Crain's Chicago Business

MACY’S: The retailer plans to open smaller-format stores in an empty Carson’s. PAGE 3

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McD’s loyalty program is turning one Despite signing up 26 million members, MyMcDonald’s Rewards hasn’t stemmed the slide in store traffic

JOHN R. BOEHM

BY ALLY MAROTTI

THE FASTEST-GROWING FIRMS IN THE AREA The businesses on Crain’s 2022 Fast 50 saw a median increase in revenue of 592.8% over the past five years

McDonald’s customer rewards program has signed up 26 million members since its U.S. launch almost a year ago, on par with some of the biggest loyalty programs in the business.

But signing up customers is just the first step. To succeed, the MyMcDonald’s Rewards loyalty program must get them to visit McDonald’s more often and spend more.

The program is critical to the Chicago-based company’s longterm effort to drive sales growth.

McDonald’s has struggled to generate consistent growth, in

part due to persistent declines in customer counts at its 14,000 U.S. locations. Guest counts fell 2.2% in 2018 and 1.9% in 2019 before dropping by an undisclosed amount in 2020 when the pandemic forced restaurant closures.

McDonald’s started disclosing customer traffic numbers again in the first quarter of this year.

Chief Financial Officer Kevin Ozan told analysts that guest counts sank 1% compared with the first quarter of 2021, an indication the loyalty program has yet to revive store traffic growth.

CEO Chris Kempczinski said See McDONALD’S on Page 26

Industry keeps quiet on transfer tax hike The proposed levy would add $158 million to the cost of buying pricey real estate in Chicago

PAGE 17

JOHN R. BOEHM

BY DENNIS RODKIN Real estate interests have been largely silent as a proposal to fund homelessness-fighting programs by nearly tripling the transfer tax on pricey Chicago properties gains momentum.

The number of aldermen sponsoring a measure authorizing a referendum on the tax hike this fall has nearly doubled since April to 17. In May, 80 members of an interfaith clergy

group delivered a letter to Mayor Lori Lightfoot urging her to support the proposal, called Bring Chicago Home.

Meanwhile, opposition to the proposal—which, based on 2021 property sales, Crain’s estimates would add about $158 million a year to the cost of buying homes or commercial property worth $1 million or more—has seemingly not materialized. No press See TAX on Page 27

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CATERPILLAR COVERAGE GREG HINZ: What we need to bounce back from HQ losses. PAGE 2

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JOE CAHILL: Will Boeing, Caterpillar exits be a wake-up call? PAGE 3

OPINION: Are elected officials listening to Cat’s message? PAGE 10

6/17/22 3:46 PM

2 JUNE 20, 2022 • CRAIN’S CHICAGO BUSINESS

What we need to bounce back from HQ losses

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headquarters of two iconic, category-leading companies, aerospace giant Boeing and construction industry leader Caterpillar. All signs are that it’s about to lose a third: hedge fund leader Citadel.

That is not good news. It sends a message to other companies and industries around the world that Chicago is, well, some midcontinent nonentity that we can live without. It makes the task of attracting the decision-makers THE FIRST STEP TOWARD A COMEBACK IS that determine an office TO RECOGNIZE REALITY AND DEAL WITH IT. whether or factory will locate here or somewhere else that much harder. that period. Just like it survived the As my colleague Joe Cahill “Beirut on the Lake” political warfare of the Harold Washington era a recalled in a column yesterday, Chicago pulled out of the previous few years earlier. But its comeback era’s blues by getting together with then was no fluke—and there’s no the state and crafting an all-out guarantee of a repeat now. drive to attract Boeing. It worked.

The first step toward a comeThe psychology changed. And for back is to recognize reality and the better part of 20 years, Chicago deal with it. The reality is that again was a place that attracted though the reasons and impact headquarters despite high taxes, are different, the Chicago area in a mixed attitude toward business the past two months has lost the aving lived through predictions of Chicago’s imminent demise before, I’m taking the latest spasm of bad news with a few grains of salt.

“Chicago Blues” proclaimed the Businessweek headline 22 years ago, adding in the readout, “It’s a great, livable city, but it’s fading as a business and financial capital.”

In fact, Chicago not only survived but came back stronger from

and, more recently, soaring crime.

That was then.

Boeing departed because Chicago does not fit its need to be close to federal appropriators in Washington. Cat didn’t say much, but it has argued in the past that Illinois’ tax and regulatory policies hurt its bottom line. As one top business insider who knows the company puts it, in a cultural sense, conservative business CEOs feel more comfortable now in Texas or Florida than they do in liberal Illinois. That means they’ll split if they have an excuse to go.

That’s the case with Citadel. Its boss, Ken Griffin, is most definitely on the conservative side. I hear he refers to Democratic Gov. J.B. Pritzker as “a Bolshevik.” But his real issue lately is Chicago street crime and violence, which has made his staff and clients feel uncomfortable and made it more difficult to lure the talent that is critical to Citadel’s future.

So, he has an excuse. And speculation is rising that if the Griffin-staked Richard Irvin goes

GREG HINZ ON POLITICS

down in flames in the June 28 GOP gubernatorial primary, as appears increasingly likely, Griffin will simply pull the plug.

Given all that, I’d like to be able to report that city and state leaders are in crisis mode and furiously working to deal with the problem.

I can’t. Though not everyone is talking about everything, what I’m mostly hearing is a bunch of excuses, explanations and subject-changing. “Look at all the other good stuff that’s happening,” they’re saying. “We’ll be OK.” That’s a loser’s answer.

For instance, has either the mayor or the governor picked up the phone to call Griffin to ask him what they can do to keep Citadel here? That would be a big ask of Pritzker, who’s been the target of

tens of millions of dollars of Griffin-funded TV ads. But if you’re the leader of the state, you have to represent everybody, including your political foes.

Illinois and Chicago certainly have things working in their favor.

Like Big Ten new-grad talent. Progressive abortion laws. Or the fact that Lightfoot and Pritzker seem to be working more closely of late on things such as rebuilding Union Station.

More, please. Say on a common approach to repositioning rather than losing Ford’s huge Torrence Avenue assembly plant to the electric-vehicle era. Or keeping Citadel.

Or finally getting a handle on crime.

That’s a big ask. But big asks are supposed to be Chicago’s stock in trade. Are they still?

What should government do about housing costs?

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ith housing costs surging across the nation, middleand low-income families in need of housing are feeling squeezed. Housing affordability has sharply declined in the past year, according to the National Association of Realtors Housing Affordability Index. But it’s not just housing prices and mortgage rates that have increased, it is also the cost to rent.

According to data from online real estate giant Zillow, U.S. housing prices surged 21% in the past year and the typical monthly mortgage payment for the median-priced home also increased by nearly 53%.

That means the share of potential homebuyers with the qualifying income to purchase the median-priced U.S. home—now estimated at $344,000—has decreased.

Getting on the property ladder is increasingly out of reach for most American families.

Unfortunately, with fewer homebuyers and a persistent housing shortage, rents are also rising. In the past year, rent for the median-priced rental increased 16% compared with just a 3% to 4% annual increase historically. The combination of higher prices, higher mortgage rates and higher rents is disproportionately squeezing young families.

It’s tempting to imagine that government intervention can ease the pain for renters. But the exact opposite is necessary to solve the problem. We need to get government out of the way so more housing becomes available.

Why? Rent control measures only benefit current tenants and may worsen the problem in the long run.

This is because landlords pivot away from providing rental housing when government sets prices.

History serves as a guide. When rent control measures were passed in St. Paul, Minn., the current

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tenants who benefitted most were high income, often at the expense of lower-income landlords. Rent control measures are poorly targeted and also reduce housing wealth.

Rent control measures permanently reduce the supply of rental units. The decline in available units raises the rent for future tenants.

Research shows that in San Francisco, landlords who faced rent control ended up putting their units up for sale—contributing to a 15% decline in the availability of rental units. And a decline in the number of units ends up raising the price of vacant rental units, disproportionately affecting lower-income families and hurting those the policy was intended to protect.

Rent control also has another nasty side effect: Crime. Research shows that rent control could cause overall crime to increase. This is because private investments are likely to flow out of the regulated area. That means fewer jobs and reduced living standards, which result in more crime.

The housing affordability crisis hits low-income families the hardest.

Research shows when rent rises, the homeless rate also increases.

Homelessness hurts entire communities, not just those pushed out.

Lawmakers in several states are now considering rent control measures. Luckily, Illinois lawmakers failed in a recent effort to reintroduce rent regulation in Illinois.

A real solution to the housing affordability crisis is to build more affordable units. So why aren’t developers building more reasonably priced units? The short answer is state and local governments stand in the way.

The National Association of Home Builders estimates regulations imposed by all levels of government account for about 24% of the current average sales price of a new single-family home. Regulation ac-

counts for nearly 41% of multifamily development costs. The burden of regulation is up 44% from a decade ago. According to the Wharton Residential Land Use Regulatory Index, the Chicago metro area ranked worse than half of the country’s metro areas for highest regulatory constraints on development.

Instead of rent control measures, governments should look to reduce the number of regulatory hurdles that raise the cost of building new residential units. That means ending restrictive zoning policies, fixing building codes and not causing cost-

ORPHE DIVOUNGUY ON THE ECONOMY

ly delays for project approval.

Many Americans—especially our most vulnerable populations—have been priced out of a home. Instead of governments interfering even more in housing, the best possible solution is to lighten regulations that restrict the construction of afford-

able housing. In the meantime, organizations like Housing Connector are doing their best to help high-risk renters weather the storm.

Crain’s contributor Orphe Divounguy is chief economist at the Illinois Policy Institute.

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6/17/22 2:57 PM

CRAIN’S CHICAGO BUSINESS • JUNE 20, 2022 3

JOE CAHILL ON BUSINESS

A former Carson’s in Evergreen Plaza

Macy’s—yes Macy’s— leases empty Carson’s It’s a surprising deal as the department store market continues to contract. But the retailer isn’t opening an old-school department store there. I BY ALBY GALLUN

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rying to fill an empty suburban department store is among the toughest jobs in real estate today, but one landlord in Evergreen Park has pulled it off with a surprising tenant: another department store. Actually, not just one, but two.

Macy’s has leased a former Carson’s in Evergreen Plaza, a big shopping center in south suburban Evergreen Park, according to Cook County property records. The 120,000-square-foot space has been empty since the Carson’s store closed in 2020.

See MACY’S on Page 26

MACY’S ITSELF HAS CLOSED DOZENS OF BIG DEPARTMENT STORES OVER THE PAST COUPLE OF YEARS.

Lightfoot moves to extend life of huge downtown TIFs The measure would allow the city to use more than $100 million a year from the Canal and Kinzie districts for Union Station work, low-income housing and more

BY GREG HINZ The Lightfoot administration is getting ready to extend the life of two huge downtown tax-increment financing districts, or TIFs—a move that would help in the rebuilding of Union Station and construction of more affordable housing and potentially spur The 78 project in the South Loop and the equally massive Lincoln Yards development to the north.

On the table is what is to believed to be 12-year extensions

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of the Canal/Congress TIF on the Near West Side and the Kinzie Industrial Corridor TIF, which covers the red-hot Fulton Market area and neighborhoods to the west.

The two districts produced just over $120 million in TIF revenue, known as increment, in 2020, the last year for which figures are available, according to a report by Cook County Clerk Karen Yarbrough’s office. That’s well over a 10th of total city TIF revenue of $1.05 billion.

Both districts are due to ex-

pire later this year, but extending them would allow the city to continue to tap their increment for special projects, rather than having it melt into the regular property tax stream.

In an email, mayoral Press Secretary Cesar Rodriguez confirmed that the city is “considering” extending the two districts as well as one other he did not name, but which appears be the much smaller North Branch (South) TIF. However, he also See TIFs on Page 13

COSTAR

T

Will Boeing and Cat’s exits be a wake-up call?

here’s an old saying in journalism that two examples are a coincidence, and three make a trend.

Based on that principle, Illinois is perilously close to a trend of major corporate defections. Caterpillar announced last week that it plans to move its headquarters to Texas after nearly a century in Illinois.

Long based in Peoria, the heavy equipment manufacturer moved to suburban Deerfield just five years ago.

Caterpillar’s bombshell comes barely a month after a Dear John letter from Boeing. The aerospace giant is moving its headquarters from Chicago to northern Virginia.

Both moves involve the loss of a few hundred corporate headquarters jobs. Far more important is the message they send and their impact on thinking in executive suites around town. Corporate executives, like most humans, are influenced by the actions of others in similar positions.

One headquarters move out of Chicago gets their attention.

Another gets them thinking. A third makes them wonder if they’re missing out on something.

Illinois has a lot to lose if more major companies follow the lead of Boeing and Caterpillar. Big corporate headquarters have always been a cornerstone of our economy.

When we lose marquee companies, our reputation as a business center suffers.

We’ve been down this road before. In the late 1990s, Chicago lost a string of major hometown corporations to takeovers. Amoco, Ameritech, Inland Steel and others succumbed to buyouts that cost Chicago well-paid jobs and international prestige while putting decisions about capital investment in the hands of out-of-town interests with no stake in the region’s economic future.

City and state leaders responded with an all-out effort to land Boeing’s headquarters when the company decided to leave Seattle.

They won, restoring Chicago’s reputation and ushering in a golden age of corporate moves to the city.

It’s time for another such effort.

Chicago needs to stop the trickle of corporate defections before it becomes a flood.

The recent departures are even more unsettling than headquarters losses of the ’90s. Most of those were the result of takeovers, which usually move the combined company’s headquarters to the acquirer’s base.

Boeing’s and Caterpillar’s moves are voluntary, reflecting the judgment of executives that Illinois isn’t the best place for their companies.

That’s a stinging indictment of the local business environment.

I hope our political leaders

realize that. Gov. J.B. Pritzker tried to minimize the Caterpillar move as merely the loss of 240 jobs. He emphasized the fact that Caterpillar still has tens of thousands of manufacturing employees here and touted the number of small businesses in Illinois.

If Pritzker thinks those manufacturing jobs are secure, he’s kidding himself. Moving a headquarters out of a state makes it easier to move factory jobs eventually; company bosses are insulated from the local fallout.

After Boeing moved to Chicago, it shifted manufacturing jobs from Seattle to South Carolina. Chicago could find itself on the wrong end of that equation this time. Caterpillar has been opening new plants in Southern states and recently moved one of its divisions to Texas.

As for small businesses, Pritzker should remember why they’re here.

Big companies often spawn small ones and generate business for constellations of small suppliers.

And a state’s business climate matters just as much to small businesses as Fortune 500 corporations.

Caterpillar and Boeing haven’t said what they found lacking in Illinois’ business climate. But it’s not hard to guess—high taxes, fiscal disarray and rising crime come immediately to mind.

Caterpillar’s comments on Texas were telling. The company told Bloomberg the move would improve access to talent and praised Dallas’ two airports.

That should puncture any complacency about Illinois’ assets. We pride ourselves on workforce talent and airport connections, among other things. Apparently they’re not as unique as we thought.

The notion that blue-state social policies are an economic drawing card also took a hit. Caterpillar and Boeing are moving to states where progressive priorities are under attack.

Illinois politicians should take these two setbacks as the wake-up call they are. They can’t assume that Illinois’ hold on any corporate headquarters is secure. Cat’s move shows that even companies with deep roots here can suddenly bolt.

Pritzker needs to reach out to the state’s biggest employers and find out if any are considering leaving. If so, he should ask what it will take to keep them—and try to provide it.

More broadly, government officials should talk to companies large and small about the difficulties of doing business here. Based on those conversations, politicians should formulate a plan to make Illinois the best state for business.

It will take an all-hands effort, involving state and local leaders.

But Illinois has done it before, to win Boeing’s headquarters. We can do it again.

6/17/22 3:51 PM

4 JUNE 20, 2022 • CRAIN’S CHICAGO BUSINESS

Can Steve Cochran save WLS-AM/890?

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Sirott, currently ranks ninth in hen Steve Cochran mornings. opened the mic on Initially at WLS Cochran will WLS-AM/890 at the be joined by another former crack of dawn June 15, he beWGN personality, Andrea Darcame the fifth morning host in las, who’ll fill in as a contribu10 years at the Cumulus Media tor while a search is underway news/talk station. And he has for a permanent teammate. nowhere to go but up.

“I’m a lucky guy,” Cochran “It’s no secret that this morning said. “I’ve sat in the same chair show has a huge hole to climb as Wally Phillips, Bob Collins, out of, and I believe we will,” CoSpike O’Dell, Jonathon Brandchran, 61, said June 14. “I’m not Robert Feder meier and now Larry Lujack getting up at 3 a.m. to lose.”

In the just-released Nielsen Audio sur- and Don and Roma (Wade). I don’t take vey for May, WLS tied for 27th place in that lightly.”

On the eve of his launch at WLS—where mornings with a 1.0% share and cumulative weekly audience of 92,900. Overall he’ll be heard from 5:30 to 9 a.m. Monday the station tied for 27th with a 1.0 share through Friday—Cochran shared a few thoughts: and 201,600 weekly cume.

Closing in on his 30th year on Chicago radio, the native of Ithaca, N.Y., began here FEDER: How would you describe your on the former WCKG (where he hosted new show? mornings for one day) and later worked COCHRAN: If you liked me in the past you at WLUP, WMVP and WPNT. In 2000 Co- will still . . . and if you hated my show you chran joined WGN-AM/720 as weekend should listen and see if you were right. and fill-in host, moving up to midday This show will be local first and inform, host in the talent shuffle that followed the entertain, inspire and be funny every day (with) great guests, great interviews and death of morning star Bob Collins.

Following a three-year detour at Sa- more politics. It’s kind of my greatest hits lem Media news/talk WIND-AM/560 and plus a bunch of new stuff.

KTRS in St. Louis, Cochran returned to WGN under new management in 2013, What are you looking for in a supporting where he hosted mornings until 2019. cast?

Way too much of talk radio and TV is Now he’ll be competing against the Nexstar Media news/talk station, where Co- dudes talking to dudes. We will add a chran’s successor, broadcast legend Bob great female voice to bring balance and

perspective every morning.

What’s wrong with talk radio?

I don’t believe people wake up and want to listen to a fistfight. It’s not just politicians.

Everyone wants to be right, but not enough want to do the right thing. Everybody has picked teams, but in this country there will always be just as many on the other side.

So you don’t compromise? To what end?

When nothing gets done nobody wins.

Apply that to Chicago.

As bad as many things are, this is still the greatest country in the world and Chicago is the best city in America. Everything doesn’t suck, but you wouldn’t know that from the majority of the news you hear and see. I’ll talk about what’s right about Chicago—not just do a daily report of everything that’s wrong.

How do you fit in politically at WLS? The far left and the far right are the problem—not the solution. One-party rule doesn’t work . . . in Chicago, Illinois or D.C. I’ll call out any politician gaming the system.

The ones who want the power but aren’t so interested in actually serving the people. I intend to inspire real participation. The extremes always show up and call in, but the question is: will the independents?

Remind me again why people should listen?

There are a million choices and distrac-

Steve Cochran tions every day, and I prefer you to be distracted by me. I’m lucky to still be able to do this—and it’s going to be fun.

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.

TV, film production in Chicago jumps to a record

BY GREG HINZ While much of Chicago’s economy is still recovering from the COVID-19 pandemic, the film industry has come roaring back and has hit a new record for spending here.

According to figures released June 16 by the state and city, producers of movies, TV shows and streaming services spent an estimated $631 million in the state in 2021, with $373 million going toward wages alone.

That not only surpasses the $362 million when much local production was shut down because of COVID, but is comfortably above the estimated $560 million spent in 2019.

TV IN THE LEAD

As usual, TV productions, in which Chicago has carved out a nice niche, are the big horse, with 1,331 of the 1,771 permits issued by the city last year for TV shows such as “Chicago Fire,” “Chicago Med” and “Chicago P.D.,” along with new productions including “Shining Girls” from Apple TV+ and “61st Street” from AMC Studios.

Suburban and downstate areas are getting into the act, too, with HBO’s series “Somebody

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Somewhere” filmed in Lockport and Legendary Television’s “Paper Girls” and “Night Sky” (formerly known as “Lightyears”) for Amazon Studios primarily shot outside Chicago proper.

“Every TV and film project here in Illinois brings a flurry of economic activity to our state,” Sylvia I. Garcia, director of the Illinois Department of Commerce & Economic Opportunity, which houses the Illinois Film Office, said in a statement. “Every production creates a multiplier effect by increasing foot traffic to local stores and restaurants, recruiting local extras, and hiring our talented crews—and then by making our incredible Illinois landmarks well known to audiences across the globe.”

“Chicago’s TV and film industry is globally renowned and continues to generate significant economic and cultural gains for our city,” said Mayor Lori Lightfoot. “Our forward-thinking Chicago Film Office is building the infrastructure with initiatives such as the ‘Chicago Made’ workforce program that will continue to open doors for our residents and deepen investments in our communities.”

To try to keep that business

A Cinespace studio at 31st Street and Kedzie Avenue.

JOHN R. BOEHM

Producers spent $631 million in Illinois last year.

With expanded state tax credits now approved, officials are hoping to pass the $1 billion mark soon.

“CHICAGO’S TV AND FILM INDUSTRY IS GLOBALLY RENOWNED AND CONTINUES TO GENERATE SIGNIFICANT ECONOMIC AND CULTURAL GAINS FOR OUR CITY.” Mayor Lori Lightfoot

coming, the General Assembly this spring extended and expanded the state’s film tax credit with a goal of bumping up total spending in the state to $1 billion. Local production has traditionally been focused

at the Cinespace soundstage complex on the Southwest Side, but a variety of other groups have been talking about opening their own production facilities here.

Driving the growth has been

the fracturing of the TV market, with not just three or four big networks but cable channels and increasingly internet streamers needing product. That product has to be shot somewhere . . . so why not Chicago?

6/17/22 2:58 PM

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A fiber-optic network now links Argonne with Hyde Park

BY JOHN PLETZ A fiber-optic network used by researchers to test quantum technology has been extended from Argonne National Laboratory in Lemont to the University of Chicago in Hyde Park.

The test network, which helped Chicago win federal research projects, will now connect the national labs with researchers at UChicago, including the Chicago Quantum Exchange, a consortium of partners from university, government and private sectors. Corporate partners include JPMorgan Chase, Verizon, Discover, Boeing and others.

Quantum computing has captured attention because of its potential to be more secure and faster in handling digital information. If the technology works at the scale that would allow widespread use, it could change the nature of high-end computing used in medicine, finance, research and other industries.

Researchers have only recently begun to delve more deeply into developing quantum technology. UChicago has become one of the research hubs. The

Toshiba that will allow users to transmit and test encryption keys over the network.

Awschalom says he hopes to extend the test network throughout the state.

JOHN R. BOEHM

Quantum could change the nature of high-end computing in medicine, finance, research and other industries

UChicago professor David Awschalom, director of the Chicago Quantum Exchange

...

“WE HAVE ONE OF THE LARGEST (TESTBEDS) IN THE U.S. HERE IN CHICAGO.” UChicago’s David Awschalom

two Chicago-area national labs that it manages were among five quantum-research centers funded by the U.S. Department of Energy two years ago.

The fiber network, originally built to link Argonne with Fermilab in Batavia, turned out to be uniquely suited to testing next-generation computing and communication technologies that rely on quantum physics.

Now the 89-mile loop has been extend by 35 miles to two sites in Hyde Park, one on the UChicago campus and the other in the neighborhood.

“Testbeds are appearing all over the world,” says UChicago professor David Awschalom, director of the Chicago Quantum Exchange, who oversees the Q-Next program at Argonne.

“We have one of the largest in the U.S. here in Chicago. Companies come to test equipment and software to do it outside a lab in a real-world environment.”

For instance, temperature swings can change the length of fiber-optic cables, which creates technological challenges. The Chicago test network is using security technology developed by

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6/17/22 2:59 PM

8 JUNE 20, 2022 • CRAIN’S CHICAGO BUSINESS

Sip a cocktail on a ’20s leather chair at this new shop After a years-long closure, Architectural Artifacts is reopening on the Near North Side with food and drinks Architectural Artifacts, the globally sourced antique shop that occupied a space in Ravenswood for decades, is reopening next month in the Near North neighborhood. And this time, there will be cocktails.

The new location at 1065 N. Orleans St. will have a cafe and wine bar, serving beverages, pizza and light bites for customers to sip and munch on as they peruse the antiques. It is set to open mid-July.

The building was once a school and has a midcentury gymnasium that can be rented out for weddings or other events. The rooms that were once classrooms can be rented out as well. They have been outfitted like individual shops, and customers can pop in and sit on an antique chair while having wine. There will also be auxiliary bars throughout the building.

“You can order your latte (or) a beer and a pizza and go eat it on 1920s leather French club chairs. . . .Or, you’ll eat it off an 18th-century Dutch farm table,” said founder Stuart Grannen.

“You can go sit in a cafe. We just bought a cafe in Munich, with all the cool chairs and tables and everything.”

The hope is that a new cafe opening in Chicago will come buy those sets and use them in their own establishment. That keeps the inventory rotating.

Grannen is working with Robby and Debra Baum of Bedderman Lodging on the business.

Robby Baum said he and his wife used to visit Architectural Artifacts’ old location on the weekends, walk around and get inspired. But sometimes they’d get hungry or thirsty as they browsed.

CUSTOMER BASE

Having food and beverage offerings is a way to expand the customer base, too, Grannen said.

“Architectural Artifacts became a destination, not just for the stuff. Not everybody wants to spend $10,000 on something, but everybody did like to come and check it out,” Grannen said. “We want to continue that—and keep them there a little bit longer with pizza and beer and coffee.”

Architectural Artifacts has been selling furniture online since it closed its former 80,000-square-foot location at 4325 N. Ravenswood Ave. about two-and-a-half years ago.

An archaeologist by training, Grannen founded the company

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in 1987. He said he spent childhood weekends in the 1960s and ‘70s frequenting antique shops on the East Coast and loved it, but he always found their ambiance a little stuffy. The old furniture should be sat in and enjoyed, and children shouldn’t have to worry about not touching an item, he said.

Now, Grannen travels the world sourcing items for his shop. He goes to South America, to markets in Buenos Aires. He visits Europe five or six times a year, frequenting antique fairs like the one in Parma, Italy. The antique markets in Europe are “not anything like anybody in America can imagine,” he said.

“A flea market in America to me is a bunch of old tube socks and some crabby old guys with an old pickup truck. The industry here is really pretty sad. But in Europe, it’s a real thing, and it’s very intense and high stress level, high value,” he said. “We just go around with a suitcase full of cash and buy stuff.”

At Architectural Artifacts’ new location, QR codes will show customers videos about where Grannen found the item, and how he got it back to Chicago.

PHOTOS COURTESY OF ARCHITECTURAL ARTIFACTS

BY ALLY MAROTTI

INVENTORY

With less space at the new place—it’s 40,000 square feet, with an additional 5,000 outside—Grannen said he “really upped the inventory game.” Now the items on sale will be “cooler, bigger, more outrageous, more design oriented,” he said. People want items they can’t find anywhere else, and Grannen thinks he can deliver.

The shop will have more than $10 million worth of inventory, Grannen said, and it is working to hire a team of about 30 people.

Supply chain issues have become a problem—Architectural Artifacts has had containers full of inventory sitting in Italian ports for three or four months now. But those same supply chain issues, coupled with increased pandemic demand, have also driven up antiques sales stateside.

“With supply chain issues, production of furniture, people amazingly have been turning to older pieces, antiques,” Robby Baum said. “People are really leaning into buying things with meaning to them.”

Other business partners include Luke Blahnik, owner of Avondale Bowl. Andrew Holladay, executive chef at Lula Cafe in Logan Square, will head up the kitchen at the cafe, which will be

open from 7 a.m. to 10 p.m. It’s a cafe and wine bar. Pizza and small bites start at 11 a.m. The building will also have a pickleball court and two outdoor patios, one of which connects to the gym for private events. In the fall,

a speakeasy-style bar is set to open downstairs.

And no worries if there’s a spill on a centuries-old product, Grannen said.

“Nobody needs any of these things. It’s all a luxury. Who are

we to say, ‘Oh, you can’t sit in that, you can’t touch that.’ It’s fun. It was sat in and touched its entire life. It might as well be now,” he said. “If you spill some pizza on it, we’ll just clean it up.

Whatever.”

6/17/22 3:00 PM

CRAIN’S CHICAGO BUSINESS • JUNE 20, 2022 9

Would Warren Buffett buy your family business?

Closely held firms have an opportunity to identify and enhance distinct competitive advantages

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s an investor and adviser to small and midsize, founder-led and family-owned businesses, I’m constantly reminded that not all businesses are created equal, yet all business owners must make the most of the hand they are dealt. In navigating the current economic uncertainty and volatility in the markets, closely held businesses have an opportunity to identify and enhance their distinct competitive advantages by reflecting on key lessons from the “Oracle of Omaha.”

Warren Buffett’s decades of success as an investor are grounded in identifying well-run businesses that benefit from certain core business principles. Chief among these principles is having and maintaining an “economic moat” that cannot be easily replicated—that is, they have sustainable economic advantages over competitors that allow them to protect their long-term profits and market share. This often leads to other key business principles including “pricing power,” or the ability to increase the pricing of goods or services without materially lowering demand. That further Warren Buffett

leads to steady and predictable cash flow generation and results in an above-average return on invested capital, or ROIC. These principles often go handin-hand, allowing companies to compound earnings and drive meaningful, long-term value creation. Unlike commodity businesses, businesses with durable economic moats do not have to invest much back into the enterprise to maintain their moat. As Buffett stat-

ed at one of Berkshire Hathaway’s legendary Meeting of Shareholders: “What we’re trying to find is a business that, for one reason or another—it can be because it’s the low-cost producer in some area . . . because it has a natural franchise . . . because of its position in the consumers’ mind . . . because of a technological advantage, or any kind of reason at all, that it has this moat around it.”

These principles came into play when my firm provided growth equity to a Chicago-based fixed wireless internet service provider, SilverIP Communications. SilverIP is a fast-growing, founder-led business with a technological competitive advantage that enables the business to operate at a lower cost.

SilverIP offers a mission-critical service and, in passing on its savings to customers, continues to gain market share. We appreciate that this sustainable advantage allows the business to sign customers to multiyear service agreements, locking in contractually recurring revenues and supporting high customer reten-

tion upon renewal. Having learned from Buffett, we believe that so long as the business maintains its lowcost advantage, it will continue to benefit from higher-than-average returns on invested capital, allowing the enterprise value to meaningfully compound.

What if your business has neither a high ROIC or an economic moat?

While perhaps not a great fit for Buffett, you can still build a great business based on his key principles.

One of our clients operates a low-margin physical security business. Unlike its peers, the business benefits from meaningful brand equity that stems from highly targeted business development efforts and minority business enterprise, or MBE, ownership status. Its MBE certification, coupled with a highly reliable service delivery model, have helped it maintain long-term customer relationships and afforded the business more pricing power than competitors. While brand equity and resulting customer loyalty may not be directly evident in a business’ financial statements, these factors often result in a higher valuation relative to peers.

With inflation here to stay for now and some economists pointing to a

Duane Jackson is co-founder and managing partner at Author Capital Partners (formerly Jackson Private Capital) and an investor-in-residence at the Polsky Center for Entrepreneurship & Innovation at the University of Chicago Booth School of Business.

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

looming recession, many business owners are distracted by the economic backdrop. There’s no better moment to intentionally embrace Buffett’s core principles and leverage them to best position your business to survive near term and thrive long term.

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6/17/22 3:01 PM

10 JUNE 20, 2022 • CRAIN’S CHICAGO BUSINESS

EDITORIAL

Are elected officials listening to Cat’s message?

CRAIN’S ILLUSTRATION / BLOOMBERG PHOTO

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rain’s columnist Joe Cahill puts it well in this week’s issue: “Corporate executives, like most humans, are influenced by the actions of others in similar positions.

One headquarters move out of Chicago gets their attention. Another gets them thinking. A third makes them wonder if they’re missing out on something.”

His remark cuts to the heart of the anxiety Chicagoans feel—or should feel— about news that’s trickled out in the past six weeks or so. Boeing, we learned in May, is pulling the plug on its Chicago headquarters and decamping for Arlington, Va. And now Caterpillar, having uprooted itself in 2017 from its historic home in Peoria in favor of north suburban Deerfield, is now shifting its roughly 250 headquarters jobs to Irving, Texas.

Those inclined to talk themselves out of worrying about such things managed to rationalize the Boeing move with varying degrees of success. It was only about 500 jobs, they said. Boeing had its reasons for wanting to be closer to its key defense industry clients in D.C., they said. And as a relative newcomer to the Chicago corporate landscape—having landed here only 21 years ago—Boeing was never much of a presence on the local civic scene anyway, they said.

Caterpillar, on the other hand, is a tougher one to gloss over. The company, after all, has called Illinois home for roughly a century. The Caterpillar brand, recognized the world over, was always closely associated with the Land of Lincoln. The company had deep roots in the Peoria community,

fostering unique partnerships with local educational institutions to funnel engineering and administrative talent into the halls of Cat’s headquarters. And though thousands of Caterpillar jobs will remain here in Illinois, the loss of executive authority close to home sets up the prospect that those local ties could fray—and makes it that much easier for Caterpillar executives, surveying their domain from an office tower outside Dallas, to trim back operations in the Midwest when and if they need to cut costs down the road.

Caterpillar’s departure, even more than Boeing’s, is a tacit statement that Illinois, in this Fortune 500 company’s judgment, is no longer the best place to run a business.

A lot of people, including Gov. J.B. Pritzker, will tell you that’s nonsense—that Cat will still have a major presence here, that other companies are choosing Illinois, that homegrown small businesses represent the economic future of this state, that headquarters don’t matter as much as they used to in the work-from-home era anyway. And all those assertions have a certain amount of merit,

but they don’t undo the sense that something important is slipping through our fingers: Chicago’s standing as a headquarters town, a place where decision-makers at some of the most important companies in the world want to be, knowing they can tap the best-educated, hardest-working talent in the nation, take advantage of global transportation connections, partake of world-class cultural amenities and have a voice in the civic conversation, all while enjoying a comfortable lifestyle in a dynamic place to live and raise a family.

Now there’s the gnawing question: Who’s next?

Perhaps we worry too much. Every city has crime, for instance. And high taxes.

And corruption. It would be great to look back on this editorial in, say, a decade and chide ourselves for having been hyperbolic about Cat’s exit. Chicagoans are tough, and we’ve been through worse. But we’ve gotten through worse by recognizing the problems confronting us and pulling together to do something about them. In this case, we can’t even seem to agree that the loss of two major corporate headquarters in a matter of weeks is a bad thing. So let’s be clear: It is a bad thing. Headquarters matter. Having major companies choose Chicago as their home provides an economic jolt to the entire region and conveys an important message to the world that this city isn’t just fly-over country. It’s a city worth investing in.

Boeing and Caterpillar just sent a very different message, loud and clear. Our elected officials and their minions don’t seem to be picking up on it.

YOUR VIEW

Future of Work Task Force outcome: Disappointing

W

hen the Legislature approved the Illinois Future of Work Task Force last year, lawmakers created a framework that allowed stakeholders to work collaboratively to assess the current realities of the state’s economy and labor market amid the ongoing COVID-19 pandemic and identify future trends and practices to address the challenges businesses and workers face.

The overall charge of the committee was to identify policies and practices that will help businesses, workers and communities thrive economically throughout the state. As the Senate and House Republican appointees to the 35-member task force, we looked forward to a comprehensive and robust exchange of ideas as we examined data and created a list of recommended policy proposals.

The task force final report was released on May 31, and along with the findings, a total of 58 policy proposals emerged. While there are aspects of the report that we support, we are extremely disappointed that the process became fractured, and in the end, excluded vital concerns expressed by prominent business groups, which in-

Sen. Don DeWitte, left, R-St. Charles, and Rep. Ryan Spain, R-Peoria, are assistant Republican leaders in their respective caucuses, and both served as co-chairs of the Future of Work Task Force. clude the Illinois Chamber of Commerce, the Chicagoland Chamber of Commerce, the Illinois Manufacturers’ Association, the Illinois Retail Merchants Association, the Mid-West Truckers Association and the Illinois Farm Bureau. Together, these groups represent thousands of businesses employing millions of Illinoisans. Because their voices were ignored, we joined nearly every pro-business representative on the task force in voting against the ratification of the final report.

The COVID-19 pandemic led to fundamental shifts across numerous sectors of Illinois’ economy in how business is conducted, how businesses interact with customers and clients, and how businesses engage, operate and build their workforces. Task force members had a responsibility to look at all aspects of the workforce and formulate policy recommendations that address every sector of the economy, not just those that advance a specific political agenda.

The task force had a responsibility to be transparent when conducting business and to provide ample opportunities for public participation. Unfortunately, many of the task force’s processes were flawed, making it nearly impossible for interested stakeholders to participate. Additionally, meetings were held prior to appointments being made, task force staff met with organizations outside of the process and ideas proposed by outside groups found their way onto task force agendas. All of these actions undermined the credibility of the panel.

We are equally concerned about the handling of administrative support for the task force. Illinois Public Act 102-0645 expressly states that administrative support (creation

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Chicago Business, 130 E. Randolph St., Suite 3200, Chicago, IL 60601, or email us at letters@chicagobusiness.com.

Please include your full name, the city from which you’re writing and a phone number for fact-checking purposes.

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of agendas, arranging individuals to provide testimony, etc.) for the task force is the responsibility of the Department of Commerce & Economic Opportunity, yet in reality, the role was designated outside of DCEO and included two registered, progressive lobbyists that had a stake in the outcomes. DCEO did not have the authority to circumvent and delegate their statutory requirement for providing administrative support.

We are also disappointed that of the 58 policy recommendations that found their way into the final report, the vast majority were never discussed at a task force meeting and were never voted on by the task force members.

We do not deny that many of the recommendations are items we would have supported had they come through proper channels. But as it stands, how are we supposed to implement beneficial reforms when the state’s largest pro-business organizations’ concerns were not taken seriously and were largely omitted from the final report? For all of these reasons, we believe the final task force report should not be considered a valid starting point for public policy discussions in the General Assembly.

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.

6/17/22 3:24 PM

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LETTER TO THE EDITOR

Does Abbott deserve to make baby formula?

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rain’s story “Abbott’s baby formula business turning into a big quagmire” (May 18) asks whether Abbott Labs’ pediatric nutrition business is “worth the trouble it’s causing” the company. We might better ask whether Abbott still deserves the privilege of providing this essential product to the babies and parents who must rely on it.

The company created its own trouble in pediatric nutrition by failing to monitor its manufacturing processes adequately and remedy problems once they were identified.

We can and should fault the FDA for its unacceptable delay in addressing reports of problems at the baby formula plant. This does not absolve Abbott of its primary responsibility to assure safety and quality, especially in a

CRAIN’S CHICAGO BUSINESS

President/CEO KC Crain Group publisher/executive editor Jim Kirk Editor Ann Dwyer Creative director Thomas J. Linden Director of audience and engagement Elizabeth Couch Assistant managing editor/audience engagement Aly Brumback Assistant managing editor/columnist Joe Cahill Assistant managing editor/digital content creation Marcus Gilmer Assistant managing editor/digital Ann R. Weiler Assistant managing editor/news features Cassandra West Deputy digital editor Todd J. Behme Deputy digital editor/audience and social media Robert Garcia Digital design editor Jason McGregor Associate creative director Karen Freese Zane Art director Joanna Metzger Copy chief Scott Williams Copy editor Tanya Meyer Contributing editor Jan Parr Political columnist Greg Hinz Senior reporters Steve Daniels, Alby Gallun, John Pletz

product given to vulnerable newborns who almost literally can’t live without it.

Abbott’s pediatric nutrition saga is not only about the future of a business line, but also about public health and the public good. Of course, Abbott’s bottom line matters, but it is not the sole or overriding concern.

Not incidentally, the “underperforming” nutrition business still had an operating margin above 20%.

Even if the pediatric nutrition segment lowered the margin somewhat, this is a “fairly lucrative” business, indeed.

“Benesch was able to look at the litigation as a whole, provide expertise within a fixed budget, and then provide great results. The team they assembled was second to none.”

ERIC BROXTERMAN Vice President and General Counsel of Intellectual Property Vertiv

Senior vice president of sales Susan Jacobs Vice president, product Kevin Skaggs Sales director Sarah Chow Director of research Frank Sennett Events manager/account executive Christine Rozmanich Marketing manager Cody Smith Production manager David Adair Events specialist Kaari Kafer

MY TEAM

Custom content coordinator Ashley Maahs Account executives Claudia Hippel, Bridget Sevcik, Laura Warren, Courtney Rush, Amy Skarnulis Sales assistant Brittany Brown People on the Move manager Debora Stein

Featured team (left to right)

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JACOB H. MARSHALL

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DAVID MCCURDY Elmhurst

MY BENESCH

Reporters Elyssa Cherney, Katherine Davis, Danny Ecker, Corli Jay, Justin Laurence, Ally Marotti, Dennis Rodkin, Steven R. Strahler Contributing photographer John R. Boehm Researcher Sophie H. Rodgers

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CRAIN’S CHICAGO BUSINESS • JUNE 20, 2022 11

No company wants to be involved in costly and time-consuming litigation. But when litigation can’t be avoided, it’s essential to have an experienced, proven legal team representing you. Eric found that team in Benesch. With the help of skilled litigators, a collaborative, businessminded approach, and consistently creative solutions, Vertiv emerged with a win from the court and a high level of respect for the Benesch team that secured it.

How can our team help protect your interests? Learn more about our relationship with Vertiv at beneschlaw.com/myteam.

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6/17/22 3:25 PM

12 JUNE 20, 2022 • CRAIN’S CHICAGO BUSINESS

Advertising Section

PEOPLE ON THE MOVE

UCAN, Chicago

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

ARCHITECTURE / DESIGN

BANKING

ENGINEERING / CONSTRUCTION

LAW

Eastlake Studio, Chicago

Capital One, Chicago

Burns & McDonnell, Chicago

Nixon Peabody LLP, Chicago

Eastlake Studio welcomes Kristin Pautlitz as the firm’s first Business Development Director and Furniture Project Manager. In her new role, she will combine her expertise in relationship building and professional design work, strengthening the firm’s network and workplace strategy. With more than a decade of industry experience as an interior designer and an account executive for a furniture dealer, Kristin will work with clients to build trust, provide accountability, and manage project workflows.

Patricia (Patty) Fening joins Capital One as a Vice President and Senior Business Banker in Chicago where she will offer financial management services to small and medium-sized businesses.

She previously worked at PNC Bank, where she worked for almost 10 years in business banking. Prior to, she worked for more than 20 years in SBA lending.

Patty is a graduate of Miami University, lives in Gurnee, spends her free time enjoying her three children and four grandchildren, and is an avid swimmer.

Burns & McDonnell recently welcomed William (Billy) Pacheco to the pipeline team in Chicago as a Senior Project Engineer. Pacheco brings nine years of experience managing projects in the natural gas pipeline and storage market. In this role, he will develop internal standards and staff as the mechanical lead for natural gas designs and act as a technical resource for natural gas conditioning, regulation stations and valve automation.

Nixon Peabody LLP is pleased to announce that Andrew Hahn has joined the firm as an associate in our Affordable Housing & Real Estate practice group. Andrew’s practice focuses on a wide range of commercial real estate matters representing both small and large business owners, landlords, tenants, entrepreneurs, and investors of all kinds. Andrew earned his JD from the University of Illinois Chicago School of Law / John Marshall Law School and he received his BA from Western Michigan University.

ARCHITECTURE / DESIGN Lamar Johnson Collaborative, Chicago Lamar Johnson Collaborative (LJC) has promoted Shelby Kroeger to Principal.

She is the Director of Communications and Marketing with more than Kroeger 20 years of marketing experience in the A/E/C industry. She is an active photographer and holds a bachelor’s degree from the University of Iowa.

LJC has promoted Charles Meagher, PE, LEEP AP, QCxP, to Principal. He has over Meagher 18 years of experience providing MEP system thoughtleadership, constructability reviews, system shop drawing reviews, and system start-up on various project types. Charles has a BS in Mechanical Engineering from Ohio State University and a Juris Doctor from DePaul University College of Law. He is a professional engineer and licensed attorney in Illinois.

BANKING Byline Bank, Chicago Tom O’Hare joins Byline Bank as SVP, Division Head for Commercial and Industrial Banking.

Tom’s experience in commercial banking spans 30 years, including work at American National, Wintrust and UMB Bank. In his new role at Byline, Tom is leading the Evanston Commercial Banking team in serving and helping grow businesses throughout Chicago. He received his MBA from Northwestern University’s Kellogg School of Management and his bachelor’s degree from Loyola University Chicago.

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

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BANKING / FINANCE Amalgamated Bank of Chicago, Chicago Amalgamated Bank of Chicago welcomes Timothy Clifford as Senior Vice President of Accounting and Finance. Prior to joining ABOC, Tim began his career in community banking with West Suburban Bank back in 1998.

He brings extensive internal audit expertise with over 24 years of financial, operational, and compliance audit experience, with 14+ years in leadership roles. Tim received a Bachelor of Arts in Accounting from North Central College and is a licensed certified public account.

FINANCIAL SERVICES Midland Wealth Management, Rockford Midland States Bank is excited to announce Jayne Hladio has joined as President of Midland Wealth Management.

Hladio will oversee the group of over 90 professionals and provide strategic leadership, planning, and executive management to achieve the group’s overall objectives. Midland’s wealth service offerings include Investment and Advisory, Trust Administration, and Retirement Plans.

NON-PROFIT Centers for New Horizons, Chicago Centers for New Horizons has selected Lakisha McFadden as its new CEO. Centers assists children, youth, and families in becoming self-reliant, improving the quality of their lives, and participating in rebuilding their community. Previously, McFadden served as Centers’ director of operations for eight years, and her appointment as CEO represents a continuation of the organization’s five decades as a Black-led organization dedicated to advancing quality of life in South Side neighborhoods.

LAW Freeborn & Peters LLP, Chicago BANKING / FINANCE Amalgamated Bank of Chicago, Chicago Amalgamated Bank of Chicago is excited to announce the return of Kelly Bradford as Vice President in Audit. Kelly previously worked for ABOC for five years followed by a period with the Illinois State Toll Highway Authority. Kelly brings 21 years of auditing experience with extensive expertise in GAAP, GAAS, and SOX 404. Kelly received a Bachelor of Science in Business Administration and Marketing from Morris College.

Welcome back to ABOC, Kelly!

Freeborn & Peters LLP is pleased to welcome Partner Sean J. Quinn to the firm’s Chicago office and the Litigation and Intellectual Property Practice Groups. Sean focuses his practice on helping businesses protect their intellectual property and resolving complex commercial disputes. He manages intellectual property litigations involving trademark, trade dress, copyright, trade secret, and unfair competition claims.

NON-PROFIT Shriver Center on Poverty Law, Chicago Dawn Raftery, a missiondriven communication leader and storyteller, has been named the Vice President of Communications for the Shriver Center on Poverty Law. Raftery, who brings nearly 25 years’ experience working in government, business, the media, and nonprofits, will lead strategic communications in support of the Shriver Center’s mission for economic and racial justice. Most recently, Raftery served as Principal of Communications at the Chicago Metropolitan Agency for Planning (CMAP).

LAW Levenfeld Pearlstein LLC, Chicago EDUCATION School of the Art Institute of Chicago, Chicago The School of the Art Institute of Chicago announced the appointment of T. Camille Martin-Thomsen as its new dean of faculty and vice president of academic affairs. In this role, Camille will oversee the School’s academic programs, research and professional practice activities, and faculty diversity and inclusion efforts.

Camille is an accomplished architect and researcher who previously served as acting associate provost for academic affairs at Pratt Institute.

LP has named Jeffery Hoffenberg as its new Managing Partner, effective July 1, 2022.

Jeff succeeds Robert Romanoff, who has been Managing Partner since January 2013. Hoffenberg was named to the firm’s Executive Committee in 2021, and as Managing Partner, he will now chair this committee. “Jeff has been a strong leader within the firm and the legal community for many years,” said Jeremy Gresham, CEO of LP. “His fresh perspectives and vast legal acumen will guide the firm into its next phase.”

NON-PROFIT

UCAN, Chicago’s leading organization to transform youth into future leaders, has awarded Colby Boyd the 2022 Youth Leadership Award.

Colby is part of a mental health group at the South Shore International College Prep High School and is an advocate for her peers’ mental health. She is currently looking at the University of Illinois at Chicago for her undergraduate degree and is interested in pursuing a career in the medical field.

NON-PROFIT UCAN, Chicago UCAN, Chicago’s leading organization to transform youth into future leaders, has awarded Anthony Ezeanyim the 2022 Comprehensive Undergraduate Success Program achievement. He is currently a sophomore at Millikin University, studying mechanical engineering.

He eventually wants to own his own company, perhaps in the auto industry, and be in a position to give back to his community. Anthony has been part of UCAN’s Workforce Development program for two years.

NON-PROFIT UCAN, Chicago UCAN, Chicago’s leading organization to transform youth into future leaders, has awarded Ya’Natika Morgan with the John E. Rooney Dynamic Award Scholarship for her outstanding academic and personal achievements. Ya’Natika has been part of UCAN’s Workforce Development program for two years and is considering starting a business or becoming a music teacher, as these are two of her biggest passions. In the future, she hopes to bring music programs to underserved youth.

NON-PROFIT UCAN, Chicago UCAN, Chicago’s leading organization to transform youth into future leaders, has awarded Diamond Neal the 2022 Comprehensive Undergraduate Success Program achievement. After graduating high school, Diamond plans to attend a four-year university and eventually get her master’s degree in architectural engineering. She has participated in UCAN’s Diermeier Future Leaders Now program, graduating on to join the Advanced Leadership Institute, and is also on UCAN’s Youth Advisory Board.

REAL ESTATE Matanky Realty Group, Chicago World Business Chicago, the city’s public-private economic development agency, named James E. Matanky, Chief Executive Officer, Matanky Realty Group, 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.

NON-PROFIT UCAN, Chicago UCAN, Chicago’s leading organization to transform youth into future leaders, has awarded Kyla Osborne the 2022 Youth Leadership Award for her outstanding achievements. Kyla has been part of UCAN’s Youth Peace Council for 3 years where she participated in a racial healing panel and spoke at a panel on gun violence convened by Rep. Danny Davis. She plans on going to the University of Illinois Urbana to study Political Science with the hopes of one day becoming an elected official.

6/14/22 9:18 AM

CRAIN’S CHICAGO BUSINESS • JUNE 20, 2022 13

After years of neglect, a city landmark is up for sale

BY ALBY GALLUN After a rough five years, including a stop in receivership, the bedraggled Pittsfield Building near Millennium Park has hit the market, bringing the landmark tower a step closer to the major overhaul it badly needs.

A new owner could pull the 38-story high-rise out of its funk, ending a dysfunctional drama that included an international financial scandal and a bitter court dispute for control of the property.

The city’s tallest building when it opened as an office property in 1927, the Pittsfield could be reborn as a residential tower—part if it already is apartments—with views of the park and the lakefront.

CBRE is courting buyers for the building at 55 E. Washington St., designed in a hybrid Gothic and art deco style that one trade journal called “another great edifice of decided distinction.”

“With the prime location in Chicago’s East Loop adjacent to Millennium Park, there are endless

possibilities for repositioning the asset assuming a successful zoning change,” CBRE says in an email marketing the property.

A CBRE executive declined to comment.

Two investors control the Pittsfield. Marc Realty, a Chicago-based landlord, owns apartments on floors 13 through 21, which aren’t part of the sale. Xiao Hua “Edward” Gong, a Chinese-born businessman who lives in Toronto, owns the rest of the building, much of it vacant and raw space.

DETERIORATION

Gong paid $20.8 million for his floors in a 2017 bankruptcy auction, raising hopes that the building might finally undergo a major redevelopment. But those hopes faded within months, after Canadian prosecutors charged Gong with criminal securities fraud. Prosecutors froze his assets, obtaining a restraining order on the Pittsfield, which put any redevelopment plan on hold. Another Illinois property owned by Gong, the former Mo-

torola campus in Harvard, went up for sale.

Meanwhile, the city filed a lawsuit over the Pittfield’s deteriorating physical condition, eventually installing a receiver to oversee the property. The case degenerated into a messy multiparty court battle involving Marc Realty, Gong’s attorneys, the city and receiver Courtney Jones.

Last year, after Gong’s company pleaded guilty to running a pyramid scheme, Canadian prosecutors lifted the restraining order on his assets. Gong reassumed control off Pittsfield after Jones was relieved as receiver.

But Jones and multiple companies are still owed money for the maintenance and rehab work they completed on the property. In February, Jones filed a foreclosure suit against the building, alleging that nearly $5 million in bills hadn’t been paid.

The foreclosure suit could complicate efforts to sell the building.

Jones did not respond to requests for comment, nor did an attorney

ALBY GALLUN

A new owner could pull the Pittsfield Building out of its funk, ending a dysfunctional drama that included an international financial scandal and a bitter court battle

The Pittsfield Building at 55 E. Washington St. for Gong.

Converting Gong’s portion of the building into apartments or condominiums would be a major undertaking, easily running into the tens of millions of dollars. Several years ago, a developer hatched a plan to convert some of the building into a hotel, but the city changed the property’s zoning to thwart the project, triggering a lawsuit.

Also complicating a sale is the building’s divided ownership. A buyer could try to take over the entire property by also acquiring

floors 13 through 21 from Marc Realty. Marc took over the space after its original owner defaulted on a loan for the property from Marc.

Marc isn’t looking to cash out but could be persuaded at the right price, said Marc Principal Gerald Nudo.

“Make me an offer, and then I can evaluate it,” he said.

Would Marc be interested in buying Gong’s space? Nudo gave a similar noncommittal answer.

“It depends on the price,” he said. “We don’t like to buy things at the top of the market or overpay.”

Lightfoot moves to extend life of huge downtown TIFs TIFs from Page 3 said the city “plans to address these TIFs at upcoming City Council meetings” and that introduction of enabling legislation is “pending.”

The council’s next meeting is June 22.

The email only gave few specifics of what they city would do with that $100 milllion-a-yearplus, but left some tantalizing hints.

One recipient would be the local share of an $850 million project at Union Station that the city and state want the federal government to fund. As previously reported, that includes some renovation inside the historic station, but also the addition of a new passenger platform and extensive track construction to the south to make the station more efficient for Amtrak and Metra.

HOUSING

At Kinzie, the extension would “support local additional affordable housing and public infrastructure,” Rodriguez said.

Rodriguez declined to elaborate, but Ald. Walter Burnett, 27th, whose ward covers most of the area, said he has been pushing for TIF money to incentivize residential developers in the area to boost their share of units that must be rented at affordable rates from 20% now to 30%.

Burnett said he also wants money for a new Metra station at Ashland Avenue to serve the Fulton Market area and for re-

P013_CCB_20220620.indd 13

lated track work.

He said some money also could go to infrastructure projects that would benefit the proposed Chicago gambling casino at Chicago Avenue and Halsted Street, and the Lincoln Yards development to the north and east.

THE 78

Beyond that, the Canal/Congress TIF is adjacent to The 78 TIF. That project has been in slow motion after the city decided not to locate the casino there, with developers seeking city TIF help for infrastructure work that casino property taxes would have funded, as previously reported.

Under state law, since The 78 and Canal/Congress TIFs are adjacent to each other, revenue collected in one can be used for projects in the other, a process known as porting.

Extending the life of downtown TIFs likely will draw fire from the Chicago Teachers Union and others who argue that TIFs deprive Chicago Public Schools of tax revenue. That argument is largely inaccurate but in an election year could carry some weight.

If Lightfoot proceeds with the pending plan, she will be following in her own steps. Late last year, the city extended the life of the Near North TIF, which produced $39 million in increment last year.

An extension would require only a majority vote of the City Council.

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6/17/22 3:51 PM

14 JUNE 20, 2022 • CRAIN’S CHICAGO BUSINESS

Biggest retail lease since 2015 boosts Mag Mile

BY ALBY GALLUN After losing one retailer after another over the past three years, the Magnificent Mile is gaining a big one.

Aritzia, a Canadian women’s apparel chain, plans to open a store in the former Gap building, at 555 N. Michigan Ave., according to CBRE, which brokered the retailer’s lease for the space. At 46,000 square feet, it is the largest retail lease on the Mag Mile since 2015.

The deal represents a vote of confidence in Chicago’s biggest and most important shopping district, which desperately needs a boost after a wave of store closings amid the pandemic and a surge in violent crime. About a quarter of retail space on the Mag Mile—a stretch of North Michigan Avenue that runs from the Chicago River north to Oak Street—is vacant after the departures of Macy’s, Gap, Uniqlo and other tenants.

“Coming out of the pandemic, this is an important deal for the Mag Mile, and Chicago in general,” Luke Molloy, CBRE senior vice president and leader of the team that arranged the lease, said in a statement. “Aritzia is one of the most sought-after brands in the world and they believe in the future of North Michigan Avenue.”

Vancouver-based Aritzia, which opened its first U.S. store in Seattle in 2007, has been expanding steadily in the United States,

where it now has 41 boutiques. In the Chicago area, Aritzia operates stores at Westfield Old Orchard mall in Skokie, Oakbrook Center in Oak Brook and on Rush Street in the Gold Coast. It closed a store in Water Tower Place during the pandemic.

Aritzia will continue to operate the Rush Street shop, which totals about 8,000 square feet. The store has been “incredibly successful,” one reason Aritzia was confident expanding onto North Michigan Avenue, said Karen Janes, the company’s senior vice president of real estate and new business development.

“We do believe that North Michigan Avenue is going to come back,” she said. Aritzia’s expansion “could be a catalyst” for other retailers to move there.

Aritzia seeks to deliver “everyday luxury,” with fashionable clothes at moderate prices embraced by celebrities, including Meghan Markle and Jennifer Lopez. It sells cardigan sweaters that range from $35 to $228 and dresses priced from $24 to $198.

The chain expects to open the Michigan Avenue store in late 2023 or early 2024, Janes said.

“It’s a beautiful building in a great location,” she said.

GLIMMER OF HOPE

Gap occupied the three-story building, which was designed

by Stanley Tigerman, for more than 20 years before moving out in early 2021. With the loss of the rental income from Gap, the

property appeared to be headed for loan trouble, with its $55.5 million mortgage transferred to a so-called special servicer earlier this year. It was a warning sign that the building’s Irish owner, ECA Capital, was in danger of defaulting on the debt.

The Aritzia lease should put the property back on a solid financial footing, though how solid depends on rent the retailer is paying, what ECA will spend to build out the space and other lease terms. Molloy and Janes declined to discuss details of the lease.

The Aritzia offers a glimmer of hope that the worst may be over for North Michigan Avenue, a key tourist destination, jobs generator and source of tax revenue for the city.

“We think this is the beginning of a shift,” said Kimberly Bares, CEO of the Magnificent Mile Association, which promotes businesses in the area.

Bares takes it as an encouraging sign that Aritzia is leasing all of Gap’s space and keeping its Rush Street store open. Many retailers these days are shrinking their store space and reducing store counts.

Aritzia’s 46,000 square feet is the biggest on the Mag Mile since Uniqlo cut a deal for 61,000 square feet at 830 N. Michigan Ave. in 2015. That space has been vacant since Uniqlo moved out last August.

North Michigan Avenue retailers were struggling with sluggish

ALBY GALLUN

Aritzia is opening a big store in the former Gap building on Michigan Avenue, a major vote of confidence in a shopping district that desperately needs one

555 N. Michigan Ave. sales before the pandemic, as more shoppers spent their money online. But COVID-19 delivered an especially devastating blow to the boulevard as local shoppers and tourists stayed home. Riots and looting over the summer of 2020 added to retailers’ pain.

FIRST STEP

More recently, shootings and other violence in the neighborhood have battered the city’s image, forcing the Chicago Police Department to beef up its presence there. In May, two people were killed and eight were wounded in a shooting on Chicago Avenue just two blocks west of the Mag Mile. A panel formed by the Urban Land Institute to generate ideas for the shopping district’s comeback cited public safety as its most pressing issue.

“Without a more concerted effort to reduce actual crime and the perception of it, any revitalization strategies are not likely to have a significant impact,” the panel wrote in a report released in March.

To be sure, turning around Michigan Avenue won’t happen

overnight. It will take many more leases to bring its vacancy rate down from about 25% today to about 5%, where it was five years ago.

Aritzia’s lease “is a great first step, but it doesn’t mean that everything is better now,” said CBRE’s Molloy. “We need to use this as a springboard to get everyone on board and get Michigan Avenue back on track.”

The ULI report offered a variety of other solutions, from changing the streetscape to bringing in experiential attractions, like virtual-reality theme parks and ticket experiences. One example: An immersive show featuring the late musician Prince that just opened at 540 N. Michigan Ave. Another one: The Museum of Ice Cream, set to open this summer at the base of Tribune Tower.

The Magnificent Mile Association also just launched a street ambassador program, with 16 uniformed representatives patrolling the boulevard. Equipped with radios, they serve as another set of eyes for the police while greeting and assisting visitors.

“It’s a very welcoming presence,” Bares said.

Dutch trading firm IMC expands at Willis Tower The lease bucks the broader trend in downtown Chicago, where many companies are shedding space, pushing the vacancy rate up to a record high As many companies shed downtown office space in the pandemic era, a Dutch trading firm is expanding, leasing an extra 50,000 square feet in Willis Tower.

IMC is growing from 110,000 to 160,000 square feet in the 110-story skyscraper, Chicago’s tallest tower, according to a press release from the building. The 10-year-lease bucks the broader trend in downtown Chicago, where the office vacancy rate has soared to a record high as companies cut back on space with many of their employees continuing to work from home.

IMC‘s Chicago office has grown from two employees to 250 since it began trading in 2000, according to the

P014_CCB_20220620.indd 14

company’s website. The firm currently occupies the 42nd and 43rd floors of Willis Tower, which is owned by Blackstone Group, the New York-based private-equity firm.

IMC is expanding after the completion of a $500 million expansion and renovation at the base of the building at 233 S. Wacker Drive, which is managed by EQ Office, Blackstone’s office company.

“With its premier location and enhanced amenities, we are excited to offer our employees an environment that fosters collaboration, innovation and fun,” Adam Hoffman, IMC’s managing director of operations, said in the release.

The release did not say how many employees IMC plans to add at Willis Tower as part of

the expansion. An IMC representative was not immediately available for comment.

“IMC’s expansion and renewal at Willis Tower is a testament to the amazing space we have created for our customers and their employees,” Britton Derkac, senior vice president at EQ Office, said in the release.

SHEDDING SPACE

The IMC lease will boost the occupancy rate at Willis Tower, currently at 88.4%, according to real estate information provider CoStar Group. The 3.9 millionsquare-foot building suffered a big blow last December, when United Airlines announced it was moving 900 employees from the tower to a property in Arlington Heights. Also in December, law firm Schiff Hardin put about

GUIDO COPPA/UNSPLASH

BY ALBY GALLUN

A $500 million renovation at the base of Willis Tower has been completed.

59,000 square feet in the building up for sublease.

Brokers Matt Carolan and Phil Geiger of Jones Lang LaSalle rep-

resented IMC in the lease. Jamey Dix, Nikki Kern and Caroline Colnon of the Telos Group represented EQ Office.

6/17/22 3:28 PM

CRAIN’S CHICAGO BUSINESS • JUNE 20, 2022 15

Food hall, riverfront patio open at Old Post Office From Here On is the newest project from the hospitality team behind Revival and Thalia Hall.

And it’s now officially open.

A new food hall opened June 13 in the Old Post Office, giving workers in the newly rehabbed century-old building more lunch options in their far-flung corner of downtown.

From Here On food hall is the latest project from 16” on Center, the group behind Pilsen music venue Thalia Hall, the Loop’s Revival Food Hall, and the Salt Shed in the old Morton Salt building.

The new food hall is located on the first floor of the sprawling Old Post Office, and is one of the first sights greeting people after they pass through the building’s striking entry hall off Van Buren Street.

The Old Post Office opened as a newly renovated office building in late 2019 after an almost $1 billion restoration, and has been adding tenants since, including Uber, Home Chef and Ferrara Candy. But the pandemic sidelined Loop office occupancy, which was only 44.2% of 2019 levels in April, according to a report from the Chicago Loop Alliance.

It’s a tough time to open a food hall in the Loop, but Tim Wickes, 16” on Center’s director of food hall operations, is optimistic.

“Everyone’s on a hybrid schedule these days,” he said. “When people do come back to work, they want to dine out, they want to dine with their coworkers. . . .This is definitely the place for that.”

TAKING THE PLUNGE

Opening a food hall downtown now is a bet that it will draw workers from other buildings, and that more folks will start working downtown, said David Henkes, senior principal at market research firm Technomic.

Timing is rarely perfect to open a restaurant, particularly in the past two years, but at some point, an operator has to take the plunge and hope for the best, Henkes said.

“They’re definitely banking not on the business as it is today, but on what it can be or could be over the next six to 12 months,” he said. “If you build it, you hope they will come.”

ALLY MAROTTI

BY ALLY MAROTTI

From Here On food hall in the Old Post Office.

From Here On has 10 restaurants—seven are open now, the rest will be open by mid-July.

They’re all outposts of Chicagoarea restaurants or 16” on Center concepts.

There’s Tempesta Market, selling housemade charcuterie, Italian sandwiches and more; Familiar Bakery from Chef Ashley Robinson, who heads

the bakery stand at Revival Food Hall and has worked at Dusek’s Tavern, Spiaggia and more; Flo’s Tacos, a family-run, Durango-style Mexican restaurant; Millie’s, a third-generation diner serving pancakes and burgers; and Hot Chi Chicken, which serves Chicago-style hot chicken. There’s also a cafe and grab-and-go area.

In the middle of it all is a bar called the Snorkelbox, which is an ode to the postal service. Snorkelbox is the name of the USPS’s freestanding, blue mailboxes, and the bar is blue to match.

From Here On occupies 18,000 square feet, and has a 26,000-square-foot riverfront patio, where it plans to host concerts and other events.

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We promise to ensure the choices we make today impact the future of our built environment to create a better quality of life for all. pepperconstruction.com

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6/17/22 3:08 PM

16 JUNE 20, 2022 • CRAIN’S CHICAGO BUSINESS

Several restaurant concepts arrive in Millennium Park The openings come just in time for summer as the city beckons tourists and office workers to return in greater numbers downtown

BY TRINA MANNINO Millennium Hall, a new multiconcept dining experience, opened in Millennium Park in the former Park Grill restaurant last month.

The opening arrives just in time for summer as the city beckons tourists and office workers to return in greater numbers downtown.

Vandalay Brands, whose restaurants include Napolita Pizzeria in Wilmette, Double Clutch Brewing in Evanston and Casa Bonita in Libertyville, and Lakefront Hospitality are partnering on the new venture with the city.

The partnership oversees all food and concessions for the park.

Patrons can currently experience Napolita Pizzeria, a 180seat dining area. On Thursday, Double Clutch Brewery will open on the Plaza, which will seat 300 and include two bars and 24 taps.

And a 120-seat Casa Bonita outpost will open by the end of June.

Eventually, the space will include a stage that the hospitality groups will work with the Department of Cultural Affairs & Special Events to program live music and other events. Each of Millennium

Hall’s concepts are headed by Executive Chef Wally Wallace, formerly of East Bank Club.

PIVOTAL MOMENT

Its first wave of openings has been “very positive,” according to Mark Ramirez, director of operations at Millennium Hall. He mentioned that patrons, who are familiar with the group’s other restaurants, have shared that, “the food is great, if not better than they experienced before.”

Millennium Hall, located at 11 N. Michigan Ave., arrives at a pivotal moment for the Loop.

Downtown has trailed behind other neighborhoods to return to pre-pandemic levels of activity. The uptick in crime and various COVID-19 waves stymied the area’s usual bustle of activity. But ventures like Millennium Hall are betting that this summer will be different.

“The downtown area is on its way back, but slowly and very unevenly,” said David Henkes, senior principal at Technomic, a food-service consulting firm.

But being positioned at Millennium Park is a plus for Millennium Hall as it’s a main tour-

ist destination. And tourists are slowly returning. In the latest Chicago Loop Alliance report, hotels in the district recorded positive occupancy growth over February, reaching 64.6% of 2019 operations in April.

Ramirez expects that in addition to locals, tourists will be a large part of the hall’s patronage. Regarding the city’s recent downtown crime wave, he said that the hospitality group has worked closely with the Chicago Police Department, park security and its own security companies to create a pleasant and safe environment for patrons.

Millennium Hall’s family friendly menu offers an eclectic mix of Napolita’s Neapolitan pizza, pastas and other traditional Italian fare as well as Double Clutch Brewing’s shareable bites, including pulled pork nachos and Belgian mussels with hefeweizen broth. The concepts also offer an extensive list of craft beer, wine and cocktails.

CAUTIOUS OPTIMISM

Millennium Hall is open daily for lunch and dinner, Sundays through Thursdays 11 a.m. to 9

A rendering of Casa Bonita Pavilion, which will open by the end of June. p.m., and Friday and Saturday 11 a.m. to 10 p.m. Outdoor seating is available throughout the season, and indoor seating is offered year-round.

Food isn’t the only thing to take in at Millennium Hall.

Ramirez described the space as a “rustic industrial look” that features design elements inspired by the park. Napolita’s metallic-mirrored ceiling is influenced by Cloud Gate, the park’s 110-ton sculpture. A

video screen in the restaurant projects images of the city like the towers that are a part of the Crown Fountain.

While it’s yet to be seen how the Loop will bounce back, Ramirez is optimistic. “People really want to get out,” he said citing the enthusiasm with the recent Chicago Blues Festival that took place at the park. “It was just a lot of fun. We had minimal issues across the board and had great feedback overall.”

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6/17/22 3:07 PM

CRAIN’S CHICAGO BUSINESS 2020

CRAIN’S CHICAGO BUSINESS • JUNE 20, 2022 17

1

The fastest-growing firms in the area The businesses on Crain’s 2022 Fast 50 saw a median increase in revenue of 592.8% over the past five years

BY SOPHIE RODGERS | COMPANY PROFILES BY H. LEE MURPHY Nortia reported explosive growth after transitioning from consulting to asset-based operations in the fourth quarter of 2019. AIT Worldwide’s revenue increase is attributable to success in executing the company’s strategic plan, which outlines both organic expansion and growth by acquisition. DeSpir said “the growth in the pharmaceutical sector and COVID vaccine has brought to light the extra care, quality management and security needed in transporting these products.” Combined, these three newcomers generated $2.2 billion in 2021.

Chicago’s financial services companies make up a large chunk of change this year. Combined revenue of these nine organizations was $4.8 billion in 2021, or 31.3% of the list’s total 2021 revenue. In this group of companies, four were not in last year’s Fast 50: Supernova Technology, Arete Wealth, Guaranteed Rate and Hightower Advisors.

These four reported revenue gains through organic growth, acquisitions, expansions and strategic investments. Supernova Technology told Crain’s that prior to 2018, the company was creating “custom built securities-based lending platforms for each of our clients, which was labor and time intensive.” After Tao Huang joined as CEO, he worked with the product team to create a core product to meet all customers’ needs, which contributed to the company’s fast growth.

Read on for our full ranking of fastest-growing companies, as well as profiles of the top five.

Missed your chance to apply for Crain’s 2022 Fast 50? To ensure your company submits on time next year, contact Sophie Rodgers (sophie.rodgers@crain.com).

P017-P021_CCB_20220620.indd 17

Cryptocurrency hasn’t been a very good investment recently, with a spring market meltdown wiping out $300 million in value in a matter of days. But for CoinFlip, bitcoin and other digital currencies have continued to fuel stunning, relentless growth, propelling the Chicago company to the top of the Fast 50 list for the second year in a row.

CoinFlip owns 4,000 ATM-style machines in 49 states that allow ordinary investors to buy bitcoin and other cryptocurrencies in convenience stores and gas stations.

Tanking prices, the company says, could actually ignite fresh interest in the sector as investors rush in looking for bargain valuations not seen for a couple of years.

“We’ve been through worse than this in the past,” CEO Benjamin Weiss says about the 50% plunge in bitcoin prices. Noting that the stock market sell-off in the spring put a 70% dent in Netflix’s stock price and a 43% hit to shares of Facebook parent Meta Platforms, CoinFlip’s chairman, Daniel Polotsky, adds: “Bitcoin is actually down less than a lot of American tech stocks lately.”

CoinFlip, which takes a 7% commission on every buy order and 5% on sell orders, is ignoring market gyrations and forging ahead with heavy investment. It’s adding 200 machines to the U.S. market every month and has just expanded to Canada, while hiring

100 new engineers.

The two-year-old over-the-counter trade desk at CoinFlip is a hot platform. While the ATM business requires cash purchases, the OTC is aimed at middle-market customers using wire and bank transfers to buy bigger quantities of cryptocurrency. Whereas the average ATM transaction is $200, the trading desk is closer to $20,000. And customers can access the trading desk from anywhere via phone apps.

Revenues at CoinFlip came close to doubling in 2022. This year Weiss is predicting that the company will grow at a mere 50% pace to roughly $150 million in sales. “We’re slowing down,” he acknowledges. A year ago he predicted the company would be ready for its first public offering of stock late in 2022. But suffering stock markets have put all IPO talk on hold. No matter. To pay its bills since CoinFlip started in 2015, co-founders Weiss and Polotsky have never borrowed money from outside the company, instead relying on internal cash flow to finance all growth.

Daniel Yurcho, a cryptocurrency consultant based in Frederick, Md., believes the downturn in crypto prices is hardly concerning to CoinFlip. “Interest in bitcoin has not fallen off. It continues to rise,” he says.

“Individuals look at the current period as a buying opportunity if anything.”

What it does: Cryptocurrency ATM banker

2021 revenue: $89.2 million

Five-year growth: 509,389%

Employees: 178 local, 201 total

Profitable: Yes

Location: Chicago

JOHN R. BOEHM

As Chicago businesses recover from the economic turmoil of COVID-19, Crain’s recognizes 50 local companies that still managed to generate impressive revenue growth since 2016. The businesses in Crain’s 2022 Fast 50 saw a median increase in revenue of 592.8% over the past five years, and an average increase of 13,310.5%, driven by enormous growers topping our list.

Cannabis, logistics and financial services companies lead the way on our latest ranking—which includes 21 not featured last year.

With a total of $1.38 billion in Illinois adult-use cannabis sales last year (a 106.1% increase from 2020), it should come as no surprise that Chicago’s largest cannabis companies rank high on our list. Cresco Labs, Verano, Green Thumb Industries and PharmaCann all made the top 10 after seeing meteoric growth.

Of these firms, only Green Thumb was featured in last year’s Fast 50.

Combined, these four businesses generated $2.7 billion in 2021, making up 17.7% of the full list’s 2021 revenue. Growth for these companies came after recreational cannabis sales became legal in Illinois on Jan. 1, 2020.

Meanwhile, Chicago’s logistics firms and employees responded with agility to the relentless changes and challenges in the wake of COVID, a theme underscored in Crain’s 2022 Largest Privately Held Companies list. With seven logistics companies making Crain’s 2022 Fast 50, Nortia Logistics, AIT Worldwide Logistics and DeSpir Logistics are new to the annual ranking.

CoinFlip

Daniel Polotsky, left, and Benjamin Weiss of CoinFlip

6/17/22 4:03 PM

18 JUNE 20, 2022 • CRAIN’S CHICAGO BUSINESS

2

TEGUS

Any investor or investment house seeking information about a company has ready sources at hand. You go to the Securities & Exchange Commission to find recent 10-K and -Q filings on profits and losses and you find what every analyst on Wall Street is writing about your subject by going to standard clearinghouses like Bloomberg.

But Michael and Thomas Elnick, the twin brothers who co-founded Tegus in 2015, dismiss all that as mere qualitative information too easy to find.

The Tegus digital platform digs deeper to find qualitative particulars, as they explain it. The firm amasses a more gossipy string of information on behind-the-scenes activity, like the loyalty of a subject company’s customers and what its employees are saying about management and how its products are viewed in the marketplace by rivals. Much of this information is gathered by inviting sources to post their impressions with Tegus.

Even Wall Street analysts are willing to deliver their own outtakes to Tegus—random knowledge they glean that never makes it into finished reports.

The Tegus corporate intelligence alternative is finding a ready auWhat it does: Compiles and sells corporate intelligence

dience. The company, founded in New York on a shoestring in 2015 by the Elnick brothers, who were both working on Wall Street at the time, charges its clients $25,000 for a standard subscription to its platform. Pension funds, mutual funds and all manner of institutions have signed up, along with venture-capital and private-equity groups seeking investment targets.

At this point, Tegus covers a roster of 25,000 businesses, ranging from big public companies to small startups.

2021 revenue: $27.1 million

“This is subjective information, but also important information,” says Michael Elnick, who is coCEO along with his brother. “Why are some companies using a particular software instead of another? You go and talk to 20 customers to find out why. You don’t find this stuff on Bloomberg.”

Tegus is looking to new vistas to amp its growth. It acquired a New York rival, BamSEC, in December.

In January it opened an office in Waterford, Ireland, with 50 employees as part of a strategy to exFive-year growth: 26,337%

3

Employees: 252 local, 254 total

Profitable: No

Michael Elnick, co-CEO

Location: Chicago

NORTIA LOGISTICS

What it does: Hauls freight by truck

2021 revenue: $51.5 million

Five-year growth: 24,563%

Employees: 25 local, 107 total

Profitable: Yes

Location: Franklin Park

P017-P021_CCB_20220620.indd 18

pand into Europe.

One backer of Tegus, Alex Wolf of the Investment Group of Santa Barbara in California, is convinced that the company is filling an obvious void in market intelligence.

“Revenues and stock prices are easy to find today,” says Wolf, who carries the title of partner. “But investors can’t make money on financial data that is already public.

They are shifting their attention now to more subjective findings.

What are employees saying? You can learn a lot there.”

“THIS IS SUBJECTIVE INFORMATION, BUT ALSO IMPORTANT INFORMATION. WHY ARE SOME COMPANIES USING A PARTICULAR SOFTWARE INSTEAD OF ANOTHER? YOU GO AND TALK TO 20 CUSTOMERS TO FIND OUT WHY. YOU DON’T FIND THIS STUFF ON BLOOMBERG.”

Ellen Lopatkina, the 43-yearold president and CEO of Nortia Logistics, a hauler of freight largely by her own fleet of trucks, is a Ukrainian immigrant who could be excused for having other things on her mind. She recently brought her father-in-law, whose house in Ukraine was destroyed by advancing Russian troops, here to live. She is managing an airlift of supplies, including ambulances, to the embattled nation through her charity, called the Ukrainian Resistance Foundation, while also caring for her 5-year-old daughter.

Somehow through all this, Lopatkina has propelled her trucking company onto the Fast 50 list through a mere three years of active operations. Soon after immigrating to Chicago in 1999, she found work as a trucking dispatcher and eventually as a consultant (under the Nortia name) to other trucking firms. But her last client was bought out three years ago, and she decided to go into business for herself with less than $100,000 in savings in an industry where a single truck alone can cost twice that.

“I maxed out every credit card I had,” Lopatkina says. “Then COVID came along, and that was actually good for business.”

Rival truckers were closing up as the pandemic hit, leaving driv-

ers and 18-wheelers available to acquire at vastly reduced prices.

What’s more, freight rates that had been at historic lows a few years before suddenly shot up. In the blink of an eye, Nortia grew to a fleet of 65 vehicles and 300 trailers, in an industry commonly dominated by rough-talking men allied with the Teamsters, not a polite woman hiring nonunion workers.

Growth could come harder in the future. Trailers priced as low as $12,000 two years ago have climbed back up to $50,000. Diesel fuel has zoomed past $6.50 a gallon, threatening profits. But Lopatkina figures a difficult economy will only put more small rivals out of business and give her cheap assets to acquire. On the positive side, import bottlenecks on the West Coast have eased lately, allowing Nortia’s trucks to roll more freely.

Yevgeniy Drobot, deputy consulate general of Ukraine in Chicago, says that Lopatkina’s success has been an inspiration to Ukraine immigrants in the area. “I’ve watched Ellen study and work hard to improve her skills,” Drobot says. “And the Russian invasion had hardly started when she went to work finding money and supplies to help.” Lopatkina’s charity, he estimates, has already sent 450 tons of supplies back to the homeland.

6/17/22 3:34 PM

CRAIN’S CHICAGO BUSINESS • JUNE 20, 2022 19

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What it does: Wholesaler and retailer of cannabis

5

2021 revenue: $821.7 million

Five-year growth: 24,135%

CRESCO LABS

In the fast-expanding legal can- sales legal, though its new law isn’t nabis industry, there is a race to expected to be implemented until consolidate as the biggest retailers December.

As part of the merger, Cresco will and wholesalers jockey for position. So far, Cresco Labs looks to be have to divest licenses in five states.

Bachtell is hardly concerned. Until winning the race.

In late March, Cresco shook the now Cresco has relied on just three industry with the announcement states—subject to shifting legislathat it would pay roughly $2 billion tion—for 80% of its sales. Columto acquire a rival industry goliath, bia was even more concentrated, New York-based Columbia Care. getting over 90% of its sales from When the deal closes, probably late three states. When the combination this year, Columbia Care will add occurs, the new Cresco will be able nearly $600 million to the top line of to boast of $100 million in sales or Cresco, which recorded $821.7 mil- more from eight different states.

“We’ve wanted a diversified revelion in sales last year. It will also add 2,600 employees to Cresco’s roster nue base, and that’s what we’ll have in the future,” Bachtell says. More of 3,600.

Since its founding in 2013, Cresco big opportunities lie ahead, he adds. has landed some 15 acquisitions— Virginia has passed a recreationalfive alone last year.

But Columbia gives SINCE ITS FOUNDING IN 2013, CRESCO Cresco significant geographic diversity, HAS LANDED SOME 15 ACQUISITIONS— expanding its footprint from its current FIVE ALONE LAST YEAR. licenses in 10 states to use law that won’t take effect until 18 after the deal is finalized.

“This is the industry’s biggest deal early 2024. There are two pending in dollar volume. It’s makes us a bipartisan bills in Pennsylvania to clear No. 1,” says Charles Bachtell, bring recreational use there, too.

Many Wall Street analysts have co-founder and CEO of Cresco.

The company has had a leading “buy” recommendations out on wholesale business, he notes, but Cresco stock recently. Russell Stanwas lagging on the retail side with ley of Beacon Securities holds out just 50 stores until now. Columbia hope that there will soon be canCare will add 83 stores to the portfo- nabis banking reforms passed at lio, including key locations in New the federal level. Owen Bennett of Jersey, which implemented a law Jefferies says the Columbia acquiin April allowing recreational mar- sition will afford Cresco “a much ijuana sales for the first time. New improved margin profile”—better York has also made recreational profits.

Employees: 855 local, 3,421 total

Profitable: No

Location: Chicago

VERANO HOLDINGS

If the future of legal cannabis is in vertical integration, Verano Holdings is grabbing a head start over many rivals in getting licenses not only to sell marijuana at retail and wholesale, but also to grow it.

In late January, Verano announced it is investing $413 million in stock to acquire Minneapolisbased Goodness Growth Holdings.

The deal expands Verano’s footprint from 15 states to 18 and from 93 dispensaries to 111. But just as important, Goodness Growth brings five new cultivation facilities to Verano, raising its total to 17.

The deal was Verano’s second largest after its purchase last year of Florida-based Alternative Medical Enterprises, valued at close to $700 million. That acquisition was so big it required Verano to offer public shares for the first time so that it could use stock in the transaction.

The two big acquisitions haven’t slowed Verano on other fronts—in the past year it’s scooped up 13 other smaller rivals.

Goodness Growth has a rare vertical license in New York, which has passed legislation allowing recre-

P017-P021-CCB_20220620.indd 19

ational cannabis sales recently. With the ability to grow, distribute and dispense cannabis in New York, Verano’s chief investment officer, Aaron Miles, says the deal “gives us the important New York market. Before, we had been trying to figure out an entry point into that market.”

In April recreational sales became legal in New Jersey, and Verano has wasted no time in opening a cultivation facility there in a closed 120,000-square-foot Walmart in Branchburg. The Alternative Medical deal gave the company a powerful presence in the booming Florida market, where Verano operates two cultivation facilities supplying product to 47 company-owned dispensaries.

CEO George Archos notes that the Goodness deal also gets Verano into emerging markets in Minnesota and New Mexico. “We anticipate tremendous growth over the next five years,” he says. “This is just the beginning.”

Is there a danger of the industry getting overbuilt? Archos doesn’t think so. “We’ve been doing this eight years,” he says. “I’m not wor-

ried about things happening too fast. We’re well known for getting ahead of the curve, and there’s nothing wrong with that.”

Archos is doubtless pinning some of his optimism on recent forecasts from Fortune Business Insights. The researcher estimates the global cannabis market grew nearly 40% last year to $28.27 billion over 2020. It predicts that global sales will rise at an annual rate of 32% compounded over the next seven years, reaching $198 billion by 2028.

What it does: Grower and seller of cannabis

Five-year growth: 17,081%

Employees: 464 local, 3,365 total

2021 revenue: $760 million

Profitable: Yes

Location: Chicago

6/17/22 1:49 PM

20 JUNE 20, 2022 • CRAIN’S CHICAGO BUSINESS

Ranked by 5-year growth COMPANY

5-YEAR GROWTH

2021 REVENUE

LOCAL FULL-TIME EMPLOYEES

TOTAL FULL-TIME EMPLOYEES

PROFITABLE IN 2021?

6 7 8 9 10 11 12

GREEN THUMB INDUSTRIES Chicago

12,287.0%

$893.6 million

622

3,729

Yes

Manufacturer and distributor of cannabis products; 2014

PHARMACANN Chicago

6,819.1%

$250.7 million

388

1,278

No

Vertically integrated cannabis company; 2014

SUPERNOVA TECHNOLOGY Chicago

6,087.3%

$16.4 million

54

62

No

Financial technology platform; 2014

RHM STAFFING SOLUTIONS Oak Brook

5,379.8%

$64.6 million

125

185

Yes

Staffing services firm; 2015

SHIPBOB Chicago

4,141.4%

$215.3 million

328

931

No

Omnichannel fulfillment platform; 2014

45

FAST RADIUS Chicago

2,873.7%

$20 million

235

323

No

Cloud manufacturing company; 2014

46

REDSHELF Chicago

2,865.2%

$128.2 million

110

125

Yes

Provider of digital textbooks and related distribution software; 2012

47

13 14 15

WAVICLE DATA SOLUTIONS Chicago

1,870.3%

$30.4 million

83

307

Yes

Data solutions and analytics consulting; 2013

RICHARD GROUP Glenview

1,693.8%

48

$34.7 million

17

27

Yes

Commercial general contractor; 2014

SIMPLIFY HEALTHCARE Aurora

1,592.2%

$33.8 million

100

492

Yes

Health care technology solutions providers for health care payers; 2008

16 17 18 19 20 21 22 23 24 25 26 27 28 29

THE LACTATION NETWORK Chicago

1,312.3%

$35 million

24

35

Yes

Lactation consultations, breast pumps and products; 2014

REDMOND CONSTRUCTION CORP. Chicago

1,210.0%

$32.5 million

31

31

Yes

Commercial general contractor; 2013

OPPFI Chicago

1,155.9%

$350.6 million

472

575

Yes

Financial technology platform; 2013

ARDMORE RODERICK Chicago

1,076.4%

$56.1 million

188

243

Yes

Engineering design and construction management firm; 2005

GOHEALTH INC. Chicago

980.9%

$1.1 billion

980

5,300

Yes

Health insurance technology; 2001

TRANSPORTATION ONE Chicago

950.1%

$166 million

83

83

Yes

Logistics services; 2010

THE MATHER GROUP Chicago

747.0%

$42.7 million

65

131

Yes

Registered investment adviser; 2011

HYDE PARK HOSPITALITY Chicago

745.2%

$16 million

75

300

Yes

Food and facility services management; 2012

NEIGHBORHOOD LOANS INC. Downers Grove

653.0%

$130.6 million

279

542

Yes

Residential mortgage lender; 2009

EDGE LOGISTICS Chicago

630.8%

$134.4 million

46

130

Yes

Freight broker; 2014

BOUNTEOUS Chicago

554.9%

$159.8 million

161

1,462

Yes

Digital experience consultancy; 2003

BALLYHOO HOSPITALITY Chicago

534.7%

$26.7 million

107

107

Yes

Hospitality restaurant group; 2009

SPROUT SOCIAL INC. Chicago

512.8%

$187.9 million

510

884

No

Social media management software for businesses; 2010

CAPGROW PARTNERS Chicago

474.7%

$24 million

9

9

Yes

Community housing for individuals with behavioral health needs; 2006

30 31

ENDURANCE WARRANTY SERVICES Northbrook

431.8%

$910.2 million

315

600

Yes

Vehicle service contracts; 2006

ARETE WEALTH Chicago

405.9%

$82.7 million

10

24

Yes

Broker-dealer, registered investment adviser and insurance firm; 2007

32 33 34 35 36 37

REDWOOD LOGISTICS Chicago

402.2%

$1.2 billion

444

868

Yes

Logistics platform company; 2001

AIT WORLDWIDE LOGISTICS Itasca

400.1%

$2.1 billion

400

2,140

Yes

Logistics freight forwarder and logistics provider; 1979

GUARANTEED RATE COS. Chicago

392.2%

$3.2 billion

5,422

12,611

Yes

Mortgage lending and financial services; 2000

FULTON GRACE REALTY Chicago

389.8%

$27.2 million

56

56

Yes

Real estate management and brokerage services; 2010

RIGHT AT SCHOOL LLC Evanston

386.5%

$39.5 million

300

1,040

Yes

In-school child care and extracurricular programs; 2010

HBR CONSULTING Chicago

351.9%

$141.3 million

318

726

Yes

Strategic guidance and operational solutions for the legal industry; 2011

DESPIR LOGISTICS Lisle

343.7%

$33.3 million

46

47

Yes

Logistics services; 2014

WYNNDALCO ENTERPRISES LLC Addison

323.9%

$20.6 million

40

55

Yes

IT managed services firm; 2009

INTERRA GLOBAL Park Ridge

309.1%

$24.6 million

14

17

Yes

Provider of bulk desiccants and industrial adsorbents; 2008

PERKSPOT Chicago

305.5%

$26.9 million

111

128

Yes

Employee discount platform; 2006

38 39 40 41

P017-P021-CCB_20220620.indd 20

COMPANY DESCRIPTION; YEAR FOUNDED

42

43

44

49

50

ME

6/17/22 1:49 PM

Work ◗ We ◗ We that p ◗ Sm ◗ Las

n

h

;

firm;

CRAIN’S CHICAGO BUSINESS • June 20, 2022 21

COMPANY

5-YEAR GROWTH

2021 REVENUE

LOCAL FULL-TIME EMPLOYEES

TOTAL FULL-TIME EMPLOYEES

PROFITABLE IN 2021?

COMPANY DESCRIPTION; YEAR FOUNDED

42

AGB INNOVATIVE SECURITY SOLUTIONS Chicago

297.9%

$39.4 million

1,000

1,100

Yes

CSecurity firm protecting people, property and data; 2001

43

MILLENNIUM TRUST CO. Oak Brook

296.3%

$250.3 million

353

434

Yes

Retirement and financial services; 2000

44

HIREOLOGY Chicago

275.8%

$33.6 million

107

172

Yes

Recruiting, hiring and employee management platform; 2010

45

AVIONOS Chicago

271%

$22.7 million

65

147

Yes

Digital commerce and marketing solution; 2014

46

WALKER SANDS Chicago

270.9%

$30 million

125

180

Yes

Full-service B2B marketing agency; 2001

47

HIGHTOWER ADVISORS LLC Chicago

259.3%

$630.7 million

285

1,150

Yes

Financial services and wealth management; 2007

48

MORGAN LI Chicago Heights

258.7%

$52.9 million

125

125

Yes

Retail and hospitality fixture and furniture manufacturing; 2009

49

LRS Rosemont

251%

$428.6 million

1,200

1,900

Yes

Waste management; 1999

50

BUSINESS IT SOURCE INC. Buffalo Grove

249.2%

$245.7 million

92

92

Yes

IT products and services provider; 2008

METHODOLOGY Working with accounting firm Plante Moran, we had these ground rules for choosing the Fast 50: w We only considered companies headquartered in the seven-county Chicago area, founded on or before Dec. 31, 2015. w We excluded franchisees, regulated banks, utilities, real estate developers, real estate investment trusts and some holding companies (such as those that primarily buy or sell other companies/large assets). w Small companies (those reporting less than $15 million in 2021 revenue) were likewise not considered. w Lastly, we disqualified companies that had more than one drop in revenue from 2016 to 2021.

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For over 15 years, Arete Wealth and its family of companies have offered full-service Broker-Dealer, RIA and insurance services.

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P017-P021-CCB_20220620.indd 21

Securities offered through Arete Wealth Management, member FINRA, SIPC, NFA. Advisory services offered through Arete Wealth Advisors, an SEC registered investment advisor. Center Street Securities, Inc., member FINRA & SIPC. Center Street Advisors, Inc. is an SEC registered investment advisor.

6/17/22 1:49 PM

22 JUNE 20, 2022 • CRAIN’S CHICAGO BUSINESS

CLASSIFIEDS

æ`ÛiÀÌ Ã } -iVÌ

.

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

CAREER OPPORTUNITIES

GETTY IMAGES

CAREER OPPORTUNITIES

An educator provides an instructional lesson while livestreaming CAREER OPPORTUNITIES

Teaching platform provider gets $40 million in funding Chicago-based Elevate K-12 addresses the growing national teacher shortage by allowing educators to livestream while students are in the classroom

CAREER OPPORTUNITIES

BY CORLI JAY

CAREER OPPORTUNITIES

AUCTIONS advertising opportunities available

To advertise contact Suzanne Janik at sjanik@crain.com (313) 446-0455

REAL ESTATE

You can’t build a new home at these low prices!!

Elevate K-12, a Chicagobased livestreaming instruction provider, just announced it raised $40 million in Series C funding led by venture-capital firm General Catalyst. The firm will use the funding to expand its products and delivery and increase optimization, while also addressing the growing national teacher shortage.

Shaily Baranwal, founder and CEO of Elevate K-12, said General Catalyst was one of the first companies to understand the importance of their model when it was founded in 2015.

“I went to Silicon Valley and New York, and nobody believed in this at all because they couldn’t see the problem.

These investors were high-income people themselves; the problem was not facing them.

This problem was in the low-income neighborhoods—100% of the students we serve are low income,” said Baranwal.

UNDERSTANDING THE PROBLEM

T h e h o m e y o u h a v e a l w a y s d r e a m e d o f ! C l o s e t o S t a r v e d R o c k S t a t e Pa r k !

This lovely all brick home 4 beds, 5 bath w/3 car att. garage. Attached 3 car garage w/epoxy floors.

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All of this is situated on 3.8 acres fenced. 2 parcels, additional pin # 11-01-300-001. Back up gen, geothermal furnaces 2018, 400 amp elec.

Home and pool house sits on approx. 3.84 acres - $799,000 Home with 54x72 insulated, heated shed with a additional ½ bath. The home plus shed sits on approx. 5 acres - $1,150,000 https://www.coldwellbanker.com/property/3508-E-5th-Rd-La-Salle-IL-61301/120789453/detail Link to YouTube: https://youtu.be/lGHWIfZcFHg Wendy Fulmer Coldwell Banker Today’s Realtor’s LLC 815-252-8280

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P022_CCB_20220620.indd 22

Linda Kaszynski, Janko Realty & Development LLC 815-228-5622

ChicagoBusiness.com

Though she was not initially interested in raising Series C funds, Baranwal said she was convinced after speaking to Hemant Taneja, managing partner of General Catalyst who also served on the board of Khan Academy, and Ken Chenault, board chairman at General Catalyst.

“They were completely convinced that this is the way to solve this problem where the teacher shortage is a crisis.

In the next two years, 55% of America’s teachers are expected to quit the profession. They

understood the problem, they eradicating geographical barunderstood the gravity of the riers and eliminating the use of problem, because they are very long-term substitute teachers. socially impact focused,” said Baranwal, also mentioning INCREASED DEMAND how General Catalyst launched Even though the company the Responsible Innovation was founded pre-COVID, BaLabs, whose mission is to build ranwal said demand increased infrastructure for high-growth for Elevate as more teachers tech companies. started to leave, but she also A survey conducted by the wants to make clear that ElNational Education Associa- evate K-12 is not for remote tion found that 55% of teach- learning or home schooling. ers are quitting earlier than “We don’t do remote teachthey planned because of the ing when the kids are at home pandemic. There are currently and the teacher is at home.

567,000 fewer educators in (This is for when) the kids are public schools than before the in the classroom, like a regular pandemic, according to the U.S. Bureau of “I WENT TO SILICON VALLEY Labor Statistics.

Baranwal said this AND NEW YORK, AND NOBODY was an issue she sought to address af- BELIEVED IN THIS AT ALL BECAUSE ter speaking with su- THEY COULDN’T SEE THE PROBLEM. perintendents in Illinois and learning that THESE INVESTORS WERE HIGHfinding teachers for certain subjects was INCOME PEOPLE THEMSELVES; THE a common challenge, PROBLEM WAS NOT FACING THEM. even before the pandemic exacerbated THIS PROBLEM WAS IN THE LOWthe issues and made virtual learning a nor- INCOME NEIGHBORHOODS—100% mal part of life.

According to a study OF THE STUDENTS WE SERVE ARE by the Learning Pol- LOW INCOME.” icy Institute, “An increased number of Shaily Baranwal, founder teachers left the pro- and CEO of Elevate K-12 fession, both through retirements and resignations classroom. That’s not the probduring pre-COVID-19 years.” lem I’m solving; I’m solving With a background in pro- when the kids come to school duction engineering and ed- and they don’t have a teacher.” ucation, Baranwal created a Elevate K-12 is currently in platform that allows teachers 27 states and operates as its to teach remotely while stu- own platform, instead of using dents sit in the classroom, video sites such as Zoom.

6/17/22 3:06 PM

SPONSORED CONTENT

LIFE SCIENCES

With thriving neighborhoods and more affordable real estate, Chicago is emerging as a life sciences hub.

Investment in life sciences was at an all-time high in 2021. As a result, demand is quickly growing for research and development space in Chicago which is emerging as a major life sciences market. Three experts in commercial real estate development, design and construction, shared their insights with Crain’s Content Studio on the trends that are shaping the future of life sciences in Chicago.

Life sciences companies are rapidly evolving, and they need spaces that can accommodate that. What factors most influence the commercial real estate, design and construction decisions companies face?

Andy Halik: Labs typically need more technically sophisticated structures with more complex mechanical systems—particularly power and HVAC—than a typical office building. Structurally, they’ll need more risers and shafts; the good news is, if the building doesn’t have these structural needs, they can usually be installed to accommodate the lab-specific needs. Access to adequate power is critical. Life sciences tenants use an average of seven times more electricity than office tenants, because their lab and systems like HVAC, exhaust and electrical load systems need more finely tuned environments.

Suzet McKinney: To meet the evolving needs of life sciences tenants, real estate developers serving the sector must broaden their vision beyond merely functional, purposebuilt laboratory facilities of decades past. That journey begins with a collaborative relationship between the developer and the life sciences tenant to ensure an adequate understanding of the needs of life sciences companies, not just for their current business needs, but also for their growth needs as well.

Some of the unique building needs

laboratories don’t make scientific breakthroughs–scientists do. By creating lab environments where research and the exchange of ideas is easy, enjoyable and seamless, we increase occupant satisfaction and set the stage for innovation.

Brett Taylor: Fundamentally, there are a few building requirements that are unique to life science tenants to accommodate their lab needs. The structural grid for a lab building consists of 11-foot modules, a timetested and universal approach that takes lab bench width and other attributes into account. Floor-tofloor height is 1-1.5 feet higher than a typical office building to accommodate additional building service requirements. Additionally, some lab tenants may install sensitive equipment that require low building vibration, therefore the structural system may need to be modified to accommodate those specific requirements. Collaboration space is critical. As such, lab buildings typically have higher collaboration / amenity ratios than typical spec offices, especially multi-purpose areas that are often used for hosting lectures and other industry presentations.

McKinney: Most of the key demand drivers that make for a successful life sciences market already exist in Chicago. Namely, top-tier research universities and healthcare institutions, STEM talent, National Institutes of

— ANDY HALIK, SKENDER

P023_025_CCB_20220620.indd 23

Vice President Skender ahalik@skender.com 312-607-4499

bleeding to the coasts and the departure of talented scientists and entrepreneurs that come out of the universities here.

Our government has awakened to this fact as well. We now have a more cohesive effort that is centered around the goal of growing Chicago’s life

SUZET MCKINNEY, DRPH, MPH

Principal & Director of Life Sciences Sterling Bay smckinney@sterlingbay.com 312-202-3492

sciences ecosystem and raising the city as a major life sciences market.

Halik: There are two main factors driving this industry’s growth.

One is an increase in Chicago-area universities and local incubators

BRETT TAYLOR, AIA

Principal Gensler Chicago brett_taylor@gensler.com 312-456-0123

developing young talent and providing them with pathways and resources to start companies. The idea of setting down roots in Chicago is appealing to this talent pool. The second main factor is the pandemicrelated needs for more life sciences

What factors are driving the industry’s interest in Chicago?

“AMID THE WAR FOR TALENT, LAB SCIENCES TENANTS WANT BUILDINGS THAT PRIORITIZE PROXIMITY TO TRANSPORTATION, CONVENIENT AMENITIES AND ADAPTABLE LAYOUTS THAT CAN BE REARRANGED AS COMPANY NEEDS EVOLVE.”

for life sciences companies include a flexible lab footprint and space design to accommodate workflow, efficiency, size of equipment, and traffic flow throughout the lab, as well as proximity between labs and offices. Human-centered architecture and amenities are important because, at the end of the day, buildings and

ANDY HALIK

b a L

THE PREMIER^CONSTRUCTION EXPERIENCE

Health funding and venture capital funding. However, Chicago has never had sufficient lab space to keep entrepreneurs and their companies here. At Sterling Bay, we’ve recognized the damage this exodus has done to our economy for decades. We think by providing quality lab spaces and full life sciences ecosystems, we can stop the

6/14/22 10:50 AM

LIFE SCIENCES

With thriving neighborhoods and more affordable real estate, Chicago is emerging as a life sciences hub. research. Both factors are resulting in demand for more specialized lab space in Chicago. Higher vacancy rates in traditional office space have also caused many building owners to consider converting office space to lab space.

Taylor: There’s a desire to invest in Chicago for lab space because it is an emerging market compared to coastal cities where the industry is more established. At the same time, many adjacent industries, including tech, education and health have large presences in Chicago. The talent and important points of connection are already here. There are opportunities to build synergy with nearby universities and hospitals, and that creates huge benefits. We’re seeing life sciences buildings being designed for various users who require a mix of dry labs, wet labs and office space.

These new buildings are dynamic enough to accept a variety of users, which is another reason why the Chicago market is so desirable. Many life sciences companies are used to having to adapt an existing building to a lab use rather than working with a developer who can accommodate their specific needs.

The cost of building new lab space in Chicago is considerably lower than on the coasts. How can life

sciences firms apply that fact to smarter real estate decisions in Chicago?

McKinney: I think it’s important for life sciences companies to consider the cost of living in Chicago versus that on either of the coasts. Chicago is also a very family-friendly city, with lots of diverse neighborhoods and communities where the employees of life sciences firms can benefit from the rich cultural and artistic benefits that Chicago can offer. Giving thought to these considerations will assist life sciences companies with making smarter, more economically sound decisions not only for their companies, but also for their employees.

Halik: All construction projects nationwide are feeling the supply chain crisis and material pricing volatility. The life sciences sector is not immune. However, Chicago real estate prices are less expensive than the coasts boasting major life sciences hubs like San Diego and Boston, which drives the overall project cost down. In Chicago, it’s useful to consider submarkets like Fulton Market and Lincoln Park where there is room for expansion and existing lab-friendly space. Plus, new buildings built for lab use will be more cost-effective than adapting

Sterling Bay is proud to support Dr. Suzet McKinney at the Crain’s Roundtable

sterlingbay.com

P023_025_CCB_20220620.indd 24

an unspecialized office building. In addition to the cost of the real estate, other cost variables include the lead times and availability for special lab equipment and furniture. However, savvy teams will order early and lock in prices to meet budget and timeline.

biohazard-labeled materials in and out of common spaces. Because they work with specialized equipment and sensitive chemicals, lab sciences tenants need a private way to get in and out of their space without running into other tenants. This often

integrate the life sciences industry in Chicago.

McKinney: Life sciences clusters are innovation districts. As defined by the Brookings Institution, innovation districts are “geographic areas where

“AT THE END OF THE DAY, BUILDINGS AND LABORATORIES DON’T MAKE SCIENTIFIC BREAKTHROUGHS. SCIENTISTS DO. BY CREATING LAB ENVIRONMENTS WHERE RESEARCH AND THE EXCHANGE OF IDEAS IS EASY, ENJOYABLE AND SEAMLESS, WE INCREASE OCCUPANT SATISFACTION AND SET THE STAGE FOR INNOVATION.” — SUZET MCKINNEY, STERLING BAY Office conversions to lab space is one of the hottest topics in commercial real estate today. Are there important pitfalls to avoid?

Halik: The mixing of traditional office activities with clinical research can create some unexpectedly tricky scenarios that must be carefully managed. For example, a traditional office environment would not need to think carefully about the path of waste removal. One major pitfall to avoid in these mixed-use environments is accidentally moving orange

includes a loading dock, a dedicated service elevator, and private storage areas. Other pitfalls include ensuring the proper installation of HVAC and power. Ensuring that HVAC infrastructure is segregated so fumes are carefully managed is important for health and comfort. Adequate power, with back-ups, is also critical so the laboratory component of a building is properly supported, and therefore does not cause outages or other problems in the more standard office component.

Taylor: Developments aimed at attracting life-science tenants need to be specific about their target tenants; this is true of any spec office. Identifying a range of target tenants and determining which range of requirements the building will accommodate is key to the development of the initial pro formas.

If the target tenant consists of wet lab uses or has more lab-specific base building requirements, that should be discussed and determined in initial planning phases. Design can mitigate many pitfalls as long as it’s addressed from the beginning.

Public health researchers have noted a correlation between life science services and transportation. How does that factor into the analysis of market opportunities?

Taylor: A sense of community is very desirable in the life sciences industry.

It’s common for lab users to prefer to be near hospitals or universities with adjacent uses and talent because of the synergy between the lab and practical application of science. In Chicago more broadly, there is a rise in the development of mixed-use campuses that support all aspects of the live, work, play lifestyle. We strive to incorporate life sciences into these environments to build communities that don’t just have labs, but also have medical, education, residential, entertainment, dining, etc. Being able to combine all of these overlapping human needs and business interests into one district can meaningfully

leading-edge anchor institutions and companies cluster and connect with startups, business incubators and accelerators. They are physically compact, transit-accessible, and technically wired, and offer mixeduse housing, office and retail.”

Recent trends are showing that an emerging generation of life-science companies are flocking toward dynamic, geographically compact industry ecosystems that embrace the clustering effects that can magnify the speed and quality of discovery and innovation. These trends, along with the ability of a development to cater to the larger quality of life needs for workers, such as healthcare, basic services, and childcare, are all important factors to consider when evaluating a potential site.

How does the design and location of life sciences buildings impact recruiting and retaining talent?

McKinney: The design and location of life sciences buildings can greatly assist in recruiting top talent and retaining them. The presence of likeminded people in trendy, up-andcoming areas is always a large draw for younger, top talent. The availability of a large selection of residential options and top-tier, world-class restaurants, shops, retail options and business facilities are also key to recruiting and retaining top talent.

Halik: Both design and location are key to recruitment and retention for life sciences firms. For those reasons they often favor real estate options in a bustling market, preferably in cities with active universities and medical campuses, and where life sciences innovators may be able to rub shoulders with other leaders in the field. In general, locations that are attractive to traditional tenants and their employees are attractive to life sciences companies as well. For example, our team recently built out Hazel Technologies’ 54,000-squarefoot office and laboratory space, the largest private chemical lab in Chicago, in an office building in the

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exciting Fulton Market neighborhood.

The neighborhood was not previously known as a destination for life sciences companies, but it is now.

Taylor: Current research and surveys indicate that places of work should be amenity-rich spaces that provide talent with an experience that can’t be found at home, which includes collaboration spaces, indoor/ outdoor work options, and access to neighboring amenities. Using ALLY at 1229 W. Concord as an example, the building is centered around wellness—an attribute humans are putting greater importance on now than ever before. The design itself prioritizes natural light and access to outdoor space, and the interiors program includes a fitness and wellness center. And the building is situated alongside the Chicago River, allowing access to the Riverwalk. Workplaces should provide lifestyle support, which includes access to public transportation and the surrounding community, outdoor space, spaces of respite and much more.

In addition to labs, life sciences firms need office space, too. What do life sciences companies look for?

Halik: Amid the war for talent, lab sciences tenants want buildings that prioritize proximity to transportation, convenient amenities such as nearby restaurants and retail and adaptable layouts that can be rearranged as the company grows and its needs evolve. A location that’s easily and equally accessible via car, public transit and bike is often preferred.

Within the workspace, they also tend to value flexible design that facilitates collaboration and engagement, with easy access to shared spaces as well as comfortable, inviting break rooms where employees can relax and socialize. Additionally, these tenants might look favorably on

more important is the availability of amenities, transportation, healthcare services, residential areas and other basic services such as childcare— essentially trendy areas where top talent will assemble and congregate in large quantities. The proximity to other innovators is also an important consideration.

Taylor: When looking at an existing building and space, it’s about how well it can accommodate their specific needs. That’s because they are unique compared to a typical commercial tenant. When it comes to speculative space, we focus on developments that are purposefully designed with high levels of flexibility. The factors life sciences companies are considering are based on location or rent structure and not adaptability. Life sciences tenants require a mix of office and lab space. Flexibility is key with all workplace environments, but this is particularly true in lab buildings.

Collaboration is critical in research, and the office should support that by providing spaces that naturally support exchange and ideation, such as lounges, conference rooms and transitional spaces that can be reconfigured based on function.

How can the life sciences contribute to a company’s environmental, social and governance (ESG) efforts and how can ESG be factored into life sciences spaces?

McKinney: While life sciences developments, like all developments, must consider ESG issues and disclose potential problems to communities, ameliorating the environmental impact of a building is often a starting place for developers. This is particularly important in life sciences buildings that will be home to tenants working to better our lives as it is a foundational way to create substantial, long-term

“THERE’S A DESIRE TO INVEST IN CHICAGO FOR LAB SPACE BECAUSE IT IS AN EMERGING MARKET COMPARED TO COASTAL CITIES. AT THE SAME TIME, MANY ADJACENT INDUSTRIES, INCLUDING TECH, EDUCATION AND HEALTH, HAVE LARGE PRESENCES IN CHICAGO, SO THE TALENT AND IMPORTANT POINTS OF CONNECTION ARE ALREADY HERE.” — BRETT TAYLOR, GENSLER

secure parking lots and/or showers and locker rooms for their biketo-work contingent. Overall, lab sciences employees want to enjoy the same office amenities as traditional knowledge workers. A building that offers a premium workplace experience in addition to fitting the requirements for labs is ideal.

McKinney: It’s important for the office spaces to have close proximity to the lab spaces. What’s

P023_025_CCB_20220620.indd 25

ABOUT THE PANELISTS BRETT TAYLOR is principal at Gensler and has deep expertise in managing complex mixed-use, office, and multifamily residential projects. He has been instrumental in the delivery of numerous largescale, award-winning development projects in Chicago, the United States and internationally. He has worked on Lincoln Yards South and 333 N. Green in Chicago, Ford’s Book Depository repositioning in Detroit and the United Nations headquarters in Geneva. He is project director on ALLY at 1229 W. Concord, a 320,000-squarefoot building in Chicago.

ANDY HALIK is vice president at Skender, a full-service building contractor with strong expertise in the life sciences arena. Halik has 20+ years of experience in the construction industry and his work includes significant laboratories for Google, Motorola and Milwaukee Tool. He leads the Interiors group, focusing on market strategy, client service and motivating the team toward continued growth. Halik works closely with Skender’s project teams to maximize value for clients and deliver the premier construction experience.

SUZET MCKINNEY is principal & director of life sciences at Sterling Bay and has made it her goal to expand the company’s national life sciences footprint and to raise Chicago to a Tier 1 life sciences market. Her work with Sterling Bay includes overseeing the groundbreaking of Ally, a 320,000-square-foot life sciences center. An expert in emergency preparedness and response, McKinney was tapped by Gov. J.B. Pritzker in 2020 to lead operations on five alternative care facilities for potential COVID-19 patient overflow.

quality health care, but also to quality housing, schools, transportation, jobs, grocery stores and other amenities.

Taylor: Life sciences companies historically have played a pivotal role in ESG. The social benefits their products offer patients is an intrinsic mission

and outcome of these companies.

Acting in support of their mission and vision, life science tenants demand and require a higher level of wellness in the design of their spaces. These systems and cultures tend to propagate into the types of buildings they desire to reside.

These requirements work downstream

to challenge the design, development and construction industry to raise the bar of baseline delivery. These baselines, in turn, tend to drive governance and local authorities changing the baseline codes. This symbiotic relationship drives a better ESG solution for everyone.

Designing the future, today. gensler.com/expertise/sciences

change. Another way developers can improve their ESG postures is to have diverse, equitable and inclusive teams and consider how DE&I must be accounted for in the structures they develop. Finally, an issue for life sciences developers that has been accelerated by the pandemic and the deplorable condition of the built environment in many neighborhoods is consideration of a locale’s social determinants of health. This means not only a neighborhood’s access to

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26 JUNE 20, 2022 • CRAIN’S CHICAGO BUSINESS

McDonald’s struggles to generate consistent growth with customer rewards McDONALD’S from Page 1 during an April earnings call that it’s still “early innings,” but enrollment and participation are exceeding the company’s expectations. He added that McDonald’s is seeing “more frequent visits from loyalty customers, many of whom were very loyal to begin with,” and some large markets have seen record customer visit frequency driven by loyalty and app-exclusive promotions.

It’s hard to tell if loyalty members are spending more at McDonald’s, because the company doesn’t disclose sales to MyMcDonald’s members. But the company does provide some information on digital sales, a useful proxy for loyalty program sales, because members sign up through the app.

McDonald’s says digital transactions accounted for about 18% of sales in the U.S. in the first quarter. Starbucks, by contrast, says its loyalty club members generate 54% of the coffee chain’s sales.

“It’s clear they’re not getting nearly as much share of wallet with their loyalty members as perhaps Starbucks is,” says Bank of America senior research analyst Sara Senatore.

Senatore also finds MyMcDonald’s membership numbers unexceptional. In the three quarters since launching the program in July 2021, McDonald’s signed up 26 million members, slightly less than Starbucks’ 27 million and Chipotle’s 28 million. While those programs have been operating for years, Senatore points out that McDonald’s vast size created an opportunity to drive higher membership numbers. On a per-store basis, Chipotle, with 3,000 stores, signed up twice as many members as McDonalds during the first year of its loyalty program.

“It looks like a very big number after just nine months,” she says. “But once you control for the sheer number of units Mc-

Donald’s has and the sheer number of customers, it starts to look much more typical.”

McDonald’s appears to be counting on its most-frequent customers to make the program a success.

“Our opportunity is always about driving frequency,” Kempczinski said during the April earnings call. “(Loyalty) has been an effective way for us to drive frequency among our users.”

And there are signs the company’s biggest users are coming through. Data from Placer.ai shows visits from customers who went to McDonald’s at least once a month accounted for 17% of transactions last year, up from 15% in 2020. The uptick suggests the loyalty program is resonating with an important segment of McDonald’s customer base, says R.J. Hottovy, head of analytical research at Placer.ai.

EXPECTATIONS

A loyalty program also can provide useful data about customer habits, which can be used to prod them to buy more. If a customer normally comes in for a morning coffee, for example, McDonald’s could offer a coupon for a purchase after 2 p.m. An offer of free fries means they’ll likely buy something else, too. And when loyalty customers order in advance through the app, McDonald’s saves on labor costs and customer lines move faster.

Rarely one to lead the charge, McDonald’s joined the rewards fray later than others. Customers expect loyalty programs from chain restaurants now. And for restaurants, such programs have become even more vital in the last two years.

To build loyalty, brands need strong emotional connections with customers. That was lost when customers started ordering food online during the pandemic. With fewer in-person interactions, brands like McDonald’s are relying more on their rewards program to build

emotional connections, says James Riess, senior vice president of strategy and insights at customer experience management company Merkle.

Riess says that connection— which can come through gamelike challenges and other types of rewards—fosters customer engagement, a key to the success of loyalty programs.

“Customers are now in control of the brands that they engage with,” Riess says. “Just because I’m part of a loyalty program doesn’t mean that I’m going to engage on a continuous basis.”

McDonald’s plans to listen to customers and update MyMcDonald’s going forward, said Alycia Mason, the company’s U.S. chief customer experience officer. McDonald’s trained restaurant workers to help customers use the program, and it rewards those workers with loyalty points, too. Joining the program is easy, and members start receiving points for free food and personalized deals immediately, Mason said in a statement.

REWARDING EXPERIENCES McDonald’s launched its rewards program in July 2021 and has reported membership count for the first nine months. Chipotle’s program had almost twice as many members enrolled on a per-store basis in the same time frame.

Program McDonald’s

(First 9 months)

Chipotle Rewards (First 9 months)

Members

Store count

26.0 million

14,000

8.5 million

2,600

Average members per store 1,857

3,269

Chipotle Rewards

(Since March 2019 28.0 million U.S. launch)

3,000

9,333

Note: Numbers are approximate.

Source: McDonald’s and Chipotle, with Crain’s calculations

There are also exclusive perks, like free fries, and resurrected offerings like the Szechuan Sauce.

Experts say McDonald’s has already amassed a data set it could try to monetize. Figuring out how to use that data to its

advantage and keep customers engaged could prove its biggest rewards-related challenge. If it fails, MyMcDonald’s could end up giving freebies to customers without incentivizing them to spend more, thereby cannibalizing existing sales.

Macy’s plans to open two newer and smaller-format stores in empty Carson’s MACY’S from Page 3 Most big department store chains have been closing more stores than they’ve been opening the past several years, especially since the beginning of the pandemic, leaving big spaces behind for their landlords to fill.

Macy’s itself has closed dozens of big department stores over the past couple years, including one in Water Tower Place mall on North Michigan Avenue in Chicago. New York-based Macy’s took over the Water Tower location and many others in the Chicago area through its acquisition of the Marshall Field’s chain in 2005.

Empty department stores have become albatrosses for the investors that own them. It takes cre-

P026_CCB_20220620.indd 26

ativity and determination to turn the spaces into something useful again. Some mall owners have chopped them up for smaller tenants, while others have just razed the empty stores to make way for apartments or another uses.

STORE PLANS

But the owner of the Carson’s store, a joint venture of New York-based Fortress Investment Group and Bloomfield Hills, Mich.-based Lormax Stern, managed to snag Macy’s. Rather than opening a big old-school department store in the two-story space, Macy’s plans to open two newer and smaller-format stores there, according to people familiar with its plans.

On the first floor, the retailer will open a Market by Macy’s,

the first Chicago-area location for the spinoff concept. A Macy’s Backstage, an off-price chain launched in 2015, will open on the second floor.

Macy’s so far has only opened about five Market by Macy’s stores, in Texas and Atlanta. The stores, which range from 20,000 square feet to 58,000 square feet, mostly sell apparel and update their inventory frequently.

Backstage stores typically operate within existing Macy’s department stores, with eight in the Chicago area, including one that recently opened in the Macy’s on State Street in the Loop.

A Macy’s spokeswoman wouldn’t confirm the company’s plans for Evergreen Plaza.

“We do not have any information to share at this time, but will

continue to keep you updated,” she wrote in an email.

Representatives of Lormax Stern and Fortress did not return phone calls.

LONG HISTORY

Evergreen Plaza has a long history that traces the rise and fall of the shopping mall—and its dependence on the department store. When it opened in 1952, it was the first regional mall in the country. It became the second U.S. indoor mall after a renovation in the 1960s.

But it fell on hard times in the 1980s and was mostly vacant by 2013. Lormax Stern tore down the old mall in 2015 and replaced it with the smaller shopping center that exists today.

Tenants in the 255,000-square-

foot property include Whole Foods Market, Burlington, T.J. Maxx, Planet Fitness and Ulta Beauty.

The Carson’s at Evergreen Plaza has closed twice, first in 2018, when the Carson’s chain liquidated in bankruptcy. But a revamped store opened later that year under new ownership, only to close again in 2020.

Lormax Stern and Fortress sold the rest of Evergreen Plaza for $67 million last fall to LBX Investments, a California investment firm. But they retained ownership of the empty Carson’s.

A team led by Joe Parrott of CBRE represented the property owners in the lease, while a team led by CBRE’s Luke Molloy represented Macy’s.

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CRAIN’S CHICAGO BUSINESS • JUNE 20, 2022 27

HERE’S HOW MUCH MORE BUYERS WOULD PAY Under the Bring Chicago Home proposal, the transfer tax that buyers of city properties at $1 million or more pay would more than triple. Here’s how much more the buyers in several recent commercial and residential transactions would have to pay if the increase were already in place.

PROPOSED TRANSFER TAX INCREASE ON RESIDENTIAL PROPERTIES

In millions of dollars. The existing transfer tax is 0.75% of the purchase price.

The proposal would increase it, on sales valued at $1 million and up, to 2.65% of the purchase price.

COLDWELL BANKER REALTY

Existing

The living room of the Trump Tower penthouse

Support grows for proposed transfer tax hike TAX from Page 1 conferences, no opinion articles, no letters to the mayor.

Kris Anderson, the Chicago Association of Realtors’ vice president of government affairs, says the industry is holding off until the City Council formally takes up the proposal. The ballot referendum, which would be advisory only, isn’t on the council’s July agenda at the moment, but Anderson said he’s prepared to “activate our 17,000 members against this” anytime it is.

Yet the industry’s silence has allowed advocates of the tax to frame the debate. They argue it’s fair to ask the buyers of expensive real estate to foot the bill for housing the homeless.

“Anyone purchasing a milliondollar property can afford to pay a little bit extra in order to make sure others have a place to live,” Mike Eldridge, a member of the Jewish Council on Urban Affairs, which supports the tax hike, told Crain’s in April.

Tax supporters’ arguments may well resonate with many aldermen and voters, most of whom don’t own million-dollar homes.

And they’re not hearing counterarguments from the people who would be tapped to do the helping: buyers of upper-priced homes and of commercial property.

“The idea that if a building is large and expensive, there must be someone sitting there who has a lot of cash is incorrect,” says Farzin Parang, executive director of the Building Owners & Managers Association in Chicago. “There’s a difference between asset cost and personal income.”

Parang warns the tax hike would be another blow to Chicago’s struggling commercial real estate sector, “an industry that is under pressure already from work-at-home and COVID and the second-highest taxes in the country, and you want to further constrain it with this transfer tax increase.”

Across the country, increases in transfer taxes have been passed or proposed everywhere from New York to Los Angeles, mostly to fund housing programs.

With home markets booming and newspapers trumpeting record-priced purchases, “people see real estate taxes as lowhanging fruit,” said Mike Kelly, director of government affairs at the New York State Association of Realtors.

“It’s not a broad-based tax on everyone,” Kelly said. “It’s a tax that only impacts people who are buying or selling these expensive properties. That looks better to legislators.” In 2019, the state raised transfer taxes on high-end properties in New York City only.

Homes sold for $1 million or more had been subject to a special transfer tax since 1989; now those sold for $2 million and up pay an additional tax, rising from 0.25% for a $2 million property to 2.9% for those over $25 million.

AFFORDABILITY

In Los Angeles, November’s ballot will include a referendum along the lines of what’s proposed in Chicago. Real estate groups are pushing back against the idea.

“It’s wrong to go after (transfer) taxes because affordability is so absolutely crazy hard in California now,” said Ryan Ole Hass, a broker at Align RE in Santa Monica and immediate past president of Greater Los Angeles Realtors. “Making it more difficult to buy a home is not helping our housing crisis.”

As Chicago’s real estate transfer tax now stands, a buyer pays $7,500 for every $1 million in purchase price, and the seller pays $3,000.

Bring Chicago Home’s proposal would more than triple the buyer’s tax, to $26,500 per $1 million. Sellers would see no increase.

In April, Crain’s calculated that in the recent $415 million sale of a 50-story Wacker Drive office building, the New York-based buyer paid about $3.1 million in

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

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transfer taxes to the city of Chicago. Under the Bring Chicago Home proposal, the buyer would have paid nearly $11 million in transfer taxes, with the entire difference, more than $7.88 million, going to the homelessness fight.

Representatives of the buyer, Opal Holdings, did not respond to Crain’s request for comment.

When a deal’s cost increases from $418 million to $426 million, the difference, Parang notes, “is going to come from tenants, in higher rents” that the buyer likely will charge.

“Rents are already under a lot of pressure,” Parang says.

In residential transactions, buyers are likely to factor the boosted transfer tax into the total cost of buying, potentially limiting the price they can afford to pay and weighing down home values.

In the headline-grabbing $20 million sale of the penthouse at the Trump International Hotel & Tower this spring, the buyer paid $150,000 in transfer taxes, but would have paid $530,000 under Bring Chicago Home. Perhaps the difference, $380,000, is mere pocket change to the yet-unidentified buyer, who may have additional millions to lay out in order to finish the mostly raw penthouse space.

But CAR’s Anderson and Mario Greco, a Berkshire Hathaway HomeServices agent who’s active in the city’s luxury-priced home market, point out that buyers of $1 million homes in Chicago are often stretching their wallets. Under current lending guidelines, a household with an income of about $245,000 could swing the mortgage on a million-dollar home. That’s a healthy income, but certainly doesn’t count among the ultra-wealthy who can spend with abandon.

Increase the transfer tax they’ll pay from $7,500 to $26,500, and “you might hear some vocal opposition,” Greco says, “but probably not in this city that’s used to

Increase*

Trump International Hotel & Tower; 89th floor ($20 million sales price) $0.16 Burling Street house ($12.6 million sales price) $0.09 $0.24 Lake Shore Drive condo ($11.3 million sales price) $0.08 $0.21 St. Regis (74th Floor) ($8.9 million sales price) $0.07 $0.17 St. Regis (80th Floor) ($8.8 million sales price) $0.07 $0.17 Orchard Street house ($8.65 million sales price) $0.06 $0.16 Mohawk Street house ($8.1 million sales price) $0.06 $0.15 Tribune Tower (22nd Floor) ($8.1 million sales price) $0.06 $0.15

$0.38

St. Regis (69th Floor) ($7.1 million sales price) $0.05 $0.13 Astor Street house ($6.5 million sales price) $0.05 $0.12

PROPOSED TRANSFER TAX INCREASE ON COMMERCIAL PROPERTIES

In millions of dollars. The existing transfer tax is 0.75% of the purchase price.

The proposal would increase it, on sales valued at $1 million and up, to 2.65% of the purchase price.

Existing

Increase*

Leo Burnett; 35 W. Wacker ($415 million sale price) $3.1 1kfulton; 1000 W. Fulton ($354.9 million sale price) $2.7 Tides at Lakeshore East; 360 E. South Water ($209 million sale price) $1.6 $4.0 The Shoreham; 400 E. South Water ($179.5 million sale price) $1.3 $3.4 210 N. Carpenter St. ($169 million sale price) $1.3 $3.2

$7.9 $6.7

225 W. Randolph Street ($166.3 million sale price) $1.2 $3.2 1401 S. State ($139.9 million sale price) $1.0 $2.7 200 W. Jackson Blvd ($130 million sale price) $1.0 $2.5 59 E. Oak St ($120 million sale price) $0.9 $2.3 The Bernardin; 747 N. Wabash Ave ($94.5 million sale price) $1.8 $0.7

*To be paid for homelessness programs Note: The commercial properties include only closed sales, with a confirmed price.

Source: Commercial: Costar Group. Residential: Midwest Real Estate Data

being pummeled with fees and taxes. If you love this city, you might put up with another tax.”

Anderson is not so sanguine, warning that buyers facing an additional $23,000 in taxes might “choose the suburbs, choose Indiana or Michigan.”

Bring Chicago Home would put the full burden of the increase on buyers, who are already losing affordability as home prices and mortgage interest rates rise.

Connecticut takes the opposite approach, imposing its transfer tax—called a conveyance tax—on sellers. In 2019, the Connecticut Association of Realtors unsuccessfully fought a proposal to increase the conveyance tax on high-priced homes and use the money to fund open-space pres-

ervation. The market was slow then, and Tammy Felenstein, an agent at William Raveis in Southport, Conn., and 2022 president of the association, said the industry expected the tax increase to anger sellers.

But any market impact of the tax increase was overwhelmed by the pandemic-driven housing boom, which kicked in about the same time the tax went up. Large numbers of New Yorkers house hunting in Connecticut sent prices skyward.

“It’s not to say that the sellers aren’t upset that they’re paying additional conveyance taxes,” Felenstein said, “but they’re so happy with the sales prices they’re getting that they’re not complaining.”

Vol. 45, No. 25 – 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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