Crain's Chicago Business

JOE CAHILL: Which local CEOs made it into the $20 Million Club? PAGE 3

GOVERNMENT: Is Fritz

Kaegi fulfilling his transparency pledge?

PAGE 4

CHICAGOBUSINESS.COM | JUNE 6, 2022 | $3.50

Consumers pay while utility regulator dozes

Miguel Patricio

The Illinois Commerce Commission is six years behind on annual reviews of Peoples Gas infrastructure surcharges

Kraft Heinz CEO’s real test starts now

COURTESY OF KRAFT HEINZ

BY STEVE DANIELS

Miguel Patricio needs to raise prices without losing all those customers who rediscovered Macaroni & Cheese during COVID lockdowns I BY ALLY MAROTTI

A

fter three years atop Kraft Heinz, CEO Miguel Patricio has shored up the ketchup-maker’s battered flagship brands and surfed the COVID-driven wave of demand for grocery staples.

He’ll have to make his own wave now that people are eating outside the home again and bring along customers who rediscovered Macaroni & Cheese during the pandemic.

The loyalty of such consumers is not a given, especially as Kraft Heinz raises prices to cover costs driven higher by inflation. Customers tend to decamp for cheaper brands as prices rise, and they’ve already begun to drift away from Kraft Heinz.

See KRAFT on Page 21

“KRAFT HEINZ’S ABILITY TO RETAIN THOSE HOUSEHOLDS THAT MAY HAVE STARTED PURCHASING ITS PRODUCTS DURING THE HEIGHT OF THE PANDEMIC STILL ISN’T A GUARANTEE.” Erin Lash, Morningstar analyst

Peoples Gas has collected more than $600 million in surcharges from Chicagoans over the past six years without the regulatory reviews required by law to protect customers from improper charges.

Regulators at the Illinois Commerce Commission are supposed to keep close tabs on Peoples’ surcharges for a massive infrastructure modernization program launched under a 2013 law pressing gas utilities to replace outdated pipes faster. Annual reviews by the ICC are meant to ensure that Peoples imposes surcharges only for legitimate infrastructure investments, and not for other costs— and does so cost-effectively.

But the law doesn’t set a timetable for the ICC to complete the reviews, and the agency is six years behind on its work, effectively

giving Peoples free rein to spend and levy surcharges as it sees fit.

Meanwhile, the natural gas utility for the city of Chicago has spent more than $1.6 billion during that time on what it calls the “system modernization program,” none of it reviewed by regulators.

In fact, they’ve only begun scrutinizing the spending for just one year—2016—the first full year after Peoples and its Chicago-based parent, Integrys Energy Group, were acquired by WEC Energy Group of Milwaukee. The infrastructure program at the time was mired in controversy, as cost estimates ballooned to $8 billion and Integrys’ executives admitted to improperly concealing that fact to get the deal approved.

Since then, heating bills in Chicago have soared. Customers are paying $16 and up each month See PEOPLES on Page 21

EXECUTIVES OF COLOR IN MANUFACTURING

These senior leaders play key roles at Chicagoarea firms that make everything from candy to electronics to custom stone. PAGE 13

NEWSPAPER l VOL. 45, NO. 23 l COPYRIGHT 2022 CRAIN COMMUNICATIONS INC. l ALL RIGHTS RESERVED

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DAN MCGRATH

TECH TAKEAWAY

A whole new language for sports? You can bet on it. PAGE 2

This hospital boss is testing a new app to help patients. PAGE 6

6/3/22 3:33 PM

2 JUNE 6, 2022 • CRAIN’S CHICAGO BUSINESS

A telltale race for the state’s highest court

I

f asked, most voters probably would say that they want Illinois judges to be impartial arbiters, wise heads whose personal and political views are unknown.

But in this hyper-polarized era, with things such as abortion rights front and center, are voters looking for pacific neutrality or someone who—wink, wink— agrees with them?

That’s the real question in the little-noticed but critical race to fill an open Illinois Supreme Court seat in the new 2nd District, which stretches west from Lake County through the northern suburbs and as far as DeKalb. Whichever political party wins this slot may well control a majority of the court, potentially giving the GOP a way back into a state government now totally run by Democrats.

The real fight for now is who the Democrats will select in their primary to take on the Republican nominee—assuming, that is, a current court case challenging some of the candidates doesn’t

end up in knocking them off the ballot.

There are two main Democratic contenders. The first is veteran Lake County Circuit Court Judge Elizabeth “Liz” Rochford, the current secretary of the Illinois Judges Association. The daughter of former Chicago Police Superintendent James Rochford, she’s been rated “highly recommended” by the Illinois State Bar Association.

Opposing her is Highland Park Mayor Nancy Rotering, a former candidate for Illinois attorney general and Congress who once served on the board of Planned Parenthood of Illinois. She was rated “not recommended.” ISBA hasn’t said why, but insiders suspect it’s because Rotering is a lot better known for her staunch political advocacy than her legal experience.

Rotering, in an interview, concedes that she never has been in court as a litigator and that her last employment as an attorney at law came a quarter century ago, when she left as a partner at McDermott

Will & Emery to focus on raising a sick child. However, she adds, she’s been a practicing attorney for 30 years who used her skills to, for instance, help draft the Highland Park ordinance banning the possession of assault weapons that was upheld by the U.S. Supreme Court.

Rotering “has life experience” that voters can relate to, says Terry Cosgrove, CEO of Personal PAC, an abortion-rights group which, with Planned Parenthood, is backing Rotering all out. In his view, the perspectives of “people in cloakrooms” don’t mean much when, for instance, the American Bar Association gave its highest rating to U.S. Supreme Court Justices Brett Kavanaugh and Amy Coney Barrett, who seem ready to overturn Roe v. Wade.

Rochford, in a separate interview, is much more, um, judicial, leaving it to allies to note that numerous pro-choice women in the Illinois Legislature have endorsed her. But she makes absolutely clear her view that it is “a dangerous

GREG HINZ ON POLITICS

thing” for judges—or potential judges—to be strong advocates on issues that could come before them. “If judges are not independent, that is a threat to the Democratic process. . . .My professional life for 35 years has been in and around the courts,” she says.

Also worth noting is that Rotering—and a couple of Republicans who are not the party establishment’s choice in the GOP primary— is on the ballot only because a Cook County judge overruled a petition challenge to her candidacy. The two top attorneys handling the appeal of that ruling are the general counsels of the Illinois Democratic and Republican parties.

Then there are questions about the $22,000 Rotering got from

Commonwealth Edison and its parent company, Exelon Generation, when she ran for attorney general in 2017, as rumors of the Mike Madigan shakedown scandals began to spread. Rotering replies that race winner Kwame Raoul and another contender got almost twice as much—in part because she wouldn’t promise to do the company’s bidding, she says.

But a GOP candidate with lots of money could make TV-ad hay out of the donation.

On balance, though, this contest is a test of what voters really want on the bench—neutrality or someone who will rule their way.

And there is a third candidate, Kane County Judge René Cruz. We’ll find out soon.

Point spreads, prop bets: The new language of sports

I

went to a ballgame at Guaranteed Rate Field the other night and a casino broke out.

Or seemed to.

A huge sign for Bet Caesars, the White Sox’s official gaming partner, looms atop the left field message board. Harrah’s, Horseshoe and Grand Victoria ads share space on a board in right field. Two other “bet here” signs adorn the outfield fences.

Seven gambling ads in the ballpark proper, plus two for the benefit of television viewers on the rotating message boards behind home plate.

And Len Kasper was calling the game from the ESPN/Hard Rock Casino broadcast booth.

At Wrigley Field, meanwhile, the lone FanDuel ad tucked into the right field corner might suggest the Cubs’ ardor for wagering is a bit less consuming than that of the Sox, but that’s to ignore the DraftKings betting emporium under construction at the fabled corner of Addison and Sheffield.

A sportsbook right on the Wrigley premises—let’s bet two!

Gambling, a word that for decades went grimly unspoken around any sport other than horse racing, is now everywhere.

“The genie is out of the bottle, and it’s not going back in,” a former sports exec with experience on both sides of town told me.

“Too much revenue.”

Everywhere there is sports there is gambling, including sports media. On WSCR the other day, MGM Bets “ambassador” Chris Chelios joined morning hosts Mully and Haugh for a chat via the Circa Resorts & Casino hotline. If you want to “bet where I bet,” Mully directed you to the Bet Rivers site, where some can’t-miss action on the French Open awaited.

The French Open! Tennis!

Dan Bernstein, who once

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fashioned himself the conscience of Chicago sports, urged listeners to use “promo code Bern” and play a multisport, multiteam parlay for which a background in calculus would be helpful. Promo code “Matt” gets you into a Matt Spiegel-endorsed home run game that . . . I’m sorry; they lost me. A listener can’t tell the conversation from the ad copy.

I’m not naive about this stuff.

My late father was known to pull up a stool at Bud O’Leary’s Tavern, a convivial neighborhood spot where the real action was in the basement—legend had it you could get a bet down on anything that moved, including some nervous clerks on the rare occasions when the cops stopped by.

Bob Young’s Barber Shop offered haircuts, naughty magazines and a back room where the older guys knew to go to get down on Bears-Packers or Notre Dame-Michigan State.

My friend Bones put his Marquette journalism degree to work in communications for a downtown insurance firm. As a sideline he ran a little book for friends and friends of friends and was oblivious to the concept of a street tax until a couple of edgy-looking goons slid into his booth at a Lincoln Park coffee shop and suggested he find a new sideline.

Shaken, Bones came and stayed with us in San Francisco for a bit while he contemplated reinventing himself—over the first weekend of the NCAA tournament. My daughter, then 7, found his mastery of point spreads fascinating.

Point spreads, parlays, prop bets . . . I don’t much care one way or the other. I know people bet, and I know people who can’t be bothered to watch a game unless they’ve got a bet down. But I don’t like the none-too-subtle messaging that you have to be “in

on the action” to enjoy sports to the fullest.

Especially when it comes from celebrity endorsers. Charles Barkley has an appalling history at the Las Vegas tables, but here he is touting FanDuel. Kevin Garnett was an NBA champion and as fierce a competitor as ever laced up sneakers, but his ad would suggest a successful Bet MGM play was his crowning glory. The Mannings (Caesars) and Mike Ditka (Bet Rivers) need more exposure? Drew Brees and his smug PointsBet “bros” urging us to “live our bets life” are more annoying than those

DAN McGRATH

ON THE BUSINESS OF SPORTS toothy Kars for Kids fake musicians.

Maybe the ads would be more tolerable if they were as tastefully clever as, say, those male enhancement spots featuring Doug Flutie and Frank Thomas on the driving range.This elixir they’re peddling is the key to restoring a 40-something’s vim and vigor.

“And she’ll like it too,” Frank, with

a leering wink, assures his dorky admirer as the dork’s female companion blushes.

I don’t have words. And I watch too much TV. 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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6/3/22 3:14 PM

CRAIN’S CHICAGO BUSINESS • JUNE 6, 2022 3

JOE CAHILL ON BUSINESS

Chicago’s $20 Million Club grows as pay soars for CEOs

ALAMY

B

Privacy laws like Illinois’ have Big Tech scrambling Though there are no federal privacy laws, state laws have corporations like Google and Facebook folding under the pressure of tough statutes I BY CORLI JAY

G

oogle is the latest tech company that has settled a class-action lawsuit after violating an Illinois privacy law.

The $100 million settlement stems from allegations that the company collected and kept biometric data of Illinois residents by having them appear in Google Photos without notice or proper consent—a violation of the Illinois Biometric Information Privacy Act, or BIPA. The settlement website says class members include anyone who appeared in a Google Photos picture “at any time between May 1, 2015, and April 25, 2022” as an Illinois resident.

BIPA, which was established in 2008, regulates the collection, use and handling of biometric identifiers by private companies, See PRIVACY on Page 20

FACIAL RECOGNITION INFORMATION COLLECTED BY SOME TECH COMPANIES HAS BEEN USED IN WAYS THAT HAVE LED TO WRONGFUL ARRESTS, ESPECIALLY IN CASES INVOLVING BLACK PEOPLE.

Chicago real estate firm raises $655 million for opportunity zones Cresset Real Estate Partners is one of only a handful of firms nationwide to raise more than $500 million for projects in blighted neighborhoods

BY DANNY ECKER A Chicago real estate firm that before the COVID-19 pandemic raised almost half a billion dollars to be invested into blighted neighborhoods nationwide has pulled in a lot more since then for similar projects, reinforcing its status as one of the largest investors in federal opportunity zones.

In one of two big fund closures it announced last week, Cresset Partners said it raised

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$655 million for its second qualified opportunity zone fund. The money adds to the $465 million fund it closed in early 2020 targeting projects in opportunity zones, which allow investors to defer or avoid taxes on capital gains if they redirect those profits into any of the roughly 8,700 designated locations in poor communities nationwide.

Separately, Cresset announced it had raised $250 million over the past 12 months for its first fund targeting industrial

developments. That money will be used to develop nine warehouses, betting on the continued strength of industrial properties that provide storage and distribution services for products bought online.

Cresset also said it has launched new funds for both opportunity zone and industrial projects, though it did not disclose whether any of its future projects will be in the Chicago See CRESSET on Page 20

ig raises lifted a record number of Chicago-area CEOs into the $20 Million Club last year.

Led by Walgreens CEO Roz Brewer, 10 local bosses crossed the magic pay threshold, eclipsing the previous record of seven set in 2020. Brewer pocketed $28.3 million in total compensation for her first year as CEO of the Deerfield-based drugstore chain.

Joining Brewer as first-time members were Mark Hoplamazian of Hyatt with $24.1 million, CME Group’s Terrence Duffy at $22.9 million, ITW’s Scott Santi at $20.8 million, and Christopher Kempczinski of McDonald’s with $20.0 million. They joined returning 2020 members Robert Ford of Abbott Laboratories ($24.9 million), Richard Gonzalez of AbbVie ($23.9 million), Juan Luciano of ADM ($23.5 million) and Boeing’s David Calhoun ($21.1 million). Caterpillar’s James Umpleby rejoined the club after a one-year hiatus, taking home $24.3 million in 2021.

The club’s growth reflects a broader surge in pay for Chicagoarea CEOs. Median CEO pay at 31 local companies in the S&P 500 rose 22.8% to $14.1 million, according to MyLogIQ, which provides data on publicly traded companies. That’s twice the 11.2% rise in median CEO pay for 457 S&P 500 companies that had reported executive compensation as of May 18. The outsized increase left local CEOs only slightly behind the national median of $14.6 million.

Pay hikes for Chicago-area honchos matched the national median of 20.4%. But they were more likely to get raises; compensation rose for 83% of local CEOs, compared with 67% nationally.

Hoplamazian got the biggest raise, an 85.4% boost that edged out Kempczinski’s 84.6% and Umpleby’s 77.7%. As my colleague Steve Daniels reported, big cash awards were a common denominator among the highest-paid CEOs here and around the country. Big increases in cash bonuses and sometimes salary in 2021 came after cash compensation declined sharply for many CEOs in 2020, when the economy suffered the worst effects of COVID-19.

For some top-paid CEOs who did without cash bonuses in 2020, the generous cash awards of 2021 more than made up for the sacrifice. Kempcinzki’s $4.4 million 2020 bonus doubled his 2019 award, as did Umpleby’s $4.8 million 2020 bonus.

Directors at these companies apparently felt obliged to make CEOs whole for a down year in

pay. But the big cash awards effectively insulated CEOs from the impact of COVID-19 on their business, a protection not afforded to other employees and shareholders.

Brewer got a pile of cash last year, too, along with loads of stock. Like many new CEOs, she negotiated generous one-time awards when she joined Walgreens: a $4.5 million cash signing bonus, and stock awards valued at more than $20 million, Walgreens’ proxy statement shows.

Not every local CEO got a big raise last year. The biggest pay cut went to Mike Pykosz of health care provider Oak Street Health, who collected a club record $73.5 million in 2020, almost all of it in stock awards arising from the company’s initial public offering. This year, his pay dropped about 99% to $886,490, a level more appropriate for a company Oak Street’s size.

Pay cuts knocked a couple of familiar faces out of the club.

Motorola Solutions CEO Greg Brown’s total of $19.9 million fell 13.3% from a $23 million 2020 haul that included a special discretionary bonus and bigger incentive awards. Allstate’s Thomas Wilson also slipped just below the bar as his pay dropped to $19.1 million from $21.1 million.

Most of the decline stemmed from a change in the present value of his accrued pension, a non-cash item.

CEO pay is supposed to bear some relationship to company performance, rising when results improve and falling when they decline. But sometimes the link can be hard to find. Raises for the highest-paid local CEOs far outstripped the median raise for S&P 500 bosses overall. But their companies’ stocks didn’t outperform by such a wide margin, and in some cases fell short of the S&P 500’s 27.7% rise last year.

At 26%, the median share price gain for companies led by $20 million club members trailed the broader market. Walgreens and Abbott shares edged out the S&P, rising 30.8% and 28.5%, respectively, while Caterpillar managed only a 13.6% rise, and Boeing shares dropped 6%.

Ironically, the local S&P 500 company that gave its CEO the biggest cut saw its shares soar past the median. Motorola Solutions stock rose 62.7% last year as CEO Brown’s pay fell by double digits.

Of course, stock price appreciation is only one of many ways to measure corporate performance.

But it’s useful for shedding light on the relationship between CEO pay and shareholder fortunes.

At many local companies, that connection could be closer.

6/3/22 3:28 PM

4 JUNE 6, 2022 • CRAIN’S CHICAGO BUSINESS

Is Fritz Kaegi fulfilling his FOIA transparency pledge?

Some requestors waited an average of 80 days to get public records requests filled or didn’t hear back from the Cook County assessor’s office, frustrating property tax insiders

Chris Boden and Kaitlin Sharkey

WGN names Chris Boden, Kaitlin Sharkey full-time sports anchors

I

t’s no surprise WGN-Channel 9 waited until Dan Roan retired to announce his successor as sports anchor. But in an unexpected twist, the Nexstar Media station appears to be hedging its bet on who’ll get top billing.

Chris Boden, the Robert Feder veteran Chicago sportscaster who’s been filling in at WGN since last August, and Kaitlin Sharkey, the former sports anchor and Chicago Bears reporter at Fox-owned WFLD-Channel 32, were named full-time sports anchor/reporters last week.

The announcement by WGN news director Dominick Stasi did not delineate specific duties for Boden and Sharkey, suggesting the two may alternate in Roan’s old role for the time being. If the plan is for one or the other eventually to emerge as top sports anchor, no one who knows is saying.

The move fills two vacancies on WGN’s sports staff. In addition to Roan, who retired last week after 38 years at the station, an earlier opening was created when Lauren Magiera was not renewed after six years as sports anchor/reporter in April.

“We are excited to welcome Kaitlin Sharkey to the sports team and to have Chris join us officially,” Stasi said in a brief statement.

“Both will be great assets as part of Chicago’s Very Own.” Boden, 59, who grew up in south suburban Burbank and graduated from Luther South High School and Columbia College, has been a solid performer on Chicago TV and radio for nearly four decades, including a long run on the former Comcast SportsNet Chicago (forerunner of NBC Sports Chicago).

Sharkey, 31, a Milwaukee native and graduate of the University of Wisconsin-Milwaukee, joined Fox 32 in 2020 from WITI, the Fox affiliate in Milwaukee.

Earlier she worked for WBAY, the ABC affiliate in Green Bay, Wis., and WSAW, the CBS affiliate in Wausau, Wis. Since she voluntarily stepped

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down from Fox 32 in April, Sharkey has been filling in as a guest host on Audacy sports/talk WSCR 670-AM. *** A rare on-air opening at WXRT 93.1-FM is about to bring a new voice to the full-time weekday lineup at the Audacy adult album alternative station.

Annalisa, a 37-year veteran of rock radio in Boston and San Francisco and self-described “music geek,” will sign on at “Chicago’s Finest Rock” June 13, according to Laura Duncan, brand manager and program director of 93 XRT. Duncan’s email to staff last week did not say what time slot Annalisa would occupy on the station’s schedule. Richard Milne announced last week he was resigning as morning host June 10 to care for his ailing wife, but his bosses have not disclosed plans to replace him yet.

Annalisa most recently hosted afternoons at WXRV in Boston.

“Annalisa brings the knowledge, passion and respect for the music that 93 XRT listeners appreciate and expect,” Duncan said in a statement. “We are thrilled that Annalisa will be joining us as her integrity and relatability are a perfect match with the current team of personalities and the iconic brand that is XRT.” Annalisa Parziale was born in Las Vegas, grew up in Medford, Mass., and graduated from Bridgewater State University. She began her career in 1985 at WAAF in Boston and later became the first woman to host a rock radio morning show in Boston at WZLX. Following a 20-year run as midday host at KFOG in San Francisco, she returned to Boston in 2017 to join WXRV. “Joining the legendary 93 XRT lineup is an absolute dream gig for a music geek like me,” she said in a statement. “I can’t wait to come to Chicago.”

Robert Feder has been covering the media beat in his hometown since 1980. His column is published in Crain’s under an agreement with the Daily Herald.

Cook County Assessor Fritz Kaegi, who campaigned on making his office transparent in part by complying “with all outstanding Freedom of Information Act requests” and making responsiveness “a priority,” has struggled to fulfill that promise.

According to records spanning from early 2020—when Kaegi’s office launched a revamped open records process—to May 2022, Kaegi’s office failed to fulfill 26%, or about 2,800, requests to turn over internal records. It took an average of 53 days to complete a request, according to that data.

Crain’s filed its own FOIA seeking a list of public records requests the office received going back to 2014, in order to compare Kaegi’s record with his predecessor, Joseph Berrios. It took six weeks for Kaegi’s office to respond, well beyond the legally required five days.

Chief Deputy Assessor Sarah Garza Resnick says she has “no faith” that data available from before the 2020 revamp is accurate.

Those records show that Berrios fulfilled nearly all of the 177,000 requests reflected in the log in his last term from 2014 through 2018.

But that data lacks information on whether requests were closed because they were denied or partially fulfilled, as well as dates for when requests were considered complete. Those records also appear to omit media requests entirely, including a period when Berrios was publicly fighting the release of assessment data as part of the blockbuster “Tax Divide” series that helped oust him from office. Kaegi’s team also found nearly 19,000 FOIA-related emails sent to the previous FOIA manager that could contain thousands more requests that “were not included in any official log that we have been able to find,” spokesman Scott Smith says.

Kaegi’s 2018 campaign centered on boosting transparency, including cutting down a backlog of FOIA requests from the Berrios era. Now his Democratic opponent in the June 28 primary, Kari Steele, is seizing on the issue. In a release sent last month, Steele’s camp said they had been waiting several weeks for replies. Among their requests: Information about properties that applied for tax breaks. “Why can’t that be easily shared since he says he’s audited them following recent scandals?”

RELEASING INFORMATION PUBLICLY

Top assessor staff say they’ve prioritized releasing reams of data to make FOIA requests unnecessary, including regularly publishing their visitors log; models for assessing residential properties; valuation reports for various townships and new dashboards on assessment changes, certifica-

ALYCE HENSON

BY A.D. QUIG

Fritz Kaegi tion reports and COVID adjust- spond as quickly to requests as the county’s Board of Review. Smith ments.

“Transparency should not be says he can receive “just in time” measured solely by FOIA, but by notes from BOR analysts that help what an office is willing to release him in the appeals process. publicly. At that, we’ve wildly excelled and will continue to excel at.

TRANSITIONS We’re the only assessor’s office in Smith says the office is getthe country to put this data out there ting closer to that goal. It recently as to how every single assessment is rolled out the new Property Decalculated,” Smith told Crain’s. tails Search, which lets property And they’ve improved on fulfill- tax practitioners easily look up ining FOIAs in recent months, they formation they commonly had to say. In the third quarter of 2021, the file a FOIA for in the past. office said requests took an average But Smith and Garza Resnick of 80 days to fulfill. In the current acknowledge the office’s shortquarter, it’s down to three days. comings, partly blaming the But attorney Michael Elliott, paper-based system that Berrios who represents commercial tax- left behind. Requests for older payers, condo associations and documents are difficult to fulfill, homeowners, says neither Berrios they say, sometimes because they nor Kaegi can claim a stellar record when it ACCORDING TO RECORDS SPANNING comes to records requests. Elliot’s firm, FROM EARLY 2020 TO MAY 2022, Elliott & Associates, has 45 open requests KAEGI’S OFFICE FAILED TO FULFILL 26%, with Kaegi’s office, OR ABOUT 2,800, REQUESTS TO TURN according to the data released.

OVER INTERNAL RECORDS. Notes or details about why assessor staff reach certain valuations are are misplaced within the county helpful in the appeals process but building or off-site at a warehouse are especially hard to come by, El- on the city’s Southwest Side. The liott says. “If you want to FOIA the office is seeking funding to digitize evidence that was submitted in a tax those records. appeal case, maybe you’re trying to COVID made the challenge compare to another property, you more difficult: Staff were rotating never get that. If you want to FOIA in and out of the office and had the notes or documentation the as- to learn how the assessor’s new sessor has that explains how or why integrated property tax system— they made the decision they did, known as iasWorld—worked. The you either don’t ever get it or wait a assessor’s longtime head of FOIA very long time to get it.” also resisted a transition to the reKaegi’s office recently made vamped request system known as some commercial property details GovQA, where the public could file available for buildings in the city and track various requests online, of Chicago.

Garza Resnick said. He was let go Attorney Gary H. Smith, a real six months after being put on a estate lawyer who also leads the performance improvement plan.

Illinois Property Tax Lawyers AsA new interim manager is in the sociation, says he’s similarly dis- process of reaching out to memappointed Kaegi had fallen short bers of the public whose responson transparency promises. He es have been delayed for months. says he’s heard similar complaints Smith suggests anyone who has from colleagues in the appeals not heard back about a FOIA file business. Both he and Elliott had a fresh request to get an answer hoped Kaegi’s office would re- back more promptly.

6/3/22 3:12 PM

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6 JUNE 6, 2022 • CRAIN’S CHICAGO BUSINESS

TECH TAKEAWAY

Tim Egan

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My Irish roots run deep. I might have mentioned that my grandfather volunteered in the original Irish Republican Army during the 1916 uprising, and that I founded the Chicago Irish Brotherhood.

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If these patients aren’t engaged regularly, they drop out of primary care.

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Lowering the skyrocketing rates of maternal fetal morbidity. Expectant mothers in the African American community are dying at higher rates than during slavery. Many don’t have access to prenatal services because they are poor, single and lack transportation. But they all have cellphones.

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Egan, 54, is president and CEO of Roseland Community Hospital on the South Side, which recently became the first U.S. hospital to pilot a patient app developed by Tell Health in Ireland.

Egan and his fiancee live in Bucktown, where he is Second Ward Democratic committeeman. He has four sons, 18, 17 and twins, 11. I By Laura Bianchi

A tech you dream of?

A superdome over the hospital to protect against cyberattacks. They are a constant health care threat. In 2019, attackers froze our system and demanded ransom. Our technicians unfroze it, but we had to rebuild our system at huge expense.

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Were you a big guy?

When I was sophomore at St. Joe’s High School in Westchester, I was 5 feet 5 inches and 85 pounds, playing basketball against guys 6 feet 4 inches who could dunk.

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I played a lot of sports, and that competitive drive helped me get where I am now.

How’d that go?

By the time I graduated St. Joe’s, I was 6-1 and 135 pounds. During two years at community college, I grew 3 more inches and gained 50 more pounds.

>

P006_CCB_20220606.indd 6

>

Chicago Layla.Lumpkin@ ThompsonHine.com

Injuries that tell a story?

Herniated disc. Broken collarbone. I broke my nose six times and all of my knuckles.

Why? Other than college basketball, I played rugby for decades and Chicago-style 16-inch softball. I traveled the world with the Chicago West Side Condors rugby team, from Europe and Australia to South America. There were many years when I was our best patient.

6/3/22 3:00 PM

CRAIN’S CHICAGO BUSINESS • JUNE 6, 2022 7

Old Post Office owner acquires more apartments

BY ALBY GALLUN The owner of the Old Post Office in downtown Chicago has acquired its second suburban apartment property in six months, paying $24 million for a new building in Naperville.

An affiliate of 601W bought Vantage Naperville, a 112-unit building at 1350 E. Ogden Ave., from a venture led by local apartment developer Michael Zaransky. The sale provided a quick cash out for Zaransky, who completed the project in spring 2021 and has more in the works, including one in Buffalo Grove and another in Mundelein.

The deal also underscores the strength of the DuPage County multifamily market—and its popularity with investors. Over the past year, several large apartment properties in the area have changed hands at high prices, including the Views of Naperville and Dwell at Naperville.

Landlords have the upper hand over tenants in the western suburbs, allowing them to hike rents and boost property values.

Vantage is 100% occupied, and apartments there this year are renting for 18% to 19% more than they did during the initial leaseup, Zaransky said.

“There’s just not enough supply for the demand out there,” said Zaransky, founder and managing principal of Northbrook-based MZ Capital Partners. “Rent growth has been amazing.”

He declined to disclose how much the Vantage project cost to build but said, “we sold it for a nice profit.”

BRANCHING OUT

Known in Chicago as an owner of big downtown office buildings like the Old Post Office, the Aon Center and the Civic Opera Building, 601W has taken a liking to suburban apartments more recently. In November, the firm

Home prices hit 11th month of double-digit price gains Values across the metropolitan area rose strongly again in March, despite weakness in the city

BY DENNIS RODKIN The Chicago-area’s streak of double-digit home price increases hit its 11th straight month, according to a prominent national index.

Single-family home values in the Chicago area rose by 13% in March from a year earlier, according to the S&P CoreLogic Case-Shiller Indices released last week.

It was the 11th consecutive report from the index that put Chicago-area home price growth at 10% or more, and the fourth of those when it was 13% or more.

This news does not conflict with Crain’s report in May that Chicago home prices are going down. That report, based on data from Illinois Realtors, was on home prices in the city specifically, while this one is on the metropolitan area. Case-Shiller also lags the Illinois Realtors reports by a month.

Price increases not only here but nationwide were driven in part by short inventory and eagerness to lock in purchases before rising interest rates whittled down buyers’ affordability. Nationwide, home prices were up 20.6% in March, the biggest increase in more than 35 years of the index’s data.

Nationwide, March was the 16th consecutive month with

P007_CCB_20220606.indd 7

double-digit increases.

“Those of us who have been anticipating a deceleration in the growth rate of U.S. home prices will have to wait at least a month longer,” Craig J. Lazzara, managing director at S&P Dow Jones Indices, said in comments that accompanied the data.

“Mortgages are becoming more expensive as the Federal Reserve has begun to ratchet up interest rates,” Lazzara said in the comments, “suggesting that the macroeconomic environment may not support extraordinary home price growth for much longer. Although one can safely predict that price gains will begin to decelerate, the timing of the deceleration is a more difficult call.”

Chicago’s price growth, while vigorous, remained near the bottom for big cities. Of 20 major U.S. cities the index tracks, only two had slower price growth than Chicago in March: Minneapolis (12.4%) and Washington, D.C. (12.9%).

For the past five years, Chicago has consistently ranked at or near the bottom of the 20 cities, which should offer a measure of consolation for potential homebuyers here. Affordability is shrinking much more slowly here than in Tampa, Fla., where home prices were up 34.8% in March, Phoenix (32.4%), Miami (32%) and Dallas (30.7%).

paid $86 million for Buckingham Place, a 267-unit property in northwest suburban Des Plaines.

Including the Naperville acquisition, 601W now owns nine multifamily properties overall, in the Atlanta; Miami; Chicago; Columbus, Ohio; and northern New Jersey markets, according to Real Capital Analytics, a New York-based research firm. The firm, which is based in suburban New York, has acquired most of the properties within the last two years.

601W executives did not respond to requests for comment.

In a stroke of luck, Zaransky scored the construction financing for the Vantage project just before the coronavirus pandemic hit Chicago. The early months of construction were a bit nerve-wracking, but to Zaransky’s relief, the health crisis barely scratched the suburban apartment market. To the chagrin of tenants and the delight of land-

MZ CAPITAL PARTNERS

The $24 million suburban deal underscores the strength of the DuPage County multifamily market—and its popularity with investors

Vantage Naperville, a 112-unit building at 1350 E. Ogden Ave. lords, the suburban market is as strong as it has ever been.

Zaransky marketed the Vantage to tenants who want to live in a high-end property but can’t afford high-end rents. By building small apartments—the average unit is just 459 square feet—he could charge lower rents without sacrificing profitability. The average Vantage apartment rents for about $1,200 per month, or $2.75 per square foot, Zaransky said.

Most tenants are single and many are millennials, with a few seniors mixed in, he said.

“We took a little bit of a leap of faith,” Zaransky said. “If you had

to pick a market to do it in, I’d pick Naperville.”

Now, Zaransky is focused on projects in Tennessee and Buffalo Grove, where he plans to break ground on a 120-unit project by the end of the year. He’s also going through the approval process for a 140-unit development in Mundelein. He doesn’t see any reason to slow down.

“I don’t see any scary stuff on the horizon,” Zaransky said.

Rising construction costs “have been an issue, but, frankly, rent growth has compensated for it.”

Jones Lang LaSalle brokered the sale to 601W.

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8 JUNE 6, 2022 • CRAIN’S CHICAGO BUSINESS

Downers Grove landlord seeks a big cash-out

Despite soft demand for workspace, a 13-story building in the western suburb could trade in one of the highest-priced suburban office deals in years After signing one of the largest suburban office leases since the start of the COVID-19 pandemic, the owner of a Downers Grove office building is looking to sell the property for what could be a hefty profit, despite a challenging time for office landlords.

A joint venture of Denver-based Kore Investments and Toronto-based BentallGreekOak has hired the Chicago office of Cushman & Wakefield to sell the property at 3500 Lacey Road in the western suburb, according to a marketing flyer. There is no asking price listed, but sources familiar with the offering said the 13-story building is expected to fetch bids between $160 million and $170 million.

A sale in that price range would be among the largest suburban office property deals in years, one that would stand out while the rise of remote work hammers demand for workspace and keeps suburban office vacancy at a record high. It would also complete a lucrative flip for the owners less than three years after they paid just less than $129 million for the property, according to DuPage County records.

Kore Principal and CEO Jack Kim said his firm is interested in maintaining a stake in the property even as BentallGreenOak looks to unload it, and that selling the building outright is a possibility but “not in our plans.”

“We’re hoping to continue

what we’re doing, and we’ll have this asset for a long time, ideally,” he said.

The 620,000-square-foot building—also known as Esplanade II—shows the widening gap between the highest- and lowest-quality office buildings in the suburbs. The former group has landed an outsized share of leasing activity during the public health crisis, while the latter has struggled as companies prioritize buildings that will help get employees to show up rather than work from home.

Kore and BentallGreenOak recently proved the resiliency of 3500 Lacey as one of the top suburban performers after their largest tenant, supply chain management company Havi Group, signed a deal to move its headquarters from Downers Grove to the Fulton Market District downtown. Havi executed an option to terminate its lease for 27% of the Downers Grove office building at the end of August 2022, sending Kore on a hunt to backfill the space amid weak demand.

But it didn’t take long. The owners earlier this year signed a 133,077-square-foot lease with Health Care Service Corp. to take almost all of the space Havi is leaving behind. The Blue Cross & Blue Shield of Illinois parent company is moving its suburban office to the building from another Downers Grove property.

With its new anchor tenant locked up on a long-term deal, the 30-year-old building is now

nearly 97% leased, according to the Cushman flyer, or back to where it was when the Kore venture bought the property. The building has 11 tenants today with a weighted average lease term of eight years, a measure of tenants’ remaining lease commitments to the property.

CASH FLOW

The financial terms of HCSC’s deal were not disclosed, but the lease likely maintains or grows the building’s operating profit.

The property generated nearly $8.9 million net cash flow in 2021 compared with $3.9 million in debt service, according to Bloomberg data tied to the owners’ $86 million loan on the property. The mortgage was packaged with other loans and sold off to commercial mortgage-backed securities investors, making much of the building’s finances public.

Kore and BentallGreenOak are in the process of renovating the 3500 Lacey building, which sits on 20 acres next to Morton Arboretum. The owners are spending around $4 million updating the building’s lobby and fitness center, according to the marketing flyer.

The building has a track record of bouncing back from tenant departures dating back to Sara Lee’s 2012 relocation of its Hillshire Brands spinoff from the building to the West Loop. The company had previously occupied 80% of the building, but the property was back to 86% leased just two years

COSTAR GROUP

BY DANNY ECKER

3500 Lacey Road in Downers Grove later, with new tenants including Havi Group, investment manager Invesco and sports nutrition company Glanbia Performance Nutrition.

Kore has demonstrated its confidence in the suburban Chicago office market despite the pandemic headwinds. The firm paid nearly $7 million last year for Rosemont Corporate Center near O’Hare International Airport, a nearly vacant property it is betting it can lease up.

Other investors have made large bets on suburban offices’ post-COVID future. A New York real estate firm paid $190 million in May for the 164-acre Kemper Lakes Business Center in Lake Zurich—the highest price paid for a suburban Chicago office property in 17 years—while another New York investor recently paid $178 million for the Corporate 500 office complex in Deer-

field, best known as Caterpillar’s headquarters. Those deals were the only sales of more than $160 million for multi-tenant suburban office properties in the area in the past five years, according to research firm MSCI Real Assets.

Those sales also closed despite financial hardship for other suburban office landlords that have lost big tenants. The owner of the four-building Oak Brook Office Center recently stopped making monthly payments on its $24 million CMBS loan tied to the property after its largest tenant’s lease expired. And the owner of the Central Park of Lisle complex had its nearly $94 million CMBS loan placed on a delinquency watchlist after its largest tenant shed most of its space, Bloomberg data show.

Cushman brokers Dan Deuter and Paul Lundstedt are marketing 3500 Lacey on behalf of Kore and BentallGreenOak.

A Cook County judge has cleared the way for Illinois to issue 185 licenses to open new marijuana dispensaries

BY JOHN PLETZ A Cook County judge has cleared the way for Illinois to issue 185 licenses to open new marijuana dispensaries.

Judge Michael Mullen agreed to lift a stay that had prevented the Illinois Department of Financial & Professional Regulation from awarding licenses to the winners of three lotteries held last summer.

“I’m happy to see the stay has been lifted and we’re finally able to start moving forward,” said Ambrose Jackson, CEO of the 1937 Group, which won a lottery to open a dispensary in Danville.

“This has been held up for a couple years. It’s in IDFPR’s court as to when they actually issue those licenses.”

The stay was issued last year in a case by applicants who challenged the application process. Those applicants later won lotteries to award dispensary licenses, and the judge who is-

P008_CCB_20220606.indd 8

sued the stay retired.

IDFPR hasn’t set a timeline for when it might issue licenses. It’s also awaiting a ruling on a case in federal court that’s challenging whether a preference for Illinois residents is constitutional. Similar challenges have been upheld in other states, such as Missouri.

The delay in awarding Illinois dispensary licenses has frustrated applicants. The first round of licenses was supposed to be issued two years ago as part of the law that legalized recreational marijuana in the state, but the process dragged out with a cumbersome application process and litigation.

MOVING AHEAD

Jackson, like some other license winners, started to move ahead recently, when it appeared the long legal delays might be coming to an end. He made a purchase offer on a building and signed a contract for site planning to get ahead of the zoning

process. He assumes it will take about five months to get the dispensary opened.

It’s estimated that a store can cost $750,000 to $1.5 million to build and stock with inventory. A successful dispensary can be sold for $3 million to $5 million.

Winners have six months to identify locations for their dispensaries but can seek a 180-day extension. Once their facilities are built out, they can seek final inspections from the state to open the stores and be formally awarded a license.

“Today is a key development towards our ultimate goal of creating the most diverse, inclusive and robust adult use cannabis industry of any state in the country,” IDFPR Secretary Mario Treto said in a statement.“We stand ready to swiftly move forward in ensuring Illinois’ standing as a national leader in the advancement of cannabis equity.”

Nonetheless, the delay in awarding new licenses has been a political headache for Gov. J.B. Pritzker, who campaigned four years ago on legalizing marijuana use, which was one of his

UNSPLASH

Judge ends legal delay in awarding pot shop licenses

The delay in awarding Illinois dispensary licenses has frustrated applicants. early legislative victories.

The Illinois law was hailed as a blueprint for other states in pursuing social equity by crafting rules to diversify a white, male-dominated industry. The aim was to award licenses to social equity applicants, or people from neighborhoods and families that were impacted most by the war on drugs. The delays in issuing those licenses, however, have caused other states to look to

learn from the speed bumps here.

Delays also meant fewer stores, which has hampered the cannabis industry in Illinois. Sales exploded after recreational weed sales began in January 2020, but growth has slowed since because there are just 110 retail locations in the state. Michigan, which legalized recreational cannabis at the same time as Illinois, reported 28% higher sales in April, despite having a smaller population.

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10 JUNE 6, 2022 • CRAIN’S CHICAGO BUSINESS

EDITORIAL

We can’t let this economic engine sputter

JOHN R. BOEHM

W

hile O’Hare International Airport still stands as the Chicago area’s No. 1 economic engine, there are other assets in the running for the crown. The bustling McCormick Place convention center complex is one. Our rail network, linking the heart of the Midwest to both coasts, is another.

One economic powerhouse that too often goes overlooked in the regional conversation, however, is Ford’s gigantic manufacturing facility at Torrence Avenue on Chicago’s Far South Side, where the Detroit-based automotive giant builds gasoline-powered Explorers and Aviator SUVs. The largest manufacturer in the city, Torrence Avenue provides about 6,500 jobs at the assembly facility and nearby stamping plant, plus 1,500 to 2,000 at an adjacent supplier park. There is simply no other business generating economic activity of that scope elsewhere on the South Side.

So maintaining this economic asset is key to any effort to revitalize the southern edge of the Chicago area, a region hit hard by disinvestment, a significant loss of manufacturing jobs and a property tax system that has put an outsize burden on local homeowners.

That’s why Crain’s took notice when, earlier this year, signs emerged that Ford would likely manufacture the first generation of electric Explorers at its factory in Oakville, Ontario—not at Torrence Avenue. As Crain’s contributor Judith Crown reported May 25, that plan throws into question the future of the nearly 100-yearold Torrence Avenue complex, and also casts doubt on Gov. J.B. Pritzker’s vision to make Illinois a hub for EV production.

With Ford expecting half of its vehicles to be electric by 2030, the likelihood that Torrence Avenue won’t be retrofitted for the coming EV age is worrying. When Crain’s approached Chicago’s economic development arm, World Business Chicago, for comment on that possibility back in May, the organization was mum. The governor’s office didn’t respond. And a Ford spokesperson said the company wouldn’t “comment on speculation.”

Now comes word, via a June 2 announcement, that Ford is investing $3.7 billion in factories across three Midwest-

ern states to pump out more electric vehicles as well as some traditional gas-powered ones, a sweeping expansion that will create 6,200 jobs—but, apparently, not at Torrence Avenue.

Five Ford plants will be expanded to produce hot-sellers such as the electric F-150 Lightning pickup and to roll out new models, including a battery-powered commercial vehicle to be built at the automaker’s factory in Avon Lake, Ontario.

More than half of the new investment dollars will go to Ford’s home state of Michigan, where the company expects to create

3,200 jobs. Ohio will get 1,800 new positions through a $1.5 billion investment, while $95 million will go toward the Kansas City Assembly Plant in Missouri.

The latest investments come after Ford announced last fall that it would spend $7 billion to build a vast EV complex in Tennessee, dubbed Blue Oval City, and two battery plants in Kentucky, employing a total of 11,000 workers.

So we’re getting past the “speculation” stage and headed toward a scenario in which Torrence Avenue might be bypassed in the race to this nation’s EV-powered future. That’s an outcome that should be avoidable. With plenty of next-generation alternative-energy know-how in the form of the downstate Rivian factory, the coming Lion Electric plant, our federal lab specialists at Argonne and Fermi, engineering R&D standouts like the University of Illinois and Illinois Tech, a deep well of specialized manufacturing talent, and unmatched logistical connections, Illinois should be as well positioned as any state in the nation to win investment in electric vehicle production.

This state simply cannot afford to allow Torrence Avenue to be passed over for new investment. The Pritzker and Lightfoot administrations should be turning on the afterburners to win Ford over and convince the company that Chicago is the right place to manufacture electric versions of its iconic Explorer line. If this is anything near the priority that it ought to be to the city and state’s economic development execs, they’re certainly holding their cards close to their vests.

What’s the plan to keep Torrence Avenue relevant for the coming EV age? Every Chicagoan has a stake in the answer.

Ken Griffin should aim higher than holding office

C

pelling, nearly perfect message, because it appealed so broadly: “We oppose the extension of slavery into the North.” It wasn’t all that abolitionists wanted, but it was powerful. And for the working stiffs, the message resonated, because it said, implicitly: “We want to keep slaves from taking your jobs up here.”

The early Republican Party, whose message spread like wildfire from 1854 until Lincoln’s election in 1860, was not a national party. Lincoln didn’t even appear on the ballot in the Southern states.

Lincoln won the White House with just 39% of the popular vote.

LESSONS

There are a couple of lessons to take away from our one illustration of a third party that became one of the two major parties. First, a party doesn’t spring fullblown, and immediately, into a successful national party. It took Lincoln’s party four

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.

P010-P011_CCB_20220606.indd 10

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YOUR VIEW

have been three critical, muturain’s reported recently ally reinforcing components of that Chicago billionaire success in politics: Credibility, and campaign Daddy visibility and political party orWarbucks Ken Griffin might ganization support. But in the someday run for office (“Citipast half-century, party orgazen Ken: What kind of politinizations have withered, recian would Illinois’ richest man placed by an even more powmake?” April 25). Griffin should erful component: Money. think bigger than that, by startAs the richest man in Illinois, ing a new political party in Ilwith a net worth of $29.7 billion linois, then go national. Here’s Jim Nowlan is a and change, Griffin has, obvihow and why. former Illinois ously, the money, plus growing Even big thinkers shy away legislator, state visibility and credibility, at least from the idea of starting a new agency director for business success. political party in the U.S., for and professor.

A fourth, underappreciated obvious but misleading reasons. First, the only time a new party component is message. Lack a compelhas supplanted a major party was in the ling message and you’ll never make it.

1850s, when the Republicans pushed Most successful people new to politics aside the Whig Party. Second, new par- think being successful is enough credenties fail to win offices, so the public falls tial, but that is not enough to build on.

In the 1850s, Abraham Lincoln and away. Voters want to back a winner.

Throughout American history, there the new Republican Party had a com-

Presi Grou

election cycles. Second, you don’t start a national party. Political parties in America are state-level creations. The Republicans started in Wisconsin, then Michigan, then Illinois and the Northeast.

I think the time is riper than ever for a new party. Republicans are for guns, against abortion and tied to Donald Trump, a potent yet fading star; this is not enough to sustain a major political party. Democrats long ago lost the white working-class voter, and the party’s liberal leadership is in the process of losing whatever appeal they might have in suburbia, where the future of parties will be determined.

But what message? This can’t emerge from focus groups or from the bottom up. The message has to be from the top down, passionate, messianic. It has to engender both fear and hope.

I believe the message has to be about education, writ large. But everybody’s

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.

6/3/22 3:32 PM

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CRAIN’S CHICAGO BUSINESS • JUNE 6, 2022 11

YOUR VIEW Continued for education, you say? What makes that a grabber? Well, the American public education system stinks overall in international comparisons, and Griffin must know that. A mediocre education system won’t cut it in our global fist fight for technological leadership, with China, South Korea and Taiwan surging toward the top in education. With 1.4 billion people, China has more top honor students than America has students.

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BROAD NEEDS

Middle-class suburbanites vaguely appreciate this. Their schools are better overall than those in the city and rural expanses, but they sense that all schools need to be better, that bottom dwellers

Ken Griffin

must be brought up as well.

We need better teachers, which will be costly; more competition, via things such as charter schools; and aroused parents across the nation who will step up to tutor their kids, set high expectations and help the youngsters achieve those goals.

This new Education for All Party could start by backing some congressional and state legislative candidates in the suburbs. With three parties vying for seats, a new party—with money—can win some elections with 35% to 40% of the vote and grow. All it takes is credibility, visibility, money and a compelling message.

It won’t be easy, but it’s doable, and it’s worth the commitment.

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SDI Presence LLC, Chicago

Sora Monachino joins Victory Park Capital as Principal to lead investor relations. She is responsible for marketing and communications for the firm and is actively involved in sourcing and fundraising for VPC funds. Previously, Monachino was vice president of investor relations at Pomona Capital, a private equity secondaries firm in New York. Prior to Pomona Capital, she was an assistant vice president at Monroe Capital and held various investor relations roles at Mesirow Financial.

Sally Venverloh has joined J.P. Morgan Private Bank as a Managing Director and Wealth Advisor in Chicago. Sally advises highly affluent individuals and business owners in exploring strategic wealth planning opportunities. She has an approachable style and the ability to discuss complex concepts in understandable terms when presenting tailored and tax efficient strategies for her client’s goals. Sally joins the firm from Bank of America Private Bank.

World Business Chicago, the city’s public-private economic development agency, named Hardik Bhatt, President & Chief Growth Officer, SDI Presence LLC, to its board of directors. World Business Chicago leads business acquisition, workforce and talent, community impact and equity, support of the business community, and promotion of Chicago as a leading global city.

BANKING Capital One, Chicago Capital One welcomes Malik Hashwani as Vice President and Senior Business Banker in Chicago, where he will leverage two decades of business banking experience to help clients achieve their financial goals through personalized cash management solutions such as, Treasury Management, Escrow Services, HOA Lending and other Commercial Lending Solutions. Malik was previously at BMO Harris Bank, Bank of America and JPMorgan Chase.

He lives just outside of Chicago with his wife, four children and dog.

LAW Golan Christie Taglia LLP, Chicago Matt Showel joins GCT as a partner in the firm’s Commercial & Business Litigation group. Matt represents companies and individuals in state and federal courts, arbitration and government investigations in areas including contracts, trade secrets, data privacy, partnership disputes, labor and employment, construction, regulatory, securities and fiduciary matters. Matt has tried several cases to jury verdicts and numerous arbitrations before tribunals such as JAMS, FINRA, the CME, CBOT, and CBOE.

FINANCIAL SERVICES J.P. Morgan Private Bank, Chicago

BANKING First Bank Chicago, Westchester First Bank Chicago, a Division of First Bank of Highland Park, is pleased to welcome Ann Vogt to our team as VP, Treasury Management Advisor. Based in our Westchester office, she is responsible for supporting our expansion strategy in the Chicago market by working with commercial & public funds clients, helping them mitigate fraud and enhancing relationships while delivering a full suite of Treasury Management banking solutions. Ann brings 25+ years of banking expertise & comes from Byline Bank.

BANKING / FINANCE Wintrust, Rosemont Wintrust Financial Corp., a financial services holding company based in Rosemont, with 175 locations across Illinois, Wisconsin, and Canada, is pleased to announce Harris two promotions.

Michael Harris has been promoted to President of Beverly Bank & Trust, N.A. Michael joined Wintrust in 2019.

Doug Boersma has been promoted to Chief Executive Officer at Boersma Wintrust Bank, N.A. He joined the company in 2011.

P012_CCB_20220606_v2.indd 1

FINANCIAL SERVICES Hilco Global, Northbrook Hilco Global is pleased to announce that Heather Morgan has joined as Director of Capital Solutions.

Ms. Morgan will be responsible for originating corporate finance and capital markets transactions for Hilco Global, with a focus on the commercial and industrial sector.

Ms. Morgan brings almost 20 years business development experience in her tenure of her professional career.

GENERAL CONTRACTING D/R Services Unlimited, Inc., Glenview Ron Cowgill, NARI Master Certified Remodeler, MCKBR, UDCP, Green Certified Professional, celebrates 30 years in business as president of D/R Services Unlimited, Inc. Started as a side job, Cowgill quickly grew the business in reputation and clients and now handles close to 300 jobs a year throughout Chicago’s North Shore. While major remodel projects drive the business, the team also helps get the smaller projects done, like changing lightbulbs, cleaning gutters, and rotating mattresses.

Jacob Fox has joined J.P. Morgan Private Bank in Chicago as an Executive Director and Investment Specialist.

Jacob serves some of the most successful individuals and families in the Greater Midwest area. He views his role as an outsourced CIO to help navigate the uncertainty of financial choices. He brings a comprehensive outlook to oversee complex balance sheets so that his clients may focus on their top priorities. Most recently, Jacob was with Deutsche Bank.

INSURANCE CS Insurance Strategies, Chicago World Business Chicago, the city’s public-private economic development agency, named Charles E. Smith, Chief Executive Officer, CS Insurance Strategies, to its board of directors. World Business Chicago leads business acquisition, workforce and talent, community impact and equity, support of the business community, and promotion of Chicago as a leading global city.

FINANCIAL SERVICES J.P. Morgan Private Bank, Chicago Laura Hearn has joined J.P. Morgan Private Bank as an Executive Director and Banker in Chicago. Laura works with affluent individuals and families who seek trusted guidance to help grow and preserve their wealth. She is skilled at anticipating clients’ needs, and has built a reputation for empathy and seasoned counsel. She remains passionate about being a good role model for women’s progress, especially in the wealth management field. Most recently, Laura joins us from RMB Capital Management.

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

LAW Levenfeld Pearlstein, LLC, Chicago LP is pleased to announce Maribeth Berlin has joined the firm as a partner in our Trusts & Estates group. She brings experience in high-net worth and ultra-high-net worth estate and tax planning matters, developing custom comprehensive plans to protect and transfer wealth. Maribeth represents fiduciaries and beneficiaries in estate administration, including contested estate litigation involving issues such as undue influence, lack of capacity and breach of fiduciary duty.

LAW Croke Fairchild Morgan & Beres, Chicago Croke Fairchild Morgan & Beres welcomes Elise Kreiling to the firm as a paralegal and executive assistant. Elise previous worked at Lindemann Miller LLP, where she Kreiling assisted the firm in insurance coverage litigation surrounding Monsanto and Opioid distributor lawsuits.

The firm also welcomes Mia Malan as a billing specialist, supporting attorneys throughout the billing and invoicing Malan process.

PHILANTHROPY American Cancer Society, Chicago The American Cancer Society welcomes Jessica Smith to the North Central Region as our new Philanthropy Director in Chicago.

Jessica will be working to maximize and grow philanthropic relationships in the Chicagoland market as we grow our major gifts program. Jessica’s tenure within ACS started in 2005 when she served as an integral member of the Patient Navigation Services program launch and was the ACS liaison to multiple “Commission on Cancer” accredited hospital systems in Chicago.

6/1/22 8:17 AM

CRAIN’S CHICAGO BUSINESS • JUNE 6, 2022 13

EXECUTIVES OF COLOR IN MANUFACTURING People of color account for nearly 25% of the manufacturing workforce. Given the rich diversity of the Chicago area and the importance of manufacturing to the economy, that percentage needs to grow, and the senior executives profiled here are working to do just that. They’re teaming with nonprofits that arrange apprenticeships for underrepresented minorities, heading employee resource groups for people of color at their organizations, hiring more people of color and inspiring more young professionals by their very presence in a corner office. All this is in addition to their day jobs, which involve playing key roles at Chicago-area firms that make everything from candy to electronics to microphones to custom stone.

By Lisa Bertagnoli 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 be in a senior role and self-identify as being part of a racial or ethnic minority. They must use their skills to advance their organization or the manufacturing field, advance minority professionals at their company, promote inclusive practices and assume leadership positions outside of their companies.

P013-P015_CCB_20220606.indd 13

TOLA ALADE-LAMBO

MOHAMMAD AZIM

RONALD DAMPER

Vice president—food safety, quality & regulatory Ferrara

Chief operating officer Azumo

President/CEO Damron

Tola Alade-Lambo manages compliance, food safety, consumer affairs, supply-chain quality and regulatory functions at Ferrara for the United States and Mexico. She also focuses on process improvement, standardization and maintaining requirements for a facility organization of 4,000 employees. In 2021, she directed a cross-functional project to ensure bioengineering compliance for more than 500 Ferrara products, reviewing 2,000-plus ingredients and raw materials, along with packaging and graphic changes. Alade-Lambo has held positions in the United States, Switzerland, the United Kingdom, South Africa and the Philippines. She was also Ferrara’s first-ever female plant manager overseeing all functions at the manufacturing site in Itasca. She volunteers with Lumity, a nonprofit supporting STEM education, and is on the board of the IQRA Foundation, a nonprofit working with adolescents across West Africa.

Mohammad Azim is responsible for all operational elements of Azumo’s business, including a global supply chain that spans Asia, Mexico and the United States; teams in both Chicago and Shanghai; and a growing list of contract manufacturing partners.

With more than 30 years of specialty film converting experience, he oversaw the design and installation of Azumo’s new production line for tablet LCD products during the challenges of COVID, secured a global partnership with the world’s largest electronics manufacturer and delivered first-quarter 2022 revenues that exceeded all of 2021’s. An advocate for hiring underrepresented groups in technical positions, Azim is president of the Wood Dale Foundation for Educational Excellence, an advisory board member of Wakefield Biochar and a member of the local Chicago COO Forum.

Ronald Damper oversees all areas of the company; he’s recently focused on furthering diversity, equity and inclusion initiatives through Damron’s Global Inclusive Innovation Group, which interfaces with its major customer, McDonald’s. He’s been a mentor in the manufacturing arena for African American and other disenfranchised groups, working with the Safer Cities program through the United Nations, designed to reduce crime by increasing employment, educational, financial, and health and wellness opportunities. Recent projects led by Damron’s senior management team (which is 83% African American and 67% women-led) include the installation of two tea-packaging machines (increasing production efficiency by 50%), the installation of an automated case erector and incline conveyor, and the buildout of approximate 800 square feet for production and warehousing. Prior to founding Damron, Damper held posts at GE Capital, Bankers Trust and Citicorp.

6/3/22 2:52 PM

14 JUNE 6, 2022 • CRAIN’S CHICAGO BUSINESS

NOTABLE 2022 EXECUTIVES OF COLOR IN MANUFACTURING SANDYA DANDAMUDI

JESSICA ASHLEY GARMON

MANAS MEHANDRU

N’GAI MERRILL

MA

President GI Stone

Chief operating officer and chief general counsel The Will Group

Chief operating officer mHUB

Chief operating officer Triangle Package Machinery

Manas Mehandru oversees the financial and facility operations of mHUB, a 63,000-square foot, hardtech innovation center that houses nearly 1,000 members manufacturing products. He sits on mHUB’s leadership team and is involved in securing grant opportunities, including $2.78 million from the U.S. Economic Development Administration and a group award of more than $1 million from the Department of Energy. In March, Mehandru led a strategic team to construct a $189 million initiative for the Build Back Better Regional Challenge, shepherding 19 organizations through the financial modeling process to build a CleanTech Economy Coalition in Illinois. He holds an MBA from the University of Chicago Booth School of Business and a Bachelor of Science in electrical engineering from Purdue and is a Leadership Greater Chicago Fellow.

N’Gai Merrill designs and implements Triangle’s strategic business plan and oversees day-to-day operations, including finance, management information systems, sales, marketing, human resources and engineering. Over the past two years, Triangle has achieved a 25% increase in revenues and a 60% increase in EBITDA (earnings before interest, taxes, depreciation and amortization.) Merrill helped increase operational capacity, improved inventory management processes, instituted Gemba walks (a lean management technique where managers walk production floors to better understand how workplaces actually work) and implemented town hall meetings with employees. Since joining Triangle, the percentage of minorities hired is 50%. Merrill is a member of the Association for Packaging & Processing Technologies and is active in the local and national efforts of the Jackie Robinson Foundation.

Vice safet Ingre

Sandya Dandamudi is responsible for the overall operations of GI Stone, which supplies, fabricates and installs custom stone for clients nationwide.

Recent projects include Tribune Tower Residences, One Chicago, Cirrus Condominiums and Nobu Hotel Chicago.

For the Four Seasons Hotel Chicago renovation, GI Stone sourced 20,000 square feet of stone from Spain, Italy, Pakistan, Turkey and Brazil. During the pandemic, Dandamudi invested in new machinery and training so that none of GI Stone’s projects encountered material supply problems. Currently, Dandamudi is working with St. Paul Church of God in Christ Community Development Ministries’ three-month pre-apprentice program to help historically underrepresented minorities enter the trades. In 2021, Dandamudi was named vice chair on the board of trustees for the DuSable Museum of African American History.

MANUFACTURING MANAGER DEMOGRAPHICS AND STATISTICS IN THE U.S. Source: Zippia.com

Jessica Ashley Garmon is COO of The Will Group, which manufactures and distributes energy-efficient lighting and electrical products, and president of Industrial Electric Supply.

Her recent initiatives at The Will Group, where Black and Brown employees comprise 70% of the workforce, include spearheading a $20 million expansion in Chicago’s North Lawndale neighborhood and running a program to help ex-offenders return to work.

Her philanthropic efforts include serving on the board of Tuskegee Next, which encourages the next generation of Black and Brown pilots, as well as with Purpose by Design, a mentoring program for teens in under-resourced communities. She is on the boards of the Illinois Manufacturers’ Association, the DuPage Housing Authority, Wheaton Bank & Trust, and the William & Mary Davis Foundation.

Manufacturing managers in the U.S.

94,150

Average age

Average annual salary

48.3

$104,985

G M F

2022

EXECUTIVES IN HR AND DIVERSITY, EQUITY AND INCLUSION Crain’s 2022 Notable Executives in HR and Diversity, Equity and Inclusion will recognize accomplished human resources executives in the Chicago area for their ability to effect change in promoting diversity & inclusion.

NOMINATE NOW! Deadline is Friday, June 17 Nominate at

ChicagoBusiness.com/NotableHR-Diversity

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supp resul 48% man 40 pl of In busin can on’s tabli insti and State and ucat arsh and

6/3/22 2:52 PM

signs ngle’s and operance, ation ting, engitwo rease TDA ation rease ntory mba here etter work) with perrill is ng & n the Rob-

CRAIN’S CHICAGO BUSINESS • JUNE 6, 2022 15

MARCUS PAYNE

JOHN PEÑA

ALTHEA RICKETTS

Vice president, global environment, health, safety and security Ingredion

President and general manager New Star Lighting

Associate vice president, corporate initiatives Shure

Under John Peña’s leadership, New Star Lighting (a division of 555 International) has become positioned as the No. 1 manufacturer in the LED lighting industry through consistent year-over-year revenue and net earnings growth. He has tripled the workforce and doubled the number of women working at New Star, which is known for manufacturing luminaires in hospitals, airports and laboratories. Peña also focuses on hiring locally and has developed a workforce that’s represented by the surrounding communities of McKinley Park, Brighton Park, Back of the Yards, Little Village and Lawndale. In addition to a Ph.D. in applied mathematics from Stanford University, Peña received an MBA in international business from Emory University and a Bachelor of Science in industrial engineering & mechanical from the University of Illinois Chicago.

Althea Ricketts oversees the company’s diversity and inclusion program, called Idea. Her responsibilities include identifying, structuring and managing a team of associates that develop mission statements, rules of engagement, and content for internal communications and external marketing. Under her leadership, Shure (one of the world’s largest audio-technology companies) has embarked on an aggressive program to develop specific task forces, called “Vibes,” that are dedicated to three key elements: WE Vibe (Women Everywhere), Pride Vibe (celebrating LGBTQ+) and Cultural Diversity Vibe (focused on global efforts). In her new role, she manages activities, such as Pride events, the Asian American Pacific Islander Summit, Women in STEM and the Lola M. Parker Foundation. In her 30 years with Shure, Ricketts has worked in international sales, strategic planning, global marketing and operations.

Marcus Payne leads Ingredion’s performance in areas that include safety, environmental controls and security for its 12,000 global employees. He leads a cross-functional pandemic team that manages impacts across its global supply chain; implemented breakthrough results in process-safety metrics (improving 48% year over year) and applied best-in-class manufacturing processes across more than 40 plant locations. He is an executive sponsor of Ingredion’s Alliance of Black Employees, a business-resource group for African American employees, and also co-chairs Ingredion’s Global DEI Council. Payne helped established partnerships with largely minority institutions, such as Chicago State University and North Carolina Agricultural & Technical State University. He is a founding member and current board chairman of the Ideal Education Foundation, which awards scholarships to high-achieving black high school and college students in the Chicago area.

MANUFACTURING MANAGER WAGE GAPS Asian manufacturing managers have the highest average salary compared to other ethnicities. Hispanic or Latino managers have the lowest average salary at $91,821. $104,000 $101,000 $98,000 $95,000 $92,000 $89,000

Unknown White Black

Asian Hispanic or Latino

MANUFACTURING MANAGER EDUCATION LEVELS High school diploma 3%

Bachelor’s 67%

Other 3% Master’s12%

Associate 15%

Gender Male - 89% Female - 11%

P013-P015_CCB_20220606.indd 15

Race White - 75.2% People of color or unknown - 24.8%

Most common degree Bachelor’s - 67% Associate - 15%

Source: Zippia.com

6/3/22 3:07 PM

16 JUNE 6, 2022 • CRAIN’S CHICAGO BUSINESS

Highest-priced condos and crime are neighbors One Chicago is selling at a record price per square foot. The new tower is also kitty-corner from the spot where nine people were shot, two fatally, last month.

“We’re obviously disappointed, and we’ve been diligent” in working with the Chicago Police Department. “It’s on every street. It’s a city issue. It’s an every city issue.”

Crain’s reported recently that crime and the fear of it have been the biggest factor in holding down prices and the number of sales in most of the downtown condo markets. The One Chicago units went under contract to their eventual buyers long before the shooting outside the McDonald’s, but buyers can cancel contracts.

APARTMENTS AND AMENITIES

The 75-story One Chicago has 77 condos on its upper 30 floors. Below them and in a second tower on the site are 735 rental apartments. Letchinger said the rentals on floors below the condos are about 40% leased and those in the other 49-story tower are 90% leased.

The podium that holds the two towers contains a Whole Foods store, a Lifetime Fitness gym and a Philz Coffee, with two restaurant tenants in the works, Letchinger said.

“The appeal is the amenities like Whole Foods and Lifetime, and the fresh edge of the de-

JAMESON SOTHEBY’S INTERNATIONAL REALTY

Tribune Tower on Michigan Avenue because the developer The first five condos at the discloses little information on 75-story One Chicago building square footage. But in October, have been delivered to buyers, the Tribune Tower’s sales agent setting a benchmark for new said sale prices were averaging condo prices. That’s despite the about $1,050 per foot.

Both of One Chicago’s comnew tower being a neighbor of a notorious, recent violent crime petitors have sold individual condos at higher dollar episode.

The sales, at prices ranging amounts. At St. Regis, two units from about $2.29 million to have sold at $8 million or more, $6.1 million, averaged out to and at the Tribune Tower, one.

Price per square foot is a mea$1,366.20 per square foot.

If that average persists, the sure of a building’s overall prictower will be selling at the ing.

The highest-priced delivery highest prices per square foot among the trio of new condo so far at One Chicago—$6.1 towers. Jim Letchinger, princi- million—is a three-bedroom, pal of One Chicago developer 3,700-square-footer on the towJDL, said the average will go up er’s 56th floor. Considered on as he delivers more of the larger, its own, the price per square foot is $1,647.

One Chicago is “(CRIME IS) ON EVERY STREET. IT’S A landing benchmark CITY ISSUE. IT’S AN EVERY CITY ISSUE.” prices, despite being kitty-corner Jim Letchinger, principal, JDL from the McDonald’s at Chicago Anenue and State Street where showier units on higher floors.

Sales at the St. Regis in Lake- two people were killed and sevshore East are averaging about en wounded in a mass shooting $1,034 a square foot, according in May and near other unruly reto Crain’s calculations based on cent incidents.

“It was isolated to their lothe developer’s closings posted on real estate sites. Sales cation and didn’t impact our are hard to calculate at the building,” Letchinger said.

BY DENNIS RODKIN

The 75-story One Chicago tower has 77 condos on its upper 30 floors. Below them and in a second tower on the site are 735 rental apartments. sign,” said Jeannette Pawula, a Compass agent whose client on May 31 paid a little under $2.29 million for a 2,060-square-foot two-bedroom on the 47th floor.

Pawula declined to identify the buyer, who is not yet named in public records, but said he was moving from a 20-year-old condo tower nearby and “wanted to trade to the new building with the amenities and views.”

Of the 77 condos, four closed May 31 and 17 are marked as pending sales on real estate sites. Letchinger said there are

more than 17 under contract, including at least two that he and his son, Joey, will buy and move into. Nancy Tassone, the Jameson Sotheby’s International Realty agent who is leading sales, was not available to provide a more precise number of contracts.

The highest-priced unit under contract is in the $5 million range, Letchinger said. The $28 million, two-story penthouse and a few full-floor units in the $10 million range have not yet attracted buyers, he confirmed.

O’Hare overhaul progresses, but it will take longer ect. Construction has yet to begin on the new terminals, and The start of the $8.5 billion the design is not finished.

The FAA issued a draft enviterminal overhaul at O’Hare International Airport is inching ronmental assessment of the closer, with no significant red project, which will replace the flags raised in a preliminary re- airport’s oldest passenger faview of the project by the Fed- cility, Terminal 2, and add two satellite terminals. The FAA will eral Aviation Administration.

But the project is going to take comments on the report take longer to complete than through July 18 and issue a fiairport officials were anticipat- nal environmental assessment ing when the expansion plan sometime afterward.

If the agency finds no new iswas approved four years ago.

The project was expected to sues, the city can move ahead finish in 2028, but that will be toward final design and engineering plans for the terminals and “THE DATE FOR PROGRAM COMPLETION begin construction on related WILL CONTINUE TO FLUCTUATE.” elements to prepare for the new Chicago Department of Aviation facilities, which include a new delayed until 2030, according employee parking facility and to an FAA document issued underground tunnel connecting June 2. Aviation Commissioner terminals. The airport is close Jamie Rhee had maintained the to wrapping up an expansion of 2028 date but didn’t rule out Terminal 5, which is necessary before Terminal 2 can be demolthe possibility of a delay.

The delay in the completion ished.

“The public release of the draft date isn’t a surprise, given the pandemic’s devastating impact Environmental Assessment for on aviation and the amount of the Terminal Area Plan and Air time that it’s taken for the en- Traffic Actions represents an imvironmental review of the proj- portant step in the Federal Avi-

BY JOHN PLETZ

P016_CCB_20220606.indd 16

ation Administration’s ongoing review of the next major projects planned as part of the O’Hare 21 initiative,” the Department of Aviation said in a statement.

The terminal project, which follows a massive expansion of O’Hare’s runways that was just completed, was approved by the city four years ago. It was expected to be completed in 2028, but the project is only about 10% designed.

EXPANSION OPPORTUNITIES

The replacement of Terminal 2 would allow incoming international passengers flying on United and American airlines— the airport’s two largest carriers—to arrive at their terminals, rather than shuttling across the airport from Terminal 5. The project also would increase the amount of gate space by about 25%, which would allow existing airlines to grow and provide opportunities for new carriers to serve the airport.

Environmental reviews are a crucial step in airport construction projects. The FAA found no major environmental impacts of the proposed plan.

“In general, these improvements are needed at O’Hare to provide adequate terminal, gate, and apron areas and to efficiently accommodate the existing and projected demand

BLOOMBERG

The project to replace Terminal 2 and add two new satellite terminals still awaits final FAA approval

The project would allow incoming international passengers flying on United and American airlines to arrive at their terminals, rather than shuttling across the airport from Terminal 5. for originating and connecting hub operations and passengers,” the FAA said in its draft. It also said the expansion plan put forth by the city was better than any alternative proposals.

The agency did say that 227 residences near the airport will be affected by noise, but nearly all of them have been insulated to reduce sound to “an impact that is considered less than significant.” The report also addressed architectural concerns about the impact on United’s Terminal 1, which was designed by the late architect Helmut Jahn and eligible for the National Register of Histor-

ic Places. The Illinois State Historic Preservation Office will review designs before completion to make sure there isn’t an adverse impact on Terminal 1.

The terminal expansion consists of “nearly 100 separate projects that must be coordinated alongside each other and in consultation with federal and airline partners,” the Department of Aviation said.

“The date for program completion will continue to fluctuate based off each of these complex factors. What’s important to remember is that aspects of O’Hare 21 will continue to open in phases over the next decade.”

6/3/22 2:48 PM

SPONSORED CONTENT

WEALTH MANAGEMENT

A LOOK INSIDE ESTATE PLANNING STRATEGIES AND OUTLOOK One of the greatest wealth transfers in history is underway in the United States. And estate planning has become more critical and complex than ever with a need to balance tax strategies with family dynamics. Three local wealth management experts shared their thoughts on wealth transfer strategies with Crain’s Content Studio.

What are some trends you’re seeing in intergenerational wealth management?

Carolynn Pfaff: One longerterm trend is to consider how much wealth is appropriate to leave to the next generation versus giving excess assets to charity. It used to be more common to leave as much as possible to children. Another trend is considering how much control children — including adult children — should have to inherited assets and at what age. Yet another is to think about including a corporate trustee to ensure trust assets are accounted for, invested appropriately, and distribution provisions are properly implemented.

And for charitable purposes, donor advised funds (DAFs) are being used more frequently than private foundations.

Frank Paolini: In recent years, we’ve seen our clients make a significant shift toward impact investing and legacy planning over traditional “estate planning” that is simply aimed at achieving tax objectives. Instead of leaving descendants a pile of money, many clients have opted to create trusts that incentivize beneficiaries to advance certain charitable causes, or achieve certain life goals, in order to be eligible to receive distributions. These approaches are less about leaving an inheritance and more about making an impact of lasting importance, which can maintain positive family dynamics while also benefitting society.

future generations in the planning has become more commonplace.

What should parents consider when determining how to involve their children in intergenerational wealth planning discussions? What kind of information is good to share and at what age?

Paolini: Parents shouldn’t assume that all their children are equally capable of managing their inheritances, and they shouldn’t feel compelled to treat their children in exactly the same manner in their estate plans. It’s very common for each child in a family to have different needs. Moreover, each child will bring different financial skills and acumen to the table.

This means that parents should consider creating separate wealth transfer strategies that are tailored to their children individually.

Additionally, parents shouldn’t be afraid to have their estate planner discuss their plans directly with their children, especially if the plan includes disparate treatment of their children. It’s almost always better to head issues off while the parents are alive so that conflict among the children can be avoided.

Good estate planners have tools that allow them to diplomatically and effectively help beneficiaries avoid potentially uncomfortable situations.

ALEX BIGELOW

Market Director Baird ABigelow@rwbaird.com 312-578-2758

maturity, involvement and interest levels.

Pfaff: Very early on, when children are little, conversations about how to budget, spend, save, hold back funds for gifts, and even for charity, can be helpful to provide a base that will later be built upon. As children become adults, if a family’s estate

CAROLYNN PFAFF

FRANK PAOLINI

Regional Director, U.S. Wealth Planning Strategy BMO Private Bank carolynn.pfaff@bmo.com 312-758-4456

plan is complex, it’s helpful to begin to include the children in discussions so they have a chance to gain a comfort level with the professionals they will one day likely work with.

Generally, it’s best to save specific information regarding the amount of money until a bit later. Once adult children begin to have children of their own, it’s very helpful for the

Partner, Private Wealth Practice Group Neal, Gerber & Eisenberg LLP fpaolini@nge.com 312-269-8071

now grandparent generation to begin to share more information with their adult children. I have seen situations where adult children are forgoing a family vacation with young children in order to accomplish goals such as saving for their children’s college education, when I know that the grandparents already have a plan in place to cover those costs.

Discover the power in partnership

Bigelow: Parents don’t have to share all aspects of their estate plan at once. Instead, they can do so in stages. Most notably, they might

“A LEGACY IS A STORY — BOTH THE STORY OF HOW THE INHERITANCE CAME TO BE AND HOW THE INHERITANCE SHOULD BE MANAGED, USED AND PRESERVED.” —ALEX BIGELOW, BAIRD

Alex Bigelow: Primarily, the increase in involvement of multiple generations, or the proliferation of family meetings. Given the historically high estate-tax exemption and the fact that fewer families are staring at an estate tax, the trend in estate planning is a shift from quantitative issues to qualitative issues. While protective trusts for future generations continue to be a focal point, the involvement of the

P017_019_CCB_20220606.indd 17

consider conversations about their experiences, their personal values, and their objectives without having to bring up specific holdings and dollar values. Of course, where there are illiquid assets like the residence, the vacation home, the family business, etc., it may be helpful to pay specific attention to those assets and invite discussion about how those pieces fit.

When to cover all of this depends less on children’s ages and more on their

One person alone can have an enormous impact on her community. But when passionate people – with diverse backgrounds, experiences and perspectives – work together, there’s no limit to what we can accomplish.

Learn more about Baird’s commitment to helping women achieve their personal financial and professional goals at WomenAtBaird.com.

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©2022 Robert W. Baird & Co. Incorporated. Member SIPC. MC-876700.

5/31/22 4:51 PM

WEALTH MANAGEMENT

A LOOK INSIDE ESTATE PLANNING STRATEGIES AND OUTLOOK What are some pitfalls you’ve seen in families’ planning — including with extended family — that should be avoided?

Bigelow: Planning to minimize estate tax at the expense of capital gains tax. Leaving inheritances exposed to mismanagement and creditors, including ex-spouses.

Leaving inheritances outright to spouses and descendants whose own estate plans might differ from the client’s plan if they were to predecease the client. Failing to coordinate retirement accounts and other beneficiary designations with wills and trusts. Failing to carefully consider the order of succession for trustees and other fiduciaries.

Failing to build in flexibility such as the ability to replace a trustee or change the terms of a trust where that might be desirable. Failure to periodically review your estate plan as well as inform your trustees and executors that you have appointed them.

Paolini: The biggest pitfall I’ve seen is in not accounting for the likelihood of strife among the extended family after the individual making the bequests has passed.

Family interactions that seem

reasonable now very regularly become complicated once money is added to the mix. Even if you think the likelihood of conflict between your heirs after you die is extremely low, you should nonetheless have a candid discussion with your planner about the possibility of conflict in order to be certain that you’ve build the best structure to maintain familial harmony.

Pfaff: One of the most common pitfalls is giving a significant gift or inheritance to a beneficiary outright and free of trust, or even giving a beneficiary withdrawal rights from a trust at certain predetermined ages. First, gifts and inheritances received outright and free of trust generally do not take maximum advantage of creditor protection that may be available, which can become meaningful if the recipient gets into any creditor issue, including experiencing a divorce. Second, gifts and inheritances received outright and free of trust do not maximize available generation-skipping transfer tax benefits (GST). Third, beneficiaries who receive assets may not yet have the experience to manage investing and spending decisions in a way to ensure assets are there to help impact their life in a positive way for a long period

of time. Another pitfall is failing to consider extended family members or friends who have come to rely on financial help, but who are not recipients under your will or trust upon your passing. One last pitfall is not carefully considering whom to name as executor or trustee.

The person serving in these roles must have the time, expertise and commitment to attend to all matters properly, including the annual accountings, tax filings and interpersonal communication issues that often arise.

What’s the difference between leaving an inheritance versus a legacy for future generations?

Pfaff: To me, leaving an inheritance means simply leaving assets. But leaving a legacy means also providing some direction about the intended purpose of the assets. This can be accomplished using various methods,

enough assets to support your lifestyle for the rest of your lifetime, then it makes sense to consider transferring assets now rather than waiting until your death. The concern with transferring assets during lifetime is that sometimes there are unforeseen changes in tax law, family circumstances or your balance sheet.

So building maximum flexibility into irrevocable trusts is critical.

Paolini: There are always good reasons for lifetime gift planning.

Sometimes there are beneficial tax incentives. Some people like to see their money being put into action.

But it doesn’t have to be one or the other. Estate planners have financial planning tools that allow their clients to make hybrid gift trusts that

“POOR DRAFTING CAN OFTEN BE FIXED, BUT A BAD TRUSTEE COULD BE CATASTROPHIC TO ANY WELL THOUGHT-OUT ESTATE PLAN.” — FRANK PAOLINI, NEAL GERBER EISENBERG Bigelow: An inheritance is a thing.

It’s a birthday gift or a Christmas present, a check for graduation or a wedding, or a winning lottery ticket.

A legacy is a story — both the story of how the inheritance came to be

ranging from very legally enforceable (such as carefully designed trust provisions) to more flexible and open to a trustee or beneficiary’s interpretation (such as statements of intent or letters of wishes).

Leaving a legacy could also imply a charitable component, in which family members may or may not be involved.

Paolini: With an inheritance, it’s usually a single lump sum influx of cash to the beneficiary. Although that influx can be life changing, a legacy can be set up to be goal-oriented or incentivized in ways that make the person or the world better.

Make the most of your wealth.

Given the market volatility and potential for a recession, should clients consider wealth transfer planning strategies, to individuals or charities, during lifetime vs. waiting until death? If so, what types of techniques could be used for the clients to maintain flexibility?

With experience in banking, borrowing, trust and estate services, our dedicated team of Wealth Management professionals can help.

“BMO Wealth Management” is a brand delivering investment management services, trust, deposit and loan products and services through BMO Harris Bank N.A., a national bank with trust powers; family office services and investment advisory services through BMO Family Office, LLC, an SEC-registered investment adviser; investment advisory services through Stoker Ostler Wealth Advisors, Inc., an SEC-registered investment advisor; and trust and investment management services through BMO Delaware Trust Company, a Delaware limited purpose trust company. These entities are all affiliates and owned by BMO Financial Corp., a wholly-owned subsidiary of the Bank of Montreal. BMO Delaware Trust Company does not offer depository, financing or other banking products, and is not FDIC insured. Not all products and services are available in every state and/or location. Family Office Services are not fiduciary services and are not subject to the Investment Advisors Act of 1940 or the rules promulgated thereunder. Investment products and services: ARE NOT A DEPOSIT–NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY–NOT GUARANTEED BY ANY BANK–MAY LOSE VALUE Capital Advisory Services are offered by a division of BMO Harris Bank N.A. Member FDIC NMLS #401052 © 2022 BMO Financial Group

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and how the inheritance should be managed, used and preserved. It has meaning. A lot of us would probably rather receive the inheritance. No strings attached. However, put us on the other side of the fence and we would probably rather leave the legacy. We would want our children to come together to enjoy the family beach house or cabin, to carry on the business a certain way, or simply to leave things for their children better than how they found/received it, just like we did for them.

Pfaff: As a starting point, low asset values provide an excellent wealth transfer opportunity, because transferring assets while their value is lower (versus higher) makes more effective use of available gift and estate tax exemptions and exclusions.

Some wealth transfer strategies also work more effectively during low interest-rate environments, while others are more effective during high interest rate environments.

So if opportunities like low values or appropriate interest rates for the strategy you want to use presents themselves during your lifetime, and you know you have more than

allow for charitable contributions today that also leave residual trust funds for the benefit of the clients’ beneficiaries.

Bigelow: Assets or percentages/ dollar amounts that can be earmarked “for the kids (or others)” today are best transferred when values are relatively low so as to minimize the use of gift/estate tax exemptions. That is, if values are expected to increase, it generally makes sense to move them now. If there is a desire for continued control or access or income, a direct gift may not be as advantageous as an installment sale or a gift to a trust such as a Spousal Limited Access Trust. When it comes to charitable gifts, it may not be as valuable to give depreciated assets because the capital gains tax savings and/or income tax deduction may not be quite as high.

How can clients protect their assets from threats such as creditors and bankruptcy and/or future estate taxes after their death?

Paolini: The most important facet in protecting one’s assets after death is to choose your trustee wisely.

Many clients mistakenly feel that they can draft against all possible scenarios, but that’s simply not possible. Instead, it’s much more important to have the right person, or people, in charge to handle the unforeseen issues. Poor drafting can often be fixed, but a bad trustee could be catastrophic to any well thoughtout estate plan.

Bigelow: Giving or leaving assets to irrevocable trusts for loved ones

5/31/22 4:51 PM

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— instead of outright to them — can insulate those assets from outsiders.

Trusts can be designed with a fair amount of flexibility. If the goal is to protect assets from the beneficiary him/herself, another trustee can be named. If giving the keys to the beneficiary is not the issue, but there is still a need to protect assets from outsiders, the beneficiary can be his/ her own trustee and distributions of principal can be limited by a cotrustee or to those needed for health, education, and support.

Pfaff: As a general rule, it’s easier to protect assets from the claims of creditors if the assets exist in a trust that was created for you, as the beneficiary, by another person (the Grantor). Well-designed trusts often do not “force” distributions out of the trust to the beneficiary, because assets that remain in trust can maximize creditor protection and GST tax benefits to the extent possible. Properly designed trusts can be GST tax exempt, meaning that they will not be subject to the GST tax as they pass from one generation to the next, so long as the assets remain in trust.

How does a family best plan and evaluate long-term philanthropic decisions and other charitable activities?

Bigelow: Don’t make decisions on what to give based on tax consequences. It is always better for the family to keep the money and pay tax than it is to give the money away.

If charity has a place in the estate plan, be thoughtful and specific. For example, don’t give money to your alma mater’s general operating fund so they can repave parking lots or pay law school professors’ salaries.

Specify that you want the funds used to be used to endow a scholarship or for the football team. Along the way, involve family members who

and to generate an interest in working together as a family and an interest in charitable giving.

The most commonly used tool is a donor advised fund (DAF), because it is the simplest and most cost effective. A DAF is set up by an account owner who names an advisor to recommend charitable distributions from the DAF to qualified charities. Not all DAFs are alike, so you have to make sure you understand what you want to accomplish and whether a given DAF is appropriate for you. Large gifts that include naming rights — the right to name a physical piece of property, such as a building after the donor or another person — must be carefully reviewed by an attorney who is familiar with the potential pitfalls.

Paolini: Consider the ultimate result that would make you happy five, 10 and 20 years after you’ve passed, then make your decisions and set up your activities accordingly.

When looking for providers to help develop an intergenerational plan, how can someone know who is a good fit for their family?

What questions should they ask a potential advisor?

Paolini: A personal connection with your estate planner is paramount. Remember, you will be sharing very intimate details with this individual. Once you have an advisor like that in mind, ask about the person’s level of experience in estate planning for people who share attributes similar to yours regarding wealth and family dynamics.

Pfaff: Ask your financial advisors, CPAs and attorneys you may work with on other matters who they

“BEYOND WORKING WITH A HIGHLY QUALIFIED PROFESSIONAL, WHAT MATTERS THE MOST IS THAT YOU HAVE A STRONG PERSONAL COMPATIBILITY WITH YOUR ESTATE PLANNING ATTORNEY.” — CAROLYNN PFAFF, BMO PRIVATE BANK

should have a say. Talking to children and grandchildren to find out what they would do with X amount of money can be a great way to help them develop their own sense of philanthropy and encourage future giving.

Pfaff: The amount of assets, family values and the interest of future generations in being involved in the process of managing the assets destined for charity must all be considered. Some families like to use charitable vehicles as a tool to teach children how to think about investing and spending decisions,

P017_019_CCB_20220606.indd 19

recommend you should interview to work with you as the attorney on your estate plan. In some cases you’ll see some similar names surface. Beyond working with a highly qualified professional, what matters the most is that you have a strong personal compatibility with your estate planning attorney. In order to do their best work for you, they have to understand your entire balance sheet, your confidence level in your children’s ability to manage money, and your real concerns about your loved ones. These are highly personal conversations and require trust.

ABOUT THE PANELISTS ALEX BIGELOW, Managing Director, is Baird’s Private Wealth Management Market Director in Chicago. He joined Baird in 2016 and has more than 35 years of experience in the financial services industry. In his current role, Bigelow is responsible for a market with six branches and more than 100 associates. Bigelow is a board member of the Securities Industry & Financial Markets Association (SIFMA), and an active participant on SIFMA’s Curriculum Committee.

CAROLYNN PFAFF is a Regional Director of Wealth Planning for BMO Private Bank, responsible for leading a team of wealth planning professionals while providing leadership and strategic direction to the wealth planning client experience. Additionally, she is a member of BMO’s Business Owner Strategy and Solutions team (BOSS), and a frequent contributor to client thought leadership. She joined BMO Private Bank in 2021 and has over 21 years of experience in the financial services industry.

FRANK PAOLINI is a partner with Neal Gerber Eisenberg’s Private Wealth Services practice group. He focuses on private wealth planning and preservation, as well as trust and estate litigation. Paolini advises clients regarding complex tax, trust and estate planning, administration, litigation and dispute resolution. He also advises nonprofit entities and family offices regarding business operations and strategies and issues related to administering private foundations and public charities.

Bigelow: The ideal candidate should approach wealth management from all angles not with a focus on investments or insurance as a solution, as a process not a product,

and with a customized approach and not with a one-size-fits-all mindset.

The client might ask, “Who do you have on your team? What are the roles of other team members? How

might they work with other members of my family? How many other families do you work in this capacity with? How many have you worked with?”

Wealth Planning Starts With a Partner You Can Trust We help our clients preserve wealth and implement comprehensive strategies that address estate planning, wealth transfer and tax implications.

Our nationally recognized team of private wealth attorneys serve as trusted advisors, helping families and family offices manage their investments and the seamless transition of their assets to future generations.

Learn more about our practical approach to helping you and your family at nge.com/Client-Services/Private-Wealth

5/31/22 4:51 PM

20 JUNE 6, 2022 • CRAIN’S CHICAGO BUSINESS

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A rendering of the Fat Village development in Fort Lauderdale, Fla., a project backed by the second Cresset-Diversified Qualified Opportunity Zone Fund.

Firm raises $655 million for opportunity zones CRESSET from Page 3

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

Find your next corporate tenant or leaser.

area. The second Logistics Fund aims to raise $400 million, while the third Opportunity Zone Fund does not have a specific dollar target.

Cresset was quick to dive into opportunity zones after the program was created in late 2017, partnering with Chicago investor Larry Levy’s Diversified Real Estate Capital to form the first Cresset-Diversified Qualified Opportunity Zone Fund. The parties formalized their partnership last year under a single banner, now known as Cresset Real Estate Partners.

The $1.1 billion raised by the partnership’s first two funds has fueled the development of 17 projects nationwide totaling over $4 billion in construction costs, Cresset said in a statement. Many of the projects have been residential buildings, including properties in Houston, Seattle, Phoenix and Portland, Ore., according to the Cresset website.

“The projects are still there, and the investors are still attracted to the program,” Cresset Real Estate

Partners Director Dominic DeRose said.

None of Cresset’s projects have been in the Chicago area so far.

Chicago has seen a handful of other opportunity zone projects come together, but most of the city’s 135 zones are in areas of extreme blight on the South and West sides.

Opportunity zone critics have noted that such locations have been largely overlooked by investors, which have channeled more of their money into up-and-coming areas that hardly need a tax incentive to fuel development.

DeRose said Cresset has evaluated Chicago-area opportunity zone projects and would like to find one in its home market, but “it’s just a question of whether or not they exist,” he said. “The pipeline in Chicago . . . is less deep than what we’re seeing in other markets.”

LARGEST OF THEIR KIND

Cresset’s opportunity zone funds are among the largest of their kind. As of the end of 2021, only 2% of all qualified opportunity zone funds had raised more than $250

million, according to data tracked

by San Francisco-based tax advisory and consulting firm Novogradac. Among the 978 funds the firm tracks, only five had raised more than $500 million.

Novogradac’s research shows that opportunity zone funds as of March have collectively raised nearly $28.4 billion since the program was launched. The total number could be two or three times bigger, Novogradac said, since it tracks only publicly available fund disclosures.

The warehouses developed using money from Cresset’s first Logistics Fund, meanwhile, will be across Phoenix, Indianapolis, Dallas, Houston and Savannah, Ga., and along Interstate 81 outside of Washington, D.C. The firm did not specify where it will target projects with its second Logistics Fund, though the Chicago area has been rife with new warehouse development. The vacancy rate for local industrial properties dropped to an all-time low of 4.91% in the first quarter, according to data from Colliers International.

Settlements underscore Illinois’ strict privacy law PRIVACY from Page 3

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

P020_CCB_20220606.indd 20

including features such as facial recognition.

BIPA allows for private citizens to sue companies who break the law, which was the case in the recent payout from a 2015 lawsuit against Facebook. Chicago attorney Jay Edelson filed the suit against the company now known as Meta, resulting in a $650 million settlement that granted 1.6 million Illinoisans checks of nearly $400.

Those settlement checks began arriving in mailboxes for class members last month.

After the lawsuit, Meta removed some augmented reality effects, including filters, from Facebook and Instagram in Illinois and says it will offer the features on an opt-in basis.

The Google settlement is said to pay between $50 and $300 via check, Venmo, PayPal, Zelle

or direct deposit, depending on how many people file a claim and based on the amount of expenses, attorney fees, litigation costs and court-related expenses. Those who file a valid claim by Sept. 24 will be entitled to receive a payment.

TEXAS ACTION

The state of Texas also filed a lawsuit against Meta in February for allegedly using facial recognition data without consent, which violates that state’s consumer privacy act. Texas’ law was passed in 2009 but doesn’t grant private right of action like Illinois’ BIPA does.

It has been noted that though there are no federal privacy laws, state laws have tech companies folding under the pressures of their tough privacy statutes.

Clearview AI, a facial recognition software company, settled a lawsuit from the American Civil

Liberties Union last month. The settlement, which was filed in an Illinois state court, restricts Clearview from selling its database of more than 20 billion facial photos to most private individuals and businesses in the country.

Clearview is still able to sell the database to federal and state agencies, however. The company’s technology has been cited as illegal in Canada, Australia and parts of Europe for violating privacy laws.

Facial recognition information collected by some tech companies has been used in ways that have led to wrongful arrests, especially in cases involving Black people, as research shows the technology to be more prone to mistakenly matching the faces of darker-skinned people.

The final approval hearing for the Google settlement will be held Sept. 28.

6/3/22 3:29 PM

CRAIN’S CHICAGO BUSINESS • JUNE 6, 2022 21

Peoples Gas surcharges balloon with ICC delays PEOPLES from Page 1 before they ever consume a therm of gas to heat their homes or cook their food. Households now pay about $14 a month in surcharges on average and another $2.43 a month to cover the costs to Peoples of the growing number of customers who can’t pay their bills.

With the average annual bill up 14% to nearly $1,400 in 2021 from $1,225 in 2019, about 30% of Chicago households currently are hit with late fees, and 1 in 5 are more than 30 days behind on gas bills.

“It’s wreaked financial devastation,” says David Kolata, executive director of the Citizens Utility Board, a consumer advocate. “You have a large part of the city driven into energy bill bankruptcy.”

It wasn’t supposed to work like this. Advocates of the 2013 law signed by then-Gov. Pat Quinn, which gave Peoples and other big gas utilities in Illinois the ability to slap the extra monthly charge on heating bills, countered criticism that it was a blank check for the companies by emphasizing that the ICC would retain the authority after the fact to disallow spending deemed inappropriate and order refunds.

The law also limits annual increases in the surcharges. That’s why surcharges collected by Peoples so far don’t cover the full amount it has spent on infrastructure improvements to date. Ultimately, however, Peoples is entitled to recover from customers all the money it spends on infrastructure, subject to ICC approval. Peoples already has invested over $1.6 billion in infrastructure since its last adjudicated rate hike in 2015 and expects to spend $300 million annually until 2040.

Utilities were expected to file normal rate requests every few years, after which the projects paid for by

the surcharges would be included in regular rates. The surcharge would restart from zero at that point, with the cycle repeating itself after each full-blown rate proceeding.

WEC opted instead to follow an unorthodox playbook. It eschewed formal rate proceedings and kept driving the surcharges higher each year. Peoples’ surcharges rose from $42 million in 2016 to $164 million in 2021.

But the surcharges haven’t been getting the annual scrutiny envisioned by the 2013 law. Regulators haven’t looked at big questions such as whether spending Peoples is allocating to the infrastructure project belongs instead to regular operations and maintenance.

The distinction makes a big difference to Peoples’ bottom line and to customers’ bills. Ordinary operating expenses are passed along to customers with no markup, but Peoples tacks a profit of 6.6% onto infrastructure investments. So the more costs the company can drop in the infrastructure bucket, the more profit it makes.

And Peoples’ profits surged along with surcharges. For the last three years, it’s posted record annual earnings. Last year’s haul was $205 million. Before WEC took over, Peoples’ net income had never reached $100 million.

The profits flowed north in the form of dividends. Peoples last year paid $180 million in dividends to WEC, which has been hiking payouts to its shareholders by about 7% annually. Last year WEC paid $855 million in dividends, up from $798 million in 2020.

ICC Chair Carrie Zalewski declined an interview request, but an agency spokeswoman blames the lag in reviews partly on COVID. The commission decided in 2018 to hire an outside auditor, Liberty Consulting, to help with the review of Peo-

ples’ spending. It took well into 2019 to finalize the contract.

Liberty filed its report on Peoples’ 2016 record in early May. “Now that they have established the structure, classifications and templates required for the audit and report, the year-to-year changes should move much quicker,” ICC spokeswoman Vicki Crawford says.

How long will it take to catch up?

There’s no statutory timetable required. Crawford estimates the 2016 review will be completed in the first quarter of next year. The other years?

It’s too hard to predict, she said.

REFUND RECOMMENDATION

Liberty’s report on 2016 says WEC improved some of Integrys’ processes in the first full year it took over. But not enough. Liberty recommended disallowing more than $15 million of the $184 million WEC spent on the infrastructure program that year.

Staff of the ICC has recommended a $16 million refund for 2016 (including interest), with refunds for future years WEC charged ratepayers for the 2016 spending to be determined.

Liberty also says WEC focused intensely on maximizing spending that could be billed at a profit through infrastructure surcharges.

“Regular, comprehensive, and objective measurement of performance comprises a central element of effective program and project management,” the report states.

“Peoples Gas continued in 2016 to fail to assess its cost performance against clear standards other than progress in spending enough in surcharge-eligible costs to support maximum available surcharge recovery for the year—in this case 2016.”

Peoples must file its response to Liberty and others by midSeptember. For now, company spokesman David Schwartz says in an email, “That statement is simply

INFRASTRUCTURE GUSHER The monthly surcharge Peoples Gas charges Chicago households and businesses for its gas-system overhaul has generated more than $600 million in revenue over six years.

INFRASTRUCTURE SURCHARGE REVENUE 2016 2017

$42 million $62 million

2018

$82 million

2019

$117 million

2020

$137 million

2021

$164 million

MONTHLY SURCHARGE FOR AVERAGE HOUSEHOLD 2018

$6.20

2019

$8.70

2020

$10.95

2021

$13.05

2022

$13.10

Note: Monthly surcharges for average household are weather-normalized estimates. 2016 and 2017 figures for those estimates are not available. 2022 figure is through March 31.

Source: ICC filings

incorrect. It cannot be supported by any objective review of what was accomplished in 2016. During that year . . . our top priority was to transition scheduling, oversight and measurement of the program from an outsourced firm to experienced company personnel.”

Based on that, expect Peoples’ formal response to challenge most if not all of the recommended refund. If 8% of expenditures in years after 2016 are disallowed, as Liberty advised for the only time frame it’s reviewed, Peoples could be on the hook for tens of millions in refunds for each year of the infrastructure program.

Since neither Peoples nor WEC maintains substantial cash reserves, they might need costly financing to cover a significant refund order by the ICC. And Peoples could challenge any such order in court, delaying matters even longer.

Says Peoples’ Schwartz, “Any spend that is deemed ‘disallowed’ is

not included in rates and can be addressed through the established reconciliation process with the ICC. As it relates to . . . financing and court appeals—this is completely speculative, and it would be difficult to comment on hypothetical situations that have not happened.”

Under the 2013 law, gas utilities’ surcharge authority expires at the end of next year. Peoples wants it renewed, but Gov. J.B. Pritzker is opposed. Gale Klappa, executive chairman of WEC Energy, has said if that happens, Peoples will file every year for rate hikes to cover infrastructure costs plus a return.

Something has to give. Who will decide? The ICC? A judge? The Illinois General Assembly? Thanks in part to a regulator that’s fallen behind on its duties, this isn’t likely to end neatly.

“I don’t see how you can have a system where review happens six or seven years after the fact,” Kolata says.

Rising costs test Kraft Heinz CEO’s ability to boost prices and not lose customers KRAFT from Page 1 Sales volumes dropped 2% in the first quarter as the Chicago-based maker of such grocery staples as Oscar Mayer meats, Velveeta cheese spread and Heinz ketchup raised prices 9%.

Analysts say the decline would have been worse without Patricio’s spending to reinvigorate brands that his predecessor starved of capital, and divestitures that reduced the company’s exposure to cheaper store brands. But worse could be yet to come, as rising costs test Patricio’s ability to boost prices without losing customers.

“Kraft Heinz’s ability to retain those households that may have started purchasing its products during the height of the pandemic still isn’t a guarantee,” says Erin Lash, an analyst at Morningstar.

“They need to continue to invest . . . to make sure they’re keeping pace with consumer trends, which historically has been a shortcoming of leading brands.”

Investors seem unsure what to expect. Kraft Heinz stock has bounced around during Patricio’s

P021_CCB_20220606.indd 21

tenure, rising 30% in his first two years before giving back more than half the gains in the next five months. Recently, though, the price has moved to a level about 22% higher than when he took over.

To keep the stock aloft and protect profit margins while raising prices, Patricio will need every bit of marketing savvy he was known for when he joined Kraft Heinz from AB InBev, where he was credited for greenlighting Budweiser’s successful “Dilly Dilly” ads.

Patricio took over a company in crisis on July 1, 2019. Sales were falling in the wake of deep cuts by predecessor Bernardo Hees, who was installed as CEO by 3G Capital after the Brazilian buyout firm teamed up with Warren Buffett to merge Kraft Foods and Heinz in 2015.

Carrying out the 3G playbook, Hees eliminated thousands of jobs and shuttered factories in a cost-cutting campaign that slashed $2 billion in expenses. For a time, profit margins surged to industry-leading levels.

But the lack of investment quickly deflated Kraft Heinz’ brands, leading to write-downs totaling more

than $15 billion. With revenues down and profit margins shrinking, Kraft Heinz stock fell 68% between early 2017 and July 2019, erasing $70 billion in market value.

Some wondered if Patricio was the right choice to reinvigorate the brands, since he came from another company controlled by 3G. There were also questions about 3G’s willingness to allow the kind of spending Kraft Heinz needed to reconnect with customers. But Patricio had a reputation for brand building, and he brought that ethos to Kraft Heinz.

He announced plans to increase media spending by 30% to support flagship brands. Kraft Heinz gave Velveeta cheese its first logo revamp in 20 years, and launched novelty products to generate buzz with consumers. There’s Kraft Macaroni & Cheese ice cream, Grey Poupon wine and an Oscar Meyer bologna-inspired face mask. The ice cream pushed sales of Kraft Macaroni and Cheese up 4% after its launch, Kraft Heinz recently told industry publication Food Dive.

Under Patricio, who declined an interview request but responded to emailed questions, Kraft Heinz built

an in-house advertising agency that won awards for its campaigns. One of his favorites: a Heinz-sponsored pause in video game platforms that lets players take a break without risking losing while they eat.

“We asked ourselves why we weren’t being as creative as we should be,” Patricio says. “We set out to redefine our creative ambition, across the entire company, not just in marketing.”

MAKING INVESTMENTS

Along with attention-grabbing marketing campaigns, he moved to strengthen Kraft Heinz’s portfolio by selling off weaker brands, reducing exposure to commodity costs and avoiding competition with store brands. He used the proceeds of selling the natural cheese and nuts businesses in 2020 to pay down debt, fund growth investments and mitigate cost inflation.

Kraft Heinz caught a huge break that year when pandemic lockdown orders shuttered restaurants across the country, forcing consumers to stock up at grocery stores. Sales rose 4.8% to $26.2 billion in 2020 after sinking 4.9% in

2019. Last year, as lockdowns loosened, sales slipped slightly 0.5% to $26 billion. Net income nearly tripled to $1.01 billion in 2021.

Patricio’s real test starts now, as people get back into the groove of consistently eating outside the home. The shift, coupled with increased costs from inflation, means Kraft Heinz growth is once again under threat. Kraft Heinz reported that price hikes boosted the dollar value of organic sales 6.8% in the first quarter, but sales volumes were down 2.2%.

Patricio predicts some cooking-athome habits will stick, but acknowledges that Kraft Heinz needs to keep consumers engaged. He pointed to recent investments in plant-based proteins; new products and flavors, like Heinz Dip & Crunch for burgers; and a new partnership with Google to better mine consumer data.

“These pandemic-era investments will make us more efficient and effective in delivering the foods people want,” he says. “While the pandemic caused plenty of disruption, it inspired us to evolve further and faster to build long-term opportunity for Kraft Heinz.”

6/3/22 3:30 PM

22 JUNE 6, 2022 • CRAIN’S CHICAGO BUSINESS

Private-equity firm leaving Mag Mile for Fulton Market

BY DANNY ECKER A private-equity firm known for making early bets on high-profile companies is moving its headquarters to the Fulton Market District, where it will be surrounded by them.

Valor Equity Partners has signed a deal for more than 24,000 square feet on the top floor of 320 N. Sangamon St., the 13-story office building that opened last year in the former meatpacking neighborhood, according to sources familiar with the deal. It’s an expansion from the roughly 12,000 square feet the firm occupies today at 875 N. Michigan Ave.—the skyscraper formerly known as the John Hancock Center—where it has two leases that expire by the end of next year, sources said.

Valor, which is best known for its early backing of Elon Musk ventures Tesla and SpaceX and has more recently invested in fast-growing Chicago companies including Fooda, Cameo and Tock, joins the party of companies moving offices to Fulton Market as the gritty-turnedtrendy corridor becomes a hotbed of upscale restaurants and hotels, major corporate offices and, more recently, apartment buildings. The firm also adds to the list of defections from the Magnificent Mile,

which has lost major retail tenants during the COVID-19 pandemic but also become less popular in recent years as a destination for traditional office users.

Valor’s deal is a win for a joint venture of New York-based Tishman Speyer and Chicago developer Mark Goodman, which completed the Sangamon Street property without any tenants signed in the midst of a public health crisis that has pummeled demand for workspace. Now the duo has nearly filled the building while downtown office vacancy hovers at an all-time high, having inked previous deals with Tock, agricultural tech firm Hazel Technologies and real estate tech company VTS, among others.

A Tishman Speyer spokeswoman declined to comment when asked about the Valor Equity Partners lease but confirmed the building is 87% leased today. A Valor Equity Partners spokesman did not respond to a request for comment.

The Tishman spokeswoman also declined to comment on a new $26.1 million supplemental mortgage the owners took out on the property last month, according to Cook County property records.

That loan from Wells Fargo added to an $81.4 million mortgage the developer borrowed in 2019 to fi-

nance construction of the building, records show.

Companies that have signed new office leases during the pandemic have gravitated to newer and recently renovated office buildings during the pandemic, taking advantage of the soft market and hunting for space that will make employees want to show up rather than work from home. Of the 60 companies downtown that signed deals to relocate their offices between mid-2020 and the first quarter of 2022, 85% moved to buildings that were newly built or had recently undergone a major renovation, according to an analysis from brokerage CBRE.

EVOLUTION

Fulton Market has evolved over the past decade from drawing primarily tech companies to more recently luring prominent professional service firms. Law firm Norton Rose Fulbright recently signed a lease to open its first Chicago office in the neighborhood, while Boston Consulting Group is slated to move from River North to anchor a new office building at 360 N. Green St. from developer Sterling Bay. Valor’s impending departure from 875 N. Michigan, meanwhile, comes as the Mag Mile tower’s owner looks to reposition a large

COSTAR GROUP

Valor Equity Partners joins the flock of tenants setting up shop in the district

The 13-story office building at 320 N. Sangamon St. opened last year. portion of its office space for medical office use. The private-equity firm’s space is contiguous with several floors that the building’s owner, Chicago real estate firm Hearn, is rebranding as the Mag Mile Medical Pavilion and marketing to private physicians groups and major hospitals that may want to open clinical space in the building.

Hearn President and CEO Steve Hearn said he is finalizing leases with four medical office users totaling around 35,000 square feet and is looking at expanding his vision beyond the 125,000 square feet of medical offices initially planned.

“We’ve had a very strong response,” he said.

Valor’s move comes just more than six months after Hearn lost one of his largest tenants in software firm SMS Assist, which recently vacated close to 85,000 square feet in the building when it relocated to a new office in the Prudential Plaza complex at 130 E. Randolph St. Robert Sevim in the Chicago office of tenant rep brokerage Savills negotiated the Valor Equity Partners lease on behalf of the firm.

Tishman Speyer’s Adam Mitchell and Ellen May oversee leasing at 320 N. Sangamon.

UNDER

FORTY

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Gold Coast home rehabbed by antiques importers The building, which contained four apartments when the men began work on it 20 years ago, is now priced at $2.7 million I BY DENNIS RODKIN

VHT STUDIOS PHOTOS

T

he pair of antique importers who two decades ago restored an 1890s Gold Coast house with a mix of design flourishes and artifacts from other countries are putting it up for sale.

Doug Van Tress and Chauwarin Tuntisak, owners of the Golden Triangle, are asking $2.7 million for their roughly 4,000-square-foot four-story home on Division Street, which comes on the market June 6. The house, which has a two-car attached garage, is represented by Sophia Worden of Berkshire Hathaway HomeServices Chicago.

Behind the 19th-century facade with a prominent cornice at the top, a traditional Chicago look, the home has rooms paneled with teak from an old British men’s club in Yangon (formerly known as Rangoon) in Myanmar, built-in armoires made of doors salvaged in China, exposed brick from removing most of a wall to enlarge rooms, and a surface that at one end is a kitchen counter and at the other is a step on the way out to a terrace.

The terrace is one of four levels of landscaped outdoor space

that Van Tress says “we made so we could have a treehouse hideaway in the middle of the Gold Coast, because we worked weekends so having a second home was unrealistic.”

HOW TO CONTACT CRAIN’S CHICAGO BUSINESS EDITORIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312-649-5200 CUSTOMER SERVICE. . . . . . . . . . . . . . . . . . 877-812-1590 ADVERTISING . . . . . . . . . . . . . . . . . . . . . . . . . 312-649-5492

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The couple have operated the Golden Triangle since 1989, first in River North and since 2021 in a 10,000-square-foot former warehouse on Grand Avenue in West Town. Over the years, they have

also developed a companion business in Thailand, and hoping to focus on building that, they are selling this home because “we need a lock-the-door-and-go home,” Van Tress said.

The building contained four apartments when the men paid a little less than $1.16 million for it in 2002. They rehabbed it into two two-story units, but wound up using the whole thing as their home.

Vol. 45, No. 23 – Crain’s Chicago Business (ISSN 0149-6956) is published weekly, except for the first week of July and the last week of December, at 130 E. Randolph St., Suite 3200, Chicago, IL 60601. $3.50 a copy, $169 a year. Outside the United States, add $50 a year for surface mail. Periodicals postage paid at Chicago, Ill. Postmaster: Send address changes to Crain’s Chicago Business, PO Box 433282, Palm Coast, FL 32143-9688. Four weeks’ notice required for change of address. © Entire contents copyright 2022 by Crain Communications Inc. All rights reserved.

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