Crain's Chicago Business

NOTABLES: Introducing nearly two dozen executives of color in finance. PAGE 13

GREG HINZ: Chicago business leaders are losing influence. PAGE 2

CHICAGOBUSINESS.COM | JULY 18, 2022 | $3.50

PRICED OUT Chicago hasn’t faced inflation this high in four decades—and the phenomenon is choking key sectors ranging from construction to health care to restaurants I BY ALBY GALLUN

See INFLATION on Page 22

CRAIN’S ILLUSTRATION USING GETTY IMAGES

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he consumer price index for the Chicago area rose 9.4% in June from a year earlier, its biggest jump since September 1981, when Jane Byrne was mayor of Chicago and “Endless Love” by Diana Ross and Lionel Richie was the most popular song in America.

But inflation evokes more stress INSIDE: than nostalgia today. Prices on apart- Inflation is ments, gasoline, jet fuel, concrete TreeHouse’s and steak all have risen, and the tight chance to job market is pushing up the cost of shine PAGE 3 labor, a key business input.

Businesses are paying their suppliers a lot more than they used to as well. The U.S. producer price index, which measures prices at the wholesale level,

Why inflation is so painful for Chicago restaurants

BY ALLY MAROTTI Manny’s Cafeteria & Delicatessen is well versed in the cadence of rising and falling brisket prices.

Most years, costs spike around St. Patrick’s Day and fall in April.

That’s when Manny’s swoops in,

stocking up on the ingredient it uses to make corned beef, which adorns many of its sandwiches.

But this year, the price kept going up and is now 30% higher than a year ago. So did the price of cream cheese, which is up 25%, and short ribs, up 30%. The

cost of flour has doubled, as has the cost of a part needed to fix a broken refrigerator, says Dan Raskin, fourth-generation owner of the 80-year-old South Loop mainstay.

“The price is always going up and it’s never going down. It’s every week,” he says. “You can’t keep up.”

See RESTAURANTS on Page 7

JOHN R. BOEHM

Eateries need to cover soaring costs but worry that raising prices too much will scare off customers

Dan Raskin is the fourth-generation owner of Manny’s Cafeteria & Delicatessen.

NEWSPAPER l VOL. 45, NO. 28 l COPYRIGHT 2022 CRAIN COMMUNICATIONS INC. l ALL RIGHTS RESERVED

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BOOTH INSIGHTS

TAKEAWAY

Entrepreneurs, it’s better to persuade than to dictate. PAGE 9

Meet the new head of the Peggy Notebaert Nature Museum. PAGE 6

7/15/22 3:41 PM

2 JULY 18, 2022 • CRAIN’S CHICAGO BUSINESS

Chicago business loses its clout

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apartment rental, if not condominium, market.

But for every step forward, there seems to be at least one step back.

Boul Mich is a shadow of the Fifth Avenue/Rodeo Drive it once was.

Vacancy rates in downtown office buildings are the highest on record.

Signature companies like Boeing, Caterpillar and Citadel are leaving town, with nary a word of protest from business leaders or City Hall.

You can’t go more than two or three CORPORATE ENGAGEMENT AND INFLUENCE days without a report of another FADE IN THE LIGHTFOOT ERA. carjacking, shooting or mugging in the heart of what’s supposed to be lective funk every day from Chicago the midcontinent’s capital. business leaders.

Above all, there’s a sense among Yes, some good things are hapbusiness leaders that their clout, pening, like in the booming Fulton Market area, and in some South and their ability to reach decision-makers and get what they need to keep West Side neighborhoods that are their money here, has waned to seeing an influx of capital due to Mayor Lori Lightfoot’s Invest South/ the lowest level in many, many years. “There’s more of a sense of West program. Google’s potential helplessness,” says one veteran takeover and reconstruction of the leader. “There’s no plan. There’s no dilapidated Thompson Center is leadership.” real. So is a revival of the downtown he Chicago business exec returned my call from New York City. I asked if Manhattan had really opened up yet after COVID. “The streets are packed,” he replied. “All of the stores and restaurants are open. There are building cranes everywhere.” Then, after a pause, he sighed, “Now I get to return to North Michigan Avenue.”

I’m picking up signs of that col-

Some of this has been apparent for a while. For instance, no one with money stepped forward to save the Chicago Tribune from a corporate raider that has thinned it out to what on some days is almost nothing. No one did much when movie producer George Lucas and his stinkin’ museum—now rising in Los Angeles— were hustled out of town.

But the malaise only seems be deepening. The business community didn’t open ts collective wallet to challenge Cook County Assessor Fritz Kaegi—or to protect the job of Board of Review Commissioner Mike Cabonargi, who has held Kaegi’s assessment hikes on business somewhat in check. It hasn’t come up with a candidate to challenge the re-election bid of Lightfoot, whose heart is with social equity and just doesn’t have the kind of personal, one-on-one contact with many business leaders that predecessors Rahm Emanuel and Richard M. Daley did.

There’s lots of reasons, some of the business community’s making, others due to outside forces.

GREG HINZ ON POLITICS

For one, the days of the close-knit club of five or 10 white men who could get together for lunch and raise the money to rehab Orchestra Hall are gone. Some say that crew stayed around too long and failed to develop new, more inclusive successors. Some bright young talent is coming up—I hear lots of names— but they need time. And they need to work in a world in which focusing on your business rather than your city is paramount. COVID has only accentuated that.

Another reason is Lightfoot. While Emanuel arguably focused too much on the moneyed set, Lightfoot is smart enough to realize that a city can’t run on fumes; without tax revenues, she can’t help people who need help. But a schmoozer and a hand-holder she’s not, and having

a staffer talk to a company isn’t the same as calling CEOs herself, big shot to big shot. What she can and must do—for all of Chicago’s sake— is get a handle on a street-violence problem that is like a cancer on the city’s life. And if that means really going after Chief Judge Tim Evans and State’s Attorney Kim Foxx, well, Lightfoot never has been one to mince words.

Ultimately, though, Chicago business has to take care of itself.

More challenges are coming quickly, like an elected school board or the growing Democratic Socialists of America caucus in the City Council.

Is the business community still up to that? That’s a very good question.

“Sometimes, it takes a crisis,” says one top insider. Well, that crisis has arrived.

A housing bubble isn’t close to bursting

D

uring the pandemic, house prices have risen far faster than income and rents across the United States, prompting concern that a further run-up could outpace economic fundamentals, leaving the housing market vulnerable to a large price correction similar to the Great Financial Crisis.

However, the bulk of the evidence suggests predictions about an imminent housing market crash are misguided. Estimates of how much house prices respond to changing economic conditions indicate that housing may not be overvalued, meaning prices— adjusted for inflation—may still be at a level that is supported by fundamentals. This is because

have been supported by economic conditions.

On the demand side, demographic trends, income, financial wealth and interest rates all play an important role in shaping house price trends. Increases in income and nonhousing wealth are linked to higher house prices, while higher interest rates tend to pull down demand.

On the supply side, natural constraints, and man-made constraints such as land and building regulations, correlate to higher house prices.

Research shows that a 1% rise in a household’s real disposable income raises house prices— adjusted for inflation—by roughly 1.5%; a 1% rise in net financial wealth raises the price by 0.06%. On the othRISING PRICES OF HOMES HAVE NOT er hand, a 1 percentpoint increase in OUTPACED ECONOMIC FUNDAMENTALS. age the real mortgage rate reduces real house prices by about 1.8%, while a 1% housing was substantially unincrease in the housing stock per dervalued before the pandemic, capita is associated with a price and valuations have been playing reduction of about 1.3%. catch-up ever since.

From 2016 to the first quarter of In theory, house prices include a speculative component and a com- 2022, house prices—adjusted for inflation—rose by 34%. Napkin ponent linked to economic fundamath shows it’s possible that higher mentals—the underlying factors income growth, lower long-term that drive the supply and demand interest rates and a persistent housfor housing and determine the “real” or intrinsic value of housing. ing stock deficit alone would have contributed to raising real house Over the long run, any speculative run-up in house prices is corrected prices by at least 13.3% over this period. Add to that a pre-existing and the valuation depends solely reality that home prices were likely on fundamentals. In practice, undervalued by 20% in 2016, one actual house prices always deviate could argue that housing is roughly somewhat from their true valuaat the correct valuation. And my tion, so homes are always either back-of-the-envelope calculation undervalued or overvalued. does not even account for the surge Estimates suggest that back in 2016—well before the pandemic— in nonhousing wealth during that period. Even with the double-digit housing in the United States was correction this year, the S&P 500 is undervalued by as much as 20%, up by 74% since the end of 2016. meaning that house valuations The reality is that the housing were below a level that could

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market has started cooling but does not appear substantially overvalued like in the run-up to the Great Financial Crisis. Further decreases in nonhousing wealth as well as rising interest rates will act to lower demand. On the supply side, inventory is ticking up, but new residential construction—which is highly responsive to changes in interest rates—will likely fall to prolong the housing unit deficit.

On one hand, falling demand acts to bring down prices. On the other hand, falling supply pushes prices up. These new develop-

ORPHE DIVOUNGUY ON THE ECONOMY

ments aren’t likely to improve housing affordability. While job openings remain plentiful and real borrowing costs remain low, households with a stable income and who can afford the mortgage payment should consider that it won’t get any easier to get on

the homeownership ladder.

Crain’s contributor Orphe Divounguy is a senior economist at ZillowGroup and former chief economist at the Illinois Policy Institute. His views do not necessarily reflect those of his employers.

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CRAIN’S CHICAGO BUSINESS • JULY 18, 2022 3

JOE CAHILL ON BUSINESS

ALAMY

Q

Inflation is TreeHouse’s chance to redeem itself

If rising prices drive consumers to store brands, the private-label food maker will have to show it can meet demand I BY ALLY MAROTTI FOR CEOS OF BRAND-NAME FOOD COMPANIES, the worst inflation in four decades is a worrisome threat to profit margins and sales growth.

For TreeHouse Foods CEO Steve Oakland, it’s a turnaround opportunity and a shot at redemption.

The largest manufacturer of private-label food products in North America, Oak Brook-based TreeHouse stands to benefit as consumers looking to stretch their dollars turn to cheaper store brands. Data from market researcher IRI shows signs that the shift has begun. Private label’s share of packaged-foods sales edged up to 17.94% in the 52 weeks ended June 12, from 17.74% a year earlier.

A surge in demand could lift TreeHouse’s sales and share price, restoring investor confidence in its longer-term prospects. But if the surge doesn’t materialize, or if TreeHouse can’t take advantage of it, pressure to break up or sell the company could arise.

To capitalize on a private-label boom, Oakland will have to show that TreeHouse has repaired the damage from his predecessor’s aggressive expansion campaign. A series of acquisitions under former CEO Sam Reed dramatically enlarged TreeHouse after it was spun

w WHAT’S IN A NAME? Private labels’ share of packaged-foods sales has edged up this year.

PRIVATE-LABEL MARKET SHARE 19%

17.9% June 12

18 17 16

’18

’19

’20

’21

’22

Note: Share is based on dollar sales.

Source: IRI

See TREEHOUSE on Page 20

Major data breach hits another Chicago corporation The online small-business lending unit of Enova International was hacked in March, exposing personal information of about 60,000 customers

BY STEVE DANIELS The small-business lending unit of Chicago-based Enova International experienced a data breach earlier this year affecting more than 60,000 customers around the country.

The affected customers of OnDeck, which Enova acquired in 2020, had their account numbers exposed in the incident, which occurred in March and was quickly discovered, according to a filing last month by the company.

Other personal information, like

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Social Security numbers, driver’s license numbers and tax ID numbers, also were exposed in some cases, according to a letter OnDeck sent to affected customers.

OnDeck’s computers weren’t disabled, and outside investigators shut down the private cloud storage account that was penetrated. But not before the information was copied by the hackers.

The incident marks at least the second major hacking incident to hit a Chicago-area corporation this year. Commercial insurance brokerage giant Aon, based in

London but with U.S. operations centered in Chicago, disclosed in late May that nearly 146,000 North American customers had personal information exposed in a hack that went undetected for over a year.

Aon is a defendant in at least two lawsuits seeking class-action status in the incident.

Enova, unlike Aon, didn’t disclose the data breach to investors. A spokeswoman says it didn’t rise to the threshold where See BREACH on Page 7

Now we’ll see who has the pricing power

uarterly earnings reports rolling out this month will provide the clearest look yet at how inflation is affecting some of the biggest local companies.

Heavyweights such as McDonald’s, Mondelez International and United Airlines are due to report second-quarter results in the coming weeks. Of particular interest will be numbers from major consumer marketing companies. They’re on the front lines of inflation, dependent on day-to-day purchasing decisions by consumers staggering under the worst inflation in 40 years.

The consumer price index rose 9.1% in June from a year earlier, according to federal data, the highest rate since 1981. As my colleague Alby Gallun reports, the Chicago-area CPI increase was slightly steeper, at 9.4%.

Prices are rising even faster for companies. The cost of everything from food ingredients to packaging materials and labor has surged, pushing the producer price index up 11.3% in June from a year earlier. McDonald’s expects expenses to rise 12% to 14% this year, and Mondelez says costs are up 10% to 13%.

CRITICAL ADVANTAGE

Cost increases that outpace price hikes imperil profits. To protect the bottom line, companies need to raise prices enough to offset rising costs. And local consumer marketing companies have been raising prices since early this year.

But price hikes come with their own risk. Higher prices can lead customers to seek out cheaper alternatives, especially during a time of widespread inflation. As more customers turn away, price hikes can start to hurt sales, and eventually squeeze profits.

In such an environment, the power to raise prices without hurting demand becomes a critical advantage. Companies with greater pricing power can keep profits growing as their own costs rise.

Investors and analysts are scrutinizing second-quarter earnings reports for signs of pricing power. But the metrics that analysts often focus on—revenue and profit growth—aren’t the best indicators that a company can pass along its costs without losing customers. That’s because price hikes can boost revenue, preserving profit levels and the all-important earnings-per-share figure that determines a company’s stock price.

But like Mondelez’s Oreo cookies, revenue increases driven by price hikes are the financial equivalent of empty calories,

unsustainable in the long run because eventually the hikes become too heavy for customers to bear.

Sales volumes—the number of Macaroni & Cheese boxes that Kraft Heinz sells, or the number of customers who order food from McDonald’s—are a healthier source of revenue and a better indication of pricing power.

We’ll soon find out how price hikes are affecting sales volumes at major Chicago-area companies. Second-quarter results will show who has more pricing power and who has less.

REACHING THE LIMIT

Results from earlier this year indicate Mondelez has leeway to boost prices. Sales volumes rose in the first quarter even as the maker of Oreos, Ritz crackers, Cadbury chocolates and a slew of other snacks pushed through mid-single-digit-percentage price increases. Still, price hikes accounted for most of Mondelez’s 7.3% quarterly revenue growth.

Others appear to be reaching the limits of their pricing power.

Conagra, which raised prices 7% to 10%, reported a 6.2% revenue increase for the quarter ended May 29. But sales volume fell by a worrisome 6.4%, suggesting demand for Conagra’s Slim Jim, Birds Eye and Hunt’s brands fell as prices rose.

Price hikes appear to have hurt volumes at Kraft Heinz, too.

Known for a range of grocery products including Kraft cheese, Oscar Mayer lunchmeats and Heinz ketchup, the company reported a 2% drop in first-quarter volumes after raising prices 9%.

Volumes and prices are also moving in opposite directions at McDonald’s. The burger chain said guest counts fell 1% and order sizes shrank in the first quarter as prices at its U.S. restaurants rose 8%.

Over at United Airlines, the end of pandemic travel restrictions has unleashed a wave of pentup travel demand, allowing the carrier and its peers to raise fares substantially without losing ticket sales. That helps buffer the impact of rapidly rising jet fuel costs and wages. The real test of airlines’ pricing power will come after the travel itch has been scratched.

Although inflation appears to have slowed a bit, nobody is predicting a quick return to the sub-2% levels of the past couple of decades. That’s a long-term challenge for companies without the pricing power to pass along their cost increases. Unless they can give customers a reason to pay more for their products, inflation will become a chronic blight on their bottom lines.

7/15/22 3:17 PM

4 JULY 18, 2022 • CRAIN’S CHICAGO BUSINESS

Allstate buys back stock as calls for rebates intensify

BY STEVE DANIELS Allstate, among the auto insurers under fire by consumer advocates for pocketing most of the windfall gained when driving levels cratered in 2020 and early 2021, is repurchasing stock at levels not seen in 15 years.

The Northbrook-based company, the second-largest insurer of cars in Illinois, spent more than $3.3 billion on share buybacks last year, according to a Securities & Exchange Commission filing. That reduced its shares outstanding by nearly 9% and made an underwhelming earnings performance look better when measured against a smaller share base. That was nearly double $1.7 billion spent in 2020 and the most in any single year since 2007, when Allstate laid out $3.6 billion to buy back its own stock.

The increase in buybacks coincided with a campaign to sharply hike rates for car insurance all over the country. Allstate, like other insurers, was hit with inflated costs to settle claims— thanks to the rise in used-car prices—as drivers resumed more normal habits.

In Illinois, Allstate hiked rates

by 12% on average earlier this year—one of the largest one-time increases in memory. The company has imposed similar increases elsewhere in the U.S. Likewise, major rivals like Geico, Progressive and, to a lesser extent, State Farm have raised rates, making it more challenging for drivers to save on insurance when they shop around.

An Allstate spokeswoman didn’t respond to a request for comment.

PAYBACK

When COVID first struck in spring 2020, Allstate was one of the first in the industry to voluntarily refund premiums to policyholders. The “shelter-in-place payback,” which Allstate CEO Tom Wilson extolled well after it expired in June 2020, ended up costing the company $948 million in that year, according to an SEC filing.

But Allstate’s profit margin on auto insurance, even after the rebate, was about double the norm.

In 2020, the company’s margin on car insurance was 14%, equating to about $3.45 billion. The year before, the margin was 8%— about $1.73 billion. Last year, as the margin narrowed to 4.6%, the

profit fell to $1.27 billion.

Critics say the refund to consumers paled in comparison with the amount Allstate provided investors.

In Illinois, Democratic state Sen. Jacqueline Collins, who earlier this year pushed successfully along with 15 of her colleagues for the state insurance department to compel auto insurers to disclose how much they made on Illinois drivers during the pandemic, will pursue legislation next year to give regulators more authority to force companies to be more transparent on profits and losses within the state.

She criticized Allstate for seemingly spending most of its windfall on share buybacks.

“There should have been some way for them to utilize that in a rainy day fund,” she said in an interview. “That money should have been used to prop up the customers.”

She emphasized that drivers by law must be insured. It’s not an expense they can cut from their budgets, which already are pressured by the cost of utilities, groceries and gasoline.

“Flush with pandemic profits, Allstate spent three times more boosting their share price than

WIECK

Illinois’ second-largest auto insurer spent $3.3 billion buying back shares last year, a level they haven’t reached since 2007

making their overcharged customers whole,” Abe Scarr, director of consumer advocate Illinois PIRG, said in an email. “We didn’t need more evidence that Illinois car insurance customers deserve stronger protections, but here it is. It’s time for the General Assembly to act.”

Collins, who represents parts of Chicago’s South Side and some south suburbs, said she’d like to see the insurance department gain the right to approve rate changes, as California and Texas regulators enjoy. With Allstate and Bloomington-based State Farm headquartered in Illinois, such moves have gone nowhere in the past.

UNUSUALLY HIGH PROFITS

The insurance industry has argued that Illinois’ approach of allowing market competition to keep a lid on rates has worked for consumers and encouraged a

robust industry to develop here.

State regulators released the data they gathered from insurers at the end of June. Allstate, Progressive and Geico all generated unusually high profits from Illinois customers in 2020 and the first quarter of 2021. In Allstate’s case, profits in its main auto insurance unit in Illinois were nearly $100 million higher than they would have been at the margins prevalent before the pandemic struck.

Allstate shows no signs of slowing down the pace of either the rate hikes or the buybacks.

In August of last year, Allstate’s board approved a new $5 billion buyback authorization, which the company expects to complete by the end of March 2023.

In the first quarter, Allstate spent $802 million buying back shares, up 72% from $467 million in the same period last year, according to filings.

Geico’s latest auto rate hike could set record

BY STEVE DANIELS Geico is hiking auto insurance rates in Illinois by 17% on average for most longtime customers and 34% for those who signed up in the past two years.

The price change, disclosed in a filing July 11 with the Illinois Department of Insurance, may be the largest one-time carinsurance increase ever for a major carrier in Illinois—certainly in the past two decades.

That distinction is somewhat ironic given that Chevy Chase, Md.-based Geico has advertised relentlessly over those decades how 15 minutes can save drivers 15% or more on insurance. But Geico, like other car insurers, is struggling to keep up with rapidly increasing claims-settlement costs.

The spike also is remarkable given that Geico has hiked rates twice already in less than a year— both at 6% clips.

Including all three rate hikes, drivers with Geico Casualty, the unit insuring most long-term customers, will have seen their

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premiums rise $470 annually, or $39 a month, when they next renew. The 17% increase takes effect Aug. 19, according to the filing.

LOSING GROUND

Newer customers, insured by Geico Secure, will see their premiums rise by $508 annually on average with the 34% hike. That comes to $42 per month.

Geico already was losing ground in Illinois before this dramatic increase. Over nearly three years, the company’s auto policies in the state have dropped 5% to 381,437 from 403,136, according to insurance department filings. Geico is the state’s fourth-largest auto insurer. The top three are Bloomington-based State Farm, Northbrook-based Allstate and Progressive, based in suburban Cleveland.

Geico’s move coincides, too, with pressure on the industry by state senators to provide more relief to drivers after insurers collected outsize profits in 2020 and early 2021 when rush hour

effectively ended due to COVID. Over industry objections, state regulators recently disclosed profitability for all auto insurers from 2019 to 2021.

Geico Casualty’s profits in Illinois in 2020 and the first quarter of 2021 totaled $87 million, a 15% profit margin. In the last three quarters of 2021, the profit narrowed to $15 million, a 5% margin.

Meanwhile, pricing newer customers in Illinois clearly has been a struggle for Geico.

Geico Secure, to which all new customers have been assigned since mid-2020, lost $25 million insuring Illinois drivers in 2021.

That was on just $106 million in premiums.

Geico doesn’t provide press contacts, so there’s no ability to request comment.

AGGRESSIVE MOVES

The comedown for the company perhaps best known for the ubiquitous lizard on television is striking given how successful it’s been over the past 25 years. It’s moved from a small

GEICO

The carrier already hiked rates twice in less than a year—both at 6% clips

auto insurer to the secondlargest in the country as an early adopter of direct sales over the internet, which enabled Geico to offer insurance at cheaper rates than agent-sold incumbents like State Farm and Allstate.

Allstate in recent years has moved to compete more effectively by aggressively moving into the direct sales channel.

Allstate policies are priced 7%

less for customers who sign up online or by phone rather than with an Allstate agent.

While Geico so far is the most aggressive in terms of rate hikes, Allstate, Progressive and to a lesser extent State Farm all have done the same this year. Allstate imposed a 12% increase on average this year, and Progressive hiked prices between 8% and 10%. State Farm has raised its rates by 8% as well.

7/15/22 3:18 PM

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6 JULY 18, 2022 • CRAIN’S CHICAGO BUSINESS

THE TAKEAWAY

Erin Amico As a nature-loving little girl growing up in Chicago, Erin Amico really wanted an iguana. She had a tank ready for it, but her mom said no. Now, at age 39, she gets a whole nature museum. Amico is the newly appointed president and CEO of the Chicago Academy of Sciences and its Peggy Notebaert Nature Museum. A Latin School graduate, Amico joins the museum after a stint as chief marketing officer at P33, a nonprofit co-founded by Penny Pritzker. She lives in the Gold Coast with her husband, Augustin Wegscheider, a partner at Boston Consulting Group, and their two daughters, ages 7 and 9. By Steve Johnson

> What made you want to run a museum?

It lies at the intersection of three things I’m quite passionate about. One is science. I come from a family of scientists.

I grew up reading scientific journals and was very much a nerd in that way. The other piece for me was education. I’m incredibly civically involved in Chicago, and most of the through-line for my civic work is focused on children, particularly education. And I love the city. I know the museum; my children had countless field trips there. I went to high school right down the street.

> Does the Notebaert need to raise its profile?

The museum has a fantastic story to tell, and more people need to hear that story. People have come up to me and said, ‘Oh, yeah, I love the Nature Museum.

That’s where I had my kid’s birthday,’ or ‘That’s where my fiance proposed to me.’

But not everybody realizes the legacy: That this is a place that’s been around for 165 years, that has the work that’s happening in conservation, and that has one of the largest Midwest collections, in terms of number of species, in the nation.

>

What would someone be surprised to learn about you?

In 2010, when I was studying at the University of Cambridge, I competed on a television cooking show called, “Britain’s Best Dish.” A true meat-and-potatoes Midwesterner, I made filet mignon and horseradish mashed potatoes and won that episode.

>

2022

GEN X LEADERS IN SPORTS

NOMINATE NOW! Deadline is Friday, August 5

>

Crain’s 2022 Notable Gen X Leaders in Sports will recognize top Chicago area leaders in sports, between 40-55 years of age, for their success and accomplishments during the last 12 to 18 months.

You write children’s books in your spare time. Tell us about that.

Stories are powerful vehicles to teach, to inspire and to reflect on the world.

I’ve written ever since I was a kid. Most of my stories have some aspect of nature, wonder or magic. My latest, “Three Fairies,” is about the wisdom a mother gives to her daughter.

Favorite travel destination?

Fischland in northeast Germany, where some of my husband’s family live.

>

Nominate at ChicagoBusiness.com/GenXSports

P006_CCB_20220718.indd 6

Who is your hero?

I have two. My dad, who was one of the wisest and most compassionate people I’ve met, and my mom, who is just an overall badass and remarkable woman.

7/15/22 3:00 PM

CRAIN’S CHICAGO BUSINESS • JULY 18, 2022 7

Restaurants battle inflation and labor costs Inflation is hitting Chicago restaurants harder than it has in decades. Operators are struggling to keep up and watching as the rising costs erase the strides they made in pandemic recovery.

With customers curbing their own spending, restaurants hesitate to raise prices too high and scare them off. As a result, many are losing money.

The producer price index for food, a benchmark for restaurants’ raw materials costs, was up 13% year over year in May after rising 16% in April. The last time it jumped so high was in 1974, according to data from the Federal Reserve Bank of St. Louis.

Driving the increases are a convergence of factors—the impact of Russia’s invasion of Ukraine on global food supplies, a surge in oil prices and the broader supply-chain squeeze caused by the pandemic, says Joe Pawlak, managing principal at market research firm Technomic. On a two-year basis, the producer price index was up 26% in May. “It’s a really bad time from a cost front for restaurants,” he says.

“Fees are going up, labor’s going up, rents are going up, everything’s going up, and something has got to give. The pressure valve has got to be released, so they’re certainly taking up price.”

Menu prices were up 7.4% nationally in May, the highest yearover-year increase since 1981.

They rose 11.7% on a two-year basis, Pawlak says. Even so, restaurants aren’t raising prices enough to fully cover rising costs, hoping to hang on to skittish customers who are eating out less often.

OTHER PRESSURES

Inflation isn’t the only financial pressure for Chicago restaurants.

Many are spending more on employees’ pay and benefits, in part to keep pace with wage inflation, but also to reset industry standards that drove many workers to launch new careers after COVID hit. Restaurants are also still trying to recoup two years’ worth of losses from the pandemic and rebuild customer traffic.

In the Loop, revenue at The Berghoff is only about 60% of pre-pandemic levels, even after the German restaurant raised menu prices

4% this year. Fourth-generation owner Pete Berghoff plans another 4% price hike soon, which “will keep us from getting in trouble.”

But finances are tight. The restaurant received $2 million in Paycheck Protection Program loans, and Berghoff said he put in $1.5 million of his own money, too.

The Berghoff is now eating costs and juggling supply chain issues daily. It switched turkey suppliers when prices went up almost $2 a pound. It took steaks off the menu completely. It had to buy different spinach for its famous creamed spinach dish. The corn starch it usually uses to bind sauces is unavailable. Different corn starch means the sauces are “quite different,” Berghoff says. He’s not sure how else the restaurant can adapt.

Berghoff’s great-grandfather founded the place in the late 1890s. It has survived Prohibition, two world wars, the Spanish Flu (which Berghoff’s grandfather caught in Europe while fighting in World War I), Korea, Vietnam, the 1970s energy crisis and the Great Recession. Berghoff has been talking to his father, Herman, who ran the place for 55 years, about the situation.

“We’ve never seen anything like this. We’ve never seen an economy like this,” Berghoff said. “I don’t know what’s going to happen next. . . .The situation we’re living in, we’re going to be living with for the foreseeable future.”

Inflation will likely remain high through the end of this year and into next, says Phillip Braun, clinical professor of finance at Northwestern University’s Kellogg School of Management. In the 1970s and 1980s, the Federal Reserve had to raise short-term interest rates higher than the inflation rate to cool prices down, eventually triggering a recession.

Restaurants would feel more pain if the Fed’s current round of rate hikes has the same result.

Chicago sommelier and restaurant operator Alpana Singh was working as director of wine and spirits at Lettuce Entertain You when the Great Recession hit in the late 2000s. Back then, the restaurant group focused on delivering value to their diners—a conundrum facing restaurant operators now, too.

That recession also sparked an unemployment crisis that caused

hundreds of people to turn up for restaurant job interviews, Singh says. That’s a stark contrast to the situation now. Restaurant operators in Chicago say that even after raising wages and adding benefits, they still struggle to fill some jobs, a symptom of a tight labor market caused by the pandemic.

WAGE RESET

When Parachute, a Korean American restaurant in Avondale, reopened last month after two years, it reset wages. Instead of paying servers a minimum tipped wage, it is paying $25 an hour.

Co-owner Beverly Kim says the restaurant covers some of the additional labor cost with a new service charge on customer checks.

Raising wages was the right thing to do, but it hasn’t been easy amid the inflation, Kim says. Profit margins in restaurants are small to begin with, and she’s just hoping to break even now. She also wants to be sure customers understand why it’s necessary to raise food costs to cover those livable wages.

“The whole industry was under-charging because we were based on an unfair living wage,” she said.

Food and labor aren’t the only costs rising for restaurants. Suppliers have tacked on additional

THOMAS M. KUBIK

RESTAURANTS from Page 1

Pete Berghoff, fourth-generation owner of The Berghoff, with his parents, Herman and Jan Berghoff. delivery fees to cover their own higher gasoline costs. With some restaurants getting half a dozen daily deliveries, those fees add up quickly, says Michael Hogan, co-owner of The Call, a bar in Andersonville. The Call has raised some drink prices 50 cents to $1, to help cover rising costs.

Hogan says shortages are another problem. He hasn’t been able to get Patrón tequila since The Call reopened in April 2021, and is having issues with whiskey, too.

“We were just informed Jameson is not available,” Hogan says.

“That says a lot.”

Experts say the inflation surge likely won’t drive restaurants out

of business at the same rate the Great Recession did. The pandemic weeded out the weakest restaurants already. But higher menu prices likely are here to stay.

Typically, restaurants raise menu prices once a year to offset normal levels of inflation. Technomic’s Pawlak says the 20-year average on restaurant inflation is about 2.7%.

But rarely do menu prices come back down, says Darren Tristano, CEO of research and consulting firm Foodservice Results.

“Restaurants raise prices, but they almost never lower prices,” he says. “If we’re seeing continued increase, that’s going to stick and it’s not going to go away.”

LUXURY HOME OF THE WEEK Advertising Section

Data hack hits Enova’s OnDeck BREACH from Page 3 disclosure was required.

In a statement, Enova said, “We worked quickly with leading cybersecurity experts to resolve it, and all of the data has been recovered by OnDeck. Impacted customers in the U.S. have received a notification via mail, along with instructions for how to access free identity monitoring and support.

Our operations were not impacted, and we continue to provide full services to our customers.”

The free identity protection is being offered for up to two years—a

P007_CCB_20220718.indd 7

standard response by companies when hacking occurs that exposes customer information.

All the affected customers were small-business owners, not retail borrowers, according to Enova’s spokeswoman.

Enova lends at high interest rates to borrowers with tarnished credit who often can’t qualify for bank loans or credit card loans.

With the 2020 buyout of OnDeck, Enova substantially increased its online lending to businesses. About half the loans Enova originates are now to small businesses.

7/15/22 3:29 PM

8 JULY 18, 2022 • CRAIN’S CHICAGO BUSINESS

Palmer House owner dealt foreclosure judgment

BY DANNY ECKER The city’s second-largest hotel is likely heading to the auction block after a Cook County court issued a judgment of foreclosure against its owner.

Cook County Judge Edward Robles last week issued the order against New York-based Thor Equities for defaulting on its $333.2 million mortgage tied to the Palmer House Hilton Chicago, court records show. The ruling came almost two years after lender Wells Fargo filed one of the largest local foreclosure lawsuits in years against Thor over its Palmer House loan, an early case of the widespread distress caused

by COVID-19’s assault on the hotel sector.

The judgment is a step toward an eventual sale of the 1,635room property at 17 E. Monroe St. at what could be a fraction of its pre-pandemic value. The hotel was appraised in March at $328 million, which is well below the value of what Thor owes on the property and far from the $560 million appraised value in 2018 when Thor took out the mortgage. Wells Fargo is a trustee overseeing the $333.2 million senior loan, which was packaged with other mortgages and sold off to commercial mortgage-backed

securities investors.

Thor also has a $94 million mezzanine loan tied to the Palmer House that was packaged separately and sold off to CMBS investors. Based on the appraised value of the property, it’s likely that investors in that mezzanine loan would have their stake completely wiped out once the foreclosure sale is completed as expected.

COVID ARGUMENTS

The property will likely proceed to a sheriff’s foreclosure sale, at which Wells Fargo could bid and ultimately take title to the property with the approval of the court.

The lender could then sell the hotel free and clear of the court system. Wells Fargo expects a sale to be approved and completed in August, according to a Bloomberg report tied to the CMBS loan.

Thor fought back against the foreclosure lawsuit on the hotel, arguing in a response to the complaint that COVID-19 pandemic restrictions made it impossible for them to comply with the mortgage. The firm also contended the pandemic prevented it from being able to use the mortgage for its intended purpose of operating the hotel.

But Robles struck down those arguments, ruling that there was

no government order that forced the hotel to close, a pandemic is not an “unforeseeable event” and that Thor could have kept paying the mortgage.

A Thor spokeswoman did not provide a comment on the judgment.

The lender could be in position to sell off the property as downtown hotel performance improves, albeit slowly. The return of strong leisure travel demand and more conventions and group events in recent months pushed downtown hotel occupancy to its highest mark since late 2019, according to hospitality data and analytics firm STR. Yet large, full-service hotels like the Palmer House are more reliant on groups gathering again and have been slower than limited-service hotels to recover.

The Palmer House foreclosure judgment follows another one at the 610-room JW Marriott Chicago in the Loop. Wells Fargo is also a trustee for a CMBS loan tied to that property and submitted a high bid of $251 million at a July 8 foreclosure auction in a move to take control of the property, according to the Chicago Tribune.

Thor is also facing a pending foreclosure lawsuit tied to the retail portion of the Palmer House property, which includes 60,000

COSTAR GROUP

The order moves the city’s second-largest hotel toward a foreclosure sale at what will likely be a fraction of the property’s pre-pandemic value

The Palmer House Hilton Chicago square feet of shops and a parking garage. A trustee representing investors in a $62 million CMBS loan tied to the retail property filed the foreclosure complaint in December 2020, according to Cook County court records.

The property was appraised in July 2021 at $39.9 million, down from $92.6 million when the loan originated in 2015, according to Bloomberg loan data.

Thor had already cashed out with significant gains on the Palmer House before the pandemic. The firm paid $230 million for the hotel in 2005 and spent $131 million renovating it in 2008.

Thor then refinanced the property in 2014 with a $420 million loan, paying off a previous $365 million loan and likely pocketing the $55 million difference.

NEW DEVELOPMENTS

The 2018 mortgage—including the mezzanine loan—allowed it to cash out with another $7 million in equity compared to the

previous one, adding onto its annual operating income from the property. The hotel generated $30.9 million in net operating income in 2019, down 20% from the year before, according to Bloomberg loan data.

Thor had tried twice to sell the hotel during its ownership tenure—it most recently sought about $575 million in a 2015 offering—but ultimately held onto it.

While it grapples with the Palmer House, Thor has focused its development efforts in the trendy Fulton Market District. The firm developed a new headquarters for snack maker Mondelez International at 905 W. Fulton Market that it sold in 2020 to a German investor for a record-high price per square foot for a Chicago office building. Thor last year also opened a 450,000-square-foot office building at 800 W. Fulton St. that is anchored by dental practice services company Aspen Dental.

River North retail market moving in the right direction Restaurants and bars, which occupy the most retail space in the area, have led the neighborhood’s recovery, a new report says

BY ALBY GALLUN A rebounding River North restaurant scene is giving retail landlords in the neighborhood one reason to feel a little better about their lot.

The retail vacancy rate for River North fell to 19.3% in 2021, down from 22.0% a year earlier, according to a report from Stone Real Estate, a Chicago-based retail brokerage. Though still high, the rate suggests that the market for store and restaurant space in the neighborhood has stabilized after suffering through a devastating pandemic that refuses to go away.

The Stone report does not include pre-pandemic figures.

Restaurants and bars are the lifeblood of the River North retail market, accounting for nearly 40% of all retail space in the area, according to Stone. And restaurants in River North are holding up better than those in the Loop, said Stone Principal John Vance.

One reason: River North has a large residential population

P008_CCB_20220718.indd 8

and also attracts a lot of tourists, while Loop food and beverage tenants tend to rely heavily on office workers for business. With so many downtown professionals still working remote or hybrid schedules, lunch and happy hour customers don’t come in as much as they did before the pandemic. The Loop retail vacancy rate rose to 27.4% at the end of last year, up from 26.3% in mid2021, according to Stone.

“River North in comparison to the Loop has a much broader customer base than the Loop,” said Vance, who co-authored the River North report with Stone Principal Noah O’Neill. Demand for space from restaurants and other hospitality concepts in River North is “extremely strong.”

LEASING PICKS UP

COVID-19 accelerated the demise of River North establishments like the Rainforest Cafe, Lawry’s, Bottled Blonde and Devon Seafood Grill, but leasing has picked up over the past nine

months or so. Gordon Ramsay Burger opened in a space at 2 E. Ontario St. vacated by Wahlburgers. Boka Restaurant Group plans to open a restaurant in the former Bottled Blonde space at 504 N. Wells St. And Yardbird Table & Bar is moving into the former P.F. Chang’s space at 530 N. Wabash Ave. Other River North retail leases in the past year include Target’s deal for a 17,000-squarefoot space at 630 N. LaSalle Drive, a former Infinity showroom. And Whole Foods Market recently vacated its longtime store at 30 W. Huron St. for a new 66,000-square-foot market at 3 W. Chicago, in the One Chicago development.

Other tenants that need big spaces have several choices, including a former Bed Bath & Beyond at 530 N. State St. and the Rainforest Cafe at 605 N. Clark St., floated as a potential site of a marijuana dispensary. And a 59,000-square-foot space at the base of Trump International

Whole Foods Market at One Chicago Hotel & Tower has sat mostly empty since the riverside skyscraper opened in 2008.

“I just don’t think it’s going to lease—ever,” Vance said.

It’s harder to find spaces of less than 15,000 square feet for smaller tenants, he said. Excluding big blocks of space, the River North vacancy rate drops to 14.7%, according to the Stone report.

Bounded by Michigan Avenue to the east, Chicago Avenue to the north and the Chicago River to the west and south, the River North retail market totals about

3.4 million square feet. Designers and art galleries represent the second biggest category of the market after restaurants and bars.

Concentrated in buildings north of the Merchandise Mart, designers and galleries account for about 10% of River North’s retail space, according to Stone.

Grocery stores account for about 7% of the total, while fitness tenants represent 5%. Apparel retailers are barely a factor in River North, occupying about 1% of the 3.4-million-square-foot retail market, according to Stone.

7/15/22 3:52 PM

CRAIN’S CHICAGO BUSINESS • JULY 18, 2022 9

T

he earliest recorded contemplation of leadership is attributed to the Chinese philosopher Lao Tzu, who wrote in the 6th century B.C.: “A leader is best when people barely know he exists.” That is, a good leader’s guidance is so subtle that his followers are unaware of it and feel their accomplishments are their own.

Needless to say, theories on leadership evolved over time to cast leaders as superior rather than invisible. The ancient Greek philosophers highlighted key leadership qualities such as ethics, integrity, excellence in character, and moral trustworthiness. Machiavelli posited that leaders were safer being feared rather than loved if they couldn’t have both. And Shakespeare, in his literature, suggested that leaders need only create the appearance of possessing the superior qualities expected of them.

The illusion of superiority certainly makes it easier for the ruled to accept the decisions of their rulers. This school of thought was the foundation of autocratic leadership, in which one top boss makes

Ozge Guney-Altay is director of Science Ventures at the University of Chicago’s Polsky Center for Entrepreneurship & Innovation.

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

all the decisions—the dominant style for quite some time now.

For today’s business leaders, particularly startup founders deeply invested in their brainchild, the in-

stinct is often to be an autocrat. But they would be more effective if they put aside ego and remembered Lao Tzu’s words on the power of subtlety.

Today, the key to impactful leadership is influence, not authority.

And the key to influence is persuasion.

My formative experience with persuasive leadership came when I was a graduate student in chemical engineering. I was running experiments in the lab that were keeping me up for 36 hours straight, and my adviser, despite knowing I was pulling all-nighters, would still invite me to participate in other projects, group discussions, and even social events. I couldn’t imagine juggling it all, but his implicit confidence that I could convinced me to try.

So I consulted friends across disciplines to figure out how to automate my experimental setup and collect data without constant supervision, unusual at the time and challenging given my high-temperature, high-pressure chemical experiments.

It ultimately created a situation where I optimized my overall pro-

GETTY IMAGES

Entrepreneurs: It’s better to persuade than to dictate

cess, but not because I was given an overt directive. To me, it was a defining example of a persuasive leader motivating people to work together, harvesting their collective intelligence and inspiring them to reach for seemingly unattainable goals.

Persuasive leaders, like autocratic leaders, are strong and maintain centralized control when making decisions. However, they also invite questions, a distinction that makes persuasive leadership a style particularly befitting entrepreneurs.

Startups bring together a small but dedicated group of people who are uniquely skilled, intelligent and self-motivated, and retaining that hard-working talent is crucial to ensure steady progress towards highly ambitious goals. Criticizing or coercing self-driven individuals is a

sure way to turn them off, so better to invite discussion to help them figure out for themselves how to improve or adjust.

In addition, startups require outof-the-box thinking to solve problems. While it can be difficult for founders to invite team members to question their vision or direction, and even harder to acknowledge someone else has a better idea, they must be able to harvest the collective intelligence of their team to make the best decisions. Unlike larger corporations run by established processes, startups require a constant influx of creative thought.

Persuasive leaders offer motivation, inspiration and creativity through inclusiveness. They know that none of us is as smart as all of us.

2022

WOMEN IN LAW Crain’s 2022 Notable Women in Law recognizes accomplished women attorneys in the Chicago area for their success during the last 18 months.

NOMINATE NOW! Deadline Extended to Friday, July 22 Nominate at

ChicagoBusiness.com/WomenLaw

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7/15/22 2:57 PM

10 JULY 18, 2022 • CRAIN’S CHICAGO BUSINESS

b i t

EDITORIAL

Chicago needs to make big plans for the Loop

T

retail brokerage Stone Real Estate. The retail picture a few blocks south is not so rosy, with Loop retail vacancy rates rising to 27.4% at the end of last year, up from 26.3% in mid-2021, according to Stone.

We’ve urged before that city officials and business leaders in Chicago need to do a better job of collaborating to come up with

BUSINESS LEADERS IN CHICAGO NEED TO DO A BETTER JOB OF COLLABORATING TO COME UP WITH A FRAMEWORK THAT IS BOTH WORKABLE AND EQUITABLE.

NEWSCOM

wo different building vacancy reports recently highlighted the head-scratching, halting progress of the downtown recovery and why Chicago needs a more aggressive plan to figure out a path forward for the city’s financial engine in a post-pandemic world.

Crain’s reporter Danny Ecker reported July 13 that the downtown office vacancy rate—a telling data point that says a lot about the health of the central business district—at the end of June remained virtually unchanged from the record high set in first quarter at an unhealthy 21%. That’s up from 19% in the same period last year and way up from the 13.8% at the outset of the pandemic more than two years ago.

But as Ecker points out in his story, not all of the data presented was doom and gloom. There is still demand for downtown office space—just not as much per company as there used to be. In fact, the net absorption rate (the net amount of leased or occupied space compared to the prior period) is up nearly 290,000 square feet. That’s enough to make an office space broker smile, if only a little bit.

More encouraging data is coming from the suburban rail lines. Metra ridership is a little more than twice what it was a year ago, though still only a third of the ridership pre-pandemic.

So what to make of this? The good news is that companies still want to be downtown and more people are coming back, albeit more slowly than other markets.

The bad news: Companies want a lot less space. And that leaves downtown Chicago

stuck in neutral at best. More to the point, it’s a downtown spinning its wheels.

More concerning is the widening gap between newer buildings with more modern amenities and older ones with fewer. The vacancy rate for top-tier buildings was 18.7% at the end of June. But for Class B and Class C, the rate climbs to an alarming 22%-plus.

And with Boeing and Citadel planning to pull up stakes in Chicago, more gaps

to fill are coming.

Meanwhile, in River North, which blends downtown with neighborhoods to the north, it’s a somewhat different story. As reporter Alby Gallun wrote on July 14, a restaurant industry on the rebound is driving a retail recovery in the food and tourist-heavy neighborhood.

Retail vacancy rates for River North fell to 19.3% in 2021, down from a dizzying 22% a year earlier, according to a report from

a framework that is both workable and equitable. Understanding where the future of office work is really headed long term is key.

We are encouraged with the ambition behind the city’s new planning initiative and its breadth in reaching all corners of the city for input. It is the kind of thinking around planning that should not have to wait 50 years to come. We also feel good about some of the risk-taking going on in the Loop, like some of the bets developer Michael Reschke is making and Google’s interest in expansion there.

Time continues to tick on what to do with our crucial business engine. Now is the time for a momentous rethinking of what a future central business district could be. And Chicago, as it has before, should be the leader in making a big plan.

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utility’s reputation and that hen the electricity will eventually determine recently went out the fates of two local powat home, my first erbrokers: Former ComEd instinct was to check if there CEO Anne Pramaggiore and was a neighborhood outage. ex-Illinois House Speaker There wasn’t. So, I left ComEd Michael Madigan. a “What’s up?” voicemail— While this high-stakes expecting to hear back, at drama takes center stage, best, in a couple of hours. it’s worth noting that thouTo my surprise, around sands of ComEd workers are 10 minutes later, a ComEd still showing up every day representative called to say Robert Reed is a to keep the lights on, repair our house was offline and veteran Chicago storm-damaged lines and a repair crew was en route. journalist who curWithin a half hour, power rently contributes to maintain the power grid.

They do so because it’s was restored and life re- Chicago magazine. turned to normal.

He is a former editor their livelihood, of course.

But I contend there’s also a While grateful for the of Crain’s Chicago greater purpose, something quick fix, this little occur- Business.

ComEd workers may not even rence also serves as a gentle reminder that there’s more to the state’s realize is their larger mission: maklargest electric utility than the ugly ing sure Chicago and northern Illinois corporate and political bribery scan- don’t backslide and end up like some dal being hashed out in federal court. energy-strapped places, such as TexIt’s a legal tussle that has muddied the as, where electrical service disruptions

cost the state economy between $80 billion and $130 billion in 2021, according to federal data.

Consider that during the past couple of years, as the bribery saga publicly unfolded, ComEd workers spent 1.2 million hours in 2020-21 on storm restoration within the company’s backyard. That means when nasty Chicagoarea weather occurred—those days when even the family dog refuses to go out because it’s so miserable outside— ComEd crews were in aerial buckets or under tarps, struggling to turn the power back on.

WORKERS DESERVE BETTER

What’s more, whenever another state was smacked by floods, hurricanes or tornadoes, ComEd workers were quick to lend a helping hand. During 2020 and 2021, the utility pitched in at least 300,000 worker hours helping short-handed and storm-ravaged states with their emergency repairs and recov-

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

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

P010-P011_CCB_20220718.indd 10

ery assistance. (All work hour data cited was provided by ComEd at my request.)

More than rescue crews are on the job: ComEd’s estimated 6,000-person workforce includes cable splicers, mechanics, meter technicians, engineers, dispatchers, attorneys, scientists and more—all keeping the place up and running.

Indeed, ComEd is a complex, government-regulated behemoth, which makes it subject to a labyrinth of rules and regulations that could confound Albert Einstein.

Yet that doesn’t excuse ComEd’s supreme disgrace: agreeing to pay $200 million in 2020 to resolve a federal criminal investigation into a yearslong bribery scheme that’s resulted in the indictments of four people connected to the utility: Former ComEd CEO Pramaggiore; an ex-executive vice president; a lobbyist; and a consultant.

They’re accused of bribery conspiracy, bribery and willfully falsifying ComEd

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

7/15/22 3:25 PM

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CRAIN’S CHICAGO BUSINESS • JULY 18, 2022 11

YOUR VIEW Continued books and records as part of a scheme to influence “Public Official A,” according to the federal indictment.

We know that “Public Official A” was government code for former Speaker Madigan, who for decades controlled the legislation that flowed through the Illinois General Assembly, including ComEd-related bills. A subsequent and separate 22-count federal indictment alleges Madigan and a co-defendant used his position to solicit and receive financial rewards from the utility for himself and his associates, including no-show or low-show jobs.

All of the accused say they’re innocent, and each will get their day in court.

ComEd’s prosecution is being deferred

for three years, and the bribery charge will then be dropped, provided the utility helps make the feds’ case against the indicted.

Obviously, the vast majority of ComEd workers had nothing to do with this sordid affair and they could care less if a couple of corporate suite types or Illinois’ master class politician end up in jail.

Yet, make no mistake: ComEd’s labor

force is a victim of this alleged bribery scheme and subsequent fallout because, like us, they are taxpayers, customers, and residents who all suffer when trust breaks down and corruption infects the business and political systems.

The employees also bear an added burden of working for a company that, for the near future, will be under a legal cloud and whose ethics are questionable.

Amid pressure from lawmakers and activists, the electric utility is taking steps to clean up its act with a steppedup corporate ethics program. A recently installed CEO, hired from outside the company, is overseeing ComEd’s reputational rebuild.

Still, rebounding won’t be easy, particularly as the ComEd-Madigan scandal wends through the courts, generating big news coverage along the way.

Yes, it’s a mess.

And it didn’t have to be.

Those ComEd workers who came to my rescue—along with the thousands of other employees who keep the region’s electricity buzzing—deserved better from their leaders.

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CRAIN’S CHICAGO BUSINESS

BR SU BE

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ACCOUNTING

BANKING

CONSULTING

HEALTH CARE

LAW

ORBA, Chicago

First Bank Chicago, Northbrook

HBR Consulting, Chicago

ORBA, one of Chicago’s largest public accounting firms, welcomes Priscilla Garza and Chris Graaf to the firm. Priscilla Garza joins the firm’s Accounting Services Group. She has Garza experience preparing financial statements, recording payroll and generating invoices for clients. She is also experienced in human resources operations.

Chris Graaf joins the firm’s Cloud CFO Services Group. He has Graaf experience maintaining general ledgers, reconciling bank statements, managing accounts payable and accounts receivable, and preparing financial statements. He is also proficient in providing systems integration solutions, improving workflows, and implementing and revising standard operating procedures.

First Bank Chicago, one of the top five privately held banks in Chicagoland, is pleased to announce the promotion of Jodi Sugar to SVP, Middle Sugar Market Banking.

Jodi is responsible for managing and building strong client relationships while underwriting large and complex credits within our Middle Market and Large Corporate portfolios. She joined the Bock First Bank team in 2016.

First Bank Chicago is also pleased to announce that Brian Bock, VP, Middle Market Banking will be supporting our expansion strategy in the Chicago marketplace as a Relationship Manager. He is responsible for developing relationships and delivering client-focused banking solutions within our Middle Market portfolio. He joined the First Bank team in 2019.

David Cram has been promoted to managing director in HBR Managed Services, leading the Business Services team providing operating support for Managed Services’ clients, including managing strategic partnerships, procurement and sales operations. He also provides strategic direction and leadership for managed services delivery in the WAN, Data Center, and Hosted Litigation Support units. David has 15+ years’ experience advising law firms on IT change efforts, process improvement and cost savings.

Loyola University Chicago Stritch School of Medicine and Loyola Medicine, Maywood

Croke Fairchild Morgan & Beres, Chicago

ARCHITECTURE / DESIGN Lamar Johnson Collaborative, Chicago Lamar Johnson Collaborative (LJC) has promoted Jonny Noble, LEED AP BD + C, to Principal. He has over 14 years of experience with residential, commercial, Noble medical, and corporate projects. Jonny leverages his innovative thinking to advance elegant design solutions. He has a BS and M.Arch from Ball State University and is a registered architect in Illinois.

Bryant (LJC) has promoted Paul Bryant, AIA, LEED AP, NCARB, to Associate Principal. He has over 14 years of experience with various projects in numerous markets, including corporate, commercial, industrial, healthcare, mixed-use, residential, and public realm/open space. Paul has a BS and M.Arch from the University of Cincinnati and is a registered architect in Illinois and Ohio.

BANKING Capital One, Chicago Steve LaFalce joins Capital One as Vice President and Senior Business Banker in Chicago, where he will serve as a trusted advisor to clients on personalized lending solutions. With nearly fifteen years of relationship manager experience, Steve joins from Fifth Third Bank where he most recently worked as a business banker. Steve holds a Master’s and Bachelor’s degree from Western Illinois University, where he focused on finance and risk, and lives in St. Charles with his wife and two children.

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BUSINESS SERVICES Amcor, Deerfield Amcor has appointed Susana Suarez Gonzalez to the role of Executive VP & Chief Human Resources Officer. She will be responsible for leading Amcor’s global human resources function, with a focus on investing in talent and organizational development. Suarez Gonzalez brings more than 31 years of HR experience, driving talent and growth in B-to-B organizations.

Previously, she was Executive VP, Chief Human Resources and Diversity & Inclusion Officer at International Flavors and Fragrances.

CONSTRUCTION PDB Construction, Buffalo Grove PDB Construction is pleased to announce two additions to its leadership team. Michael Swain has joined as Vice President, and Marty Mansch has been promoted to General Superintendent. Swain Michael and Marty each have more than 20 years of experience in construction management and commercial real estate development. They will oversee construction of commercial facilities with a strong emphasis Mansch on safety, quality, and efficiency. PDB Construction specializes in construction management. The firm’s project execution teams bring a wealth of experience and expertise to program work and other assignments.

PDB Construction is currently managing commercial projects for clients in three states and is rapidly expanding into other markets.

Marilyn Glassberg Csete M.D., an internationallyrecognized expert in lung disease, joins Loyola University Chicago Stritch School of Medicine and Loyola Medicine as John W. Clarke endowed chair, Department of Medicine. Dr. Glassberg conducts ground-breaking research to improve patient care. She has developed mentorship, faculty recruitment, and diversity programs to provide educational opportunities for the next generation of physicians.

Glassberg earned her M.D. from the University of Miami.

Croke Fairchild Morgan & Beres welcomes Nina Monahan to the Firm as Chief Operating Officer. A strategic executive leader with more than 25 years of business leadership experience, Nina is responsible for leading the roadmap for achieving the Firm’s strategic goals while driving efficiencies to improve the Firm’s operations and overall performance.

LAW Freeborn & Peters LLP, Chicago

ENGINEERING

INTERIOR DESIGN

Milhouse Engineering and Construction, Inc., Chicago

BKV Group, Chicago

Juan Campos has been promoted to Vice President of Power at Milhouse Engineering and Construction, Inc. Since joining Milhouse in 2016 as a founding member of the Power group, Juan has been instrumental in the success of the team. Over the past six years, Juan has helped grow the department from a team of six to over 70+ talented individuals. Juan is a registered Professional Engineer with over 20 years of experience in electrical engineering and field support for high voltage substations.

Jackie Wilcox, AIA, LEED AP, IIDA, has joined BKV Group as director of interior design and associate partner in the company’s Chicago practice site. Wilcox will lead interior design for Chicagobased projects and related business development opportunities working across market sectors of commercial office, multifamily, government, hospitality, education and student, senior and affordable housing. She holds a bachelor’s in architectural studies from the University of Illinois, Urbana-Champaign.

EXECUTIVE SEARCH Slayton Search Partners, Chicago Slayton Search Partners is proud to announce the newest addition to the team, Taylor Wilson, who will be filling the role of Vice President & Principal.

Taylor will be focused on supporting Slayton partners with executive searches within the Industrial function. He joins Slayton from WilsonHCG with prior experience at Stiles Associates and Lucas Group.

His background in strategic sourcing and relationship-building makes him a strong fit for the Slayton team.

LAW Firsel Ross & Weis, Deerfield Attorney Michael D. Weis has been named a principal in the newly renamed firm of Firsel Ross & Weis. He joins principals Michael D. Firsel and Michael E. Ross in the firm they founded in 2011.

Mr. Weis has a long track record of advising clients in privately and publicly held entities in business and commercial transactions, handling the negotiation and closing of hundreds of complex corporate and commercial real estate transactions both domestically and internationally.

Wintrust Financial Corp., a financial services holding company based in Rosemont, Illinois, with 175 locations across Illinois, Indiana, and Wisconsin, is pleased to announce the promotion of Lena Dawson. Lena was promoted to President of Wintrust Agency Finance at Lake Forest Bank & Trust Company, N.A. She will lead both the legacy agent finance and the newly acquired Allstate Agent Finance businesses.

Lena joined Wintrust in March 2011.

NON-PROFIT Skills for Chicagoland’s Future, Chicago Skills for Chicagoland’s Future, a nonprofit business intermediary that brings a jobs-first approach to returning unemployed and underemployed job seekers to work, is excited to welcome Rob Ritchie, Regional President for Ingredion Mexico, U.S./Canada Sweetener & Industrial Solutions, Kerr Concentrates and Global Core Strategy to its Board of Directors.

NON-PROFIT Skills for Chicagoland’s Future, Chicago Skills for Chicagoland’s Future, a nonprofit business intermediary that brings a jobs-first approach to returning unemployed and underemployed job seekers to work, is excited to welcome Audrey Williams-Lee, Chief People Officer at Ann & Robert H. Lurie Children’s Hospital of Chicago to its Board of Directors.

NON-PROFIT

FINANCIAL SERVICES Wintrust, Rosemont

Freeborn & Peters LLP is pleased to announce that the firm has elevated Jeffrey J. Catalano to Equity Partner effective January 1, 2023. Jeff is a Partner in the Litigation Practice Group and Co-Leader of the Intellectual Property Litigation Practice Group and a member of the Consumer Products Industry Team. He focuses his practice on intellectual property litigation as well as IP-adjacent commercial litigation.

LAW Firsel Ross & Weis, Deerfield Jessica T. Cooper has been promoted from associate to partner in the law firm, Firsel Ross & Weis. Cooper, who has been with the firm for over two years, focuses her practice on commercial real estate, including the acquisition, financing, leasing, and disposition of commercial properties. She has extensive experience in handling transactions from their inception, routinely working with title companies to resolve complex title issues, through closing.

Union League Boys & Girls Clubs, Chicago Thomas E. Payne, a Union League Boys & Girls Clubs Board member since 1999, has been appointed Board President. Payne retired in 2015 as Senior Vice President with The Private Client Reserve of US Bank. Prior, Payne was a Director with Citi Private Bank in Chicago, and formerly in senior management with Harris myCFO, and with Northern Trust’s Private Bank.

For over 100 years, Union League Boys & Girls Clubs have been serving youth in neighborhoods with the highest hardship index in Chicago.

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2022

CRAIN’S CHICAGO BUSINESS • JULY 18, 2022 13

EXECUTIVES OF EXECUTIVES OF COLOR COLORIN INFINANCE FINANCE With its overwhelming lack of diversity—only 5% Black, 9% Asian and 8% Hispanic/Latino—it’s no wonder some have termed finance a “male and pale” industry. The executives profiled here are changing that. They hold senior leadership positions at major Chicago-area firms. Through individual mentoring, work with their alma maters and partnerships with national organizations, they are promoting finance as a satisfying and lucrative career for younger people of color. Perhaps most importantly, by dint of their position, they are visible to the young professionals in their organizations. That visibility says silently, but forcefully: You belong here.

—By Lisa Bertagnoli METHODOLOGY: The individuals featured did not pay to be included. Their profiles were written from the nomination materials submitted. This list is not comprehensive. It includes only individuals for whom nominations were submitted and accepted after a review by editors. To qualify for the list, nominees must self-identify as a person of color, serve in a leadership role at a financial organization and demonstrate the ability to effect change at their organization. They must use their skills to advance minority professionals in their field or organization and promote inclusive practices in the workplace. They must also show leadership outside of their organization, with involvement in civic or professional organizations.

ANDRE BAKER

EVA BROWN

Executive director and market director JPMorgan Chase

Vice president, minority and women-owned businesses US Bank

Andre Baker oversees 16 branches and 180 employees across the Chicago area, which includes the top 10 most diverse communities in Illinois. In 2008, he was a founding member of JPMorgan’s DE&I Council and helped write the playbook for meaningful conversations within its central region. He was instrumental in creating a partnership between JPMorgan and Chicago State University, creating a pipeline to graduates to fill open positions (i.e., licensed banker, relationship banker) with diverse talent. He’s the Illinois co-sponsor for the firm’s Fellowship Initiative, which supports young men of color as they navigate high school, and Illinois co-executive sponsor for the Black Organization for Leadership Development.

Eva Brown joined US Bank’s business banking segmentation strategy team as segment leader for minority and women-owned businesses. She is responsible for launching US Bank’s Access Business collaboration between banking teams and external partners to address gaps in capital that limit opportunities. Access Business has already hired nine business access advisers across the country to serve Black business owners. Brown is on the Women’s Business Development Center’s board and is its executive committee’s acting treasurer. She helped develop WBDC’s Access to Capital program, which provides loans and counseling to women- and minority-owned businesses. Brown chairs Greenwood Archer Capital’s board and serves on the board of the Woodstock Institute.

Congratulations, Robert and José!

Your leadership makes the banking industry and our community a Fifth Third better®.

Congratulations on being named Chicago’s Notable Executives of Color in Finance.

Robert McGhee

SVP and Market Manager Community and Economic Development

José Peña

SVP and Regional Retail Executive

53.com Fifth Third Bank, National Association. Member FDIC.

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14 JULY 18, 2022 • CRAIN’S CHICAGO BUSINESS

LINDA CHOI

MELISSA CLARK

MELISSA CONYEARS-ERVIN

REGINA CROSS

Chief operating officer Kabouter Management

Controller Primera Engineers

City treasurer City of Chicago

Vice president Goldman Sachs

When Linda Choi assumed the role of COO at Kabouter in 2009, the firm’s assets were less than $180 million and were managed by a team of four running one micro-cap fund.

Under her leadership, the team has grown to 36 people (75% minorities and women) managing four portfolios with peak assets of nearly $6 billion.

The firm’s institutional client base is composed primarily of endowments,

Melissa Clark leads the corporate accounting and finance functions with a focus on strategic planning, budgeting, financial analysis, process improvement and cash management. She recently upgraded the enterprise resource planning and human capital management systems within a three-month period, helped set up new business entities for New York and North Carolina and earned her Certified Plan Sponsor Professional credential.

In 2021, she became part of Primera’s executive management team. She co-chairs its DEI committee and helped launch a 501(c)(3) for its new charitable foundation.

Clark serves on the CFO Leadership Council steering committee, is on the advisory board for CXO Now, and is board treasurer for Green City Market as well as the Urban Growers Collective.

As city treasurer, Melissa Conyears-Ervin manages Chicago’s $9 billion investment portfolio and is the only elected official to sit on all four local pension boards. In recent years, she helped achieve rates of return above the 10-year average for the city’s four pension funds, divested city funds from fossil fuels and championed a city council ordinance mandating divestment. She held the first-ever Financial Services Career Fair, hosting more than 45 employers, and launched HOPE Inside, a program for Chicagoans to receive free credit and money management services. Her office is working to reform the municipal depository selection process and to lower the collateral threshold of deposits to help community banks.

Regina Cross’ team manages investment portfolios for ultra-high-net-worth families, family offices, corporate executives and nonprofits. She is an ambassador with Goldman Sachs’ One Million Black Women program and is president of the Stanford Graduate School of Business Black Alumni Chapter, which doubled its endowment under her tenure. She also serves on Indiana University’s Kelley School of Business alumni board as well as on the boards of Cara Chicago, the Chicago Foundation for Women and KIPP Indy charter school network. She is the recipient of the Eli Lilly’s Global CFO Award, recognizing cross-divisional leadership and Six Sigma international experience.

foundations and pensions. Choi oversees Kabouter’s diversity, equity and inclusion initiatives, launched a Women’s Mentoring program with the goal of encouraging professional development and providing a safe space to discuss challenges, and has partnered with the New America Alliance Institute and its Pathway Fellowship program over the past two summers.

PERCENTAGE OF WOMEN BY CORPORATE ROLE, 2021

31%

Women, particularly women of color, continue to be underrepresented in financial-services roles above entry level.

21%

White women

30%

15%

27%

23%

22%

23%

11%

7%

6%

4%

Senior manager

Vice president

Senior vice president

C-suite

Women of color

Source: McKinsey

Entry level

Manager

Congratulations Brian Egwele Egwele & Company congratulates Brian Egwele on being recognized by Crain’s Chicago Business as a Notable Executive of Color in Finance.

We celebrate Mr. Egwele’s passion and commitment to growing financial literacy across all communities of Chicago. www.egwele.com

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Congratulations to

Linda Igbinovia

CRAIN’S 202 2 NOTABLE EXECUTIVE OF COLOR IN FINANC E

SVP of Finance

With Linda’s leadership, BOWA has been on a growth trajectory focused on excelling as general contractors and construction managers. Since the beginning, Linda has been at the helm supporting the pursuance of momentous projects and encouraging the organization’s consistent community engagement. Her professional insight was a critical piece to our building financial capacity to deliver, at an exceptional level, for our clients.

About Us Our talent and intellectual capital are what drives us. Through competitive success, perseverance, logic, and cooperation our team takes on high-profile projects.

BOWA’s work is recognized as M/W/DBE breakthrough firsts and trailblazers in Chicago through our industry expertise in Aviation, Athletics, Commercial, Corporate, Government, Healthcare, K-12, Mission Critical, Residential, and Science & Technology. We build projects with passion and are driven by the anticipation of the impact it will have for years to come.

We exist to build in all communities.

www.bowaconstruction.com

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16 JULY 18, 2022 • CRAIN’S CHICAGO BUSINESS

BRIAN EGWELE

JOHARA FARHADIEH

NICKOL R. HACKETT

WILLIAM HEARD

LIN

Managing director Egwele & Co.

Executive director and chief investment officer Illinois State Board of Investment

Chief investment officer and treasurer Joyce Foundation

CEO and chief investment officer Heard Capital

Senio Bowa

Brian Egwele leads the firm’s deal origination and execution efforts in its two primary business lines, mergers & acquisitions and private capital raising; he also is involved in managing client relationships and all compliance and regulatory matters. In 2022, Egwele began sponsoring the Englewood Neighborhood Choir program for the Chicago Children’s Choir, a nonprofit that provides choral

Johara Farhadieh oversees $25 billion in assets for ISBI’s 156,000 beneficiaries, including all investment decision-making, operations and portfolio management.

ISBI’s annual net returns (including 25.8% for the one-year period ending June 30, 2021) beat the respective benchmarks, ranking No. 1 for the last three years among public pension plans nationwide for private-equity performance. Farhadieh is a member of the Economic Club of Chicago, the Milken Institute Executive Circle (an invitation-only group of women CEOs, founders and presidents) and the New America Alliance. She serves on the board of La Rabida Children’s Hospital Foundation. Farhadieh earned an MBA with honors from the Kellstadt Graduate School of Business at DePaul University.

Nickol R. Hackett is a member of the foundation’s executive leadership team and directs its investment program (assets of $1.3 billion) in support of the foundation’s grantmaking.

Under Hackett’s direction, in November 2020 the foundation launched an initiative to invest $100 million with investment managers of color, focusing on early-stage founders of race- and genderdiverse firms. Previously, she was the founding chief investment officer of the $10 billion Cook County Pension Fund, establishing its first investment office in 2008. Today, Hackett serves as board vice chair with the Museum of Contemporary Art, is a board member of First Women’s Bank and a University of Chicago Medical Center trustee.

William Heard is responsible for the firm’s security selection, portfolio construction and risk management, as well as its infrastructure program. He has grown his capital base with institutional investment partners and now manages more than $1 billion in total assets across his investment vehicles, making it a contender for the largest Black-owned and -managed hedge fund in the United States. At Heard Capital, women represent 40% and people of color 60% of the firm’s senior leadership. Heard serves on the boards of City Year Chicago, the President’s Circle and the Young Professionals Network for the Chicago Council on Global Affairs. He’s also active in OneGoal, a diverse collective of local organizations creating opportunities for low-income youth.

A fo sees ing e finan

music training largely to minority youth. He is registered with the Securities & Exchange Commission as a licensed broker-dealer and has obtained all the Financial Industry Regulatory Authority licenses required to operate his business lines. Egwele is an innovator-in-residence mentor at Tulane University’s Freeman School of Business.

SHARE OF PROFESSIONALS

BY ROLE CATEGORY, 2018 The proportion of people of color in financial services drops by 75% from entry level to the C-suite.

Source: McKinsey

Entry level

Manager

Senior manager

61% 64% 76% 81% 88% 90%

White

9%

Vice president

6%

4%

3%

Black

Senior vice president

2%

2%

9%

C-suite

6%

4%

3%

2%

Hispanic/Latinx

2%

17% 21% 15% 12%

7%

6%

Asian

3%

Hawa

international small-cap specialists

Congratulations Linda Choi

Congratulations to Linda Choi, Kabouter’s Chief Operating Officer, for being named among Crain’s Chicago Business 2022 Notable Executives in Finance.

Linda has prioritized empathetic leadership as the world has struggled with racial inequity and a pandemic. Her commitment to recruiting and retaining diverse talent have yielded a staff that is 75% people of color and women.

Visit us at kaboutermgmt.com

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bond milli vend by $3 ee an Man Asso

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CRAIN’S CHICAGO BUSINESS • JULY 18, 2022 17

SOPHIA LADOUCEUR

LINDA IGBINOVIA

firm’s ction nfracapitiontners more total vestaking the and fund s. At and eadCity d the hicao aclocal for

Senior vice president, finance Bowa Construction

Vice president, corporate finance Ventas

A former ICU nurse, Linda Igbinovia oversees all financial decisions at Bowa, including expenditures, budgets, cash flow analysis, financial reporting, audits and risk management. She is also responsible for management staff oversight, hiring decisions (hand-picking a financial team of all women) and promotions. In recent years, she implemented cost-saving initiatives and productivity tools, established a competitive bonus and incentive program, facilitated growth in surety bonding aggregate capacity exceeding $350 million, and negotiated cost savings and new vendor terms that reduced operating costs by $300,000. She is an Ehi Foundation trustee and belongs to the Construction Financial Management Association and the National Association of Women in Construction.

Sophia Ladouceur is responsible for the corporate finance team, management and external reporting, corporate budgeting and forecasting, managing the quarterly earnings process and leading targeted transformational corporate finance initiatives. She recently initiated and oversaw the implementation of software to support capital expenditure and general and administrative management, two key corporate priorities. Her capex management also was key in helping Ventas navigate the early stages of the pandemic, when capital conservation was priority. Prior to Ventas, her career included stints with PepsiCo and Ernst & Young, among others. Today, she chairs the Beyond Ventas DEI sub-committee and has been nominated to the board of High Jump, which provides support for Chicago middle school students.

O. VICTORIA “VICKIE” LAKES-BATTLE

ROBERT MCGHEE Senior vice president, community economic development market manager Fifth Third Bank

Executive director, Chicago region IFF

As IFF’s first-ever Chicago region executive director, Vickie Lakes-Battle oversees the development of the nonprofit’s annual plan and identifies opportunities to raise capital in coordination with management. Under her leadership, IFF’s Chicago region closed 31 loans in 2021, valued at $42.04 million. Nine of the loans, valued at $9.45 million, were for affordable housing. She also led the team in securing philanthropic funding for nonprofits on Chicago’s South and West sides, including the launch of Chicago’s Cultural Treasures, which awarded $14.4 million to nonprofits that help retain BIPOC culture. Her civic service includes the Illinois Public Health Institute.

Rob McGhee leads Fifth Third Bank’s Community Economic Development program for Chicago and oversees its regional compliance with the federal Community Reinvestment Act. He also has been tapped by Fifth Third to lead, among other initiatives, its local efforts in support of the Emerging Black Futures Neighborhood program.

Fifth Third will commit up to $20 million in lending, investments and philanthropy in Chicago’s South Chicago community. McGhee has held leadership roles with U.S Bank (vice president, community affairs manager for the Chicago region) and with Citigroup’s Citi Community Investment and Development as vice president and community relations manager.

Drop-off for Latinx and Asian women at senior levels is driving the overall drop-off for women of color.

6%

3%

2%

1%

1%

1%

0

Hawaiian/Pacific Islander/Mixed race

39% 36% 24% 19% 12% 10%

The percentage of Hispanic/Latinx women steadily decreases 55% 48% 38% 30% 27% 4% throughout the corporate pipeline.

2018 pipeline of people of color

Hispanic/Latinx women

The precentage of Asian women also steadily decreases throughout the corporate pipeline.

47% 39% 38% 34% 24% 14%

Asian women

CIBC is pleased to congratulate Linda Ross, Vice President and Head of US Commercial Operations, for being named one of Crain’s Chicago Business' Notable Executives of Color in Finance for her strong leadership and dedication at our bank.

Congratulations to all of the 2022 Notable Executives of Color in Finance.

cibc.com/US The CIBC logo is a registered trademark of CIBC, used under license. ©2022 CIBC Bank USA. Products and services offered by CIBC Bank USA. Member FDIC.

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18 JULY 18, 2022 • CRAIN’S CHICAGO BUSINESS

GORDON PAN

JOSÉ PEÑA

JOHN RHODES

DEBORAH E. ROSS

LIN

President Baird Capital

Senior vice president, head of retail (Chicago) Fifth Third Bank

As president of Baird Capital, Gordon Pan oversees the strategic, operational and organizational activities for Baird’s direct private-investment business. He also chairs the investment committee for Baird’s venture-capital and global private funds.

He’s also a member of firm’s executive committee. Pan guided Baird through COVID-19, deploying $105 million in eight new platform invest-

José Peña is a member of Fifth Third Bank’s regional executive management team, which is responsible for guiding the region’s business. This includes overseeing more than $15 billion in assets, a total of 180 financial centers and more than 1,000 employees, along with execution of the bank’s commitment of investment in all the communities it serves.

During the pandemic, Peña led a team to ensure that all Fifth Third branches, driveups and lobbies remained open, and that customer service was not disrupted. Peña is an executive board member for Junior Achievement of Chicago, as well as a graduate and advisory board member of the ABA Stonier Graduate School of Banking.

Chief financial officer, community impact banking and marketing and communications JPMorgan Chase

Vice president, community development relationship manager Huntington National Bank

Vice oper CIBC

John Rhodes leads strategic vision-setting, budget planning and execution, and expense management across both the marketing and communications and community-impact organizations. He helms efforts to build data analytics, insights and reporting capabilities specific to community impact. Under Rhodes’ leadership, commercial banking built new teams to advance a Green Economy banking team to help scale decarbonization technologies as well as a team focused on serving diverse-, women- and veteran-owned businesses across 21 U.S. cities. This work in particular is making progress against the firm’s $30 billion Racial Equity Commitment. Rhodes began his career as an engineer at UPS before finishing graduate studies and joining Booz as an associate.

Deborah E. Ross is a member of the bank’s regional leadership team, managing mergerrelated community development leading to investments, lending, volunteerism, training and external relations.

She is the primary point of contact in activities in community development and Community Reinvestment Act performance focused on low-to-moderate income and small businesses. She assisted Huntington National Bank in becoming a leader on a state level by investing more than $77 million in support of neighborhood stabilization and revitalization in CRA-eligible communities.

This included originating and purchasing more than $250 million in loans focused on affordable home mortgages as well as loans to small businesses. Ross is a member of the Junior Achievement Chicago/Western Division’s board and the Mercy Housing Lakefront Financial Capability committee.

Lind tiona and

ments and $33 million in 16 follow-on investments in 2021. He oversaw the creation and implementation of Baird’s Leadership Development Intern program, which offers handson financial services experience for diverse MBA students. Pan is the executive sponsor of Prism, an associate resource group focused on multicultural diversity, and a member of Baird’s Bridge Builders program.

BANKING STATUS BY RACE/ ETHNICITY, 2019 Unbanked

Underbanked

Fully banked

White 3%

11%

Black

14%

Hispanic Source: Board of Governors of the Federal Reserve System

Overall

86% 32%

10% 6%

54%

22%

68%

16%

79%

Congratulations O. Victoria “Vickie” Lakes-Battle on being named a Notable Executive of Color in Finance. Vickie's passion and fire to create stronger communities have helped propel nonprofit organizations across the Chicago area forward for more than 30 years.

IFF.org/chicago

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tives stren abili cont Loan fello Blac mem

JOB

In th finan 100 e diver corpo

Source

ank’s rgerding ding, ning ions. point vities elopunity peron ome tingon a llion n and ities. asing d on oans of the DiviLake-

6%

4%

8%

9%

CRAIN’S CHICAGO BUSINESS • JULY 18, 2022 19

LINDA ROSS

KAM SHAH

AL SHOREIBAH

SUZANNE YOON

Vice president and head of U.S. commercial operations CIBC Bank USA

Partner Linden Capital Partners

Chief financial officer Thresholds

Founder and managing partner Kinzie Capital Partners

Kam Shah invests in health care companies that improve patient outcomes and make a positive societal impact. When patients began delaying procedures during the pandemic, he guided two companies to shift gears and create new growth strategies. By late 2020, it was beating prepandemic performance; the company attracted investors and went public in May 2021. The first minority promoted from entry-level associate to the most senior partner, Shah spearheads Linden’s associate and vice president recruiting processes, focusing on candidates with atypical paths, whether they’re first-generation graduates or minorities. He recently joined the University of Illinois Alumni Association’s finance committee, supports Best Buddies (Illinois chapter) and, through Linden investments, serves on the boards of Advarra and StatLab.

Al Shoreibah supervises all the functions of Thresholds’ finance department, including accounting, audits, financial reporting, budgeting, billing, grants and risk management. Under his leadership, more than half the finance team is African American, Asian American or Latino American; Thresholds reduced its outstanding accounts receivable by $15 million or 75% over the course of four years; and it received $22 million in COVID relief funding from state and federal sources, which enabled its mental-health and substance-use treatment agencies to operate during the pandemic. Previously, he held positions with the Milwaukee Area Technical College, the Cleveland Clinic (Abu Dhabi) and Loyola University Medical Center. Along with his family, he helped fund and build an elementary school in Sufiya, Egypt.

Suzanne Yoon leads investments, portfolio, human capital and investor management at Kinzie, one of the few woman-owned private-equity firms in the country that executes acquisitions with enterprise values of up to $100 million. The past 18 months, she led the team through the acquisition of Braeside Displays and the expansion of portfolio company Chelsea Lighting into South Florida and Chicago. In 2019, she hired a head of culture and engagement to ensure an equitable environment for employees and she mandates that portfolio companies recruit women and people of color into C-level management. Yoon chairs the board of trustees at the National Philanthropic Trust, the largest independent donor-advised fund manager in the world.

Linda Ross is responsible for the operational fulfillment of commercial, consumer and digital products offered by CIBC Bank USA. She and her team are responsible for loans, payments, check and card operations, as well as ensuring that these activities are compliant with applicable laws and regulatory and investor guidelines. She has implemented critical system upgrades and various initiatives which led to increased efficiencies, strengthened controls and improved scalability in operations. She was also a key contributor on the Paycheck Protection Loan program. Ross is a Daniel Burnham fellow, co-executive sponsor of the CIBC Black Employee Network and is a board member at the Be The Miracle nonprofit.

JOB LEVEL BY RACE, 2018 In the U.S., there are 3.6 million workers at finance and insurance companies with at least 100 employees. The data shows that racial diversity decreases as you move further up the corporate ladder.

Source: U.S. Equal Employment Opportunity Commission

Other

Asian

Hispanic

Black

White

86%

Executive/senior level 1% 6% 4% 3% First/midlevel 2%

10%

Professional level 2% Other roles 4%

13% 5%

86% 7%

7% 7%

75% 9%

14%

69% 19%

59%

Discover the Power in Partnership When passionate people – with diverse backgrounds, experiences and perspectives – work together, there’s no limit to what we can accomplish.

Baird is proud to salute Baird Capital President Gordon Pan – one of the Crain’s Chicago Business 2022 Notable Executives of Color in Finance. His dedication to clients, colleagues and the community we share inspires us all. bairdchicago.com

©2022 Robert W. Baird & Co. Incorporated. Member SIPC. MC-915735.

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54% 68% 79%

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“TreeHouse arguably got too big and too complex at a time when there were other things happening in the business, and they struggled operationally,” says analyst Jon Andersen at William Blair.

TreeHouse’s shot at redemption TREEHOUSE from Page 3

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out of Dean Foods in 2005, culminating in a pair of deals in 2014 and 2016 that nearly tripled the company’s size. But the buyouts bogged down operations, leaving TreeHouse unable to meet the delivery requirements of the big grocery chains it supplies with store brands.

“Sometimes you reach a critical point, an inflection point, where the business gets too big, too complex and too unwieldy,” says analyst Jon Andersen at William Blair.

“TreeHouse arguably got too big and too complex at a time when there were other things happening in the business, and they struggled operationally.”

Oakland came aboard in 2018 with a mandate to untangle the mess. He says the company is now prepared for a potential rise in demand. “We believe that our work around lean and continuous improvement coupled with our actions to mitigate the ongoing disruption will enable us to improve service and produce more of what our customers need,” he said during the company’s earnings call in May. Wall Street needs more convincing.

“We remain on the sidelines to take into account higher execution risk in the complex private label business … in a disruptive supply chain environment,” analysts from Credit Suisse wrote after the earnings call.

STREAMLINING OPERATIONS

Skepticism is understandable, considering the pain TreeHouse inflicted on investors in the years before Oakland was hired. The company’s stock plummeted as executives struggled to rationalize a cumbersome collection of acquired businesses. From a peak of $103 in 2016, TreeHouse shares plunged 63% to $38 in early 2018.

Revenues sank from $6.2 billion in 2016 to $4.6 billion in 2018, and TreeHouse posted net losses of nearly $600 million during that three-year stretch.

Oakland got to work streamlining the company. He closed factories and sold off product lines, including snack nuts and trail mix, and ready-to-eat cereals. Bad financial news kept coming. At $4.3

billion last year, sales are down 6% since 2016. TreeHouse lost money in three of the past four years, with a $12.5 million deficit in 2021.

CONTINUING STRUGGLES

Nagging uncertainty about the likelihood and timing of a turnaround has weighed down TreeHouse’s stock. Although the shares have jumped nearly 46% to around $44 since hitting a recent low of $30.54 in early May, they’re up only about 16% since Oakland took over. The broader stock market and an index of small-capitalization consumer staples stocks both rose more than 42% during the same period.

TreeHouse’s continuing struggles attracted interest last year from activist investor Jana Partners, which now owns 9% of the company’s stock. Under pressure from Jana, TreeHouse agreed to explore strategic options, including a sale of the company. In April, TreeHouse called off the search for an acquirer but said it would look to sell business lines. Bloomberg reported June 26 that TreeHouse is in talks to sell its meal preparation business to a private-equity firm.

In a sign of cooling tensions, TreeHouse in April named Jana partner Scott Ostfeld to its board.

But pressure for a sale or breakup could re-emerge if TreeHouse fumbles the latest opportunity.

And there’s no guarantee that torrid inflation will provide the boost TreeHouse needs. Higher prices raise TreeHouse’s costs, too. And unlike brand-name companies, it has fewer tools to protect the bottom line. There’s no consumer marketing and advertising budget to cut, and if TreeHouse raises prices, its advantage over brand-name rivals shrinks.

Industry experts say store brands need a 25% to 30% pricing advantage to lure customers away from name brands. TreeHouse’s pricing edge is now in the low 30% range, despite price hikes the company says will reach 10% by the end of the year.

Executives at big grocery chains, including Kroger and Walmart, have said recently that the price gap is drawing more customers to store brands. That means opportunity for TreeHouse, if it can deliver the goods.

7/15/22 3:17 PM

CRAIN’S CHICAGO BUSINESS • JULY 18, 2022 21

VHT Studios, a pioneer in home-listing photos, is sold The Rosemont-based firm that rode the internet’s transformation of the way people shop for houses will keep its 65-person headquarters here, CEO Brian Balduf says Rosemont-based VHT Studios, the nation’s biggest real estate listing photo agency and arguably an inventor of the very concept, has been sold to a California firm.

In 1998, VHT Studios was first in the Midwest—and possibly in the nation—to provide pictorial home tours for online consumption, and it grew along with the internet, until viewing homes online became most buyers’ first stop, an essential piece of the homebuying process.

By 2021, VHT Studios was the nation’s largest agency for real estate listing photos.

VHT Studios CEO Brian Balduf, one of two founders of the firm, said that he and the company’s 65 headquarters employees will remain based in Rosemont but work for the Sunnyvale, Calif.-based buyer, Matterport.

“Everybody is moving over to Matterport,” Balduf said. “No jobs lost.”

VHT Studios also has about 100 photographers in the Chicago area, as well as corps of photographers in other parts of the country.

In the sale, terms of which were not disclosed, Balduf will become

vice president of service for Matterport.

Matterport is a technology firm that specializes in what it calls “digital twins,” or virtual replicas of objects in the built world. In the residential real estate realm, Matterport is known for its 3D tours of properties that are included in a listing along with listing photos.

The two businesses “are complementary,” Balduf said. Together, VHT Studios’ still images, video and drone footage of properties and Matterport’s virtual recreations are “a great combination for the marketing of properties,” Balduf said.

RJ Pittman, CEO of Matterport, said in prepared comments in a press release announcing the purchase that “it was a natural fit to unite our efforts to reimagine the fragmented process that was in place for brokers and agents to list properties and prospective buyers to view them.”

That is essentially the idea that in the late 1990s prompted Balduf, who was in marketing with AT&T and Ameritech, and real estate developer Brannon Lambert to launch a company that was then called Video Home Tours.

In the pre-internet 1990s, Balduf said, real estate listings generally included a single photo, a blackand-white of the home’s exterior.

“You had to drive around to each house and find out this one has dark wood” and the next one had some other unattractive attributes, he said.

VHT STUDIOS

BY DENNIS RODKIN

EARLY TOURS

The firm began making video tours of properties so that buyers could take a first look before wasting time visiting houses they wouldn’t like. The tours were offered on compact discs or could be viewed online at one of two video platforms. “It was one small window and it was blurry and jerky, but it was a video walkthrough of the house,” Balduf recalls.

One of the first real estate executives to grasp the concept was Steve Baird, president and CEO of Chicago-based brokerage Baird & Warner. In the 1990s, his firm was producing a Sunday morning television show that featured some listings, Baird said recently, but when he learned what VHT was going to do, “we shifted our resources there. We knew real estate listing photos were going to be

VHT Studios CEO Brian Balduf is a co-founder of the company. come a thing, but we didn’t know how.”

With VHT, Baird said, the brokerage was able to get good-quality listing photos for all of its clients’ properties, not only the 30 it could fit into a television show, “for about the same cost, or less,” he said.

VHT Studios landed some big national clients early, including New York market leaders Corcoran and Douglas Elliman, as well as a then-fledgling Chicago firm, @ properties, which grew to become the volume leader in the Chicago market and, with an acquisition last year, became a global player called @properties Christie’s International Real Estate.

In 2021, VHT was the nation’s

largest real estate listing photo company, and it bought the second-largest, TourFactory. At the time, Balduf told Crain’s that the acquisition grew its reach in the U.S. residential real estate market from 60% to “90%-plus.”

Balduf and Lambert sold a stake in the firm to Chicago privateequity firm Hopewell Ventures in 2007. By the time of the sale, Hopewell was the majority owner and there were about 30 other investors, Balduf said. A privately held firm, VHT Studios does not disclose revenue figures. Matterport, with about 485 employees, is a Nasdaq-listed firm with $27.1 million in revenue in fourth-quarter 2021.

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7/15/22 3:13 PM

22 JULY 18, 2022 • CRAIN’S CHICAGO BUSINESS

Highest inflation in decades squeezes Chicago’s economy and key industries rose 11.3% in the 12 months through June, according to the U.S. Bureau of Labor Statistics. The bureau does not compile an index at the metro level.

Labor costs in the Chicago area have risen since the pandemic.

Total compensation for private-industry workers in the Chicago area was up 3.9% in March from a year earlier, compared with a 3.2% gain in March 2020, according to BLS. But compensation was up much more in places like Seattle, at 7.8%, and Boston, 5.6%.

Still, when it comes to the consumer price index, the Chicago area, at 9.4% in June, doesn’t compare favorably to the nation, which came in at 9.1% for the month.

Other data offers early signs that inflation may be cooling. Prices for gasoline and commodities including oil, corn, copper and lumber have been falling recently, pulling back after big jumps.

Of course, what the future holds will depend heavily on the Federal Reserve as it raises short-term interest rates to tame inflation. And the Fed’s recent rate hikes have given businesses and consumers something else to worry about: a potential recession.

Whatever’s on the horizon, inflation is here today, and here’s how it’s affecting key Chicago industries:

AIRLINES

Planes are full and fares are soaring into summer, the busiest time of year for air travel.

The number of people passing through security checkpoints at the nation’s airports is edging ever closer to pre-pandemic levels, and airlines are struggling to keep up.

The average price of a ticket sold by travel agents has soared 37% this year to $628, a seven-year high, according to Airlines Reporting Corp.

Just as inflation can giveth, inflation can taketh away. The same thing driving up airfares—higher fuel prices—also squeezes consumers’ budgets, making them less likely to spring for a vacation.

Inflation also is driving up airlines’ biggest cost: labor. United offered its pilots a 14.75% raise over two years. American is offering its pilots 16.9%.

“Higher fuel prices means they have to crank up fares, and that’s going to hurt demand,” says George Ferguson, an analyst at Bloomberg Intelligence. “The consumer is going to pay up for summer. Once we get past that, and the extreme desire to get out and take a vacation, we think some of that (travel) demand is at risk once you get past Labor Day.” One reason to be concerned even before then: Consumer sentiment is at its lowest point in 70 years, according to a University of Michigan index. If the consumer pulls back, it threatens the goals of United and other big airlines, which have forecast a return to profitability this summer.

United CEO Scott Kirby is betting against it, telling investors recently that prices are still below historical levels and that spending on air travel isn’t as volatile nor as

P022-P023_CCB_20220718.indd 22

BLOOMBERG

INFLATION from Page 1

correlated to the broader economy as most people think.

Wall Street is watching what happens later this year.

“The test is: Will the companies let people travel, and will consumers keep traveling at Thanksgiving and Christmas?” Ferguson says.

—John Pletz

HEALTH CARE

Local hospitals are in a tight spot.

They’re being squeezed as the costs of labor, crucial supplies and pharmaceuticals rise, but longterm pricing agreements with insurance companies limit them from immediately increasing the cost of care for most patients, a phenomenon shrinking hospital margins by the week.

“The challenge is the mismatch between the costs that we see rising relative to commercially insured health care rates,” says Ivan Samstein, executive vice president and chief financial officer at the University of Chicago Medicine.

“This isn’t by any means unique to UChicago Medicine.”

Typical hospital and insurance pricing agreements tend to last two to four years, he explains.

A recent report from Chicago health care consultancy Kaufman, Hall & Associates shows that across 900 U.S. hospitals and health systems, expenses are up nearly 11% in May compared to the year before.

At Rockford-based Mercyhealth and Chicago’s Sinai Chicago, rising supply and shipping costs are growing. But increasing labor costs, compounded by a widespread health care worker shortage, is the No. 1 burden, they say.

“The single most central impact that we’ve seen on the price increases has been in our staffing and labor contracts,” says Sinai Chicago Chief Operating Officer Dr. Airica Steed.

For local medical device and pharmaceutical companies—including Baxter International, AbbVie and Abbott—the rising costs of manufacturing, distribution, labor

UTILITIES

w HEATING UP The consumer price indexes for the U.S. and Chicago metropolitan area in June rose to their highest levels since 1981.

CHANGE IN THE CONSUMER PRICE INDEX U.S. 10%

Chicago area

9.4% 9.1%

8 6 4 2 0 -2 -4

‘00

‘02

rates in Illinois for most long-term customers by 17% and for newer policyholders by 34%—the steepest such increase in recent memory here by any major auto carrier.

Other companies are hiking rates, often in the high single digits, more than once a year in order to catch up with costs. The inflated prices just raise the cost of driving, which already is well up due to the steep rise in gasoline prices.

The rate hikes also have attracted the ire of insurance regulators in many states, including Illinois, who question why drivers continued to pay relatively high amounts for insurance while they were sheltering at home and now are seeing their rates soar with the resumption of relatively normal driving. The Illinois Department of Insurance recently released data showing the fat profits many of the largest insurers here earned in 2020 and early 2021 with the aim of putting pressure on companies to share more of that windfall with their policyholders.

—Steve Daniels

‘04

‘06

‘08

‘10

‘12

‘14

‘16

‘18

‘20

‘22

Note: All urban consumers, 12-month percentage change.

Prices of energy, vehicles and food have jumped the most among household expenditures in the Chicago area.

CHANGE IN PRICES FROM JUNE 2021 Motor fuel

67.4% 34.8%

Fuels and utilities New and used motor vehicles Food and beverages All items Shelter Medical care

12.2% 10.8% 9.4% 4.4% 1.6%

Source: U.S. Bureau of Labor Statistics

and supplies are taking a toll on their bottom lines, says Harry Kraemer, a professor at Northwestern University and former Baxter CEO. One particularly pricey material is plastic. It’s typically made from raw materials like natural gas and oil, which have jumped in price.

“The major component in most medical products is plastic, and that’s all petroleum-based,” Kraemer says.

—Katherine Davis

AUTO INSURANCE

Few industries have been whipsawed more dramatically than the auto insurance business.

Companies like Bloomington-based State Farm and Northbrook-based Allstate veered from swimming in cash in 2020 and early 2021 due to the COVID-caused disappearance of rush hour to losing money insuring cars beginning in late 2021 and continuing into this year.

Drivers returned to the roads in the middle of last year. With usedcar prices soaring, the cost to insurers of replacing a totaled car increased along with them.

Geico, best known for its ubiquitous TV ads extolling how much it can save consumers on car insurance, next month is raising

Consumers also are feeling the heat from rising energy costs. With natural gas prices up after more than a decade of unusually low costs, electric and natural gas utilities continue to bank on hiking delivery rates to finance ambitious infrastructure projects, as well as pay for ever-rising dividends to shareholders.

Overall household energy prices in the Chicago area rose 43.9% in the 12 months through June, according to the BLS. The price of gas piped into people’s homes jumped 59.5%.

Politicians like Gov. J.B. Pritzker are caught in a quandary. He needs utilities to put in place infrastructure to enable his vision of a carbon-free power-generation sector. But the high costs of the fuel itself threaten to make those ambitions unaffordable for a larger and larger swath of society.

—Steve Daniels

CONSTRUCTION

Construction costs soared during the first two years of the pandemic from a manufacturing slowdown and supply chain headaches, plus the recent surge in fuel prices. An index measuring the cost of construction materials was up 19% year over year in May, more than double the increase of the consumer price index over that span, according to the Associated General Contractors of America.

Builders expect price increases of 3% to 5% per year with normal inflation, but a typical project today might cost 25% more than it would have cost at the beginning of 2020, says Andy MacGregor, president of Chicago-based Accend Construction.

“People are coming up pretty short,” he says.

It’s a threat to hot real estate sectors like warehouses and apartments, where pricey rents are helping developers cover their inflated costs. Contractors aren’t as willing to eat the higher costs

7/15/22 3:32 PM

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APARTMENTS

For many people who live in an apartment, rent is their biggest household expense by far. It’s even bigger today.

Rents in downtown Chicago and the suburbs have hit record highs, rising 17% or more in March from a year earlier, according to the Chicago office of Integra Realty Resources, an appraisal and consulting firm. The strong job market has boosted demand for rental housing, and developers haven’t built enough apartments to match the increase in demand.

For housing advocates, the surge in rents has added urgency to the debate over affordable housing and what the government should do to create more of it. In late 2021, Chicago Mayor Lori Lightfoot disclosed a campaign to create $1 billion in affordable housing.

“If somebody’s making 80% of median (income), there’s very little housing that’s really truly affordable to them,” says John Bartlett, executive director of Metropolitan Tenants Organization, a tenant advocacy group.

Rising rents have stretched household budgets, especially for renters with low and moderate incomes. Bartlett says that 20% of Chicago renters spend nearly half of their income on rent, while a little over 40% are spending a third of their income on rent. He notes that renters have been cutting back on other expenses, like groceries.

Bartlett says that eviction filings are back up to pre-pandemic levels.

Landlords have been on the receiving end of inflation, forced to absorb rising utility costs and property taxes. But they shouldn’t look to Bartlett for sympathy.

“I think that many landlords are taking advantage of the times and are charging an increase in rents faster than they need to,” he says.

—Corli Jay

CITY GOVERNMENT

Thanks to an automatic increase in property taxes tied to the consumer price index approved by the Chicago City Council in 2020, as inflation soars, taxpayers will be asked to keep up.

Mayor Lori Lightfoot hailed the move—first included in the 2021 city budget—as a responsible measure to provide predictability to taxpayers and avoid asking aldermen to vote for unpopular,

steep one-time property taxes.

Pegged to the December-to-December rise in the consumer price index from the previous year or 5%, whichever is lower, the resulting increase for the 2022 budget was set at 1.4%, or a modest $22.9 million increase.

But the CPI jumped 7% from December 2020 to December 2021, meaning the 2023 proposed increase will be capped at 5% so taxpayers won’t feel the full brunt of inflation. That is, if the City Council doesn’t balk at approving the supposed automatic hike.

Although the CPI increase is now baked into the city’s budget planning, aldermen must still approve the annual revenue appropriation, and many would like to avoid a 5% increase just months before they ask voters for a new term. But, when celebrating passage of her 2022 budget last October, Lightfoot said the annual CPI increase isn’t going anywhere.

Taxpayers need a predictable tax bill “that they can plan for and isn’t going to sock them right in the gut every few years because politicians wouldn’t make the tough calls when they needed to,” she said.

“Those days are over as long as I am mayor.”

—Justin Laurence

RESIDENTIAL REAL ESTATE

Local home prices have soared since the beginning of the pandemic, but rising mortgage rates have cooled the market—and driven up the cost of using borrowed money to buy a home.

Mortgage rates have risen in response to the Federal Reserve’s effort to quell inflation through a series of short-term interest-rate hikes. Now, the question is whether job cuts are in the offing for companies in the residential real estate industry. In early June, two national real estate brokerages, Compass and Redfin, both announced layoffs, though they declined to say whether they planned to cut any jobs in the Chicago area. No locally based firms, including mortgage-lending giant Guaranteed Rate, have announced layoffs, either.

But residential brokers work as independent contractors, so the decision of whether they will continue to work in the industry is largely up to them. Jeff Baker, CEO of Illinois Realtors, a trade group, thought he might see a sign that more agents were leaving the business in April, when all licensed realtors in the state—54,748 at the end of 2021—had to renew their licenses.

“That would be our first opportunity to see a dip,” Baker said, “but all we saw was a relatively normal rate of attrition, about 7%, which is the normal number of people who are retiring” or moving to another place.

The next renewal date is April 2024, by which time the market could have multiple ups and downs.

Both Baker and Ayoub Rabah, president of Coldwell Banker Re-

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alty in the Central West region, which includes the Chicago area, say they don’t yet envision large numbers of agents leaving or layoffs. That’s in part because while Chicago’s market grew during the boom, it didn’t heat up like it did in places like Phoenix and Tampa.

Thus, there’s not as much new extra personnel to shed.

In a downturn, Rabah would expect to see “a flight to quality, (agents) moving to the firms with a strong platform and a history of resilience.”

—Dennis Rodkin

AGRICULTURE

Farmers who grow corn and soybeans, key crops in Illinois, are performing a delicate balancing act.

Farming costs, from fertilizer to seed, have shot up due to historically high inflation. But rising corn and soybean prices so far have offset elevated input expenses.

“The commodity price increases have been a godsend,” says Mike Rauch, a corn and soybean farmer based in Tinley Park in southern Cook County, and a member of the Cook County Farm Bureau board of directors. “Hopefully, we’ll come out OK.” The question is whether corn and soybean prices will stay high enough to protect farmers’ profit margins. They’ve already started falling amid improved weather in the United States and Europe, which could boost the supply of grain harvested, driving down prices.

The problem is that prices of fertilizer, seed and other inputs aren’t likely to drop or fall as quickly even if grain prices do, according to Gary Schnitkey, a professor at the University of Illinois and contributor to the Farmdoc daily paper, “Inflation and Commodity Prices.” The war in Ukraine and persistent global supply chain issues should keep those costs high, he says.

ALAMY

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as they were early in the pandemic when there were fewer projects to go around, says AGC Chief Economist Ken Simonson. The group’s index tracking what contractors bid on projects is now virtually even with its construction cost index, signaling the price hikes are being passed along to developers.

“Contractors are getting choosier, and they’re telling owners, ‘OK, we’ll do it, but only if you’ll take the 20% (cost) increase we’ve had to absorb,’ “ Simonson says. “Inflation is now hitting project owners after it already hit contractors.”

—Danny Ecker

Farmers are at the mercy of global markets, but their fate also depends an especially unpredictable variable: Mother Nature.

Though recent rains have brought some relief, June was an especially dry month in Illinois.

“I’ve never seen cracks in the ground this wide in June in my life,” says Rauch, a 40-year veteran in the agriculture sector.

—Trina Mannino

FOOD COMPANIES

Local food companies are walking an inflationary tightrope as they try to raise their prices without scaring off the new customers they gained during the pandemic.

Consumers flocked to wellknown brand names—like Kraft Macaroni & Cheese from Chicago-based Kraft Heinz and Oreos from Chicago-based Mondelez— as they started eating at home

more and sought out nostalgic brands when COVID-19 hit. But those same customers are known to decamp for cheaper brands when prices rise.

Kraft Heinz’s prices increased about 9% in the first quarter compared to the prior year. Sales volumes dropped 2%. Analysts say the decline would have been worse if the ketchup maker hadn’t spent big on reinvigorating brands in recent years.

Conagra Brands, whose portfolio includes Slim Jim, Birds Eye and Hunt’s, said inflation-related price hikes boosted the dollar value of sales in the three months that ended May 29 but led to a 6.4% drop in sales volume. Mondelez, meanwhile, said it expected its packaging and ingredient costs would be up in the low double digits this year.

—Ally Marotti

BLOOMBERG

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