Crain's Chicago Business by crainschicago

CHICAGO COMES BACK: What’s changed with the LGBTQ+ community? PAGE 4

TECH TAKEAWAY: Science nerd says she was ‘born that way.’ PAGE 6

CHICAGOBUSINESS.COM | July 5, 2021 | $3.50

Bears aren’t the only players at Arlington Suburban racetrack site attracts bids from major local developers

Arlington International Racecourse

BY ALBY GALLUN

MCSHANE FLEMING STUDIOS

When it comes to the future of the Arlington International Racecourse, it’s hard to compete with the Chicago Bears. But a couple of dark horses have entered the race. Crain’s has learned that two prominent local developers, Glenstar Properties and UrbanStreet Group, are among the bidders for the 326-acre horse track in northwest suburban Arlington Heights, a site that could accommodate a massive mixed-use project including homes, retail space, warehouses and hotels. Bigger than the Chicago Loop, the property offers a tantalizing opportunity for a developer with the vision, experience and money to pull it off. “This is sort of a once every 20 or 30 years project,” says Michael See BEARS on Page 21

Middle-class hike lurks in energy bill California’s experience in helping pay the bills of the less fortunate provides some clues for us BY STEVE DANIELS Electricity rates already at risk of rising more than 10 percent under Gov. J.B. Pritzker’s energy bill could increase even more. That depends on how regulators execute a little-discussed provision to subsidize the bills of lower-income households. The wide-ranging measure, which remains very much alive despite continued disagreements between environmentalists and organized labor over the future closure of fossil-fuel pow-

er plants, for the first time would allow for some households to pay less for power and natural gas. The rub is that utilities don’t pay for such programs. The cost of any such subsidy, which the bill authorizes the Illinois Commerce Commission to develop, would mean even higher utility bills for those who don’t qualify, as well as for businesses. Depending on where the income line is set for such subsidies, the costs could double the increases the bill already would impose to preserve financially

OVERDUE BILLS With Springfield preparing to hike utility rates, hundreds of thousands of households already are struggling to stay current on their bills. Percentage charged late-payment fees Residential customers in May 2021 Peoples Gas 26% 209,214 of 802,337 customers Nicor Gas 17% 349,651 of 2,010,798 customers Commonwealth Edison 17% 617,917 of 3,699,911 customers Source: ICC filings

ailing nuclear plants, develop new solar and wind projects, and fund social programs centered See RATES on Page 22

United boss burns the boats With huge jet order, Kirby gambles road warriors will return BY JOHN PLETZ United Airlines CEO Scott Kirby, who counted blackjack cards so successfully that he was barred from casinos around the world, is betting billions on a full recovery in business travel. Kirby last week announced plans to buy 200 large jets from Boeing and 70 from Airbus over the next five years, replacing hundreds of small regional

planes. United will focus on flying more passengers to and from its large hub airports in Chicago and other big cities. Key to the plan are business travelers willing to pay premium prices for either lie-flat seats at the front of the plane or more legroom in coach. Kirby predicts corporate flying will rebound to pre-pandemic levels by 2023, after plunging 95 percent last year. “Business travel is going to come back at 100 percent,” he told reporters and analysts in announcing the purchase of the See UNITED on Page 19

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JOE CAHILL

BIG FOOD

Strongest local stock performers capitalize on recovery. PAGE 4

Results will reveal the staying power of recent growth surge. PAGE 3

7/2/21 4:18 PM

2 July 5, 2021 • CRAIN’S CHICAGO BUSINESS

ON POLITICS

Foxx playing ‘trial and error’ with justice system

And I largely agree with her, hen I arrived home in theory. But in reality, what the other night, I she’s doing is abruptly changdiscovered I was out ing a system without considof toothpaste. Bummer, but no ering the complications and problem. Just hit the neighborimpact of, say, immediately hood Walgreens at Broadway releasing someone who has and Belmont. When I got there, served prison time, has an though, I had to summon an arrest record as long as your attendant with a key. “We have arm and against whom there to keep toothpaste locked up,” is compelling evidence that she explained. Otherwise, it they’ll commit another crime. walks away, a whole case in Public confidence in the just one day. criminal justice system—the Toothpaste?! belief that those who intenCall it the canary in the coal tionally harm others will be mine, a sign if it wasn’t already caught and held accountclear from the latest crime stats able—is plummeting. The very that some disturbing things are brazenness of recent carjackafoot here. ings and other horrid incidents Look at San Francisco. That’s here lately tells you that. So where excessive shoplifting does last week’s special City and related woes have caused Council meeting about crime the drugstore chain to begin woes, which was called by pulling out of the city, closing mostly Black and Latino alder17 stores in recent years, stores men. That’s as much of a realithat carry not only toothpaste ty in my book as the appeals to but lifesaving pharmaceutical constitutional purity. drugs. Back to shoplifting. WalThe toothpaste tale came to greens declined to comment. mind later in the week when I Rob Karr, head of the Illinois listened in on a virtual crimRetail Merchants Association, inal justice reform panel that says pilferage now “is affecting included Cook County Public some store location decisions,” Defender Kim Foxx. with some merchants reportEr, make that State’s Attoring they lose 10 percent of ney Kim Foxx, who only talks their merchandise monthly to like she’s the public defender theft, by workers or shoplifters. much of the time in advocating Ald. Pat Dowell, 3rd, says her positions such as not prosecutconstituents and merchants ing felonies shoplifting cases are more concerned about viounless the value of goods taken lence, but says not only toothpaste but “shavNOT ENFORCING “SMALL” LAWS ing cream, pain pills, RISKS SENDING WRONG MESSAGE. body soap and deodorant” have been locked up in her ward for a while. Ald. is more than $1,000. Foxx says Brian Hopkins, 2nd, says mass that allows her to focus on shoplifting “unquestionably is fighting violent crime. a problem” and echoes the 10 Foxx strongly asserted that percent figure. a companion policy change In the end, human life obvishe’s pushed, ending cash bail, ously is more important than has been a crashing success. money. But when you quit Only a relative handful of enforcing “small” laws, you those released on bail are bustrisk sending the message that ed again for violent offenses bigger laws can be ignored, before their trial, she said— too—sometimes referred to as whatever the “sensational” the broken-windows theomedia says. ry of policing. Right now in In fact, more reform is needthis town, some people have ed, Foxx said as other panelists concluded anything goes, called for slashing the use of any time. And that’s bad for electronic monitors for those everyone. free on noncash bail and One of others on the panel restricting recalcitrant judges with Foxx was Illinois Supreme who still hold some defendants Court Chief Justice Anne in jail until trial. What’s really, Burke. She made a critical really needed, she said, is for point: Right now, we don’t reofficials to educate the public ally know what we’re doing. It’s that someone is presumed “trial and error,” with results to innocent until convicted at a be determined. trial, and the “pre-trial punishThe justice is correct. I hope ment” is wrong. we know what we’re doing. I get what Foxx is saying.

CORRECTION Tanjia Coleman’s last name was misspelled in the Notable Executives in

Diversity, Equity and Inclusion feature on June 28.

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Hey, Chicago landlords, you think your taxes are high? They are. Aurora homes are taxed at the highest effective rate among 53 cities included in a new study. Commercial properties in Chicago are taxed at the second-highest rate. BY ALBY GALLUN A new study gives Aurora homeowners and Chicago commercial landlords an extra reason to gripe about property taxes. Homes in Aurora are taxed at the highest effective rate among 53 U.S. cities included in the “50-State Property Tax Comparison Study,” an annual report published by the Lincoln Institute of Land Policy and the Minnesota Center for Fiscal Excellence. Commercial properties in Chicago, meanwhile, are taxed at the second-highest rate, after Detroit, according to the report. The findings are consistent with those in previous studies comparing property tax rates but come at a time of high anxiety for many property owners: just as Cook County Assessor Fritz Kaegi is reassessing properties in the city of Chicago. Over the past two years, Kaegi has hiked commercial assessments in suburban Cook County. Many owners of apartment, office and other income-producing properties in the city worry that he’ll do the same thing to them, resulting in big tax increases next year. Recently released figures for Rogers Park suggest those fears may be justified. The new study found that the 2020 effective tax rate—a property’s tax bill as a percentage of its value—was 4.03 percent for Chicago commercial properties worth $1 million or more, ver-

VICTOR LOZANO/UNSPLASH

GREG HINZ

The effective tax rate for $1 million-plus Chicago commercial properties trailed only Detroit’s. sus an average of 1.95 percent for all cities included in the report. Only Detroit was higher, at 4.16 percent. Chicago’s tax rate is so high because of high spending by local governments, including the city, county and Chicago Public Schools, and because the tax system is structured to shift more of the tax burden onto commercial properties, the report says. While that’s bad news for landlords, it’s good for homeowners, who carry less of the tax load. Chicago ranks fifth among the 53 cities for a metric used to measure preferential tax treatment for homeowners. Still, Chicago homeowners can’t be too happy. The city

ranks 15th when it comes to effective tax rates on median-value homes. The city’s 2020 rate, 1.54 percent, was slightly higher than the average for all 53 cities, 1.38 percent. It’s much worse out in Aurora, which had a tax rate of 3.25 percent, according to the report. The city’s tax rate is so high largely because local governments in the western suburb rely heavily on property taxes to finance their operations, the report said. Aurora residents sick of their taxes and Midwestern winters may fantasize about moving to a low-tax city in a warmer clime. One option: Honolulu, which had the lowest tax rate last year: just 0.31 percent.

wintrust.com/privateclient

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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Banking products provided by Wintrust Financial Corp. banks. 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. 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

7/2/21 2:15 PM

CRAIN’S CHICAGO BUSINESS • JULY 5, 2021 3

Kaegi thwarted in reform efforts Powerful interest groups put muscle behind defeat of data collection bill

BIG FOOD’S BIG RECKONING

Second-quarter numbers will show post-COVID trajectory QUARTERLY FINANCIAL RESULTS due this month from Chicago’s packaged-food giants will provide the first glimpse at how the industry is emerging from the pandemic, which gave mature brands a badly needed jolt of growth. Sales surged at Kraft Heinz, Mondelez and Conagra amid restaurant closures and travel restrictions that forced consumers to eat more meals at home. People stocked up on comfort food and nostalgic brands from childhood, like Oreos and Kraft Macaroni & Cheese. Kraft Heinz’s sales rose

BY ALLY MAROTTI

4.8 percent last year after sinking 4.9 percent in 2019; Mondelez’s revenue was up 2.8 percent after four flat years; Conagra’s sales for the 39 weeks ended Feb. 28 increased 8.7 percent over the year-earlier period as shoppers rediscovered frozen food. But the second quarter brought an easing of COVID restrictions in many U.S. cities, as vaccination rates went up and case counts went down. People ventured out again and started spending See BIG FOOD on Page 19

“THE ONES WHO ARE ABLE TO UNDERSTAND THE CONSUMER . . . WILL WIN AND SUSTAIN. THE OTHERS WILL FIND IT CHALLENGING.” Samrat Sharma, PwC

JOHN R. BOEHM

BY A.D. QUIG Cook County Assessor Fritz Kaegi is now 0-3 in his efforts to push through Springfield a piece of legislation that he says is key to his property tax reform agenda: the data modernization bill. His ultimate goal is to require certain commercial property owners to disclose their income and expenses to his office each year. It’s the same data Kaegi says building owners often use when they appeal his valuations. But attempts to get versions of the Fritz Kaegi data modernization bill—and a 2021 companion bill that would have only mandated disclosures of a property’s physical characteristics—have failed to pass in the General Assembly since 2019. Kaegi’s office says the lack of income and expense data makes it harder for him to make his valuations more objective, transparent and up to date. With disclosures in hand, he argues, the office can get commercial assessments right the first time. That would reduce the number of appeals and increase confidence in the office. He blames powerful real estate and property tax appeals interests for tanking discussions at the end of the spring legislative session, arguing they benefit from preservation of an opaque, See KAEGI on Page 20

Help (desperately) wanted at the airports BY JOHN PLETZ As travelers get back in the air, an already tight labor market for service jobs that is squeezing restaurants and retailers outside the airport is putting even more pressure on employers at O’Hare and Midway. “It’s horrible,” says Robert Kenney, manager of Nuts on Clark, at a job fair held last week at Midway Airport, which drew five people. Before the pandemic, airport

job fairs would attract about 100. “We’ve got skeleton crews while we’re trying to hire,” he says of Nuts on Clark’s five shops at the city’s two airports. He’s looking to fill six positions. Like other companies in search of service workers, airport vendors are struggling to find employees who will answer the call. “People aren’t showing up for interviews,” says Patty Sianis, who runs Billy Goat Tavern locations at O’Hare and Midway

and is looking to fill two to three jobs at each location. “Before the pandemic, you’d put an ad out and get a lot of responses. People would show up, and you could make a hire in two weeks. Now you set up 10 interviews and only one responds.” Without enough workers, retailers are leaving sales on the table, and the travel experience is less inviting for customers whom airlines and the airports desperately want to win back. It potentially means less revenue that the airport can use to offset landing See AIRPORTS on Page 21

JOHN R. BOEHM

Finding workers for O’Hare and Midway is a challenge in the best of times, and these aren’t the best of times

Some retail operators are offering sign-on bonuses, a practice airport veterans say is unheard of.

4 July 5, 2021 • CRAIN’S CHICAGO BUSINESS

ON BUSINESS

Strong first half for local stocks

of Baxter’s injectable drugs and surgical equipment. Other local medical stocks also turned in subpar results for the first half. Shares of pharmaceutical giant AbbVie and medical device-maker Abbott Laboratories rose 5.1 percent and 5.9 percent respectively, trailing an 11.0 percent rise for the S&P health care index. North Chicago-based Abbott’s diagnostics business sold a lot of COVID-19 tests last year, helping offset declines for products affected by the cutback in other medical procedures. But with COVID-19 fading in the developed world, diagnostics sales are falling faster than expected, leaving investors to hope Abbott’s other business lines will pick up the slack. AbbVie, for its part, still faces questions about long-term growth after its top-selling drug, Humira, encounters generic competition in the U.S. for the first time in 2023. North Chicago-based AbbVie has several promising new drugs, but hasn’t yet proved they’ll offset an expected rapid decline in Humira sales, which accounted for 43 percent of AbbVie’s revenue last year. Chicago also has a big LOCAL MEDICAL STOCKS presence in another industry TURNED IN SUBPAR RESULTS . that has underperformed on Wall Street this year. Mondelez International, Kraft Heinz and half, more than double the 13.2 Conagra Brands are major players percent increase for the S&P index in the packaged-foods sector, of information technology stocks. which saw surging demand last CDW said revenue climbed year as lockdown orders shuttered 10 percent in the first quarter, restaurants, forcing people to eat citing continued strong sales more meals at home. of remote-working equipment, They flocked to grocery stores, augmented by a broader upturn filling carts with items like Kraft in technology demand among Macaroni & Cheese, Conagra’s corporate customers anticipating frozen dinners and Mondelez’s a robust economic rebound. cookies and crackers. Laggards are concentrated in With restaurants and bars industries facing uncertainty as reopening, investors wonder COVID-19 cases ebb, especially if grocery sales will sag. Their health care. The pandemic had doubts have held the S&P index of mixed effects on health-related consumer staples stocks to a 3.6 businesses, boosting demand percent gain this year. Shares of in some areas and all but elimiKraft Heinz and Mondelez have nating activity elsewhere in the done better, rising 17.7 percent sector. No local company felt that and 6.8 percent, respectively. whipsaw effect more sharply than Conagra, however, has manBaxter International, which makes a range of medical equipment and aged only a 0.3 percent rise. As my colleague Ally Marotti reports, pharmaceuticals. earnings announcements for Baxter shares posted the worst the quarter ended June 30 will performance among the larggive investors their first glimpse est local stocks, eking out a 0.3 of post-pandemic prospects for percent gain as the pandemic these companies. boosted some of its business Another major local industry lines and battered others. has done better this year. Large COVID-19 patients often suffer manufacturing stocks generally kidney failure, lifting demand for are up 15.6 percent since January, Deerfield-based Baxter’s acute as global trade reopens. Illinois indialysis products. dustrial shares have jumped even But hospital admissions unrelated to COVID declined as people higher, with agricultural equipment manufacturer Deere up 31.1 stayed away for fear of coming in percent, construction equipment contact with the virus. At the same giant Caterpillar rising 19.6 pertime, hospitals overwhelmed with cent and diversified manufacturer COVID-19 cases curtailed elective Dover up 19.3 percent. surgeries. These trends hurt sales ocal stocks tracked higher alongside the broader market during the first half of 2021, as COVID-19 loosened its grip on the economy. Bloomberg’s index of Illinois stocks rose 13.8 percent from January through June, roughly in line with a 14.4 percent gain for the S&P 500. The strongest local performers were well-positioned to capitalize on the early stages of economic recovery, particularly those in the technology sector. Zebra Technologies led all Illinois stocks, soaring 37.8 percent during the first half and touching a record high of $538.51 on June 30. The Lincolnshire-based maker of bar code equipment, mobile computers, workflow optimization software and other technologies posted a 28 percent rise in first quarter sales as orders poured in from businesses in a range of industries gearing up to meet rising demand. Coming in second was another local supplier of business technology. Shares of Vernon Hills-based computer equipment vendor CDW rose 32.5 percent in the first

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What’s changed with the LGBTQ+ community? Emily Drake and Todd Connor speak with Kevin Hauswirth of Hauswirth/Co and Channyn Lynne Parker of Howard Brown Health on company relations 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. June was LGBTQ+ Pride month, when companies demonstrate their commitment to LGBTQ+ equality and employee engagement. To get a pulse on what’s changing in the LGBTQ+ community and the organizations seeking to support them, Todd Connor and Emily Drake sat down with Kevin Hauswirth of Hauswirth/Co and Channyn Lynne Parker, director of strategic Partnerships for Howard Brown Health. Both are Crain’s LGBTQ+ Notable Executives, thought leaders and noted advocates. Often, the centerpiece of this work is on display at pride parades, festivals and hosted events. TODD CONNOR: Kevin, let’s start with you. How are you seeing companies express their commitment to the LGBTQ+ community differently this year? What are the trends over the last several years, and where are you seeing the line between active allyship and performative marketing? KEVIN HAUSWIRTH: We’re seeing more demand for companies to show up, both from consumers and from their own employees. That’s not surprising considering a recent Gallup poll that found nearly 16% of Generation Z and 9% of millennials identify as LGBT. And, in 2025, millennials will represent 75% of the workforce. This isn’t just reshaping the workforce; it’s also challenging the “Will and Grace” stereotype of the community as gay white single men with disposable income. Remember, this is a generation that never saw Ellen in the closet and may remember an America without marriage equality as a distant memory. This “normal” isn’t new for a huge number of consumers. This “mainstreaming” of queer representation has resulted in drag queens appearing in a McDonald’s TV ad and even a Super Bowl ad for hummus. EMILY DRAKE: Channyn, you’ve been on the forefront advocating for the LGBTQ+ community, in particular for trans women, and broadening the aperture of the conversation. How are you seeing the role of advocacy for the LGBTQ+ evolving? CHANNYN LYNNE PARKER: In the past, the landscape of LGBTQ+ advocacy, firstly, was devoid of the T. Within the past decade or so, the voices of trans people are being centered now, more than ever. We are also seeing nonbinary individuals lend their advocacy and activism in the movement towards equity. In the beginning of our fight, the focus was very equality-driven. While we know that equality is an inherently good thing, what we find is that not everyone in our community

GETTY IMAGES

JOE CAHILL

CHICAGO COMES BACK

is on equal footing. Because of this, we cannot be equality-focused, but rather instead, more focused on equity. Stunning findings show that lesbian and bisexual women are consistently poorer than heterosexual women, between the ages of 18-44, according to data published by the Williams Institute, titled “Poverty in the Lesbian, Gay and Bisexual Community.” If we couple these statistics with race, particularly amongst Black and Brown people, the rates of poverty are even more harrowing. TC: Kevin, beyond celebrations in the month of June, what best practices are you seeing companies adopt to fully engage in allyship with the LGBTQ+ community? KH: If “PRIDE” is simply part of a seasonal marketing calendar, we have a problem. Honoring Pride should be one part of an annual strategy engaging LGBTQ+ consumers, employees and communities. We want to trust that companies will do the right thing when no one is looking, not just in June. How will you honor lesbian moms on Mother’s Day? Are trans families part of back-to-school campaigns? Are your focus groups talking to queer people, or are they a room of straight folks? If you’re raising awareness around hunger or homelessness, are you center-

ing the experiences of queer youth, who are disproportionately kicked out of their homes? Is your LGBTQ employee group resourced and connected to leadership? I’d argue that every opportunity to engage is a chance to be inclusive and a step closer to more equity. Companies must remember: Allyship is an action, not an identity. ED: Channyn, in your role building partnerships for Howard Brown Health, what novel partnership approaches are you seeing organizations take to fully reach and engage the LGBTQ+ community? CLP: Like with any organization, no one can do it all. Howard Brown Health is a health care organization. And while we provide an array of services, designed to support our patient needs, we also recognize that there are other organizations, perhaps even in our patients backyards, that have the resources to help these community members as well. During COVID, Howard Brown Health formed many partnerships with local community orgs, from churches down to local business in effort to provide COVID-19 testing and vaccinations in hard-hit/ underserved communities. These communities were often on the city’s South and West sides, which oftentimes did not have the same access to testing and vaccinations as other parts of the city.

7/2/21 2:15 PM

One year ago, our lives dramatically changed. For many in our region, COVID-19 has disrupted our jobs, education, budgets, and access to healthcare. Though it’s a new year, our neighbors still need our help. We face many hurdles as we work to reverse the economic impact of the pandemic, but with your support, we can move from pandemic response to recovery. Your donation will help 9RMXIH ;E] HIPMZIV GVMXMGEP VIWSYVGIW XS RSRTVSƤX SVKERM^EXMSRW on the front lines of the crisis so that our neighbors can easily access food, housing, and healthcare.

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RunDate 3/29/21

Together, we’ll build Chicago back stronger than before. Make a gift online today at LIVEUNITEDchicago.org/Recovery-March

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6 July 5, 2021 • CRAIN’S CHICAGO BUSINESS

NOMINATION PROGRAMS

to honor any deserving colleague

RISING STARS IN LAW

Now is the time to nominate Chicago-area’s rising stars in law—professionals who are setting legal precedents, winning significant cases, and giving back to their communities.

EXECUTIVES IN MARKETING

2021

How did you react? I developed ulcers the summer after fourth grade. Eventually, I saw a great therapist.

Was there a positive side? It taught me resiliency, and it really bonded us kids together.

What’s the excitement? Besides being really cool, it’s about the impacts that this will have on industries from biotech and banking to transportation and logistics.

< Were you always a science nerd? I think I was born that way. During elementary school in Arizona, we talked about conserving water a lot. One day I decided to go around the house measuring how much water was dripping out of our faucets and being wasted.

Recognizing some of the top brand marketers responsible for branding, PR, communications, partnerships, recruiting, training, data analytics and beyond for some of the most iconic brands in Chicago.

Tell us more about your childhood. I was one of five kids across three moms and two dads. My parents divorced when I was young, and I grew up alternating between L.A. and Phoenix. There were frequent conflicts going on at the parental level, which was very stressful.

NOMINATION DEADLINE: AUGUST 6 PUBLICATION DATE: SEPTEMBER 27

What’s quantum? Put very simply, it’s just physics, but at subatomic scales—a single atom or electron.

2021

Timmerman, 42, is the executive director of the Chicago Quantum Exchange, which fosters partnerships between academia, national labs and industry to promote the science and engineering of quantum information. Timmerman also is a board member of P33, a private initiative fostering Chicago’s tech economy. She lives in Lincoln Park with her husband and their 8-year-old son. By Laura Bianchi

NOMINATION DEADLINE: JULY 16 PUBLICATION DATE: SEPTEMBER 6

Kate Waimey Timmerman

2021

THE TECH TAKEAWAY

You were in neuroscience for a decade. Why did you switch to quantum science? I couldn’t find career opportunities to match my evolving interests. But there are a lot of similarities between the two fields.

NONPROFIT BOARD LEADERS NOMINATION DEADLINE: AUGUST 20 PUBLICATION DATE: OCTOBER 11

Featuring top Chicago area board members with at least five years of board experience and have advanced the cause of a nonprofit organization and raised its profile in the community.

MILITARY VETERAN EXECUTIVES

Highlighting accomplished military veteran executives in the Chicago area who are currently serving in a senior level role at his or her company and have made significant contributions to advancing the issues that affect veterans within the workplace.

Nominate at ChicagoBusiness.com/NotableNoms

P006_CCB_20210705.indd 6

Your super power? Sleeping. I can pretty much nap anytime, anywhere, thoroughly bugging those in the family who didn’t inherit this talent.

NOMINATION DEADLINE: SEPTEMBER 24 PUBLICATION DATE: NOVEMBER 8

2021

Such as? Some of the quantum sensors that scientists are developing will provide neuroscientists with an unprecedented level of information about the brain, such as cell division and growth. That stuff makes the hair on my arms stand up.

Your favorite app? My Apple podcast app. Right now I’m listening to “The Bomb” on the BBC, and “The Daily” from the New York Times is part of my morning routine, but I’ll never say no to political or true-crime podcasts.

7/2/21 2:11 PM

CRAIN’S CHICAGO BUSINESS • July 5, 2021 7

Where there are almost no homes left to buy In these Chicago suburbs, the nearly nonexistent inventory of homes for sale means higher prices and stiff competition BY DENNIS RODKIN

LaHood says. They may lose out in a series of fierce bidding wars over choice properties, back out of the market even though epochally low interest rates make buying a home cheaper than it’s been in decades, or inconvenience themselves by offering deal-sweeteners to the sellers such as the chance to stay in the house as renters until they buy their next home.

HIGH BIDS FIZZLE

One thing that isn’t working for buyers is vastly overbidding as a pre-emptive strike. “They just lose the house when the appraisal doesn’t match that value,” says Chris Grano, a Keller Williams Infinity agent. An appraisal is a bank’s tool for measuring how much it will lend against the house, and banks aren’t as willing as buyers are to bid high to get that cute kitchen. Grano represented buyers who in June paid $330,000 for a four-bedroom house on William Drive in Romeoville. When it hit the market in mid-May priced at $315,000, the house attracted at least 15 offers in the first few days, with bidders reaching as high as $360,000, Grano says. The sellers “knew that price wouldn’t appraise,” he says, and went with his buyers. They paid $330,000, or about 4.7 percent over the asking price. Bowles says she was willing to bid so high over the asking price because LaHood’s market research told her the seller, the estate of the late owners, had priced it well below its apparent market value. While there was just two weeks’ worth of inventory available in any of these three towns at the end of May, there wasn’t much more in a few couple dozen other suburbs. The inventory of homes on the market was less than a month but more than half a month in 25 of the roughly 200 suburbs covered in the

JOHN R. BOEHM

RAIN WAS POURING DOWN when Andrea Bowles and her real estate agent stood in the backyard of a Tinley Park house they had just toured. The three-bedroom house on 175th Place wasn’t perfect. The kitchen and baths were dated, and the driveway needed to be rebuilt. “It’s solid, though,” Bowles recalls, and that reassured her because “a lot of people are putting junk on the market.” Standing in the rain, Bowles decided to make an offer, which turned out to be one of 17 the sellers received within 48 hours of putting the home on the market, according to Marti LaHood, Bowles’ agent. In late May, Bowles closed on her deal, paying $243,100, or about 13 percent more than the sellers’ asking price. That’s how it’s been in Tinley Park this spring, one of three Chicago suburbs where the inventory of homes for sale is so slim, it’s nearly nonexistent. Tight inventory has characterized the housing market both in the Chicago area and around the country for much of the past year. Real estate inventory is usually called tight if there are less than enough homes on the market to fuel three months of sales at the current pace of the market. In Chicago at the end of May, there were enough homes on the market for 2.9 months of sales, according to data released in midJune by Midwest Real Estate Data and the Chicago Association of Realtors. In Tinley Park, Romeoville and Island Lake, the inventory was enough to last just two weeks. “The lack of inventory is our biggest problem in this good market,” says LaHood, the Keller Williams Preferred Realty Agent who represented Bowles. “I feel bad for a lot of the buyers,”

Andrea Bowles, right, with her real estate agent, Marti LaHood, in front of the home she recently purchased in Tinley Park. four-county report. Inventory figures are not reported the same way for individual Chicago neighborhoods.

DEMAND AND SUPPLY

Inventory gets this low for a variety of reasons, including high demand that swiftly picks off nearly every home that pops onto the market. Agents say there’s a slow pipeline of supply as well, and a key culprit is the fast-rising market itself. “It feels like the only people selling now are people who are downsizing,” says Ismail Ismail, a Worth Realty agent in Tinley Park. That’s because “people who want to move up can’t afford that step with prices going up so much,” he says. “Maybe they’re selling high, but they’re going into a market where you have to buy high too.”

The median price of homes sold in Tinley Park was up 7 percent in the first five months of the year compared to the same period in 2020, according to the report from MRED and CAR. In Romeoville, prices are up 10 percent. They’re both middle-class towns, with the median price of homes sold in Tinley Park this year $231,000; in Romeoville, $226,500; and in Island Lake, $190,000. That means “we don’t have a lot of people who can afford to be paying two mortgages at once” if they buy a new place before they can sell the old one, LaHood says, “so they stay out of the market.” More affluent households may have other assets to draw on if they’re temporarily caught carrying two homes at once. One way to ease an invento-

ry shortage is to make more, but homebuilders were as surprised as anyone else by the rapid upturn in housing demand that began in mid-2020, Erik Doersching, executive vice president of Tracy Cross Associates, a homebuilding industry consultancy based in Schaumburg, told Crain’s in May. Looking at the number of new developments under construction when the boom began, Doersching said: “Supply won’t keep up with demand.” In Tinley Park, one new-construction development sold its last units in the fall of 2020, and another sold out in April. At present, there are no new construction homes listed for sale in the town, though that could change soon, as builders eye the tightness in that market.

Wilson Sporting Goods picks Gold Coast for its first store The Chicago-based company is taking over Rush Street space formerly occupied by Vineyard Vines, the first of many retail locations planned in the U.S. and China BY ALBY GALLUN Wilson Sporting Goods has picked a space right in its backyard for the first store in its 108-year history. The Chicago-based company is preparing to open the 2,247-squarefoot store in mid-July in the Gold Coast, the first of many retail locations Wilson plans in the United States and China. The company is taking over space at 932 N. Rush St. previously occupied by Vineyard Vines. “Our first store had to be in our hometown,” says Gordon Devin, president of Wilson Sportswear and Retail. “We look at it as a love letter to Chicago.”

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Wilson, which historically has sold its products through other retailers or online, is expanding into physical retailing at an uncertain time for brick-and-mortar stores. Many big brands, including Vineyard Vines, closed stores permanently during the pandemic, an especially difficult period for the business as consumers stepped up their online purchases. But Wilson’s new stores will allow the company to showcase its new Wilson Sportswear apparel line, a foray into fashion for a company better known for making tennis rackets, baseball mitts, footballs and other sports gear. The new line includes men’s polo shirts

for $68, women’s skirts for $58 and windbreakers for $88. Wilson’s stores will also feature an “edited collection” of sporting goods, Devin says.

ADDING STORES

Wilson unveiled its plans for Wilson Sportswear and its retail rollout in May. Devin declined to say how many stores the company plans to open, but said the number would not reach into “the hundreds and hundreds.” He expects Wilson to open multiple locations here. “I can see a future where we have more than four, less than eight” in the Chicago area, he says.

Stores serve a key branding purpose for retailers, especially for companies trying to reposition themselves in the marketplace, allowing them to connect directly with consumers. A store in a high-traffic location can serve as something of a billboard, sometimes more valuable as a marketing tool than a sales generator. That’s not Devin’s goal. “Of course, retail stores play a role in the marketing and storytelling of the brand,” he says. But, “ultimately it’s about creating a highly profitable channel.” How profitable the store will be will depend on the future of brickand-mortar retailing. Online shopping has siphoned sales away from stores, a trend that accelerated during the pandemic. Shoppers are returning to stores enthusiastical-

ly amid the easing pandemic and booming economy, but the e-commerce threat has not gone away. In Chicago, the pandemic has been especially cruel to landlords on North Michigan Avenue, where the retail vacancy rate is hovering around 20 percent. The Oak and Rush Street shopping corridors have held up better, one reason Wilson picked the area for its first store, Devin said. In recent months, Dior has leased more space to expand its store at 931 N. Rush, across the street from the new Wilson location. And Veronica Beard recently opened a store at 11 E. Walton St., just around the corner. “This particular neighborhood has been far more resilient,” Devin says. “We felt it was a little more protected.”

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8 July 5, 2021 • CRAIN’S CHICAGO BUSINESS

Driehaus Museum buys ornate Murphy Auditorium next door BY DENNIS RODKIN An ornate, but little-used auditorium from the 1920s has been sold to its neighbor, the Richard H. Driehaus Museum. The John B. Murphy Memorial Auditorium at 50 E. Erie Street went up for sale in 2019, with no asking price disclosed by the seller, the American College of Surgeons. Sascha Freudenheim, a press representative for Driehaus, confirms that the purchase price is not being released. Set just west of North Michigan Avenue, the building is not related to the Lake Shore Drive mansion that is being sold by the International College of Surgeons, a separate group from the ACS. Built in 1926, the grand limestone Murphy building will become the fifth historical building around the intersection of Erie and Wabash owned by entities associated with Richard Driehaus, the noted investment manager and philanthropist who died in March. Along with the Nickerson Mansion at 40 E. Erie, an 1888 building that houses the Driehaus art and design museum, other Driehaus-associated

buildings include: the Ransom Cable House, 1886, at 25 E. Erie, headquarters of Driehaus Capital Management; the Cable house’s separate carriage house; and a townhouse at 17 E. Erie built in 1913 that also contains Driehaus offices. Designed by the architects Benjamin Marshall and Charles Fox to resemble a chapel in Paris, the auditorium building has a pair of monumental bronze doors designed by Tiffany Studios in its columned and garlanded stone façade. Inside is a lavish lobby that leads to the auditorium, whose three-story domed ceiling hangs walls decorated with ornamental plaster and a tall stainedglass window above the stage.

PRESERVATION

The six-story, 32,000-squarefoot Murphy building has been owned since it was built in 1926 by the American College of Surgeons, which originally used it for conferences about surgical methods. The college, whose offices are a few blocks away, has primarily operated the building as a rental venue for the past two decades.

“The Driehaus Museum is honored to succeed the American College of Surgeons as steward of their magnificent building,” Zachary Lazar, president of the board of trustees of the Richard H. Driehaus Museum, says. “It was no secret within the museum that Mr. Driehaus hoped someday to acquire the Murphy Auditorium, an extension of his passion for preserving the world-class historic architecture for which Chicago is so well known.” Richard Driehaus had a long list of preservation projects, including his Lake Geneva mansion Glanworth Gardens, and he funded awards for preservation at both the national and state level. “We owe ACS our thanks for their excellent oversight and care of this irreplaceable property,” Lazar says, “and are only sorry that Mr. Driehaus’ untimely passing means he did not have the opportunity to celebrate with us.” David B. Hoyt, executive director of the ACS, says that “we could not have found a better buyer than the Driehaus Muse-

JASON MARCK/WBEZ

Built in 1926 to honor a Chicago surgeon, the six-story, 32,000-square-foot building will become the fifth on a short stretch of Erie Street to be owned by Driehaus entities

The exterior of the “Murphy,” located at 50 E. Erie St, just west of Michigan Avenue. um. It is an important legacy to have the building remain part of Chicago’s unique architectural fabric now and for years to come.” The Driehaus Museum will use the Murphy building for programming, according to the press release. In the transaction, the auditorium rejoins the Nickerson Mansion. In the early 2000s, Driehaus acquired the Nickerson Mansion from the ACS. The Murphy auditorium bears the name of an abdominal surgeon whom one of the founders of the Mayo clinic described as “the surgical genius of our generation” in the late 19th and 20th centuries. John B. Murphy, who was an innovator in appendectomy, gallbladder surgery, repair-

ing gunshot wounds and other procedures, was a founder of the American College of Surgeons. Murphy, who practiced medicine in Chicago for all but a year of his 40-year medical career, was a professor of surgery at three Chicago medical schools at once: Northwestern, Rush and the College of Physicians and Surgeons, which later became the University of Illinois College of Medicine. In 1912, when former President Theodore Roosevelt was shot in Milwaukee, he was taken to Chicago’s Mercy Hospital, where Murphy performed the surgery that may have saved Roosevelt’s life. Murphy died in 1916, and the college built the auditorium in his memory a decade later.

Former AT&T campus gets first long-term tenant BY DANNY ECKER A locally based home mortgage company is moving its headquarters to the former AT&T campus in Hoffman Estates, becoming the first tenant to sign a long-term lease for workspace in the 150-acre project. Platinum Home Mortgage inked a 12-year deal for 22,000 square feet at Bell Works Chicagoland along the Jane Addams Memorial Tollway, where it will move more than 100 employees this fall from its main office in Rolling Meadows. The company will occupy 18,000 square feet combined between the second and fourth floors of the revamped 1.6 million-square-foot office building at the heart of the property, with an affiliated title company business occupying another 4,000 square feet on the building’s second floor. The deal is a landmark leasing moment for Somerset Development, the Holmdel, N.J.-based real estate firm that bought the abandoned campus in 2019 with a plan to spend $200 million turning it into a mixeduse destination where people would work, shop, dine and eventually live. Finding compa-

P008_CCB_20210705.indd 8

nies to buy into that vision is one of the most formidable obstacles in transforming one of the biggest buildings in the area left behind over the past decade by corporate tenants. Somerset thus far has renovated part of the obsolete main office building and has signed a handful of tenants to small, short-term leases in pre-built office space, but PHMC is the first company to plant its flag in the building for the long haul.

EYE-CATCHING OFFICE

PHMC President and CEO Bill Giambrone says Bell Works was the boldest option of the many offices it considered in the northwest suburbs as its lease expiration approached at 2200 Hicks Road in Rolling Meadows, where his company has been based since it was founded in 1993. “We looked at a variety of spaces and this one caught my eye and caught the staff’s eye because it’s so unique,” he says, noting the impressive renovation work Somerset has done to the building’s interior and its 31,000-squarefoot fitness center. Being the first major adopter of a building trying to reprove itself as an office destination is

a risk, but “our hope is we got in early on something that’s going to be great,” Giambrone says. “We think it’s going to work.” The office footprint in Hoffman Estates will be slightly smaller than the roughly 30,000 square feet PHMC occupies today in Rolling Meadows, a product of more of its staff planning to work from home more frequently even after the COVID-19 pandemic subsides, Giambrone says. But he also stressed the importance of in-person interaction among some of his staff and the ability to meet face-to-face with clients applying for mortgages or closing on home purchases. “It’s nice to just go into a meeting and do the brainstorming and get the body language,” he says. Somerset CEO Ralph Zucker, who dubs Bell Works Chicagoland a “metroburb” as an urban-like hub in the suburbs, says the PHMC lease is an “incredible milestone” as the property “begins to come alive with its own magnetic energy.” Other small tenants that leased move-in-ready space include boutique-accounting firm CPA Advisors Group, pest control company Mosquito Hunters

SOMERSET DEVELOPMENT

Platinum Home Mortgage’s 12-year workspace deal at Bell Works Chicagoland is a key step for a developer looking to create an office destination at the Hoffman Estates site

Inside Bell Works Chicagoland, the renovated former AT&T campus in Hoffman Estates. and equity crowdfunding firm the Next Unicorn. Fairgrounds Craft Coffee & Tea also signed a deal to open a small shop in the building. Bell Works Chicagoland is modeled after Bell Works New Jersey, a former Bell Labs research campus in Holmdel that Somerset bought in 2013 and leased up with more than 1 million square feet of tenants. While it generates some office leasing momentum, Somerset is also trying to jump-start residential plans for the campus amid a frenzy of suburban home-buying

during the COVID-19 pandemic. Zucker confirmed in May that his firm is under contract to sell 15 acres in the northeast corner of the campus to an undisclosed townhouse developer that aims to develop 189 units. Somerset is also soliciting buyers to acquire other parts of the land where they could develop a total of 361 apartments. Brokers from Colliers International and the Garibaldi Group oversee leasing at Bell Works Chicagoland. Colliers Principal Jason Simon represented PHMC in its lease negotiation.

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CRAIN’S CHICAGO BUSINESS • July 5, 2021 9

Crain’s Chicago Business takes top honors in national journalism contest Crain’s Chicago Business garnered a number of honors in the Alliance of Area Business Publishers’ 2021 Editorial Excellence Awards, an annual competition that spotlights the best local business journalism nationwide. Crain’s website was judged the best in the competition. “This website is robust and offers a fullon digital experience,” the judges wrote while giving ChicagoBusiness.com top honors. “The multimedia work is top notch and the reporting is excellent.” John Pletz, a senior reporter covering technology, aviation and the cannabis industry, won the gold medal in the Best Body of Work by a Single Writer category. Also receiving golds were Crain’s Digital Design Editor Jason McGregor along with contributing photographers Steve Serio, John Boehm and Alex Garcia in the Best Use of Multimedia category for their work on Crain’s Forum, the publication’s monthly public policy series. Crain’s Associate Creative Director Karen Freese Zane’s design of the Best New Restaurants feature won gold in the Best Feature Layout category. Crain’s design and photography team also won silver medal honors in the categories of Best

Front Page Newspaper Design, Best Overall Design and Best Use of Photography and Illustrations. Crain’s contributing writer Steven R. Strahler won silver in the Best Feature category for his work on the October 2020 Forum on regional planning. Reporter A.D. Quig won silver in the Best Coverage of Local Breaking News category for her “Landmark Deal for Catholic Schools’’ coverage, while reporter Ally Marotti won silver in the Best Local Coverage of a National Business Story category for her coverage of COVID-19’s impact on local restaurants. Crain’s columnist Joe Cahill won silver for Best Bylined Commentary. Meanwhile, the entire Crain’s staff received silver honors in the Best Newspaper category. “The AABP awards are a truly national competition, and so it’s gratifying to be recognized at that level,” says Crain’s Editor Ann Dwyer. “What’s even more exciting is seeing our work honored across disciplines—from reporting to photography to design—and in print as well as online. These honors underscore our mission: to serve our audience wherever they may choose to read, consume and utilize our work.”

Fast-growing logistics startup ShipBob raises $200 million BY JOHN PLETZ ShipBob investors are doubling down on the logistics-services company, betting $200 million that the e-commerce growth turbocharged by the coronavirus pandemic isn’t going to slow down anytime soon. The deal makes ShipBob the latest in a growing herd of ‘unicorns,” or venture-backed companies worth $1 billion or more. Its revenue more than doubled last year to $124 million, making it the fifth-fastest growing company on Crain’s Fast 50 list. “Since everything has opened up again, we’re still growing, mostly because the overall e-commerce market keeps growing,” says Divey Gulati, ShipBob’s president and co-founder. Since it was founded in 2014, the company has raised slightly more than $330 million, including $68 million last fall. The latest round was led by Bain Capital Ventures, which also led an investment in the company four years ago. Other backers include SoftBank, Menlo Ventures and Chicago-based investors Hyde Park Venture Partners and Hyde Park Angels. “The business has had a torrid growth rate the last 18 months with

an acceleration that began preCOVID,” says Ajay Agarwal, a partner at Bain Capital. Gulati declines to disclose ShipBob’s specific valuation, other than to say it’s “well north of $1 billion.” Small and midsize businesses use ShipBob to provide shipping of their merchandise, including warehousing. ShipBob has integrated with online-shopping platforms such as Walmart.com and enabled small companies to meet requirements such as two-day shipping. ShipBob’s funding is the latest in a record string of deals over $100 mil-

lion among Chicago tech companies, coming amid a surge of capital flooding late-stage venture rounds in a frothy market for mergers and acquisitions and public offerings. Three of the eight “mega-rounds” have gone to companies in logistics, which has emerged as one of Chicago’s hottest startup sectors. ShipBob has about 800 employees, more than half of them in Chicago. It plans to hire an additional 200 workers. It also will continue its expansion overseas, Gulati says, roughly doubling its international footprint.

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7/2/21 2:08 PM

10 July 5, 2021 • CRAIN’S CHICAGO BUSINESS

EDITORIAL

The Cook County treasurer did the math. It’s not pretty.

WWW.COOKCOUNTYTREASURER.COM/

n that opaque black box called your property tax bill, it’s virtually impossible to get the full picture of how much of the reckless borrowing and pension obligation locally costs you. That’s why a recent report by Cook County Treasurer Maria Pappas is illuminating, giving us a more comprehensive snapshot of how heavy that burden really is. We’ll warn you early—avert your eyes if you don’t like watching slow-motion car crashes—the result of the number crunching is enough to horrify most taxpayers. Pappas’ analysis shows for the first time the breakdown of municipal debt in Cook County by individual property. In essence, as Crain’s reporter A.D. Quig explains, it’s a look at what debt weighs on individual buildings compared with the overall value of the property. The takeaways are eye-popping. Take Willis Tower. The city’s tallest and perhaps most famous building carries an “attributed’’ share of debt at around $289 million, or roughly 41.5 percent of the building’s market value of $697 million, Quig reports. Think that’s scary? If your house is worth $66,970 in south suburban Riverdale, you’re technically on the hook for $31,800 in local government debt, Quig points out. That’s roughly equal to 48 percent of the home’s value. River Oaks Shopping Center in Calumet City? Its $10 million share of the burden is equal to 38 percent of its $26 million valuation. Of course, property owners aren’t actually on the hook to pay for this debt. In-

deed, local governments have several levers to pull to bring in more revenue. But Pappas’ report puts the state’s spending issues in clearer perspective, considering that property taxes are local governments’ primary source to pay off debt. Pappas’ calculations came from combining the borrowing on everything from unfunded pensions and other post-employment obligations to infrastructure projects and other ongoing expenses.

Years of the kick-the-can-down-theroad borrowing policies by politicians who bank on voters looking the other way are costing taxpayers in ways that future generations won’t be able to comprehend. Pappas put the results of her office’s report in succinct terms. “The idea behind this is for people to begin to understand that when they purchase a piece of real estate in Cook County, they are also purchasing a long-term credit card,’’ Pappas

told Crain’s. She also argues, rightly so, that as local municipalities turn more toward property taxes to solve debt issues, the more incentive people have to move away from the region. More worrisome is the increasingly higher burden in areas where traditional tax bases have eroded to the point that raising property taxes is necessary to keep the municipality afloat. In Cook County, that often means that areas with majority-minority populations are getting soaked with debt the most. Pappas points to suburbs like Park Forest, where taxes are $6,558 per $100,000 in home value. The report states that buyers of homes there “would pay twice as much taxes over 30 years than they paid for their home in the first place.’’ Of the 15 cities or villages where total debt comes to more than 25 percent of the value of the home, eight have populations that are at least 50 percent Black or Latino. And the news in those areas is worse for commercial property owners, whose tax burdens are 2.5 times higher than they are for homeowners, according to our story. Try selling that to a company considering relocating here. After a spin through the treasurer’s report, you start to see how the inaction on spending feeds on itself over time. We applaud this type of analysis and hope it serves as yet another wake-up call to voters. And for those leaders focused on attracting more business and growth in their regions, this report should be required reading.

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YOUR VIEW

We have a rare chance to address violence

paramount and daunting. tragic irony that haunts The Chicago Police Departmany of us is that evment needs better-trained cops ery step forward to and detectives—many more of improve race relations them Black and Latino—to esand the plight of too many Afritablish crime-fighting and suscan Americans in Chicago—the pect-identifying relationships in Black Lives Matter movement, minority neighborhoods. affirmative hiring and investThe disconnect between cops ment decisions, conversations and residents—distrust is a about reparations and the new better word—has to eventually Juneteenth holiday, to name evolve into a partnership that a few—is accompanied by the Andy Shaw is a veterseemingly endless cycle of an Chicago journal- facilitates the apprehension of senseless Black-on-Black vio- ist and good-govern- suspects and a concomitant reduction in violence. lence in many of our South and ment advocate. CPD also needs new and betWest Side neighborhoods. So I also wonder incessantly about how ter policies on foot and vehicle chases, and we climb out of this abyss, and it always more reliance on the use of nonlethal weapcomes down to necessary and long-overdue ons in subduing suspects. Criminal justice reform is already a mareforms in three areas: policing, criminal jor work in progress that needs additional justice and community services. On the cop side, one answer is a major at- refinements in determining who should be titude adjustment in dealing with residents incarnated while awaiting trial; who should be released on bail, along with the proper of the neighborhoods they patrol. After paying out almost a billion of our amount; and how electronic monitoring tax dollars to litigate and settle excessive can be utilized more effectively. As for the festering and incendiary conforce cases over the past 15 years—Black suspects were the victims of most of the ditions in so many of our mostly minority brutality—it’s obvious the attitude issue is high-crime neighborhoods? That’s much

more complicated, but I think we have, at this moment, a once-in-a-lifetime opportunity to walk the walk and not just talk the talk. The Biden administration’s plan to confront many of our health, education, welfare, environmental and infrastructure concerns is also an opportunity to actually implement some of the expensive and generally cost-prohibitive programs that change agents have been suggesting for years. That includes: Expanded community counseling, mental health and gang intervention specialists. Additional counselors and special-ed teachers in public schools, along with expanded enrichment programs and extracurricular activities. Full-day and evening school and park district programs that give young people and their families additional educational, social and recreational opportunities in safe havens. Updated job training, including paid internships, to give young people alternatives to gangs and train adults for jobs in a variety of professions. More public transportation options be-

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Chicago Business, 150 N. Michigan Ave., Chicago, IL 60601, or email us at letters@chicagobusiness.com. Please include your full name, the city from which you’re writing and a phone number for fact-checking purposes.

P010-P011_CCB_20210705.indd 10

tween city neighborhoods and suburban job and education sites. Entertainment venues for fun—movies, plays, musicals and dance—and classes for would-be entertainers. I could probably add a few more things to each bucket: More police department transparency and accountability; smarter prosecutorial and judicial dispositions; more faith- and-civic-based neighborhood interventions before, rather than after, tragedies; and beefed-up efforts to interrupt the endless pipeline of illegal weapons from outside the city to violence-prone neighborhoods. And finally, the most important missing piece: enlightened and committed leadership from our elected and appointed officials to turn the best ideas into on-theground reality. The biggest crime of all—beyond the missteps of thugs, cops, prosecutors, judges and public officials—would be inaction by those with the power to implement change. Think about my suggestions, offer your own and listen to others’ ideas. Please. As many have said before, in a variety of ways, we cannot and should not let this crisis go to waste. That would be the ultimate tragedy.

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

7/2/21 3:21 PM

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CRAIN’S CHICAGO BUSINESS • July 5, 2021 11

LETTER TO THE EDITOR

ComEd: ICC is doing its job, as are we In a recent article, Crain’s implies the Illinois Commerce Commission has not been up to the task of providing adequate regulatory oversight, failing to recognize the ICC’s oversight of an industry that has delivered increasingly reliable and affordable energy (“Is the ICC ready for its close-up?” June 28). Over the past decade, the ICC has overseen a transformation of the electric grid. In fact, due to smart-grid investments that started in 2012, ComEd is delivering top decile reliability that, coupled with affordable rates, arguably make it the top-performing utility in America. These investments continue to deliver fewer and shorter power outages for northern Illinois families and businesses, with overall reliability improving more than 80 percent

since 2012, outside of the historically destructive August derecho storm. As a result of these investments, customers also saved $2.7 billion in avoided outages, as well as many millions more through efficiencies. Every dollar of these investments was reviewed by the ICC as part of its annual eightmonth process. Every year, ComEd answers hundreds of questions about its investment plans. And every year, dozens of consumer, public interest and other groups—such as the International Institute for Energy Conservation, AARP and the Citizens Utility Board— participate in that process to review and at times challenge our investments for the power grid and our customers. Beyond the transparency into every dollar

of investment, the 2012 smart-grid law improved utility accountability by requiring annual reporting on results and holding utilities responsible for their performance against key operational and customer service metrics. Besides ignoring ComEd’s record performance and the lengthy and transparent process overseen by the ICC to set customer rates, the article does not report on the outstanding affordability ComEd customers enjoy. The ICC has approved ComEd’s requests for five rate decreases over the past 10 years, and, in fact, ComEd’s average residential rates are 17 percent lower than the rates in the 10 largest U.S. metropolitan areas. The average monthly bill for residential customers who get their energy supply from ComEd was about $6 less in

2020 than it was in 2011, when the smart-grid law was enacted. Recent catastrophic grid failures in Texas and California have shown that reliable power is not a given and requires continued investment. As evidenced by the tornado that hit the southwest Chicago suburbs in June, a resilient grid is needed to withstand more frequent severe weather due to climate change. The ICC has already overseen necessary grid investment while keeping customer bills affordable. It would be a mistake to overlook the enormous value that families and businesses across the state have enjoyed as a result of this investment. MICHELLE BLAISE Senior vice president, technical services, ComEd

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RECEPTOR BRANDS / BRIAN COOPER PHOTOGRAPHY

12 July 5, 2021 • CRAIN’S CHICAGO BUSINESS

How one advertising agency is seizing on Chicago’s status as the ‘Silicon Valley of pot’ Receptor Brands wants a piece of the cannabis marketing pie, but making money in the pot biz is no easy task

hicago ad agencies for decades have fed off the heavy concentration of food and beverage clients based in the town, from Molson Coors to Kraft Heinz. Now a startup shop is trying to capitalize on what could be the Windy City’s next big industry cluster—cannabis. The agency, called Receptor Brands, is offering end-to-end services for cannabis brands— including strategy, branding, design, digital and content creation—as it tries to win business at a time when big holding company-owned shops are still cautious about doing work for a category that remains federally illegal. Single-product-focused shops are a rare breed in the agency industry because of long-standing practices that tend to preclude agencies from working for two brands that compete. But conflict rules seem to be easing as clients move more to short-term, project-focused work. This is especially true in the cannabis industry, where brands are operating in a fast-paced environment as they constantly adapt to new regulations as more states legalize pot. Receptor has been quietly operating for months and has lured project work from two Midwestern-based cannabis marketers: Cresco Labs, a large vertically integrated, publicly-traded company that is headquartered in Chicago and operates in multiple states, and Red Arrow Farm, a Michigan-based cannabis grower. Also on its client list is Chicago-based Spence Labs, which works with dispensaries to make cashless payment systems. Receptor has connections

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to Chicago-based sports marketing agency Revolution. Kent Thomas, Revolution’s former senior VP for business intelligence, is now running Receptor as its managing partner. Revolution was one of the first agencies to start a specialized unit for e-sports, a trend that other shops are now following.

CHALLENGING FIELD

While e-sports and cannabis share similar traits—both are new and fast-rising industries in which digital marketing is critical—the pot market offers unique challenges, including the fact that it operates in a so-called gray market, meaning it is only legal in some states, and the playing field varies widely from state-to-state. But Chicago has emerged as fertile ground for pot marketers, which have grown up in the city in the wake of Illinois legalizing recreational marijuana effective Jan. 1, 2020. A rising crop of national and regional cannabis players now call the city home, including three of the five largest publicly traded marijuana companies in the U.S.: Cresco, Green Thumb Industries and Verano Holdings. The rise has led some experts to dub Chicago as “the Silicon Valley of pot,” as reported recently by Crain’s Chicago Business. “Chicago has been at the center of the cannabis industry,” Alan Brochstein, founder of Houston-based 420 Investor, which covers cannabis companies, tells Crain’s. “It’s figuratively a bridge between all the capital on the East Coast and the legacy (cannabis industry) on the West Coast.” Many of the Midwest firms have poached marketing talent from Chicago-based consumer

packaged goods firms as the industry attempts to professionalize its practices and move beyond its stoner culture past. Cresco’s chief commercial officer is Greg Butler, who previously ran Miller Lite marketing for Molson Coors; the company’s senior brand marketing VP is Cory Rothschild, who joined Cresco from PepsiCo-owned Gatorade, which is run from Chicago. Receptor is duplicating that talent acquisition strategy from the agency side. Running the agency along with Thomas is Allison Disney, an alum of Chicago-based Energy BBDO, whose Omnicom agency career included stints working for CPG giants including SC Johnson, Mars and Johnson & Johnson. Another Energy BBDO vet, Jake Setlak, oversees creative strategy and brand experience for Receptor. “The marketing talent in Chicago from the brand side and agency side is second to none,” Disney says. And “more and more folks are crossing over to the cannabis space.” Disney first got interested in the pot business during dinnertime conversations with her husband, Ryan Disney, who is a plant biologist and now works for Red Arrow Farm. Cannabis “certainly got normalized in our household as a conversation topic after he got involved. Slowly but surely I started to see the opportunity,” Disney says. When it comes to marketing weed, Disney draws parallels with her previous work on behalf of big global clients, such as Mars, which had to navigate the different states of play in each country they operate, whether it be regulations or consumer

tastes. With pot, those differences exist in each state. “Those brands that started in California but are moving East with legalization— they have very mature brands out West, and they are launching as entirely new entities in the states where folks haven’t visited California,” she says. Receptor is attempting to get a running start in cannabis while most big holding company-owned shops remain at a standstill, awaiting federal legalization before diving in head-first. Among the hurdles faced by these shops is that some don’t want to get into hot water with big federal government clients. There are potential complications with moving money between state lines for revenue derived from a product that is illegal federally. Big publicly traded media companies like Facebook and Twitter have also remained on the sidelines when it comes to accepting marijuana ads, complicating media buys. “Every platform has its own policy around cannabis advertising and communications,” Disney says. “It’s forced us to be more innovative.” One of the agency’s projects for Cresco involves hiring local artists to paint murals inside the company’s Sunnyside brand of dispensaries, including in Rockford and Philadelphia.

MAKING POT PROJECT WORK PROFITABLE

The biggest challenge for Receptor and other agencies trying to make money from cannabis clients is winning a consistent flow of work. “What most big accounts are doing at a big agency is campaign work, and fundamentally that is not what we need

BY E.J. SCHULTZ

right now,” says Cresco’s Rothschild. “I haven’t found a full-service agency that meets our needs and at a cost that makes sense.” In older categories, like soda, brands must run new campaigns every season to put a new spin on their long-held brand identities. It’s why Coke for years came up with a new summer twist for its “Share a Coke” platform, for instance. But cannabis brands are still trying to build their core identities. So “I think it’s a disservice to change our work on a really frequent basis because people don’t even know our brand and product yet,” Rothschild says. That leaves agencies with two ways to build their cannabis revenue—strategic consulting or trying to win bits and pieces of productions, like making a new video. Both are more suitable for project work. “It’s a dangerous industry to staff a big team and staff a big thing and hope for the revenue to come in the future,” Rothschild says. Receptor’s business model seems to concede this reality. The 10-person agency relies on freelancers, for instance, to keep overhead costs down. “With some of our bigger clients we’ll move into a retainer model if it’s efficient for them and makes sense for us,” says Disney. “But we are happy to be project-based because so many of our clients, given the life-stage of their business, are so different (and) not everyone is going to be ready or able or even interested in a retainer partnership at the moment.” E.J. Schultz is the news editor for Crain’s sister publication Ad Age.

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Nicor’s ‘trash gas’ project gets OK despite opposition The Illinois Commerce Commission’s decision went against the advice of its own staff and even the administrative law judge who handled the matter The Illinois Commerce Commission last month approved Nicor Gas’ controversial proposal to link its pipe network with landfills and other sources of “renewable” gas, over the objections of consumer advocates, environmental groups and even its own staff and the administrative law judge who handled the proceeding. The regulators trimmed Nicor’s request to invest $20 million, paid for by ratepayers, and allowed $16 million. But they ignored the arguments of environmental groups like the Natural Resources Defense Council that, even though natural gas utilities are advocating for investment in developing “trash gas” resources on environmental grounds, it’s too costly as a replacement for natural gas as a heating source. In addition, environmentalists want to phase out gas for heating purposes within several decades,

appeared to be concerned that Illinois would be left behind in developing a promising new path to addressing climate change. The project is a pilot that will enable the state to learn whether the resource is cost-effective to develop, commissioners said. Commissioner Ethan Kimbrel called the project an “enormous opportunity.”

OBJECTION

The vote was 3-1, but the dissenting commissioner, Maria Bocanegra, still supported the project and objected, among other things, to not allowing Nicor to spend all of the $20 million it requested. The decision has implications beyond the confines of the “trash gas” debate, which is taking place all over the country as gas utilities perceive a potential capital-investment opportunity that would mean higher rates and increased profits. Gas utilities increasingly are the target of enviro campaigns to sharply reuse of the THE JUDGE AND ICC STAFF ARGUED, AMONG duce carbon-emitting fuel. ConOTHER THINGS, THAT NICOR HADN’T verting waste OFFERED ANY METRICS BY WHICH TO JUDGE gas to pipeline-quality WHETHER THE PILOT IS A SUCCESS. fuel is a way for those utiliarguing that development of the ties to get on the green train. Perhaps more importantly, resource just gives utilities another argument for preserving and though, the commission’s ruling, continuing to invest in their pipe which surprised consumer advocates and environmentalists who networks. In remarks during the June 24 thought they’d likely killed Nicor’s meeting, though, ICC Chair Car- plan, raises questions about the rie Zalewski pointed to more than wisdom of the critical role the ICC 20 other states that already are is being asked to play in Gov. J.B. pursuing some form of renewable Pritzker’s wide-ranging energy bill gas development. Commissioners still being debated in Springfield.

BLOOMBERG

BY STEVE DANIELS

Nicor Gas’ proposal would link its pipe network with landfills and other sources of “renewable” gas. To promote more green power sources, the measure would raise electricity rates by 10 percent or more on households and businesses, with the ICC asked to heavily scrutinize and potentially reduce planned capital investment by Commonwealth Edison. If the decision on Nicor is any indication, this commission may struggle to say no to investments marketed as crucial to addressing climate change and making more renewable energy possible. There was no obligation for the commission to approve a pilot program—or legal risk if it chose to say no. ICC staff and Administrative Law Judge Leslie Haynes pushed regulators to reject Nicor’s petition, arguing, among other things, that Nicor hadn’t offered

any quantifiable metrics by which to judge whether the pilot is a success. ICC staff said Nicor didn’t provide a cost-benefit analysis, which is common in this kind of proceeding. And it’s not as if waste gas from Illinois landfills, farms and other facilities hasn’t been captured for industrial or other uses before.

cost-benefit analysis wasn’t feasible and “would impose an impossible-to-meet standard,” according to the summary. In a statement, Zalewski didn’t address why the commission gave the green light despite opposition from every involved interest other than Nicor, including impartial ones like the staff and the judge. She also didn’t respond to concerns about the ICC’s willingness to reject utility spending proposals in the future. “This pilot will allow Illinois to explore innovative approaches to addressing climate change in the gas industry and examine environmental and economic benefits that RNG can bring,” she wrote. She said the impact of the project on ratepayers would be “minimal.”

PRESUMPTION

“In the absence of either a cost-benefit analysis or concrete, detailed information regarding existing (renewable natural gas) facilities in the state, staff asserts that the commission may presume that such studies, were they to exist, would not support Nicor Gas’ petition,” according to the judge’s summary of staff’s position Nicor’s position was that a

Ventas reaches $2.3 billion deal for more senior housing

The REIT continues to wager on future demand from aging baby boomers despite the brutal pandemic Chicago-based real estate investment trust Ventas is raising its bet on a strong post-COVID-19 comeback for the pandemic-stung senior housing sector. Ventas said June 28 that it has reached a deal to acquire New York-based REIT New Senior Investment Group in a $2.3 billion all-stock deal that includes $1.5 billion of debt and will add 103 private senior living communities to Ventas’ portfolio. The 103 New Senior properties are in 36 states and total 12,404 units; all but one are independent-living communities. The deal, expected to close during the second half of this year, illustrates Ventas’ conviction that independent- and assisted-living facilities are poised for a lucrative next decade with demand expect-

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ed to swell from aging baby boomers. The company has reinforced its position as one of the largest owners of senior housing in the country based on that thesis, and a public health crisis that caused major financial and reputational harm to the sector appears to have done little to shake Ventas’ confidence.

‘ATTRACTIVE VALUATION’

“We are delighted to announce this strategic and accretive acquisition with New Senior that expands Ventas’s position in senior housing at an important inflection point in the cycle as the senior housing industry rebounds,” Ventas Chairman and CEO Debra Cafaro said in a statement. “The transaction provides Ventas shareholders with an attractive valuation and accre-

BLOOMBERG

BY DANNY ECKER

Ventas Chairman and CEO Debra Cafaro tion and further positions us to win the recovery.” Ventas was among the many senior housing facility owners scrambling early in the pandemic

to fight off COVID-19 outbreaks, and the company cut a quarter of its corporate staff to brace for financial headaches as demand for its properties virtually froze

and vacancy steadily rose. Net operating income in its portfolio of owned and operated facilities— known as its “Shop” assets—was $97 million during the first quarter, down 42.5 percent year over year. On top of all of that: The pandemic has cast congregate living in a harsh light that might diminish some of the future demand Ventas is counting on. But Ventas said in May that it had reason for optimism, reporting its first back-to-back months of occupancy upticks in its senior housing portfolio since the onset of the pandemic. With New Senior’s properties in its portfolio, 48 percent of Ventas’ net operating income would come from senior housing based on its first quarter performance, up from 44 percent without the new properties, according to Ventas. As of the end of March, Ventas had 439 properties in its Shop portfolio, the majority of its senior housing assets.

7/2/21 2:06 PM

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Housing leaders want banks’ data on equity in lending A proposed ordinance would require banks to report their record of lending in majority Black or Latino neighborhoods compared to majority white communities borhoods that need it if we’re going to partner with” these banks, says Banks doing business with the Ald. Harry Osterman, 48th, chaircity of Chicago would be required man of the City Council’s housing to release detailed data showing and real estate committee. He is who gets mortgages from them one of nine aldermen sponsoring and who doesn’t, if a newly in- the proposal, which was sent to the troduced ordinance introduced finance committee. Because banks are federally goes through. The goal is to find discrepan- regulated, changes in their lendcies between a bank’s record of ing policies cannot be legislated mortgage lending in majority at the city level, but Osterman Black or Latino neighborhoods says he believes “transparency and majority white neighbor- works.” If city officials and housing groups have access to data on hoods. Banks that are or want to be where banks are lending, “that city depositories, managing tells us a lot,” he says. A banking professionals group count“IT’S IMPORTANT TO KNOW IF THE ers that the ordinance, if adopted, could disDOLLARS ARE GOING INTO THE courage some banks from working with NEIGHBORHOODS THAT NEED IT.” the city because of the Ald. Harry Osterman, 48th added reporting requirement. “The process for becoming an some of Chicago’s funds, would be required to publish extensive approved depository with the data on their patterns of lending city is already a burdensome for both purchase and home eq- process, with banks submitting uity loans within the city, includ- extensive information on their ing financing terms and down lending activity and communipayment sizes as they vary in dif- ty activity in the Chicago area,” ferent census tracts, and tallies of Randy Hultgren, president and mortgage refusals broken down CEO of the Illinois Bankers Association, says. “This ordinance by race and gender. “It’s important to know if the would pile on even more requiredollars are going into the neigh- ments, discouraging local banks

BY DENNIS RODKIN

from applying to become depositories, particularly at smaller institutions with limited resources. Ultimately, this will result in fewer choices for taxpayers to invest city dollars.” Hultgren says the banking industry is working to address racial lending disparities that have been spotlighted in recent years. Among other initiatives is JPMorgan Chase’s recent announcement that it will invest $150 million on Chicago’s South and West sides.

SUPPORT

The lending equity ordinance is supported by The Metropolitan Planning Council, the Woodstock Institute, Neighborhood Housing Services of Chicago and others among the 20 member groups in the Housing Policy Task Force. Osterman says the ordinance grew out of a June 2020 report by radio station WBEZ and the nonprofit newsroom City Bureau. It found that for every dollar banks lend in the city’s white neighborhoods, they lend 13 cents in Latino neighborhoods and 12 in Black neighborhoods. The news agencies reported that they found “gaping disparities in the amount of money lent in Chicago’s white neigh-

The proposal would require extensive data on patterns of lending within the city. borhoods compared to Black and Latino areas, a pattern that locks residents out of home ownership, deprives communities of desperately needed capital investment and threatens to exacerbate racial inequities between neighborhoods.” In January, the housing and real estate committee invited 10 big banks to a hearing on lending disparities in Chicago neighborhoods, but only one, Guaranteed Rate, agreed to come. The no-shows “inspired this effort at transparency,” the new lending equity ordinance, Osterman says. Both Osterman and Sarah Brune, director of public policy at Neighborhood Housing Services of Chicago, say the ordinance

would not impose new standards on banks. It would require only publication of the data and at least one joint public meeting each year of the council’s finance committee and its housing and real estate committee to discuss findings in the data. Osterman says he does not envision the data resulting in any sort of scorecard or ranking of banks according to their lending records in Black and Latino neighborhoods. Publication of banks’ lending data, Brune says, “is critical to help us understand where they stand as far as racial equity in their lending.” Osterman says a timeline for adoption of the ordinance is yet set.

Ferrara debuts massive DeKalb packaging facility The maker of Nerds, Laffy Taffy and other treats aims to employ 500 workers in a $100 million complex that dwarfs Facebook’s neighboring data center Abbye Lakin says. The positions are filled on a rolling basis, and Candy-maker Ferrara is open- the roles are largely hourly maning a facility in DeKalb where ufacturing positions. Economic development is its Nerds, Laffy Taffy and other products will be packed up and picking up in Illinois as the state emerges from the pandemic and shipped to consumers. At 1.6 million square feet, the sorts out the role its companies facility is one of the largest in the play in a post-COVID economy, state, says Sylvia Garcia, acting Garcia says. “We’re coming out of COVID director of the Illinois Department of Commerce & Economic stronger in a lot of these areas, Opportunity. It joins a growing and I think particularly in the number of companies setting up transportation, distribution and shop in DeKalb, such as Facebook logistics side,” she says. Construction of Ferrara’s facility and Nestle. But Ferrara’s facility was underway pre-pandemic, but the growth of “WE SET OUT TO FIND A SITE AND the business over the last year “reinforced the need TO BUILD A SPACE THAT WOULD for an expanded footprint,” Lakin says. FURTHER OUR LEADERSHIP Indeed, many conPOSITION IN THE INDUSTRY.” sumer packaged-goods companies saw revenues Todd Siwak, CEO, Ferrara increase during the pandemic, as people stayed dwarfs Facebook’s neighboring 1 home and turned to comforting and indulgent foods. Ferrara’s million-square-foot data center. The new complex marks a $100 revenue was $2.5 billion in 2020, million investment for Ferrara. It up 4.2 percent over the year prior, will eventually employ about 500 according to Crain’s list of Chicapeople, and the company has go’s largest privately held comalready filled about half of those panies. At the same time, a shift jobs, Ferrara spokeswoman toward online shopping and di-

BY ALLY MAROTTI

P015_CCB_20210705.indd 15

rect-to-consumer sales sparked a greater reliance on distribution centers.

LOCATION

Ferrara chose DeKalb because of its proximity to Interstate 88, advanced utility infrastructure and access to talent coming from nearby Northern Illinois University and Kishwaukee College. “We set out to find a site and to build a space that would further our leadership position in the industry,” says Ferrara CEO Todd Siwak in a statement. “DeKalb provided us that and more. The utility infrastructure, trained workforce and central location will allow us to drive scale and realize our ambitious growth agenda.” Ferrara also received a $2 million grant from the Illinois Department of Transportation, which went to infrastructure improvements, Garcia says. Gov. J.B. Pritzker lauded Ferrara’s decision, saying in a statement that the facility’s job creation will boost the local economy. “Companies like Ferrara are making these decisions in no small part because of our highly

The 1.6 million-square-foot facility is one of the largest in Illinois, a state official says. skilled talent, access to modern infrastructure and strong supply chain that makes Illinois the right choice to remain competitive in today’s global economy,” he says. The candy industry is big business in this country, with national retail sales amounting to $36 billion a year, according to the National Confectioners Association. The confectionary industry directly employs more than 14,000 people in Illinois and indirectly employs almost 38,000 through supplier and other roles, according to the trade group. Economic output in the state is $5.5 billion. Ferrara’s new complex includes two facilities: a 400,000-square-

foot packing center where product is put into its final packaging and a 1.2 million-square-foot distribution center, which serves more than half of the U.S. Ferrara started more than 100 years ago when founder Salvatore Ferrara began selling candy-coated almonds from his bakery in Chicago’s Little Village neighborhood. It produces classics like Atomic Fireball, Sweetarts, Jujyfruits and Now & Later. It is still based in Chicago, moving its headquarters from Oakbrook Terrace to the Old Post Office in 2019. The company employs about 6,000 people, roughly half of whom are located in Illinois.

7/2/21 2:04 PM

16 July 5, 2021 • CRAIN’S CHICAGO BUSINESS

Chicago home prices are rising at 5 times pre-pandemic rate BY DENNIS RODKIN Home prices are rising at five times the rate they were moving before the pandemic, according to new data from a national home price index. Single-family home values rose 9.9 percent in the Chicago area in April compared to the same month a year ago, according to the S&P CoreLogic Case-Shiller Indices released last week. That’s 5.2 times the growth rate the index reported for Chicago at the same time in 2019. It’s seven times the figure for this time in 2020, but that was in the early days of the pandemic. April was the second straight month when Chicago home prices grew at quintuple the pace of 2019. The figure for March, reported a month ago, was 9 percent, or five times the March 2019 figure, 1.8 percent. The gap between the old, slow pace of the market and the current

accelerated market is growing. In the two months prior to these two, the multiplier for 2021 was 4.5 for February and 3.7 for January. Nationwide, home prices are rising at about four times the 2019 pace. Today’s report shows the nation’s home prices rising by 14.6 percent in April, compared to 3.5 percent in April 2015. The multiplier is just under 4.2 percent. In last month’s report the multiplier was about 3.8 percent. While the rapid rise in home prices “may be met with concerns,” Selma Hepp, CoreLogic deputy chief economist says in prepared comments about the index data, “mortgage interest rates remain 50 percent lower than they were in 2005, when home price growth last peaked, keeping the ratio of mortgage payments to monthly households income lower today. It’s probable that continued massive demand will keep pressure on prices, which are likely to remain at double-dig-

it growth rate throughout the remainder of 2021.” Even with the big run-up, Chicago lags behind the rest of the nation’s major cities. Of 20 major cities tracked by the S&P CoreLogic Case-Shiller Indices, Chicago is the only one in the newest report where April home prices weren’t up by double digits from the same time a year ago. Closest to Chicago was Minneapolis, where home prices were up 11.3 percent in April compared to a year earlier. In three of the 20 cities prices were up more than 20 percent from a year ago: Phoenix at 22.3 percent; San Diego, 21.6 percent; and Seattle, 20.2 percent. Chicago’s 9.9 percent increase is the highest monthly figure since April 2014, when prices were up almost 10.1 percent. The difference in price growth rates between Chicago and cities like Seattle is another indication that the market here is farther from crossing the line into bubble territory.

CENTURY 21 ASSOCIATES PHOTOS

The year-over-year increase in April was the highest jump in seven years

This newly built house on Hillock Avenue in Bridgeport sold for $650,000 in April.

Legal tech company inks Loop office expansion deal BY DANNY ECKER A fast-growing legal software company is nearly quadrupling its Loop office space as it goes on a hiring spree, notching a much-needed leasing victory for a Chicago developer that finished a new office building just before the COVID-19 pandemic began. Reveal, which offers artificial intelligence-powered software that law firms and corporate legal departments use to sift through emails, text messages and other electronic data, signed a five-year lease for nearly 25,000 square feet at 145 S. Wells St., the company says. It has already begun moving employees into one of its two floors in the building, where it is moving from a roughly 6,500-square-foot office at 330 S. Wells. The deal is a promising data point for downtown office landlords as they cope with record-high vacancy and many companies trying to cut back their downtown office footprints after adjusting to life with remote workers over the past 15 months. Reveal is doing the opposite after it merged earlier this year with Dallas-based rival Brainspace, bringing the combined company’s headcount to around 150. The company has added more than 30 jobs since then and plans to have at least 250 employees— mostly based in Chicago—over the next two years, says Reveal Founder and CEO Wendell Jisa. While some companies are embracing the idea of employ-

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ees working from home for good or more frequently, Jisa says his workers—which range in age from their 20s to 50s—have sent a clear message that they prefer to be working in-person and clearly separate home and work life. “Our employees want to come to the office, they want to have that interpersonal relationship with folks,” says Jisa, whose company acquired AI software startup NexLP last summer before Reveal itself was acquired by Los Angeles-based private-equity firm K1 Investment Management and combined with Brainspace. “I believe that folks who move to Chicago want to experience Chicago, and putting them in a worldclass building downtown and in a world-class city—I feel it will allow us to grow the organization,” Jisa says. Jisa says he toured about 20 office buildings downtown over several months before landing at 145 S. Wells, a 20-story property built by Chicago developers Thomas Roszak and Dan Moceri. Pushing it over the top was that the building, where Jisa is the third tenant to sign thus far, gives Reveal room to grow as it gets a feel for how much space it needs as the pandemic wanes, Jisa says. The deal comes with a right of first refusal to add two more floors beyond those it has leased, and Jisa says he intends to build out space on one of those floors as a training facility for clients learning to use Reveal’s e-discovery products.

DANNY ECKER

A.I. software group Reveal is nearly quadrupling its space in a positive sign for downtown office landlords

Reveal, a tech company that offers artificial intelligence-powered software, signed a five-year lease for nearly 25,000 square feet at 145 S. Wells St. The building “gave me the opportunity not to grow out of something and move like we’ve done for the past (few) years over and over,” says Jisa, who launched the company from his living room in 2011.

TENANT SCRAMBLE

Reveal’s lease is especially important for Moceri & Roszak, which began building the 210,000-square-foot office building in 2018 on speculation, or without any tenants lined up in advance. Downtown enjoyed record-high demand for office space at the time, but COVID

thwarted that momentum just after the building opened early last year with a single tenant in legal co-working provider Firmspace. Alcoholic beverage company Mark Anthony Brewing signed on for a full floor in the building last spring, bringing the property to nearly 25 percent leased, according to real estate information company CoStar Group. Now the developers have added Reveal as they compete with landlords scrambling to lock up tenants and a flood of available sublease space in the central business district that could drive up the financial incentives landlords need

to offer, or potentially push down rents. Reveal’s lease also stands out as a commitment to a building in the Central Loop, a part of downtown that is losing major corporate tenants to other more trendy parts of the city like the West Loop and Fulton Market District. Jisa says he doesn’t see the advantage of being located in those more popular corporate destinations and prioritized quick access to downtown hotels and train stations. “It was Central Loop or bust, quite frankly,” he says. In addition to its Chicago headquarters, Reveal has offices in Dallas and Dublin, Ireland.

7/2/21 2:03 PM

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$50 million foreclosure lawsuit hangs over LaSalle Street offices BY DANNY ECKER

A Cook County Circuit Court judge has appointed a receiver to oversee a five-floor block of offices above the JW Marriott Chicago hotel as owner and Chicago real estate veteran Michael Reschke faces a nearly $50 million foreclosure lawsuit at the property. Judge Patricia Spratt in June designated Chicago commercial real estate broker Dan Hyman as the receiver for the roughly 220,000-square-foot office condo at 208 S. LaSalle St., court documents show. The move is part of an ongoing foreclosure complaint filed in March against a venture controlled by Reschke’s Prime Group alleging the venture defaulted on a $47.5 million loan tied to the property. The dispute puts at stake the future ownership of the office property and raises questions about ongoing work on a 233-room hotel Reschke is developing on five floors above the offices. Both are the types of properties that have been stung by the COVID-19 pandemic, with companies rethinking their office space needs and demand for downtown hotels almost non-existent for much of the past 15 months. Lender Midland National Life Insurance did not claim in the complaint that Reschke’s office venture missed any loan payments, but

alleged the venture defaulted on the loan by commingling funds between the office property and the hotel project, failing to pay more than half a million dollars in utility bills and failing to get Midland’s consent to perform construction work at the office property, among other allegations. Midland is seeking a court order that the Reschke venture immediately pay off the $45.7 million balance of the loan, which the Reschke venture took out in 2016, as well as $3.8 million prepayment penalty. The loan is only secured by the office portion of the building that includes a first-floor lobby and floors 13-17, but the foreclosure lawsuit also names as defendants the Reschke venture developing the hotel on floors 18-22 as well as a venture controlled by Orlando, Fla.-based Estein USA, which owns the JW Marriott Chicago. It’s unclear why those ventures are named as part of the lawsuit, though the complaint specifies that each venture has an easement agreement with the office venture for shared space in the building. Tenants in the office portion of the building include human rights organization Heartland Alliance and several law firms. Neither Reschke nor spokesmen for Estein or Midland could be reached for comment. Hyman, CEO of Chicago-based real estate brokerage and property manager

firm Millennium Properties, acknowledges he has been appointed as the receiver for the LaSalle Street property but declines to comment further. Reschke’s venture has owned the 208 S. LaSalle offices since 2005, when his Prime Group paid $44 million for the entire Daniel Burnhamdesigned building and proceeded to spend close to $400 million renovating it and converting the first 12 floors into the 610-room JW Marriott, which opened in 2010.

HOTEL PLANS

Reschke listed the upper floors of the building for sale in 2012 seeking around $70 million, but ultimately refinanced the property in 2014 and laid out a plan to convert part of the upper floors into more hotel rooms. That plan sat idle for several years until the developer struck a deal with Marriott International to develop a boutique hotel on the top floors of the building that will be dubbed the Reserve— named for the Federal Reserve bank building next door—and part of Marriott’s Autograph Collection. Reschke won a Cook County Class L tax incentive earlier this year for restoring aspects of a landmark building as part of the $73 million project and told the Chicago Plan Commission in February that the hotel would be completed by the end of 2021. That project and the foreclosure

COSTAR GROUP

The dispute raises questions about future ownership of a 220,000-square-foot block above the JW Marriott Chicago hotel and plans for another hotel above it

Midland National Life Insurance alleges the owner of the office block at 208 S. LaSalle St. defaulted on its loan by commingling funds between the property and a hotel project on the floors above it. lawsuit come as the JW Marriott hotel grapples with its own debt issues. The senior portion of a $203.5 million mortgage on the property was one of many hotel loans transferred to a special servicer last year amid the pandemic, a signal that the hotel’s owner could default on the debt or need to restructure its terms to avoid doing so. The $40 million piece of the loan was packaged with other mortgages and sold off to commercial mortgage-backed securities bondholders. The Estein venture reached two relief agreements with special servicer Rialto Capital Management and has asked for a third that is now being evaluated, according to a Bloomberg report tied to the loan. A spokesperson for Rialto couldn’t be reached. The hotel was appraised in June at $236 million, according to the Bloomberg report. That’s up from the $210 million it was appraised

at last August, but down dramatically from the $370.4 million value an appraiser gave to the property in 2017 when Estein refinanced the hotel. Reschke has fought foreclosure before on LaSalle Street. A Prime Group venture was hit with a $50 million foreclosure complaint in 2012 alleging it defaulted on a loan tied to a 35-story building at 11 S. LaSalle St. But Reschke resolved that dispute in 2013 when he landed a $68 million construction loan to convert the vintage building into a 381-room Residence Inn that eventually opened in 2015. Reschke refinanced the hotel this year with a new $141 million loan. Reschke also made headlines in the local hotel market recently with Spanish luxury hotel owner RIU Hotels & Resorts, which hired him to develop a nearly $200 million, 388-room hotel it is proposing at 150 E. Ontario St. in Streeterville.

Naperville sale marks biggest deal of its kind since 2018 BY ALBY GALLUN An Iowa investment firm has paid more than $100 million for a Naperville apartment complex, the biggest suburban Chicago multifamily sale in nearly three years. A venture led by Des Moinesbased BH Equities has acquired Glenmuir of Naperville, a 321-unit property on 95th Street near State Route 59. The deal generated a hefty gain for Connor Group, the Ohio investment firm that sold the complex, another good sign for a suburban apartment market that has flourished even during the COVID-19 pandemic. The BH Equities venture paid about $320,000 a unit, or roughly $103 million, for Glenmuir, according to people familiar with the transaction. That’s within the expected price range for the property, but it’s 66 percent more than the $61.8 million that Connor, which is based in suburban Dayton, paid for Glenmuir in 2014. Though the pandemic drastically disrupted the downtown apartment market, suburban properties escaped with little trauma. Subur-

P018_CCB_20210705.indd 18

ban rents hit a record high in the first quarter, and the suburban occupancy rate rose to its highest level since 2016, according to the Chicago office of Integra Realty Resources, an appraisal and consulting firm. The Glenmuir sale suggests that apartment values kept right on climbing, too. Rising rents and occupancies boost property incomes and lift values, especially if investors are confident they’ll keep going up. Low interest rates have made a big difference too, lowering borrowing costs and allowing buyers to bid more aggressively, says Integra Senior Managing Director Ron Devries. “You can pay up and still get a return on your equity,” he says.

MORE TO COME

Given how much investors are paying for apartments in the suburbs, 2021 could be a very big year for apartment sales, with more landlords deciding it’s a good time to cash out and putting their properties up for sale. “There is an incredible amount of product on the market right now and more stuff is coming

out,” DeVries says. A BH spokeswoman declined to comment. With more than 51,000 units, BH is the 20th-biggest apartment owner in the nation, according to the National Multifamily Housing Council. Including Glenmuir, BH owns 14 properties in the Chicago area, none in the city, according to its website. In its most recent local acquisition before Glenmuir, a BH joint venture paid $96 million in December 2019 for Railway Plaza, a 417-unit property in Naperville, about six miles north of Glenmuir. At $103 million, the Glenmuir deal is the largest suburban Chicago apartment sale since October 2018, when Wheaton Center, a 758-unit property in downtown Wheaton, sold for $131 million. Glenmuir is 100 percent occupied, according to real estate information provider CoStar Group. The property’s average apartment rents for $1.67 per square foot, up from $1.62 a year earlier, according to CoStar. Rents range from $1,602 per month for a one-bedroom unit to $2,242 for a three-bedroom. The complex generates net operating income of about $4.8 million to

COSTAR GROUP

The $103 million purchase is a good sign for a suburban apartment market that flourished even during the COVID-19 pandemic

Glenmuir of Naperville, a 321-unit property on 95th Street sold for $103 million. $5.0 million, according to a person familiar with the property. ARA Newmark, the brokerage that sold Glenmuir, pitched the property to investors as value-add opportunity, or a fixer-upper. BH can boost the value of the property with improvements like new cabinetry and flooring in its apartments and a renovation of its clubhouse, updates that would allow it to hike rents. An ARA Newmark executive did not return a call.

Connor, which oversees a $3.7 billion portfolio, owns apartments as far east as Raleigh, N.C., and as far west as Denver. In the Chicago area, the company owns properties in Arlington Heights, Glenview and Wheaton, near Naperville. The company says it plans to continue operating in the Naperville market long-term, “anticipating it will continue to outperform other areas of the Chicago real estate market.”

7/2/21 3:12 PM

CRAIN’S CHICAGO BUSINESS • JULY 5, 2021 19

UNITED from Page 1 new planes, which cost $35 billion at list prices, though United will pay much less than that. Kirby is more optimistic than the Global Business Travel Association, which doesn’t expect full recovery until 2025. Even more downbeat is former International Air Transport Association chief economist Brian Pierce, who predicts videoconferencing could permanently reduce business travel by 20 percent. Airline analyst Helane Becker at Cowen concurs: “We believe there will be some level of permanent demand destruction in that segment.” If Kirby is right, United could regain its spot as the biggest U.S. airline, while adding thousands of high-paying jobs in Chicago and ensuring that O’Hare International Airport remains a dominant aviation hub. If not, United will be saddled with a lot of expensive planes tailored for a shrunken market segment. Kirby is playing the hand he was dealt when he joined United from American Airlines five years ago. “Our hub demographics are unique,” he said June 28 when announcing his “United Next” plan. “We are in the largest markets in the country with our seven hubs. . . .It has always been the reason why people have said, ‘Why isn’t United the No. 1 airline in the world?’ That is a unique advantage this plan is designed to take advantage of.”

New planes will increase United’s overall seats by 30 percent, with premium seats up 75 percent. The airline gets one-third of its revenue from business customers and one-third from international travelers. As his predecessors found out, United isn’t going to find long-term success trying to beat its competitors on price. “I don’t think it takes a rocket scientist to pull it off,” Becker says of the strategy. “Their hubs are where people live. I think they have a really good shot at it. There’s going to be a competitive response: American and Delta aren’t going to just roll over.”

SUPPLY AND STAFF

Key questions are whether United can get the planes on time and get the staff needed to expand amid a large wave of retirements expected across the industry. United’s spending on aircraft will more than double to about $7 billion in 2023, when it takes delivery of 138 new aircraft. It’s already borrowed more than $7 billion to weather the pandemic. Kirby, who spent much of his career as a network planner, has long believed growth was United’s best option. He thought the airline erred by leaving New York’s John F. Kennedy International Airport five years ago and by relying too heavily on small regional jets to connect big hubs such as Newark and Chicago. United says 27 percent of its

flights from Newark are on regional jets, which carry fewer passengers and lack premium seats. At O’Hare, 42 percent of its departures are on regional jets, compared with 28 percent for American. After the fleet upgrade, just 4 percent of O’Hare departures will be on regional jets. Kirby also plans to add flights, about 100 a day at O’Hare, Denver and Houston. He aims to make hubs more efficient, operating more flights carrying more passengers. Kirby says United’s cost per seat mile, a measure of profitability, will drop 8 percent. More flying means more jobs. United says it will hire 25,000 new pilots, flight attendants, gate agents, ramp workers and others—including 3,000 at O’Hare. Those jobs matter to unions, which are crucial to winning over the high-end customers United needs. “These are good signs that the company is growing,” says Richard Johnsen, chief of staff to the president of the International Association of Machinists, the largest union at United. “We have a history with Scott that dates back to American. We’ve had a good working relationship.” Flight attendants aren’t as sanguine. “United management has a long way to go on inspiring trust and good morale,” says Sara Nelson, president of the Association of Flight Attendants, which sued the airline June 22 over a

JOHN R. BOEHM

United Airlines’ massive jet order is a wager on the recovery of business travel

If United Airlines CEO Scott Kirby is right, the company could regain its spot as the biggest U.S. airline. disciplinary investigation of two flight attendants. Through the pandemic—which triggered rounds of voluntary leaves, white-collar layoffs and government grants and loans— Kirby built a reputation for blunt honesty as he reduced headcount by 4,800, or 5 percent. But he reached a deal with pilots to avoid furloughs, positioning the airline to staff up fast if demand rebounded sharply, based largely on his plans to expand after the pandemic. Labor relations are fluid, however. The goodwill cultivated by

former CEO Oscar Munoz will be tested this year as United negotiates new contracts with pilots and machinists. Even those who are the most bullish on business-travel realize Kirby’s gamble is risky. “Given how heavily skewed its operations are to premium demand, and (the new) aircraft order only throws more fuel on that fire, we’ll admit that we quietly quipped, ‘you better hope so,’ as Scott Kirby was expressing his confidence in corporate recovery,” J.P. Morgan analyst Jamie Baker wrote in a note to clients.

BIG FOOD from Page 3 pandemic savings and stimulus money on restaurants and travel. Workers are heading back to the office, children will soon return to school and once again eating habits are on the verge of a shift. Second-quarter financial results will be an early test of whether Big Food’s newfound growth was more than a fleeting side effect of lockdowns. A reversion to pre-pandemic consumer preferences and behavior could also bring back the sluggish sales growth that plagued the sector for years before COVID. Experts predict some pandemic habits will continue. A recent report from Accenture found that 95 percent of individuals expect at least one change they made during the pandemic will be permanent, whether that’s buying more cookies or eating healthier. But which habits will stick and which will fade? “That is the million-, or in many cases, the billion-dollar question,” says Samrat Sharma, who leads PwC’s U.S. consumer packaged-goods team. Kraft Heinz, Conagra and Mondelez must zero in on consumers’ wants and deliver the right products, online and on retailer’s shelves. Packaged-food companies gained new customers during the pandemic, many of whom are younger—like Generation Z and millennials—and drive trends. Experts say the packaged-food giants

P019_CCB_20210705.indd 19

can use data they’ve gained from their new customers to figure out where eating habits are heading. The companies will need to innovate, and that goes beyond simply offering a new Oreo flavor or a keto-friendly frozen meal. For example, new package sizes could retain or rope in new customers as their daily routines change. “The ones who are able to understand the consumer, build the right value propositions—which adhere to the likes and dislikes of the consumer and actually fulfill that need—will win and sustain,” Sharma says. “The others will find it challenging.”

PANDEMIC ACTIONS

Actions taken during the pandemic could make it harder for food companies to meet changing tastes. Many shifted production to a narrow selection of favorites, reversing a previous focus on variety and new products. If consumers liberated from lockdown renew their search for new experiences, companies will have to pivot quickly. Erin Lash, director of consumer equity research at Morningstar, is watching how much companies spend on marketing and product development. Less money flowed into those areas during the pandemic, as companies scrambled to meet surging demand for the products cooped-up consumers craved most. Lash says increased promotional spending could indicate

companies are adding complexity back into their product offerings. If marketing spending tapers off, however, “that would be indicative that they’re not spending to support their brand and the retail relationships” or working to keep new customers, Lash says. “We want to see it hold stable or tick up.” Mondelez does not plan to bring back all of the offerings it cut during the pandemic. The company is reducing its product varieties—“SKUs” in industry jargon—by 25 percent. Minsok Pak, executive vice president and chief strategy and transformation officer at Chicago-based Mondelez, says it is using data analytics to track changes in consumer behavior and snacking trends. Pak predicts people will continue working from home frequently, relying on e-commerce and focusing on their well-being. “We expect to see more in-home consumption and more snacking overall,” he says. Kraft Heinz executives have said the company has cut about 20 percent of its SKUs. It is also focused on retaining new households it has won during the pandemic, CEO Miguel Patricio said during the company’s April earnings call. Many of those “younger, more diverse” families are increasing consumption of Kraft Heinz brands throughout the day, be it Macaroni & Cheese or Oscar Mayer hot dogs. Patricio said the company will work to maintain that momentum

JOHN R. BOEHM

Quarterly results will reveal the staying power of pandemic-induced growth

Consumers forced to eat more meals at home rediscovered frozen foods. going forward, as kids start heading back to school. Conagra started making bets months ago on which foods had post-pandemic staying power. The Chicago-based company invested in its Birds Eye frozen vegetable factories, ramped up popcorn production and modernized facilities that make products such as Slim Jim meat snacks. Chef Boyardee, however, will likely see its pandemic popularity fade, CEO Sean Connolly told Bloomberg in February. Conagra declines to comment, citing a “quiet period” ahead of its fiscal fourth-quarter earnings announcement July 13. Kraft Heinz has not yet scheduled its second-quarter earnings call, but analysts expect it will be held late July

or early August. A company representative declines to comment. Mondelez’s earnings report is scheduled for the week of July 26. Along with shedding light on growth trends, the quarterly results also will show how companies are responding to rising costs of raw materials. Some packaged-food companies, including General Mills, are raising prices to offset higher costs. Measures such as changing package sizes also could help ease the bottom-line impact. “They have other levers to pull to offset some of those margin headwinds,” says Morningstar’s Lash. “But pricing is coming into play and will likely continue to do so over the course of the next several quarters.”

7/2/21 4:20 PM

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Cook County Assessor Fritz Kaegi blames powerful real estate and property tax appeals interests for tanking discussions on his proposal.

Kaegi’s reform efforts keep getting squashed KAEGI from Page 3 appeals-driven system susceptible to their influence. After so much time and what he describes as opponents trying to insert poison pills into counterproposals, Kaegi suggests he’s done trying to reach a compromise. “If (opponents) think they can get to a point where they are in the driver’s seat, they’ll drive the bill off the side of the road every time,” Kaegi says. The General Assembly passes legislation over opponents’ objections “if it’s considered important enough, and property taxes are important. Property tax reform is important. Equity is important.” Kaegi’s setback this session happened in spite of two leaders with ties to the property tax appeals industry—former House Speaker Mike Madigan and Senate President John Cullerton— leaving the Legislature. Springfield insiders close to the negotiations agree pushback from business and tax groups did help sink the bill but weren’t the only culprit. Property tax reforms are inherently “heavy” bills—complex and with a wide impact—making them more difficult to pass, especially in Springfield, where negotiations tend to go down to the wire, if not into overtime. But some of those insiders say Kaegi’s desire to maintain a white knight reformer image that propelled him into the office in 2018 didn’t help. “All our attempts at well-researched and thoughtful cooperation have been met with a ‘my way or the highway’ response,” read a letter from a coalition of business groups to the lead negotiator on the bill, Rep. Mike Zalewski, and its sponsor, Rep. Will Davis. That coalition included the Building Owners & Managers Association of Chicago, the Illinois Retail Merchants Association, the Chicago and Illinois chambers of commerce and the Taxpayers’ Federation of Illinois. There’s little doubt the system needs reforming. A series of out-

side reports—including a joint series from the Chicago Tribune and ProPublica, as well as from the International Association of Assessing Officers—concluded that Cook County’s tax system generally undervalued commercial property and overassessed homes, particularly in heavily minority neighborhoods. Kaegi ran on correcting it. But trust was low between the two sides heading into negotiations. It is arguably even lower now. The property tax burden has shifted substantially toward commercial property owners under Kaegi’s watch. Some, like Chicagoland Chamber of Commerce President Jack Lavin, believe Kaegi is doing it “purposely and intentionally . . . without any reservation for what is happening to property values or the economy.” “Business folks went in thinking, ‘This guy is trying to stick it to us,’ ” says Carol Portman of the Taxpayers’ Federation. With the Chicago assessment underway, many fear being walloped by the 70 to 80 percent valuation increases seen in some of the suburbs.

DISCLOSURES

One of the biggest sticking points has been whether disclosures should be mandatory or voluntary. Opponents are leery of being forced to turn over proprietary information about leases, rents and expenses, worrying competitors or tenants could get their hands on it. If Kaegi wants better data, they say, he could use a mix of commercial databases, appeals documents from past years and other property tax bodies like the Board of Review, and Kaegi’s own voluntary disclosure portal, called RPIE, for Real Property Income & Expense. The problem is, Kaegi says, uptake of RPIE has been low. If response rates were closer to 30 or 40 percent, he might be able to build a better model. But they’ve been closer to 4 percent of all commercial units so far, and as

low as 0.3 percent from apartments. That’s in part because some real estate attorneys have discouraged their clients from using it. HMB Legal Counsel, for example, warned real estate clients in a February 2020 alert that what they disclosed could be kept for a “potentially indefinite amount of time” and “may be used against you in a future tax appeal.” Commercial databases have decent figures for big investment properties but far less on smaller mom-and-pop businesses that can vary widely depending on the neighborhood, Kaegi says. Besides, other big cities like New York, Seattle and Boston have programs that require submission of commercial data annually. Kaegi says he’s committed to anonymizing that data to protect businesses’ competitiveness and pledged in return to share calculations of how his office reached assessments so that property owners could better predict how their bill might change in the future. Portman and others in the negotiating coalition deny purposely putting up roadblocks. Portman still thinks there’s room for a deal and that a voluntary system would get more participation with some privacy guardrails in place. “Things get kind of heated. There’s been a lot of misunderstandings,” she says. “We want transparency; we want to understand what he’s doing better.” Davis and Zalewski both want to reach an agreement, possibly in the fall veto session. By then, temperatures may have cooled. Laurence Msall, the head of the fiscal watchdog Civic Federation, has been repeatedly disappointed by Springfield’s failure to untangle the county’s complicated tax system, and he doesn’t place all the blame on Kaegi. “Every reformer has a difficult time in Springfield,” Msall says. “(It’s) more difficult to be the outside pushing in than the inside pushing out, but we don’t have much history of inside pushing out.”

7/2/21 3:54 PM

CRAIN’S CHICAGO BUSINESS • July 5, 2021 21

Finding workers for O’Hare and Midway is a challenge as travel demand soars fees paid by airlines, which remain under financial strain from the pandemic. “Our concessionaires, like many industries around the country, are facing challenges in recruiting employees to return to work,” says a spokeswoman for the Department of Aviation. “This is a phenomenon that is being experienced at most airports nationally, along with other segments of the travel and hospitality industries.” The city says 77 percent of shops and restaurants at O’Hare have reopened. At Midway, 59 percent are back in business. “Some restaurants have reopened. Some haven’t,” says Patrick Little, director of operations for Tortas Frontera, the Rick Bayless restaurants at O’Hare. “Staffing is part of that equation. Some of it is what concepts are most popular with customers. There are myriad reasons.” Tortas Frontera’s three O’Hare locations, which are operated by a concessionaire, have reopened over the past three months. “I’m sure there’s been some money left on the table,” he says. “That’s true for everyone. No one has a crystal ball about when traffic is going to pick up and when to start hiring. You have to be a few weeks ahead of it.” Some retail operators are offering sign-on bonuses, a practice airport veterans say is unheard of. Hudson Group, which operates newsstands and bookstores, and Marshall Retail Group, which operates InMotion and Headphone Hub—are offering a $300

incentive, based on recent online job postings. “Like many other retailers, we’re experiencing challenges in hiring store associates,” says a spokeswoman for Hudson, based in East Rutherford, N.J. She declines to comment further. Ads showed Sodexo is offering a $1,000 sign-on bonus for a cook at the United Club at O’Hare. Outsourcing firms Worldwide Flight Services offered a $1,500 bonus for cargo ramp workers at O’Hare, and Atlantic Aviation offered a $1,500 bonus for refuelers at Midway. The Transportation Security Administration is offering $1,000 bonuses for new security screeners.

‘WE’RE ALL SCRAMBLING’

It’s another sign of the strain being felt across vast swaths of an economy that had been idling for 15 months as it tries to restart all at once. “Passenger demand has come roaring back quicker than anticipated,” says Mike Durocher, senior vice president at Prospect Airport Services, a Des Plaines firm that provides baggage handlers, aircraft-cleaning crews, ticket-counter agents and other workers at 33 airports. “It’s a very tough labor market right now. We’re all scrambling to get people in the door.” The company laid off about 1,000 employees at O’Hare and Midway when COVID hit. It has recalled all laid-off employees. “We’re doing OK,” Durocher says. “We’re meeting our commitments.” About 50,000 people work at

JOHN R. BOEHM

AIRPORTS from Page 3

Damien Sanchez speaks with a recuiter at a recent Midway Airport job fair. the two airports. Airlines rely on outsourcers to handle ticketing, loading and unloading aircraft, cleaning planes between flights and fueling. If they have difficulty finding staff, it’s that much more difficult for airlines to crank up their operations. Finding airport workers is a challenge in the best of times because employees generally have to travel longer distances to get to work, go through security, pay more for parking and food, and schedules can be more demanding.

WAGE BOOST

Vendors took another blow last week. Pay rates for many workers rose from $14.25-$14.85 per hour July 1 when the city minimum wage rose to $15. The boost in minimum wage will push up pay

rates for other workers. “Airports are always in a difficult hiring situation,” says Tom Gimbel, CEO of the LaSalle Network, a staffing firm—LaSalle does not do work at the airport. “Right now, they’re in the worst situation of anybody.” When companies do find workers, it takes longer to bring them on board because employees have to undergo background checks to get security clearance to work at the airport. The process can take a couple of weeks. As airport operations picked up in May, the city’s badging operations at the airports were quickly overrun with both existing employees seeking renewals and new hires getting new badges. The city has hired a staffing firm to add badging clerks. In the meantime, restaurants

and retailers also are looking to technology, such as kiosks, for help. Hudson News recently opened a Midway store that allows customers to purchase products with Amazon technology instead of standing in line. Vending machines that contain clothing and sunglasses also have been added. Home Run Inn Pizza at Midway, which is beating pre-COVID level sales thanks to a location close to Southwest Airlines’ busiest gates, is also encouraging online ordering. “There’s more business than we have the people to meet,” says Alan Potekin, regional operations manager. “We’re not fully staffed. We’re trying to push as many guests as we can to use technology to order to take some pressure off our staff.”

Developers compete with Bears in bid for Arlington International Racecourse BEARS from Page 1 Klein, co-founder and managing principal of Chicago-based Glenstar. But any bidder hoping to clear the starting gate will face a delicate three-way dance with track owner Churchill Downs and the Village of Arlington Heights. Churchill Downs will drive a hard bargain as it looks to maximize its payout. Village officials, who have their own aspirations for the site, will have final say on zoning decisions. Navigating an approval process likely to attract heavy scrutiny will require diplomacy and political savvy. Klein and Robert Burk, co-founder and managing partner of Schaumburg-based UrbanStreet, both confirm they submitted bids for the horse track but decline to discuss prices or other specifics about their plans. Glenstar has proposed developing the land in partnership with Louisville, Ky.-based Churchill Downs, obtaining zoning from the Village of Arlington Heights and then selling off individual pieces of the property to other developers, Klein says. Known locally as an office landlord—its properties include the Chicago Board of Trade Building

P021_CCB_20210705.indd 21

in the Loop—Glenstar gained experience with big mixed-use projects several years ago, developing the former Culligan headquarters, a 40-acre site in Glenview, into offices, apartments and a Mariano’s grocery store.

‘MASSIVE LETDOWN’

UrbanStreet, meanwhile, has its hands full with a big redevelopment of the Motorola headquarters site in nearby Schaumburg. Called Veridian, the 225-acre project, which includes 260 apartments and a Topgolf driving range, could provide some clues about UrbanStreet’s vision for the Arlington Heights site. “It’s a natural fit because of our skill set and because of what we’ve done at Veridian,” Burk says. But the Bears, who confirmed their bid June 17, have sucked up most of the oxygen in the discussion over the future of the horse track, an Arlington Heights fixture for 93 years. To many people, the Bears’ proposal to build a new football stadium in Arlington Heights is such a titillating idea that even Burk acknowledges a more traditional development seems pretty boring. “The delta between those two is so great,” Burk says. “We’d better be careful because everything else

is a massive letdown.” Since Churchill Downs put the track up for sale in February, the only other bidder to reveal itself publicly is a group led by former Arlington International President Roy Arnold that wants to keep the track open. Arnold’s partners include Sterling Bay, the big Chicago developer working on the Lincoln Yards project in Chicago’s North Side. A Churchill Downs spokesman declines to identify other bidders. The speculation over the last several weeks has focused on the Bears and whether they are truly serious about leaving Soldier Field or merely using their Arlington Heights bid as leverage to work out a better deal with the city of Chicago. Village officials have been busy trying to figure out what makes sense on the site if the Bears stay put. They’ve made it perfectly clear they don’t want the one thing that could generate the biggest payday for Churchill Downs: a big industrial park. Amid torrid growth in the e-commerce and logistics sectors, developers have been paying up for land intended for large warehouse projects, arguably the hottest real estate sector today. In June, however, the village board approved a zoning plan

that prohibits warehouses on the site at Euclid Avenue just east of Illinois Hwy. 53. While the village could be open to some warehouse development on the property, the trustees passed the restriction because they don’t want the whole thing turned into an industrial park, says Charles Perkins, the village’s director of planning and community development. “Nothing is set in stone,” he says. “This is just a first step of many to allow the village to have a say.” A mixed-use project there would likely include a lot of apartments, another booming sector, especially near the Metra stop on Northwest Highway next to the horse track. Some retail and restaurant space would make sense as well, but future demand for store space remains uncertain as more consumers shop online.

OFFICE OUTLOOK

Glenstar hasn’t included much office space in its plans, believing that other northwest suburban locations are more attractive to office tenants, Klein says. The outlook for the suburban office market is also cloudy, with no firm answers yet on how many professionals working from home will return to the office in the postCOVID era.

But a 326-acre site needs a big idea, an element that will make it a destination and create new energy. Klein believes Glenstar has found one: a “recreational” concept new to the Chicago area that could take up 90 acres or more. He declines to elaborate. A developer also will need to provide the right mix of uses to satisfy local officials, who want more jobs and a bigger tax base. Housing is an obvious option, but too much residential development brings in more children, putting pressure on schools. Big mixed-use developments typically proceed in stages, with local officials first signing off on a master plan for the site and construction on individual phases beginning based on market conditions and the availability of financing. It could take a decade or more to complete the Arlington Heights project. A recession could delay progress or require a change in plans. Complicating matters is all the expensive infrastructure—roads, sewers and utilities—needed to support a such a large development. Will village officials support public financing to pay for all of it? “It’s premature to say at this point,” Perkins says. “But that’s not outside the realm of possibility.”

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22 July 5, 2021 • CRAIN’S CHICAGO BUSINESS

Who’s going to pay for subsidized energy bills? Not the utility companies. RATES from Page 1 around clean energy production and electric-vehicle adoption. The experience of California, which has offered subsidized rates for years, is illuminating. Electricity rates there are among the highest in the nation, and one contributing factor is the California Alternative Rates for Energy program, or CARE. Depending on the utility, CARE adds between 1 and 2 cents per kilowatt-hour to residential bills, according to a Feb. 23 study on electricity rates by the Energy Institute at the Haas School of

cent increase. If the bill is passed and the ICC does something similar to California, electricity rate hikes could exceed 20 percent for households that don’t qualify for the lower rates.

COVERING THE COST

The other option would be to force businesses to cover more of the cost—something the Pritzker administration already has agreed to do during the many weeks of deliberations over the bill. Ratepayer financing of more than $200 million a year for social-equity programs— originally proposed as a flat fee for all customers—was changed “IT SOUNDS LIKE ILLINOIS IS ON ITS in May to a charge per kilowatt-hour, WAY TO (EMULATING) CALIFORNIA, meaning that the average Illinois inWHICH ISN’T A GREAT IDEA.” dustrial company Severin Borenstein, University of California, Berkeley would pay well over $1,000 a month rathBusiness at the University of Cal- er than a little over $3 just for ifornia, Berkeley. That enables a that part of the bill, according reduction of between 30 and 35 to the Illinois Manufacturers’ percent for about 30 percent of Association. The California study recomCalifornia households. California’s rates are double those here, mends, among other things, conso even subsidized utility bills are sidering alternative ways to lower utility bills for the less fortunate. significantly higher than Illinois’. An increase of 1.5 cents per “When you pay for it through utilkilowatt-hour on the average ity rates, that is massively more ComEd household bill would regressive than when you pay amount to more than a 10 per- for it through virtually any tax,”

says Berkeley professor Severin Borenstein, one of the report’s three authors. In addition, adding those costs to middle-class electric bills impedes climate goals, since most environmental groups advocate shifting from fossil fuels to electricity for transportation and home heating. “The way we’re paying for it is going to undermine electrification,” he says. “It sounds like Illinois is on its way to (emulating) California, which isn’t a great idea,” Borenstein says. Pritzker spokeswoman Jordan Abudayyeh says in an email that studying other states’ low-income subsidies is part of the plan. “The goal is to make sure that the energy burden is equitably distributed for as much of the population as possible.”

THE GAS PROBLEM

Exacerbating the potential problem here is that the energy bill offers the same tiered rate-setting for natural gas as it does for electricity. California’s CARE program covers gas, too, but gas bills are far more costly here due to the Midwestern winters. Nearly three in 10 households served by Peoples Gas, the utility for the city of Chicago, were delinquent on their gas bills as of early this year. The average Chicago household pays well

over $1,000 a year to keep warm. The bill requires the ICC to study how to reduce utility bills for low-income households, but it only authorizes action after the study is completed. Given rising rates and the difficulty lowincome households have today in paying utility bills, the likelihood that Pritzker’s regulators would take no action on affordability seems slim. Among the issues the ICC would study, according to Abudayyeh: “What is the policy benefit of lessening the energy burden on low-income customers? What percentage of the customer base will benefit? What is the impact on other customers? Does the subsidy result in others having unacceptable cost increases pushed onto them?” “No new policies would be implemented until there are comprehensive answers to these questions, the commission can ensure consumers are protected, and the commission has reported to the General Assembly,” Abudayyeh says. “But one thing is certain: The status quo does not work for consumers or our climate, so leaving the current system in place should not be the only option we consider.” How would they decide who gets help and who doesn’t? The

measure offers little guidance. But other parts of the bill define “low-income” households deserving of special help. More than once, “low income” is defined as 80 percent or less of the median income for the area. In ComEd’s service territory, that threshold would encompass roughly 1.5 million of the utility’s 3.7 million residential customers, a spokeswoman says. That standard would mean subsidies for more than 40 percent of ComEd households, well above the 30 percent that qualify for CARE in California. If Illinois were to adopt California’s approach and subsidize households at 200 percent of the poverty level, that would benefit about 816,000 customers, or more than 22 percent, she says. (ComEd emphasizes that these are estimates, since it doesn’t have access to verified income data for all its customers.) If the bill passes, the income cutoff for assistance will present unpleasant choices for regulators. Do they head off broader ratepayer revolt by developing a standard that’s too meager to be meaningful? Or do they take responsibility for meaningfully higher utility bills and hope the public finds the price acceptable to realize Pritzker’s green ambitions?

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CRAIN’S CHICAGO BUSINESS • July 5, 2021 23

The estate is the North Shore suburb’s third property to go for $5 million or more in the hot housing market of the past year BY DENNIS RODKIN

TOM SIMPSON VIA FLICKR

Mr. T’s former Lake Forest mansion sells after 4 years Mr. T in the 80s.

COMPASS PHOTOS

he Lake Forest estate where television and movie star Mr. T famously chopped down dozens of trees has sold after four years on the market. Known as Twin Gables, the 7.5-acre estate on Green Bay Road sold for $5 million. It’s the third Lake Forest property to sell for $5 million or more in the year since the present real estate boom kicked in, compared to two sales at that price level in the North Shore suburb in the entire four years prior to that. Sellers Neil and Jane Cummins put Twin Gables on the market in March 2017 at $7.5 million. They paid $4.65 million for the estate in 2009 and made upgrades that they say in 2017 included a four-car coach house with a one-bedroom apartment upstairs, a brick garden wall encircling the entire estate, and planting 150 full-grown trees. Those items alone seem likely to have cost more than the $350,000 gap between what the Cumminses paid for the property in 2009 and what they sold it for. The Cumminses could not be reached. Their listed home phone number has been disconnected. Neil Cummins is not listed on the website of the firm where he was chairman in 2017, Chicago-based Oak Ridge Investments, and the media representative at the firm did not immediately respond to an email asking whether Cummins is still at the firm. Nicole Oertel, who represented the property with fellow Compass agent John Oertel, declined to comment on whether the Cumminses profited in the sale. Ann Lyon, the @properties agent who represented the buyers, did not respond to a request for comment. The buyers are not yet identified in public records. The question of whether the sellers profited is significant because they were the third owners in 22 years to undertake lavish restoration of the property and the first to fully complete it. The Cumminses bought it from Norstates Bank after that lender’s 2007 foreclosure on developers who had it on the market at almost $12 million. Those developers bought it in 2003 from a previous owner whose renovations and tree-planting plans didn’t get finished. Originally built for Chicago banker Orville Babcock and designed by architect H.T. Lindebergh, the home was owned by the meatpacking Armour family from 1913 until it was sold to Mr. T for $1.7 million in 1986. Although the Chicago-born “A-Team” star’s real name is Laurence Tureaud, the official deed documents on file in Lake County refer to him as “T., Mr.” Blaming the trees for inflaming his allergies. Mr. T took a chainsaw to more than 100 oaks on his property, attracting national media attention to what became known as the “Lake Forest Chainsaw Massacre” and suggesting that his TV character’s name, B.A. “Bad Attitude” Baracus, may have been apt for the actor himself. In 1993, Mr. T deeded the estate to his girlfriend, Phyllis Clark, who sold it in 1999 for $2.4 million. The couple who bought it from Clark, Robert and Christine Shaw, were the first of three owners to launch the rehab the Cumminses completed.

MORE PHOTOS ONLINE: ChicagoBusiness.com/residential-real-estate

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MORE THAN EVER, OUR CHILDREN NEED US. Because of COVID-19, hunger has more than doubled. And children are particularly at risk; one in three households with children is facing hunger. As job loss and the continued economic downturn push more people to the end of their resources, many families are having to choose between paying bills or buying food.

In four decades of feeding our community, we have never faced a need so great.

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