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WOODLAWN: Neighborhood incubates ways to boost Black homeownership. PAGE 3

NOTABLES: 39 leaders in diversity, equity and inclusion. PAGE 21

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The pandemic took a toll on every corner of a city that is slowly returning to life in unexpected ways. PAGE 13

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HQ is where the CEO is. Or is it?

Rival targets Blue Cross, Walgreens

BY ALLY MAROTTI If asked, many people could name the headquarters city of cereal giant Kellogg—Battle Creek, Mich. But the Pop-Tarts- and Corn Flakes-maker’s CEO and at least one other top executive own multimillion-dollar homes in Chicago. In 2018, CEO Steven Cahillane paid more than $5.62 million for a five-bedroom mansion in Lincoln Park, and Chief Growth Officer Monica McGurk

bought a house in Winnetka for $2.05 million, according to Cook County Clerk’s Office records. McGurk oversees teams that include research and development, marketing and sales. Does that make Kellogg a Chicago-based company? Those who believe a company’s headquarters is wherever the CEO is might say yes. Kellogg would disagree. A spokeswoman says most of Kellogg’s U.S. executives, including Cahillane, are based in Battle Creek, where the com-

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Remote work isn’t just for corporate underlings

If Kellogg’s CEO owns a multimillion-dollar home in Chicago, does that make it a Chicago-based company? pany was founded 115 years ago. A company’s home base has become harder to pinpoint with See KELLOGG on Page 8

CVS/Aetna expands in their Illinois stronghold BY STEPHANIE GOLDBERG Health care powerhouse CVS Health is making a play for more business in Illinois, setting up a showdown with local giants Walgreens and Blue Cross & Blue Shield of Illinois. With more than 9,900 retail stores, 23 million people in its health insurance plans and pharmacy benefit management services covering 105 million, the self-styled “health care innovation company” offers a wider

array of services than less-integrated rivals. Now CVS, which merged with health insurer Aetna in 2018, is expanding in Illinois through government-run health insurance programs and medical clinics in its drugstores. By steering members toward its pharmacies and clinics, CVS gains more control over patient outcomes and costs. And as the Woonsocket, R.I.-based company steps up its See CVS on Page 35

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DEBT

YOUR VIEW

Commercial properties remain beset by pandemic’s woes. PAGE 6

Stronger workforce infrastructure is vital to our recovery. PAGE 10

6/25/21 1:57 PM

2 June 28, 2021 • CRAIN’S CHICAGO BUSINESS

Are the Bears bluffing?

on whether Mayor Lori Lightfoot can refrain from wagging fingers of the face of City Council members long enough to think creatively. Like putting a retractable roof on Soldier Field as part of a new deal, however much some folks will hate that idea. Here’s what I’ve found out. Under terms of the pact that landed the saucer in a remade Soldier Field, a local governmental unit assumed hundreds of millions of dollars in debt to pay for field reconstruction. That wasn’t the Chicago Park District, which Soldier Field, but rathIT SEEMS TO ME QUITE POSSIBLE owns er the Illinois Sports Facilities Authority, a city/state entity THE BEARS INDEED COULD GO. that owns and operates Sox Park, er, Guaranteed Rate Field. According to ISFA, it still has their investors, and I’m not sure a cool $688 million in Soldier Field they know yet either. debt (principal and interest) to pay Having talked to informed insidoff by 2032. ers and looked at some critical legal That alone would give the locals documents, it seems to me quite good reason not to let the Bears out possible the Bears indeed could go eventually. But at least not until their of their lease. So does the fact that, lease at Soldier Field expires in 2033. according to the park district, Soldier Field is a profit center, netting And maybe not then, depending ow that the bars are reopening, sort of, one of the better topics of conversation is whether the Chicago Bears are bluffing with their bid to buy the site where Arlington International Racecourse now stands—presumably in expectation of vacating the flying saucer on the lake known as Soldier Field and moving to more profitable suburban climes. The only people who know for sure are members of the controlling McCaskey-Halas clan and

the district around $15 million a year after property taxes. Some of that comes from other users, but the Bears’ rent alone is around $5 million a year. I’ve read through terms of the 2001 lease, and it appears to be pretty tight. “No agreement or law is ever ironclad,” says Park District General Counsel Timothy King. But this pact is about as tight as it gets, allowing the deal to be terminated only by mutual agreement (over Lightfoot’s dead body) or if the field is unusable for at least two games in a season. If the Bears nonetheless tried to play somewhere else in an “improper relocation,” the lease entitles the district to payment of 150 percent of its financial losses. Of course, the district could sweeten the deal, something Lightfoot has suggested is a possibility. For instance, more signage ads, which now are fairly limited despite some additional space granted a few years ago when the district was talking about reducing Bears parking to make way for the Lucas

GREG HINZ ON POLITICS

Museum. Or naming rights, something that was envisioned in the 2001 deal but fell apart after Sept. 11, 2001, over fears that the public would revolt at the concept of Acme Widget Stadium at Soldier Field. Ergo, the Bears quite probably stay around awhile longer. Even if they announced a deal today, it would be several years until they could open a stadium in Arlington Heights. But after 2033? Soldier Field already is the smallest stadium in the NFL and is a little more obsolete every year, a cold and windswept memorial more than a modern stadium. As long as it’s the Bears’ home, Chicago has no chance to host a Super Bowl or a Final Four. Does that mean that the team’s

fiscally conservative ownership is willing to bring in equity partners or assume huge debts to build a new stadium that could cost $2 billion? Not necessarily. Does that mean that naming rights and other sweeteners wouldn’t move the needle some? No. But there’s no guarantee in that. The only guarantee will come if the city and team reach a new long-term deal, one which could, for instance, result in Soldier Field getting a retractable dome, with a few more seats in the process. That would have been technologically impossible a few decades ago. But now? As I suggested, that’s the kind of thing Team Lightfoot needs to be examining. One of these years, the team won’t be bluffing.

Keep up the momentum toward open elections

he pandemic reminded us that necessity is the mother of invention and, in some cases, progress. Necessity, and political calculation, certainly moved us ahead when it comes to how we conduct our elections in Illinois. We should keep that momentum going. Illinois lawmakers made a major shift in 2020 in accepting voting by mail and by drop boxes, and now they’ve moved to make that option permanent, something many advocates had been pushing for years. Lawmakers also, at least for next year, pushed the primary election day back three months to June 28. They wouldn’t acknowledge it publicly, but supermajority Democrats did this in order to wait for late census results before drawing congressional districts. The late results would have caused havoc with the election calendar. But plenty of people long have believed holding primaries in March in Illinois only drives down participation. It will take some effort by voters to push lawmakers to make the June move permanent, however. Historically, the major political parties have preferred March because it gives them more control over who votes in cold-weather primaries. Democrats patted themselves on the back for these changes this spring, contrasting them with efforts in Georgia, Texas and elsewhere to change laws that likely will suppress voting. The difference between what happened here and there is stark, and so let’s give credit where it is due. It is still important, however, to continue to ensure Illinois provides enough polling locations for voters

who don’t have confidence in the U.S. postal system or who don’t have the time or internet access to apply to vote by mail. We have a primary problem in America. Illinois lawmakers should continue to lead by becoming one of the early states to fix that. People don’t like partisan primaries. They don’t like having to ask for one party’s ballot or the other, and they don’t participate. Only a bit more than 28 percent of Illinois voters cast ballots in the 2020 primary election, and it was just above 26 percent in 2018. Here and around the country, this creates a long-term and deep governing problem. Just 10 percent of eligible voters nationwide cast ballots in primaries that effectively decided the outcome of more than 80 percent of congressional elections, the Unite America Institute concluded in a recent report. Nick Troiano, Unite America’s executive director, wrote in the Atlantic that low-voter partisan primaries “disenfranchise voters, distort representation, and fuel extremism—on both the left and, most acutely (at present), the right.” In effect, the foundation of our democracy is fracturing us. Gerrymandering and partisan primaries drive the hyperpolarization that is paralyzing many governments and driving down voter participation. We’ve created systems that incent politicians to move to the fringes because they concern themselves, primarily (pun intended), with whether they will be primaried. It doesn’t have to be this way. Progress, invention and trials are underway in some states. New

York City, of course, just held its first primary where voters ranked candidates to determine winners. In Maine, lawmakers followed up ranked-choice voting with sending their governor a bill to allow unaffiliated voters to cast ballots in primaries. The nonprofit Open Primaries says nearly a third of Maine voters are unaffiliated, and that’s a growing trend nationwide. In Alaska, voters moved to an open, nonpartisan primary. The top four finishers of whatever party affiliation advance to the general election, where voters can rank them. Troiano suggests that major move might be what freed

MADELEINE DOUBEK ON GOVERNMENT

Alaska’s Sen. Lisa Murkowski to become the first Senate Republican to call for former President Donald Trump’s resignation. Ranked-choice voting, opening up primaries and lowering the numbers of voter signatures it takes to run for Chicago-wide and Cook County-wide offices all are moves that could increase voter participation and access to the

ballot. Illinois lawmakers took big steps allowing voting by mail and by drop box and by temporarily moving next year’s primary. Let’s take some more. Madeleine Doubek is executive director of Change Illinois, a nonpartisan nonprofit that advocates for ethical and efficient government.

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N E W N A M E S A M E G R E AT S E R V I C E

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CORRECTIONS

Banking products provided by Wintrust Financial Corp. banks.

The Takeaway profile of architect Jackie Koo on June 21 should have said the e-sports venue she is designing will be 108,000 square feet. A June 21 article about White Claw seltzer did not fully identify Nick Johnson, an equity analyst at Morningstar.

Securities, insurance products, financial planning, and investment management services offered through Wintrust Investments, LLC (Member FINRA/SIPC), founded in 1931. Trust and asset management services offered by The Chicago Trust Company, N.A. and Great Lakes Advisors, LLC, respectively.

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Investment products such as stocks, bonds, and mutual funds are: NOT FDIC INSURED | NOT BANK GUARANTEED | MAY LOSE VALUE | NOT A DEPOSIT | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

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CRAIN’S CHICAGO BUSINESS • JUNE 28, 2021 3

Is the ICC ready for its close-up? Sidelined agency recalled into action to keep utility bills from soaring BY STEVE DANIELS

PAUL GOYETTE

BUILDING BACK WEST WOODLAWN Iman Haynes Duncan and her husband recently bought the property at 6546 S. Evans Ave.

This area has become an incubator for Black homeownership efforts WHEN THEY CLOSE ON THEIR PURCHASE of a rehabbed red brick two-flat in early July, Iman Haynes Duncan and Andre Duncan won’t only be buying a home. “We’re buying a vision that aligns with ours,” says Hayes Duncan, who’s in health care sales. Her husband is an engineer. A pair of Black professionals, they wanted their home purchase “to be part of a solution for our community,” she says.

The two-flat, in the 6500 block of South Evans Avenue in West Woodlawn, is the first of four that developer Michael Altheimer and investment partner Desmond Clark, who played seven seasons with the Chicago Bears, expect to complete in 2021. They also plan to do two in Humboldt Park. “We’re trying to repopulate the neighborhood,” See WEST WOODLAWN on Page 35

BY DENNIS RODKIN

“FOR US IT WAS, ‘CHANGE IS NOT COMING UNLESS WE BRING THE CHANGE OURSELVES.’ ” Bonita Harrison, principal, KMB Realty

A mixed blessing for downtown office landlords New sublease listings plateau as employers rethink plans to unload space BY DANNY ECKER Sam Rattner spent a few weeks in late February and early March touring prospective downtown offices for his fast-growing sports gambling company, walking through a mix of empty, raw space it could lease directly from landlords and fully built workspaces it could rent from companies trying to shrink their footprint amid the COVID-induced rise in remote work. It wasn’t hard to figure out

P003_CCB_20210628.indd 3

where to place his bet. “We saw deals getting done at a 20 to 30 percent discount” on the sublease market compared to the monthly rates for space it would design from scratch, says Rattner, chief operating officer of Fubo Gaming, the sports wagering division of television streaming company fuboTV that plans to hire 100 people in Chicago this year. Compared to the price tag to build out an entire new office, “what it cost to sublease and renovate it with our colors and themes is five

cents on the dollar,” he says. By April, Fubo Gaming had moved into a 30,000-squarefoot office on the seventh floor of 1 N. Dearborn St., paying rent to Narrative Science, the artificial intelligence company that leased the space three years ago. It was an early example of what is now a budding trend as the pandemic wanes: Businesses hunting for downtown workspace are snapping up offices on the secondary market, taking advantage of bargains for high-quality space that tenants

are motivated to shed. TikTok, Lactalis Dairy, Farmers Business Network and the Healthcare Information Management Systems Society are among the companies that have signed or are finalizing downtown subleases over the past three months, and brokers say there are as much as 200,000 square feet of other aftermarket deals expected to be completed this summer. It’s a mixed blessing for downtown landlords, which are coping with the highest office

Don’t let the back-and-forth in Springfield over energy policy fool you; odds remain better than even that the sprawling bill ultimately will pass. When and if it does, a hollowed-out state agency essentially will be all that stands between single-digit electricity rate hikes to pay for Gov. J.B. Pritzker’s goal of a carbon-free power-generation industry in Illinois and increases exceeding 10 percent. With the vast bulk of the measure finalized, its contours are clear. Gov. J.B. Pritzker It would hike the average Commonwealth Edison residential ratepayer’s bill by about $5 a month based strictly on the numerous surcharges it authorizes to subsidize existing nuclear plants, expand wind and solar power development, support electric vehicle adoption and finance various “equity-oriented” projects. But those surcharges represent only about half the potential cost to consumers. ComEd’s delivery rates likely would soar just in the next few years by hundreds of millions under the rate-setting process the bill lays out to replace the disliked formula-rate system that was at the heart of ComEd’s admitted bribery See ICC on Page 34

 TOOTHLESS WATCHDOG The Illinois Commerce Commission would be tasked with immense responsibility under the sprawling energy bill still pending in Springfield, but its headcount has plummeted over the past two decades. ICC AUTHORIZED STAFF LEVEL BY FISCAL YEAR 400 350 300 250 200 150

237 2022

100 50 0

’02 ’04 ’06 ’08 ’10 ’12 ’14 ’16 ’18 ’20 ’22

Note: 2022 staff level is the request number. Source: ICC

See SUBLEASE on Page 30

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4 June 28, 2021 • CRAIN’S CHICAGO BUSINESS

ON BUSINESS

The Good Hands People are losing their grip example, it seems to assume clients accustomed to getting personal attention from an agent they’ve known for years will be just as happy dealing with a stranger in a remote call center over the phone or online. Misguided generally, this assumption is particularly flawed in the context of Allstate’s business. A big reason why customers choose Allstate is that they want personalized service from an agent. If Allstate agents stop providing that service, customers might as well save money by switching to Geico or Progressive. Numbers suggest that’s exactly what’s happening. Customer retention, long a key strength at Allstate, is slipping. The company’s policy renewal rate was 86.7 percent in the first quarter, down from 87.4 percent a year earlier and a peak of 88.5 percent in 2018. Every percentage point decline in renewals costs Allstate about 200,000 policies. Defections on that scale undermine growth. Allstate’s auto policies plateaued at 21.8 million in the first quarter, despite a 5 percent increase in new policy sales. Wilson is making a WILSON’S PLAN MIGHT HAVE classic mistake: favoring LOOKED GOOD ON PAPER. new business over existing customers. Adding new customers doesn’t boost growth percent commission on policy if equal or greater numbers are renewals. Allstate benefited, too, leaving. And it’s usually cheaper as customers tended to renew and easier to keep old customers even when the company’s prethan land new ones. miums were higher than those of Wilson’s strategy makes more rivals in the intensely price-comsense if his longer-term goal is petitive insurance business. As a to ditch the agent-led model result, Allstate generated indusaltogether. His commission cuts try-leading profit margins. and other moves seem calculatWhat Allstate’s traditional ed to alienate the roughly 10,000 approach didn’t produce was agents who have served as Allgrowth on par with some comstate’s primary sales channel for petitors. Faster-growing auto generations. If so, it’s working; insurers like Geico and Progresa group of agents are so angry sive, which sell mostly direct to they’ve sued the company. customers via phone or online, And even as Allstate urges have been outpacing Allstate for agents to sell more new policies, years. it’s undercutting them on price. In a bid for growth, Wilson Allstate’s growing direct-sales is hacking at the foundation operation offers policies at a 7 of Allstate’s longtime business percent discount to agents’ pricmodel. Allstate cut renewal coming. Not surprisingly, agents sold missions to 9 percent last year, 3 percent fewer new policies in and Daniels reports that another the first quarter, while Allstate’s two percentage-point reduction direct sales surged 33 percent. is coming in 2023. Altogether, Allstate didn’t respond to renewal commissions will have my questions. But as Daniels fallen 30 percent over three reports, the company tells agents years. that its goal is “evolving the role At the same time, Allstate of the agency for long-term is raising the commission for success.” new policy sales to as much as Allstate’s actions point in a dif30 percent when they exceed a ferent direction. Putting agents at yet-to-be disclosed threshold. To a price disadvantage and funnelgive agents more time for selling, ing customers to a company-run Allstate created a centralized call center are logical steps tocustomer service operation. ward a new model built around Wilson’s plan might have direct sales. It’s hard to see a role looked good on paper, but it for agents in that picture. ignores some basic realities. For Tom Wilson’s “transformative growth plan” for Allstate looks more like a stagnation strategy. As my colleague Steve Daniels has reported, the Northbrook-based insurer is losing customers as fast as it’s adding them under the CEO’s plan to rev up growth. Wilson wants agents to spend more time chasing new customers and less time providing service to existing clients. To spur the change, he’s slashing agents’ commissions on policy renewals and boosting compensation for new policies. Allstate also is pressing agents to send clients to a new customer service center when they need help. That’s a fundamental change in the relationship between Allstate agents and their clients. Traditionally, agents have played an important role in customer service at Allstate. Hands-on attention from agents created strong personal bonds with customers, leading to high levels of repeat business. Allstate’s customer retention rates have been the envy of the auto insurance business. Allstate rewarded agents for retaining clients, paying a 10

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Reconsidering how and where we meet

There are new rules for everything now. Smart leaders should think through the process and purpose of coming together to ensure people walk away from gatherings feeling better than when they arrived. BY EMILY DRAKE AND TODD CONNOR Chicago Comes Back is a weekly series on ChicagoBusiness.com providing leadership insights to help your business move forward, written by leadership consultants Emily Drake and Todd Connor. Drake and Connor facilitate Crain’s Leadership Academy. Drake is a licensed therapist, owner of the Collective Academy and a leadership coach. Connor is the founder of Bunker Labs and the Collective Academy and is also a leadership consultant. Check out previous installments at ChicagoBusiness.com/comesback. TODD CONNOR: As leaders, transition points like the city’s reopening are the ideal opportunity to take what we need from where we’ve been and leave behind that which no longer serves us. While there are timeless leadership principles, I appreciate hearing leaders acknowledge there are new rules heading into the second half of 2021, particularly as we reflect on last summer igniting new levels of awareness around systemic racism—and a leader’s responsibility in addressing it internally and in their organizations—as well as each employee having a pandemic experience that may have them thinking differently. EMILY DRAKE: We often say leadership is people and paperwork, and paperwork is the easy part. So, while we may not have made all the decisions on what a successful return looks like—we are very much “in process” there—my hope is that the core of whatever ethos we create results in greater equity. TC: Getting to equity is going to require stretching. We’ve just celebrated Juneteenth, now known as Juneteenth National Independence Day, a new federal holiday that two years ago many Americans would not have had any awareness of. The paperwork part of leading is starting to make progress for the people. The interest and awareness in what Juneteenth represents is a powerful acknowledgment of what leaders can take with us as company policies are revised. Honoring the day and what it represents—the emancipation of those who had been enslaved in the United States—is an example of a new leadership opportunity. ED: Another opportunity for leaders has to do with setting the pace of work. We’ve made progress here to at least acknowledge that the pace we have historically run may not work for everyone, but there is still a lot of work to do. One of the core beliefs of our work as facilitators is that leadership lessons come from sources both unexpected and close to home. Keeping Juneteenth in mind, I talked to Ashley Munson, organizer of the 2021 March for Us, which took place June 19 in honor of the day. She shared that while the first March in 2020 was about

ISTOCK

JOE CAHILL

CHICAGO COMES BACK

demands in the wake of police violence, as well as gathering people together to grieve and process, this year it’s about what happens next. TC: What happens next is a question we’re hearing a lot. When I consider it, it’s really a conversation about endurance. The new rules of leadership seem to take into account a slower, more intentional pace so the change we’re working to create can last. It’s normal for humans to go big and then go home on social issues, like we approach a business event. But the new rules have social issues placed squarely as workplace issues, and how we approach that work is as important as what we decide. As interest in Black Lives Matter declines and people return to the office, there’s a real fear that we’ll regress. But I’m excited to see how people like Ashley get support and build momentum, and even some joy, around weaving anti-racism, diversity, equity and inclusion work into strategic plans beyond 2021. ED: Other new rules are happening around inclusivity in all areas of organizations, including how we meet: to hybrid or not to hybrid? What are the pros and cons? I love these questions because they can only be answered in dialogue. Gone are the days of edicts. Instead, great leaders are inviting conversation. In-person gatherings, like the rallies this month, are powerful. They have a purpose. We would do well to take guidance from organizers like Ashley and invite that intentionality to our

workplace gatherings—including asking the question, “What is the purpose of this gathering? And if there isn’t one, do we need it?” That editing, reflecting, auditing—whatever you want to call it—is part of the new rules. Priya Parker, master facilitator and strategic adviser, recently joined Brené Brown to share her expertise on that very thing: why we meet and why it matters. TC: I love her invitation that “every gathering is a social contract” and needs to be treated with that deference. As a leader, it raises the level of awareness not just of how important a meeting is, but the opportunity and connection and meaning they can have, even a weekly staff meeting. Some organizations are being more explicit: In-person is for relationship-building, virtual meetings are for decisions and Microsoft Teams is for information sharing. Thinking through the purpose of our meetings and communications and sharing it explicitly can make the difference between people leaving the experience better than when they arrived. ED: Whether it’s to envision what’s next, as it may be at Juneteenth events, or to make a decision, as it may be in board meetings next week, intentional gathering is a huge new rule. People’s level of discernment and consideration for their own time has never been greater. Time and energy are too important to waste—and there is far too much important work to be done as we return better than we were a year ago.

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BY ALBY GALLUN The Palmer House Hilton has reopened, but foreclosure looms. Gurnee Mills has won a reprieve from its lenders. The Civic Opera Building is in purgatory. After a scary 2020 for commercial real estate investors, the fading pandemic and recovering economy are easing their worst fears of a prolonged and painful slump—and wave of foreclosures. But the market’s 2021 comeback won’t save all of real estate’s long-haulers, the properties that remain beset by debt woes caused or exacerbated by COVID-19. The Chicago-area delinquency rate on a key category of debt, commercial mortgage-backed securities, or CMBS, fell to 11.2 percent in May, according to Trepp, a New York-based research and consulting firm. That’s an improvement from the peak of 14.0 percent in June 2020, but it could take years for the rate to return to its pre-COVID level of 2 to 3 percent. “I don’t think we’re out of the woods yet,” says Tom Fink, senior vice president and managing director at Trepp. That statement applies to some of the biggest properties contributing to the area’s high delinquency rate. The 1,635-room Palmer House, the city’s second-largest hotel, reopened June 17 after being closed due to the pandemic for 15 months. But its future remains a question as its owner, New York-based Thor Equities, tries to resolve two foreclosure suits totaling more than $410 million. Gurnee Mills, the area’s third-biggest mall, with about 1.9 million square feet, is in a better spot. After defaulting on about $124 million in CMBS debt last year, the mall’s owner, Indianapolis-based Simon Property Group, negotiated a forbearance agreement with a loan servicer in December, protecting the property from a potential foreclosure suit.

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In the West Loop, the owner of the Civic Opera building, Nanuet, N.Y.-based Berkley Properties, also is trying to work out a forbearance agreement after stopping payments on about $164 million in CMBS debt, according to public securities filings. Foreclosure is a still possibility. The properties represent the three real estate sectors—hotel, retail and office—hit hardest by the pandemic. Hotels suffered massive losses last year as business and leisure travel came to a halt and occupancies plunged.

HOTELS HURTING Hotels are by far the most delinquent sector in repaying CMBS debt after suffering massive losses during the pandemic. DELINQUENCY RATE BY SECTOR For Chicago-area commercial mortgage-backed securities loans 2.2%

May 2021 0.7%

Hotels Feb. 2020

2.2% 55.0%

May 2021

Apartments Feb. 2020 0.2% 4.8%

May 2021

Office Feb. 2020

2.7%

May 2021

3.8%

“PE ... AH

Tom direc

Industrial Feb. 2020

Th is a g whic retai store rent. for C rose gust In delin perc big Cent Rive tiate aver seizi in a loan

SOURCE: TREPP

The CMBS delinquency rate for Chicago-area hotels jumped to 57.1 percent in October, largely due to the Palmer House’s troubles, and has declined only slightly since then, to 55 percent in May, according to Trepp. Local hotels with delinquent CMBS debt include the W Chicago City Center, the Marriott Chicago River North and the Hilton Orrington Evanston.

STEPS FORWARD

A rebound in tourist and business travel could lift many hotels out of the danger zone. The owners of some, like the Godfrey in River North, have already worked out loan modifications. But lenders, after being patient with delinquent hotel owners during the pandemic, also could start demanding that borrowers do more to recapitalize their properties now that the market’s improving, says attorney David Neff, a partner at Perkins Coie who specializes in hotel bankruptcies and restructurings. If a hotel owner asks a lender to forgive some of its debt, the lender will require the borrower to invest more equity in the property, he said. “I think you’re going to see lenders get more aggressive,” says Neff, who represents lender Wells Fargo in one of the foreclosure suits against the Palmer House. Though he wouldn’t make any predictions about the Loop hotel’s fate, Neff says the hotel’s reopening is a positive step. A Thor spokeswoman declines to discuss the suits but says Thor “looks forward to a lively summer” at the hotel.

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.0%

CRAIN’S CHICAGO BUSINESS • June 28, 2021 7

The recovering economy also is a good sign for retail landlords, which were crushed last year as retailers went bankrupt, closed stores or stopped paying their rent. The CMBS delinquency rate for Chicago-area retail properties rose as high as 29.6 percent in August, according to Trepp. In an encouraging sign, retail delinquencies dropped to 11.9 percent in May. Owners of some big properties, like Yorktown Center in Lombard and North Riverside Park Mall, have negotiated loan modifications and averted foreclosure. Rather than seizing a big mall and bringing in another firm to fix it, many loan servicers and lenders would

the convenience of online shopping, which had been taking big bites out of the brick-and-mortar retail sector for years. Though shoppers are returning to stores, e-commerce will remain a growing threat to shopping malls and other properties, one reason to expect more distress in the future.

‘SLOW BURN’

The future is uncertain for the office market, too. The CMBS delinquency rate for local office properties has edged up but is still relatively low, just 3.8 percent in May. The question is what happens in the coming years: Will demand for office space decline as more professionals work from home in the post-pandemic era? No one knows “PEOPLE ARE TRYING TO BE RATIONAL right now, but Fink bracing for higher . . . BECAUSE THE ALTERNATIVE IS TO BE isdelinquencies. “Office is going A HARD-ASS AND TAKE A LOSS.” to be a slow burn,” Tom Fink, senior vice president and managing he says. director, Trepp Just one big downtown property, a rather work out a deal with a mall 487,000-square-foot office building owner that has the expertise to at 401 S. State St., fell into foreclosure last year, and its owner handturn it around. “People are trying to be ratio- ed the building over to its lender. nal about what they’re doing, Rialto Capital, the loan servicer because the alternative is to be overseeing the Civic Opera Builda hard-ass and take a loss,” Fink ing, has not ruled out a foreclosure suit against the 915,000-square-foot says. Still, the long-term outlook for tower at 20 N. Wacker Drive, acretail is anything but bright. For cording to public filings. Though Berkley, the owner of many housebound consumers, the pandemic merely reinforced the Civic Opera Building, stopped

e for d to rgely trouightMay, otels t innter, North van-

making mortgage payments, the property’s problems are mostly temporary, says Brian Whiting, president of Chicago-based Telos Group, the building’s leasing agent. Two co-working tenants, Bond Collective and TechNexus, had a hard time making rent payments as people stopped coming into the office, but their business is coming back, Whiting says. He’s confident Berkley will be able to work out an agreement with Rialto. “There are amicable discussions going on between the lender and the landlord,” he says. Investors that seek out distressed properties could find some compelling opportunities in the future. The volume of distressed deals has been pretty low so far, but it’s still early, says Jim Costello, senior vice president at Real Capital Analytics, a New York-based research and consulting firm. But the deals will require different skills than those employed after the recession of 2008-09, he says. Many properties that ran into trouble then suffered from financial distress: They were simply carrying too much debt that financial pros restructured. This time around, more properties are suffering from operational distress—not enough cash flow. It takes a different person to solve those problems, Costello says. “It’s not the financial sharpshooter,” he says. “It’s the people who understand the cost of rebar.”

LESS DISTRESS The delinquency rate on Chicago-area commercial mortgage-backed securities loans has declined since last summer, but it’s still above its peak after the Great Recession. Commercial mortgage-backed securities loan Delinquency rate Monthly, June 2006 to May 2021 14.0% 12.0

11.2% Chicago area

10.0

6.2%

8.0

All U.S. metro areas

6.0 4.0 2.0 0.0

’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21

Source: Trepp

Royal Bank offers commercial loans with attractive rates and terms. Contact Richard Nichols, Senior Vice President 2IƓFH Ř 0RELOH (PDLO UQLFKROV#UR\DO EDQN XV Putting community first since 1887.

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8 June 28, 2021 • CRAIN’S CHICAGO BUSINESS

Surgeons group has deal to finally sell Lake Shore Drive mansion BY DENNIS RODKIN Nearly six years after putting up for sale one of its two historical Lake Shore Drive mansions, the International College of Surgeons may have finally sewn up a deal. The sale would be at far below half the group’s original $17 million asking price for the century-old mansion. In June, with the asking price reduced to $5.75 million, the listing agent issued a call for final offers by June 14. On June 22 the listing was marked “contingent,” indicating that an offer has been accepted but there are details to be settled. The sellers’ letter to potential buyers indicated the organization would need seven to 10 days to obtain approval from its governing board. Both the listing agent, Crystal Tran of Berkshire Hathaway HomeServices Chicago, and Max Downham, the executive director of the International College of Surgeons, declined to comment. Crain’s has determined that multiple bids were submitted by

the June 14 deadline. One bidder, longtime developer Fred Latsko, offered $3.5 million. Latsko says that when it was rejected, he was told the surgeons group was entertaining a different offer. It’s not known whether the prospective buyer plans to use the four-story, 12,000-square-foot home as a single dwelling, divide it into condominiums or put a commercial use such as foundation offices in it. Building a new residential tower on the site seems unlikely, as a 1990s plan for a 41-story tower behind the facades of the group’s two landmark mansions at 1516 and 1524 N. Lake Shore Drive sparked a yearslong court battle. The limestone mansion at 1516 N. Lake Shore first went on the market in September 2015 at $17 million. The asking price was down to $5.75 million in late May, when the listing agent issued a call for “best offers by June 14.” Although formerly residential, the mansions at 1516 and 1524 have housed the International

College of Surgeons and the related International Museum of Surgical Science for seven decades. In the early 1950s, Chicago surgeon Max Thorek bought the pair of buildings and moved the International College of Surgeons in from Geneva, Switzerland. In 2015 an executive of the surgeons group said five employees were working in the 1516 N. Lake Shore building, down from 15 in the 1980s.

LAKE SHORE ARTIFACT

Built in 1914, the 12,000-squarefooter is one of only seven mansions that remains from North Lake Shore Drive’s early 20th century origins as a pleasure drive lined with palatial homes. It was designed by noted New York architecture firm McKim Mead & White for Edward Tyler Blair and Ruby McCormick Blair. He was the son of an early Chicago hardware merchant, and she was a niece of Cyrus McCormick, inventor of the mechanical reaper. Their son William founded what’s now Chi-

BERKSHIRE HATHAWAY HOMESERVICES CHICAGO

Nearly five years after putting the building on the market at $17 million, the group has it under contract after issuing a call for final offers with the price down to below $6 million; the future of the building remains unknown

The listing for the mansion at 1516 N. Lake Shore Drive, left, was recently marked “contingent.” The surgeons group’s other mansion at 1524, right, is not for sale. cago-based financial services firm William Blair. Many features of the original design are intact, including grand salon-sized formal rooms, elaborate plaster ceilings, carved stone mantelpieces and wood paneling on the interior. There are nine fireplaces, original marble or herringbone-laid wood floors, 16-foot ceilings on the second floor—which is the main living floor, above reception rooms and servant spaces on the ground level— and a two-story coach house that contains 2,400 additional square feet. Any new use would likely entail a multimillion-dollar renovation. The kitchen is still the origi-

nal small room designed for use by servants, and the remaining bathrooms have been reduced to powder rooms with no shower or bathtub. The building also needs a new roof. In 2015, Nick Rebel, executive director of the surgeons group’s U.S. section, says “we haven’t been able to afford to maintain (the structure) the way it should be.” Rebel declined to comment for this story. In 2017 the group changed the offering to include both mansions, 1516 and 1524, but later relented and has been offering only 1516. Latsko says that “when they list 1524 I will certainly be more aggressive.”

Emerging ‘virtual C-suite’ chips away at expectations about where execs will gather

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Kellogg has operations and offices around the world, and most of its office-based employees remain remote, according to spokeswoman Kris Bahner. “Once we do return to the office, we will continue to promote flexible work, with the expectation that employees spend at least half of their time in the office,” she says in the statement.

CONSOLIDATING

The company is also consolidating its Chicago-area offices. Outposts in Elmhurst and Oak Brook will be consolidated at a new location in Naperville. An office in Merchandise Mart is set to move into 410 N. Wells St., the headquarters of RxBar, which Kellogg acquired in 2017. RxBar and Kellogg also have innovation spaces at the Hatchery, an East Garfield Park food incubator. The company declines to comment on how many employees are based in the Chicago area or how much time executives spend here. Noting that Kellogg recently invested almost $30 million in Battle Creek facility improvements, Bahner says “there are no plans to establish a second headquarters location.” Megamergers in the packaged-foods industry raise thorny questions about headquarters locations. For example, when Heinz merged with Kraft in 2015, the combined company decided to maintain dual headquarters in Chicago and Pittsburgh, de-

ALAMY

challenges as companies figure out the new role of the headquarthe pandemic-driven rise in re- ters. Companies know that their mote work. Although conversa- headquarters must be a place that tions about the topic tend to focus people want to come back to, and on mid- and lower-level employ- they’re trying to figure out what ees, Kellogg’s situation shows that that means, Reaumond says. The work-from-home culture top brass sometimes prefer to spend time someplace other than has “infiltrated” companies, and the long-term repercussions of a the company’s hometown. An emerging “virtual C-suite” hybrid workplace are unknown, is chipping away at long-standing says executive recruiter Peter expectations that senior execu- Crist. “To me, the pendulum swing tives will cluster together in a traditional corporate headquarters. on the cultural elements will be That means companies hoping to dramatic if you allow a work-fromrecruit the best leaders might have home environment to really domto let them live and work where inate your culture,” he says. “I just they want. And if they prefer cos- don’t see how you create a vibrant culture if human beings aren’t close to “COMPANIES ARE MORE OPEN THAN one another. I just see it.” EVER TO GETTING THE RIGHT TALENT, don’t Crist acknowledges that his viewpoint REGARDLESS OF WHERE THEY LIVE.” may be considered Paul Reaumond, vice chairman, CBRE old-fashioned in a post-pandemic world, mopolitan hubs of commerce and but he worries about what will culture, cities like Chicago could happen with companies that don’t have an edge over smaller locales get the balance right. Without a strong workplace culture, turnlike Battle Creek. “Companies are more open over could accelerate, he warns. Creating and maintaining a than ever to getting the right talent, regardless of where they live,” company’s culture is one of the says Paul Reaumond, vice chair- most important responsibilities of man at commercial real estate senior management. A CEO who firm CBRE. “That still holds true at works remotely may find it harder to influence culture. And the exan executive level.” Having remote executives, along ample of a remote-working CEO with many employees’ desire to may inspire underlings to follow maintain some form of flexibility suit, further loosening cultural in where they work, could present connections. KELLOGG from Page 1

Kellogg was founded in Battle Creek, Mich., 115 years ago. spite ongoing cost-cutting efforts. Heinz got its start in Pittsburgh about 150 years ago. There’s a Heinz History Center there, with a recipe book from 1869 and largerthan-life ketchup displays. “They have not abandoned Pittsburgh because of the ties with Heinz,” says Erin Lash, director of consumer equity research at Morningstar. “It is very intriguing the extent to which that heritage has continued to persist in (the consumer packaged-goods industry) for so long.” Companies with such long his-

tories should maintain ties to their origin stories for brand management, says Neal Roese, professor of marketing at Northwestern University’s Kellogg School of Management. Origin stories help differentiate brands and convey authenticity, he says. If a brand still has a presence in the place it was founded, it should hold on to that, Roese says. His advice to such companies: “Keep some kind of a presence there so you can keep telling that story,” he says. “Even if you can say it’s only symbolic.”

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CRAIN’S CHICAGO BUSINESS • June 28, 2021 9

SPONSORS

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6/25/21 2:36 PM

14 June 28, 2021 • CRAIN’S CHICAGO BUSINESS

A COMEBACK TAKES SHAPE

Lessons learned are embedded in the city’s return to not necessarily business as usual

recently reported. “As people hicago can’t be declared return to work, there are going a post-COVID city just to be confrontations,” said Pete yet, but it’s getting there. Berghoff, whose family owns the The health crisis that claimed hundreds of lives weekly Berghoff restaurant in the Loop, which plans to reopen in July. for a year, shut down businesses, “We need to make sure that evforced employees who could erybody downtown feels safe.” to work from home and turned Yet faith remains strong in this downtown streets into empty city that survived a deadly fire 150 canyons seems largely over, with years ago and went on to transmuch credit going to the city’s form itself into a global hub of vaccination rate approaching 55 commerce and culture. But you percent. can’t overlook a healthy supply of The city’s official reopening June 11 was a subdued milestone city real estate bargains and low mortgage interest rates. That’s as the state entered Phase 5 in the case now with enticingly low the lifting of restrictions. Crowds condo prices, which are attracting didn’t rush the Magnificent Mile. buyers and laying the groundThe usual horde of summer tourwork for a big increase in downists posing for selfies at the Bean town sales, as Dennis Rodkin didn’t materialize. Whole blocks reports in this month’s Forum. of commercial properties along In 2020, downtown living State Street still lack tenants. lost a bit of its luster. Some 15 Once-busy downtown lunchtime months later, home hunters are spots haven’t reopened. But reconsidering. The lakefront, a attendance numbers are climbreawakening restaurant scene— ing at both Wrigley and Guarand maybe the just-opened anteed Rate fields. And digital Obama portraits parking marketplace exhibit at the Art SpotHero says it saw “WE ARE A Institute of ChicaChicago traffic jump go—will bring more 205 percent this June people downtown in over June 2020. the coming months. Still noticeably Outside of the missing are the big central business conventions and Dr. Ponni Arunkumar, district, Chicago has tourists, who before been transformed by COVID helped power Cook County medical examiner the pandemic, which Chicago’s econoclaimed 5,305 lives in my. They generated the city between March 16, 2020, billions in economic activity. In 2019 Chicago attracted 61 million and June 22 of this year. Crain’s reporter A.D. Quig interviewed visitors, and their expenditures the Cook County medical extopped $16 billion, bringing the aminer, Dr. Ponni Arunkumar, city $1.1 billion in tax dollars, to learn how the government according to Choose Chicago. agency navigated a terrible year. Two years ago, nearly 154,000 people worked in tourism-related It was numbing work, but Arunkumar says, “We are a sturdy jobs, the marketing organization bunch.” reports. That’s the kind of confidence Chicago’s return to a pre-panshowing up throughout a city demic bustle will take time. But that is working to make its way in the week leading up to the first back from what it lost in the past day of summer, Chicago was the 15 months. Confidence has long largest city in the country to fully been a backbone of business. reopen, according to Mayor Lori Whether it’s an ambitious Lightfoot’s office. While there are no capacity limits for bars, restau- bakery on the South Side, an essential food supplier to restaurants, gyms or other large venues rants or a successful lender in and no social distancing requirements, businesses can make their the federal government’s Payroll own rules when it comes to mask- Protection Program, Chicago businesses and leaders are proving and distancing. ing how sturdy they are. As the coronavirus continues This doesn’t mean that everyto recede, the persistent cloud of gun violence hangs over Chicago. thing is rosy and every business will regain its footing. But we And some Loop business owners can see a post-COVID Chicago express worry “about the unruly becoming clearer every day. gatherings of younger people downtown that have turned —Cassandra West violent,” the New York Times

STURDY BUNCH.”

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CRAIN’S CHICAGO BUSINESS • JUNE 28, 2021 15

DOWNTOWN’S CONDO SPREE

GOVERNMENT

THE COUNTY MEDICAL EXAMINER’S ‘LONG YEAR’

Home hunters see bargains instead of despair, making the central city attractive once more

arah Langum, a real estate agent with Compass, recalls shopping for downtown condos with a pair of clients in October 2020. “It was like tumbleweeds in the street,” she says. “There was nobody.” The condo market downtown was reeling under the double crises of 2020—COVID shutdowns and social unrest—leading to a massive overhang of condos on the market. In November, there were enough units to fuel 24 months of sales, compared with six months’ inventory of homes for sale citywide. Prices were crashing as a result. Langum’s clients pulled back from buying at the time, but this spring, “when prices were at the bottom,” they were back at it, she says. In early May, they put under contract a two-bedroom, 40th-floor condo with views of Millennium Park and the Loop skyline. The clients, whom Langum declines to put in contact with Crain’s, paid $760,000, or 14 percent off the $880,000 the sellers paid for the condo in 2013. How did 2020 change the downtown condo market? By creating a giant backlog of supply, the pandemic-affected year made buying downtown significantly cheaper, a fact that may lead to a surge in sales in coming months. The decline in downtown prices is the opposite of what’s happening virtually everywhere

How the pandemic prepared a crucial public department to deal with mass mortalities n a typical year, the Cook County medical examiner’s office handles about 6,000 cases. In 2020, it handled more than 16,000. That caseload included 8,339 coronavirus-related deaths, plus 982 homicides—a recent record—450 suicides and 1,381 opioid-related deaths. As Cook County approaches a grim marker—11,000 recorded COVID fatalities since the beginning of the pandemic—Dr. Ponni Arunkumar, the calm and soft-spoken M.E. since 2016, shares an understatement: “It has been a long year.” The office has never handled a mass casualty situation like COVID, or one that has lasted for so many months. The only close comparisons are the 1995 heat wave and the 1979 crash of American Airlines Flight 191. COVID proved too overwhelming for other medical examiners’ and coroners’ offices around the country. Some left the duty of signing death certificates to the treating physicians and hospitals. Cook County took them all. The office fulfilled an important public health duty: reporting demographics, comorbidities and clusters of cases in the hopes of averting further deaths. “We are a sturdy bunch,” Arunkumar says. But it wasn’t until October 2020 that she felt total confidence that the office could manage the caseload. “Every section had to kind of ramp up, scale up, either work long hours or get more staff to help with just our operations,” she says. That work has been, at times, numbing, with pathologists on some days reviewing more than 90 deaths. The county opened a 66,000-square-foot refrigerated warehouse surge center in April 2020, with capacity to hold more than 2,000 bodies and ease crowding at hospital morgues. The M.E.’s office made some small permanent changes. Staff now wear N95 masks when they visit scenes. Supervisors are more agile and can shift staff for different purposes. Perhaps an even larger change: Arunkumar monitors global health trends, and she watched with worry as cases in Asia surged in May. While the daily COVID fatalities have waned in recent weeks, Arunkumar is expecting another bad summer for gun homicides, and she continues to be troubled by opioid overdoses, which are now more prominent in nonwhite populations. She believes the office can handle whatever comes. “Over the last year, and even this year, our confidence in being able to deal with a mass fatality situation has increased because we’ve actually had to do it.”

P013-P020_CCB_20210628.indd 15

—Dennis Rodkin

ANDREA UCINI

REAL ESTATE

ALEX GARCIA

—A.D. Quig

else in the city and suburbs, which could turn buyers’ attention downtown. “We bought at a good time, before everyone else figures out what’s coming,” says Paridhi Shrivastava, who with her husband, Kumar Siddhartha, bought a condo on Lake Shore Drive in Streeterville on June 4. The couple, who are both in technology fields, got the two-bedroom, 45th-floor unit for $640,000, or about 5 percent off the $675,000 it went for 11 years ago. Their real estate agent, Larissa Brodsky of Baird & Warner, says they were one of four young couples she has represented in the past several weeks who have all bought downtown condos and gotten considerably more square footage and luxury amenities than they would have just prior to the pandemic. Shrivastava and Siddhartha were renting in River North when the shutdown began, and in early 2021 they began looking to buy. They checked out suburban markets “like everybody did,” Shrivastava says, but turned back toward State and Madison. They’re fans of downtown restaurants and use the riverwalk and lakefront paths daily. “It’s downtown,” she says. “It’s not like the suburbs.”

6/24/21 1:32 PM

16 JUNE 28, 2021 • CRAIN’S CHICAGO BUSINESS

FOOD AND RESTAURANTS

THE MEAT OF THE MATTER West Town beef, poultry and pork seller confronts the reality of rising prices for commodities ndrew Neva is standing next to a pile of boxes full of raw chicken wings. He’s 6-foot-1, and the boxes are stacked up to his waist. “It’ll be gone by tomorrow,” he says. Neva, 34, co-owns Northwest Meat with his parents and works from a warehouse in West Town to supply restaurants with beef, poultry and pork. His client list reads like a wish list for Friday night dinner spots, ranging from high-end steakhouses to dive bars. There’s Lonesome Rose in Logan Square, Michelin-starred Elske in the West Loop, Gibsons Restaurant Group, Saigon Sisters, pizza places, taverns—the list goes on. Perhaps the oldest client is Gene & Georgetti steakhouse in River North. Neva’s grandfather, Bruno Michelotti, who founded Northwest Meat in 1956 after he immigrated from the Tuscany region of Italy, was the brother of steakhouse co-founder Gene Michelotti. The pandemic forced the closure of restaurants, confined people to their homes and altered consumers’ eating habits in ways that will likely linger for years. Businesses in the industry had to adapt or die. Northwest Meat was no different. It cut down working days and tried its best to hold on to staff, but it ultimately lost $2.5 million in sales last year. “That’s business you’ll never get back,” Neva says. But it is what has unfolded in 2021, as the world reopened, that has changed the baseline for Northwest Meat. Supply-chain issues, which surfaced early in the pandemic, have been exacerbated as vaccines rolled out and restaurant demand picked up. As a result, meat prices went up and have not come down. “You always had ups and downs,” Neva says. This is different. Pre-pandemic, chicken thighs cost 60 cents a pound wholesale. Now Neva pays $2.08. Chicken wings went from about $2.80 a pound to $3.90. Part of it is demand—chicken wings and thighs are fattier and travel well in to-go orders, for example. But supply issues have not let up, either. Neva couldn’t get his normal cuts for a while, as meatpackers faced shutdowns, outbreaks and staff shortages. When he could get them, he had to pay more. Now, he plays an allocation game. That waist-high stack of chicken wing boxes won’t satisfy all his restaurant clients. In the next room, bone-in rib-eyes and other cuts of beef dry age on shelves, as Himalayan salt blocks sit stacked in the corner to control the humidity. Neva says the shelves are not nearly as full as they once were. “We’re all in this mess together, so you all have got to share, you all have got to help everybody out,” he says. “We all almost lost our businesses a year ago. We have got to keep that in perspective.” Neva has had to educate his customers on the importance and fragility of the supply chain. For so long, restaurant operators have weathered fluctuating commodity prices by building in extra margins on desserts or drinks. Now, many must raise their prices. Beef prices are up, too—burgers also travel well—and Neva predicts that Americans will simply need to get used to paying more for a steak or burger. “You don’t have a choice now” on raising prices, Neva says. “You have to understand that food is going to be more expensive.”

—Ally Marotti

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SWEETER SUCCESS

After a brief shutdown last year, South Side bakery sets sights on growth—and Betty Crocker rown Sugar Bakery, a South Side destination for lavish cakes, didn’t shrink during the pandemic. Instead, it expanded. After closing in March 2020, then reopening two months later, business has been steady, says Stephanie Hart, founder and owner. “I saw that because of the pandemic people needed comfort, and the services we offer are comfort, thus making us in demand,” says Hart, a business consultant before she started Brown Sugar in 2004. “The pandemic made it difficult, though, because I had to grapple with how to get employees safely back to work after temporarily SMALL BUSINESS shutting down.” Last summer, Hart purchased the 9,000-square-foot former Cupid Candies factory Street headquarters for $225,000 on the Southwest Side, using a from the owner of a next-door $500,000 grant from the Illinois business. Brown Sugar, famous Department of Commerce & for its caramel cakes and colorful Economic Opportunity. With her fruit-flavored cupcakes, now own funds, she bought her 75th

WORSOM ROBINSON

makes most of its baked goods at the Cupid facility. The bakery in early June formed a partnership with Lou Malnati’s Pizzeria to have its

products sold online by the deep-dish chain. Hart’s entrepreneurial ambitions continue to rise. She is developing a cake mix that she plans to eventually sell at grocery stores. “This way you can go to your local grocer, buy Brown Sugar Bakery cake mix and make it at home,” she says. “So I guess you can say I’m coming for Betty Crocker and any other over-thecounter cake mixes.” She has plans to reopen her Navy Pier store by July 4. The pier location closed last year due to the pandemic, which also forced the closing in October of a West Side store. But now, Hart says she sees an airport location—O’Hare or Midway—in Brown Sugar’s future. As the city continues to see the pandemic recede, Hart is looking way into the future. In the next 10 years, she expects Brown Sugar’s annual revenues to increase from $1.5 million to $100 million and have at least 200 employees. —Wendell Hutson

AN IMAGE REDEMPTION FOR BANKS Banking veteran John McKinnon believes the industry did a lot right during the pandemic

ALYCE HENSEN

P013-P020_CCB_20210628.indd 17

anks were still trying to live down the infamy of the financial crisis and the Great Recession when the pandemic hit. At the beginning, it appeared as if there might be another round of loan defaults, charge-offs and general misery among consumer and business borrowers. But the BANKING overwhelming federal intervention, which called on banks to distribute critical Paycheck Protection Program loans to businesses that otherwise would have had to resort to mass layoffs, was both a successful rescue mission and secondarily a surprising rehabilitation non, along with former LaSalle opportunity for banks. Bank CEO Norm Bobins, are the Wintrust Financial, based in Chicago banking industry’s living Rosemont, was one of the most legends. And both are still worksuccessful PPP lenders at the ing well into their 70s, Bobins as a program’s onset and still is reapdirector of the U.S. holding coming the rewards in terms of client pany for Toronto-based CIBC. opportunities. Asked why he’s still doing it, John McKinnon, who is McKinnon says simply, “I love it.” Wintrust’s CEO of commercial During the pandemic period, banking, has seen just about banks didn’t get hit financially everything in a 53-year banking like they did during the Great career—all in Chicago. Before Recession, but McKinnon doesn’t joining Wintrust, he ran midhesitate when asked to compare dle-market business lending for this crisis to past ones. Bank One under Jamie Dimon. “This was the worst by far. By Before that, at the old American far,” he says. “We’ve gone through National Bank, he was a mentor where all the banks are fighting to dozens of business bankers through tough loans, and that’s still working in Chicago. McKin-

aggravating. But you work it through, it is what it is, you’ve got reserves—that’s our business. There was never a light at the end of the tunnel. . . .You have a company, let’s say, and they’ve always done quite well. They have a good balance sheet; everything’s good. All of a sudden, one month goes by, two months, six months, eight months, and there’s a point where you go, ‘Wow. Really?’ ” Wintrust and other business banks put together wide-ranging forbearance programs in which borrowers didn’t have to make loan payments for a period of time. Ultimately, most of their business customers were able

to survive, and loan write-offs were shockingly low. McKinnon credits the government’s massive financial response. But the speed at which banks built computer systems and mobilized people, even as the pandemic was at its worst, to process PPP applications was unlike anything he’d ever seen in his industry. “You think the government could have done that without the banks? I don’t think so,” he says. Wintrust was a relatively small bank when the financial crisis hit in 2008 and wasn’t involved in the practices that led to the housing bust. But all banks got a black eye. “We got kind of tarred by that,” McKinnon says. Now? There always will be banking industry detractors. As the saying goes, banks will lend to you when you don’t need the money but won’t when you do. With the government’s help, that didn’t happen this time. For McKinnon, the lessons learned from the Great Recession and now the COVID crisis boil down to this: “You can’t sell stuff that doesn’t have value. I don’t think that buyer beware works. . . .You’ve got to warrant what you’re selling.” —Steve Daniels

6/24/21 1:32 PM

18 JUNE 28, 2021 • CRAIN’S CHICAGO BUSINESS

MEDICINE FOR MEMBERS Business booms for a direct primary care practice that offers personalized health care

r. Alex Lickerman averages 10 calls per day from patients who pay a flat monthly fee for 24/7 access to personalized medical care. But over the course of two days in February 2020—with less than two dozen confirmed COVID-19 cases in the U.S.—the chief medical officer of Chicago-based ImagineMD fielded 70 calls from patients asking about the mysterious new virus circulating worldwide. “There were a number of patients who couldn’t reach their physicians and were actually more motivated to join our practice because they wanted immediate access to any advice we could give,” Lickerman says. Under traditional fee-for-service medicine, doctors are reimbursed for each medical service provided. But the payment model presented challenges early in the pandemic, as many people avoided medical care for fear of infection. Meanwhile, $130 monthly memberships provided a steady stream of revenue at “direct primary care” practice ImagineMD. Even as some canceled their memberships amid the pandemic’s economic fallout, others joined the practice. More than a year later, business is booming. Lickerman, 54, and CEO Rhea Campbell, 53, a married couple who founded the practice in 2016, credit COVID-19 with accelerating the adoption of direct primary care, sometimes called concierge medicine. Attracting individuals and those covered under employer-sponsored plans, ImagineMD says it currently has nearly 570 patients—up more than 50 percent since December. And with locations in the West Loop and Bloomingdale, it’s in the midst

of opening a Rockford clinic to treat patients covered under new employer contracts. “COVID hit and sort of blew open the cracks in the health care system for all to see,” Campbell says, noting that the pandemic has led more employers to consider offering direct primary care benefits, which aim to reduce health care costs and improve outcomes for employees. Under employer contracts, workers can see their ImagineMD primary care physician as often as they want with no copays or deductibles. At the same time, referrals for specialty care aren’t subject to approval from payers. The goal is to ensure patients get the best possible care in the most appropriate—and cost-effective—setting. ImagineMD aims to open a fourth location in the Chicago area by the end of 2022, Campbell says, noting it’s a conservative goal. Campbell and Lickerman have built the business with no outside capital. But as more employers offer direct primary care and ImagineMD grows, they say they’re open to finding the right investment partner. Prior to ImagineMD, Campbell worked in commercial real estate—a skill set she says has come in handy as the practice quickly expands into new areas. For Lickerman, who spent the majority of his career at the University of Chicago Medical Center, the practice represents an opportunity to “save primary care” and make it easier for riskaverse doctors to be part of an innovative payment model. “We feel like we’re building this business brick by brick, almost literally.”

RETAIL

ALONG CAME AMAZON E-commerce goliath’s fulfillment center could help reverse the fortunes of struggling Matteson

—Stephanie Goldberg

RASHMI TYAGI

HEALTH CARE

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ike most suburban officials, Matteson Village President Sheila Chalmers-Currin grew accustomed to receiving bad news as COVID-19 cases surged last year. But one piece of good news overshadowed everything else: Amazon’s decision to open a gargantuan fulfillment center in Matteson that will employ as many as 1,800 people. It was a “best of times, worst of times” story that became familiar across suburban Chicago in 2020 as the e-commerce goliath accelerated its expansion in the middle of the pandemic. Amazon added a bunch of warehouses and 15,000 workers in Illinois amid a boom in online shopping last year. The 3.8 million-square-foot building in

Matteson, which will use robots to process packages, is set to open in the fall. “I was extremely excited” when Amazon announced its plans last June, Chalmers-Currin says. “I’m still excited about the possibilities.” Amazon’s growth could soften any lasting economic impact from the pandemic for Matteson, Markham and University Park, three largely African American south suburbs where the company is building large fulfilment centers. In Matteson, population 19,500, the big drop in travel took a heavy toll on the village’s six hotels, resulting in a loss of more than $300,000 in tax revenue, Chalmers-Currin says. Two Matteson restaurants closed, but the other dozen or so did “relatively OK,” she says.

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CRAIN’S CHICAGO BUSINESS • JUNE 28, 2021 19

INVENTORY REINVENTED Corporate pivots, home offices redirect used furniture business

—Danny Ecker

PAUL GOYETTE

fter spending years helping companies put furniture into their offices, Mark Knepper got a lot busier in 2020 taking it out—and selling it to the work-from-home crowd. His 30-year-old West Side new and used furniture business, Rework, pivoted several months into the pandemic as companies acknowledged that their workers weren’t coming back to offices anytime soon and that work life would be a lot different when they did. “That was when the realization was that new habits are being formed, and companies are discovering new ways to use technology to run their businesses,” Knepper says. “We had to be flexible to let this unfold.” By early 2021, so many clients were hiring Rework to remove workstations as they shrank their office footprint or redesigned their offices to be less dense and have more collaboration space that Knepper held three free furniture giveaways at his warehouse along the Eisenhower Expressway to unload inventory without having to pay to send it to a landfill. “We’re spilling out the doors,” he says. The swelling demand from people looking to upgrade home offices has also turned into a lot more business. Sales to noncorporate buyers surged from a few thousand dollars per month before the pandemic to around $150,000 this spring, now accounting for some 10 percent of company revenue, Knepper says. Now the combination of a growing customer base and retail landlords desperate for tenants pushed Knepper to seek out space for its first retail outlet, slated to open this fall in Naperville. Also bolstering sales, Knepper says: Most of the furniture like chairs, height-adjustable desks and storage cabinets it has pulled out of offices is barely used. “Ten years ago (companies) would hold on to furniture forever, and by the time they were done with it, it was done,” he says. “Now the furniture isn’t coming out because it’s worn out—it’s coming out because the company has changed and pivoted.”

n anrin es.” ting r k, be ion y na e, stauid

MATTESON ON THE MAP.”

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CRAIN’S ILLUSTRATION/GETTY IMAGES

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going,” Chalmers-Currin says. “We have to The village did manage to benefit from embrace it and see how we can work within disruptive economic forces unleashed by the the environment.” rise of e-commerce—and prodded further by She still has one big task on her to-do list: rethe pandemic. Sam’s Club closed a store there developing the site of Lincoln Mall, which shut in 2018 but then converted the building into a fulfillment center that now employs about 500 people. “WE’RE DOING EVERYTHING WE CAN TO KEEP Not everyone agrees that warehouse jobs are the answer. Amid Amazon’s aggressive expansion, the Sheila Chalmers-Currin, Matteson village president Seattle-based company has faced scrutiny over its labor down in 2015 and was razed in 2017. A develpolicies and its impact on the environment. oper plans to convert the 60-acre parcel into But the sheer number of jobs, which can a big mixed-use development, with homes, start around $18 per hour with medical stores, restaurants and recreational space. insurance and a 401(k) match, make them “We’re doing everything we can to keep hard for local officials to resist. In Matteson, Matteson on the map,” Chalmers-Currin says. Amazon will receive an $82 million property tax abatement over 12 years. —Alby Gallun “We have to look at where the future’s

COMMERCIAL REAL ESTATE

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20 JUNE 28, 2021 • CRAIN’S CHICAGO BUSINESS

JOHN R. BOEHM

TECHNOLOGY

HANDS-FREE MESSAGING

Digital media firm CEO says people now ‘want to use their phone for everything’ ew Chicago tech companies got hit harder by the initial wave of the COVID-19 pandemic than UPshow. Restaurants and bars were the biggest source of customers for its network of interactive television screens and software that connects them with patrons’ smartphones. Other clients included gyms and doctors’ offices. Eventually, more than half of UPshow’s customers were affected by state-mandated shutdowns. Layoffs followed as UPshow tried to sort out what would happen. But as COVID-19 ground on, bars and restaurants started thinking about the future— what their businesses would look like on the other side of the pandemic. The

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UPshow added new content, such as importance of connecting with customstreaming UFC fights and NHL clips. ers and getting them to return, using It also took advantage of the wave of contactless menus, quickly became legalized sports betting. The new offerapparent. ings helped the company increase its “People don’t want to come in and revenue by 75 percent per location, on touch stuff,” says CEO Adam Hirsen. “They want to use their phone for everything. Every marketing cam“PEOPLE DON’T WANT TO COME IN paign is paired with contactless digital engagement. (The pandemic) lit a fire under brands to make the in-venue experience welcoming. Adam Hirsen, CEO, UPshow That’s a positive trend for us.” Companies are using UPshow’s average, since the pandemic. interactive platform for entertainment In the middle of the pandemic, UPand loyalty programs—and even to reshow signed nationwide deals with two cruit new workers as hospitality scramlarge restaurant chains, Buffalo Wild bles to restaff.

AND TOUCH STUFF.”

Wings and Dave & Buster’s. More than 90 percent of its customers are back in business, and the company’s headcount has returned to its pre-pandemic level of about 65. The company also closed a $14 million funding round in September. “People realized that nothing about the market had changed,” says Yelena Shkolnik, a partner at Chicago-based Jump Capital, one of UPshow’s early investors. “We were still in a strong position. Once people returned, this (product) was still a necessity. There were signs already we were coming out of (COVID) stronger.” —John Pletz

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Directors of DEI are a new breed. They hail from the world of human resources, but many have been recruited from other disciplines. The importance of these 39 specialists grew last year following the growing stature of the Black Lives Matter movement, the murder of George Floyd and the recognition of systemic racism. A number of them report directly to their company’s president or CEO. Many DEI managers opened channels to hear the grievances of Black and Latino employees. They launched speaker series and expanded resource groups. They added inclusion initia-

tives or established more concrete goals in recruiting and advancing minority staff along with metrics to measure progress. In some cases, job descriptions were rewritten to mitigate bias, and interview processes were reviewed. Some managers launched training for senior management to spotlight unconscious bias. The next years will show whether Chicago companies are willing and able to reform long-established practices that have hindered diversity and inclusion. By Judith Crown and Lisa Bertagnoli

CRYSTAL ANDREWS BANKS Director, diversity and inclusion Ulta Beauty

At the beauty products retailer based in Bolingbrook, Crystal Andrews Banks launched diversity and inclusion initiatives, including the company’s first Diversity Week and Race Matters Series, a mandatory leadership training program. Following the murder of George Floyd, Andrews Banks and her team provided leaders with resources to engage with employees and hear their concerns. Efforts led to the recruiting of actor Tracee Ellis Ross as an adviser. Andrews Banks joined Ulta in 2019 from Johnson Controls, where she was global manager of diversity and inclusion. Since 2015, she’s been an ambassador at the One Young World Summit, which convenes global talent to share DEI experiences. Andrews Banks is chair of the Retail Industry Leaders Association’s Diversity and Inclusion Leadership Council and is on the board of Girls in the Game.

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JOAN ARCHIE Executive director, construction compliance UChicago Medicine

Joan Archie runs a program at UChicago Medicine that provides a pathway for certified minority- and women-owned firms to participate in medical center construction and renovation projects. While at the Chicago Urban League, she developed the Construction Compliance Initiative for UChicago Medicine to benefit minority- and women-owned construction and construction-related firms. The program opened opportunities for minority firms, expanded their technical capacity and better positioned them to bid on and win other projects. Archie led the diversity effort on the construction of the Center for Care & Discovery, which was completed in 2013 and was the largest construction project in the history of the university and medical center. Before joining UChicago Medicine in 2007, Archie was director of the economic development department at the Urban League.

EKPEDEME “PAMAY” M. BASSEY Chief learning and diversity officer Kraft Heinz

Ekpedeme “Pamay” M. Bassey implements diversity and inclusion strategies at Kraft Heinz. She launched the WE Network, a leadership accelerator for women at the associate director level. Bassey also started a speaker series for all employees that features experts from diverse backgrounds. She’s a charter member of the Global Inclusion Council and through that group garnered support for the company to join the Human Rights Campaign’s Business Coalition for the Equality Act. Following the murder of George Floyd, Bassey was a voice for Black employees before board members and top leadership. Bassey joined the food giant in 2018 from BlackRock, where she was global head of learning and professional development. She’s the author of My 52 Weeks of Worship, describing her visits to a variety of sacred spaces.

GETTY IMAGES

METHODOLOGY: The honorees did not pay to be included. Their profiles were drawn from nomination materials submitted. This list is not comprehensive. It includes only executives for whom nominations were submitted and accepted after an editorial review. The honorees demonstrated that they made an impact in advancing DEI at their companies and in the workplace.

NATALIE BODUS

PAMYLA BROWN

Senior director, inclusion and diversity and employer brand Zebra Technologies

Community and citizenship director Turner Construction

In the past 18 months, Natalie Bodus led the launch of employee networks to enable Lincolnshire-based Zebra to progress toward its goal of a more inclusive workplace. Bodus’ team established goals for managers with guidance on how all employees can further inclusion and diversity. The team also launched KPIs—key performance indicators—that are reviewed quarterly with senior leadership to ensure progress is measured. Other efforts include an executive-sponsored inclusion and diversity council and partnerships with outreach organizations to provide access to talent from diverse backgrounds. To remove barriers to entry and advancement, Bodus has worked to revise job descriptions and interview guides. She joined Zebra in 2017 from Medline Industries, where she was global HR manager. Earlier, she held HR positions at Baxalta and Baxter.

At Turner Construction, Pamyla Brown oversees DEI programs for Turner-Chicago projects. She leads on-the-ground efforts for the development and execution of economic-impact programs for the Obama Presidential Center, or OPC, and the O’Hare 21 Project. In addition, Brown oversees the OPC Resource Center, which, prior to COVID, hosted information sessions for individuals interested in a construction career and one-on-one meetings for interested vendors and contractors. Following the murder of George Floyd, Brown assisted senior leadership in hosting a series of calls to highlight the company’s stance against racism. Brown is responsible for planning at the Turner School of Construction Management, a series of free workshops for entrepreneurs from diverse backgrounds interested in construction management. She is on the boards of Chicago Women in Trades and Rebuilding Together Metro Chicago.

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22 June 28, 2021 • CRAIN’S CHICAGO BUSINESS

DERRICK BRUMMELL

TANJIA COLEMAN

ERICKAJOY DANIELS

CARL DAVIS

MELISSA DONALDSON

Inclusion and diversity lead, U.S. Midwest Accenture

President Reimagine Organization Development

Chief DEI officer Advocate Aurora Health

Senior vice president, DEI and recruitment Mesirow

Senior vice president, chief diversity officer Wintrust Financial

Derrick Brummell manages the inclusion and diversity strategy for Accenture Midwest’s 11,000 employees. This includes driving progress toward Accenture’s goal of a gender-equal global workplace in 2025. Brummell leads a partnership with the Mom Project to address the impact of the pandemic on working women. The company established a goal of hiring 150 project members. He also introduced a learning series that covers topics such as stereotypes, privilege and microaggressions in the workplace. Brummell was a team lead in the company’s campaign to diversify referrals. He’s active across resource groups representing minority employees and is a mentor in the African American employee resource group. He joined Accenture in 2015 from PNC Mortgage, where he was vice president, HR business partner, mortgage originations.

Tanjia Colman heads her own consultancy specializing in DEI, executive coaching and leadership development. Following the murder of George Floyd, Coleman helped clients manage trauma among employees and change the way talent is recruited. She helped them form DEI committees and employee resource groups. Coleman holds a faculty position at the Loyola University Chicago Quinlan School of Business and is a founding member of and faculty at the school’s DEI leadership institute certification program. In July, she joins the dean’s board of advisers. She is program development chair for the Academy of Management, a professional association for management and organization scholars with 20,000 members worldwide. Coleman has held HR management positions at YWCA Chicago, KinderCare Education, Microsoft and Starbucks.

Last year, Carl Davis played a key role as Mesirow enhanced its DEI commitment. He helped establish a DEI Council with representation across the company’s businesses. Following the George Floyd murder, Mesirow expanded inclusion-related initiatives, and Davis led in identifying processes to elevate people of color in leadership positions. He also led in improving the environment for candid conversations about the challenges and opportunities facing Black colleagues. Davis has more than 25 years of experience in technology and financial services recruitment. He joined Mesirow in 2016 from JPMorgan Chase, where he was a senior corporate recruiter. Davis has served in a pastoral capacity for nearly 32 years at a number of religious institutions. He is a mentor in the LINK Unlimited Scholars program.

Melissa Donaldson is the first chief diversity officer at Wintrust Financial in Rosemont and reports to the CEO. In the past 18 months, Donaldson hosted a two-day workshop for senior women at Wintrust. She co-facilitated a meeting of directors from across the Wintrust enterprise to discuss advancing racial equity. Additionally, she expanded diversity and inclusion business unit action plans, affirmative action operations and business resource groups. Following George Floyd’s

During the pandemic, Erickajoy Daniels directed educational resources toward African American and Latino communities. Her team at Advocate Aurora Health in Downers Grove supported 1,980 telehealth visits that required an interpreter. She led the health system’s community-based flu vaccination initiative in the ZIP codes with the greatest gaps in life expectancy. Following the murder of George Floyd, employees came together in a kneeling ceremony, and the system adjusted its policies. For example, it now requires mandatory unconscious bias training for all staff members. Daniels has been invited to provide leadership for national platforms. She co-designed and taught the Health Management Academy’s first Master of Health Care Administration DEI Course. Daniels joined predecessor Aurora Health Care in 2015 from Brady Corp. in Milwaukee, a manufacturer of safety products.

murder, Donaldson was recruited to the crisis communications team. Donaldson joined Wintrust Financial in 2016 from Walgreens, where she was director of diversity networks and communication. She is on the boards of Skills for Chicagoland’s Future and Chicago Sinfonietta.

2021 NOTABLE EXECUTIVES IN DIVERSITY, EQUITY, AND INCLUSION

Benesch congratulates all of the 2021 Notable Executives in Diversity, Equity, and Inclusion. We take particular pride in recognizing our partner, Margo Wolf O’Donnell. Margo is Co-Chair of Benesch’s Labor & Employment Practice Group and Co-Chair of Benesch’s Diversity, Equity & Inclusion Committee.

www.beneschlaw.com

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Opening opportunities for minority contractors Joan Archie has been a trailblazer in opening opportunities for minority contractors. A South Side native, she spent 24 years at the Chicago Urban League, where she became interested in economic development. Archie developed the Construction Compliance Initiative for UChicago Medicine to open more opportunities for minority- and women-owned contractors. She then went on to join UChicago Medicine after being recruited by Michelle Obama, then executive director for community affairs at University of Chicago Hospitals, and Valerie Jarrett, chair of the medical center’s board of trustees. CRAIN’S: What attracted you to the Urban League? ARCHIE: I simply fell in love with the mission and vison of the organization. Working to achieve equity for Black families and communities through social and economic empowerment resonated with me and my desire to work toward making a difference. I wanted to know, at the end of my career, that I worked toward changing lives and communities, as opposed to creating shareholder wealth. How did the Construction Compli-

ance Initiative come about? UChicago Medicine wanted a program that maximized opportunity for certified diverse firms to participate in the system’s new construction projects. At the time the initiative was developed, I was a consultant to UChicago Medicine through the Chicago Urban League. The medical center was committed to providing opportunities to diverse construction and construction-related firms. The UChicago Medicine president participated in our weekly diversity meetings and at each milestone achievement would say: “What more can we do?” Did you come across resistance to this approach? The support provided by the health system at the highest level was not mirrored in construction management or general contractors working at UChicago Medicine. There was expected resistance to identifying separate, distinct portions of work to subcontract to diverse firms. We wound up doing a great deal of work with construction-management firms and general contractors, helping them to see and comply with our vision for

providing economic benefit to diverse firms through their construction and renovation projects. How does it work? Do companies contact you directly or do they work through the general contractors?

to minority and female construction workers. More information is available in the health system’s community benefit report: Community. UChicagoMedicine.org/2020 What are obstacles for further progress?

There are many: lack of access to Certified diverse firms are either capital, banking and bonding relasolicited to participate in the compettionships, limited access to critical itive bid process by UChicago Medinformation and business networks, icine or through the awarded construction management firm or general and a lack of opportunity. It’s the legacy of systemic bias that creates contractor. There are minority- and an unlevel playing field. It takes a women-owned business enterprises lot hard work for an organization to utilization goals on every construction and renovation project, and there actualize its desire to have diversity in are processes in place to support attaining those IT’S THE LEGACY OF SYSTEMIC BIAS THAT goals. Efforts are made to utilize certified firms CREATES AN UNLEVEL PLAYING FIELD. as prime contractors whenever possible. the construction firms used to comCan you share metrics on the value of plete its projects. Unless and until a work completed by minority contraccompany has a real commitment to tors? achieving and maintaining diversity, it will be a hard problem to rectify. In fiscal 2020, UChicago Medicine Thankfully I’ve seen firsthand what spent $20.8 million with certified happens when employers commit to minority- and women-owned conthis work, and I’m proud to be a part struction and construction-related of that continued effort at UChicago firms, through contracts awarded and Medicine. paid, with $4.3 million in wages going

OUR TEAM PROUDLY INCLUDES CHICAGO’S VERY BEST We know our best asset is our people. And, we wouldn’t be where we are today without them. We’re lucky to call some of Chicago’s very best part of the Wintrust family. Leaders like Melissa Donaldson, senior vice president and chief diversity officer, contribute to our success by offering expertise, guidance, and dedication in everything we do. Congratulations, Melissa, for your recognition as one of Crain’s 2021 Notable Executives in Diversity, Equity and Inclusion. Your contributions are invaluable in making us the company we are.

Congratulations on being named Crain’s 2021 Notable Executive in Diversity, Equity and Inclusion! MELISSA DONALDSON Senior Vice President & Chief Diversity Officer, Wintrust Banking products provided by Wintrust Financial Corp. banks.

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ALAN DURAND Senior director of people Kin + Carta

At the Kin + Carta’s U.S. operations, Alan Durand improved female representation by 28 percent and minority representation by 19 percent. Durand leads an HR department of 20 people covering 600 employees. Last year, job interviewers completed unconscious bias training, and analytics were improved to better measure demographics and pay equity, as well as to ensure equity in employee advancement. Job descriptions were rewritten to mitigate bias, and new diversity-focused recruiting partnerships were forged. Most recently, Durand led the firm through implementation of a hybrid work model that ensures internal opportunities and promotions remain accessible to all employees, regardless of their chosen work location. Durand joined Kin + Carta early last year from Uptake, where he was director of human resources. He’s also held HR positions at Avant and Capital One.

WILLIAM T. “TOBY” EVELAND Chicago office managing partner Saul Ewing Arnstein & Lehr

Following the murder of George Floyd, William T. “Toby” Eveland, then vice office managing partner, launched a program of town hall discussions across the firm’s 16 offices. It culminated with a firmwide diversity and inclusion retreat in the fall. As part of the retreat, Saul Ewing retained a consultant to review its culture and promote an inclusive environment. Eveland was promoted to Chicago office managing partner earlier this year. He also leads the firm’s higher education practice in Chicago. “Toby has been critical to our DEI efforts and, as a member of the LGBTQ community, serves as a role model for diverse lawyers through his tremendous success in growing his practice,” says DEI committee chair Indira Sharma. He is on the board of the Federal Bar Association, Chicago chapter.

CORLISS GARNER

GRAHAM GRADY

ANURADHA HEBBAR

Senior vice president; head of corporate social responsibility and DEI First Midwest Bank

Partner Taft Stettinius & Hollister

Partner, global DEI practice leader Kincentric

Real estate and land use attorney Graham Grady is active in diversity and inclusion issues. He’s a founder of the Chicago Emerging Minority Developer Initiative, which builds a pipeline of community-focused developers from African American, Latino and other minority communities. He participated in “Diversity in Development: How Black and Latino Developers Can Change the Map,” on WTTW’s Black Voices series. In his legal practice, Grady helps clients win approvals for land developments. He joined Taft Stettinius & Hollister in 2012 from K&L Gates, where he was an equity partner. Earlier, he was CEO of the Chicago Housing Authority, city buildings commissioner and zoning administrator and also an assistant state’s attorney. He is on the board of BOMA Chicago and active in a number of other civic organizations.

Anuradha Hebbar leads DEI for HR consultancy Kincentric, parent Spencer Stuart and recently acquired consultancy Cambria. The companies generate a combined revenue of $750 million. Based in Deerfield, Hebbar leads consulting engagements with CEOs, C-suites and boards in inclusive leadership, DEI, talent and culture. Last year, Hebbar led her clients to conduct objective assessments around DEI. She’s working with six CEOs and teams on these topics, which include an exploration of how

Last year, Corliss Garner led First Midwest to broaden philanthropy. The bank doubled its employee match for donations to COVID-19 funds, as well as to social justice and racial equity causes. Participation tripled its 2019 levels. Garner led efforts to commit $2.5 million over two years to organizations providing COVID-19 relief and financial stability to underserved communities. Following the George Floyd murder, she expanded listening sessions

with executive leadership and groups of Black and Latino employees. Garner joined First Midwest in 2019 after a 24-year career at BMO Harris, where she was most recently vice president and senior advisor, diversity and inclusion.

racial bias manifests in organizations. Hebbar joined Kincentric last year from Verizon, where she was global head of diversity and inclusion. Earlier, Hebbar held DEI positions at Zurich North America, Blue Cross & Blue Shield and McDonald’s. She served on the diversity and inclusion council of the Executives’ Club of Chicago.

CONGRATULATIONS TO

CORLISS GARNER Named one of Crain’s 2021 Notable Executives in Diversity, Equity and Inclusion

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PRECIOUS S. JACOBS-PERRY Equity partner Jenner & Block

Over the past 18 months, Precious S. Jacobs-Perry has advocated for Black lawyers and their mental health. She worked with Jenner & Block’s diversity and inclusion committee on a pilot in which the firm assigned each Black lawyer a sponsor on the management or policy committee. This provided a tangible opportunity for Black lawyers to elevate their visibility and have a sounding board and support system in upper management. Given the success of the pilot, the firm will roll it out to other groups. In her pro bono practice, Jacobs-Perry is working with the Transgender Legal Defense & Education Fund to help obtain legal name changes for transgender, gender-nonconforming and nonbinary people. She’s also represented women who have been subjected to sexual harassment and assault in the workplace.

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JESSICA KIMBROUGH Chief DEI officer United Airlines

In her role since July 2020, Jessica Kimbrough teamed with United’s executive DEI council, chaired by President Brett Hart. She’s prioritized transparency and the use of demographic data to track progress and build accountability. Following the George Floyd murder, Kimbrough led several initiatives, including a formal mentoring program to support and retain Black executives and a commitment to add greater diversity to the board. United in February announced the addition of a second Black board member, Laysha Ward, executive vice president at Target. Kimbrough joined United in 2011 from the Illinois Labor Relations Board. She’s led United’s pro bono partnership with the nonprofit Equip for Equality, which provides legal support to parents of children with disabilities.

IRINA KONSTANTINOVSKY Executive vice president, chief human resources and chief diversity officer Horizon Therapeutics

Irina Konstantinovsky last year led a program to improve inclusion in culture, recruiting, employee development and community engagement. The program brought together hundreds of employees to discuss racism and its impact on patients, employees and communities. Horizon pledged $500,000 to support community organizations addressing racial inequality and racism, and the company is working to promote inclusive leadership behavior and recruit employees from diverse backgrounds. Earmarking $100,000, Horizon was the first contributor to the YWCA Metropolitan Chicago’s Racial Justice League. Konstantinovsky joined Deerfield-based Horizon in 2017 from Baxter, where she was vice president of global talent. Earlier, she spent 14 years at Towers Watson. She is board chair for the Human Resources Management Association of Chicago.

WIL LEWIS

CONNIE L. LINDSEY

Chief DEI officer Experian

Executive vice president and head of corporate social responsibility Northern Trust

Wil Lewis in October joined credit reporting firm Experian in Schaumburg. His mandate is to ensure employees and stakeholders feel connected to the organization. He’s also involved in developing products and materials that help communities of color better understand how credit works and gain a path to financial security. Before joining Experian, Lewis spent 13 years at Bank of America, most recently as senior vice president, global diversity and inclusion executive. He expanded membership in business and employee resource groups by 30 percent. Lewis launched training for the top 5,000 employees to promote understanding of DEI concepts. He is board secretary for the nonprofit Centers for New Horizons and is on the board of the Chicago Minority Supplier Development Council.

As a direct report to the CEO, Connie L. Lindsey is responsible for the design and implementation of Northern Trust’s global corporate social responsibility, community development and investments, and DEI strategies. She also manages the firm’s response to environmental matters and social issues within the marketplace and workplace. She’s held many leadership roles at Northern Trust, including deputy business head in operations and technology, group head in the company’s wealth management business and director of enterprise relationship management. Lindsey is a former national board president of Girl Scouts of the USA. She is on several civic and charitable boards, including Leadership Greater Chicago, McCormick Theological Seminary and the Obama Foundation Inclusion Council. She was recently profiled on PBS’s “30 Good Minutes” and ABC7’s “Heart and Soul.”

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ALETHA MAYBANK Chief health equity officer, senior vice president American Medical Association

Since launching its Center for Health Equity, Dr. Aletha Maybank has focused on sustaining and elevating the AMA’s health-equity efforts. She facilitated a change in processes to embed racial justice into organizational performance and outcomes. She’s been interviewed by Oprah Winfrey about structural inequities in COVID-response efforts; wrote a New York Times opinion piece, “The Pandemic’s Missing Data;” and moderates a biweekly web series. A pediatrician and public health physician, Maybank was a founding deputy commissioner for the Center for Health Equity in New York City’s Department of Health & Mental Hygiene. She’s a board member of RaceForward and Human Impact Partners and was vice chair of the Health Equity & Social Justice Committee of the National Association of City/County Health Officials.

NATASHA MILLER WILLIAMS Vice president, head of diversity and inclusion Ferrara

Natasha Miller Williams leads Ferrara’s multiyear strategies on workforce commitments, organizational culture and partnerships. Under her guidance, the company has committed to transparency in workforce data reporting; launched corporate initiatives for BIPOC with Management Leadership for Tomorrow, the McKinsey Black Leadership Academy and the company’s first virtual HBCU Fair; and holds a “Day of Solidarity” for Juneteenth, a “Day of Wellness” and a “Day of Legacy” in remembrance of Martin Luther King Jr. By the end of 2020, 100 percent of responding employees described their DEI awareness as “progressing or excellent.” Before joining Ferrara, Miller Williams was a senior vice president at Nielsen. She was on the host committee for Rep. Lauren Underwood’s election and is on the executive board for Oak Lawn’s Chamber of Commerce.

OTTO NICHOLS III

ANDREA O’LEARY

AMALIA PALLARES

Executive vice president and shareholder Clayco

Global senior director, culture and change Aon

Associate chancellor and vice provost for diversity University of Illinois at Chicago

Pa an Lo

One of 11 shareholders at Clayco, Otto Nichols III leads large-scale projects from conceptual design to turnover. He’s also creating Clayco’s first-ever DEI operations manual for Chicago for executing supplier diversity outreach on every project. Under Nichols’ leadership over the years, more than $350 million in contracts has been directly awarded to minority- and women-owned contractors. In 2020, Nichols co-created the Clayco Foundation Juneteenth Fund as an outlet for individuals and organizations to support causes that promote freedom, equity and safety in their communities and has raised nearly $200,000 to date. Prior to joining Clayco, Nichols was a facilities engineer with Olin. He is a member of the Urban Land Institute, Pedal the Cause and the Construction Career Development Initiative.

Andrea O’Leary leads Aon’s global initiatives to drive culture transformation. She is one of 20 leaders on Aon’s Global Inclusive Leadership Council, co-chairing its promotion workstream and helping to expand Aon’s apprenticeship program to six cities and 125 positions. She also leads the North American Black Professional Network leadership team to help advance Black colleagues. In 2020, she revamped Aon’s culture transformation workshops to be delivered virtually, trained facilitators to deliver them in eight languages and reached more than 6,000 colleagues. Prior to joining Aon, O’Leary was a product management/ project manager with CareerBuilder/Personified, consulting externally with organizations on how to improve employee experience including DEI initiatives. She’s on the board of Cara, working to eradicate poverty.

Amalia Pallares advises the provost and chancellor on DEI-related issues. She has oversight responsibilities for seven centers for cultural understanding and social change as well as office of diversity initiatives in diversity education, student inclusion and faculty retention. Launches include a postdoc-to-faculty mentoring program, an inclusive classroom initiative with eight online modules, an equity dashboard enabling UIC’s 16 colleges to monitor DEI progress, redesigned training for the faculty search committee and a new scholarship and pathway program for Black students in STEM. She’s been on the faculty for 22 years and is a professor of political science and Latin American and Latino studies. She led a statewide campaign to pass the RISE Act, giving undocumented college students access to aid.

E L si

Congratulations

Taftlaw.com

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CRAIN’S CHICAGO BUSINESS • June 28, 2021 27

ERNESTO PALOMO

JANICE PARKS

ALLISON PITTMAN

KAVITHA PRABHAKAR

Partner and co-chair of diversity and inclusion committee Locke Lord

Chief human resources officer First Hospitality

Head of inclusion and diversity, U.S. Region CIBC

Chief DEI officer Deloitte US

Ernesto Palomo is co-chair of Locke Lord’s 30-person diversity and inclusion committee, focusing on recruitment and equal advancement opportunities as well as expanding education efforts, including mandatory, firmwide training to identify and interrupt bias. The firm has established a diversity supplier program and achieved its fifth consecutive 100 percent rating on the Human Rights Campaign’s Corporate Equality Index. In 2019, Palomo filed Locke Lord’s amicus brief with the Supreme Court on behalf of 16 organizations opposing a citizenship question on the 2020 census. He is treasurer of the Chicago Committee on Minorities in Large Law Firms and a board member of LatinoJustice PRLDEF. He handles pro bono matters through the National Immigrant Justice Center, the Center for Disability & Elder Law and Chicago Volunteer Legal Services.

Janice Parks develops and executes all aspects of First Hospitality’s people strategy, including talent management, organizational development, culture transformation, thought leadership and executive coaching. Under her guidance, the company formalized its diversity and Inclusion Advisory Council, upgraded its people management systems, reimagined the recruitment process and launched new leadership training partnerships covering issues such as unconscious bias. She led the U.S. strategy for a one-day national hiring event that hired 50,000 people and helped boost the company’s Archways to Opportunity tuition reimbursement program by 30 percent. Before joining First Hospitality, Parks worked at McDonald’s, PacifiCare Health and the United Way of Orange County, Calif. She’s a mentor with the 100 Black Women Organization of Orange County, financially supporting “college-able” African American girls.

Allison Pittman is responsible for the design and implementation of a comprehensive DEI strategy at CIBC. She leads the U.S. Inclusion & Diversity Action Committee, addressing issues such as unconscious bias learning. Following the murder of George Floyd, in June 2020 Pittman led 13 listening sessions that engaged more than 200 employees in conversations from 22 U.S. CIBC offices. Prior to joining CIBC, she was business program manager and associate vice president, operations project consultant manager at Bank of America; corporate investment banking auditor at Wells Fargo; and in the finance enterprise program at Wachovia Bank. She is an ambassador with Bonfire Coaching and a lead with the YearUp organization.

Kavitha Prabhakar is a principal with Deloitte Consulting and cochair of its Black Action Council, which is building trust with the community through “Brave Space” listening sessions and an “Uncensored” series showcasing Black experiences. Along with Deloitte’s CEO, she championed $10 million in donations to organizations for improving social justice, employment, wealth and equal educational opportunities, with additional funding for organizations addressing anti-Asian discrimination. Prabhakar released Deloitte’s inaugural DEI Transparency Report and co-authored its Equity Imperative report. Previously, she led a $1 billion practice with nearly 5,000 professionals as Deloitte Consulting’s civil government sector leader. She is committed to increasing STEM awareness and is involved in Girls on the Run and Girls Who Code. She also supports charitable causes including the Race for Hope, Walk for Wellness and Helping Hand Center.

A survey of diversity and inclusion practives and benchmarking metrics at real estate investment management firms in North America found:

96% of firms have a diversity and inclusion program or initiatives to improve D&I.

71% of firms dedicate

staff to their D&I approach (either dedicated or through committees), compared with 37% in 2017.

15% of executive

managers were minority professionals, compared with 10% in 2017.

44% of executive

management new hires were women, higher than the 7% rate of departures for women and helping increase the ratio of women to men across survey participants.

Sources: NAREIM Diversity & Inclusion Survey 2021 and NAREIM Compensation Survey 2017.

Congratulations Jonita, your vision is driving change Į ğ ą Ğ ğ feel at home hereğ Ğ ğ ğ Ğ ğ ğ Ğ Jonita Wilson, 2021 Crain’s DEI Honoree ą

Learn more at jobs.discover.com/culture The same way we treat our employees is how we treat all applicants – with respect. Discover Financial Services is an equal opportunity employer (EEO is the law). We thrive on diversity & inclusion. You will be treated fairly throughout our recruiting process and without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability, or veteran status in consideration for a career at Discover.

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28 June 28, 2021 • CRAIN’S CHICAGO BUSINESS

PAMELA RANDLE

CLAUDE ROBINSON

LAURA ROCK

CEDRIC D. THURMAN

Vice president and senior business consultant JPMorgan Chase

Executive vice president, external affairs and diversity UCAN

Chief human resources officer Zurich North America

Last fall in Chicago, Pamela Randle, co-chair of JPMorgan Chase’s Black Organization Leadership Development in Illinois, helped develop, design and launch an initiative to accelerate minority small-business growth through tailored advisory services. It proved so successful that it’s being expanded to 13 other cities this year and is now a central pillar in JPMorgan Chase’s $30 billion Path Forward commitment to advance racial equity. She previously held positions with PayNet, Urban Partnership Bank and Bank One. Since 2015, Randle has been actively involved with SCORE, the nation’s largest volunteer/business mentor network helping small businesses launch and grow. She’s also a member of the League of Black Women and has been an adjunct professor at Roosevelt University and Robert Morris University.

Claude Robinson is the Chicago Community Trust’s 2021 Donald Stewart Fellowship recipient. He’s the lead practitioner of UCAN’s ninetiered, internal/external DEI model. He has fostered more than $2.5 million in spending with minority- and women-owned business enterprises, up 48 percent from 2009. During the pandemic, he pivoted UCAN, which serves more than 10,000 individuals annually, to virtual collaborations through more than 50 virtual events. Prior to joining UCAN, Robinson served Chicago’s South Side as supervisor of the Chicago Park District’s Lindbloom Park and Gage Park. Robinson sits on the boards of the Illinois Collaboration on Youth and the Foundation for Homan Square, is a committee chair of the North Lawndale Community Coordinating Council and is on the Hearing Board of the Illinois Attorney Registration & Disciplinary Commission.

Executive vice president, chief diversity officer and group head, community investment and DEI Federal Home Loan Bank of Chicago

P021-P029_CCB_20210628.indd 28

Laura Rock is responsible for driving Zurich North America’s overall HR strategy, including DEI, talent management, performance management and sustainability initiatives. She led the formation of an executive diversity and inclusion council and the development of an action plan to advance diversity in Zurich’s workplaces and industry. She supported the expansion of Zurich’s Apprenticeship Program, extending a professional pathway that does not require a college degree, as well as its Inclusion Cohort program, which identifies leadership competency among employees of color. She organized anti-racism training for the leadership team and expanded Zurich’s Inclusion for Success program, educating managers on unconscious bias. Rock championed Zurich’s partnership with Markle’s Rework America Alliance and is also on the board of the American Red Cross of Greater Chicago.

Reporting directly to the CEO, Cedric D. Thurman shapes the FHLBank Chicago’s culture and ensures that the bank’s DEI commitments are integrated into customer-facing program offerings. Recently, he helped devise goals for the office relocation project, ensuring that 81 percent of the project cost was diverse. Following the George Floyd murder case, he spearheaded bankwide panel discussions on how race affects decision-making in the workplace plus conversations on Tulsa’s Black Wall Street and the racial wealth gap. In 2020, his annual Cultural Exploration event took board members and executives through the ways systemic and institutional racism affect employment, housing and access to capital. He is on the boards of Urban Initiatives, UCAN, Junior Achievement of Chicago, the Gies College of Business Alumni Association and Fellows Association.

SHANNON TOMLINSON-EILAND Senior director, DEI and HR compliance Cantel Medical

Shannon Tomlinson-Eiland is responsible for the design, implementation and maintenance of Cantel Medical’s DEI strategy as well as its programs to advance diversity. She facilitates a variety of recognition events, piloting training and discussion programs as well as a monthly DEI communication. She recently piloted a “Day of Understanding” to drive candid conversations about different social scenarios and unconscious bias. In addition to her DEI responsibilities, Tomlinson-Eiland has been pivotal in developing and leading overall initiatives as senior director for HR at Hu-Friedy, a Cantel acquisition. Tomlinson-Eiland is a member of the Society for Human Resource Management and the Human Resource Management Association of Chicago. She also supports corporate social responsibility activities by partnering with the Greater Chicago Food Depository and Brave Space Alliance.

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CRAIN’S CHICAGO BUSINESS • June 28, 2021 29

J. VINCENT WILLIAMS

KEN WILLIAMS

JONITA WILSON

President and CEO Chicago Minority Supplier Development Council

Executive vice president Chicago White Sox

Chief diversity officer Discover Financial Services

As executive vice president, Ken Williams maintains oversight and final approval of major decisions for the White Sox roster. He’s actively involved in Major League Baseball’s Diversity Committee, an 18-member task force seeking to increase racial and ethnic inclusion in the game. The White Sox rank fifth in the overall diverse workforce category in MLB, according to the league’s 2020 analysis. The team exceeds league averages for on-the-field representation of Asian Americans, African Americans and Latinos. Williams is the first African American general manager in Chicago sports and the third in major league history. He joined the White Sox organization in 1992 following his playing career that started with the White Sox and took him to Detroit, Toronto and Montreal.

In 2020, Discover created a new DEI Office, promoted Jonita Wilson to chief diversity officer and launched a host of initiatives: It updated its code of conduct language to limit bias, enhanced the company’s diverse supplier spend program, required DEI goals for all people managers along with companywide training sessions, instituted a strategy to increase disability inclusion and set new gender-identity and transition guidelines. She also co-led a task force with more than 30

As president of ChicagoMSDC, J. Vincent Williams facilitates connections between diverse minority suppliers and corporate buyers. During the COVID-19 shutdown, ChicagoMSDC provided outreach, assessments, technical assistance and CARES Act relief resources to those businesses most negatively affected by the pandemic. The ChicagoMSDC partnership includes more than 250 privateand public-sector buying organizations—reporting more than $3 billion in annual purchases from minority firms—and nearly 1,100 MBEs, which employ some 20,000 workers. Prior to joining ChicagoMSDC, Williams was vice president of economic empowerment at the YWCA Metropolitan Chicago, director of business and entrepreneurship at the Illinois Small Business Development Center and director of membership at the Executives Club of Chicago. He serves with YearUp Chicago and YWCA Metropolitan Chicago.

cross-function employees to increase minority representation and develop advocates for ensuring an equitable work environment. Prior to joining Discover in 2018, Wilson was global human resources business lead at a global consumer packaged-goods firm.

MARGO WOLF O’DONNELL Partner Benesch

Margo Wolf O’Donnell co-chairs the labor and employment group and DEI committee at Benesch. This past year, she led a number of training programs on implicit bias and anti-discrimination and harassment issues for some of the largest employers in the world, working with several to develop diversity councils and employee resource groups. O’Donnell co-founded B-Sharp, Benesch’s power coaching and professional development group. Under her leadership, the Coalition

of Women’s Initiatives in Law expanded membership from a handful to more than 70 people at law firms in Chicago, New York and Washington, D.C. Before joining Benesch, she was chair of the diversity committee and founder of the women’s initiative at Vedder Price.

NAMRATA YADAV SVP, global head of inclusion Bank of America

Namrata Yadav heads the inclusion strategy at Bank of America, creating initiatives focused on the work environment and culture, underrepresented-talent strategies, external partnerships and global executive-development diversity programs. Working with the global diversity and inclusion council, business council leaders, business heads, staffing and other enterprise teams, she has created award-winning programs using scalable technologies, gamification, just-in-time resources and big data measurement methodologies. Recently, Yadav’s team doubled down on conversations on race, privilege and equity, engaging with 160,000 employees out of an organization of 220,000. She joined Bank of America in 2008 as part of the Human Resources Development program and has held roles in learning and leadership development. Before joining the bank, she held human resources positions at General Electric and IBM Daksh in India.

CIBC is proud of Allison Pittman for her work and recognition in helping to build an inclusive culture within our bank. We congratulate all of the 2021 notable executives in diversity, equity and inclusion.

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30 JUNE 28, 2021 • CRAIN’S CHICAGO BUSINESS

CLASSIFIEDS

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Fubo Gaming COO Sam Rattner, right, says it was a far better deal for the company to sign a sublease for their new office space at 1 N. Dearborn St.

Downtown office sublease listings plateau SUBLEASE from Page 3 vacancy rate on record after 15 months of paltry pandemic-era demand. Any new commitment to real estate shows that companies see the value of returning to offices in a post-COVID world, but swaths of move-in ready space available for sublease is proving to undercut the deals landlords can offer. “There used to be a pretty strict bifurcation between the sublease and direct space market, but that’s certainly not the case today,” says Cushman & Wakefield Vice Chairman Chris Wood, who represents tenants downtown. “I’ve definitely noticed the trend of companies who maybe previously wouldn’t have considered a sublease now being interested and wanting to evaluate them alongside direct space options.” Companies across the city last year rushed to put some or all of their downtown offices up for sublease as they learned to function with remote workers, much of it high-end space that was built out so recently that furnishings and amenities are like new. But new listings on the secondary market have recently plateaued as some companies have started inking sublease deals and others have reconsidered plans to unload space now that they are calling workers back to the office. After sublease inventory downtown jumped by almost 2.4 million square feet over the last nine months of 2020—a 75 percent increase—the number has only increased by 250,000 square feet since the beginning of this year, according to data from brokerage CBRE.

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Now the key question for the market is whether the available sublease space has peaked. Another wave could be on the horizon once workers return to offices in greater numbers and companies can more accurately assess how much workspace they need, and it’s unclear whether demand will keep pace with the new supply, says CBRE Senior Vice President and tenant rep Mark Cassata. “We still have a lot of road to run here. We’re not going to see (sublease inventory) go down as quick-

ly as it went up,” he says. Brokers say companies are gravitating to sublease offerings today because of the quality of the inventory after several years in which tenants poured loads of cash into building out cool offices to attract and retain talent. Tech companies, which account for more than a third of downtown sublease offerings, led that trend.

BARGAIN PRICES

Asking rental rates for downtown subleases are also 25 percent lower on average than asking rents for direct leases, according to CBRE, and many sublease offerings have plenty of lease term left, meaning a subtenant could lock in a long-term bargain. Almost half of the available aftermarket space over 10,000 square feet has at least five years left on their lease, CBRE data shows. “We just finished a decade where everybody built out magnificent space to attract the labor force, and now buildings that have raw direct space are being forced to compete in an environment where people don’t want to do long-term deals,” says Andy Davidson, who leads the tenant advisory group at Chicago-based brokerage MBRE. “It’s like a funnel going to the sublease market.” Landlords cannot compete with the economics of a sublease deal but have plenty of other levers to pull to tailor lease terms or offset tenants’ upfront costs in ways that sublandords can’t or won’t, says Adam Pines, a former suburban tenant rep at brokerage Jones Lang LaSalle who now represents landlords at Chicago leasing brokerage Madison Rose. One recent example: In the face of formidable sublease competition and construction materials costs recently soaring, River North office developer North Wells Capital committed to fund all office buildout costs to help finalize a deal this month with freight logistics company U.S. Xpress for a 40,000-square-foot office at 306 W. Erie St. “What many landlords have had to do in order to stay in the game over the last year is offer flexibility they wouldn’t have before,” Pines says.

SURGE SLOWING The amount of downtown office space available for sublease jumped by 75 percent in 2020 but has flattened in recent months as deals have been made and companies have started calling workers back to offices. AVAILABLE SUBLEASE SPACE DOWNTOWN 6 million 5 4 3 2 1

5.9 million

Q1 Q1 Q1 Q1 Q1 Q1 2016 2017 2018 2019 2020 2021

Note: Q2 2021 data is quarter-to-date Source: CBRE

Other landlords have adjusted to the sublease competition by putting up money to build out move-in ready space, or spec suites, to lure tenants. Chicago leasing brokerage Telos Group, which represents landlords at 23 buildings in the central business district, is marketing more than half a million square feet of spec suites ranging from a few thousand to more than 30,000 square feet in size. Telos Senior Vice President Nikki Kern says she’s encouraged by the recent surge of tenants back in the market hunting for space after many put off leasing decisions over the past year, but that smart landlords are investing in spec suites to be able to compete with compelling secondary marketing offerings. “There’s basically two years of demand that has been pent up and ready to do something, and you have to be able to have a product for every type of user that’s out there,” Kern says. “Plenty of users are looking for something that’s immediate, so you have to have ready-to-go space to meet that demand or they’ve got subleases or co-working space to go to.”

6/25/21 4:14 PM

SPONSORED CONTENT

THE ROI OF DEI

WHY DIVERSITY, EQUITY AND INCLUSION MATTER It’s been said that organizations with best-in-class diversity, equity and inclusion (DEI) programs deliver a better ROI, and perform better than those without them. There’s also evidence to show that a strong DEI program helps to de-risk an organization. Three Chicago-area leaders involved with DEI initiatives shared their insights and best practices with Crain’s Content Studio.

What are the main social concerns that your organization is focusing on? Camilo Escalante: As a lender, Guaranteed Rate is focused on access to capital and helping close the wealth gap through homeownership. According to a study from Northwestern University, which used data on consumer finances from the Federal Reserve to track changes in family wealth from 2004 to 2016, for every dollar of accumulated wealth that white families have, Black families have just one cent. These statistics must change. Purchasing a home is an opportunity more families need to have to build equity to achieve their future financial goals. By performing our role and following our core company value to “Grow for Good,” we can help make sure more diverse families have better access to the financing they need to purchase a home. D. Nigel Green: The communities we serve have been impacted by so much over the last year. We recognize and understand that before almost any other cause, our students and families’ concerns and struggles are rooted in racism. Therefore, Noble has taken the important and critical

issue in communities of color. When children are repeatedly exposed to lead in their drinking water, it can lead to profound long-term learning disabilities. We established a nonprofit called Fountains for Youth to help combat this issue in underserved communities across the United States. How do DEI concerns and priorities shape your organization’s focus? Green: We focus on creating opportunities for our students to live choice-filled lives, primarily through college success. While 98% of the children and families we serve are people of color, the institutions that our children and families will ultimately navigate—including colleges—are not. We function and perform under the belief that our children will be ready to navigate the deficits of those institutions, and ultimately alter those institutions to create generational change. Our beliefs, our interactions and our support must create circumstances where our children can live choicefilled lives. So, we’re unapologetically prioritizing a positive and equitable student experience that prepares our students for college completion.

“WE STRIVE TO ACCURATELY RESEMBLE THE DEMOGRAPHIC BREAKDOWN OF THE MAJOR METROPOLITAN AREAS WE SERVE NATIONWIDE.”

CAMILO ESCALANTE

Exec. Director - Diverse Segments Guaranteed Rate camilo.escalante@rate.com 312-736-9583

D. NIGEL GREEN

KIM KING

Director - Equity, Inclusion & Diversity Noble Schools dngreen@nobleschools.org 312-521-5287

Sr. Director - Global Sourcing DEI Council Leader Elkay Manufacturing Co. kim.king@elkay.com 630-574-8559

King: Last year’s events inspired us to adopt an active listening and learning stance concerning DEI. At Elkay, one of our core values is “our strength is in our people.” We’ve always recognized the importance of treating people with respect and fairness; we now realize that the expectations may not only

differ by race but also by generation. In addition, different priorities exist in various regions of the country. Directly engaging in a two-way dialogue with employees has led us to embark upon a renewed DEI journey, led by the recently formed DEI Council, which worked months to

understand the demographic baseline as well as employees’ expectations. The Council then prepared a set of recommendations approved by our leadership, ranging from educational workshops, communications and branding, community engagement, supplier diversity program and

“

It’s about saying to every community, to every homebuyer: your dream matters. Camilo Escalante Executive Director Diverse Segments

— CAMILO ESCALANTE, GUARANTEED RATE

G U A R A N T E E D R AT E

stance of committing to functioning and progressing as an antiracist organization. We’ve stated our commitment to antiracism and are working within that journey as we speak. This is radical work, and the concerns of our community are both evergreen and constantly shifting in urgency. Our effort is always to invest in the full dignity of our community members.

We’re committed to reflecting the diverse communities we’re proud to serve. By expanding our bilingual support staff nationwide, ramping up our homebuying education programs and hiring in diverse communities, we’re living our core values and holding ourselves accountable for the transformation we want to see in our industry.

Kim King: One social issue that’s particularly near and dear to our hearts at Elkay is access to safe drinking water. Domestically this means ensuring clean, fresh, potable water free from impurities like lead in public spaces such as schools. Lead in drinking water is a particularly pernicious problem because it’s linked to environmental justice and is more frequently an

P031_033_CCB_20210628.indd 31

Escalante: Making DEI a priority has allowed us to look inward and better understand the positions throughout the company that impact our ability to increase our lending in diverse communities. We strive to accurately resemble the demographic breakdown of the major metropolitan areas we serve nationwide. It’s a lofty goal, but we want to lead the industry. We want our company to reflect the communities we serve, and we believe that bringing more diverse employees to the company and helping them expand their reach through their networks will result in more access to loans for borrowers in diverse neighborhoods. That path allows us to better serve diverse communities and help create a more inclusive and equitable environment for our employees.

Let’s talk about how we can help you serve your communities.

R AT E . C O M / C A R E E R S NMLS ID #2611 (Nationwide Mortgage Licensing System, www.nmlsconsumeraccess.org) • Guaranteed Rate, Inc. is an Equal Opportunity Employer that welcomes and encourages all applicants to apply regardless of age, race, sex, religion, color, national origin, disability, veteran status, sexual orientation, gender identity and/or expression, marital or parental status, ancestry, citizenship status, pregnancy or other reason prohibited by law.

6/24/21 9:27 AM

THE ROI OF DEI

WHY DIVERSITY, EQUITY AND INCLUSION MATTER establishing new guidelines for employee recruitment and development efforts. What role does DEI play in your product and service brand positioning? King: Whether it’s developing ADA-compliant products such as our award-winning Dart Canyon sinks or the accurate representation of the people we feature in our marketing materials, we’ve always aligned our messaging to the diversity of the markets we serve. Our enhanced internal DEI focus has inspired our marketing team to reimage the role that our brand positioning can and should play in effecting change and encouraging greater acceptance and understanding in our nation and our world. Escalante: Over the past few years, we’ve grown tremendously, both from an employee count and closed loan volume. During that time, we’ve enhanced our brand equity across the country by staying focused on our “Grow for Good” core value and metric that measures the impact we have on our customers, business partners, employees and

the communities we serve. DEI initiatives have pushed our company to look even closer at how we build brand awareness and engage diverse communities at the local levels. We’ve built an entire community engagement strategy focused around better connecting with local diverse communities nationwide. This means prioritizing resources to support local partners and staffing accordingly to authentically foster those important relationships. We’re working to align with other partners that value homeownership, financial literacy and neighborhood stabilization. What are some examples of your organization’s DEI objectives? Escalante: One of our main objectives is to recruit more diverse loan originators. We want to provide and build career paths through all sides of the company to attract more diverse candidates. When we think of the future, we have to think about how to attract people to the company who are new to our industry. This also connects directly to our efforts to continue to expand and improve our employee resource groups— which have incredible programming,

mentoring, networking and cultural components—to foster a more inclusive company culture. Another example is our language access program, which is a large companywide effort designed to better service customers who prefer to conduct business in foreign languages such as Spanish. This latter initiative will set us apart in our industry. We’re working hard to resolve the challenges

that exist with implementation so we can lead the mortgage industry in providing funding in more languages.

have the space to be their authentic selves and ensure their voices are heard.

Green: Our equity index formula ensures fair funding at our campuses and creates access to college opportunities for our undocumented/ Dreamer community members. We’ve also been nurturing a leadership talent pool that has yielded senior leadership that reflects the backgrounds of our students and families. We’re

King: We’re focused on integrating DEI more firmly into our company culture. This will be achieved through a visible commitment from our leadership; by attracting, retaining and promoting more diverse talent at all levels; establishing a deep awareness of how critical DEI is to the success of our business; and continuing to attract increasingly diverse customer markets while increasing the diversity of our suppliers. We also recognize the opportunity to serve as a thought leader within our industry to lead the way in attracting and leveraging diverse talent. In the spirit of continuous improvement, we’ve set ambitious internal targets for creating a welcoming, comfortable and supportive environment for diverse employees, promoting our DEI efforts outside the company. How do you measure, monitor progress and report on DEI performance?

98%

17,500

Black/Latinx

students

alumni

84%

87%

Free/Reduced Lunch

Learn more at NobleSchools.org

P031_033_CCB_20210628.indd 32

King: We’re developing a DEI scorecard based on the recommendations of our DEI Council. For example, we’re driving to increase the percentage of diverse candidates presented to our hiring managers for

— D. NIGEL GREEN, NOBLE SCHOOLS

Noble alumni are graduating from college at rates 3x that of their peers from similar backgrounds in Chicago.

First-Generation College Students

will be tasked with creating the accountability structures, measures and progress monitors for our antiracism goals.

“OUR SENIOR LEADERSHIP AND BOARD ARE MORE DIVERSE THAN EVER, AND OUR PATHWAY PROGRAMMING HAS SUPPORTED OVER 40 LEADERS OF COLOR TO NEW POSITIONS.”

Noble’s nation-leading focus on DEI and anti-racism has resulted in more than 60% of staff identifying as a Person of Color

12,700

institutionalizing continual and critical self-reflection that promotes ownership and culturally responsive and sustaining practices at every level of our organization. We’re building our individual and collective consciousness about race and racism, and examining our implicit biases and areas of privilege and ensuring that all of our community members, including students, families and staff,

Green: We’ve been fortunate to partner with Promise54, a talent solutions provider specializing in supporting organizational DEI efforts. Using their data, we’ve been able to quantify the experiences of the varied intersectional identities within our organization. More importantly, we’ve been able to identify the greatest gaps within student and family experiences, allowing campuses and our entire organization to narrow the focus on where we must improve, while also cultivating the strengths we currently exhibit. We have an internal DEI steering committee composed of more than 20 crossfunctional individuals, including parents, focusing on our antiracism work. Once our reimagining has produced the final product that will shift our approach to education and community partnership, the group

professional roles in office locations to 25%, while also increasing the rate of diverse hires for these professional opportunities to 25%. For both of these target metrics, we define diversity according to ethnicity. We’re also seeking to increase non-male representation. Our recruiting team is actively monitoring and evaluating performance data to identify and implement specific continuous improvement opportunities as we go forward. These metrics are part of our enterprise-level strategic scorecard, reported to senior leadership and the board of directors every quarter. How do you engage your employees in your DEI efforts? King: Videos, newsletters, interactive workshops and webinars allow our people to learn and engage in dialogues about DEI, enabling them to share their points of view in a safe environment while gaining deeper insights. They can also participate in our DEI Council, which is made up of 12 employees from across the company. Employees can also volunteer as DEI ambassadors to promote, facilitate and support the implementation of corporate diversity initiatives at the business level. Escalante: Our executive leadership team is creating and supporting more in-depth careerpathing opportunities with internal organizations such as Leadership, Equality and Development; PROUD, aimed at promoting LGBTQ+ inclusion in the workplace; and the Guaranteed Rate Organization of Women. We’re working hard to hit our ultimate hiring goals and keep up the pace, while remaining focused on retaining our diverse employees. As COVID restrictions are lifting, we’re also encouraging our employees to participate in local events hosted by the company or our community engagement partners. Employee participation is critical for these

6/24/21 9:27 AM

SPONSORED CONTENT efforts to resonate authentically within the company and the communities we serve. Green: Our antiracist journey is a higher bar and a newer organizational commitment. We created pathways for desired but optional input to allow our team members to contribute as their capacity allows. Our team members have also sat on organization-wide committees providing direction and feedback on our antiracist reimagining. All totaled, about 300 stakeholders played an active role in our decisionmaking. We continue to hold events, developments and forums for engagement, surveying and information sharing for all DEI and antiracism efforts. What results have you seen from previous DEI initiatives? King: Two areas where we’ve made measurable impacts include access to clean drinking water and ADA accessibility. While we can’t change access to clean drinking water at the infrastructure level, our nonprofit, Fountains for Youth, has made a significant difference in some areas by donating products to underserved communities dealing with clean water issues. On the ADA front, we have a longstanding track record for designing products that provide easy access to sinks, faucets, drinking fountains and bottle fillers for the disabled. Green: Our senior leadership and board are more diverse than ever, and our pathway programming has supported over 40 leaders of color to new positions. We’ve made a conscious effort to create a community that reflects who we serve, and provides a seat at the table for voices that were previously excluded from decision-making. But the true success has been in our questioning. We process and challenge thoughts in alignment with DEI and antiracism. We view data differently. We shifted from solely looking at the average to disaggregating the numbers for subgroup experience and results. Then, before making a decision, we question whether we’ve spoken—and listened to—the folks that will be impacted. Our thinking is the result and success. Has your organization evolved in how it views DEI? Green: We’re constantly learning and adjusting to new information. When we first introduced our core values, DEI was glossed over as “diversity of perspective,” accounting solely for the low-branched fruit of difference or distinction. In 2016, we shifted to the directionally clear core value of DEI we have today. This adds to our responsibility to create spaces

that welcome and affirm our unique individuals and establish structures and strategies where all individuals have a just experience regardless of their intersectional identities. While DEI is our core value, we’re also now holding ourselves to the higher bar of antiracist organizational progression. While we’re one year into this commitment, we’ve moved forward with care and intentionality to accelerate our understanding and growth. King: I’m inspired by our new DEI Council and the programs that have taken shape over the past year to fast-track DEI efforts and move these issues more central within our culture. In light of evolving public DEI expectations and the increasing focus that our customers are placing on the subject, this evolution and our company’s proactive response are well-timed. I’m exceedingly hopeful about where this effort is leading our company and our nation as a whole, and I’m very proud of our progress. What advice would you give to organizations that want to launch DEI initiatives? Escalante: It starts at the top. For meaningful and impactful change, leadership must buy into the strategies. It’s important to create leadership roles that have impact throughout the company and most importantly, to set tangible and clear goals that resonate with employees and customers. The message has to be authentic, and the DEI vision should be clear to the entire company. King: My best advice is to listen closely to your most critical stakeholders—employees, customers, partners and consumers—as well as to public sentiments. Take the time to understand their expectations and let them know you’re listening. Then take an honest, open-hearted look at your own organization. How diverse are you across locations, levels, job categories? Does your diversity decrease as you move up the management ranks? An impartial internal audit can help identify opportunities for improvement. With those in hand, share your results and intentions with your stakeholders. Your people will appreciate the transparency and efforts to effect positive change aligned with the feedback provided. If it all becomes too overwhelming and you don’t know where to start, bring in an expert. We were fortunate to have great support along the way. Green: Rely on passionate experts, not just passionate people, to be your guides. Invite diverse members of your community to the table with the expectation and understanding

“. . . LISTEN CLOSELY TO YOUR MOST CRITICAL STAKEHOLDERS—EMPLOYEES, CUSTOMERS, PARTNERS AND CONSUMERS— AS WELL AS TO PUBLIC SENTIMENTS.”

ABOUT THE PANELISTS CAMILO ESCALANTE is executive director – diverse segments, for Guaranteed Rate, one of the top five retail mortgage lenders in the United States, where he ensures that its loan officers are equipped to serve all borrowers. With over 16 years of industry experience, he has earned recognition as one of the top loan producers in the country while helping thousands of families achieve homeownership in neighborhoods nationwide. He has been recognized as a Top 1% Mortgage Originator by Mortgage Executive Magazine (2015 to 2018) and the National Association of Minority Mortgage Bankers (2017 and 2018). D. NIGEL GREEN is director - equity, inclusion and diversity for Noble Schools, a nonprofit organization that runs 17 charter public high schools and one middle school in Chicago serving more than 12,700 students from every neighborhood in the city. He joined Noble in 2010, serving as a history instructor, dean of instruction and assistant principal before assuming his current role in July 2020. His energy is dedicated to creating justice-aligned outcomes for students, families and staff; eliminating racist policies and practices; and ensuring that all students have equitable and positive school experiences. KIM KING is senior director - global sourcing and procurement for Elkay Manufacturing Co., a Downers Grove-based,101-year-old manufacturing firm with more than 3,000 employees and 17 locations worldwide. She has over 20 years of sourcing/procurement experience, and in July 2020, she assumed the role of DEI Council chair, with strategic accountability for the company’s diversity efforts. She is an advisory board member for Governors State University’s Supply Chain Innovation Center and Business Incubator, which promotes innovation and contribute to the economic and workforce development of the greater Chicagoland area.

that their perspective matters and may even matter more given their contextual knowledge and understanding. Don’t exploit the brilliance of the diverse members of your community; pay people for their time, energy and dedication.

Don’t be performative; it’s in vogue to say you’re doing equity work right now, but you should go in with the heart and mind of true transformation for your organization to better serve the humans within and those that

interact with it. Own the work; the centered (dominant) community must do this work. The leaders must do the work. The marginalized should not also have to bear the burden of teaching everyone about justice and equity.

Water, cooler. That’s

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— KIM KING, ELKAY MANUFACTURING CO.

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34 June 28, 2021 • CRAIN’S CHICAGO BUSINESS

Energy bill puts Illinois Commerce Commission back in charge of rate-setting ICC from Page 3 scheme to secure its passage in 2011. That would potentially make the average increase more like $10 a month. What could ease the burden for consumers is the greatly expanded role under the bill of the Illinois Commerce Commission, the state’s utility regulator whose authority to control electricity rates was dramatically curtailed by the old formula system. ComEd would submit a four-year spending plan to the commission, and regulators then would review the planned investments in detail and tell the utility which ones could be included in rates. The problem: The ICC as an agency is a shadow of its former self following years of budget cuts, first over the chaotic Blagojevich era and then more recently during the spending wars between former Gov. Bruce Rauner and former House Speaker Michael Madigan. In two decades, staffing at the agency has fallen more than 30 percent. It’s an issue the bill’s architects recognize and say they’re addressing. But, even when more fully staffed, the ICC rarely has been more than a speed bump for utilities bent on capital spending, which leads to higher rates. Based on ComEd’s own projections for historically high capital spending over the next four years and how that will sharply inflate the assets on which it earns a return,

ratepayers can expect a roughly $250 million delivery rate hike effective in 2023, nearly $90 million more the following year and another $55 million or so in 2024. ComEd already has filed for a $51 million increase to go into effect next year, over which the ICC will have little say. After combining all those hikes, the average household bill would increase another $4 to $5, bringing the total to about $10. The current average monthly bill is about $83, so that would be a 12 percent spike. Keep in mind that in ComEd’s territory, dominated by Chicago and its large number of apartment renters and condo owners, an average residential customer uses just 600 kilowatt-hours a month. Residents in single-family homes typically consume more like 900 kilowatt-hours on average, so monthly increases would be correspondingly more.

SET THE SCALE

To put the $250 million projected increase in context, during the formula-rate era, that is a bigger increase than in all but one year— 2014, when ComEd’s rates soared $340 million. The reasons for this are somewhat convoluted, but they boil down to an increased return on equity and the much higher rate base that ComEd has forecast. One of the unexpected benefits of the formula rate was that ComEd’s returns were lower than most utilities’ because they

were based on long-term interest rates, which have been and remain extraordinarily low. That benefit disappears with the formula’s demise. The Pritzker administration promises reinforcements. “The ICC will have more information and personnel than it’s had in decades, if ever,” Deputy Gov. Christian Mitchell says in an interview. “The ICC will have more responsibility than it’s ever had. But they’ll also have more tools than they’ve ever had.” What will help is a thorough audit required in the bill of what ComEd has spent under the formula and the benefits of the investments, he says. In the past, utilities have used control over information to win substantial rate hikes from regulators with little pushback. Mitchell hopes to end that dynamic. The ICC has yet to lay out how many more people it will need. “The ICC stands ready to implement and enforce provisions of a comprehensive energy package once enacted by the legislature and signed into law by Governor J.B. Pritzker,” a spokeswoman says in an email. “We believe a reinvestment of resources will enable the commission to live up to its mission of ensuring that customers receive safe, reliable and affordable utility services.” ComEd declines to comment on Crain’s rate projections, saying it can’t provide such an estimate “until a final version of the energy

bill is introduced.” But it does emphasize the benefit households will see from the decline beginning in June 2022 in payments to power generators in return for their promise to deliver during high-demand days of the year. The reduction in what residents pay for “capacity,” a charge that varies annually and is embedded in their energy cost, will save the average household nearly $11 a month, a spokeswoman says in an email. “These savings would more than cover the costs of the various provisions in different legislative drafts,” she says. Of course, that cost is set only for a single year, beginning in June 2022 and ending May 2023. Future capacity costs may well be higher. For the current year, they’re nearly three times more. The surcharges and rate hikes the energy bill would authorize would last years. In addition, because households place more of a burden on the grid during peak-demand times than businesses, they pay more as a percentage of their usage than does the commercial sector for these power-plant guarantees. So businesses won’t be seeing the same level of benefit from next year’s reduction, but they will be seeing the same level of cost increase from the bill, if not more. Business groups have estimated the bill will raise their members’ rates by 8 to 15 percent depending on the industry.

BEHIND THE MATH To get to Crain’s projection of a $250 million rate hike for 2022 (taking effect in 2023), Crain’s assumed ComEd would get a similar return on equity from the ICC that Nicor Gas got in the commission’s most recent ruling in a full-blown rate proceeding. That was 9.7 percent. Crain’s then projected a 1 percent increase in ComEd’s operating costs for the year, to a little over $2 billion. ComEd has told investors of parent company Exelon that it expects its “rate base” (the collected assets on which it earns a return) to be $13.8 billion for 2022, up 15 percent from $12 billion last year. The combined debt and equity return, using the 9.7 percent ROE and ComEd’s projection of debt costs in its current rate case, would be 6.86 percent. Applied to the $13.8 billion rate base, that blended return would yield $947 million in profit. Combined revenue (operating costs plus profit) then would be $2.97 billion, up $250 million from the $2.72 billion ComEd is requesting for next year.

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CRAIN’S CHICAGO BUSINESS • June 28, 2021 35

CVS/Aetna targets Blue Cross and Walgreens in their Illinois stronghold CVS from Page 1 presence here, it will put pressure on Deerfield-based Walgreens and Chicago-based Blue Cross, which historically have dominated in their home state. “Illinois is really Walgreens’ home turf, and it’s a little bit challenging for a competitor to get in,” says Syed Husain, managing director at advisory firm PJ Solomon’s pharmacy and health care practice. “CVS always had a presence, but what happened with the Aetna acquisition—and ultimately (last year’s acquisition of a Medicaid managed care company in Illinois)—is, now there’s a reason to expand and maybe substantiate the presence a little more.” Nationally, CVS is the largest pharmacy chain and the sixth-largest health insurer by market share. But in Illinois it trails Walgreens, which has 183 more stores in the state, and Blue Cross, which controls the vast majority of the local health insurance market. According to the latest data from the National Association of Insurance Commissioners, CVS ranks third in Illinois with 12 percent of the market, just behind UnitedHealth Group with 12.3 percent. But under CEO Karen Lynch, previously Aetna’s president, CVS is focusing more on its health insurance segment—and particularly how that business works in tandem with the company’s other assets. “That combination of consumer-centrism is really something that should be able to set CVS apart from some of its peers, even in similar business lines,” says Morningstar analyst Julie Utterback. Aetna’s health plan covering Illinoisans who are eligible for both

Medicare and Medicaid benefits has grown 27 percent year over year to nearly 9,500 members, or 15 percent of the market, the latest state data shows. But enrollment is expected to balloon starting next month, when Aetna’s plan becomes the first in Illinois to expand into all 102 counties. Corey Taliaferro, Aetna Better Health of Illinois’ executive director, predicts the expansion will double enrollment to 18,000.

HOW CVS STACKS UP IN ILLINOIS With an array of pharmacies, medical clinics and health insurance plans, CVS is challenging Walgreens and Blue Cross in their home state.

CVS Health (Aetna) 392

Walgreens 574

Blue Cross & Blue Shield of Illinois n/a

Retail stores (Chicago only)

118

n/a

Clinics offering primary care services

n/a

Nearly 724,000*

n/a

8 million

406,257 (15% of market)

n/a

634,648 (24% of market)

9,418 (15% of market)

n/a

19,956 (32% of market)

Retail stores

Total health plan members Medicaid managed care members**

GROWING FOOTPRINT

On another front, Aetna entered Illinois’ Medicaid managed care program late last year after acquiring the Medicaid—as well as Medicare Advantage—business of Centene. The move comes three years after the state narrowed the number of payers participating in the program, forcing Aetna to exit. “From Aetna’s perspective, this was a terrific opportunity to get a little more of a footprint on the payer side and help drive some traffic to their physical footprint on the pharmacy side,” Husain says. Even though Medicaid has the lowest margins, many insurers are beefing up their offerings as the Biden administration expands access to the health insurance program for the poor and disabled. From January 2020 to May 2021, enrollment in Illinois’ program increased 25 percent to 2.6 million members, according to state data. The company also aims to enter Affordable Care Act exchanges next year in up to eight states “where we believe we can make a meaningful impact and maximize returns with our first-ever Aetna-CVS branded offerings,” Lynch said during the latest earnings call. Following significant losses,

Medicare-Medicaid members** Sources: CVS Health, Walgreens, Illinois Department of Healthcare & Family Services, National Assocation of Insurance Commissioners

Aetna stopped selling Obamacare plans in Illinois and other states in 2017. CVS spokesman Charlie Rice- Minoso declines to say whether the company plans to rejoin the Illinois marketplace. But during the earnings call, Daniel Finke, president of the company’s Health Care Benefits segment, said the ability to “connect our strategies around the use of CVS assets”—such as MinuteClinics and HealthHUBs—is a factor in selecting the states. When deciding which markets to enter, Aetna is likely to consider the 16 states, including Illinois, where it already offers Medicaid plans, says Ari Singh, a senior research analyst at investment management firm Neuberger Berman. Singh says he expects that individuals who enroll in the impending exchange plans will be encouraged to get care at CVS clinics, either through low or no copays. Aetna’s focus on govern-

* as of December 2019 ** as of May 2021

ment-sponsored health insurance in Illinois could eat into Blue Cross of Illinois’ membership. Meanwhile, Aetna can offer incentives to steer health plan members toward its CVS pharmacies and clinics, boosting retail and pharmacy sales while also giving the company’s insurance arm more control over patients’ medical costs. Lacking retail clinics of its own, Blue Cross has less influence over the medical costs its insurance plans are on the hook to cover. Blue Cross didn’t respond to a request for comment.

ADDING CLINICS

On the retail side, CVS is launching 1,000 clinics nationwide with expanded medical services, including preventive care, diagnostic testing and behavioral health. Of the 871 HealthHUBs that have opened, 35 are in Illinois, including eight in the Chicago area, Rice-Minoso says, declining to say whether additional locations are

expected to open in the state. As CVS launches its HealthHUBs, archrival Walgreens Boots Alliance is opening primary care clinics of its own. Walgreens recently made a big bet on an integrated pharmacy and primary care model, investing $1 billion to put up to 700 VillageMD clinics in its stores in the next four years. The company is in the midst of opening 40 of the clinics, but none are in Illinois. Walgreens says its “payer agnostic” approach expands the range of choices available to customers. Noting Walgreens has “proudly served Chicago and Illinois communities since 1901,” company spokesman Phil Caruso says the pharmacy chain has a network of payers and providers, as well as partnerships with hospital systems like Advocate Aurora Health and clinical laboratory services firm LabCorp, that enable it to give patients access to the services they need.

Black homeownership efforts are on the agenda in Chicago’s West Woodlawn WEST WOODLAWN from Page 3 Altheimer says. Clark added that the effort comes after “decades and decades of disinvestment in this historically Black community.” They’re not the only ones hoping to lift long-neglected West Woodlawn. In the blocks around the Duncans’ new home right now, there’s a cluster of homebuilding efforts by Black-led development firms. They include a new two-flat on the same block of Evans that sold for $524,000 in May by West Woodlawn native Lamell McMorris’ Greenlining Realty. The firm sold a rehabbed 19th-century two-flat on the 6400 block of South Langley in August for $469,000 and plans to finish at least five more units this year, according to Jerry Brown, the Compass agent representing Greenlining’s properties. On the 6500 block of Langley, Eric Stewart’s firm, Fashion Fair Homes, plans to break ground June 29 on a contemporary-styled house that will be priced at about $295,000.

Two blocks north on Langley, five Black developers bought 12 vacant lots where they plan to build new homes. “For us it was, ‘change is not coming unless we bring the change ourselves,’ ” says Bonita Harrison, principal of KMB Realty, part of the “buy the block” initiative on Langley. That’s the sort of vision that Haynes Duncan says she and her husband “wanted to be involved in, Black professionals building our communities in an intentional way.” As homeowners, they’ll bring new life to a formerly derelict building, and as landlords of the second unit, they’ll offer affordable, newly renovated housing to others who want to stay in West Woodlawn. Both they and their tenants will help support existing businesses, such as the Jewel at 63rd and Cottage Grove, and contribute to demand for new businesses. Ald. Jeanette Taylor, whose 20th Ward includes West Woodlawn,

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says she welcomes the round of new homes, but guardedly. “In the 20th Ward we have 4,000 vacant lots,” Taylor says. About half are city-owned and half privately owned. “We have to get those lots filled, but I have enough strangers coming in and taking the money they make out of Chicago and even out of the state.” Taylor declines to comment on the specifics of any developers mentioned in this story but says, “If they’re going to be accountable, if they’re going to build for the people who are in my community and not turn it into gentrification, that’s what we want.”

FIGHTING GENTRIFICATION

A wave of affordable developments in West Woodlawn now could act as a sort of firebreak in later years against the anticipated impact of the Obama Presidential Center: rapid gentrification of the eastern portion of Woodlawn adjacent to the Jackson Park site. Development pressure is also building

in Woodlawn just south of the University of Chicago campus, where new single-family homes priced in the mid-$700,000s appeal to buyers who may have been priced out of Hyde Park to the north. “I don’t think it’s OK to just leave the neighborhood as it is and watch someone else come do it” a few years down the line, Harrison says. “We’ll do it now, for us,” Harrison says. As well as being part of “buy the bock” on Langley, she rehabbed a 1910s brick two-flat on the 6500 block of Champlain Avenue that her firm sold in March for $450,000. For McMorris, the effort to build back the neighborhood is deeply personal. Now a strategy and government affairs consultant based in Washington, D.C., he grew up on Marquette Road in West Woodlawn. The greystone has been in his family for at least 60 years, and while visiting several years ago, he says, “I sat on the steps and I looked across the street at the same vacant lots that I had looked at four decades ago.”

McMorris told himself, he says, “We have to start somewhere to reverse this paradigm. We have to drop a pebble somewhere, and it’s going to be here.” Two-flats, whether built new or rehabbed, are a good place to start because in Chicago they’ve traditionally been practical wealth-builders. The rent that livein owners collect on the second unit defrays their mortgage cost, accelerating their growth in household wealth. The two-flat model also works for Taylor because of the rental component. “That can be housing for the people who have been here in my community,” she says, “and want to stay in my community.” Altheimer, who’s built up a portfolio of a few hundred apartments under his primary firm, Miro Development, says he’ll draw on his expertise to train his two-flat buyers on the nuts and bolts and the tribulations of being a landlord. He will also offer to manage their rentals.

Vol. 44, No. 26 – Crain’s Chicago Business (ISSN 0149-6956) is published weekly, except for the last week in December, at 150 N. Michigan Ave., Chicago, IL 60601-3806. $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 2021 by Crain Communications Inc. All rights reserved.

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Free Shipping/Delivery: Minimum purchase required after discounts and before taxes. Orders must be placed by 5:00 P.M. local time (in most locations) via phone/online or 3:00 PM via fax. Orders outside our local delivery area and most furniture, oversized, bulk items, cases of bottled water and other beverages and special order items do not qualify. Non-qualifying orders incur a delivery charge. Delivery fees will be noted prior to purchase. Other restrictions apply. See officedepot.com/delivery, call 800.GO.DEPOT or ask a store associate for details.

We reserve the right to limit quantities sold to each customer. We are not responsible for errors. Office Depot® is a trademark of The Office Club, Inc. OfficeMax® is a trademark of OMX, Inc. ©2021 Office Depot, LLC. All rights reserved.

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