, over the last decade, means looking at what the taxes pay for. If a the share of the property tax levy going into government provides a dollar’s worth of ser- the pension funds increased from 42% to 82%. vices for every dollar in taxes, there’s no rea- That’s right, 4 out of 5 dollars in property taxes son a tax increase should harm the business for the city today go to paying pension obliclimate. Indeed, a tax increase that leads to gations. (Because the city has other sources improved services or infrastructure upgrades of revenue, pension payments account for might be net positive for the business environ- “only” 22% of total appropriations.) At CPS, property taxes pay operating exment. Unfortunately for all Chicagoans, when it penses and pension obligations. In fact, CPS comes to property taxes, we find ourselves enjoys a separate property tax levy explicitpretty far from this ideal. The impetus for ly dedicated to pension funding. That levy

was reinstated in fiscal year 2017 and then quickly raised from 0.383% to 0.567% in fiscal year 2018. The property tax pension levy now nets about half a billion dollars a year, still not enough to cover the district’s pension expenses. Seen from this perspective, rising property taxes are a symptom of a deeper disorder. We should be more concerned about what those taxes are and are not paying for. Increasingly, they aren’t paying for world-class services; they are paying for legacy costs resulting from decades of shortsighted fiscal can-kicking. And that is harmful to the city’s business climate. Let’s also consider the indirect affect that higher property taxes have on the value of Chicagoans’ homes and businesses. As taxes go up, property values will go down if equally valuable services aren’t delivered in return, which is almost surely the case in Chicago now. This is because, as every homeowner understands, prospective buyers will offer a lower price for a property with a higher tax bill. This combination of higher bills accompanied by lower values is a double whammy for current property owners.

None of this has much to do with Kaegi’s assessments. Kaegi’s office has been, by all accounts, attempting to rectify generations of property tax inequity, in which lower-income residents and small businesses have been paying more than their fair share. This represents progress. Many commercial properties, especially downtown, have seen their assessments rise, catching up to market values after many years in which they were underassessed by Kaegi’s predecessors. These fixes will affect who pays the property tax, shifting the balance between rich and poor and between residents and businesses. But assessments are not the cause of Chicago’s underlying property tax problems, nor would returning to the old ways do anything to fix them. Even after the recent increases, current taxes are not sufficient to pay the growing pension obligations. It’s time for Chicago’s leadership to level with taxpayers about what’s coming. This will require developing a long-term financial plan and a long-term revenue plan for funding pensions. The truth derived from such an exercise will be painful, but we must rid ourselves of yesterday’s debt in order to lessen tomorrow’s hardships.

LIABILITIES

Assessment appeals perpetuate a vicious cycle

Successful appeals after tax bills n area of concern in recent are paid result in refunds that are years has been real estate tax taken from taxing agency’s current assessment appeals in Illiyear collections. Given all these nois. These appeals influence both avenues of appeal, the problem is relative tax burdens and tax rates. not a lack of opportunity to appeal. Before deciding whether these Second, there are important concerns need to be addressed and differences between appeals of how to go about it, it is important residential and commercial propto have a common understanding erties. The main difference is the of the appeals process and how apquantity and quality of the evipeals influence the tax burden. Scott Metcalf is dence of value. There are always First, real estate taxes are paid in a partner at law more sales of residential properproportion to a property’s value, firm Franczek in ties than commercial and indusso the ability to appeal an incor- Chicago. trial properties, and residential rect assessment is fundamental to a fair system of taxation. In Illinois, assess- properties tend to be more similar to one ment appeals can occur before tax bills are another. As a result, it easier to use the sale paid by appealing to the local assessor and prices of comparable residential properties board of review. These appeals shift the tax to identify an accurate market value. The difficulty of finding sales of truly comburden between taxpayers. Like slicing a pie, if my piece is smaller, someone else’s parable commercial and industrial properpiece is larger. So long as an appeal is filed ties results in valuation experts also anaat the board of review, appeals can proceed lyzing the income-producing capability of after tax bills are paid either at the state-level commercial and industrial properties. Howadministrative agency, known as the Prop- ever, the income-producing capability of a erty Tax Appeal Board, or in circuit court. property is largely in the eye of the beholder.

P013-P020_CCB_20220502.indd 16

Rent and expenses, capitalization rates and business value are just a few examples of where opinions can diverge. This is the first indication of a problem. Reasonable people can disagree on the value of commercial and industrial properties, and small differences of opinion on one factor can lead to large swings in a property’s value. Finally, there is the impact of assessment appeals on tax burdens and tax rates. Reported evidence indicates that, at least in Cook County, commercial and industrial properties—and to a certain extent, affluent homeowners—are more likely to successfully appeal their assessments, which results in higher tax burdens for less-affluent homeowners. Additionally, there is an entire industry of appraisers, analysts and attorneys to assist taxpayers in appealing their assessments. Given that there can be large swings in the opinions of value for commercial and industrial properties, successful appeals of commercial and industrial property shift the tax burden onto homeowners. Successful appeals after taxes are paid reduce the money available to local govern-

ments to pay for public services. In simple terms, if a successful assessment appeal results in a $10 refund, a local government that levies $100 will only receive $90. These refunds, as well as limitations like the Property Tax Extension Limitation Law, create an economic incentive for local governments to levy at the maximum amount allowed. Additionally, a recent amendment to the Property Tax Code now adds the amount of prior-year refunds to the levies of local governments. This has the potential to increase tax bills by hundreds of millions of dollars in the coming years. Given all this, there seems to be a vicious cycle. High taxes encourage taxpayers to appeal their assessments. Successful appeals shift the tax burden onto others and force local governments to increase taxes even more. Higher taxes lead to more appeals, and so on and so forth. One way to combat this is for those involved in assessing and appealing assessments to reach agreement on acceptable ranges of value for properties and to stop appealing assessments that are within those acceptable ranges.

4/28/22 4:43 PM

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CRAIN’S CHICAGO BUSINESS • MAY 2, 2022 17

EQUITY

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and onto the shoulders of renters. s a result of Cook The valuations used to establish County’s latest trisome commercial and apartment ennial real estate asbuilding assessments can be debated sessment, property taxes on by reasonable people on both sides residential apartment buildof the disagreement, but whether the ings are likely to increase sigupdated assessments are too high or nificantly compared to more too low seems less important than demodest changes for those who termining if the policy of dramatically own single-family homes. shifting the tax burden unevenly onto More than half of Chicago commercial and apartment properties residents are renters, so it Michael Mini is a fair or wise practice. Compoundneeds to be emphasized that as is executive vice ing the disparity is the existence of the valuations of apartment build- president of the homeowners’ exemption and “COVID ings are raised, increased costs Chicagoland adjustments” that further reduced will apply upward pressure on Apartment assessments at a time when singlerents. Unlike the largest Amer- Association. family residential values increased ican cities on both coasts, Chicago is still far more affordable for renters, but significantly. According to an analysis performed by the to maintain and expand affordability in Chicago, we should not risk placing our thumb on Cook County treasurer’s office on tax year the scale against renters, leading to disruption 2020 property tax bills, $534 million more of future supply and ultimately fewer afford- was collected in Cook County than the previous year, an increase of over 3.4%. More than able housing options. Crain’s deserves credit for thoroughly $400 million of that increase was passed on to researching, analyzing and reporting Cook commercial, industrial and multifamily propCounty’s latest round of dramatic shifts in erties. That category of properties includes property tax assessments. While the reporters’ everything from Loop high-rises to suburban work has been illuminating to a process that manufacturers, but it also includes residential has not always been transparent or easy to un- rental apartment buildings and thus impacts derstand, we should also continue to pursue the cost variable of hundreds of thousands more public discussions on the equity of shift- of apartment leases, including some building the tax burden away from homeowners ings that are specifically intended to provide

affordable housing. Threats to the sustainabil- up by real estate taxes was in the 12% to 18% ity of affordable housing should always be a range, but if the assessor’s current valuations are left unchanged, this percentage would incause for alarm. Some homeowners can rightly claim sim- crease significantly and even double in some ilar concerns regarding equity. The county cases. Handler leans on his decades of expetreasurer’s report is extraordinarily clear: “In rience to emphasize that market-rate rents what has become an all-too-familiar story, do not always rise with costs, but instead unit majority Black and Latino communities are modernizations are deferred to balance budbeing hardest hit with property tax increases. gets and ultimately new development is curThat’s true for both homeowners and busi- tailed. Any of these inevitable outcomes result nesses in those areas.” Property owners in the in housing choices becoming either scarcer south suburbs—which includes many areas or reduced in quality. In each scenario, the that are predominantly Black and Latino— renter is disadvantaged. The elected officials we as voters choose continue to pay rates three to five times higher than equally valued properties in Chicago. to determine tax levies, assess the valuation A homeowner in racially diverse Park Forest of property and then establish property tax is hammered with tax bills five times higher rates all have challenging jobs, and their dilthan if their home was located inside Chicago. igent service to taxpayers is appreciated. But The organization I serve, the Chicagoland in the spirit of equity, the Chicagoland ApartApartment Association, represents more than ment Association urges those policymakers to 6,000 apartment professionals who “MAJORITY BLACK AND LATINO COMMUNITIES ARE own and/or manage over 250,000 BEING HARDEST HIT WITH PROPERTY TAX INCREASES.” market-rate and affordable rental units located in properties consider how increased valuations of apartranging from high-rises to two-flats across ment buildings will impact the price, quality the Chicagoland region. One of my executive and future supply of rental housing for more board members, Stuart Handler, recently au- than half of Chicago’s residents. Any efforts to thored an article on property tax assessments shift the burden from homeowners to other in which he noted the percentage of typical property types should not dismiss the fact that gross income for apartment buildings taken renters are taxpaying residents, too.

STATE OF AFFAIRS

General Assembly missed chance to solve a problem

ment services, thereby encouraging wo weeks ago, in a scene citizen involvement and monitoring reminiscent of a Faber of government expenditures. UnforCollege all-nighter, the tunately, it has also incented many Illinois General Assembly sucpublic officials to offer more slogans cessfully ignored the benefits of than answers to improve the situasleep, general transparency and tion. thoughtful deliberation to comAlthough Illinois has not levied plete passage of Illinois’ $47 billion a state property tax since 1932, the spending plan for 2023. Luckily, Illinois legislature has contrived a the General Assembly followed number of statutory changes to the most of Gov. Pritzker’s proposed Laurence Msall local property tax system that have budget CliffsNotes and moved is president of the moved it about as far away from the Illinois forward financially with- Civic Federation. ideal tax on value as possible. out creating too severe of a budget Retaining Illinois’ highest-in-the-nation exam for next year. One important tax priority left unaddressed 9,000 units of local government drives up tax among the Springfield pizza boxes and rush bills, contributing to property tax rates that are to adjourn was any movement on compre- among the highest in the U.S. In Cook County, hensive property tax relief. Despite years of especially, the system is opaque, complex and repeated calls by elected officials of almost all too confusing for most nonexperts to track political affiliations, meaningful property tax effectively. Decades of politically motivated property tax exemptions and other tweaks reform in Illinois remains elusive. The property tax is not inherently bad. It is have moved the property tax away from being an important component of our overall struc- a tax based on value. Springfield’s continued ture of taxes that are critical to local govern- mandates of increasing local government ments. It can be a stable, consistent revenue pension benefits mean that many municipalsource for local government services (in- ities’ property tax levies—including the city cluding schools), and its high collection rate of Chicago’s—effectively go straight into the makes it a reliable pledge for debt and bond pension funds or toward related debt. We now see that some property-poor cities and towns security. The property tax is also a highly visible tax, in Illinois cannot raise enough property tax meaning that most Illinois property owners revenue and have reverted to instituting varare typically—and often painfully—aware of ious user fees, selling infrastructure or laying the exact amount of property tax they pay, be- off public safety personnel to keep up with cause they are explicitly billed twice per year. their pension costs. To address some of the challenges facing Visibility can have the benefit of provoking taxpayer interest in the cost of local govern- local governments and property taxpayers,

P013-P020_CCB_20220502.indd 17

GETTY IMAGES

Higher valuations have a downside for renters A

half of the Illinois General Assembly rushed in mid-2019 to join a Property Tax Relief Task Force. Over the course of five months, these brave members held public hearings that culminated in an unfinished draft report, never to be revisited as far as the public can tell. If members of the General Assembly are still serious about meaningful property tax reform and providing relief to taxpayers, they need to thoroughly examine the structural oddity that is Illinois government. Reconvene as many still-eligible task force members as possible and commit to presenting an updated final report. While the world has changed a lot since the end of 2019, most of the task force’s original work should still be usable. Illinois still has 9,000 local governments that need to be consolidated or streamlined. Pension benefits are still mandated at the state level but funded at the local level. State funding of education has grown, thanks to the evidence-based funding formula, but it remains insufficient to allow too many cashstrapped school districts to slow down their reliance on property taxes. Since the General Assembly adjourned

early to accommodate campaigning for the June 28 primary election, all of the candidates for the Illinois House and Senate should be encouraged to answer in detail how they will tackle Illinois’ high property taxes and the factors driving them. For example, how they might propose to streamline so many Illinois school districts that rely heavily on property taxes. Consolidation does not have to mean closing schools; it more likely means streamlining administration and spending property tax money more efficiently. The same is true for thousands of other redundant special purpose governments throughout the state. Whatever the course of action, legislators should act soon. This is not a problem that will solve itself or get easier over time. Inflationary pressures mean that many Illinois governments subject to tax caps will now be able to raise their levies higher than ever for the upcoming tax year. Illinois’ unwieldy property tax burden needs Springfield’s ideas and commitment to addressing not just one part of the property tax bill, but reform of the entire system. Such an effort would be a real reason to celebrate.

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18 MAY 2, 2022 • CRAIN’S CHICAGO BUSINESS

limited power to fix a broken local and state property tax system that’s much bigger than his office. The problems start with the state’s heavy reliance on property taxes to fund public schools. Shifting more of the cost to Springfield would ease the burden on property tax payers, but lawmakers and governors have lacked the will to take that big step. A task force of state legislators formed to offer ideas for property tax relief dissolved amid partisan bickering in early 2020 without releasing a draft report. “There’s a general awareness that property taxes are a problem, but the Illinois General Assembly never fails to miss an opportunity to fully address our financial problems,” says Laurence Msall, president of the Civic Federation, a tax policy and government research organization. But multiple other changes could improve the way property taxes are calculated and collected in Cook County—and improve confidence in the entire system. The assessor could value properties in the county annually, versus every three years now. With more funding from the Cook County Board, the assessor’s office also could hire more data scientists and valuation specialists to boost the efficiency and accuracy of its assessment process. And the county could dust off an old plan to consolidate the assessor, treasurer and other offices under a single office of tax administration. Disillusionment with the assessor’s office is especially high today amid expected delays in the delivery of 2022 tax bills. Cook County property owners typically receive the second installment of their tax bills over the summer, with payment due Aug. 1, but the bills could be six months late this year. While Kaegi attributes some of the delay to the implementation of a new computer system in his office, he also assigns blame to the Cook County Board of Review, a three-member panel that hears appeals of property tax assessments after the assessor completes them. He and Board of Review Commissioner Larry Rogers Jr. have been pointing fingers at each other, with Rogers ripping the assessor’s office for its “horrid” execution and Kaegi arguing that the bills wouldn’t be so late if the board hadn’t stubbornly refused to install a new computer system itself.

BRACING FOR THE BILL

Commercial landlords in Chicago and their tenants are more focused on a bigger question: How much are their property taxes going to rise? After reassessing the northern Cook suburbs in 2019 and the southern suburbs in 2020, Kaegi moved on to the city last year. The county calculates this year’s taxes based on last year’s assessments, so the delays mean city property owners won’t know how much they will owe for

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Continued from Page 13

several months. But many landlords in Chicago are bracing for big property tax hikes after receiving hefty increases in their assessments last year. Kaegi’s office valued all the residential property in the city at $22.4 billion, up 14% from 2018, the last time the city was reassessed. But the total value of nonresidential property in Chicago jumped 77%, to $28.9 billion. The new assessments shifted the city’s property’s tax burden onto nonresidential property owners, who now account for 56% of the Chicago tax base, up from 45% previously. That’s good for Chicago homeowners but downright daunting for owners of office, apartment, and retail and industrial properties. The assessor valued the Merchandise Mart office building on the Chicago River at $880 million, up 36% from its prior value. The value of the Aon Center in the East Loop more than doubled, to $886 million, while the value of the Willis Tower, the city’s tallest building, jumped 78%, to $1.24 billion. Kaegi defends the higher values, saying Berrios used a flawed methodology that consistently underassessed bigger commercial properties, pushing more of the tax burden onto homeowners. Research studies and media reports suggest that Kaegi’s higher commercial assessments are more accurate than his predecessor’s. Yet even if Kaegi’s right, can his critics be right, too? Will his assessments push up taxes so much that investors avoid Chicago and businesses expand elsewhere? Brokers and landlords say he’s already had a chilling effect on the market, with many out-of-town real estate investors steering clear of Cook County, at least for now. “Buyers are gun-shy,” says Chicago apartment landlord Bill O’Kane. “Taxes are higher, and they’re afraid (taxes) are going to go up more unfairly. At what point do taxes become so high that it’s confiscatory?” A much higher tax bill could be in the offing for one of O’Kane’s properties: the Lofts at River East, a 285-unit apartment building in Streeterville. The assessor’s office valued the property at $139 million last year, up 98% from 2020. The building’s property taxes have risen 10% since 2018. For now, O’Kane, owner of Group Fox Management, says he’s not making any more big investments in Chicago. He’s seeking opportunities elsewhere, especially in the Southeast. He’s currently developing a 225-unit apartment building in St. Petersburg, Fla. Though higher taxes can create an economic drag, the bigger problem may be uncertainty. Chicago landlords and their tenants can guess how much their taxes will rise, but they won’t know for sure until they receive their bills. Calculating property taxes is a complicated process with multiple variables, starting with the

Bill O’Kane, a Chicago apartment landlord

ALYCE HENSON

BALANCING

Cook County Assessor Fritz Kaegi amount of money that school districts, park districts, municipalities and other local governments need to fund their budgets, and including the change in assessed value for every property.

UNCERTAINTY A FACTOR

But uncertainty makes it hard to

plan, so investors and businesses tend to hold off decisions about the future. Some in the industry hope the Kaegi effect is only temporary: Once taxes are known, investors will be able to account for them, and the market will return to normal. Is it true that real estate inves-

tors are avoiding the Chicago market? Rising downtown crime and the prospect of rising property taxes haven’t helped the city’s image. Institutional investors “just have a very negative view” of Chicago, says apartment broker Pete Evans, senior managing director of investment sales in the Chicago

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ALYCE HENSON

JOHN R. BOEHM

CRAIN’S CHICAGO BUSINESS • MAY 2, 2022 19

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office of Berkadia. “We have to push back against that narrative,” Evans says. Yet the numbers contradict the narrative. Total commercial property sales in the Chicago area, including suburban counties, rose to $24.4 billion in the 12 months through the end of March, more than double the prior 12-month total and the highest volume in at least two decades, according to Real Capital Analytics, a New York-based research firm. The Chicago market ranked eighth among major U.S. metro areas in commercial real estate sales in 2021, compared with sixth in 2020 and eighth in 2019. In theory, rising costs like property taxes also should curb construction activity by reducing the investment returns on new buildings. That could lead to another unintended consequence: a shortage of housing—and increasingly unaffordable rents—as supply fails to keep up with demand. Apartment brokers and developers say the prospect of rising taxes has made it harder to raise equity financing to fund new multifamily developments. But apartment development in downtown Chicago is actually picking up again after a big drop in the early months of the COVID-19 pandemic. Developers are on track to complete 5,500 apartments downtown in 2023, up from 1,263 this

P013-P020_CCB_20220502.indd 19

year and 2,693 in 2021, according to Integra Realty Resources, a consulting and appraisal firm. “We see smart money from around the world coming into Chicago,” Kaegi said at a Crain’s event in April. Still, rising property taxes can and do depress property values. If the tax bill on the Lofts at River East, about $1.6 million in 2021, rises 15%, the value of the building could drop by $4.7 million or more, based on current return expectations. And Chicago landlords already pay some of the highest property taxes in the nation. Chicago had the second-highest effective tax rate—a property’s tax bill as a percentage of its value—for office, retail and other commercial properties in a 2021 study of 53 U.S. cities by the Lincoln Institute of Land Policy. Chicago also ranked second for its tax rate on industrial properties but was middle of the pack, at 32nd, for apartments. Landlords aren’t the most sympathetic bunch. Not many people feel sorry for them when their taxes go up. But Kaegi’s critics contend that his actions unintentionally target another victim: the businesses that rent space. At most office, retail and industrial properties, tenants—not landlords—pay property taxes. Rising taxes increase a tenant’s occupancy cost and can factor into its decision whether to hire more people and lease more space. That’s a problem for Scott Fithian, an investor in a retail space in a River North building. A day care provider that leased the space shut down after the pandemic swept into town, and Fithian, executive vice president at Chicago-based Lord Cos., says he has been courting another day care tenant to re-lease it. The problem: The assessment for the property jumped 66% last year, and it’s unclear what the tenant will pay in taxes as a result. “We haven’t been able to sign them because of this uncertainty,” Fithian says. Indeed, Kaegi’s challenger in the June 28 primary election, Kari Steele, has focused on the potential impact of his assessments on small-business owners, not their landlords, arguing that “mom-andpop shops” are the real victims. After making it through the pandemic, now some small businesses are facing assessment hikes exceeding 100% in some cases, she says. “They can’t survive with that,” says Steele, president of the Metropolitan Water Reclamation District of Greater Chicago. Kaegi has also drawn criticism for his 2020 decision to adjust property values across the entire county to account for the impact of COVID-19. Expecting a dramatic shock to the economy, Kaegi’s office cut values on residential properties 8% to 12% across the board, but the move backfired when the residential market went boom instead of bust. Many residential properties in the northern suburbs are still assessed too low

because of the adjustments.

POWER LIMITS

For all the Sturm und Drang over Kaegi within the real estate industry, his power over assessments is limited. Landlords can appeal his assessments to the Board of Review, which has rolled back the assessor’s increases in suburbs, minimizing their property tax hit. In 2019, when Kaegi assessed the county’s northern suburbs, the total assessed value of nonresidential property rose 75%. After granting appeals, the Board of Review knocked the aggregate increase down to just 25%. When the county sent out its tax bills in the summer of 2020, the average bill for commercial and industrial properties in the northern suburbs rose 15.8% over 2019, a big increase but less than many expected. Homeowners, meanwhile, had few reasons to complain: The average residential tax bill in the northern suburbs rose just 1.1%. The Board of Review also slashed Kaegi’s nonresidential assessment hikes in the southern suburbs in 2020, from 44% to 10%. If the past is any indication, owners of some of the city’s biggest and most expensive buildings could find some relief at the board in the coming months. Commercial real estate industry advocates contend that landlords and their tenants already carry more than their share of the property tax load. In Cook County, most commercial properties are assessed at 25% of their market value, while residential properties, including apartments, are assessed at 10%. In other words, the tax bill on a hypothetical commercial property valued at $1 million would be 2.5 times higher than the bill on a $1 million residential property next door. “Commercial is subsidizing everything else,” says Farzin Parang, executive director of the Building Owners & Managers Association of Chicago. Cook County is the only county in the state that assesses commercial and residential properties at different levels, though other big cities around the country also treat residential property preferentially. Some experts say the county should scrap the structure. “It creates a drag on the economic attractiveness of the city,” says Msall of the Civic Federation. “It adds to the opaqueness, the level of confusion and the lack of confidence in the property tax system.” Politically, however, such an idea is probably a nonstarter. What politician wants to vote for a proposal to ease the tax burden on landlords and increase it on homeowners? “Homeowners vote. Businesses don’t,” says Carol Portman, president of the Taxpayers Federation of Illinois. Still, the county could take other steps to improve the way it assesses properties. Instead of re-

ASSESSOR VS. BOARD OF REVIEW Fritz’s Kaegi’s office has hiked assessed values of nonresidential properties substantially in Cook County. But the Board of Review, which hears appeals of assessments from property owners, has rolled back the increases in the north and south suburbs, limiting the hit on commercial landlords. TOTAL ASSESSED VALUE Residential

$30 billion

Nonresidential

North suburbs

South suburbs

Chicago*

$20

$10 $0

2018

2019 assessor

2019 BOR

2018

2020 assessor

2020 BOR

2018

2021 assessor

*The board has not completed its work for city properties

Source: Cook County Assessor

HOW CHICAGO MEASURES UP In a 2021 study of 53 U.S. cities by the Lincoln Institute of Land Policy, Chicago at 4% had the second-highest effective tax rate—a property’s tax bill as a percentage of its value—for office, retail and other commercial properties. Chicago also ranked second for its tax rate on industrial properties but 32nd for apartments. HOW CHICAGO MEASURES UP

Ranking

Tax rate

U.S. commercial*

2.0%

New York

Los Angeles

Chicago

1.4% 1.2% 4.0%

U.S. apartment

1.6%

New York

1.3%

Los Angeles

1.2%

Chicago

U.S. industrial

1.3% 1.4%

New York

Los Angeles

Chicago

U.S. residential

0.5% 1.0% 2.4% 1.3%

1.2%

Los Angeles

1.2%

Chicago

New York

1.5%

Sources: Lincoln Institute of Land Policy, Minnesota Center for Fiscal Excellence *Commercial includes office and retail properties.

TRICKLE-DOWN TAXES In downtown Chicago office buildings, tenants foot the tax bill because landlords pass the expense directly to them. Tenants in Class A downtown office buildings pay an average of $10 per square foot in property taxes, at the upper end among the biggest U.S. cities both on a dollar basis and as a percentage of total occupancy costs. OFFICE BUILDINGS IN MAJOR U.S. CITIES Net rent

Operating expenses $0 $20

Property taxes Electricity $40 $60 $80

$100

$120

Manhattan (Midtown) San Francisco Silicon Valley Washington, D.C. Boston Los Angeles (Westside) Austin Atlanta Seattle Chicago (Downtown) Source: Savills

See BALANCING on Page 20

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20 MAY 2, 2022 • CRAIN’S CHICAGO BUSINESS

BALANCING assessing properties every three years—the northern suburbs one year, the southern suburbs the next, followed by the city in year three—the assessor should be able to do the job in just one, says Larry Clark, director of strategic initiatives at the International Association of Assessing Officers, a professional organization. “There will be fewer appeals, fewer disgruntled property owners,” he says. Kaegi agrees, saying assessors in other big cities, including New York and Los Angeles, value properties on an annual basis. “It would be better if it was following the market every year,” he says. “It’s totally doable and viable.” But it would be hard to make the switch without more staff. Right now, the county assessor’s office employs about 230 people, down from more than 400 when James Houlihan was assessor, from 1997 to 2010, Kaegi says. The assessor’s office has 35 vacancies now, according to Kaegi, who would like to hire 100 people over the next two years. He says his office is woefully understaffed, especially when compared with the assessor’s offices in places like Maricopa County, Ariz. (600 employees); Harris County, Texas (600 or so); and Los Angeles (1,400).

DATA DILEMMA

Advancements in data collection would make a difference, too. Kaegi has pushed for state legislation mandating that landlords provide financial data to his office that would allow him to assess commercial properties more accurately, but the proposal has run into resistance in Springfield. Opponents have argued that the proposal amounts to government overreach and won’t protect their private information from getting

Continued from Page 19

into the wrong hands. Kaegi and other assessors around the country also are working with the Biden administration to persuade federal chartered mortgage buyers Fannie Mae and Freddie Mac to share information on the condition and quality of homes collected with home appraisals. A recent study by University of Chicago professor Chris Berry found that residential assessments can lead to over-taxation of homeowners in lower-income minority neighborhoods because of a lack of data about condition and quality. A home in Beverly, for instance, might have a fully updated kitchen, but one in Englewood might not have been renovated in decades. Currently, the assessor’s office has no way to model for those differences, meaning the Englewood home is valued too high. “We don’t see what’s going on inside people’s houses,” Kaegi said. Assuming the federal government and Fannie and Freddie can figure out a way to maintain the privacy of borrowers, having that extra information from appraisals could improve the fairness of assessments. Small, incremental improvements in data collection could make a big difference in the accuracy of assessments, if the assessor’s office can achieve them. “It’s clear that you’re not going to get too far without better data,” Berry says. Msall favors an even bigger idea: consolidating the various offices that oversee the county’s property tax system. In 2003, Mike Quigley—now in Congress but then serving on the Cook County Board—authored a report with ideas on how to reform county government. One of his recommendations: consolidating the assessor, treasurer, clerk, recorder of deeds and auditor under

Kari Steele, president of the Metropolitan Water Reclamation District of Greater Chicago, will be Kaegi’s challenger in the June 28 primary election. one department, the Office of Tax Administration, led by one elected official. Consolidation could save the county money and improve accountability. “We have too many elected officials working in the property tax system,” Msall says. It’s hard to talk about property tax reform without a discussion of school funding. No one expects a school-funding solution from Springfield anytime soon—the political trade-offs are too risky for many lawmakers—but having the state pick up more of the tab could make a big difference, especially in the southern suburbs, where tax rates have soared due to falling property values. Kaegi, meanwhile, believes the property tax will become an increasingly flawed way to fund government as digital technology transforms our economy. As dig-

ital assets create more wealth in the future, continuing to put a big burden on brick-and-mortar assets to raise revenue will distort the economy and hurt neighborhoods, he argues. “The more digital an economy gets, the more unfair the distribution of costs becomes if property tax is a principal source of revenues,” he wrote in a white paper last year. The transition is already creating shifts among property sectors: Water Tower Place and other retail properties on the North Michigan Avenue shopping district have lost value partly due to e-commerce competition, while data center developers are spending billions on new projects to keep up with demand from companies like Microsoft, Netflix and Apple. Technology also threatens the office sector: With more people working on remote or hybrid

schedules, how much will demand for downtown office space fall in the future? Will relying on the city’s trophy office towers for a large share of tax revenue still make sense 30 years from now? Kaegi thinks it’s time to start planning for the future. He wants to see a bigger role for the federal government, which “has a unique ability to tax digital commerce as no one else has,” he says. He acknowledges one problem with the idea: More taxation at the federal level would likely mean less local control over how the tax dollars are spent. But “this is something that needs to happen,” Kaegi says. “If it doesn’t, we’re going to get more distortions. There’s going to be a shrinking base of brick-and-mortar assets in a lot of communities while the cost base has not changed. And (tax) rates will go up.”

w 4 IDEAS TO REFORM OUR PROPERTY TAX SYSTEM For years, voices from multiple quarters have called for property tax reform in Illinois. There’s no shortage of solutions. Some are still on a shelf, collecting dust. One or a combination of them could be real game-changers. Here are four ideas to address what many agree is a broken system. By Alby Gallun 1. MORE DATA

2. ASSESS MORE FREQUENTLY

3. CONSOLIDATE COUNTY OFFICES

4. HELLO, SPRINGFIELD?

The problem: Assessors don’t have good information about the condition or quality of homes. As a result, current valuation models used by assessors assume there’s no variability in home condition or quality, contradicting actual data suggesting that less-expensive homes aren’t maintained as well as expensive ones. The upshot: Less-expensive homes in lower-income communities tend to be overvalued—and overtaxed.

The problem: The Cook County assessor takes three years to assess the entire county, valuing the northern suburbs one year, the southern suburbs the next and the city of Chicago in the third. The lag time can result in distortions in assessed values due to market swings over a three-year period.

The problem: Multiple county offices led by different elected officials—including the assessor, the clerk and the treasurer—handle different aspects of the property tax system. The structure results in confusion, waste and a lack of accountability.

The solution: Assess all properties in the county annually. Assessors in other large metro areas do it, and Cook County can, too. But the county assessor’s office would need a bigger budget to pay all the extra people it would have to hire to do the job. “This is something that could be doable in four years,” Kaegi says. “It would be better if it was following the market every year.”

The solution: Merge the offices into a new department led by a single elected official. It’s an idea that has been discussed for more than a century. Former Cook County Commissioner Mike Quigley in 2003 proposed a consolidation of functions into a new Office of Tax Administration. A single office would be simpler, more efficient and more accountable, he wrote in a report that year.

The problem: Public schools in Illinois rely heavily on property taxes to cover their costs due to a lack of funding from the state. The result: The state has some of the highest property taxes in the nation and a wide disparity between school districts on how much they spend per student.

The solution: Obtain home appraisal data that ranks homes based on condition and quality. Cook County Assessor Fritz Kaegi and other tax officials from around the country are seeking the data from Fannie Mae and Freddie Mac, housing finance firms that are controlled by the federal government.

P013-P020_CCB_20220502.indd 20

The solution: Increase spending on public education at the state level. It sounds simple enough, but it’s a political career-killer for lawmakers in Springfield because the state would have to increase taxes to pay for it. How hard is it to reach a solution that Republicans and Democrats can live with? A task force of state legislators created in 2019 to hatch property tax relief ideas dissolved amid partisan bickering without even releasing a draft report.

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CRAIN’S CHICAGO BUSINESS • MAY 2, 2022 21

West suburban office landlords facing loan trouble BY DANNY ECKER The owner of one west suburban office property that endured a big tenant loss has stopped paying its mortgage and another is facing imminent loan issues, two prime examples of ongoing COVID-19 fallout for suburban office landlords. A venture of Canadian real estate firm Adventus Realty Trust is more than 60 days delinquent on its $24 million loan tied to the four-building Oak Brook Office Center property along Butterfield Road in the western suburb, according to Bloomberg data tied to the mortgage. The loan, which was packaged with others and sold off to commercial mortgage-backed securities investors, was recently transferred to a special servicer, a sign that Adventus is in danger of default. In a separate case of potential distress, a venture led by Dallas-based Lincoln Property had its nearly $94 million CMBS loan tied to the Central Park of Lisle office complex placed on a delinquency watch list in April after its largest tenant shed most of its space, Bloomberg data shows. The loan troubles show the leasing problems rankling suburban office landlords more than two years into a public health crisis that has weakened demand. Companies shrinking their office footprints after adjusting to the rise of remote work have pushed suburban office vacancy to an all-time high, setting off a battle for landlords to attract and retain tenants and eroding property values.

The headaches are especially painful for landlords facing imminent loan deadlines, a group that includes both Adventus and Lincoln Property. Adventus’ loan in Oak Brook is due to mature in April 2023, a decade after it borrowed the money to finance its nearly $33 million acquisition of the 312,212-square-foot complex. The amortizing mortgage has a balance of around $20 million today, according to Bloomberg loan data. The property was close to 90% leased during Adventus’ first few years of ownership, but that percentage dropped to the mid70s in 2017 and the building’s net operating income has fallen since then by nearly 30% to just more than $2 million in 2021, loan data show. The situation got worse for Adventus this year with the recent lease expiration of writing utensil maker Sanford—the property’s largest tenant—and the fact that eight other tenants had lease expirations by the end of 2022, according to the Bloomberg loan report.

LOAN PAYMENTS

With suburban office demand subdued, Adventus would likely have a hard time refinancing its mortgage. Bloomberg data shows the firm has not made its loan payments for February, March or April, a sign it could be preparing to surrender the property to its lender. An Adventus spokesman did not respond to a request for comment.

Oak Brook Office Center isn’t the only Chicago-area office property causing issues for Adventus. The firm also owns the Riverway office building in Rosemont, which lost a major tenant just before the pandemic began and was just 65% leased at the end of last year, according to Bloomberg data tied to Adventus’ $128 million CMBS loan on the property. The building generated net cash flow of less than $5.3 million in 2021, well below Adventus’ $8.2 million in debt service for the year. Another big loan challenge is emerging in Lisle at the two-building complex along Interstate 88 at 4225 Naperville Road and 3333 Warrenville Road, which Lincoln Property and an unidentified Middle Eastern equity partner bought in 2017 for $129 million. Facing a January 2023 loan maturity, the owners were dealt a blow earlier this year when their largest tenant, Armour Eckrich Meats, exercised an option to give back the majority of their space, according to a Bloomberg report on the mortgage. The termination includes a nearly $1.5 million fee the company is paying the ownership group, according to the report. The property was 78% leased before the Armour Eckrich cutback. That was down from 86% when the Lincoln Property venture bought it. The 690,000-square-foot complex generated just more than $9 million in net cash flow last year, 17% less than it did in 2019, according to Bloomberg loan

COSTAR GROUP

Tenant losses have put the owners of two office properties in a tight spot as the COVID-19 pandemic keeps hampering demand for suburban workspace

The Oak Brook Office Center data. But the debt service also more than doubled in 2021 due to a jump in the debt owed on a “B note,” or secondary piece of the mortgage, according to the Bloomberg loan report.

DEBT SERVICE

With the debt service spike, the building today doesn’t generate enough net cash flow to cover its debt service, which is why the loan was placed on the watch list. Prior to the debt service increase, net cash flow was more than double the debt service amount. A Lincoln Property spokesman did not respond to a request for comment. Properties like Central Park of Lisle that have been recently renovated have weathered the COVID crisis better than most. Such top-tier quality buildings— known as Class A—have drawn most of the leasing activity as companies have taken advantage of the soft marketplace and sought workspace that will com-

pel employees to show up rather than work from home. Class A buildings accounted for 74% of new leases signed during the first quarter, according to data from brokerage Jones Lang LaSalle. Investors that have placed bets during the pandemic on the future of suburban offices have mostly flocked toward newer and updated buildings. New York-based Opal Holdings in April paid more than $73 million for the Shuman in Naperville, the former OfficeMax headquarters that Chicago developer Franklin Partners revamped as a multi-tenant office building and nearly filled with tenants. In another pair of recent deals, New York-based Group RMC paid close to $100 million for a series of office buildings in Downers Grove that had all been substantially updated by their previous owners with renovations, including modernized lobbies, gyms and conference centers.

129-unit apartment building proposed for Near North Side BY ALBY GALLUN Chicago developer Draper & Kramer plans a 129-unit apartment building on the Near North Side, adding another multifamily project to a downtown market that’s awash in them. D&K wants to build the nine-story development at 330 W. Chestnut St., currently a vacant lot on the west side of the CTA Brown Line tracks, according to a zoning application filed with the Chicago City Council. The site also is about a block west of North Union, a huge residential project that JDL Development is building on land recently acquired from the Moody Bible Institute of Chicago. Apartment developers are roll-

P021_CCB_20220502.indd 21

ing out plans for new projects all over downtown Chicago, wagering that the multifamily market will keep rising. After plunging briefly in first several months of the COVID-19 pandemic, occupancies and rents have rebounded, and developers have gotten their swagger back. Developers will complete only about 1,300 apartments in downtown Chicago this year, their lowest annual total in a decade, the result of a slowdown in construction starts in 2020, according to Integra Realty Resources, an appraisal and consulting firm. But they’re on track to complete more than 5,500 units in 2023, their biggest year since at least 1999. Around 17,000 units are still

in the planning stage, including more than 2,000 in the works on the Moody Bible property. They won’t all come on the market at the same time, and some projects may never get off the ground. “We are currently in the early stages of planning and look forward to working with the city and local stakeholders to finalize a plan for this site,” D&K Vice President Gordon Ziegenhagen said in a statement.

OTHER PROJECTS

Founded in 1893, the firm is one of the oldest real estate companies in Chicago and has developed multiple apartment buildings in the city over the past several years, including a 275-

DRAPER & KRAMER

Developer Draper & Kramer is jumping back into a downtown multifamily market that’s booming but getting more crowded by the day

A rendering of Draper & Kramer’s planned 129-unit apartment building at 330 W. Chestnut St. unit tower in the South Loop and a 58-unit project in the Gold Coast. D&K also plans a 133-unit building at 1649 N. Halsted St. in Lincoln Park, according to its website. The project on Chestnut would include 13 parking spaces and 26 apartments set aside as affordable for residents of limited incomes, meeting requirements under the city’s affordable housing ordinance. Chicago architecture firm FitzGerald Associates is designing the building.

“Offering a contemporary take on traditional warehouse architecture of the early 1900s, the design is intended to complement the diverse architectural styles that are found in the surrounding neighborhood,” D&K says on its website. The developer filed a zoning application with the City Council because it needs a zoning change to build the project. D&K also would need to line up an equity and construction loan to finance the development.

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22 MAY 2, 2022 • CRAIN’S CHICAGO BUSINESS

This lakefront house has embodied ‘the call of the dunes’ since 1959

A Chicago patent attorney and his stay-at-home wife raised their three children in the home while also leading efforts to protect Indiana’s spectacular natural dunes. After 63 years, their children are putting the Dune Acres home on the market. I BY DENNIS RODKIN

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QUALITY HOME IMAGES

n 1959, Edward and Ruth Osann built a house in the Indiana Dunes, 45 miles by South Shore Line train to downtown Chicago, where Edward worked as a patent attorney. “They felt the call of the dunes,” says Ellen Goff, the youngest of the Osanns’ three children, who was four when they moved into the house. With views of the beach and the wooded dunes filling nearly every window of the two-story house, she says, it was “a magical place” to grow up. The house sits at the western end of Dune Acres, a two-milelong lakefront enclave surrounded on three sides by the 15,000acre Indiana Dunes National Park, with Lake Michigan on the fourth. “I had a free-range childhood,” says Goff, who now lives in South Carolina. “I knew every trail and every tree on the park’s land.” On clear days, the Chicago skyline shimmers at the western horizon of the lake. The Osanns, who both played integral roles in the 1960s effort to protect Indiana’s remarkable coastal dunes, have both passed on. Edward, who led the legal effort to block construction of a nuclear power plant on the shore, died in 2005. Ruth, who was a former president of the Save the Dunes Council, died in 2011. Their three children, two of whom live far from northwest Indiana, are now planning to sell the house their parents built 63 years ago. They put the house, four bedrooms and 3,630 square feet on eight-tenths of an acre, on the market April 28. The price is $3 million. The property is represented by Lesley Sweeney of Encore Sotheby’s International Realty.

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EXECUTIVES OF COLOR IN CONSTRUCTION AND COMMERCIAL REAL ESTATE These leaders in construction and commercial real estate are helping bolster Chicago’s physical presence, particularly in long-neglected South and West Side neighborhoods. Several honorees’ companies belong to Lakeside Alliance, the construction firm that is building the Obama Presidential Center in Jackson Park. Others have led multimilliondollar development initiatives in Bronzeville, Pullman and Austin; at major universities, including Northwestern University, the University of Chicago and the University of Illinois; and for crucial projects at O’Hare International Airport and for the Chicago Transit Authority. For civic involvement, these professionals volunteer their time and talent for causes that advance affordable housing and promote education for young people of color, as well as encourage careers in construction, architecture and commercial real estate. Their efforts on and off the clock are creating jobs, excitement and a more vibrant and livable Chicago for all residents. By Lisa Bertagnoli, Kate Rockwood and Jennifer Thomas

JIMMY AKINTONDE President and CEO UJAMAA Construction

MAGGIE BECKLEY

LINDA F. CHAVEZ BACA

Development executive, healthcare Mortenson

Design principal JGMA

Jimmy Akintonde oversees all aspects of UJAMAA Construction’s business, pursuing expansion opportunities and managing a team of more than 100 employees. He is one of five principals for Lakeside Alliance, the builders of the Obama Presidential Center. Since founding UJAMAA in 2002, the firm has grown into a $70 million-plus enterprise. Akintonde has led UJAMAA through several significant projects at the University of Chicago, O’Hare International Airport, U.S. Cellular Field, Halsted Parkways and Kennedy-Jordan Manor. He is a trustee at his alma mater, Illinois Institute of Technology, and was appointed to Chicago’s Building Board of Appeals.

With a focus on expanding health care real estate development in the Chicago and Milwaukee markets, Maggie Beckley also drives the development of client relationships in other key markets. Prior to joining Mortenson, she was director of real estate at Advocate Aurora Health. There, she developed strategies, transaction services and qualitative analysis for more 30 million square feet, including 27 hospitals and 500 sites of care. She serves as a diversity, equity and inclusion champion for Mortenson’s development group; at Advocate Aurora, she was a core member of the supplier diversity implementation team. A graduate of Xavier University of Louisiana and Roosevelt University, she is treasurer of nonprofit Cuped and sponsorship chair of the Dr. Tylithia L. Burks Foundation.

Linda F. Chavez Baca has experience in every phase of the design and construction process on projects ranging from urban ground-up architecture and complex renovations to adaptive reuse. She served as the lead project architect on several education buildings and renovations locally at Northeastern University, Northwestern University, and most recently the Columbia College Chicago Student Center. Chavez Baca led the design efforts for JGMA’s finalist bid for a proposed Chicago casino and was the firm’s design leader for the new concourses at O’Hare International Airport, Epic Academy High School and the new innovation center for the University of Illinois Chicago. She has a bachelor’s degree from Tecnológico de Monterrey in Guadalajara and a master’s from Northwestern University.

DWAYNE BARLOW

CIERE BOATRIGHT

DOLLA DAWSON

President The BarTech Group

Vice president of real estate and community development CRG

CEO Milhouse Engineering & Construction

Dwayne Barlow is responsible for the day-to-day operations as well as business development for The BarTech Group, which recently was responsible for installing all-new electrified rail on portions of the Chicago Transit Authority’s Red Line project. Barlow started as a meter reader at ComEd before eventually holding two concurrent chief-of-staff positions at the company. The BarTech Group works within predominantly Hispanic and African American communities to spur interest in electrical industry careers. Barlow serves on various national committees for the American Association of Blacks in Energy and the Exelon African American Members Association.

Ciere Boatright manages the development, planning and community engagement for key projects at CRG, while also leading innovation and inclusion efforts within its parent company, Clayco. She joined CRG in August 2021 after working for Chicago Neighborhood Initiatives, where she was vice president of real estate and inclusion, managing transformative projects including the 180-acre Pullman Park development. Through Boatright’s management and project oversight, she has achieved 30% to 50% minority business enterprise contractor participation on projects. A graduate of Hamilton College and the University of Illinois Chicago, Boatright is a board member of Landmarks Illinois, the state’s leading organization for historic preservation. She recently joined the board of Link Unlimited Scholars, which promotes education equity.

Dolla Dawson is responsible for aligning the Milhouse family of companies’ strategic vision and steering its core business functions, including accounting, administrative services, asset management, information technology, legal services, marketing and project development. When she joined Milhouse in 2007, it had 30 team members; today, with more than 400, it is the largest African American-owned engineering firm in the world. A graduate of the University of Illinois Chicago (finance) and Lake Forest Graduate School of Management, she sponsors the Pink Hard Hats program, providing girls with mentoring and job shadowing experiences. She also serves on two boards: Milhouse Charities, which educates underrepresented youth in STEM disciplines, and The Goat Foundation, which introduces student athletes to various career paths.

MATTHEW BEAUDET

ERNEST BROWN

HERB DAWSON

Commissioner City of Chicago Department of Buildings

President Brown & Momen

Project executive W.E. O’Neil Construction

Matthew Beaudet manages day-to-day operations of the nation’s third-largest local buildings department, a 265-employee operation with a $34 million budget that issues 40,000 building permits, conducts 200,000 inspections and regulates 30,000 trade licensees annually. He has implemented process innovations to increase productivity and accountability, reduced the overall time to obtain commercial and residential building permits by 25%, and increased permit annual issuance by 30%. A graduate of Loyola University Chicago and the former John Marshall Law School, he is the first Native American to serve as a city commissioner. Beaudet also serves as a member of the State of Illinois’ Native American Employment Plan Council and is a past commissioner of the Illinois Supreme Court Committee on Character & Fitness.

As founder of Brown & Momen, Ernest Brown oversees all operations at the general contracting and construction management firm’s two offices. Current projects include the University of Illinois’ Outpatient Surgery Center & Specialty Clinics, Sheba Medical Center’s Bronzeville innovation center, O’Hare International Airport’s expansion project, and the Aspire Center for Workforce Innovation in Chicago’s Austin community. Brown is one of five principals with Lakeside Alliance, the builders of the Obama Presidential Center. He’s served as president of the African American Home Builders Association and Black Contractors United, and currently serves as DEI chairman for the Chicago Area General Contractors Association.

A 30-year veteran of the construction industry, Herb Dawson serves on W.E. O’Neil’s most complex projects, including the University of Chicago’s William Eckhardt Research Center ($200 million), the Block 37 development above the CTA’s Red and Blue Line subway stops ($375 million), and American Airlines’ newest airplane hangar at O’Hare ($135 million). He also manages client relationships within the infrastructure market. Current projects include the University of Illinois Chicago’s Computer Design, Research and Learning Center as well as the maintenance facility for the Illinois Tollway in Aurora. Dawson co-chairs W.E. O’Neil’s DEI Committee and is an executive board member of Hard Hats with Heart in Chicago, which focuses on creating safe work environments on job sites.

METHODOLOGY: The individuals featured did not pay to be included. Their profiles were drawn from the nomination materials submitted. This list is not comprehensive. It includes only individuals for whom nominations were submitted and accepted after a review by editors. To qualify for the list, nominees must identify as a person of color and work at companies with minimum annual revenues ($1 million for architecture, $15 million for construction and engineering, and projects costing $10 million and up for commercial real estate). Candidates must also demonstrate leadership, outside of their own firms, in their professions and via community involvement.

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24 MAY 2, 2022 • CRAIN’S CHICAGO BUSINESS

RANDAL DAWSON

EDUARDO DESANTIAGO

GREGORY A. FAULKNER

RYAN GREEN

CHARLTON HAMER

Executive vice president CBRE

Vice president, engineering director Primera Engineers

Randal Dawson is a co-national litigation practice leader and leads the Midwest consulting practice for CBRE’s Valuation & Advisory Services Group. An expert in real estate valuations, tax appeals and counseling, he has litigated insurance claims, shareholder disputes, bankruptcy, divorce and IRS tax disputes. He holds the CRE designation from The Counselors of Real Estate, the MAI designation from the Appraisal Institute and the FRICS designation from the Royal Institute of Chartered Surveyors. He is a member of the Business Leadership Council, Urban Land Institute and CBRE’s National Black Excellence Employee Business Resource Group Executive Committee. Dawson also serves on the National Association of Industrial & Office Professionals’ board of directors for the Chicago area.

Eduardo DeSantiago leads a 15-person team of engineers and oversees the analysis, design and inspection of building, utility and industrial structures. He is responsible for executive management, strategic planning and project management and serves as Primera’s structural engineering expert. Over the past 18 months, DeSantiago’s work has included upgrades for utilities in the energy sector, which is foundational to the Build Back Better Act. He also focuses on combatting climate change via the electric vehicle market. The first Chicano awarded a doctorate (Ph.D. and Master of Science, structural engineering) from the department of engineering at Stanford University, he spent more than a decade teaching graduate and undergraduate courses before entering the private sector.

Vice president of business development Trice Construction

Chief investment and administrative officer DL3 Realty

Senior vice president, Habitat Affordable Group The Habitat Company

Gregory A. Faulkner is responsible for overseeing the company’s strategic objectives, sales, marketing and business development, one of the fastest-growing minority- and woman-owned self-performing utility contractors in the Midwest. He is also the director of DEI for Concrete Collective, a joint venture that is the cast-in-place concrete subcontractor for the Obama Presidential Center, where he’s responsible for the procurement of goods, services, a diverse workforce and subcontracting opportunities. A graduate of the University of Illinois and Keller Graduate School of Management, Faulkner also serves as a director for the North Lawndale Employment Network, a workforce placement agency. Faulkner is also the managing broker of The Faulkner Group-Re/Max Premier, a boutique commercial and residential real estate team.

Ryan Green oversees DL3 Realty’s strategic partnerships and initiatives, asset management and facilities, operations, legal affairs, government relations, community affairs and marketing. A graduate of Emory University and The University of Chicago Law School, he is responsible for shaping business strategy through pipeline management, deal sourcing and investor relations. In recent years, Green had leadership roles in the refinance and subsequent sale of

Charlton Hamer provides oversight for the development and property management operations of 9,000 units in Chicago, Illinois and Missouri. A graduate of the University of Illinois (Master of Urban Planning & Policy) and the University of Illinois Chicago, he has participated in $400 million worth of transactions in all asset classes. He initiated the P3 Markets/Habitat joint venture for the $100 million 43 Green development—the first mixed-income, equitable transitoriented development, or eTOD, in Bronzeville. He is a member of the Real Estate Executive Council and is involved in its mentorship program. He is also a member of the Urban Land Institute, the city of Chicago’s Five-Year Housing Plan and the Chicago Continuum of Care. He is a past member of the city’s ARO Inclusionary Housing Task Force 2020.

an office/community center that brought 500 jobs; the lease of the former Target in Chicago’s Chatham neighborhood to Discover as a tenant, bringing 1,000 jobs; and the acquisition and lease-up of a shopping and professional office center in Jackson Park. He also volunteers with Center on Halsted’s Youth Housing Committee to establish housing for transgender youth.

Sterling Bay

Visit us at sterlingbay.com

Congratulations Dr. Suzet McKinney Sterling Bay congratulates its very own Dr. Suzet McKinney on being recognized as a Notable Executive of Color in Commercial Real Estate. We celebrate Dr. McKinney’s commitment to creating a bright future for Chicago and her advocacy for creating equitable opportunities across our industry.

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CONGRATULATIONS DWAYNE BARLOW

Dwayne Barlow

Canino Electric Company Congratulations to Powering Chicago member Dwayne Barlow and The Bartech Group for being recognized in this year’s Crain’s Chicago Business Notable Executives of Color in Construction and Commercial Real Estate.

LEARN MORE AT POWERINGCHICAGO.COM

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CRAIN’S CHICAGO BUSINESS • MAY 2, 2022 26

27 M

AISHA JOHNSON

ERICA KIRKWOOD

MICHAEL LUCAS

GLORIA MATERRE

MICHELLE MCCLENDON

SUZ

Director of accounting Focus

Vice president and general counsel GMA Construction Group

Managing director EnTrust Realty Advisors

Senior project executive Gilbane Building

Princ Sterl

Aisha Johnson was named director of accounting at Focus in February 2022 after joining the company in 2017. In her role, she develops the company’s financial strategy and directs the fiscal functions of the firm, including financial reporting and forecasting. Since the start of the pandemic, Johnson has led several initiatives to automate processes and improve Focus’ ability to work remotely. That includes verifying a new software integration that connects real-time construction schedules and contracts with real-time financial data. Johnson, a certified public accountant, is a member of Focus’ Justice, Equity, Diversity & Inclusion committee and a founding member and current treasurer of Professional Women in Construction Chicago, an organization that supports, advances and connects women while promoting diversity within the architecture, engineering and construction industry.

Erica Kirkwood provides legal and business counsel on business development, real estate development, mergers and acquisitions, corporate transactions, contracts, litigation, risk management and compliance. She managed the formation of GMA’s real estate development company, GRE Ventures, and leads efforts to expand GMA’s operations to East Africa. She also managed the company’s expansion into Virginia, and in March 2021, GMA broke ground on the single largest public housing construction contract awarded to an African American firm in Charlottesville. Kirkwood has negotiated construction contracts including the National Public Housing Museum, Pullman National Monument Visitor Center and the Northwestern University Black House project. She serves on the executive boards of the Jack & Jill Chicago Chapter and the Black Women Lawyers’ Association Scholarship Fund.

Director, business development and investor relations McLaurin Development Partners

Along with serving as the principal attorney for Chicago-based Materre & Associates, Gloria Materre serves as managing director for EnTrust Realty Advisors. In that role, she leads business development, cultivates client relationships and oversees assignment execution and recruiting for the company. Prior to building her own practice, Materre taught legal writing at John Marshall Law School and was a partner at Dinsmore & Shohl. Past roles also include serving as Illinois Gov. Pat Quinn’s deputy chief of staff and as executive director of the Illinois Housing Development Authority. Materre is a board member of Chicagoland Habitat for Humanity and Ruth Page Center for the Arts.

As operational lead for Gilbane’s K-12 and public-sector market, Michelle McClendon has led several key projects, including the Neal Math & Science Academy redevelopment project and Proviso Township High School District 209’s facility master plan implementation. She also spearheaded the company’s summer internship program. An 18-year construction veteran, McClendon advocates for minority voices as a speaker for Polished Pebbles and She Builds. Along with her twin sister, she also founded the Myesha & Michelle McClendon Scholarship Fund for African American women who are pursuing undergraduate degrees in engineering. McClendon is a board member at The Essence of Ivy & Pearls Foundation, Illinois Green Alliance and the Illinois International Port District.

Suze Bay i mad com

Michael Lucas finds diverse sources of development capital, including from minority and women investors who have not had regular access to institutional-quality options. As a commercial real estate bidder, he works with high-net-worth individuals, family offices and impact investors to assemble a capital stack for large-scale developments. These include the $3.8 billion, 100-acre Bronzeville Lakefront development that hopes to revive Chicago’s “Black Metropolis” and provide as many as 75,000 jobs. He was also instrumental in a successful bid for Chicago multifamily properties in the Better Housing Foundation bankruptcy. Lucas’ retail projects, including a Pete’s Fresh Market in Bronzeville, provide business development anchors. Financing also enables McLaurin to hire minority- and women-owned architecture, engineering and construction firms for repeat engagements.

Barack Ferrazzano Congratulates g

Ankit Patel of

Ventas, Inc. For Being Recognized Among Amo Crain’s Chicago Business' Notable Executives of Color in Construction & Commercial Real Estate Barack Ferrazzano Kirsc Kirschbaum chbaum & Nagelberg LLP | T. T 312.984.3100 | bfkn.com

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27 MAY 2, 2022 • CRAIN’S CHICAGO BUSINESS

CRAIN’S CHICAGO BUSINESS • MAY 2, 2022 27

SUZET MCKINNEY

WILBUR C. MILHOUSE III

JUAN MORENO

OTTO NICHOLS III

JOANN ORNELAS-BAUER

Principal and director of life sciences Sterling Bay

Chairman and CEO Milhouse Engineering & Construction

Founder and president JGMA

Executive vice president Clayco

CEO Dynamic Utility Solutions

As founder and president of JGMA, Juan Moreno has continued to expand his architecture firm, which has nearly doubled in size in the past 18 months. The firm is leading the design for one of the finalists for the Chicago casino bids, Rivers Casino at The 78, and is nearing completion on a 24,000-seat arena project in Colombia. JGMA is also working on the new $60 million headquarters for the Illinois Environmental Protection Agency in Springfield. Moreno, a former commissioner on the Chicago Landmarks Commission, is on the boards of the National Museum of Mexican Art and the Chicago Architecture Center. He was also recently named to the city’s Committee on Design, a group of design professionals elevating the presence of architecture in Chicago.

Otto Nichols III leads Clayco’s large-scale projects from conceptual design to turnover and has overseen $1.7 billion in new construction projects across various markets. That includes executive oversight on the O’Hare 21 suite of projects, which includes a new Terminal 5 garage, elevated parking structure and the 4 Right/22 Left runway rehabilitation. Nichols is also providing owner’s representation and program management services for the Obama Presidential Center. Nichols prioritizes diversity, equity and inclusion opportunities and has awarded over $450 million in contracts to minority and female contractors. He also co-founded Clayco’s Juneteenth Fund, which has raised more than $250,000 since 2020 to support nonprofits that are focused on equality and fighting injustice. Nichols is a member of the Urban Land Institute and Pedal the Cause.

Despite the challenges posed by COVID-19, Joann Ornelas-Bauer has grown her electric utility contracting company by more than 40% since the start of the pandemic. She and her staff also have boosted the company’s safety and quality performance and scalability by improving back-office and support processes. Ornelas-Bauer, who has more than 20 years of experience in the electric utility industry, has built a diverse company of 100 employees in less than six years. She is a member of Hispanic American Construction Industry Association and the Hispanic Chamber of Commerce.

Suzet McKinney joined Sterling Bay in February 2021 and has made it her goal to expand the company’s national life sciences footprint and to raise Chicago to a Tier 1 life sciences market. In her prior role as executive director and CEO of the Illinois Medical District, she jump-started that effort by attracting new life sciences projects to the city. Her work with Sterling Bay includes overseeing the groundbreaking of Ally, a 320,000-square-foot life sciences center. An expert in

emergency preparedness and response, McKinney was tapped by Gov. J.B. Pritzker in 2020 to lead operations on five alternative care facilities for potential COVID-19 patient overflow. She is a board member of Lurie Children’s Hospital and the Science & Security Board of the Bulletin of the Atomic Scientists.

Wilbur C. Milhouse III oversees the growth and vision of Milhouse Engineering & Construction, the country’s largest minorityowned engineering firm, which he founded in 2001. In the past 18 months alone, the company’s headcount has increased by 49%. The company also completed multiple high-profile projects, including providing project management and engineering services for the $17 million ground-up construction of the Walmart Supercenter in Pullman. In July 2021, Milhouse founded a new company, Milhouse Forestry, a vegetation management firm that provides line clearance for utility companies. Last year, the nonprofit that he founded, Milhouse Charities, provided 821 service-hours to the community. He created the charity to support the education, exposure and advancement of youth and minorities in science, technology, engineering and math.

2022

EXECUTIVES OF COLOR IN CONSTRUCTION AND COMMERCIAL REAL ESTATE

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28 MAY 2, 2022 • CRAIN’S CHICAGO BUSINESS

ANKIT PATEL

MAMON POWERS JR.

SWAPNA SATHYAN

Senior vice president, corporate finance Ventas

CEO and chairman Powers & Sons Construction

Director of strategy and consulting Blue Cottage of CannonDesign

Mamon Powers Jr. oversees all company operations across the Chicago area and Indiana. He is also one of five principals with Lakeside Alliance, builders of the Obama Presidential Center, which broke ground in September. Powers is working on the 45,000-square-foot Friend Health headquarters in Woodlawn, which aligns with his passion for expanding equitable access to health care on the South Side. Powers, a registered professional engineer, is on the Purdue University board of directors. In February, he and his wife, Cynthia, endowed the Quentin P. Smith Sr. Endowed Aviation Scholarship to Indiana State University to support minority students pursuing careers in the architecture, engineering and construction industry.

In the past year, Swapna Sathyan has worked with organizations such as the Los Angeles Philharmonic and MD Anderson Cancer Center that are reshaping the future of work, culture and leadership. In her role, Sathyan helps organizations align their space, operational and people strategies to meet their business goals. As a member of CannonDesign’s board of directors, she has helped champion numerous diversity, equity and inclusion practices. That includes hiring a director of DEI and forming employee resource groups for women and the LGBTQ+ community. She is also a champion for CannonDesign’s Open Hand Studio, a pro-bono effort that donates design services to organizations that empower their communities. Past projects include work with Jamaa Birth Village, the YMCA and the Cook County Bond Court.

As the leader of the corporate finance team, Ankit Patel is responsible for budgeting and forecasting, the quarterly earnings process and investor relations. He has played a pivotal role at Ventas since the start of the pandemic, including transforming the company’s reporting capabilities and implementing a new end-to-end data process for capital expenditures (over $1 billion annually). He also guided Ventas through the challenges

of forecasting business performance during a highly unpredictable period. Patel, who took on the senior vice president role in 2019, is on the Internal Affairs Committee of EverThrive Illinois, a nonprofit that advocates for access to high-quality health care for women, children and families in Illinois.

DAMONA STRAUTMANIS Vice president, project and development services JLL

As a commercial real estate development manager, project executive and team leader, Damona Strautmanis has recently led projects that encompassed more than 1.5 million square feet and were worth more than $500 million. Notable projects include the construction of the 490,000-square-foot GW University Science & Engineering Hall and a $450 million mixed-use project of 490,000 square feet of street-facing retail and restaurant space. Strautmanis is a leader in the JLL Black Professionals Network and helped create a minority new-hire mentorship program. She is on the board of Chicago African Americans in Commercial Real Estate and was on the steering committee for the Greater Chicago Food Depository’s 2021 Commercial Real Estate Awards.

STEVE THOMAS

President 5T Development Partners

Mana bKL A

As president of 5T Development Partners, Steve Thomas oversees the acquisition, development and property management of more than 1,300 affordable housing units in Chicago’s low- and moderate-income neighborhoods. Recent projects include delivering 43 high-quality, naturally occurring affordable housing units to residents and preserving 35 property rental assistance units. Thomas, an engineer by training, previously was a restaurant operator and owner. His work

As m Arch help direc

with restaurant employees led him to want to provide low-wage workers with affordable housing. Thomas is also co-founder of the South Side Community Investors Association, a nonprofit that promotes the responsible ownership, management, development and expansion of real estate on the South Side.

with She i al Or Arch the p for w estat the L prog

2022

LEADERS IN SUSTAINABILITY Crain’s 2022 Notable Leaders in Sustainability, a special editorial feature within Crain’s June 27 print issue and online, will profile top Chicago area leaders in sustainability. This special section will recognize individuals for their success and accomplishments during the last 18 months.

NOMINATE NOW! Deadline is Friday, May 6 Nominate at

ChicagoBusiness.com/NotableSustainability

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CRAIN’S CHICAGO BUSINESS • MAY 2, 2022 29

DANIELLE TILLMAN

LEON WALKER

HANSEL WHITEURST

ARTHUR ZAYAS MILLER

JAMES ZHENG

Managing principal bKL Architecture

Managing partner DL3 Realty

Vice president Berglund Construction

President and CEO MZI Group

Co-CEO and president Goettsch Partners

As managing principal at bKL Architecture, Danielle Tillman helps guide the firm’s strategic direction, design efforts and client relations. Promoted to the role in November 2020, she has worked on many notable recent projects, including the renovation of the Whitney M. Young Jr. Branch Library and select projects in China. In 2021, she received the American Institute of Architects’ Young Architect Award. As one of a small number of Black female architects, Tillman is an advocate for diversity within her firm and the industry. She is a member of the National Organization of Minority Architects and CREW Chicago, the premier business network for women in commercial real estate. She is also a mentor with the LINK Unlimited Scholars program.

Leon Walker builds and maintains relationships with investors, lenders, civic leaders and community stakeholders. Walker has executed over $100 million of community developments in the past 18 months, including the redevelopment of two former Target stores into a Blue Cross & Blue Shield call center in Morgan Park. Walker and DL3 Realty regularly exceed minimum requirements for minority and women business enterprises, and during

As vice president, Hansel Whiteurst provides general and operational oversight of Berglund’s Illinois Building Division, which also includes out-ofstate projects. Since joining the company in October 2020, Whiteurst has worked on building a culture of accountability, collaboration and problem solving. He has been involved in multiple high-profile projects including major Chicago developments such as Wintrust Arena at McCormick Square—a 300,000 square-foot, 10,500-seat event center—and the Centennial Vision for Navy Pier. Whiteurst is active in Berglund’s Workplace Equity, Diversity & Inclusion Group and is a member of the Business Leadership Council, whose mission is to advance Black businesses and leaders. Whiteurst is also a member of the Urban Land Institute.

Arthur Zayas Miller provides strategic, financial and operational leadership for MZI Group. In recent months, Zayas Miller has grown MZI Group into a turnkey electric vehicle infrastructure contractor partnering with utilities, municipalities, commercial real estate and, most recently, one of the largest beverage brands in the world, to create smart infrastructure. Zayas Miller, a U.S. Army veteran, founded the company in 1999 and has overseen major growth, including adding a telecom division in 2018. He is a board member of the National Latino Education Institute, Chicago United, the Hispanic American Construction Industry Association, the Illinois Hispanic Chamber of Commerce, Loyola University Health System and the National Association of Veteran Owned Businesses.

James Zheng oversees Goettsch Partners’ business strategy and daily operations. During the pandemic, Zheng not only led the firm but directed—and won—projects throughout Asia with almost zero travel. Notable projects include the Guangxi China Resources Tower, an 85-story, 2.9 million-square-foot mixed-use tower in Nanning, and the China Resources Qianhai Center, in Shenzhen, a five-building, 5.1 million-square-foot mixed-use complex. In the past five years, Zheng has helped expand the company’s work to span five continents and 18 countries. He has also helped advance staff diversity. In 2017, 31% of the firm’s employees were minorities; now that number is 52%. Zheng is a member of the Chicago Architecture Center, the American Institute of Architects, the Council on Tall Buildings and Urban Habitat’s advisory group.

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negotiations with a national anchor tenant, Walker procured shelf space for more than 40 local minority business enterprises. He also is the founder of the Chicago Emerging Minority Developer Initiative to increase the number of minority developers in Chicago. Walker is a board member of Chicago Loop Alliance, The Civic Federation and the Greater Chicago Food Depository.

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30 MAY 2, 2022 • CRAIN’S CHICAGO BUSINESS

CLASSIFIEDS

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To place your listing, contact Suzanne Janik at (313) 446-0455 or email sjanik@crain.com www.chicagobusiness.com/classifieds CAREER OPPORTUNITIES

CAREER OPPORTUNITIES

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DADS’ RIGHTS! A rendering of Quincy Medical Group’s proposed hospital

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ChicagoBusiness.com

State regulators OK controversial hospital with ties to private equity Quincy Medical Group filed its application for the small hospital in 2020 and has since faced strong opposition from a nearby hospital operator, Blessing Health System BY KATHERINE DAVIS

OUR READERS ARE 125% MORE LIKELY TO INFLUENCE OFFICE SPACE DECISIONS

Find your next corporate tenant or leaser.

A controversial proposal for a new hospital in downstate Quincy was approved April 26 by the Illinois Health Facilities & Services Review Board. The board is allowing Quincy Medical Group to move forward with building a “small format” nonprofit hospital, which the owners say will provide more innovative care and services not currently offered in the rural area. The facility will have 28 beds and cost about $61 million to build, according to board documents. It is expected to be completed in April 2026. The board also approved a separate $2 million, three-room, free-standing birthing center that QMG also proposed in Quincy. Both facilities will be built on the campus of the Quincy Town Center, which already houses the QMG Surgery Center and Cancer Institute. “We are thrilled with the board’s decisions today,” QMG CEO Carol Brockmiller said in a statement. “At QMG, we are doing really good things for all the right reasons and trying hard to serve the people of Quincy, Adams County, West Central Illinois, and the tri-states.”

OPPOSITION

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

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QMG originally filed its application for the small hospital in 2020 and has since faced strong opposition from a nearby hospital operator, Blessing Health System. The nonprofit, three-hospital chain has argued that QMG’s

new hospital would siphon off its profitable surgeries and privately insured patients that keep it afloat financially. Blessing also took aim at QMG parent Duly Health & Care’s private-equity backer, Ares Management, expressing concern over what Blessing considers profit-motivated ownership that could threaten care in the area.

COMPETITION

became intense at times as representatives of both Blessing and QMG made their points. At one point, a QMG representative said the new hospital will allow them to “crush” and “decimate” Blessing’s “monopoly” on health care in Quincy. Of the eight-person board, just one member, Linda Rae Murray, voted against QMG’s proposed hospital, saying “there’s not a need for these 28 beds.” Applications are approved if they receive at least six votes. Once the project was approved, QMG attorney Tracey Klein thanked the board, adding, “We will make you proud.” “We are deeply disappointed in the board’s decision to ignore its own rules and approve

QMG has defended itself by saying it’s looking to introduce more competition in Quincy’s health care market and provide services not currently offered in the area. QMG has alleged that Blessing’s opposition to the project was spurred by Blessing’s desire to maintain a monopoly on health care services in the area. Over the last THE “SMALL FORMAT” HOSPITAL, WHICH two years that the project has been WILL HAVE 28 BEDS AND COST ABOUT before state regu$61 MILLION TO BUILD, IS EXPECTED TO lators, dozens of letters of opposi- BE COMPLETED IN APRIL 2026. tion and support were filed from representatives from both QMG this unnecessary QMG Hospital and Blessing, as well as from and Birthing Center,” Blessing local business owners and oth- CEO Maureen Kahn said in a er stakeholders and community statement to Crain’s. “By siphoning away patients with insurmembers. Last May, the Illinois Health ance, QMG threatens our ability Facilities & Services Review to provide accessible health care Board issued an intent-to-deny for an entire region. While we notice to QMG’s hospital. Among will remain the safety net proother reasons, the board said at vider for the region, we will also the time that the hospital would continue to advocate for what is create “unnecessary duplication right for Blessing and for all community hospitals across the state. of service” in the area. The April 26 board meeting We are reviewing all options.”

4/29/22 3:12 PM