Crain's Chicago Business, July 10, 2023

Invest South/West projects ring up sky-high building costs

A ordable housing nanced through former Mayor Lori Lightfoot’s signature economic development program costs far more to build than the most expensive apartment towers in the city I

Developers spend a lot of private money building luxury apartments in expensive neighborhoods like River North, the Gold Coast or the Fulton Market District. But it costs even more to build a ordable housing nanced mostly with government money in places like Auburn Gresham, Englewood and Bronzeville.

BY ALBY GALLUN

at’s one of the great ironies of Invest South/ West, a massive economic development initiative launched four years ago by former Chicago Mayor Lori Lightfoot. Construction costs for the program’s a ordable housing projects in some of the city’s

Starved for cash, banks offer enticing savings rates

It’s been over 15 years since savers could get more than 5% on a fully insured CD

BY STEVE DANIELS

Banks want your money — in a way they haven’t for more than 15 years.

ey’re running ads on television o ering 5% or more on certi cates of deposit. ey’re stuing mailboxes with o ers. ey’re posting big signs in branch windows. ey’re running banner ads online.

Banks are starved for cash, only two years after they were swimming in it and scrambling for money-making places to stash it. Adding anxiety to what otherwise would be a straightforward

matter of paying enticing enough rates to stay liquid are the failures earlier this year of Silicon Valley Bank and New York’s Signature Bank, impelled by depositor runs on both institutions.

“As an industry, we’ve continued to see surge-deposit runo ,” says Brent Tischler, CEO of community banking for Evansville, Ind.-based Old National Bank, which has a large presence in Chicago from its 2022 acquisition of First Midwest Bank. “Consumer spending continues to be strong, and stimulus is starting to burn through.”

For savers, it’s a refreshing change after more than a decade

in which bank accounts were the last place anyone would look for yield. No one now has to search long for o ers of more than 5% on as little as $1,000.

For banks, it’s an abrupt end to a long era of near-free money, thanks to the Federal Reserve’s rapid ramp-up of interest rates to tame in ation. Liquidity is now their top concern, even as they face growing worries about future loan defaults, particularly in commercial real estate.

With the second quarter just ended, investors and analysts

THE TAKEAWAY

A top executive at City Cruises describes a heart-thumping career moment. PAGE 6

CRAIN’S LIST

See our roundup of the area’s biggest out-of-town employers. PAGE 9

Keeping existing depositors and nding new ones is suddenly job one for banks.

See INVEST SOUTH/WEST on Page 18

See BANKS on Page 14

In Auburn Gresham, 838 79th St. is under construction at left. It is part of a two-building project with a total cost of $48 million, or $827,596 per unit.

DAN McGRATH ON THE BUSINESS OF SPORTS

Is it over yet? Chicago baseball (so far) in 2023.

The Cubs’ season was plummeting toward a dispiriting low point on the Fourth of July in Milwaukee before Ian Happ picked up a save.

ey’d lost six of their previous seven games. ey’d blown a 6-0 lead in the Brewers’ series opener. ey were about to squander a 6-2 advantage before left elder Happ rescued them with two laser-beam throws that brought a wildly entertaining nish to a 7-6 extra-inning victory.

All good holiday fun, but come on: Does anybody think the Cubs — the fourth-place Cubs as this is written — are a contending team?

In the No. 5 division among MLB’s six?

Hours later, the same could be said of the White Sox. Luis Robert Jr., their lone All-Star, continued to show what he might become by clubbing a monster three-run homer that gave them a 3-2 lead and a promising start to a series with Toronto. But again the bullpen shrunk from the task of holding it, and when Vlad Guerrero Jr. took Joe Kelly deep to the opposite eld, the Sox were 13 games — soon to be 15 games — under .500 in MLB’s most forlorn grouping.

at’s Chicago Baseball 2023 at the All-Star break. When does Bears camp open? Better yet, when do we get a peek at Connor Bedard?

Whereas the White Sox have been bad all season, the Cubs in a sense are more frustrating, having demonstrated some early competence that proved to be a tease.

Yes, Dansby Swanson has been as good as advertised. Yes, Nico Hoerner is a build-around guy at second base. ere ought to be a spot for Christopher Morel once he learns how to play baseball.

And with Clayton Kershaw ailing, it won’t be an a ront to anyone if Justin Steele starts the All-Star Game.

But the team is woefully lacking in power, getting 40 home runs from its corner in elders and out elders. Fourteen came from Patrick Wisdom, but none since May 28. Yes, he missed two weeks with a sprained wrist, but a .189 average, 84 strikeouts in 190 at-bats and eight RBIs since May 1 suggest a regression to the 4-A mean for the 31-year-old third baseman.

Nick Madrigal hit .357 as Wisdom’s replacement, but he has no power, and when his hamstring “grabbed” against Milwaukee last week . . . Madrigal came from the White Sox, and their star-crossed history of injuries may have traveled north with him.

What of Marcus Stroman, you

CORRECTION

Pritzker signs new health bills into law

on certain plans

ask? Trade him — his value will never be higher.

Rarely has a player parlayed 10 productive weeks into as much leverage as Stroman has, with demands that the team extend him drowning out the noise from the recent NASCAR doings. He’s often good, and energetically charismatic — I was in the stands for his one-hitter against Tampa Bay on Memorial Day and you couldn’t beat fun at the old ballpark that day.

But . . . Stroman is 9-6 as this is written. at makes him 76-73 for his career— a .500 pitcher before nding something (?) with the Cubs. So how much do you invest in a slightly built 33-year-old (as of next season) who pro les as a No. 3 starter when a contending team that’s a pitcher short might o er a middle-of-the-order hitter prospect and a power arm to reinforce a wayward bullpen?

And if you like Stroman that much, sign him back this winter.

ings are a bit more complicated on the South Side, where Robert’s emergence as a star — think Frank omas with speed and a useful glove — is a welcome diversion from the team’s many aws.

You’re as tone-deaf as Rob Manfred if you aren’t pulling for Liam Hendriks to make it all the way back. And Zach Remillard is a nice story, getting a chance and playing well after eight minor league seasons. But the reason a player remains stuck in Triple-A at age 29 usually reveals itself over time. Otherwise, more questions than answers.

Will Michael Kopech and/or Yoan Moncada ever vacate the corner of “Maybe” and “I Don’t Know” and have a hand in winning? Is Jake Burger a right-handed Kyle Schwarber at a more challenging defensive position? What, exactly, is Eloy Jimenez? Gavin Sheets?

And what in the world is with Tim Anderson? Has he nally found it at the plate or will he continue to mope through an inexplicably lost season?

After two years of almost unwatchable underachieving, a Sox team that was “built to win” hardly seems on the cusp. Might be time to start over with a cast featuring Robert, Burger, a sturdy Andrew Vaughn and some new guys.

And to acknowledge that it wasn’t all Tony La Russa’s fault.

Crain’s contributing columnist Dan McGrath is president of Leo High School in Chicago and a former Chicago Tribune sports editor.

 A June 26 Forum article should have identi ed F. Christopher Lee as principal emeritus of Johnson & Lee Architects and said he grew up at 61st Street and Rhodes Avenue in the West Woodlawn community.

BY JON ASPLUND

With more than 500 bills passed in the recent session of the General Assembly, Gov. J.B. Pritzker’s signing pen has been busy. In terms of health care, one of the highest-prole acts establishes a state-based exchange for A ordable Care Act health insurance, which is slated to be up and running by 2026. Another allows state regulators to deny premium rate increases on certain health insurance plans.

He also signed laws dealing with long-term care, health professionals’ labor issues, coverage mandates and more.

Long-term care organizations must post information about the ombudsman program on their websites, and the Illinois Department of Public Health will identify and publish a list of distressed nursing facilities quarterly, beginning Jan. 1.

A number of bills deal with labor issues and address sta ng shortages among health professions.

E ective Jan. 1, hospital nursing care committees must annually notify nursing sta of their rights concerning sta ng. Also beginning the rst of the year, written collaborative agreements between a physician and an advanced practice registered nurse will spell out the services for which the physician can provide adequate collaboration.

Two e orts to bolster workforce numbers also take e ect Jan. 1. One includes chiropractic medicine in the Medical Student Scholarship Program to receive loan repayment assistance for agreements to work in a designated shortage area. e other allows pharmacy support sta who solely perform clerical work without a license as a registered pharmacy technician. at law lays

out restrictions and training requirements for these sta .

Several bills were e ective immediately upon signing, including:

 A measure changing the Illinois insurance code to clarify that Illinois Insurance Guaranty Fund can cover cybersecurity insurance claims when a company goes insolvent.

 A law allowing school districts to maintain an on-site trauma kit while requiring trauma response training for school employees.

E ective immediately, there is a new requirement for continuing education for providers and sta of obstetric medicine and others who care for pregnant or postpartum women to include addressing airway emergencies experienced during childbirth.

Other bills that take e ect at the beginning of next year include measures that:

 Allow the Department of Public Health to issue autism awareness decals for license plates.

 Allow trained overdose responders within an organization enrolled in the state’s Drug Overdose Pre-

vention Program.

 Streamline the process for Illinois courts when dealing with cases involving abused and neglected children who have medical records from multiple states.

 Allow emergency service districts to charge fees for services outside of the district and employ or contract with rescue squad and/or ambulance personnel.

Medicaid coverage of mental health and substance-use disorder, whether through fee-for-service or managed care, will be reimbursed on the same basis whether care is delivered as behavioral telehealth services or as in-person encounters. And, e ective Jan. 1, no hospital may delay medical care or screening in order to inquire about an individual’s method of payment or insurance status.

Also, insurance plans regulated by the state must provide coverage for medically necessary reconstructive services intended to restore physical appearance, with companies needing to be in compliance with plans that start on or after Jan. 1, 2025.

Among the measures is one establishing a state-based exchange for A ordable Care Act insurance and another allowing regulators to deny rate increases

Gov. J.B. Pritzker signed a bill June 27 giving the Insurance Department new oversight authority.

Scoping out succession paths after the death of Jim Crown

BY STEVEN R.

People used to tease Jim Crown that not long after he joined a corporate board or took a key position on one, there would be a new CEO, often a consequential one.

It happened with Jamie Dimon at JPMorgan Chase predecessor Bank One, at the Aspen Institute with Walter Isaacson, and at the University of Chicago when Robert Zimmer was named president.

Now, it’s Crown’s own rm, the family held Henry Crown & Co., that will turn to a successor CEO after Crown’s death June 25 in a racetrack accident in Colorado. Crown had been chairman and CEO only since 2018, but he was steeped in the real estate, investment and operating conglomerate founded by his grandfather Henry and led for decades by his father, Lester.

Fraudster fights to keep his VC investments

BY JOHN PLETZ

As a startup founder, Rishi Shah was a proli c fundraiser, pulling in nearly a half-billion dollars from high-pro le investors for Outcome Health before the company unraveled amid allegations of widespread fraud.

He also was a proli c investor, backing individual startups and putting money into at least a half-dozen venture funds and investment companies, including several in Chicago, such as Guild Capital, I2A/Chicago Ventures, MATH Venture Partners and 7Wire Ventures.

After Shah’s conviction on 17 counts of fraud and two counts of money laundering, the Justice Department is looking to seize those investments as part of an e ort to recover $55 million that he pocketed when Outcome Health raised capital.

Prosecutors say the money is directly tied to the fraud for which Shah was convicted in overbilling pharmaceutical companies, such as AbbVie, that advertised on Outcome Health’s network of television and computer screens in doctors’ o ces. e overbilling in ated Outcome Health’s nancials, which investors and lenders relied upon to fund the company.

When Shah was indicted in 2019, prosecutors persuad-

ed U.S. District Judge omas Durkin to freeze 26 investments made by Shah or JumpStart Ventures, a venture-capital fund he launched with Outcome Health colleagues and co-defendants Shradha Agarwal and Brad Purdy, who also were convicted on fraud charges. Now the feds want Shah to forfeit those investments, but he’s challenging the move. Agarwal and Purdy aren’t contesting the forfeiture. According to prosecutors, many of Shah’s investments have grown signi cantly since they were frozen, bene ting from a record period of venture funding when valuations skyrocketed. Prosecutors said during a

ComEd wants you to help pay for its post-scandal insurance

Liability coverage for directors and o cers at the electric utility and parent Exelon is set next year to more than double since 2019

BY STEVE DANIELS

Insurers of Exelon and its subsidiary Commonwealth Edison so far have agreed to pay $213 million to settle shareholder lawsuits stemming from the ComEd bribery scandal.

No surprise then that premiums are soaring for policies insuring Exelon and ComEd’s directors and o cers for liability stemming from the decisions they make or actions they fail to take that harm the company.

ComEd is asking ratepayers to bear at least some of those higher insurance costs in the $1.5 billion, four-year delivery rate hike

the utility is seeking, a ComEd spokeswoman con rms. But she won’t say how much, and lings with the Illinois Commerce Commission don’t disclose the gure.

“Because insurance protects customers and utilities from unforeseen and potentially significant costs, utilities like ComEd recover insurance costs in rates,” spokeswoman Shannon Breymaier says in an email.

Asked the amount and whether Exelon seeks to pass all or a portion of its insurance costs to ratepayers of its utilities, she wrote, “I won’t have anything further for you on this.”

e ICC lings do lay out, however, how much more Exelon must pay now to shield directors and o cers from liability — hardly a surprise given the hundreds of millions in settle-

ments the insurers have agreed to absorb. e company expects to pay $9.6 million this year, $10.4 million in 2024, $11 million in 2025, $11.5 million in 2026 and $12.1 million in 2027.

Coverage for directors and ofcers accounts for nearly a third of Exelon’s total payments to outside insurers in 2023. (ComEd also assumes nancial risk for a limited portion of its bodily, property and automotive liabilities, as well as workers’ compensation.)

In 2019, the year before the ComEd bribery scandal erupted, Exelon paid $5.2 million for directors and o cers insurance, according to a separate ling. at was 19% of its total insurance tab and half of what it expects to pay next year.

ough details are lacking, Exelon appears to be asking ComEd ratepayers to absorb some of the spike in insurance rates stemming from the utility’s admission to a nearly nine-year

There’s no clear line of succession at the family-held and multifaceted business empire. As the dust settles, one potential candidate may be emerging.

I

STRAHLER

The Justice Department is looking to recover $55 million that startup founder Rishi Shah pocketed when Outcome Health raised capital

Rishi Shah

See SHAH on Page 14

“THE ACCIDENT REMOVED AN EXTRAORDINARY PERSON WHO IS IRREPLACEABLE, GIVEN HIS HISTORY, INFLUENCE AND LEADERSHIP CAPABILITIES, AND THUS AN ENORMOUS VACUUM NOW EXISTS.”

Peter Crist, executive recruiter

See CROWN on Page 13

Paula and Jim Crown at a Metropolitan Museum of Art gala. Jim Crown died June 25.

Cook County continues to lose Black residents

The Black population in the county fell 2% between 2021 and 2022 to 1.26 million, according to recent estimates from the Census Bureau

BY JOHN PLETZ

Cook County is home to the largest number of Black residents of any county in the U.S. But while the Black population continues to drop here and in other traditional Black enclaves, such as New York and Los Angeles, it’s growing in the Houston and Dallas areas.

e number of Black residents in Cook County fell 2% between 2021 and 2022 to 1.26 million, according to recent U.S. Census Bureau estimates. e Black population in Harris County, Texas, which is home to Houston, rose 2% to 1.03 million.

Meanwhile, Los Angeles County slipped below 1 million Black residents. at leaves Cook and Harris counties as the only ones in the U.S. with Black populations of 1 million or more.

New York City’s Kings and Bronx counties lost even more Black residents, dropping 3% last year.

e decline in Black residents in Cook County continues a pattern that’s been underway for decades as the Great Migration from the South to the West, Midwest and Northeast reversed course, says William Frey, a senior fellow at the Brookings Institution.

“For many years the Black population has been moving to these other places for the same

reasons other groups move to the suburbs or other parts of the country.”

e Black population of Cook County declined 3% between 2020 and 2022, in line with Los Angeles and Philadelphia counties, Census data show. e decline in the Black population mirrors Cook County’s overall population decline of 3% during

the past two years. By contrast, the number of Black residents in Harris County grew 3% — or three times its overall rate of growth.

BIGGEST DECLINES

Among the 10 U.S. counties with the largest Black populations, King and Bronx counties in New York posted the largest declines, dropping 5% each be-

tween 2020 and 2022.

Harris County’s Black population grew the most during that time period, at 3%, followed by Fort Lauderdale, Fla.’s Broward County at 1% and Dallas County, Texas, at 0.3%.

e divergence between Harris and Cook counties goes beyond the raw migration, says Kenneth Johnson, senior de-

mographer at the Carsey School of Public Policy at the University of New Hampshire. e number of Black births in the two counties is reasonably close at about 13,000 a year. Deaths among Cook County’s Black population outnumber births, but the reverse is true in Harris County, Johnson says.

“It’s a continuation of the trend line we’ve been seeing for a while now,” says Elizabeth Ginsberg, senior policy analyst at the Chicago Metropolitan Agency for Planning. “We’re keeping an eye on it. It speaks to a broader need for more inclusive growth and investment overall so residents have resources they need to stay.”

If it continues, Harris County could overtake Cook County as home to the nation’s largest Black population, Frey says.

“It will take another ve or six years,” he says. “Houston is one of the largest-gaining metros. ere’s a good chance it will happen.”

He says it’s more likely before then that Dallas County will overtake Philadelphia County; Tarrant County will overtake Miami-Dade and Bronx counties; Mecklenburg County, Va., will overtake Cuyahoga County, Ohio; and Wake County, N.C., will overtake Milwaukee County.

GTCR’s buyout of payments company is its largest ever

lion, virtually unchanged from the year before.

FORMER CEO TO RETURN

BY STEVE DANIELS

Chicago-based private-equity firm GTCR last week struck its largest deal ever, with the planned buyout of payments processing giant Worldpay.

e agreement with Worldpay’s owner, publicly traded Fidelity National Information Services, or FIS, valued Worldpay at $18.5 billion. GTCR will own 55% of the company after the transaction closes, which the companies said should happen by the rst quarter of next year. FIS will own the remainder.

GTCR has reason to be hunting bigger game than it’s used to. e rm in May completed its 14th fund, raising $11.5 billion, its largest buyout pool in its history.

FUNDING

GTCR is tapping that most recent fund, as well as its $7.9 billion Fund XIII, for the equity in the transaction, according to the Financial Times, quoting an anonymous source. FIS will collect $11.7 billion in cash from the deal.

GTCR also is committing

$1.25 billion more in equity to finance future acquisitions to bolster Worldpay.

“Worldpay has established itself as a leader in the payments sector, and we see strong opportunity to enhance its existing physical, e-commerce and omni-channel presence through additional investment, allowing the business to capitalize on digital payment trends,” GTCR co-CEO and Managing Director Collin

Roche said in a July 6 release. The sale of Worldpay, which processes payments on behalf of merchants ranging from grocery stores to large retailers, follows a rocky period for the company. FIS acquired Worldpay for more than $30 billion just four years ago. Since then, the payments unit lost market share to upstarts, and the value of the unit fell. FIS earlier this year announced

it would spin o its merchant solutions business — FIS’s largest business line is technology support for banks — but then opted to auction the unit after buyer interest emerged. GTCR prevailed in the contest.

Merchant solutions generated $4.8 billion in revenue for FIS last year. e unit’s earnings before interest, taxes, depreciation and amortization — a proxy for cash ow — were a little over $2.2 bil-

GTCR has extensive experience in financial services and specifically in payments handling. FIS already had planned for Charles Drucker, former CEO of Worldpay, to return and run the company again once the deal closes. That plan remains in place once GTCR is majority owner.

“ e GTCR team has deep knowledge and experience within the nancial technology sector, which will help position Worldpay for long-term success,” Drucker said in the release.

The deal is a good sign both for GTCR and the privateequit y industry generally. The rapid rise in interest rates last year led some of the country’s largest banks to pull back on financing private-equity deals after several of them were stuck hanging onto billions in loans they’d intended to sell off after the close of some blockbusters, most notably Elon Musk’s buyout of Twitter.

The Worldpay deal has debt support from JPMorgan Chase, Goldman Sachs, Citibank, Wells Fargo and others, signaling renewed appetite from banking giants for a piece of large-scale private-equity buyouts.

The decline in Black residents in Cook County continues a pattern that’s been underway for decades.

The agreement with Worldpay’s owner, publicly traded Fidelity National Information Services, or FIS, valued Worldpay at $18.5 billion.

BLOOMBERG

Empowering the local workforce

Rita Sola Cook President, Bank of America Chicago

CRAIN’S PARTNER

Dan Russell

Russell, 54, is co-chief operating o cer of Chicago-based City Cruises, which has grown from three ports and a handful of boats to 125 boats at 16 ports throughout the U.S., with related operations in Canada, Europe and Australia. This summer the company debuted a new, highspeed thrill ride with 360-degree spins via its Seadog brand. Russell is well known at The Magni cent Mile Association, where he has served as an o cer for almost eight years. He and his wife, Margaret, live in Hinsdale with their two children, a son, 19, and a daughter, 15. I By Laura Bianchi

What kind of kid were you?

A mostly serious, hard-working dude, who wanted to stay out of trouble but didn’t always succeed. I started mowing lawns at 11, served hot dogs at the zoo and bagged groceries through high school.

Why so diligent?

I grew up with hard-working parents in Tacoma, Wash., which is mostly a blue-collar, very grounded town. It rubbed o on me.

How bad was it?

It was hot, humid labor at big industrial dishwashers for eight hours. Oh, my aching back! After the rst 15 minutes, I thought, “I have seven more hours of this?”

A heart-thumping career moment?

Sept. 28, 2018, the day we launched the rst Odyssey Chicago River cruise.

What happened?

This had been a six-year, complex project for a highly customized vessel. Close to opening day, with a hurricane bearing down on Florida, we rushed down to the shipyard on the Atlantic Coast to bring the boat up the Mississippi to a shipyard on the South Side for Coast Guard inspection.

How did that go?

The Coast Guard discovered that the actual circuitry on the boat was di erent than the drawings, which had to be reconciled. And did I mention that we had very important banking clients expect ing a river cruise that day?

Egads!

Luckily our electrician got us cer ti ed, but we were running late and had to have the cruise food prepared on a di erent boat and transferred in warming ovens to the new boat, plus do a test run of the new boat.

Did you make deadline?

We pulled up just in time to greet our client. The cruise went perfectly and the bank is still a good customer.

Your hidden talent?

I am an outstanding gardener. From evaluating soil and light conditions to plant choices and how often to water, fertilize and prune, I’ve got it down to a science. I’m experimenting with native milkweed now to attract butter ies.

What was it like to leave the mountains and forests of Washington for Illinois?

A bit jarring. When I rst went skiing in Michigan with friends, I expected a mountain. No such luck.

Worst job ever?

Washing dishes for a week as part of my 13-week, all-inclusive training when

Here’s how much HCSC paid for Trustmark’s health benefits biz

er did not respond to further questions about the size of its past acquisitions.

BY KATHERINE DAVIS

Health Care Service Corp., the parent company of Blue Cross & Blue Shield of Illinois, paid more than $400 million last year in a deal to acquire Trustmark Health Benefits, records reveal.

Terms of the transaction were not disclosed when the deal was announced last August, but HCSC filings obtained by Crain’s through a Freedom of Information Act request to the state of Illinois show the insurer paid $402.5 million in cash and an estimated $51.1 million in a three-year earnout provision to the firm’s owner.

Trustmark Health Benefits, a third-party health benefits business administrator, was a wholly owned subsidiary and one of four business units of Trustmark, a Lake Forest-based insurance company. At the time of deal, Chicago-based HCSC said Trustmark Health Benefits would help the insurer expand

services for its self-funded customers.

In a statement to Crain’s, HCSC spokeswoman Colleen Miller confirmed the company paid $402.5 million for Trustmark Health Benefits but declined to comment on details of the earnout provisions. She added that HCSC considers the asset to be a “tremendous” addition to its portfolio, saying the integration has gone “very well.”

“The acquisition of Trustmark Health benefits is the latest way we’re developing and building out our network of subsidiaries and investments in businesses with interests affiliated with ours — as we seek to increase access to quality, cost-effective health care,” Miller said.

Among the known HCSC acquisitions and deal prices, the purchase of Trustmark Health Benefits is the largest acquisition HCSC has ever closed, PitchBook data shows. Mill -

In 2013, HCSC, through its Blue Cross & Blue Shield of New Mexico division, agreed to acquire Lovelace Health Plan in New Mexico, paying $221.4 million for the asset, according to the HCSC records. The year before, HCSC announced it would buy Blue Cross Blue Shield of Montana and ended up paying $40 million for it.

Miller said HCSC believes it purchased Trustmark Health Benefits at a fair value that is consistent with its “assessment of its risk-adjusted outlook.”

RELATIVELY FAIR PRICE

Based on Trustmark Health Benefits’ revenues of about $150 million 2021, Nathan Ray, a partner in the health care practice at Chicago consulting firm West Monroe, believes HCSC paid a relatively fair price for the asset, saying it is “definitely within the pocket of forward-looking earnings.”

When the acquisition closed, HCSC said it welcomed nearly 1,000 of Trustmark Health Ben -

efits’ employees, all of whom have been retained, Miller said. HCSC, which also owns Blues plans in Montana, New Mexico, Oklahoma and Texas, saw net income climb to nearly $1.5 billion as revenues reached $49.3

billion in 2022 as COVID-19 claims stabilized and enrollment grew. The insurer added 2 million members from 2018 to 2022, totaling 17.7 million enrollees across its five plans in 2022.

The purchase is the largest acquisition the parent company of Blue Cross & Blue Shield has ever closed

When the acquisition closed, Chicago-based HCSC said it welcomed nearly 1,000 of Trustmark Health Bene ts’ employees, all of whom have been retained.

ALAMY

Chicago’s affordable housing gap widens

BY ALBY GALLUN

Chicago has never had enough a ordable rental housing, but the shortage worsened in the early months of the pandemic.

at’s a key takeaway from a new report by the Institute for Housing Studies at DePaul University. Rising rents and an increase in the number of low-income renters widened the gap between a ordable housing supply and demand in 2021 to its greatest margin since at least 2012, the study found.

It’s a discouraging sign, representing a reversal from the second half of the last decade, when the city’s a ordability gap narrowed. e report also contained another negative nugget: e share of Chicago renter households that are cost-burdened — or spending more than 30% of their income on housing — rose in 2021, ending a decline that began in 2016.

“ e pandemic exacerbated some of the existing challenges in the city, especially on the supply side,” said Geo Smith, executive director of the DePaul housing institute.

A ordability is declining the most on the city’s North and Northwest sides, in neighborhoods like Logan Square, Avondale, Rogers Park and Uptown, according to the report. Gentri cation is playing a big role: With higher-income households moving into some neighborhoods, investors are redeveloping buildings and raising rents or building new ones, pricing many tenants out of the market.

e data underscore the chal-

lenge facing new Mayor Brandon Johnson as he tries to x the city’s a ordable housing de cit. e city has a variety of tools at its disposal, including tax credits, subsidies and zoning measures, but its shortage of good housing for low- and middle-income renters is a stubborn problem that ebbs and ows but never goes away.

Yet other big cities have it worse. A new study from the Joint Center of Housing Studies at Harvard University found that 48.2% percent of renter households in the Chicago region were cost-burdened in 2021, below the national average and placing it in the middle of a ranking of 100 metropolitan areas.

GETTING WORSE IN CITY

But the DePaul study shows the problem here is getting worse within the Chicago city limits. Using data from the U.S. Census Bureau’s American Community Survey, DePaul researchers found that the supply of a ordable rental housing in the city fell 6.1% from 2019 to 2021 while demand for it rose 1.5%.

As a result, the a ordable housing gap increased to 119,435 units in 2021 from 100,197 units in 2019.

at’s the biggest gap since 2012, when the IHS data begins, but it was nearly that wide in 2016.

e institute calculates the affordability gap by comparing the demand for rental housing by households earning 150% of the federal poverty level, or $41,610 annually in 2021, with the supply of units at an annual rent equaling 30% of that income level.

Smith cautioned that the gap

LOSING GROUND

doesn’t directly express the number of units that need to be built to solve the city’s a ordable housing problem. It works instead as a broad indicator to measure the severity of the shortage and how it changes over time.

A combination of factors widened the gap. For starters, landlords were able to raise rents from 2019 through 2021, pushing many households beyond their a ordability threshold. A lot of apartment buildings changed hands during that period, and many landlords will hike rents after acquiring a property, Smith said.

“ e idea is that the new owner is probably buying it on future expectations of income,” he said, factoring rent increases into the price.

Second, the city continued to lose low-cost apartments, espe-

cially in two- and four-unit buildings. In wealthy and gentrifying neighborhoods, developers have been converting two- ats into single-family homes, reducing the supply of low-cost housing stock. Poorer neighborhoods, meanwhile, continue to lose small apartment buildings to neglect and foreclosure, Smith said.

Finally, the number of low-income households in the city grew slightly from 2019 to 2021, increasing demand for low-cost housing, according to the report.

PANOPLY OF PROGRAMS

A ordability also moved in the wrong direction by another key measure: cost burdens. By 2019, the share of renters in Chicago who spent more than 30% of their income on housing had fallen to 47.4%, down from 53.3% in 2015, according to the DePaul report. But

that share jumped to 51.1% in 2021.

e problem is especially acute for the city’s poorest renters. e share of very low-income Chicago renters who were severely cost-burdened — spending more than 50% of their income on housing — rose to 75% in 2021, from 66.7% in 2019, the report found.

e DePaul data could help progressives in City Council make their case that the city needs rent control. But the city can’t regulate rents unless the state lifts its ban on local rental-control ordinances — an idea that hasn’t had enough support in Spring eld.

e city and state already have a panoply of programs to address the a ordable housing problem. State o cials added another tool to the mix in 2021, when they approved legislation including property tax breaks for developers and landlords that invest in low-cost housing.

Building more is an obvious solution, but the most practical remedies aim to preserve the inexpensive housing that already exists.

“Once you lose a unit of low-cost housing . . . it’s hard to replace it,” Smith said.

Organizations like the Preservation Compact provide nancing and other resources to existing landlords that need extra money to keep their buildings in good physical shape. Smith also cited a zoning ordinance pilot in Pilsen than makes it harder for property owners to convert multi-unit rental buildings into single-family homes.

Land bank targets Englewood rehabs to spur homeownership

BY DENNIS RODKIN

In Englewood, a part of Chicago where abandoned and derelict buildings are legion, there’s a newly intensi ed push from resident groups and the Cook County Land Bank Authority to revitalize empty homes into vessels for expanding homeownership.

“ is is a community where the majority of homes are vacant,” says Asiaha Butler, CEO of the Resident Association of Greater Englewood. “Our strategy is to change that in a reparative way that

ings at no cost in June as part of its Juneteenth e ort to “help them move their horizons forward,” said Jessica Ca rey, the land bank’s executive director.

At the same time, the land bank cut in half the prices on its inventory of 113 rehab-ready distressed residential properties in Englewood. Previously priced at between $10,000 and $25,000, they’re now at $5,000 to $12,500.

“ is is our initiative to really get people into homeownership and get them building generational wealth,” Ca rey said. By targeting Englewood with the discounted prices and property giveaways, she said, “we will see the e ect in the whole neighborhood.”

Jessica Ca rey, executive director of the Cook County Land Bank Authority

(increases) homeownership in a neighborhood that has historically been harmed by redlining, predatory lending and other ways that stripped away Black wealth.”

Butler’s group, RAGE, is one of two Englewood nonpro t groups that the Cook County Land Bank Authority gave residential build-

e Cook County Land Bank Authority, launched in 2013 as an e ort to strip the red tape o foreclosures and other distressed properties so they could get put back to productive use, on Juneteenth also gave properties to two groups outside Englewood, the Greater Auburn-Gresham Development Corp. and Claretian Associates in South Chicago.

Englewood can bene t from

the intensi ed focus. Some vacant properties have been in trouble for decades, and many are remnants of the early-2000s foreclosure crisis, when Englewood’s rate of foreclosure peaked at 5.6 properties per 100 in 2009, or more than four times the citywide rate, according to the Institute for Housing Studies at DePaul University. e foreclosure rate remained high in Englewood for a decade after that.

e institute also reports that 23.6% of households in Englewood own their home, about half the rate in Chicago and a little better than one-third the national rate.

“I’m happy that the land bank is doing this in Englewood,” Butler said. “ ey get it; they get what we need to do here to make a change.”

e land bank gave RAGE a house on 66th Place, an empty and foreclosed property that the county has owned since 2017. Butler said rehab will cost about $250,000, which the group has on hand from philanthropic sources.

Getting the property at no cost helps keep the ultimate sale price below RAGE’s target of $300,000, Butler said.

As part of RAGE’s Economic Upliftment Program, “we’re going to use this house to demonstrate to the community what it takes,”

Butler said. at includes installing new climate systems and updating the roof, kitchen and baths. RAGE will also tutor potential buyers on the nancial incentives available to moderate-income buyers from lenders, the state of Illinois and others, she said.

About a mile and a half away, on Bishop Street, the land bank gave an abandoned red brick two- at to No Matter What, a youth mentoring and summer camp program run by Kenneth Gri n.

YOUTH CENTER PLANNED

e boarded-up building “has been a sour spot for the neighborhood, where you saw trash and kids going in to do things,” says Gri n, a Chicago police o cer and Englewood resident. “It’s a block where people cut the grass and keep things nice, so we’re grateful to be able to do something better with it.”

It’s not clear how long the building was empty, but it was in the process of foreclosure for 12 years by the time the county took ownership in 2021, according to the Cook County clerk.

Gri n’s six-year-old group started a community garden last year on an empty lot that he purchased for $200 in a county tax scavenger sale. It’s next door to

the two- at, which he now plans to rehab into a youth center.

While rehab work requiring technical expertise will be handled by professionals, Gri n wants young people in the group to paint and do other non-skilled work, learning job skills along the way. e land bank typically sells its properties to for-pro t developers who rehab them. at strategy generated hundreds of home rehabs, mostly by small startup developers. at pipeline has slowed because of rising interest rates that make selling the nished product more di cult.

Ca rey said the four properties the land bank gave away on Juneteenth were ones “that developers have not (said) they would like to rehabilitate” and could be used strategically by the nonpro ts.

In its rst decade, the land bank sold 145 Englewood parcels, including both vacant land and sites with derelict homes on them, Ca rey said. e discount it announced recently covers 113 parcels it still owns with homes on them. Vacant land is not discounted.

e goal, Ca rey said, is to accelerate the pace of housing rehabs in the neighborhood. “We want that focus on growing homeownership,” she said.

The gap between the supply of and demand for affordable housing in Chicago expanded in 2021 to its widest margin since at least 2012 amid rising rents, a continued loss of low-cost housing and an increase in the number of low-income renters.

Source: Institute for Housing Studies at DePaul University, American Community Survey PUMS Data 1-Year, 2012-2019, 2021

“THIS IS OUR INITIATIVE TO REALLY GET PEOPLE INTO HOMEOWNERSHIP AND GET THEM BUILDING GENERATIONAL WEALTH.”

OUT-OF-TOWN EMPLOYERS CRAIN'S LIST

Ranked by full-time local employment as of 12/31/2022. e = Crain's estimate (in gray).

|IncludeslargeemployerswithprimaryheadquartersoutsideCook,Kane,Lake,DuPage,Will,andMcHenrycountiesinIllinoisandLakeCountyinIndiana.Figuresestimatedby Crain’sareproducedusingvarioussourcesofinformationaboutthecompaniesandtheirindustries.Otherinformationisfromthecompaniesandpublicsources.TopChicago-areaexecutivesareincludedwhenavailable.Incaseswherewe’vepublisheda full-timelocalemployment gurealongsideaworldwide gurethatincludespart-timeemployees,thepercentageofemployeesinChicagoshouldbetakenasaroughapproximation.NOTES: e. Crain'sestimate.

ResearchbySophieRodgers(sophie.rodgers@crain.com).

1. Includesestimateddistributioncenter employment guresfromMWPVLInternational.IncludesWholeFoodsemployees.

2. Includespart-timeemployees.IncludesWholeFoodsemployees.

3. Includespart-timeemployees. 4. CalculatedfromSEC lings.Re ectsallAlbertsonsemployees. 5. Re ects headquarters of parent company, Albertsons. 6. Calculated from SEC lings. 7. Company estimate. 8. Includes subsidiaries of Deloitte LLP. Want 42 companies in Excel format? Become a Data Member: ChicagoBusiness.com/Data-Lists

Chicago’s arts industry needs a champion. The city’s long-term survival depends on it.

Even if you don’t consider yourself a regular of Chicago’s arts and culture scene, the stunning news late last month that one of the city’s most alluring independent theater companies, Lookingglass eatre, is cutting its sta by more than half and halting production until next year should give you pause.

What brought Lookingglass — started in 1988 by Northwestern University graduates, including actor David Schwimmer — to its knees is not isolated. It’s a story of a post-pandemic con uence of events that threaten one of Chicago’s iconic industries and one that business, philanthropy and especially city and state o cials should address on a broader scale, immediately.

Like everything else, theaters and cultural institutions shut down abruptly in March 2020 as the pandemic raced across the city and the country. Slow to reopen, because of the very nature that people must sit close together in an enclosed space, the city’s arts community experienced a far tougher back-to-business story than most.

But other factors are playing into ongoing signi cant challenges that, if not addressed, will make Lookingglass’ situation not just a one-o , but a rolling derailment of one of the city’s greatest assets — one that attracts businesses, workers, tourists, restaurant-goers and more to the Loop and other neighborhoods.

Fear of crime in the Loop and the neighborhoods has taken over the fear of COVID in keeping audiences away. So is the city’s halting return-to-o ce situation. Week-

day nights, and especially Fridays, used to be big for theaters, as o ce workers left their cubicles to meet up for dinner and a show.

Now, Fridays are eerily quiet.

Add to that the bleeding of corporate underwriting, a lifeline for Chicago’s independent arts scene, that started prepandemic and you write a script t for an epic tragedy. Nowhere is this more prev-

alent than in some of the neighborhoods, where a once-thriving, diverse theater scene that was a model for the country — not to mention an exporter of talent — now risks slipping into oblivion.

“I wish on the federal, state and local level, there was a greater recognition that this evolution is going on and the nancial challenges that people are facing,” Roche Schulfer, executive director and CEO of

the Goodman eatre, told Crain’s after the Lookingglass announcement.

It’s no understatement that the arts and culture scene’s survival is crucial to the city’s long-term survival.

Mayors Richard M. Daley and Rahm Emanuel both understood that. Daley pulled strings and twisted arms, in the typical Daley style, to force a re-imagining of the Loop theater district, jump-starting a new era that kept workers from emptying out of the city center after work. at sparked new restaurants and helped what was, back then, a stagnant o ce market. Sound familiar?

Emanuel, whose heart is in the arts, picked up the baton and used the city’s bustling independent arts district as a selling point for out-of-town companies and their employees to relocate here.

Now it’s time for business and Mayor Brandon Johnson’s team to take up the mantle and work with our city’s institutions to once again (pardon the pun) put this issue at center stage. is requires a coordinated rethinking of the business model, as a start. But like any big turnaround that has happened in this city over the past several decades, it takes leadership. Chicago’s biggest companies need to reinvest and encourage employees to take notice of the incredible work by world-class artists here, not just in the Loop, but in the neighborhoods where some of the most innovative work is being done.

Most important, our arts and culture industry needs a champion on the fth oor at City Hall. at champion should be you, Mr. Mayor.

Mayor should look beyond biz in taxation overhaul

Chicago Mayor Brandon Johnson, who’s in hot pursuit of new city revenues, might want to check out neighboring Evanston, where some residents and politicians are backing a controversial cash-generating program that’s already working in other municipalities.

It’s called payment in lieu of taxes — or PILOT — and it’s aimed primarily at large, land-owning nonpro ts, such as colleges or medical centers, that are legally exempt from paying local property taxes, even as they enjoy essential taxpayer-supported services spanning from public safety to garbage pick-ups.

e Johnson administration is prospecting $800 million in added tax revenues, most of it coming from business interests. So far, the mayor hasn’t zeroed

in on large nonpro ts, but nothing is stopping him from taking a hard, calculated look at these institutions and their impact on public resources.

Yes, it may be politically risky for Johnson to tussle with powerful nonpro ts, but that’s a chance the recentlyelected mayor, who vows to hold the line on property taxes for everyday folks, should be willing to take.

In Evanston, PILOT-backers argue that Northwestern University — which has an estimated $15 billion endowment and owns a signi cant swath of that suburban city — should start paying for the civic benets it enjoys gratis. at includes police, re, tra c control and emergency support.

is debate has simmered for decades in Evanston but is coming to a boil after

NU recently sought a zoning variance that’s essential to the university’s $800 million rebuild of its Ryan Field football stadium, located in the bosom of a residential neighborhood. NU wants to build a bustling sports/entertainment complex that critics argue is a for-pro t venue within a nonpro t organization. (Besides football games, NU wants to host up to 10 concerts/events and a bunch of other smaller programs).

NU and the city are in stadium negotiations. Local advocacy groups and some Evanston council members argue this is an unprecedented opportunity to ink a NU-Evanston PILOT pact.

O cially, NU says it’s open to talking about anything with the community, but local powerbrokers privately say the university is adamantly opposed to a PILOT that requires it to pour a yearly sum — probably in the millions — into city co ers. (Since 2015, NU has a strictly voluntary “good neighbor fund” that contributes

about $1 million annually to Evanston.)

Yet with or without a stadium deal, NU nds itself increasingly out of step with other elite universities that, in recent years, have entered into multimillion-dollar PILOTs or similar compacts with their host towns. Some examples: Brown University gave over $4 million to Providence, R.I., and created a $10 million endowment for public schools; Yale University has agreed to give around $16 million annually to New Haven, Conn.; Princeton is giving $14 million over ve years to local public schools.

In Chicago, the new mayor is pursuing assorted taxes by mostly tapping an array of business interests. He envisions a nancial transaction tax, a reinstatement of the employee head tax on companies, boosting the real estate transfer tax, a “pollution” tax on commercial airlines, and various “user” fees for the tourism and convention trade.

Obviously, the mayor’s objective

Robert Reed is a veteran Chicago journalist and a former editor of Crain’s Chicago Business.

ISTOCK

doesn’t have the private sector whooping with joy.

But if Johnson is determined to overhaul institutional taxation, why limit it to traditional business? How about spreading the burden?

Wealthy nonprofit targets abound, including the University of Chicago, Loyola University Chicago and DePaul University. Each institution has been growing and owns a lot of land throughout the city.

I’m not certain what these organizations actually think of payments in lieu of taxes. I’ve sent emails to each asking about their PILOT positions and have yet to get a response.

But it’s safe to assume they aren’t wild about the idea any more than busi-

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ness chiefs like the tax hikes heading their way. It’s also likely these nonprofits would remind us that they are major employers, important neighborhood anchors and necessary providers of charitable or pro bono services, including medical, legal and educational works. ey also enhance Chicago’s cultural and international standing.

is is all absolutely true.

But can’t that also be said of the growing number of other universities that have entered PILOTs with their hometowns?

Undoubtedly, pursuing these agreements will be politically prickly.

Some of the area’s largest medical centers — including those run by universities — are increasingly under re

from activists claiming these nonpro t providers spend a minuscule amount of their revenues on free patient and community care.

Moreover, publicly owned Stroger Hospital has far outpaced other Cook County medical centers, contributing about 54% of its revenues to charity work, while its 10 biggest peers posted charitable spending in the low single digits, according to the Illinois Health Facilities & Services Review Board.

In late 2019, Ald. Jeanette Taylor — who was recently re-elected to represent the 20th Ward — introduced a City Council resolution chiding “wealthy” educational and medical nonpro ts for failing to supply adequate community support. Her resolution asked the city to negotiate a

PILOT with large universities and health care nonpro ts, including the University of Chicago and Loyola.

e measure languished in committee, partly because pandemic concerns overshadowed the issue.

But there’s a new mayor in town — along with a reconstituted and more politically independent City Council — so a PILOT initiative could get a second wind like it is in Evanston. Of course, that’s provided the city’s powers-that-be are willing to take on the cause.

Johnson is demanding for-pro t industries pony up more tax money. So why not ask great, successful and tax-exempt nonpro ts — many of which run like corporations anyway — to start pitching in, too?

PEOPLE ON THE MOVE

ACCOUNTING

ORBA, Chicago

ORBA, one of Chicago’s largest public accounting rms, welcomes Taylor Sterling and Georgia Smeu to ORBA’s Tax Group. Taylor will be working with clients to prepare consolidated, multi-state and corporate tax returns for corporations, partnerships and S-corporations. She will also be using her expertise in foreign tax lings and preparing response letters of evidentiary support for IRS and state tax notices.

Georgia will be reviewing incoming cash ows, researching and providing tax solutions, and preparing tax returns for individuals. She has experience working with various tax agencies, including states, municipalities and the Internal Revenue Service.

ARCHITECTURE / ENGINEERING

Lamar Johnson Collaborative, Chicago

Lamar Johnson Collaborative Elevates Scott Stolarz AIA, NCARB, BECxP to Principal and Nick Casaletto BECxP, CxA+BE, CDT, LEED Green Associate to Associate Principal.

Scott has 24 years of experience working on large, complex academic buildings, corporate headquarters and data centers, and healthcare facilities. He leverages his in-depth knowledge of the construction process to deliver design solutions to clients. Scott holds a Bachelor of Architecture and a Bachelor of Environmental Science both from Ball State University. Nick has 14 years of experience focusing on the design and re ning construction processes of exterior wall and roo ng systems. Nick holds a Master of Architecture from Boston Architectural College and a Bachelor of Science in Architectural Studies from the University of Illinois at Urbana-Champaign.

CONSTRUCTION

Buildots, Chicago

Jessica Herrala has joined the construction technology rm Buildots, becoming one of the highest ranking women in the construction technology space. Herrala brings more than 25 years of construction industry experience in sales, communications, marketing, strategy and operational improvement and has held executive positions at multiple leading construction and real estate development companies including Skanska, Walsh Group and Clayco.

GOVERNMENT

Illinois Housing Development Authority, Chicago

Ed Gin, Chief Financial Of cer of the Illinois Housing Development Authority, was named to the Government Finance Of cers Association’s Executive Board. GFOA seeks to advance excellence in public nance throughout the U.S. and Canada. Ed led IHDA to achieve GFOA’s Certi cate of Achievement for Excellence in Financial Reporting in 2022. Ed is a banking veteran from J.P. Morgan and was previously named a Crain’s Notable CFO and a Financial Executives International CFO of the Year nalist.

MARKETING

HydraForce, Lincolnshire HydraForce, a leading manufacturer of hydraulic valves and manifolds, has appointed David Krafft as marketing and communications director. In this role, Krafft is responsible for developing and overseeing HydraForce’s global marketing strategy and ensuring that it achieves company goals. Krafft joins HydraForce with 15 years of marketing experience. He was most recently digital marketing manager at Grifols, a pharmaceutical manufacturer.

ARCHITECTURE / DESIGN

Kahler Slater, Chicago / Richmond / Milwaukee / Madison

Kahler Slater is pleased to announce the promotion of Kim Bruffy to Principal. She serves as the National Director of Business Development for the rm’s Healthcare market. Kim is an accomplished leader with over 30 years of business development, project management, and interior design experience. Her ability to cultivate relationships with current and future clients has contributed directly to our signi cant growth within the Healthcare and Mid-Atlantic markets.

BANKING

Byline Bank, Chicago

Byline Bank welcomes

Chad Lyons as Senior Vice President in the Commercial and Industrial Banking group.

Lyons’ commercial banking experience spans 28 years working for multiple regional nancial institutions. As part of Byline’s commercial banking team, Lyons will report to Brogan Ptacin and focus on franchise banking for Tier I food concepts and continue to serve traditional commercial banking clientele.

EVENT MKTG / PRODUCTION

Kindle Communications, Chicago

Kindle Communications is pleased to announce the addition of Olivia Merlin as Account Director, Client Services and Business Development. Olivia comes to Kindle with seven years in experiential marketing and events, along with leadership roles in production, working primarily in the tech and biopharmaceutical industries. At Kindle, Olivia will help cultivate relationships with new clients and build on the exceptional reputation the brand has established.

MARKETING

McGuf n Creative Group, Chicago

ARCHITECTURE / DESIGN

Kahler Slater, Chicago / Milwaukee / Madison / Richmond

Kahler Slater is pleased to announce the promotion of Evelyn Freimann and Kelli Zaremba to Associate Principal. Evelyn is an accomplished and recognized project leader with a focus on highly complex projects including mixed-use, multifamily, and urban in ll/adaptive-reuse projects.

Freimann Zaremba

Kelli serves as the National Director of Business Development for the rm’s Residential, Hospitality, and Corporate markets. She is known within the architecture and interior design industry for her ability to authentically build relationships, grow brands, and articulate a client’s vision into the design process.

BANKING

First Bank Chicago, Northbrook

One of Chicago’s top ve privately held banks, First Bank Chicago is pleased to announce John Berghorst’s promotion to the Chief Lending Of cer of the Commercial Real Estate Group. John shapes a CRE lending strategy focused on providing exceptional service and producing disciplined growth of the loan portfolio. His experienced team develops and expands relationships for a loyal and growing client base across many asset classes. John has 30+ years of CRE experience and joined the Bank in 2020.

FINANCIAL SERVICES

Mesirow, Chicago

David Schrock joins Mesirow Global Investment Management as a Managing Director, responsible for the distribution of the rm’s traditional and alternative investment management capabilities to institutional investors in the U.S. western region. Previously, David was the Head of U.S. Institutional at London-based Jupiter Asset Management, where he was responsible for helping to launch and build their business with institutional investors and consultants in the United States.

FINANCIAL SERVICES

Mesirow, Chicago

Mike Tadlock, CFA, now serves as a Managing Director in Mesirow Global Investment Management. In this position, Mike plays a pivotal role in maintaining and building relationships with institutional consultants across the globe. Before assuming the position at Mesirow, Mike was a Senior Product Specialist, Head of Global Consultant Relations at DCI, and subsequently, a Principal at Blackstone.

LAW FIRM

Honigman LLP, Chicago Honigman LLP has welcomed Justin D. Gingerich to its Chicago Of ce as a Partner. Based in the rm’s Transactions and Counseling Group, Justin specializes in venture capital, private equity, and M&A transactions. He works with start-ups and private companies, managing their life cycle from formation and structuring to fundraising and strategic exits. Justin has extensive experience advising nancial institutions on issues related to strategic transactions, deal structuring, and diligence.

The American Marketing Association Chicago has named Chris McGuire 2023-2024 chapter president. Chris, Director of Client Growth and Engagement at advertising and marketing rm McGuf n Creative Group, has served on the board of AMA Chicago for four years and brings 25 years of industry leadership to the position. Chris will lead the largest AMA chapter to establish a mentorship program, as well as position the chapter as a marketing resource to the broader Chicago business community.

NON-PROFIT

Aspire, Hillside / Waukegan

LEGAL

Levenfeld Pearlstein, LLC, Chicago

Levenfeld Pearlstein is pleased to announce that Simone Randolph has joined the rm as a Partner in the Financial Services and Restructuring Group. Simone focuses on representing clients in a wide range of complex nancial transactions, including syndicated, mezzanine, and construction nancing. She also advises lenders on loan purchases, sales, restructurings, and modi cations. Simone serves on the board of the Women’s Bar Foundation and Chicago Loop Alliance.

Serena Alaily is named Chief Executive Of cer of Aspire, helping empower people with developmental disabilities, rethink accessibility and reshape communities. Previously as Aspire’s CFO, Serena led a $7 million merger and doubled Aspire’s equity. With 20 years of in uence in Chicago’s non-pro t sector, she’ll steer Aspire’s next strategic plan by partnering with DEI focused business leaders, people with disabilities and donors. Become a partner in progress at aspirechicago.com.

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

Stolarz

Casaletto

Sterling Smeu

Bucking the fast-fashion, disposable trend

‘There is no intelligence, arti cial or otherwise, that can replace the spirit of a work made by hand,’ says Angie West, co-founder of Refractory in Logan Square

BY ZLATA KOZUL NAUMOVSKI

In a world of fast fashion, disposable products and cheap goods, a new Chicago design studio o ers handcrafted furniture and accessories meant to be heirlooms.

Refractory, founded by Angie West and Alberto Vélez, embraces a respect for American craft and the artisans who painstakingly produce the lighting, furniture and sculptural objects designed by the partners. Made of cast bronze, cast glass and wood, the pieces cost upward of thousands of dollars and are meant to last generations. It can take up to 10 artisans who have mastered centuries-old techniques and 40 hours to make a single item. “ e work is the polar opposite of disposable or temporary,” said West.

Refractory was born as a means to bring in new business when the COVID pandemic threatened work orders for West Supply, a foundry owned by West and a sister company to Refractory. West Supply fabricates high-end furnishings commissioned by designer and architect clients and serves as a production partner to the furnishings designed by Refractory.

e businesses share space in a 40,000-square-foot building in

Logan Square, where products are fabricated by welders, pattern makers, glassworks artisans and industrial designers. “We were rescued by the nancial programs the government put in place (during COVID), but we had far too few orders to perform against,” West said of the foundry.

“We needed to create new work to keep the team intact.”

Incubating a new design studio o ered a solution. “ e pandemic forced my longstanding dreams of both designing and making work into lightning-fast progression,” West said.

In its inaugural series, Refractory o ers contemporary light xtures, vessels and furniture, including a monumental dining table that weighs 600 pounds. Each is stamped with a maker’s mark as a symbol of provenance. e work is labor- and process-intensive, involving multiple steps.

Artisans must make a pattern, cut a silicone mold, pull and burn out wax, heat kilns, pour molten bronze, break ceramic shells, machine- and ne- nish cast metal, chase away welds and patinate metal. “ at’s just for the bronze components of the form,” West said. West Supply has its own glassworks studio, too.

A minimum of six artisans and often up to 10 handle each piece, with many crew members producing a single work all the way through from mold to patina, which is the nal nishing step. “It takes grit and such a fortitude in working with these materials,” West said, “the complexities, the variables and all the things that can go wrong.”

‘MEANINGFUL, PERIOD’

All that handcrafting comes at a steep price. With most pieces requiring 20 to 40 hours of time and combined with costs for materials, the manufacturing cost of each piece that moves through the workshop ranges from $2,500 to $10,000, according to West. She marks up the price two to three or more times its costs when selling to the trade or collectors through showrooms and galleries.

As a center of small-scale urban manufacturing, Chicago has no shortage of companies creating handcrafted pieces. Gentner Design fabricates furniture and light xtures of metal, while Troscan Design has an in-house team of woodworkers, nishers and fabricators who craft bespoke furniture and sculptures of wood. Anees specializes in custom upholstery and

has a new showroom at the Merchandise Mart. Dozens of other fabricators and purveyors throughout the city produce sculpture and handcrafted goods as well.

But with combined revenues of $6.5 million for 2022 and $7.5 million projected for 2023, West Supply and Refractory are among the most robust. “2022 was a big year for us, due to the pent-up demand that was unleashed on the interior-design industry halfway through and following the pandemic,” West said. “We aim to evolve conservatively in 2023

and to continue to invest in our team, infrastructure and o erings.”

Long-term plans include a consumer-facing brand of handcrafted home goods and an apprenticeship program to teach future generations American craftsmanship, which is increasingly being threatened by mass production and imports.

“It is important to preserve handcraft,” West said. “Work produced by hand is meaningful, period. ere is no intelligence, articial or otherwise, that can replace the spirit of a work made by hand.”

Scoping out succession paths for the firm in the wake of Jim Crown’s death

CROWN from Page 3

A person with knowledge of the rm’s dynamics says there’s no clear line of succession, that a case could be made for any of several family members or for none of them. One potential candidate is William Kunkler, a Crown in-law who has worked at family-a liated companies since the early 1980s .

It’s di cult to imagine someone possessing both the detailed knowledge of the rm and the management breadth that Crown had established over nearly four decades after earning a law degree, working on Wall Street and serving as lead director since 2010 of both Chase and defense contractor General Dynamics.

And despite a heterogeneous portfolio that ranges from sports teams like the Chicago Bulls and New York Yankees and real estate like Rockefeller Center and Aspen ski trails to investments in public companies like Chase and General Dynamics, it’s improbable that the rm will confront family breakup pressures of the kind that upended the Pritzker empire two decades ago. Nevertheless, new management could reshape the portfolio by pursuing acquisitions and divestitures. e Crown fortune was estimated at $10.2 billion in 2020 by Forbes magazine.

“ ere were no strategic cleavages or personality factions,” said Je rey Sonnenfeld, a dean and professor at the Yale School of Management, where he holds the

Lester Crown chair in management practice. He says Jim Crown “didn’t have a con dence problem where he had to hoard everything” and that his relatives on the payroll “were not pushed aside in the shadows or ghettoized in specialty elds.”

ose relatives encompass Crown’s older brother, Steven, a general partner of Henry Crown; their younger sister Susan; a cousin, William, CEO of Crown unit CC Industries; and Crown in-laws Jamie Star and Richard Robb. Two of Jim Crown’s four children — daughter Torie and son Andrew — have joined the rm in nancial roles, according to people with knowledge of the situation.

‘ENORMOUS VACUUM’

At 98, patriarch Lester Crown continues as chairman emeritus of the enterprise begun in 1919 by his father and two uncles as construction supply rm Material Service. Other Crowns have carved out business and philanthropic careers outside the rm, including Keating Crown, Steve’s son, a managing principal at developer Sterling Bay.

A key outsider is Craig Martin, a family consigliere whose law rm, Willkie Farr & Gallagher, handles Crown estate matters. He could serve as a “stop-gap organizer” of Henry Crown a airs in the wake of Jim Crown’s death, according to the person familiar with the rm.

At a Willkie Farr reception last June at the Museum of Contemporary Art, Jim Crown stood among a bee

swarm of supplicants on the museum’s terrace, testifying to his sway and the challenges associated with replacing him.

Martin, who chairs the New York law rm’s Midwest o ce here, couldn’t be reached for comment. In an email, an intermediary passed along a message from him, writing, “nonstop for us. Not ignoring (your request for comment) but hundreds of messages.”

A spokesman for the Crowns said the family would decline to comment on succession plans.

Jim Crown was killed on his 70th birthday on June 25 when a car he was driving collided with a barrier at a motorsports park in Woody Creek, Colo., near the family’s Aspen-area skiing and resort interests. A sheri ’s report said he had been racing “very fast” and trying to reduce lap times.

Days before, he and his wife, Paula, had attended the White House state dinner for Indian Prime Minister Narendra Modi. Less than a month ago, Crown had gone public with a strategy to confront Chicago’s endemic violent crime problems as head of a newly established public safety task force by the Civic Committee of the Commercial Club of Chicago.

“ e accident removed an extraordinary person who is irreplaceable, given his history, in uence and leadership capabilities, and thus an enormous vacuum now exists,” says Peter Crist, an executive recruiter who suggests the rm not overlook

outside CEO candidates.

Crown’s reach was facilitated by the approach he took as a corporate director, according to James Gordon, a former neighbor who runs a private-equity rm. “He got the right people to run the organization and got huge leverage on his time that allowed him to do so many things,” Gordon says.

Still, Crown was criticized for spreading himself too thin when he headed Chase’s risk policy committee, and the bank su ered $6 billion in losses and nearly $1 billion in nes as a result of a derivatives trading debacle a decade ago instigated by an employee who became known as the London Whale. At the time, Crown, as a Sara Lee director, was supervising a spino and conducting a search for a CEO at the food company, while General Dynamics was wrestling with federal budget cuts.

Kunkler has been married since 1981 to Susan Crown and employed since 1985 by CC Industries, a private-equity rm owned by Henry Crown that invests in real estate and operating companies, like truck trailer manufacturer Great Dane. He’s executive vice president for operations and a vice president of the parent company, according to a corporate bio. CC Industries calls itself as “the primary ownership and management vehicle” for Crown’s operating companies.

A native of Worcester, Mass., and, like his wife, a graduate of Yale University, Kunkler worked initially as an engineer for gypsum maker

USG and then Marblehead Lime, a General Dynamics unit. He has a master’s degree from Northwestern University’s Kellogg School of Management.

Notwithstanding civic and philanthropic roles at the Field Museum, Brook eld Zoo and Northwestern Memorial Foundation, and serving as co-chair of a business coalition on immigration, Kunkler has kept a low public prole. According to his bio, his lone public company directorship was at Sears Holdings from 2009 to 2018.

Jamie Star, another executive and family member, is married to Sara Crown Star, a sister of Susan and Jim. He is executive chairman of Longview Asset Management after serving until 2019 as CEO of the Crown investment a liate, according to a corporate bio. Holding a law degree from Yale and a master’s from Kellogg, Star has been a vice president of Henry Crown since 1994.

Whoever takes over will inherit the mantle not only of Jim Crown but of Lester Crown, too.

During visits to Chicago, the late Sen. Edward Kennedy would make a point of meeting with the patriarch, a staunch Democratic Party donor and supporter of Israel. But whenever Kennedy tried to interest Crown in taking on a public service role, Crown had a standard answer, according to someone who attended the meetings: “I have one job, Ted. at job is to hold the family together.”

Refractory’s handcrafted home items

Banks’ scramble for your money means great savings rates Fraudster fights feds

are drumming their ngers with more than the usual anticipation for a fresh look at banks’ deposits and other sources of cash. How much are banks now paying for the money they lend out? What percentage of deposits are now interest-bearing versus those stashed in demand accounts like checking, which typically don’t pay interest?

“It’s 100% deposits, deposits, deposits,” says Terry McEvoy, analyst with Stephens in Portland, Maine. “How is market competition a ecting the overall cost of funds?”

ose banks showing larger-than-expected deposit declines are likely to get punished on Wall Street. Likewise, investors will be poring over banks’ net interest margins — the difference between what they earn on assets and what they pay for deposits and other funds. ose posting margins narrowing considerably more than analysts’ estimates are likely to pay a price in the markets.

It’s not as if bank stocks haven’t already sunk. e KBW Nasdaq Bank Index, which tracks banks other than colossal ones such as JPMorgan Chase and Bank of America, is down 23% so far this year.

Publicly traded locally based commercial banks Wintrust Financial and Byline Bancorp are down 19% and 21%, respectively.

MORE BARE-KNUCKLED

Deposit deals available in the Chicago market right now include a 5.35%, 11-month CD at Wintrust, the fourth-largest area bank by deposits, for $1,000 or more not already stashed there. BMO, the second-largest Chicago-area bank by deposits, is o ering 4.75% for 12 months. Fifth ird, the sixth-largest by deposits, is o ering 5% for ve months and 4.75% for 12 months.

ese sorts of yields haven’t been available from banks since

2006, says Greg McBride, senior vice president and chief nancial analyst at Bankrate.com.

“CDs are back on the radar screen for retirees,” he says.

McBride marvels, though, at how many depositors haven’t yet reacted and still have their cash in accounts earning virtually nothing.

“For those who have, it’s the easiest return you’ll nd,” he says. “ e only free lunch, and it (just requires) moving from one bank to the next.”

For banks, this go-round in frenzied competition for cash is more bare-knuckled than it was 15-plus years ago. Back then, there weren’t as many online banks paying higher rates than their brick-and-mortar competitors could a ord to pay. (One of those, Riverwoods-based credit card giant Discover Financial Services, is o ering 5% on CDs of $2,500 or more over 18

months, a longer term that most commercial banks are willing to do.)

Likewise, marketing over the internet wasn’t so ubiquitous.

ose on the hunt for the best rates had to scour print newspapers for ads.

“It’s hard as a consumer to miss the promotions that are out there,” Old National’s Tischler says. (Old National is o ering 4.68% on a 15-month CD with a minimum $500 and 4.85% for nine months.)

OPPORTUNITY

Rosemont-based Wintrust, the last remaining homegrown commercial bank of size after multiple local banks sold to out-of-state acquirers, views the current challenges as an opportunity to take market share.

“Chicago is still a fragmented market compared to many urban areas,” Wintrust CEO Tim

Crane says. “We still have only 7% to 8% of the market. It’s not surprising to us that the competition is meaningful.”

He says Wintrust feels particularly good about a uent submarkets in which it’s recently opened branches, like Oak Park and Glenview.

Not every bank feels compelled to pay up for cash. e largest of the large — Chase and Bank of America, for example — bene ted from the mini-crisis enveloping the industry a few months ago after Silicon Valley Bank failed. Many businesses with deposits at levels well above what is insured by federal regulators moved their cash to institutions like those giants, viewed as “too big to fail.”

Chase is the largest bank in the Chicago area by deposits but still has only about a quarter of the market. Bank of America is the third-largest.

ComEd wants you to help pay for its post-scandal insurance

COMED from Page 3

bribery scheme, even as its insurers bear all the costs so far of settling shareholder lawsuits.

Exelon’s subsidiaries — in addition to ComEd, the company owns utilities serving metropolitan Philadelphia, Baltimore and Washington, D.C., as well as other portions of Maryland and a part of New Jersey — get their insurance coverage through the corporate parent. Similar to other large corporations, Exelon has a business services unit, which procures items like legal assistance, information technology, nancial services and insurance on behalf of subsidiaries.

e business services unit’s costs then are allocated to the utilities each year.

In testimony submitted Jan. 17 to the ICC, ComEd Chief Financial O cer Lisa Graham spoke to the increase in insurance costs allocated to ComEd in a passage aimed more directly at rejecting arguments that the spino of Exelon’s power-generation business in 2022 was saddling utilities like ComEd with more expenses.

“While ComEd’s (business services company) costs will be higher, these increases are unrelated to the separation, and are due to items such as in ation and increased costs for services such as insurance,” she wrote.

PAYOUTS

Insurers have agreed to pay $40 million. A quarter of that, $10 million, will go to the plain-

ti s’ attorneys. Exelon will collect the remainder, since the shareholders who sued did so on behalf of the company.

Exelon also has agreed in that proposed settlement to overhaul its board and impose signi cant restrictions on political lobbying.

Exelon in May struck a separate $173 million settlement in which the cash will go to shareholders who sued, arguing they su ered losses in the value of their holdings due to the scandal. e company said insurance would cover the entire cost.

ComEd’s rate-hike request is pending before the ICC. Commissioners must act on it by December, and they could reject the utility’s bid to recover all the

forfeiture hearing that they have more than $15 million in escrow from investments that already have been liquidated.

In court lings, Shah’s attorney estimates the value of a $1.2 million stake in one investment fund frozen by the feds is now worth about $21 million. Shah argues that the government is entitled to less than half that amount, even if Durkin approves an asset forfeiture, because much of that particular investment predates the money Shah received in connection with the fraud.

It’s not that unusual in fraud cases for defendants to have investments that grow substantially after they’re frozen, says Je rey Alberts, a former federal prosecutor who co-chairs the white-collar defense practice at Pryor Cashman in New York.

“Lots of times, rich people have these investments in partnerships and other ventures,” he says. “ e government gets all these partial interests in illiquid investments. It’s sort of like an estate sale.”

Shah’s attorney, Richard Finneran of Bryan Cave Leighton Paisner, says the amount of assets the government froze before the trial — including Shah’s home in River North — exceeds the $55 million that can be traced to the fraud.

At minimum, he argues that prosecutors froze more than $1.1 million in assets that weren’t connected to fraud. It’s not clear how much those assets are worth now. Startup valuations generally aren’t updated unless there’s a transaction, and valuations have come down in the past couple of years.

Any improperly frozen funds should be available for Shah to hire attorneys for an appeal or other purposes, Finneran says.

insurance costs it’s seeking.

ComEd paid a $200 million ne to the federal government in 2020 when it entered into a deferred-prosecution agreement admitting guilt in the bribery scheme. It also agreed to refund $38 million to ratepayers, which it made in a one-time credit on customer bills this past April.

Evidence in the trial of the “ComEd Four” — former ComEd CEO Anne Pramaggiore and three former outside lobbyists for ComEd, accused of illegally bribing then-Illinois House Speaker Michael Madigan for support in Spring eld — showed that bene ts to Exelon and ComEd from laws passed in the 2010s totaled billions. A jury found the four guilty in early May.

Prosecutors, however, are seeking to recover more than the $55 million Shah received from the Outcome Health nancing. ey’re also asking Durkin to allow them to garnish or freeze additional assets of Shah’s to pay for what they expect will be restitution of more than $400 million they’ll seek when he is sentenced in October. Investors — such as Gov. J.B. Pritzker’s former venture fund, Pritzker Group Venture Capital, which invested $50 million in Outcome Health — saw their investments go to zero, according to court lings.

“Even though some of those assets have appreciated over the years, the value of the assets will not be close to su cient to satisfy the anticipated restitution,” prosecutors said in a ling.

Prosecutors say Shah’s free-spending lifestyle could further drain those funds. e government pointed to spending records that showed Shah spending $100,000 a month in a nearly two-year period leading up to his indictment. During the trial, Shah had a $10,500 wine cooler installed in his River North mansion, prosecutors said in court lings in June.

SHAH from Page 3

Chase is the largest bank in the Chicago area by deposits but still has only about a quarter of the market.

BLOOMBERG

CRAIN’S DINING AND ENTERTAINMENT GUIDE

From private dining to specialty steakhouses, here are options for your next business meal.

BANDOL

100 West Monroe Street, Chicago, IL 60603 312-877-5713 • bandolrestaurant.com

Brasserie & Raw Bar. A Southern French coastal inspired urban oasis, Bandol’s menu intertwines French and Mediterranean classics with modern seafood, raw bar and a sophisticated-casual touch. Using the freshest ingredients and local seafood, Bandol creates delicious steak tartare, prime rib sandwiches, burgers, salads, and more! Our raw bar features the best selections with oysters, salmon, and nancial district’s best shrimp cocktails.

FILLMORE

120 West Monroe Street, Chicago, IL 60603 312-312-2142 • llmorerestaurant.com

West Coast American-Asian-Sushi. Inventive in spirit and modern in approach, The Fillmore updates the traditional bistro, seamlessly blending contemporary West Coast cuisine with Asian-fusion in uences. Menu signatures include premium steaks and seafood, hearth-roasted sh and chicken, Wagyu burgers, healthy salads and more. Creative, hand-rolled sushi, sashimi and nigiri play the menu’s center stage along with bourbons, Japanese whiskeys and sakes.

REMINGTON’S AMERICAN GRILL

20 North Michigan Avenue, Chicago, IL 60602

312-782-6000 • remingtonschicago.com

Located across the street from downtown Chicago’s cherished Millennium Park is Remington’s – a classic American grill and steakhouse serving up warm hospitality, unparalleled service, and satisfying cuisine. Remington’s menu features classic American fare and Chicago Steakhouse classics.

The luxurious and rich interiors create an appealing ambiance for travelers and locals alike with the perfect setting for social gatherings and private parties.

BLVD STEAKHOUSE

817 West Lake Street, Chicago, IL 60607 312-526-3116 • blvdchicago.com

Located in the Fulton Market District, BLVD Steakhouse is a classic American steakhouse inspired by Hollywood’s Sunset Blvd. Helmed by Celebrity Chef/Partner Joe Flamm, the restaurant embodies the glamour and luxury that de ned Old Hollywood offering sophisticated yet approachable service along with prime cuts and fresh seafood, innovative twists on 1950s cocktails, and an award-winning list of wines.

GRILL ON 21

208 South LaSalle Street, Chicago, IL 60604 312-634-0000 ext. 3 • grillon21.com

A Cut Above Classic. Located on the 21st oor of the Lasalle Hotel, Grill on 21 is a modern approach to a classic steakhouse, blending timeless dishes with a contemporary ambiance. Centrally located in the heart of Chicago’s Financial District, an ideal destination for professionals, fancy date nights, and locals alike. The menu features a diverse array of grilled steaks, chops, hearth-roasted sh, poultry, and plantbased items.

ROSEBUD ROSETTA ITALIAN

1 South Dearborn Street, Chicago, IL 60603 312-384-1900 • rosebudrestaurants.com/ locations/rosetta-italian/

Located amidst Chicago’s nest entertainment venues and steps away from the heart of the Loop, Rosebud Rosetta Italian features a stunning indoor dining space, bar and outdoor piazza! With Rosebud’s impeccable reputation for serving only the highest-quality steaks, seafood and Italian recipes, you’re sure to leave the restaurant satis ed. Rosebud Restaurants have been serving Chicago and the surrounding suburbs since 1976.

BRASS TACK

11 East Walton, Chicago, IL 60611 312-646-1402 • brasstackchicago.com

Brass Tack is a trendy and eclectic establishment that combines vintage charm with modern air. Nestled in the heart of the city, this bustling venue offers a unique dining and drinking experience. With its stylish decor, expertly crafted cocktails, and a diverse menu of delectable dishes, Brass Tack is the perfect destination for those seeking a memorable night out in the Gold Coast.

THE M ROOM

450 North Clark St, Chicago, IL 60654 312-224-1650 • mroomchicago.com

Explore the perfect harmony of Dish and Dram at The M Room. The culinary team behind Roka Akor has created a one-of-kind chef tasting menu, highlighting the ingredients and avors used in The Macallan whisky making process. Indulge in the Macallan craft cocktails, Signature The Macallan pours, or opt for our sommelier wine pairing.

ROSE MARY

932 West Fulton Market, Chicago, IL 60607 872-260-3921 • rosemarychicago.com

Located in the Fulton Market District, Rose Mary is inspired by Celebrity Chef/Partner Joe Flamm’s Italian heritage and the bold, bright avors of Croatian cuisine. The award-winning restaurant offers a seasonal menu featuring house-made pasta and risottos, fresh seafood, and grilled meats, along with craft cocktails and a diverse list of Eastern European wines.

Crain’s Dining and Entertainment Guide showcases a variety of Chicagoland restaurants, bars, private spaces and entertainment venues. This special advertising guide will highlight new menus, spotlight chefs and promote any upcoming special events. To reserve your spot in the guide, please contact Menia Pappas at menia.pappas@crain.com.

PRESENTING SPONSOR

Over 300 people attended Crain’s Fast 50 Awards Luncheon last month to recognize Chicago’s 50 fastest growing companies. In addition to the live reveal of the ranking order of the Fast 50 class of 2023, the event featured a keynote conversation with Mike Evans, Founder of Fixer.com and Co-Founder of Grubhub and Betsy Ziegler, CEO of 1871 about how to succeed in Chicago’s startup scene.

SPONSORS

Invest South/West projects are ringing up sky-high construction costs

poorest neighborhoods exceed $600,000 and even $700,000 per unit, far higher than the $450,000 to $500,000 per unit for the ritziest high-rises under construction in and around downtown.

e cost disparity can’t help city o cials as they push forward with Invest South/West, a program Lightfoot called a “Marshall Plan” for 10 Chicago neighborhoods that have su ered from decades of disinvestment. Backed by $750 million in public investment, it’s a huge undertaking that continues under new Mayor Brandon Johnson. He said during his campaign that he wants to boost funding for the program by $500 million per year.

It will be many years before anyone can say de nitively whether all that money generates a return on investment, but city o cials are facing criticism for subsidizing a ordable housing that costs so much. e upshot is that the program produces less a ordable housing than it could, says David Doig, president of Chicago Neighborhood Initiatives, a community development non-pro t known for its work in Pullman.

“It’s absurd,” he says. “ is just doesn’t make sense.”

O cials at the Chicago Department of Housing and the Department of Planning & Development declined interview requests. In statements, they attribute the high construction budgets to recent increases in the cost of building materials and labor, and interest rates — forces that have driven up the cost of market-rate projects, too. ey also say a ordable housing often costs more to build than conventional market-rate housing because nancing for the projects — which can include tax credits and tax-exempt bonds — can be especially complicated, resulting in large fees paid to lawyers and other professionals.

JAW-DROPPING DISPARITIES

Lightfoot doesn’t apologize for the higher construction costs. In a statement, a spokeswoman for the former mayor says “Mayor Lightfoot rejected the premise that development in these communities should be done on the cheap, and instead centered a commitment to high-quality, sustainable projects that used world-class design and amenities to spur more growth around them. Furthermore, Invest South/West activated an unprecedented level of public engagement, leading to additional costs around funding of stated community needs and priorities.”

Still, the disparities are jaw-dropping. Chicago developer Sterling Bay and a partner broke ground last September on a 350unit luxury apartment tower in the Fulton Market District that will include high-end nishes, a pool, a tness center and other amenities. e project will cost $155.6 million, or $445,000 per unit, in the range of what upscale multifamily projects in the city cost to build these days.

Also last September, Lightfoot and other city o cials attended the ceremonial groundbreaking of the rst Invest South/West development, a 58-unit project in Auburn Gresham. With a construction budget of $48 million, or nearly $828,000 per unit, it’s the most expensive Invest South/ West development on a per-unit basis so far.

An Invest South/West project planned in Bronzeville that includes 25 condominiums will cost an estimated $19.2 million, or $768,000 per unit, while one with 57 units in New City will cost $40 million, or nearly $702,000 per unit.

A ordable housing is the biggest and sometimes only component of most, but not all, Invest South/ West developments. According to a Crain’s review of cost data for nine Invest South/West housing projects that have been approved or selected by the city, two cost less than $500,000 per unit, four cost $600,000 to $700,000, and three exceed $700,000. e average cost: $653,007.

Cost data on private projects isn’t publicly available, but several developers interviewed by Crain’s said per-unit costs for upscale apartments typically range from $450,000 to $500,000.

ere’s a simple reason for that: With the most expensive market-rate apartment buildings in downtown Chicago rarely selling for more than $550,000 per unit, many developers would lose money on a sale if their costs were any higher.

“ e problem is there’s no discipline” in Invest South/West projects, says Doig. “Nobody is saying we’re not going to spend more than $500,000. ere’s no incentive for people to economize or value engineer or cost contain.”

Construction costs are high even though Invest South/West builders often pay little or nothing for their development sites. Land is a major expense for market-rate multifamily developers, accounting for 10% or more of a typical construction budget. But land in targeted Invest South/West neighborhoods costs a fraction of what it does in places

like Fulton Market. And for some Invest South/West projects, the city owns the land and just donates it to the developers that build on it.

Some say Invest South/West projects are so expensive because they emphasize design, the result of the city’s goal to build architectural showpieces in targeted neighborhoods. e city’s process of selecting Invest South/West developers is essentially a design competition.

“Any time there’s a design competition, those projects tend to be more expensive in general because there’s a lot of pressure to get the design just right,” says Bill Eager, senior vice president of the Midwest region for Preservation of A ordable Housing, a non-profit. “You’re looking to have a good ‘wow’ factor and you want to win the competition.”

By pushing for excellence in design rather than prioritizing efciency, city o cials believe the developments will have a transformational impact on their surrounding neighborhoods, creating an economic ripple e ect by attracting additional investment. Maximizing production of a ordable housing isn’t the primary objective.

A ordable housing is surprisingly expensive to build, partly because it requires layers ofnancing from multiple sources. Financing for rive Exchange, a 43-unit Invest South/West project planned in South Shore, includes $10.6 million in Low-Income Housing Tax Credits, $10.2 million in tax-increment nancing, or TIF, from the city, a $2.6 million loan from the city and a $2.5 million senior mortgage. Lawyers, consultants and other professionals charge big fees to assemble an a ordable project’s funding package, driving up “soft” costs that don’t cover the actual construction of a building. rive Exchange’s total cost: $610,435 per unit.

“ e way we choose to fund affordable housing as a country — as a complex workaround through tax credits in exchange for equity rather than directly funding it — carries very high transaction costs that do

to build because now we have two foundations, two heating and cooling systems” and four elevators instead of two, at $200,000 apiece, says David Block, director of development for Chicago-based Evergreen.

But that doesn’t tell the whole story, either. Developers say the city’s vetting process for Invest South/West projects, which starts with a request for proposals and includes community meetings, is long and requires them to jump though a lot of hoops with multiple city agencies that push up development costs. Developers must include high-cost sustainable elements and meet certain design standards at the whim of city o cials, for instance.

not exist in the private sector,” the Department of Housing says in a statement. “ is is the price we pay as a country for choosing to not fund a ordable housing directly.”

SCALE A BIG FACTOR e same forces pushing up affordable housing costs may partly explain why Invest South/West projects are so expensive, but there’s more to the story. Per-unit costs for Invest South/West projects generally exceed those for a sample of recently approved a ordable developments in Chicago outside the program, suggesting other factors at play. Chicago-based Habitat and P3 Markets recently completed the rst phase of 43 Green, a 99-unit mixed-income apartment building in Bronzeville that cost $37.8 million, or about $382,000 per unit. It is not an Invest South/West project.

In April, Habitat and P3 broke ground on the second phase of the project, an 80-unit mixed-income building that will cost $44 million, or $550,000 per unit — much more, but still low by Invest South/West standards.

City o cials and some developers point out that scale is a major factor driving construction budgets — the bigger the project, the lower the per-unit cost. Invest South/West developments tend to be on the small side, especially when compared to the high-rises in downtown Chicago. rough the community engagement process, residents in Invest South/ West neighborhoods have objected to big buildings with lots of apartments, according to a planning department spokesman.

“ e smaller sizes are what’s palatable to neighbors, and what’s palatable is more expensive,” he says in a statement.

In Auburn Gresham, for instance, a joint venture of Imagine Group and Evergreen Real Estate Group initially proposed one building with 56 a ordable apartments at 838-58 79th St. at a cost of $19.4 million. But after local residents pushed back, the developers broke up the project into two buildings with a total of 58 units. Its nal cost: $48 million, or $827,596 per unit.

“It’s not a terribly e cient way

Another factor that drives up costs, according to developers, is the city’s requirement that they seek bids from general contractors for Invest South/West projects after they’ve completed the design process with the city. ough intuitively that makes sense as a way to keep costs down, developers say they can wring unnecessary costs out of a project if they select a general contractor at the beginning of the design process, not the end.

“ e best projects, we’ve had the contractor on board early on,” says Evergreen’s Block. “Without a contractor on board during the design process, a developer is ying blind.”

at may explain why developers of standard a ordable projects outside the Invest South/West program that pick their construction teams early on — like 43 Green — are able to build less expensively.

By signing o on high-cost housing projects for Invest South/ West, city o cials have accepted a trade-o . ey’re prioritizing economic development that could deliver a potential future payo , but they’re not creating as much housing as they could.

“It all gets to the point of how many social objectives you are trying to accomplish with one pot of money,” said Matthew Fiascone, president of Habitat, co-developer of 43 Green.

Right now, that pot of money for nine Invest South/West projects reviewed by Crain’s will create 558 units. But at an average cost of $500,000 per unit, the program would create 724, nearly 30% more.

e impact could go beyond Invest South/West. e city is replicating the program’s developer selection and design process for other projects on the South and West sides. In East Gar eld Park, the Lightfoot administration recently backed the developers of Hub 32, a 63-unit building that would cost $47.2 million, or about $749,000 per unit. In Woodlawn in May, Lightfoot o cials selected a development team for Woodlawn Social, a 70-unit project estimated to cost $48.4 million, or more than $691,000 per unit. Neither of those is an Invest South/West program. “ is is just way too expensive,” Doig says. “And it’s a huge time suck.”

Sterling Bay is building a luxury apartment tower in the Fulton Market District (rendering shown at right) at a cost of $155.6 million, or about $445,000 per unit. United Yards, a 57-unit Invest South/West a ordable housing project planned in New City (rendering above), will cost a lot more: $702,000 per unit.

CITY OF CHICAGO, STERLING BAY

A new penthouse goes old school in Ukrainian Village

BY DENNIS RODKIN

It might not be surprising that a sixth-generation Chicagoan would be a proponent of protecting the city’s old buildings, including the century-old Lutheran school building where she lives.

What might be a surprise is precisely where Laura Johnson lives: not quite in the former St. John Evangelical Lutheran School, but on top of it, in a fourth- oor penthouse that was added when developers turned the landmark building on Hoyne Street into condos in 2018.

Designed to be invisible from the street, to keep the brick and stone facade looking as it did when completed in 1905, Johnson’s space is just ve years old, but she and the developers collaborated to conceal that fact. Using excess brick, along with wood and steel beams from the original, they made the new 3,000-square-foot penthouse look old.

Her executive post at a biotech rm has Johnson traveling a lot, often for weeks at a time, so she’s planning to move to a lock-the-door-and-leave building. She’s asking $1.4 million for the condo, a four-bedroom with two terraces that total about 820 square feet.

Johnson lived in the neighborhood for several years before developers started work turning into condos this former school, which closed in 1974 and stood empty for years. An ardent fan of Chicago’s old buildings and impressed with this one’s potential, she went for a look but wasn’t convinced.

“I didn’t want to buy new,” she says. “I wanted vintage.” With the developers, she worked out a hybrid of the two.

AND HUNGER AFFECT US ALL.