See NURSING HOMES on

NURSING HOMES from Page 1

residents at long-term care facilities in Illinois and killed more than 10,000. Though vaccines and infection control measures have lately helped prevent the sort of outbreaks that marked the darkest days of the lockdown era, health care providers are now grappling with a new and more contagious COVID variant. Add in the lingering fear of contagion among families weighing the pros and cons of caring for elder loved ones at home versus in a facility, and it’s little wonder that nursing homes report that they are on life support.

“Our census is recovering, but it’s recovering so slowly,” says Donna Sroczynski, president of operations at Symphony Care Network, which has 28 facilities in Illinois, Indiana, Michigan and Wisconsin.

Sroczynski says the average number of people that Symphony serves per day is down about 20 percent, compared with pre-pandemic levels. At the same time, expenses are up at least 30 percent due to hiring additional staff, testing requirements and securing personal protective equipment.

“It’s a recipe for disaster,” Sroczynski says.

While COVID-19 brought new challenges, it also exacerbated long-standing issues facing an industry tasked with caring for some vey reported they are operating at a loss.

According to a separate analysis by the trade groups, the nursing home industry has projected that it will lose $22.6 billion in revenue this year and that 1,670 facilities will close or merge.

Meanwhile, publicly traded Brookdale Senior Living posted a net loss of $108 million during the first quarter of 2021, compared with net income of $369 million during the same period a year earlier. And revenue fell 26 percent to $749 million in the quarter. Brentwood, Tenn.-based Brookdale is the largest senior living company in the country, with about 700 assisted living, skilled nursing and other locations in 41 states, including 11 communities in the Chicago area.

of the nation’s most vulnerable residents.

In fact, only one-quarter of nursing homes and assisted living communities nationwide are confident they’ll last a year or more, according to a recent survey of 738 facilities by the American Health Care Association and National Center for Assisted Living. While most nursing home operators are privately held and therefore keep their revenue and profit margins under wraps, more than half of those who responded to this sur-

DECLINES

Occupancy rates at nursing homes have steadily declined for decades, as assisted living facilities and home health have become more popular among individuals requiring a lower level of care. But nursing home occupancy dropped sharply during the pandemic as hospitals postponed elective surgeries, which meant fewer referrals for post-acute care. Meanwhile, to prevent outbreaks when COVID tests were scarce, many nursing homes refused to admit people “THE PANDEMIC REALLY SORT OF LAID BARE who might have JUST HOW PROBLEMATIC THE STAFFING been exposed to the virus during SHORTAGE IN NURSING HOMES IS.” a hospital stay. And people with Tamara Konetzka, health economist, University of Chicago access to homebased services avoided high-risk congregate living settings for fear of infection. Even before COVID-19 started spreading, the number of longterm care facilities in Illinois had declined nearly 10 percent to 913— alongside a 14 percent drop in admissions—from 2015 to 2019, according to the latest state data. Today, nursing homes in Illinois are 63 percent full on average— about 10 percentage points below pre-pandemic levels, says Matt Hartman, executive director of the Illinois Health Care Association, which represents about 500 senior care facilities in the state.

Hartman says that four association members have shuttered in the last few months alone and that even more facilities are expected to close through the end of 2021, particularly as federal COVID relief funds run out.

Further complicating matters for nursing home operators is a nationwide staffing shortage. During the pandemic, nursing homes saw workers leave the industry in search of higher-paying jobs with less exposure risk.

The shortage has created a bidding war for talent. To attract Chicago-area workers, some nursing home operators say they’re raising pay and offering signing bonuses.

“The pandemic really sort of laid bare just how problematic the staffing shortage in nursing homes is because it has been there for decades, but it just got worse during COVID,” says Tamara Konetzka, a health economist at the University of Chicago. The “physically and emotionally demanding” jobs often come with no benefits or sick pay, she adds.

Many operators say they’re having to dig deep to incentivize workers, noting that low Medicaid rates don’t cover the cost of doing business. However, lawmakers and advocacy groups have called for more transparency during the pandemic around just how much facilities are spending on staffing and quality. For example, many nursing homes keep operations under a separate entity than real estate and other valuable assets, which can shield the companies from liability.

To prevent nursing homes from profiting while staffing levels remain low and three or more residents are packed into each room, lawmakers are looking to link new funding to specific safety and quality metrics that benefit residents and reduce racial health disparities.

SUPPORT

The Illinois Department of Healthcare & Family Services, which spends more than $2.5 billion annually on nursing home services for about 45,000 Medicaid beneficiaSmith Senior living CEO Kevin McGee says his firm has been approached to acquire two local facilities.

ries, supports the proposal. The government health insurance program for the poor and disabled covers the majority—about 60 percent—of nursing home care provided in the state each year.

Nursing home operators are also bracing for a flood of COVID-related lawsuits.

Law firm Levin & Perconti is representing families affected by the COVID-19 outbreak at the state-run LaSalle Veterans’ Home late last year, during which more than 200 veterans and staff tested positive for the virus and 36 veterans died, according to an April report by the Illinois Department of Human Services’ Office of the Inspector General.

And an estimated 1,000 lawsuits against nursing homes are in the works, according to Healthcare Heroes Illinois, an advocacy group raising awareness around immunity and liability issues.

“This is an existential threat to the industry,” says Healthcare Heroes spokesman Paul Gaynor. “And the pandemic isn’t over.”

Sroczynski declines to say whether any lawsuits have been filed against Symphony, which is among operators that experienced outbreaks during the pandemic. But she notes that “the whole industry in Illinois is being stalked by predatory lawyers.”

Amid all the uncertainty, COVID relief funds have been a lifeline for nursing home operators during the pandemic.

HFS last year distributed $359 million in CARES Act funding to long-term care facilities, which also got about $520 million directly from the federal government. And an additional $75 million was recently allocated to the facilities.

“As those dollars run out, you’ll start to see more operators close their doors,” says Hartman. Even though pre-pandemic occupancy rates in Illinois hover below the national average, facility closures in certain areas prevent residents from getting care close to home and family, he says.

Some struggling facilities will look to find a partner that can help keep them afloat. For example, Kevin McGee, CEO of two-community Smith Senior Living, says the company has been approached by two local facilities looking for a buyer.

At Smith Village and Smith Crossing, “we have support for nursing at the corporate level, we have support for purchasing, we have support for business office functions,” McGee says. “Those single-site organizations that are by themselves, they’re putting their hands up and saying, ‘We can’t do this again. We need to join a system.’ ”

Crime could dampen demand for downtown condos, real estate agents worry

DOWNTOWN from Page 3

Gwen Hughes, a Berkshire Hathaway HomeServices Chicago agent, agrees. “Crime is on everyone’s minds, both buyers and sellers,” Hughes says an in email. As a result, she writes, “The downtown recovery has been slower than I expected. We are all hoping that the crime situation gets taken care of, and the market will start to improve.”

Many of the buyers of high-end downtown condos are suburban people either moving into the city as empty-nesters or buying weekend in-towns, and people from other parts of the Midwest who want a foothold in the dynamic city they love to visit. “If they keep seeing this news,” Farra says, “they’ll stay closer to home.”

The violence certainly doesn’t only threaten condo sales in pricey neighborhoods; it’s undermining daily life throughout Chicago.

Efforts by Mayor Lori Lightfoot and the Chicago Police Department to get violence under control have had little effect, to the point that frustrated aldermen called a special City Council meeting in early July to push for better solutions to a frightening spate of shootings around the city. And the Illinois Retail Merchants Association wants more police patrols in the Loop to prevent violence from convincing downtown workers to stay home and work remotely.

It’s too soon for any data that would indicate whether recent spasms of disorder downtown have led to a falloff in the area’s condo sales.

Gail Spreen, a Jameson Sotheby’s International Realty agent and longtime Streeterville resident, says she doesn’t expect to see the market’s recovery slow down, for two reasons: All the great amenities downtown, such as restaurants and entertainment venues, outweigh violent incidents in buyers’ perception of the lakefront neighborhoods. And violence has become, essentially, white noise in the background of Chicago.

“We’ve been hearing about crime for so long, every weekend for years,” Spreen says. “It’s just another weekend.”

Spreen says she showed two suburban couples downtown condos on July 6 and 7 and neither expressed any concern about violence. “It didn’t come up,” she says.

Because of the long history of violence, Spreen says, “people are more careful when they go out. I’m more careful when I go out. But they want the energy of downtown living.”

The strongest sign yet that the appetite for downtown condos is back was the $11.25 million sale of a Lake Shore Drive penthouse last week. The sale price was the highest anyone has paid for a downtown condo since early 2019. That is, since long before the pandemic and episodes of social unrest punctured the downtown condo market.

Restaurants are reopening, theaters are getting ready to, and the lakefront path and parks beckon. “With everything opening up, people are seeing that downtown is where they want to be, where they have the opportunity to be with other folks and connect,” says Kimberly Bares, CEO of the Magnificent Mile Association, which boosts that area’s retail, entertainment and tourism options.

While she’s not involved in residential real estate, Bares says what she expects to see in the market is “people who didn’t buy during the downturn trying to get in before the prices go back up.”

Farra says she’s hoping for the same thing, although she’s surprised not to have seen more buyers flowing into the market when “the inventory is priced so aggressively” thanks to a giant backlog that built up during the two crises of 2020. And she attributes that, at least in part, to an overriding sense that downtown isn’t as safe as it once was.

“We have to turn around the perception that there’s no control,” Farra says.

RYAN from Page 3

Whether that applies to Ryan Specialty is debatable.

Rick Fleming, the SEC’s investor advocate (an office that represents the interests of retail investors but has no regulatory authority), is a fierce opponent of dual-class shares.

“It is true that a few well-known companies have thrived with long-term founders,” he said in an October 2019 address at a corporate-governance conference in Miami. “But less noticeable are the hundreds of public companies that now have entrenched management. A growing body of research suggests that, over the long term, entrenchment of founders produces lower returns for investors. Specifically, companies with dual-class structures tend to underperform companies with dispersed voting power.”

A spokeswoman for Ryan said the company couldn’t comment because it’s in a quiet period while the IPO is pending.

Ryan launched his firm in 2010, two years after exiting Aon, the commercial insurance brokerage he founded and built into the world’s second largest through multiple acquisitions. The initiative was a bit surprising for a man who then was 73, but it represented a second chance for Ryan after Aon’s board took the initiative five years before to recruit his successor and the firm’s second CEO in its history. That man, Greg Case, remains Aon’s CEO today.

Ryan chose a far smaller niche in the insurance world for his second act—wholesale brokerage, where specialty firms find insurers to cover exotic or hard-to-insure risks for clients of conventional brokers like Aon and Marsh McLennan. Indeed, Aon is a client of Ryan Specialty now.

But the playbook is the same as in his Aon days. Lots and lots of acquisitions. The firm has grown to $1 billion in revenue, and a publicly traded stock will give it currency to finance more deals. Ryan Specialty is the nation’s second-largest wholesale insurance brokerage, behind Charlotte, N.C.-based AmWins Group, and the two compete regularly for acquisitions in what remains a fragmented business.

A key question, though, is Ryan’s staying power. In the section of the IPO’s prospectus laying out investment risks, the first one listed is the need for a succession plan given Ryan’s age.

“Our success depends in a large part upon the continued service of our senior management team, including our founder, chairman and chief executive officer, Patrick G. Ryan, each of whom are critical to our vision, strategic direction, culture, products, and technology,” the document states.

The firm says it has a succession plan but doesn’t hint at who would follow Ryan. Most prospectuses don’t offer up such information, but given Ryan’s age, this case is highly unusual. Investors may well want more insight into that.

ROLE OF ONEX

Another wrinkle is Toronto-based private-equity firm Onex’s minority ownership of Ryan Specialty. Onex, which has $45 billion in assets under management, first invested in Ryan Specialty in 2018 and added to its stake last year, plowing nearly $300 million in total into the firm. The SEC document doesn’t detail what Onex’s stake is. But the firm is treated in the IPO like a small-scale investor.

Onex gets one seat on what is a 12-member board. Three board members are executives. One of those, Ryan, is chairman. The remainder are familiar Chicago business names, most of whom were Aon executives or on its board when Ryan was there and are longtime allies of his. They include Andrew McKenna, former chairman of McDonald’s, who is 91 and is expected to be the independent members’ lead director on the board.

Moreover, even if the Ryan investors’ stake in the firm falls to as low as 10 percent, they will continue to have the right to nominate the chairman.

If Ryan dies or otherwise has to exit his role, the Class B shares lose their supermajority status after 12 months and his group of investors lose their guaranteed overrepresentation on the board. They do continue to get one member so long as they collectively hold at least 10 percent of the shares. Onex? It gets one member so long as it keeps at least half the shares it holds upon completion of the IPO.

An Onex representative didn’t respond to a message seeking comment.

With such a late-in-life gambit, Ryan emulates another notable Chicago business story— McDonald’s founder Ray Kroc. Kroc famously was in his 50s when he happened upon the McDonald brothers and their hamburger restaurant in California. He opened the flagship in Des Plaines under a franchise agreement, and the rest is history.

Kroc’s age at the time of McDonald’s IPO in 1965? Sixty-two. He retired from McDonald’s in 1974, in his early 70s. Ryan already has outlived Kroc, who died at 81.

Pat Ryan launched Ryan Specialty Group in 2010, two years after exiting Aon.

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Restored Prairie Style mansion hits the market

Demolition was a possibility before the current owners bought the Hinsdale house in 2013 and did a total renovation

BY DENNIS RODKIN

The couple who restored an early 20th-century Hinsdale mansion, built in the Prairie Style with influences of Austrian and Scottish artistic movements of the same era, have it on the market at just under $5 million.

In 2013, when Rob and Amanda Miller bought the home, designed by Prairie Style architect E.E. Roberts in 1908, “it needed a lot of help,” Rob Miller says.

Many of the home’s utilities were dated, and the historical wood-andtile look of the interior was obscured by shag carpeting, floral wallpapers and metal light fixtures, Rob Miller says. As he told Better Homes & Gardens magazine last year, “It had been 1980s-ized.”

Demolition was a possibility, says Dawn McKenna, the Coldwell Banker agent representing the house in its restored condition. Back in 2013, before the Millers bought it, “I suggested to a few of my clients that they take it down and build something new,” she says.

The Millers believed the old house should be saved and bought it for $2 million in July 2013. They undertook a total renovation and expansion, working with noted preservation architect John Eifler and interior designer Donna Mondi, both based in Chicago.

The team’s research found in the original design elements of the Vienna Secession and the work of Scottish architect Charles Rennie Mackintosh, which were both roughly contemporaneous with the Prairie Style. In the rehab and the addition, they played up those elements, such as in the casual dining room off the kitchen, where panels that depict elongated flowers evoke both a Prairie Style stained-glass window and Mackintosh’s designs.

The house is now almost 7,500 square feet, with five bedrooms and six full baths, with much of its historical woodwork and floors intact, a new roof and new utilities including environmentally friendly geothermal heat. The Millers built a swimming pool on the property, which is four-fifths of an acre.

In the end, “it would have cost less to have John Eifler do detailed drawings of the old house, tear it down and build a new replica of it,” says Rob Miller, CEO of the Miller Cos., a private-equity firm that finances, builds and manages casinos in the U.S. and the U.K.

Even so, Miller says, they’re glad they went restoration route, retaining the house as “a historic asset of the community.”

With their three children grown, the Millers are moving to a downtown Chicago condominium.

As in many suburbs, the upper end of Hinsdale’s market has been very active in the current housing boom. So far in 2021, there have been two sales at $6 million or more, after an 11-year stretch when nothing in town sold for $5 million or more. MORE PHOTOS ONLINE: ChicagoBusiness.com/residential-real-estate