Crain's Chicago Business by crainschicago

Recession is the new worry for the office market

PAGE 8 HEALTH CARE Price

CRIME New York and L.A. have made a dent in gun violence. Why can’t Chicago? concerns arise with Advocate Aurora’s planned

Early in the pandemic, Chris and Allison Ward ordered a recreational vehicle so they could travel while keeping themselves and their two young kids safe. Back then, gas prices were plunging, COVID fears were rising and RV makers were struggling to churn out vehicles in the face of soaring demand. By the time the Wards got their $62,000 Airstream trailer last month, gas prices had surged past $5 a gallon and people were much less worried about catching COVID.

Fading COVID fears combine with high gas prices and rising interest rates to de ate record demand I BY JOHN PLETZ

ENVIRONMENTAL JUSTICE How environmental injustices keep property values low and residents battling health problems PAGE 13 See RVs on Page 19 See OFFICES on Page 22 Chris and

with their children, Austin, left, and Logan.

Signs of a slowdown suggest more pain ahead for landlords battered by work from home

RV sales turn south as pandemic eases

THE BULK OF THE INDUSTRY’S SALES ARE $40,000.FORCAMPERSTOW-ALONGPURCHASED$25,000TO

BOEHMR.JOHN BOEHMR.JOHN CHICAGOBUSINESS.COM | AUGUST 15, 2022 | $3.50 BOOTH INSIGHTS: Brand loyalty can save a firm in stressful economic times. PAGE9 ORPHE DIVOUNGUY: Key factors holding back Black families PAGE 2

After white-knuckling their way through the COVID-19 pandemic with the rise of remote work hacking away at their bottom lines, Chicago o ce landlords now face the prospect of an economic recession. Some aren’t sure whether to panic or feel relief. Recent signals suggest that anyone who owns an o ce building ought to do the former: Rising interest rates and a slowdown in spending have pushed a growing number of companies to lay o employees or pause hiring, moves that have historically led businesses to reduce o ce space. Job cuts among big tech companies—which drove much of the pre-COVID leasing boom in Chicago—threaten to diminish local o ce demand, driving o ce vacancy beyond its current record high and potentially setting back the recovery of the city from the public health crisis. One of the fastest-growing segments of Chicago’s o ce market last year—cryptocurrency rms— already is feeling the e ects. Cryptocurrency exchange Gemini listed its entire new Wacker Drive o ce for sublease last month before it even moved in. DANNY ECKER Allison Ward

down by almost half, the number of violent crimes on CTA vehicles through July 19 is the highest it’s been since 2011, and the second highest in two decades. Given all that, CTA President Dorval Carter is trying again. In a presentation at the City Club of Chicago, he rejected a propos al from mayoral hopeful Willie

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Housing disparities widened during the pandemic ORPHE DIVOUNGUY ON THE ECONOMY having less access to credit or being less likely to get parental help for a down payment, the odds are stacked up against Black families. However, when comparing U.S. metropolitan statistical areas, Black households tend to have a higher homeowner ship rate in areas that build more housing. is makes sense. House prices tend to grow faster and a ordability can more easily get out of reach in areas where building new housing is constrained by nature— such as lakes and mountains—or by land use and building regulations. While not much can be done about a lack of developable land in some areas, loosening singlefamily zoning restrictions—which prevent homes from being built— could yield millions of addition al homes and go a long way to lower housing costs, reduce race and ethnic wealth inequality, and boost U.S. economic prospects. Crain’s contributor Orphe Divounguy is a senior economist at ZillowGroup and former chief econ omist at the Illinois Policy Institute. His views do not necessarily re ect those of his employers.

CHICAGO’S ECONOMY WILL NOT RECOVER WITHOUT A TRANSIT SYSTEM THAT PEOPLE ARE UNAFRAID TO USE.

Black mortgage applicants are de nied 84% more often than white borrowers are, according to data from the Home Mortgage Disclosure Act, with poor or nonexistent credit history being the most commonly cited reason for the denial. Mortgage denial rates among Black applicants increased by 10 percentage points during the Researchpandemic.alsoshows that even after accounting for income, credit, and loan-to-value and debt-toincome ratios associated with a mortgage application, Black mortgage applicants experience di erent processing times and worse outcomes than similar whites. Black applicants are 2.9 percentage points more likely to have their mortgage application denied relative to similar whiteRisingapplicants.housing costs dispropor tionately a ect low-income house holds and minorities, contributing to higher wealth inequality. And the resulting increase in the wealth gap drags down U.S. economic growth. at means lower living standards for everyone, not just those who are left behind. is is because stable housing is linked to better health, more private and pub lic investments, higher labor supply and local employment. New research published by the Federal Reserve Bank of San Fran cisco reveals that children whose parents extract equity from their home are 60% more likely to become a homeowner than children whose homeowner parents are not able to extract equity from their home. Unfortunately, a history of discrimi natory housing practices led to land loss and lower housing values for Blacks, and that often means less home equity for those who still man aged to get on the homeownership ladder, limiting the opportunities for their children as well. From paying higher rent costs,

2 AUGUST 15, 2022 • CRAIN’S CHICAGO BUSINESS

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GREG HINZ ON POLITICS the CTA nally taking security seriously?

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Nationally, fewer than half of all Blacks own their home, compared to more than 70% of white households. e racial and ethnic gaps in homeownership were wide even before COVID-19 and the pandemic surge in house prices and rents only expanded the gulf. According to research pub lished by the National Association of Realtors, the Black homeownership rate in the United States is lower today than it was a decade ago. Unfortunately, the pandemic buying frenzy meant that prospec tive Black buyers—who earn less on average than other Americans and have less access to credit—struggled to keep up with bidding wars associated with quickly rising house prices. All told, homeownership increased for all races during the pandemic, but Black homeowner ship grew more slowly than it did for whiteerehouseholds.aremanyreasons Black renters face huge obstacles on the road to homeownership. First, Blacks disproportionately live closer to cities, where rents tend to be higher. What’s more, research from Zillow shows that minority renters also face higher upfront costs— from submitting a higher number of applications and being rejected more often to paying higher security deposits. e disproportionately higher costs associated with renting lengthen the time it takes to save for a down payment. Perhaps as a result, Black mortgage applicants also tend to make smaller down payments when applying for a loan—a median of 3.5%, less than half the overall median down pay ment of 8.9%. en, there’s access to credit. More than 50% of white households have a FICO credit score above 700, compared to only 21% of Black households, according to research by the Urban Institute. Finally, Wilson to reform the CTA’s own police unit, saying it would take two years to do so and that the CTA would face the same challenges hir ing quali ed sta that the Chicago Police Department does. But he laid out a series of other initiatives, including adding K-9 units, adding higher fare gates to el stations to keep fare jumpers and other troublemakers from entering, and spi ng up the look of dozens of stations so they don’t appear quite soCarterforlorn.even unveiled a new initiative about how to cope with sometimes dozens of homeless people, some of them with addic tion problems, who occupy trains, especially in cold-weather months. Trying to walk a ne line between protecting his customers and extending a hand to those in need, Carter said the CTA this winter will be partnering with social-service agencies who will “engage” home less people on the system. Carter said he’s “not talking about” throw ing people o the trains wholesale, as they’re doing in New York City. “I’m talking about getting people who really need help, help.” I hope it works. Just like I hope Carter’s parallel plan to adjust CTA schedules to reality works, too. In stead of sticking to a pre-pandemic schedule the agency clearly cannot meet because of a shortage of work ers, it instead will release schedules that may appear stretched out but actually are achievable. “ e pandemic changed every thing,” Carter summarized. “ ere’s no road map on how to maneuver a pandemic.”Onbalance, it looks likes the gravity of the situation nally has sunk in—at CTA headquarters and, more important, in Mayor Lori Lightfoot’s o ce, which has had a bad case of rose-colored glassism on this Chicago’ssubject.economy, particularly the downtown economy, will not recover without a transit system that works and that people are unafraid to use. I’ve seen stu on the CTA in the last year I thought I’d never see. I don’t know how many friends and associates and co-workers I know who biked to work, or took three buses, because they’re afraid to get on the train. e clock is ticking on this one. With huge federal COVID-relief aid that’s been supporting CTA opera tions starting to phase out after next year, the CTA only has so long to get its house in order and lure back riders. I wish Carter luck. I fear he’ll need it. Isaw something when I got on the el the other day that I hadn’t seen in, well, probably a year and a half. at was two Chicago police o cers—not unarmed and barely awake “security” personnel, mind you, but actual cops. Is it the rst robin of spring? Or at least a recognition by City Hall and the Chicago Transit Authority that they’ve got a rst-class security problem on their hands as mayoral election season approaches? I certainly hope so. I rst wrote about this situation way back in March 2021. At that time, police and the CTA said they were doing their best, and predict ed improvement with more time, especially as largely self-policing crowds of commuters returned to work. Since then, the commuters have returned, sort of, with CTA ridership up to about half of what it was pre-pandemic. Police have added more sta ers, the CTA has hired security guards and things are somewhat improved. But not enough. Just this last week, the Chicago Tribune re ported police would be boosting their presence on the CTA, even pulling some people o desk duty, after a 29-year-old man was shot to death on the Red Line. A few days ridershipthat,TimesChicagoearlier, theSun-reportedeventhoughisstill

REVENUE SOURCES A closer look at Lightfoot’s forecast shows these dynamics at play. For example, projected revenues include $152 million in federal COVID-19 relief money, a funding source that won’t be available over the long term. e forecast also appears to count on continuing strong revenues from a range of sources, including the real estate transaction tax, the city’s share of state income tax collections, and hotel and amusement taxes, all of which have been buoyed by a strong economy.Sure,these revenue sources might hold up through scal 2023. But how long will they last? Higher interest rates already are cooling housing markets, and eventually may tip the economy into a recession that would depress tax receipts across the board.Ifthe 2023 budget were really the model of scal rectitude Lightfoot describes, it would shun shoddy practices of the past, like raising spending more than revenue. But spending rises 6% to $5.1 billion, three times the 2% revenue increase to $5 billion. Much of the spending increase re ects salary hikes for city employees and required contributions to their pension funds, an obligation that’s taking a large and growing share of the budget.

CRAIN’S CHICAGO BUSINESS • A UGUS T 15, 2022 3

Advocate Aurora hospitals in Wisconsin have consistently charged commercial insurers higher-than-average prices since the 2018 merger of Advocate Health Care and Aurora Health Care I Advocate Aurora’s proposed merger with Atrium sparks pricing concerns

Senate Democrats’ passage of a sweeping tax bill will require most of corporate Chicago to dig deeper to pay Uncle Sam, with the area’s pharmaceutical players ap pearing to be hit the hardest of all. e measure—which passed 51-50 on a strictly partisan basis in the chamber Aug. 7 and 220207 in the House on Aug. 12, and is expected to get President Joe Biden’s signature—would hike tax revenues by well over $300 billion over a decade. Central to that is a minimum corporate tax of 15% of the annual income earned by companies making at least $1 billion. Another key component is a 1% excise tax on shareosebuybacks.companies ensnared in the minimum tax will shoulder considerably more of the tax bur den than the far broader set that will pay the new buyback tax. Arguably most exposed of the Chicago area’s largest corpora tions is North Chicago-based Abbott Laboratories. e phar maceutical giant’s e ective tax rate has ranged from 9.6% in 2019 to 13.9% last year, according to Securities & Exchange Com mission lings. Pretax earnings in 2021 topped $8 billion. So, if earnings continue at that sort of level— rst-half prof its were 54% higher than at the same point last year—and Abbott must pay, say, an extra percentage point to hit the 15% minimum threshold, that’s another $80 mil lion to $100 million in taxes. Abbott also is one of corpo rate Chicago’s most aggressive repurchasers of stock. e com pany shelled out $2.3 billion in just the rst half of this year, ac cording to an SEC ling, second only to McDonald’s $2.5 billion in Abbott’srepurchases.excise tax on that amount would be $23 million if

BY STEVE DANIELSSeeADVOCATE AURORA on Page 20 See TAX BILL on Page 19

PERSISTENT REALITY Lightfoot could have narrowed the gap by nding more places to cut spending or by seeking the full property tax increase required by legislation she championed. at legislation ties property taxes to the consumer price index. But with in ation exceeding 8%, that’s a nonstarter in an election year. Instead, Lightfoot is asking for a 2.5% increase, sacri cing more than $40 million in additional revenue, based on the optimistic assumption that in ation will fall to 2.5% in scal 2023, which began on July 1. I know prices have started to ease, but it’s a long way from 8.5% to 2.5% in ation. Even the 2.5% hike could be sacri ced to political expediency as Lightfoot works to win City Council approval of her budget. Ald. Pat Dowell, a Lightfoot ally and head of the council’s budget committee, gave the game away when she told my colleague Justin Laurence that a tax increase is “not something most elected o cials want to do in an election year.” (Don’t be surprised if a bigger tax hike becomes politically doable after they’re all safely re-elected.)Lightfoot’s rosy scenario also may invite additional spending demands from aldermen eager to pave their re-election pathways with taxpayer dollars. After all, if city nances are in such good shape, why not underwrite more pet programs like guaranteed basic income? If you’re wondering where all this leads, check out Lightfoot’s projections for scal 2024 and 2025. De cits roar back, tripling to $553.7 million by 2025. Driving the surge is a projected 10% rise in spending while revenues essentially atten. And that assumes economic conditions don’t worsen signi cantly, an eventuality that Lightfoot acknowledges could push the 2025 de cit past $1 billion. ese gloomier gures highlight the persistent reality of Chicago’s nances, a chronic mismatch between revenue sources and spending obligations. e city still carries a heavy debt load, massive unfunded pension liabilities and a large, well-compensated workforce. ose expenditures regularly outstrip recurring revenue. An election-year budget might divert attention from that problem, but it doesn’t solve it.

It’s no secret that elected o cials preparing to face the voters will use government budgets to improve their chances at the polls. ey’ve been known to gussy up the numbers with optimistic projections and onetime revenue infusions. Above all, they shun major tax hikes on the people who will determine whether they keep their jobs.

The buyback tax will hit a broader set of companies.

Here’s how that big D.C. tax bill is going to hit corporate Chicago Abbott Labs and AbbVie look like they’ll be paying considerably more in taxes.

North Carolina Treasurer Dale Folwell

Call it the incredible shrinking de Chicagocit. Mayor Lori Lightfoot’s projected city budget shortfall for scal 2023 has shriveled from $866 million a year ago to $178 million three months ago to $128 million as of Aug. 10. e latest gure also represents a sharp decline from de cits of $722 million in scal 2022 and $1.2 billion in 2021. What’s behind this sudden, seemingly dramatic improvement in the city’s nancial condition? According to Lightfoot, the sunny 2023 outlook re ects her success in shoring up Chicago’s scal foundation for the long run. In a speech announcing the forecast, she proclaimed that “we are now living within our means and have started on the true road to nancial stability and recovery.”Amore accurate description would call the forecast a mixture of helpful short-term factors and election-year hopium. Lightfoot and the aldermen who will approve or reject her budget are all up for re-election next year.

BY ALEX KACIK

JOE CAHILL ON BUSINESS Lightfoot’s feel-good budget forecast

“RESEARCH CONSISTENTLY SHOWS MERGERS AND ACQUISITIONS DO NOT DELIVER ON HIGHERBUTEXECUTIVES’HOSPITALPROMISES,INSTEADTRIGGERCOSTS.”

Two weeks after announcing plans in May to merge with Atrium and form a $27 billion health system, Advocate Aurora was hit with a federal lawsuit alleging its all-ornothing contract provisions stymied competition and allowed the health system to raise prices. Advocate last month led a motion to dismiss the complaint led by a self-insured Wisconsin pharmacy. Nevertheless, Advocate Aurora’s recent experience in Wis consin does not allay pricing concerns as it and Atrium work toward—and regulators mull—a transaction that would combine 67 hospitals and 145,000 employees across Illinois, Wisconsin, North Carolina, South Carolina, Georgia and Alabama. Advocate and Atrium hope to complete the deal by year’s end.

At least three homes have been the scene of unregulated gatherings that neighbors say damaged the properties and improvement brought to their neighborhoods

Now we have an idea of how much the newly issued Illinois re tail marijuana licenses are worth. Planet 13 says it will pay $2.9 million to purchase the 51% of a Chicago-area retail license it doesn’t already own, putting the total value of the license at roughly $6 million. e Las Vegas-based compa ny partnered with Frank Cowan, who quali ed as a social-equity applicant and won an Illinois li cense a year ago when the state held lotteries for 185 new dis pensaries. After several lawsuits were resolved, the state issued the licenses beginning July 22. Applicants have 180 days to nd a store location. Planet 13 has yet to announce a location. Planet 13 says it has negotiated an option to purchase Cowan’s majority interest over the next two years for $866,250 in cash, as well as nearly 1.1 million shares of stock that are valued at roughly $2 million. Cowan says he plans to re main with Planet 13 after he sells. e state of Illinois says dispen

“ ey trashed the house,” a neighbor of the Wabash home said. “ ey kicked holes in the walls, broke windows, left trash everywhere. Usually we don’t see anything of that nature here.” Crain’s could not independently verify the condition of the home’s interior.Unpermitted parties are known to have happened at the house on Wabash Avenue, a bungalow on Vernon Avenue in the Greater Grand Crossing neighborhood whose asking price is $185,000, and a house on State Street in the Roseland neighborhood that was priced at $130,000 before its listing wasNeighborscanceled. said in one case, the party host might have been a short-term tenant in the home who gained access with standard keys, not through the real estate lockbox.Crain’s attempted to reach the owners of all the properties, who are based in Crete, Oak Lawn and Plain eld, according to county records, but was unable to con tact any of them. David Hulbert, the Carter Realty Group agent representing the Vernon Avenue house—the only one still actively on the market—did not respond to a request for comment. “ e neighbors don’t want to see this happening. ey want to see the rehab as an improve ment,” said Belinda Mitchell, a real estate agent and veteran re hab- ipper who’s xed up more than 35 homes in the past seven years, mostly on the South Side. Mitchell’s rehabs are not among the recent party houses, and she says she’s never experienced that. Mitchell said experienced re habbers and real estate agents “want to protect the neighbors,” in part for the reciprocity it brings. If the rehabber is respectful and ap pears to be improving the neigh borhood, she said, the neighbors respond in kind. When she was rehabbing a two- at on Dr. Mar tin Luther King Jr. Drive in Great er Grand Crossing, she added a wrought iron fence to keep out the uninvited strangers that neighbors told her were hanging around on the porch. LACK OF SECURITY When a property has been re habbed and is standing vacant, “people notice,” Mitchell said, and without su cient security on the property, break-ins like the recent parties may happen. A neighbor of one of the hous es where the parties occurred said “that feels like it’s extra-wrong. It’s not just trespassing. Somebody put so much time and money of their own into this property to x and ip it. is should be a pret ty house to raise their kids in, not for you to come in with your party and destroy it.” e rehabber of the house on Wabash Avenue paid $70,500 for it in December, before rehabbing it with new ooring, carpet, kitch en cabinetry and appliances and basement waterproo ng, among other details mentioned in a now-defunct listing. ese are the kinds of upgrades that the previ ous owner, who had the house for at least 30 years, according to pub lic records, had “put o for years because she couldn’t a ord to do it,” a neighbor said. BY DENNIS RODKIN

After a long-decaying house on Wabash Avenue in Chicago’s Cha tham neighborhood went through an extensive rehab in 2021, neigh bors believed it would add to the charm of their block of pretty bun galows and well-trimmed lawns. Instead, the house became the scene of an out-of-control party hosted by someone who may have gotten access via a lockbox key intended for real estate agents showing the property. “We keep our block nice. We plant owers,” one homeowner said. “Now we’ve got red Solo cups and tequila bottles in the gutters. We had teenagers passed out on our lawns.” e homeowners in this story requested anonymity, for fear of retaliation. e house in Chatham was priced at $269,900 before the list ing was canceled in April. It’s one of at least three recently rehabbed, vacant South Side houses where rowdy, alcohol-laden crowds of young people have been hosted at parties in the past several weeks, Ald. Anthony Beale, 9th, con rmed. In all three cases, neigh bors have been diligent about calling the police and aldermen, according to Beale, whose ward includes two of the houses. Police and aldermanic sta “are going to get to the bottom of this,” Beale said. “We’re not going to tol erate this.” Police shut down the parties when they were alerted, the neighbors told Crain’s. Beale said it appears that all the parties were thrown by one person who gained access to the empty houses via the real estate lockboxes, and that the person last week took down all party notices that had been online.

BANKERCOLDWELL

SOCIAL EQUITY A key aspect of the Illinois law was its aim to diversify owner ship of the largely white- and male-owned marijuana industry. Lawmakers created a provision to award extra points to “socialequity” applicants, or those who lived in neighborhoods dispro portionately impacted by vio lence and poverty associated with the war on drugs or who had con victions for marijuana possession that no longer would be illegal. “Restricting social-equity ap plicants’ ability to sell dispensary licenses would have e ectively created a second class of licensees, with fewer rights than their major ity-owned counterparts,” a spokes man for the governor said in an email. “ ose who wish to sell their license are entitled to do so and are aware of the requirement to return any state bene t they may have re ceived as an applicant.”

As the state issues dispensary licenses, the rst agreements to sell them are surfacing Frank Cowan GOYETTEPAUL

Here come the weed shop license sales in Illinois

Social-equity applicants re ceived a $2,500 discount on the license application fee and are el igible for low-interest loans from theEarlystate. on, industry experts speculated the new retail licenses would fetch as much as $8 mil lion to $10 million. But the price of those licenses has been under pressure over the past year. Can nabis stocks have dropped by two-thirds as the overall market fell and hopes faded for loosen ing federal cannabis restrictions. Since Illinois legalized recre ational weed, would-be investors also have been presented with additional options to invest, with new markets such as New Jersey, Arizona and New York. Mean while, the costs of opening a dis pensary have risen. “Interest rates are challenging,” Bogot says. “ e federal govern ment hasn’t moved on legislation (that would free banks and others to lend to cannabis companies). Sources of capital are highly con strained, and that presents chal lenges. People are getting o ers and entertaining them.”

Ever since Illinois legalized recreational marijuana three years ago and announced that it planned to award new licenses for retail shops, lawmakers and people connected to the weed in dustry have wondered how many winners would sell their licenses.

sary licenses it issued are condi tional and can’t be sold until they are nalized, which means a store has passed nal inspection and is open for business. But that hasn’t stopped license holders from ne gotiatingMariMed,deals.a Massachusettsbased cannabis company with four Downstate retail shops, said Aug. 8 that it has an agreement to buy another dispensary license in southeastern Illinois near the Indiana border. It declined to disclose the name of the license holder or the price. In May, the company bought a “craft-grow” license to cultivate marijuana in downstate Mount Vernon. “I anticipate we’ll hear of a lot more license sales in the next 30 days,” says Bill Bogot, a partner in Chicago at law rm Fox Roth schild and co-chair of the rm’s cannabis group. “ ere are peo ple who had partners all along, but I’m also seeing people who never intended to sell who are getting o ers.”

Raucous parties threaten South Side rehab wave

4 AUGUST 15, 2022 • CRAIN’S CHICAGO BUSINESS

UNANTICIPATED DOWNSIDE e parties highlight a possi ble, unanticipated downside to the rehab wave that in the past dozen years has revitalized tens of thousands of neglected homes on the South Side and in the south suburbs. While the great majority of the rehabs have sold, infusing the neighborhoods with solid homeownership, some of the houses sitting unsold may have become an attractive nui sance, inviting misuse by some wily person who’s gured out how to get inside and throw an unregulated party in the newly sparkling space. “It’s disheartening,” Beale said, “because no matter what you do to try to move forward, you have people who want to bring the communityNeighborsbackwards.”toldCrain’s they saw numerous young people con verging on otherwise quiet, safe blocks, including clearly underage people carrying liquor bottles. e parties are reminiscent of crowds at North Avenue Beach and Mil lennium Park this summer that attracted heavy police attention.

BY JOHN PLETZ

One of at least three newly rehabbed homes where neighbors and police have broken up large raucous parties, this extensively redone house on Wabash Avenue in the West Chester eld part of Chatham was priced at $269,900 before it was taken o the market in April.

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6 AUGUST 15, 2022 • CRAIN’S CHICAGO BUSINESS S ALE S Crain’s Sales Leadership Academy will inspire you to: •Keep strong momentum going to ensure you’re securing work, and winning new work, as you outdo your competition •Ready your sales and business development strategy as the surge so ens •Frame your mindset , messaging, and methods to develop a revenue growth strategy. WHEN: Tuesday, September 20 WHERE: Chicago, IL Learn More: CrainsAcademy.com This Crain’s Academy session on Sales Leadership will guide you through selling as an act of service. Contact us at crainsacademy@crain.com

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OCCUPANCY AT DOWNTOWN HOTELS

AVERAGED 78% LAST MONTH, UP FROM 59% IN JULY 2021 AND JUST SHY OF THE 82% AVERAGE IN JULY 2019.

Hotel Felix will provide another test of investor appetite downtown as hospitality sector demand recovers Investors looking to pick up downtown hotels o the discount rack have a new option in River North, where the distressed loan tied to the Hotel Felix is going up forParamountauction. Lodging Advisors has been tapped to sell the $44.7 million mortgage on the 228-room hotel at 111 W. Huron St., accord ing to marketing materials for an online auction scheduled for Sept. 8. e o ering comes more than a year and a half after the hotel’s owner was hit with a foreclosure lawsuit alleging it defaulted by failing to make loan payments early in the COVID-19 pandemic. e listing will provide another test of investor appetite for dis tressed hotels down town as hospitality sec tor demand recovers from the public health crisis. Strong leisure travel and the return of large group events at hotels over the past few months have lifted occupancy and room rates to their highest levels since late 2019, signs that might entice hotel investors to bet on the Occupancyrecovery.atdowntown hotels averaged 78% last month, up from 59% in July 2021 and just shy of the 82% average in July 2019, accord ing to hospitality data and analyt ics rm STR. Yet business travel, which ac counts for a larger share of hotel demand in Chicago than it does in most cities, has been slower to come back and hampered the recovery for the downtown hotel market. at has weighed down property values and triggered a wave of distress across the market.

Miami Beach, Fla.-based spe cial servicer LNR Partners is over seeing the loan on behalf of CMBS bondholders. A spokesman for LNR declined to comment on the o ering.

Distressed River North hotel loan heads to auction

“Despite several years attempt ing to create solutions to overcome (pandemic-related) challenges at this hotel, such as identifying a social services agency to occupy the hotel as we did at many other hotels, the lender would not agree to any of our proposals,” the state ment said. “As such, we and our partners, reluctantly but volun tarily, agreed to an amicable reso lution with the lender.” e starting bid for the auc tion, which is being operated by commercial real estate auction platform Ten-X, is listed at $7.5 million, according to marketing materials.eHotel Felix auction comes as other prominent downtown ho tels move through the foreclosure process.ACook County judge late last month issued a judgment of fore closure against the owner of the Palmer House Hilton Chicago— the city’s second-largest hotel— for defaulting on its $333.2 mil lion CMBS loan. That puts a trustee representing investors in the mortgage in position to take control of the property through anSeparately,auction. a trustee on behalf of investors in a $203.5 million CMBS loan tied to the JW Marriott Chica go hotel in the Loop submitted the sole bid in an auction last month to take control of the property.

PROMINENT FORECLOSURES Paramount is marketing the loan as an opportunity for a buyer to complete the foreclosure pro cess and take control to the hotel. e brokerage said in marketing materials that the owner “remains cooperative with (the) lender to wards transition of title” and that buyers could pursue “alternative branding or potential alternative use” with the 12-story building. Oxford President and CEO John Rutledge said in a statement that the ownership group had already generated “attractive returns” from its 2013 re nancing and that the venture could not come to terms with its lender on a plan to continue owning the property.

PANDEMIC EFFECT e Hotel Felix was one of many downtown hotels to be clobbered by the pandemic. e property was appraised at $23.5 million in July 2020, a fraction of the $68.6 million appraised value when the property’s owner, a joint venture of Chicago-based Oxford Hotels & Resorts and Gettys Group, took out the loan in 2013. at re nancing allowed the ownership venture to cash out on some of its equity in the property, which it bought in 2007 for $24 million. e Felix was most recently ap praised at $24.1 million in Decem ber, according to Bloomberg data tied to the loan. e mortgage was packaged with other loans and sold o to commercial mortgagebacked securities investors, mak ing much of the property’s nan cial data publicly available.

The sale of high-end Cité on the 70th oor of the high-rise overlooking Navy Pier would end a nearly three-year court battle between its longtime owner, Evangeline Gouletas, and her bank. The sale needs a bankruptcy judge’s approval.

BY ALBY GALLUN Lake Point Tower Lake Point Tower AND LAKE MICHIGAN.

BACKGROUND Lotfi opened his first restau rant, Al’s Char-House in La Grange, in 1994 and now owns Casa Margarita, a chain of six Mexican restaurants, including one at the base of Lake Point Tower. The others are in La Grange, Orland Park, Boling brook, Hinsdale and Downers Grove.Al’s Char-House, meanwhile, closed last year, but Lotfi is re opening it as Crawdaddy’s Sea foodLotfi’sBoil. venture has agreed to pay $2.0 million for the 5,200-square-foot restaurant space on the 70th floor and about 2,400 square feet of commercial space on the building’s second floor, according to a purchase and sale agreement filed in U.S. bankruptcy court in Chicago. It’s also paying $2.1 million for the restaurant equipment, fixtures, inventory and other items.

Cité at

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The restaurant at the top of Lake Point Tower that landed in bankruptcy court last year could live on with the same name but a new owner. A venture led by the owner of a chain of suburban Mexi can restaurants has agreed to buy Cité, the white-tablecloth restaurant on the 70th floor of the high-rise overlooking Navy Pier, court documents show. The $4.15 million sale, which needs a bankruptcy judge’s approval, would give the restaurant a fresh start and end a nearly three-year court battle between its longtime owner, Evangeline Gouletas, and herThebank.broker selling the prop erty marketed it to restaurant operators but also pitched it for residential use, believing the cir cular space might fetch a high price from a buyer interested in converting it into a penthouse condominium.ButAlLotfi,leader of the ven ture buying the space, said he plans to continue to run Cité as a fine-dining restaurant with the same staff of about 25 employ ees. That includes longtime Chef Oscar“TheOrnelas.placehas a lot of poten tial,” he said. “It just needs some love and care.” Cité’s biggest asset is its breathtaking views of the city and Lake Michigan. Lotfi has seen guests react as soon as they get off the elevator. “The first thing they do is they have a big smile on their face be cause of the view,” he said. “It’s the best view in Chicago.”

Restaurant atop Lake Point Tower could get a fresh start under a new owner

MULTIPLE OBJECTIONS The sale won’t generate enough proceeds to pay off all that’s owed to the restaurant’s creditors—nearly $6.1 million, according to a March bankrupt cy filing. Republic Bank of Chi cago, the largest creditor, will re ceive at least $3.4 million of the $3.6 million it’s owed, according to a court document. U.S. Bankruptcy Judge Janet Baer still has to sign off on the sale, and multiple parties in the case have filed limited objec tions finding fault with certain parts of the agreement. Robert Handler, the bankruptcy trustee overseeing the property and the sale process, declined to com ment.The sale would strip Goule tas of a property she has owned for decades. A member of the Gouletas family that built condo deconversion juggernaut American Invsco in the 1970s and 1980s, Gouletas knows Lake Point Tower well because the firm con verted the building at 505 N. Lake Shore Drive from apartments to condos in 1988. Built in 1968, the curvy black glass-and-steel tower is the only high-rise in the city east of Lake ShoreReachedDrive.by phone Aug. 10, Gouletas declined to comment, saying she was boarding a plane. She has a colorful biography that includes her marriage in the 1980s to then-New York Gov. Hugh Carey and a feud with her brother, Nicholas Gouletas, about 20 years ago. Now in her mid-80s, Gouletas lives in Mi ami, where she runs her own real estate business, Skyline Equities. Her personal website, which de scribes Gouletas as “a real estate legend,” boasts that she has mar keted and sold more than 30,000 condos in more than 40 regional markets around the country. Yet, Cité has been a source of trouble. Back in 2012, Gouletas faced a $5.7 million foreclosure suit on the restaurant and com mercial space, but she managed to retain ownership of the prop erty. She refinanced it with a new loan from Republic in 2015. Gouletas has been wrangling in court with Republic since Oc tober 2019, when the bank filed to foreclose on the restaurant property. The bank was able to evict the Gouletas venture that owns the restaurant last Novem ber.But the venture countered a few days later by filing for Chap ter 11 bankruptcy protection last December, effectively blocking Republic from completing its foreclosure. In March, Judge Baer handed control of the prop erty over the Handler, the trustee. She gave Handler permission to hire a broker, Northbrook-based Hilco Real Estate, to sell the property about a month later.

Ander pointed to L.A.’s Gang Reduction & Youth Development program as an e ective example of nonenforcement services. GRYD provides gang prevention and intervention services in 23 designated areas of the city. e program works to prevent gang-joining among youth ages 10 through 15, and to reduce gang-embeddedness among people ages 14 through 25.However, since the COVID-19 pandemic, the city of Chicago created the Community Safety Coordination Center, or CSCC, which ghts against gun-violence using data and community-driven strategies. “CSCC and other social program investments (in Chicago) are still in their early days, though it seems like an encouraging step consistent with the nonenforcement investments and e orts of Los Angeles and New York City,” Ander said. Ander also noted New York City’s and L.A.’s improved policing as a hypothesis for lower homicide rates. “As the accountability and progress of policing improved, community trust improved. If you can do a better job of clearance and closure, it can help break a retaliatory cycle,” Ander said. As for the Chicago Police Department: “We continue to see vestiges of the machine,” Ander added, referring to the “boss” politics of Chicago during the late 19th and early 20th century. Promotions within the department may not necessarily re ect quality-of-work performance. “Stepped-up investments in outreach are a step in the right direction, but we still need to improve the quality of policing.” Mayor Lori Lightfoot’s o ce did not respond to Crain’s request to comment on steps the city is taking to establish greater trust in local law enforcement, though the mayor has recently increased her calls for new steps to beef up neighborhood-level policing and to better coordinate with other local agencies as well as federal o cials to ght crime, laying out the framework of her agenda in a wide-ranging December speech. What is at stake? First and foremost, people’s lives are at stake: the lives of the victims, their families, friends and community. Chicago’s gun violence also has a broader ripple e ect. “Chicago is the economic engine of the region. We are all worse o if we don’t have a city that’s safe for everybody. It does hurt everybody,” Ander said. e city is already seeing the repercussions from a business standpoint. In June, billionaire Ken Gri n announced his hedge fund Citadel will relocate its headquarters to Miami. Gri n often cited Chicago’s increasing crime as a reason to leave. Children in violent communities are among those who su er most. Children’s school performance is inevitably a ected if their communities are exposed to persistent violence, Ander said. “ ese are issues happening in plain sight. ere’s no reason why we can’t be doing more or doing better,” she said. “If you can’t provide people with fundamental safety, it’s hard to do anything else we care about as a city.” than L.A.’s, and than five times higher than NYC’s.

8 AUGUST 15, 2022 • CRAIN’S CHICAGO BUSINESS New York and Los Angeles made a dent in gun violence. Why can’t Chicago?

Here’s what you need to know about guns in the city, and what Chicago can do about it

In 2021, Chicago’s homicide rate was nearly three times higher than Los Angeles’, and it was more than ve times higher than New York City’s. Over 90% of Chicago’s total homicides last year were gun-related. Despite Illinois’ vigorous gun safety laws, the city’s gun violence epidemic continues to pervade vulnerable neighborhoods. But now, as violent crime spills into areas previously deemed immune, will more Chicagoans show commitment to the communities most a Crain’sected? spoke with two Chicago crime experts—Roseanna Ander, founding executive director of the University of Chicago Crime Lab, and David Leitson, embedded research analyst at the Crime Lab—to discuss L.A.’s and New York’s approaches to ghting gun violence, and what is at stake if the city does not x the underlying issues. “Los Angeles and New York had the exact same shootings as Chicago,” Ander said. “ ey did something about it.” Here are some quick stats:  In 2021, Chicago had 29 homicides per 100,000 people, nearly triple L.A.’s rate of 10.05 and more than ve times New York City’s rate of 5.5, according to data provided by the UChicago Crime Lab.  e state of Illinois conducted the most rearm background checks in the country in 2021: 8.47 million in total, according to the National Instant Criminal Background Check System, or NICS, a database run by the Federal Bureau of Investigation. is is a 13.7% increase in background checks from 2020.  Cook County had 991 gunrelated homicides in 2021, a 14.7% increase from 2020, according to data from the Cook County Medical Examiner’s Ofce. Approximately 82.2% of last year’s victims were Black. Illinois gun safety laws Possessing a gun—legally—in Illinois requires applying for and ultimately being eligible to obtain a rearm owner’s identi cation card, which is issued by the Illinois State Police. e state police conduct a background check on each applicant through the FBI’s NICS database to ensure the applicant does not have a criminal record. While the number of rearm background checks in Illinois has increased by a whopping 579.4% since 2015, Cook County—and, more speci cally, Chicago—is still plagued with gun homicides. e city of Chicago reported in its most recent Gun Trace Report from 2017 that the majority of illegally used and possessed guns were originally obtained outside city limits, or in nearby states with less regulation: Indiana, Mississippi and Wisconsin. Gun-related homicides in Cook County Regardless of how or where these rearms are originally obtained, Chicago’s gun violence seems insurmountable. And there is a clear start date in Chicago’s increased number of homicides: Sunday, May 31, 2020—the deadliest day in the city’s recent history. “ e increase in gun violence really coincided with the murder of George Floyd,” said Leitson. Of course, COVID-19 did not help matters. At the start of the pandemic, both the police and community outreach organizations were less active. But the city’s violence has not improved since 2020—of the 991 gun-related homicides in Cook County in 2021, 774 of them took place in Chicago ZIP codes. And Chicago’s violence almost entirely impacts people of color. Nearly 82.2% of those victims were Black; approximately 13.7% were Latino. Why is Chicago’s crime di erent? So why do the two largest cities in the U.S.—New York and Los Angeles—have less gun violence per capita, and lower homicide rates, than Chicago? Ander o ered a plausible hypothesis: New York and Los Angeles have invested more—and more consistently, in a data-driven way—in an ecosystem of nonenforcement services. ese outreach programs, which emphasize prevention and intervention, directly invest in communities with the highest levels of violence. ese strategies have been implemented to complement the police, not replace them.“New York had a robust and coordinated strategy to try to leverage city apparatus around making the city safe. Chicago doesn’t have that kind of coordination,” Ander said. “Chicago hasn’t been as data-driven, focused or committed into why these shootings are happening in the rst place.”

BY SOPHIE RODGERS BY THE NUMBERS HOMICIDE RATE (PER 100,000) PEOPLE Chicago’s 2021 homicide rate is nearly three times higher

GUN DEATHS Illinois had the fifth-highest number of gun deaths in the U.S. in 2021. GUN-RELATED HOMICIDES For much of the past century, Chicago’s homicide rate had been nearly on par with New York’s and Los Angeles’. But now Chicago outpaces its peers in homicides and gun 19201930194019501960197019801990200020102020deaths.403020100 Chicago NYC L.A. 4,0003,0002,0001,000 1,999 2021 gun deaths Since homicides2015, Total number of 1,000500’15 991 431* 864 573597 732 521 808 ’16’17’18’19’20’21’22 Since 2015, there have been a total of 5,517 in Cook County. Total number of gun-related homicides in the county per year * Data reflects date of incident; 2022 data as of July 22 Source: Cook County Medical Examiner’s OfficeNote: Provisional number of firearm deaths by state, 2021 Source: Centers for Disease Control & Prevention Sources: University of Chicago Crime Lab; Chicago Historical Homicide Project; UCR; Criminal Justice Research Center; National Institute of Justice; Chicago, LA and NYC open data portals

Deadline is Friday, August 19

BLACK LEADERS AND EXECUTIVES 2022

BUILDING LOYALTY

CRAIN’S CHICAGO BUSINESS • A UGUS T 15, 2022 9

Building a brand is about loyal ty, not transaction. To build loy alty, focus on earning trust and nding authentic connections with your audience by appealing to their shared values and ide als. e rst step in this process is to identify who your brand is, what it stands for, and why that matters. When you do that home work, you will be able to articu late your brand’s purpose. Brand purpose is your com pany’s north star. It drives your actions, your innovation strate gy, and your company culture. I can’t stress this enough: A brand’s purpose is not meant to be written on a PowerPoint slide and discussed in a company meeting. It’s meant to be acted upon. Take Dr. Bronner’s, a per sonal and household care brand that successfully leads with pur pose. Buying Dr. Bronner’s isn’t about buying soap, it’s about buying into an ideal that we must all take care of our planet and each other—what the company has termed “constructive capi talism.” Not only does this drive the actions and partnerships in which Dr. Bronner’s engages, but it also drives engagement and longevity with its customer base. In a 2021 nationwide study conducted by Porter Novelli, more than 70% of consumers across generations were like ly to trust, be loyal to, buy, and champion those companies and brands with a strong purpose. Nearly 80% were also more likely to want to work for the company. By having a strong brand point of view, and consistently acting on those principles, you evan gelize consumers who will have your back long after the next best thing has come and gone. Re member: Trust leads to loyalty, loyalty builds advocacy, and ad vocacy drives sales even when it seems the odds are against you.

NOMINATE NOW!

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Advice for small businesses and entrepreneurs in partnership with the University of Chicago Booth School of Business. Shilpa Gadhok is vice president of brand marketing at HumanCo and a member of the Polsky Brain Trust, a collective of thought leaders afliated with Chicago Booth’s Polsky Center for Entrepreneurship & Innovation.

Crain’s Notable Black Leaders and Executives program will recognize black leaders in the Chicago area who have demonstrated the ability to advance their industries, places of work, and communities. Nominate at ChicagoBusiness.com/BlackLeaders S elling a product and build ing a brand are not the same thing. But the former bene ts greatly from the latter—especially during nervous economic times. In an era when the market is shifting from a focus on share holder return to stakeholder primacy—taking into account the interests of employees, cus tomers and the community as a whole—consumers are demand ing greater collective responsi bility from organizations to drive meaningful social impact. During the last nancial crisis, business es certi ed as socially responsible B corporations “were 63% more likely than other businesses of a similar size to make it through the downturn,” noted Andrew Kassoy, founder of B Lab. Furthermore, purpose-driven brands, if done right, can com mand a premium price, increase employee retention and provide greater exibility to innovate. According to a recent study by Kantar Consulting, brands that operate with a higher sense of purpose experience 175% higher Want to build long-term value? Lead with purpose. brand valuations than competi torIfbrands.abrand is to thrive in the long run, it must do more than simply tell consumers how their product or service will solve their imme diate problem or need. Touting product bene t attributes and proof points, otherwise known as a brand’s “reasons to believe,” are extremely valuable when the objective is to drive sales, but this method of marketing will bear fruit only until the next brand comes along and diverts con sumers’ attention, resulting in a battle for share-of-voice. Ulti mately, this type of relationship between brand and consumer is a transactional one.

10 AUGUST 15, 2022 • CRAIN’S CHICAGO BUSINESS

Chicago and its future: A glass half full Moving to Chicago after college changed my life. e city changed this kid who grew up 4 miles outside a town of fewer than a hundred people into an “urbanophile”—a name I gave to a blog I later started. So I’ve always had a special attach ment to the city. My move to Chicago in 1992 coincided with the decade in which America’s urban resur gence exploded. Waves of re development surged outward from the downtown Loop and the thin north lakefront gentri ed zone. A dingy in dustrial city was cleaned up and adorned with owers, a reclaimed river, wrought iron and classy streetlights. e vibe of the city transformed from “ e Blues Brothers” to “Ferris Bueller’s Day O .” Richard M. Daley was heralded as one of America’s supermayors. e city’s path proved to have downs as well as ups. e 2000s turned out to be a lost decade of job growth in which Daley seemed to have lost his magic touch. e city dug itself into a nancial hole that would only become apparent later. Still, the young college grads of the Midwest kept rolling in, and ultimately so did business, with United Airlines, Boeing and other corporations plant ing their ags in downtown Chicago during the decade. e 2010s, though not with out challenges, saw another business surge into the city; ConAgra Foods and Molson Coors, among others, were drawn to the city from out of town. Big tech set up shop and the city’s startup scene grew. In the last few years, the city has again hit choppy waters, with many raising questions about its future prospects.

EDITORIAL

Ever since the stay-at-home order s of March 2020, those of us who still believe downtown Chicago is a great place to do business—and who still believe in the power of in-person human interaction in the workplace—have been rooting for a return to something like pre-pandemic normalcy, with workers coming back to the area to meet, collaborate and rein fuse the Loop with the vital energy it’s lacked for years.

Yes, there are signs of a nascent re bound downtown now. But one factor that is very likely holding back a full recovery is the perception—which isn’t unfounded—that the public transit sys tems Chicagoans once relied on to get to and from work aren’t as safe as they used to be. The deterioration has been esp ecially pronounced on the Chicago Transit Author ity’s el lines. As Crain’s Greg Hinz put it in a March 2021 column, CTA rap id transit operations “are a big, crashing mess . . . with the tubes filthy and stained with graffiti, elevators and escalators out of operation, cars converted into rolling homeless shelters, rules about eating and smoking seemingly forgotten, and police presence all but invisible.”

Crime, a problem that unlike in New York had never fully been conquered, has come back to the fore. Carjackings, shootings and industrial-scale shoplifting now plague even the most upscale areas of town. Most work ers are still not coming into their downtown o ces. Upscale Michigan Avenue has seen signi cant retail closures. And, especially ominous, several major corporations have recently announced their departure from the region: Boeing, Caterpillar and hedge fund giant Citadel. Yet despite the gloomy head lines, there’s a lot of reason to feel that Chicago has a basically bright future. e city remains home to a large and diverse col lection of major corporate headquarters. Food giant Kellogg recently announced it will be moving the headquarters of its largest business to Chicago after the com pany splits up. e city is a huge center of professional services in law, consulting andDespiteaccounting.thedeparture of Citadel, Chi cago will remain an important nan cial node so long as the CME Group, the world’s most important nancial ex change, remains in the city. O’Hare Inter national Airport remains a key national hub, and the region a critical logistics cen ter in general. e University of Chicago and Northwestern University are nation ally prominent. In short, Chicago retains a powerful collection of economic assets. e city is also physically beautiful, with a magni cent lakefront setting. In a country with precious little genuine urbanism—dense, walkable, mixed-use neighborhoods and extensive transit— Chicago has all of that. And its urbanism comes at a price unavailable elsewhere. With the city’s real estate values having lagged since the Great Recession, and urban real estate prices in other Midwest Aaron M. Renn is a senior fellow at the Manhattan Institute for Policy Research and a contributing editor at its quarterly magazine City Journal. He is also a columnist for Governing magazine, where this piece appeared.originally

BOEHMR.JOHN YOUR VIEW Sound o : Send a column for the Opinion page to editor@ chicagobusiness.com. Please include a phone number for veri cation purposes, and limit submissions to 425 words or fewer. 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.

CHICAGO’S ECONOMY WILL NEVER FULLY RECOVER WITHOUT A TRANSIT SYSTEM THAT FUNCTIONS WELL, THAT IS REASONABLY CLEAN AND RELIABLE.

Earlier this month, the Chicago SunTimes reported that, even though rid ership is still down by almost half, the number of violent crimes on CTA ve hicles through July 19 is the highest it’s been since 2011, and the second highest in two decades. After a 29-year-old man was fatally shot on a CTA Red Line train on Aug. 6, however, CTA brass and the Chicago Po lice Department seem finally to be shift ing their security efforts into a higher gear. The Chicago Tribune reported po lice will boost their presence on the CTA, even pulling some staffers off desk duty to monitor the transit system. And in an Aug. 11 presentation before the City Club of Chicago, CTA President Dorval Carter laid out a series of other planned initiatives, including adding K-9 units, erecting higher fare gates at el stations to keep fare-jumpers and other trouble makers from entering, rehabbing dela pidated stations and helping homeless people who occupy trains, particularly in It’swinter.allin the execution now. How well can Carter and his CPD counterpart, Superintendent David Brown, deliver on this plan? There’s a lot riding on it— no pun intended. Chicago’s economy will never fully recover without a tran sit system that functions well, that is reasonably clean and reliable, and that people are unafraid to use. And, as Hinz points out, the federal COVID-relief aid that’s been propping up CTA operations is starting to phase out after next year, which means the CTA has only so long to restore security, clean up the system and lure back riders. All of Chicago—not just the Loop— has a stake in this mission. Here’s hop ing Carter and Brown can get it right.

DESPITE THE GLOOMY HEADLINES, THERE’S A LOT OF REASON TO FEEL THAT CHICAGO HAS A BASICALLY BRIGHT FUTURE.

A key to economic recovery: Safe transit

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ern cities having soared, the city is now actually one of America’s bargains on a quality-price ratio basis. It’s still possible for a professional couple to buy a decently spacious condo with enough room for a family, and with a parking spot to boot. is is unachievable for all but the rich in New York City. And while much of the Midwest remains stagnant, the region as a whole still is large and important. Chicago is its capital, and that is not going to change. For a large number of the Midwest’s educated young people, Chicago will remain the preferred destination. Midwestern tourists will visit the city for shopping and entertainment. Midwestern cities and states will look to Chicago for high-level business services. at’s not to say all will be well. e city never was able to fully transform it self into a coastal-style elite metropolis. Realistically, Chicago’s global city dreams and ambitions are on hold. Both the city and state are bedeviled by poor leadership that seems in over its head and incapable of dealing with the serious problems facing both. Even its once-vaunted business lead ership has lost a step. But despite the prob lems, there are so many assets and forces sustaining Chicago that this metropolis will remain a nationally powerful and promi nent city for many more years to come.

The cannabisregulatedindustry, may be but it’s anything but regular.

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CRAIN’S CHICAGO BUSINESS • A UGUS T 15, 2022 11

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REAL ESTATE

Wintrust Commercial Banking, Wheaton Wintrust is proud to welcome Senior Vice President Kurt Marsan to the Wintrust Commercial Banking team. Kurt brings over 20 years of banking industry experience working with numerous middle market companies as well as large corporate, private, and publicly traded multinationals. In his new role, Kurt will help grow the Wintrust Construction, Engineering & Architecture portfolio nationally as well as help in the expansion efforts for Wintrust Commercial Banking.

ARCHITECTURE / DESIGN

PROFESSIONAL SERVICES Crowe LLP, Chicago Mallory Fairless, CPA was recently promoted to partner in tax services at Crowe LLP, a public accounting, consulting, and technology rm. She has been with the rm for over 15 years. Fairless specializes in federal and state tax compliance and reporting issues for tax-exempt organizations. She earned her bachelor’s degree in business administration from Illinois College and her master’s in accountancy from Loyola UniversityChicago. She is a member of the AICPA and Illinois CPA Society.

bKL Architecture LLC, Chicago bKL Architecture is pleased to announce Angela Spadoni, AIA as the rm’s newest principal and owner. Angela has grown alongside bKL since joining in 2012, managing the development of projects in Chicago, Miami, Phoenix, Austin, Washington D.C., and Toronto. In her expanded role as principal, Angela will lead client engagement and drive growth for the rm, developing new business opportunities across bKL’s functional and geographic markets.

PROFESSIONAL SERVICES Loyola University Chicago, Chicago Karen Weigert has been named the director of the Baumhart Center for Social Enterprise and Responsibility at the Quinlan School of Business. Weigert served as the rst chief sustainability of cer for the City of Chicago from 2011 to 2016 and has been a leading gure in the sustainability sector as an educator, executive, and advocate. At Loyola, she will continue to build the Baumhart Center’s nationwide impact and strengthen the highly selective, cohort-based Baumhart Scholars MBA program.

EDUCATION Crowe LLP, Chicago Crowe LLP would like to announce the hiring of Bo Qiu, CISA, as a managing director in consulting services. In his role, he will lead the life science business, technology and risk team to help clients effectively and ef ciently manage their compliance and operational risks. Qiu received a bachelor’s degree from Colorado State University, master’s degrees in accounting and nance from the University of Illinois Urbana-Champaign and is a member of Ascend and ISACA.

NON-PROFITS

Muller & Muller, Ltd. (M2), Peoria Stephanie Coad has joined Muller & Muller, Ltd. (M2) Peoria as Project Manager. The engineering,expertisecombinationcomplementaryofherinstructuralarchitecture, and project management galvanizes M2’s strategy to grow their presence in Central Illinois. A self-starter and an active member of her community, she brings 15+ years of experience in new construction and renovation projects. Stephanie’s passion is creating elegant and ef cient structural systems and functional spaces.

ARCHITECTURE / ENGINEERING

Muller & Muller, Ltd. (M2), Chicago Tom Harrison, SE, PE, AIA, LEED® AP, has joined the Muller & Muller, Ltd. (M2) team as Chief structuralEngineer.StructuralAskilledengineer with an architect’s sensibility, he holds professional degrees and licenses in both elds. Tom leads M2’s structural team with his 30+ years of experience and an extensive list of professional thought leadership credentials. His expertise covers a variety of building projects, including signi cant experience in cladding design, renovations, and large multi-use structures.

Chicagoland Habitat for Humanity, GloriaChicagoMaterre Principal Attorney, Materre & Associates, has been voted Chair of Chicagoland Habitat for Humanity’s Board of Directors. Gloria also serves as managing director of EnTrust Realty Advisors. Past roles include serving as executive director of the Illinois Housing Development Authority, and the Illinois Liquor Control Commission under Gov. Pat Quinn. Joining the board in 2017, Gloria has brought a wealth of knowledge and skills to support Habitat’s mission in the Chicagoland region.

HEALTH CARE Wintrust, Rosemont Wintrust Financial Corp., a nancial services holding company based in Rosemont, Illinois, with 175 locations across Illinois, Indiana, and Wisconsin, is pleased to announce a new appointment. Raymond Reilly joined Wintrust as the Senior Vice President of the Customer Contact Center. Ray brings deep experience to the role with over 30 years in contact center management, including banking industry experience.

BANKING / FINANCE After School Matters, Chicago After School Matters, Chicago’s leading provider of after-school and summer programs for local teens, is pleased to welcome Katrina Ferreyra as Chief Development Of cer. She brings extensive experience in the development and education space, previously serving as Director of Development and Campaign Operations at University of Chicago Laboratory Schools, Dean of Advancement and Enrollment for Chile’s premier PK-12 school, and guided development for schools and non-pro ts in California.

NON-PROFITS

Busey Bank, Chicago Joe Sheils joins Busey Bank as Executive Vice President and President of Consumer and Digital Banking. With more than 25 years of banking experience, he is responsible for the organization’s essential Consumer, Community, Mortgage and Digital Banking teams, leading overall strategy and initiative execution.

BANKING Mesirow, Chicago Mesirow is pleased to announce that Ben Blakney, President of Mesirow Institutional Real Estate Magazine’swasInvestmentsDirect(“IRED”),namedoneofSavoy2022MostIn uential Black Executives in Corporate America. Ben has more than 30 years of experience as a senior executive in both the public and private sectors. Today, he serves as a member of the Mesirow Board of Directors and IRED Investment Committee and as a Vice Chair of the Mesirow Diversity, Equity and Inclusion Council.

ARCHITECTURE / ENGINEERING Zing Health, Chicago Chicago-based Zing Health, an insurance company expanding access to welcomesandcomprehensiveaffordable,equitablecare,President Andrew Clifton, an innovator in Medicare Advantage operational and growth strategy. Previously, he rebuilt Centene and WellCare’s direct, broker and eld sales channels and expanded to new geographic markets. Zing Health offers Medicare Advantage managed care plans in Illinois, Indiana and Michigan and Medicare Health Savings Account plans in 34 states and D.C.

BANKINGAlfordGroup, Chicago Donald A. Cooke joins Alford Group as Vice President, where he will bring his expertise in nonpro t management to clients across the country. During his career, he collectively raised over $1 billion, including leading six capital campaigns. Most recently, Don served as the Senior Vice President for Philanthropy of the Robert R. McCormick Foundation where he oversaw programs, such as veterans and public safety. Alford Group is an equity-forward, full-service consultancy serving nonpro ts.

CONSULTING Chuhak & Tecson, P.C., Chicago Chuhak & Tecson, P.C. congratulates Lindsey Paige Markus, shareholder and practice group leader of the 24-attorney Trusts & Estates Group, on the success of her book, A Gift for the Future, which quickly became a #1 Best Seller in legal self-help and #1 new release in many categories. Russ Sullivan, former Senate Finance Committee chief tax counsel, said, “A Gift for the Future is an in-depth guide for estate planning.” Licensed in Illinois, Florida and New York, Markus has a national practice.

LAW Levenfeld Pearlstein LLC, Chicago Casey Koppelman joins LP as a partner in the Real Estate Group; he will focus on representing clients in commercial real estate transactions, including acquisitions & dispositions, leasing, nancing and loan workouts. He also represents clients in build-to-suit leases throughout the country. Casey represents institutional real estate developers in the development process, including acquisition, disposition, and nancing with a focus on CMBS loans. He is also a licensed real estate broker.

PROFESSIONAL SERVICES Cresa, Chicago Veteran real estate leader Greg Schementi has joined Cresa, the world’s leading occupiercentric commercial real estate rm, as President. He will continue to steer Cresa on its growth path while ensuring its advisors and of ces are set up for optimal client service and success. Mr. Schementi previously served as President, Americas Tenant Representation, at Cushman & Wake eld. REAL ESTATE

BANKING / FINANCE

LAWCushman & Wake eld, Midwest Victoria Malkin has been promoted to Regional President, Midwest, based in Chicago. In this new role, she will be responsible for the rm’s local markets business including Chicago, Cincinnati, Columbus, Detroit, Indianapolis, Kansas City, Minneapolis and St. Louis.

First Bank Chicago, Northbrook First Bank Chicago, one of the top ve privately held banks in Chicagoland, proudly announces the recent promotion of Erin Reardon Cohn to Chief Treasury Management and Private Banking Of cer. She leads an allstar team of professionals that are responsible for assessing the nancial needs of both high-net-worth and commercial clients while providing customized solutions to meet their banking needs. Erin has over 25 years of nancial expertise and joined our dynamic team in 2014.

PEOPLE ON THE MOVE Advertising Section To place your listing, visit www.chicagobusiness.com/peoplemoves or, for more information, contact Debora Stein at 917.226.5470 / dstein@crain.com 12 AUGUST 15, 2022 • CRAIN’S CHICAGO BUSINESS

FINANCIAL SERVICES

Crowe LLP, Chicago Ryan Silvino was recently promoted to principal in advisory services at Crowe LLP, a public technologyconsulting,accounting,andrm.He has been with the rm for over seven years. Silvino is responsible for managing client relationships and delivery of performance improvement engagements. He earned his Bachelor of Science in Applied Engineering & Supply Chain Management from Michigan State University. He is a certi ed Lean Six Sigma Green Belt.

ANOTHER IMPEDIMENT TO PROSPERITY

Gina Ramirez is board president of the Southeast Environmental Task Force.

ENVIRONMENTAL JUSTICE SPONSORS

About 250 Environmental Protection Agencyregulated facilities are located there, including both Chicago Superfund sites. Residents breathe some of the area’s dirtiest air, contributed by manufacturers past and present. In 2017, 77% of toxic substance releases in Chicago occurred there, according to the EPA. “ is plot right here used to hold coal ash,” environmental justice advocate Gina Ramirez says during a recent drive through the Southeast Side, where she grew up and still lives. “It was three stories tall and uncovered for almost all of my life—until we started complaining.” e U.S. Department of Housing & Urban Development launched a two-year investigation in 2020 after three environmental justice groups complained that Chicago o cials repeatedly steered polluting industries from mostly white neighborhoods to largely Black and Latino communities.

CRAIN’S CHICAGO BUSINESS GREEN WEALTH: Trees contribute to a community’s economic well-being. PAGE 14

ZONING REFORM: Fight with General Iron was just the start of equitable remedies. PAGE 18 See INJUSTICES Page 16 How environmental hazards keep property values low and residents battling health problems while industries inundate surrounding communities with pollution and harmful contaminants BY DEBORAH L. SHELTON

BOEHMR.JOHN

CRAIN’S CHICAGO BUSINESS • AUGUST 15, 2022 13

Those rolling hills? That’s a landfill. at massive mound of neon yellow? Sulfur. e soil in the Little League eld? Some of it had to be removed because it was contaminated with lead and arsenic. Same for the ball eld just to the north, which was contaminated with manganese. Welcome Environmentalhome.hazards mark the landscape of Chicago’s Southeast Side, where residents cope with industrial dust and noxious odors from diesel trucks and factories.

EPA PRIORITY: The federal agency steps up to address legacy injustices. PAGE 15

IMAGESGETTY

“A tree planted anywhere is going to have benefits, but it’s important to focus on areas that have extremely low cano py or vulnerable populations— re ally young or really old people and where there’s a history of respiratory issues or other in dicators of vulnerability,” says Michael Dugan, director of for estry at Openlands, a nonprofit working to grow the region’s tree canopy.“Planting trees can have ex tremely high impact,” he says. “ ey’re almost a prescription for a more livable and healthy com munity.”Blacks in Green, the West Woodlawn group, has planted over 400 trees, partnering with Openlands, the Morton Arbore tum and other groups, Davis says. While some residents were re luctant to take the donated trees, viewing them as too much trou ble, over time, demand across the South Side has outstripped supply.Now, Davis says, “I’m like, ‘Oh, my God, I gotta get some more trees.’ ”

Naomi Davis is founder of Blacks in Green.

Michael Dugan, director of forestry at Openlands

TREES ARE “ALMOST A PRESCRIPTION FOR A MORE LIVABLE AND HEALTHY COMMUNITY.”

14 AUGUST 15, 2022 • CRAIN’S CHICAGO BUSINESS Tree inequity can drive up utility bills for residents and deprive them of healthy green spaces CRAIN’S CHICAGO BUSINESS ENVIRONMENTAL JUSTICE

City o cials say they are now utilizing a data mapping tool to ensure that planting occurs in ar eas most in need. e mapping tool considers factors such as social vulnerabil ity, ooding susceptibility, eco nomic hardship, tra c volumes, asthma rates and current tree canopy, says Angela Tovar, Chi cago’s chief sustainability o cer. “Trees will still be available to anyone in Chicago that requests them,” she says. “But we have now ranked priority areas.” e city is deploying tree am bassadors into those areas to identify sites for planting and to educate residents about the ben e ts of trees. e program was pi loted in Little Village in June. “In just one session, we were able to generate 130 new tree re quests in one small subsection of the neighborhood,” Tovar says. “So we are con dent this model of engaging the community at a very granular level and building partnerships . . . will be success ful.”Chicago has a goal of planting 75,000 trees by 2026.

BY DEBORAH L. SHELTON Who says money doesn’t grow onExpertstrees? say an expansive tree canopy correlates with better air quality as well as higher property values, lower utility bills and im proved quality of life. Residents of Chicago’s mar ginalized communities want to cash in on that towering natural greenery.“ere’s beauty, there’s com fort, there’s economy, there’s ecology,” says Naomi Davis, founder of Blacks in Green, a nonpro t based in West Wood lawn that promotes green, walk able and self-sustaining African American communities. “In this climate crisis that we’re in, we de nitely need all of the cooling tools that we can garner,” Davis says. “So, we love trees.” But Chicago’s trees are not equally distributed. A tree equity map in the city’s 2022 Climate Action Plan shows that South, West and Southwest Side neighborhoods are most in need.Some majority-white census tracts have a tree canopy of 30% or more. In historically under-re sourced census tracts—predom inantly Black and Latino—the coverage drops as low as 4% to 10%. e citywide average is 16%. “Communities in these regions with low tree canopy also dis proportionately face urban heat island e ects in the summer and experience more frequent ood ing,” the climate plan says. Heat island e ects occur when sidewalks, roads and other im penetrable surfaces store sun light, causing temperatures to rise. Trees lower temperatures by intercepting sunlight and releas ing water vapor into the air. ey shade homes and streets, reduc ing cooling costs. About 172 million trees make up the Chicago area’s region al forest, up from 157 million in 2010, according to the Morton Arboretum’s 2020 Chicago Re gion Tree Census Report. Al though tree cover increased from 21% to 23% overall, it decreased 3% in SeveralChicago.public- and privatesector tree planting initiatives are underway. But invasive pests, opportunistic species, climate change and urban land develop ment pose Environmentalchallenges.advocates say underserved areas should be prioritized to ensure equity and education about the importance of trees is critical so people will actually want them. “ ere are misconceptions among residents that tree roots go after pipes,” says Rolando Favela, volunteer lead environ mentalist with e RootsitandofcollaborativeCollective,Southwestavolunteersnonprofgroups.eydon’t.some times migrate toward water inside pipes that are already broken. e Southwest Collective ad vocates for green spaces in heavi ly industrialized corridors on the Southwest Side. It monitors tree canopy and air quality and uses data mapping to understand where problem areas are and how they might a ect residents’ health, quality of life and even property values over time. “We nd that living near indus trial corridors with heavy truck tra c, we have a lot more issues with particulate matter 2.5 and 10,” Favela Particulatesays.matter contains microscopic solids or liquid droplets small enough to inhale, which can cause serious health problems. Particulates 10 mi crometers in diameter or smaller can get deep into the lungs and possibly the bloodstream. Partic ulates tinier than 2.5 microme ters pose the greatest risk. Trees also can help with wealth-building.inkabouttrees rst from an aesthetic perspective, says Mar cus Casey, an associate professor of economics at the University of Illinois“PeopleChicago.like to live in plac es with higher curb appeal,” he says. “You drive through certain neighborhoods with that leafy look—it’s picturesque—and peo ple are willing to buy and spend more on that.” Leafy areas also attract de sired retail, “and then you get this compounding e ect,” Casey says. Not investing in trees in more economically challenged areas can exacerbate disparities. A recent Chicago Tribune in vestigation reported that signi cantly more trees were planted in wealthier white neighborhoods between 2011 and 2021, even though research had identi ed lower-income communities as a higher priority because of their vulnerability to poor air quality and the damaging e ects of cli mateechange.poorest Black residential neighborhoods received the few est trees.

Where more trees grow, so do a neighborhood’s wealth and well-being

CUZANAMANDILO

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COMMON CAUSE EPA escalates the advancing of equity and justice At the Environmental Protection Agency, we define environmen tal justice as the fair treatment and meaningful involvement of all people—regardless of race, color, na tional origin, or income—with respect to the development, implementation and enforcement of environmental laws, regulations and policies. Fair treatment means no group of people should bear a disproportionate share of the negative environmental consequences resulting from indus trial, governmental and commercial operations or policies. Put another way, all people deserve clean air to breathe, fresh safe water to drink, and healthy places to live and work—no matter what ZIP code they live in, the color of their skin, how much money they have in their pockets, where they worship, or whom they vote for. Or in the environmental justice adage—where they live, work, play, pray and go to school. Yet for far too long, some communi ties have borne the brunt of polluting industries sullying their air, contam inating their water, and leaving toxic chemicals in the soil. ese commu nities are largely lower income and populated by people of color and in digenous peoples in addition to some times being small and rural. eir residents have too often been disen franchised, their voices dismissed and disregarded when decisions are made to place hazardous waste land lls or facilities producing harmful chemi cals or generating noxious odors.

CRAIN’S CHICAGO BUSINESS • A UGUS T 15, 2022 15

To ForOppoWegetherBuildrtunityEveryone

Debra Shore is theforadministratorregionalRegion5ofU.S.EPA.

TORISEGETHER

President Joe Biden and EPA Ad ministrator Michael Regan have made it clear, in words and actions, that ad vancing equity and justice is a top pri ority for the whole of government. e Bipartisan Infrastructure Law passed last fall provides signi cant new resources to the EPA to address climate change and build resiliency into communities.  Millions of dollars are available to re place lead service lines—Chicago has the most in the country—and millions more for work on brown elds remedi ation and Superfund cleanups.  e Great Lakes Restoration Ini tiative is devoting $200 million each year to accelerate work on legacy con taminated sites such as Waukegan Harbor and the Grand Calumet River in nearby northwest Indiana. Once contaminated sediments have been removed and habitat restored, these sites can become economic drivers for community revitalization and wel come amenities for residents, provid ing opportunities for shing, boating, biking and hiking.

 is year alone, the EPA will award $500 million nationwide to school dis tricts in underserved communities to obtain clean electric buses replacing old diesel engine ones. So far, Illinois accounts for a third of the region’s grant applications. I have directed our sta to use every tool at our disposal to address legacy injustices embedded in our systems and in our communities. We are work ing with the city of Chicago’s Depart ment of Public Health on a framework for a cumulative health impact assess ment of the entire city, relying on com prehensive data and local monitoring of air and water quality and diverse health measures to identify pollution hot spots. We have required a metal shredding facility in Pilsen to install sophisticated air monitoring equip ment in every direction along its fence line to test for a range of toxic chem icals, heavy metals, volatile organic compounds and particulate matter. Environmental justice is an EPA priority, but it is also a demand being made of the EPA—and of businesses— by communities and by the people who live in those communities. As businesses make decisions and invest ments, they will bene t greatly from early and meaningful engagement with residents of communities where their facilities are located and where their operations have impacts. e rst rule of environmental justice from the early leaders of the movement is “communities speak for themselves.” Community engagement and collabo ration take time and energy, but they are a necessary business investment— and as valuable as investments in ma chinery or software. at’s the vision I carry forward every day—that people deserve to participate in the decisions a ecting them and their families, that solutions to problems often lie within commu nities—and that we can be bound to gether in common cause to protect public health and the environment.

Air quality, overall, has im proved in the Chicago area, with the exception of ozone. But air pollution continues to disproportionately a ect some communities of color, especially those with major highways and heavy industry. e impact has been far-reaching. “ e clustering of industries has led to signi cant pockets of pol lution and degraded air quality, sometimes degraded soil and wa ter,” says U.S. EPA Regional Admin istrator Debra Shore. “And now we’re facing the consequences.”

McKinley Park resident Alfredo Romo is executive director of Neighbors for Environmental Justice, which was formed in 2018 to protest the MAT Asphalt plant.

A “cumulative burden” ordinance being pushed by advocates would limit the number of polluting in dustries that could locate in a given area. Chicago o cials, who for the rst time have agreed to conduct a citywide cumulative impact assess ment, say they embrace the idea. e impact assessment, says Me gan Cunningham, managing deputy commissioner at the Chicago De partment of Public Health, “has the potential to be transformational in driving policy changes that are going to be more protective of these more highly burdened neighborhoods.” A cumulative impact ordinance would “bring a sense of clarity and predictability,” adds Cunningham, “so that businesses and communi ties know what to expect and how decisions are being made about industrial zoning and enforcement e orts.”

In a letter last month to Mayor Lori Lightfoot, HUD sided with the advocates.efederal agency could with hold hundreds of millions of dol lars in funding if the city fails to reform its zoning and land use policies, which HUD determined were racially discriminatory. “We will respond given the op portunity, but any allegations that we have done something to com promise the health and safety of our Black and Brown communities are absolutely absurd,” a statement from the mayor’s o ce said. “We will demonstrate that and prove them wrong.”

HELPING A COMMUNITY HEAL

Environmental justice advocates are calling for greater accountabil ity and transparency from political leaders, government agencies and manufacturers.“Ifwehadrules and regulations to x the permitting laws that ex ist right now, we wouldn’t be tak ing this Whac-a-Mole approach,” says Ramirez, board president of the Southeast Environmental Task Force, one of the groups that led the complaint with HUD. “ ese communities have been sacri ce zones long enough.”

Continued from Page 13

Environmental justice advocates are tallying big wins. ey blocked plans to open a new scrap metal facility on the Southeast Side and successfully pressured the city to postpone a $500 million city contract after expressing concerns about one of the bidders, an asphalt manufacturer in the McKinley Park neighborhood.Regulations have been tight ened on large recycling centers and on manufacturers handling manganese, a heavy metal used in steelmaking that can cause brain damage after prolonged exposure, especially in children. An ordinance passed last year re quires tra c and air quality studies and greater e orts to engage com munity residents. It also bans new incinerators, land lls and mining operations in the city. Advocates are pressing for stron ger action against Hilco Redevelop ment Partners after it demolished the former Crawford Power Plant smokestack in April 2020. A partic ulate dust cloud from the implosion engulfed homes in a large section of the Little Village neighborhood. Lightfoot issued a letter to Hilco, demanding swift action to clean up the area around the site, including addressing any deposited dust from the implosion.

e city inspector general’s sum mary report faulted both Hilco and the city. Aldermen passed a resolu tion in July calling for release of the complete report. At a June news conference, Ald. Michael Rodriguez of the 22nd Ward, where the demolition took place, said making the details public is critical “for good governance to work, as well as to help our neigh bors and community heal.”

16 AUGUST 15, 2022 • CRAIN’S CHICAGO BUSINESS CRAIN’S CHICAGO BUSINESS

Children are particularly vulner able because they breathe more air, eat more food and drink more water per body weight than adults, says Dr. Susan Buchanan, clinical associ ate professor of environmental and occupational health sciences at the UIC School of Public Health. “Anything that’s in the air, water or soil is going to a ect children more,” she says. Air pollution is linked to asthma and other lung problems, small er birth weights and premature births. “We also have evidence of neurocognitive e ects of partic ulate matter because it crosses the placenta and gets to the fetal brain,” Buchanan says. Furthermore, pollution’s corro sive e ects go beyond health. It de presses housing values. Marcus Casey, associate profes sor of economics at the University of Illinois Chicago, says a compli cated interplay of factors in uence property values and the ability of individuals to build wealth in neigh borhoods near polluting industries. Inexpensive properties and cheap land draw both industry and residents with limited means. Over many decades, redlining and other racist real estate practices brand Black and Latino neighborhoods as undesirable, encouraging mu nicipalities to allow heavy industry to amass there. But clearly a low-income neigh borhood’s exposure to signi cant pollution hurts housing values, Casey says, which “further reduces some of the pathways out of pov erty, which can lead to persistent intergenerational poverty.”

A LARGE SWATH OF RED African Americans are almost three times as likely to die from ex posure to pollution, which is a major contributor to heart disease, asthma and premature death, according to the city’s 2020 Air Quality & Health Report“Airpollution can both increase risk of chronic illnesses like heart and lung diseases and contribute to worse outcomes for people liv ing with certain health conditions,” says the report, which for the rst time analyzed community-level data on air quality, health and social factors to identify which neighborhoods should be prior itized for air pollution reduction and mitigation e orts.

e federal Clean Air Act and environmentally friendly and sus tainable development practices are credited with improving over all air quality. But Cook County does not meet the federal standard for ozone, and the Chicago area has seen an in creasing number of days with high levels of ozone-polluted air. “Additionally, ne particulate matter pollution remains high in Chicago,” says the air quality report. “Although the Chicago area meets federal standards for ne particulate matter (PM2.5) pollution and levels have fallen by 40% since 2000, con centrations are still among the high est in the Particulatenation.”matter that is 2.5 mi crometers or smaller can penetrate deep into the lungs and bloodstream and is particularly damaging. “Our estimates suggest that 5% of prema ture deaths in Chicago each year can be attributed to exposure to PM2.5,” the report Concentrationssays. of particulate matter and ozone are fairly uniform across the city, according to the re port, but pollutants such as diesel particulate matter are more preva lent in areas with signi cant tra c and industry. A map produced by the city shows a large swath of Chicago’s South and West sides shaded in bright red, indicating areas of greatest vulnerability.

JUSTICE

ENVIRONMENTAL INJUSTICES

ULTIMATE GOAL Advocates are demanding that nes paid by Hilco Redevelopment Partners be used to install and main tain permanent, publicly accessible air monitoring systems. ey also want the city and Hilco to pay for and maintain air ltration systems for homes directly a ected and for the health department to complete a new soil study, create a remediation plan and install and maintain permanent air monitoring systems in impacted areas. “I don’t understand to what ex tent there was supervision and oversight and accountability,” Rodriguez said in June. “ e city issued 16 citations against the re development company and two subcontractors for $68,000, and those were settled for about a third of that, without having to admit guilt or wrongdoing. Our commu nity still wants to understand why those decisions were made.” e city has since toughened its rules on demolitions. Hilco did not respond to requests forJohnson,comment.of Altgeld Gardens, says communities of color want to plan for the future, but it’s a future that “depends on how good our air, wa ter and soil is.” She plans to establish an environ mental justice center that will train residents in communities harmed by pollution for green jobs, includ ing how to test air and water quality and remediate lead and asbestos. Tovar, of Little Village, also is look ing ahead.eultimate goal of environmen tal justice, she says, is to “rethink what our community can look like and how we can prosper.”

Michael Tadin Jr., co-owner of MAT Asphalt, says his business is among the most environmentally friendly facilities of its kind, “yet it has become a scapegoat for the ills of environmental racism.” e company voluntarily under went testing, which determined that plant emissions were about one-twentieth of the allowable regulatory limit of hazardous air pollution and less than 1% of the permissible amount of particulate matter, he says. He calls the advocates’ criti cisms “mind-boggling.” e company will rebid for the city contract, Tadin says, and will meet any additional environmental requirements.eIllinois EPA says it takes into account a community’s conditions when companies apply for permits and uses a screening tool to deter mine whether “the location of the source or project is or would be within an area of (environmental justice) concern,” says a written re sponse to Crain’s questions. It added: “ e Illinois EPA then uses its discretion to inform the pub lic of those permit actions.”

A similar map by the Natural Resources Defense Council high lights overburdened areas they say should be targeted for “increased environmental monitoring, en hanced enforcement, and land use and public health reform.”

CRAIN’S CHICAGO BUSINESS • A UGUS T 15, 2022 17

WHEN INDUSTRY MOVED NEXT DOOR One day in 2018, Alfredo Romo, who lives in the McKinley Park neighborhood, noticed large indus trial tanks being constructed across the street from the namesake 72acre park. Romo, in remission from a rare form of cancer, later learned that it was MAT Asphalt, which manufactures paving material for street repair and resurfacing under cityNeighborscontracts. for Environmen tal Justice was formed in 2018 to protest the facility, which they say was operating without their input or knowledge. Romo says that the people who experience the noise, tra c and odors want a say in de cisions that could a ect their envi ronment and health. “We just couldn’t comprehend how a heavy industrial facility was able to get constructed in front of the park, next to schools and 1,000 feet from homes,” says Romo, the non pro t’s executive director. McKinley Park is a working-class neighborhood that is 54% Latino and in 2021 had a poverty rate of 18.3%.ey later learned their neighbor hood was deemed an environmen tal justice community, which meant “we are already a community over burdened with pollution,” he says. e group has led complaints against MAT Asphalt, accusing the company of emitting particulate matter in harmful amounts. “People are literally waking up to smells in their kitchens, in their backyards and in their basements,” RomoMATsays.Asphalt was a bidder for the now delayed half-billion-dollar city contract. Cunningham, of the health department, says the city wants to more fully study the matter to avoid overburdening the community. O cials will “more fully build in, even to our procurement processes, consideration of environment and public health,” she says. “ ere are meaningful and important steps that the city can and is taking to more equitably distribute burdens and reduce burdens overall.”

BOEHMR.JOHN Lower scores—those in blue—are less vulnerable to the effects of air pollution. Areas in red are most Note:vulnerable.TheAirQuality + Health Index score weighs a census block’s air pollution burden with various community health and social factors to provide an overall score accounting for both metrics. Source: Chicago Department of Public Health AIR QUALITY + HEALTH INDEX SCORE PERCENTILE INEQUALITY IN CHICAGO’S AIR The red, orange and yellow areas are most vulnerable to air pollution and are located primarily on the South and West sides of the city. 0 to 19 20 to 39 40 to 59 60 to 79 79 to 99

TOXIC METALS IN TOENAILS Gina Ramirez’s mother grew up near U.S. Steel’s former South Works plant and su ered from asthma attacks on poor air quality days. Ramirez was pregnant in 2013 when residents banded together to reduce fugitive dust from stockpiles of pe troleum coke, or petcoke, a ne dust byproduct of oil re ning. en she heard that Reserve Management Group was planning to open a metal recycling facility in 2018 in the working-class, largely Latino Southeast Side after it was pressured by the city to close Gen eral Iron, RMG’s facility in a uent, majority-white Lincoln Park. “I was going to be raising my son in this neighborhood, and I was like, ‘Oh, hell no,’ ” she says, citing the company’s history of violations andRMGcomplaints.formeda new company to operate the facility, Southside Recy cling, at a cost of over $80 million, in cluding “best-in-class air pollution control equipment that meets or ex ceeds all applicable environmental laws,” the company said. Ramirez helped organize protests to stop it from operating. After an impact assessment, the city health department denied the company a nal permit. RMG is appealing the decision— and suing the city. A February statement from the company said the Illinois EPA com pleted an exhaustive review process, issuing a state air permit, and that experts repeatedly determined that the facility would not pose a public health or environmental threat. “And the City’s own health ex perts, using intentionally in ated parameters to overstate the e ects of the operation, still concluded that the facility poses no risk of adverse health e ects above the benchmarks de ned by the U.S. EPA,” the statement said. e company says the health de partment bowed to political pres sure.Health is top of mind for Ramirez, whose 8-year-old son Evan has autism. Evan is enrolled in a health study analyzing exposure to manganese, which can be measured in chil dren’s teeth and toenails. Instead of saving Evan’s front baby teeth as a childhood memento, she sent them to researchers. A study published last year in the International Journal of Environ mental Research & Public Health found measurable concentrations of toxic and trace metals in the toenails of a sampling of children with asthma living on the South east Side as compared to children with asthma in a demographically similar Chicago community. e children with concentrations of certain metals in their toenails had more asthma complications. “ ese data suggest that selected metal exposures may be associated with impaired pulmonary function parameters and reduced asthma control among children with preex isting asthma,” the study reported.

THE ‘TOXIC DONUT’ AND ‘ASPHALT TRIANGLE’ e EPA has stepped up its in spections recently, conducting about 60 in the Chicago area alone since last summer, says agency administrator Shore. e EPA reg ulates inhalable particles but not those larger than 10 micrometers. “It’s a very high level of atten tion, which is consistent with our focus on places where cumulative impacts from multiple facilities raise environmental and public health concern,” Shore says. e area around Altgeld Gar dens, a sprawling public housing complex on the Far South Side, has been tagged the “toxic donut” because it is encircled by industry. ree asphalt companies form an “asphalt triangle” around several Southwest Side neighborhoods. Hazel Johnson, a pioneering en vironmental activist, coined the term “toxic donut.” She founded People for Community Recovery in 1979 to raise awareness and help local residents harmed by pollution. She died in 2011. Her daughter, Cheryl Johnson, has picked up the mantle. “At the end of the day, these in dustries are only looking at their pro ts, not the quality of my life and my health,” says Johnson, who grew up and still lives in Altgeld Gardens.Residents shouldn’t be asked to choose between jobs and good health, says Edith Tovar, who lives in Little Village. “Poor communities are always being cornered into choosing one or the other,” says Tovar, an orga nizer with the Little Village Environ mental Justice Organization. “You either have to choose clean air or you have to be OK with a factory or a warehouse being built here.” It’s not a fair choice, she says.

Dr. Victoria Persky, one of the study authors, says more air mon itoring is needed, especially at the hyperlocal level, to identify pollu tion hot spots. “We know that way beneath the current standards for particulate matter that there are health e ects and that the standards need to be changed,’’ says Persky, professor of epidemiology and biostatistics at the UIC School of Public Health.

Olga Bautista is executive director of the TaskEnvironmentalSoutheastForce.

SELF-DETERMINATION CRAIN’S CHICAGO BUSINESS ENVIRONMENTAL JUSTICE WE E K By aligning with Crain’s MBA Week o ering, partner schools can capitalize on prospective students and business education in uencers looking to reskill or upskill through trusted Crain’s content and impactful media placements. Learn more about how to be a part of this guide by emailing Sarah Chow at schow@crain.com OCTOBER 3 - OCTOBER 9, 2022 25% of Crain’s Chicago readers plan to continue their education in the next two years. Federal government did what the City Council didn’t do

18 AUGUST 15, 2022 • CRAIN’S CHICAGO BUSINESS B roken zoning laws are akin to the redlining that divided communities in major cities across the country. In places like my home city of Chicago, segregation is maintained and often deepened by zoning laws that create sacrifice zones where industrial pollution is concentrated in communities of color.Factories brush up against schools, parks and our homes. e Calumet River is lined with polluters. ere are dozens of factories, warehouses, piles of dust and metals crowding the rivers on the South Side. Our current conditions exist directly because of federal and local policies like redlining and discour aging non-white individuals from owning property in certain neigh borhoods. I’ve seen how parts of Chicago modernize and develop while communities of color, like the Southeast Side, stay trapped in an industrial legacy by the city’s zoning and land-use laws. I want more for my daughters, Lib erty, 9, and Pilar, 15. ey deserve to live in a neighborhood that feels like home and will not make them sick. ey deserve to be protected like the kids in Lincoln Park. Stopping General Iron was hardfought and hard-won. It took nearly four years and some Southeast Side activists, including a local teacher, went on a hunger strike that lasted a month to try to stop the massive car shredder and metals recycler from setting up shop. We did it without the support of our alderwoman, Susan Sadlowski Garza. e ght was so intense that eventually federal agencies intervened and successfully urged the city to do the right thing and deny the facility a permit to operate in our community. Recently, after a nearly two-yearlong investigation, the U.S. Depart ment of Housing & Urban Develop ment sent a letter to Chicago o cials demanding that the city change its illegal planning, zoning, and landuse policies, so they don’t discrimi nate against communities of color. HUD o cials determined that the city continued a “discriminatory” pattern of relocating polluters from white communities to Black and Latino neighborhoods by helping General Iron in its attempt to move from Lincoln Park to the Southeast Side even though they knew it would make us sick. To resolve the investigation, the city must address “existing and potential environmental harms” of General Iron’s relocation plans while also adopting “an enhanced fair housing planning process” that in cludes plans to overcome disparities in environmental impacts. If the city fails to change its policies, it could be cut from millions of dollars in federal funding.Butdoing the right thing is much more complicated than denying a permit to this facility. Soon, the City Council will have to reckon with the environmentally racist past that has been encoded into zoning and landuse laws and address the impacts. We desperately need to pass a cu mulative impacts zoning ordinance that will consider the health e ects of industry and limit where they are allowed to operate. With the right reform, zoning laws could be used to protect commu nities like mine against pollution instead of harming us. Chicago can reverse racially biased laws and re place them with protections for pub lic health and environmental justice and allow for genuine participation in the processes that determine what a community will look like. It took interventions from the local, state, and federal agencies to stop General Iron. Let us not squan der this moment. It’s a relief to know we are not alone in this ght. Even if our mayor and alderwoman don’t want to hold polluters accountable, our federal government is ensuring theyFederaldo. agencies like the EPA and HUD play an essential role in prioritizing environmental justice on a national scale. ey can in uence local governments and agencies and bring resources to bear across com munities like mine. Dismantling seg regation in our country must include reforming the racially-biased zoning laws that have stacked the deck against us. Only then can communi ties like mine ultimately determine our own future.

RVs from Page 1 TAX BILL from Page 3

RV sales decline amid high gas prices, rising interest rates, fading COVID fears

LONGTIME TARGET A last-minute concession to continue allowing manufactur ers to deduct their capital invest ments in one chunk rather than over their productive lives will soften the blow for that sector. Other major local corpora tions with e ective tax rates low er than 15% over the past few years include North Chicagobased AbbVie, another phar maceutical giant hived o from Abbott more than a decade ago; Deer eld-based medical prod ucts maker Baxter International; and Chicago-based food and farm products processor Archer DanielsRepresentativesMidland. of those com panies didn’t respond to requests forIncomment.addition to Abbott and McDonald’s, the largest repur chasers of stock locally in the rst half of the year were Deer eldbased Caterpillar at $1.9 billion; Northbrook-based insurer All state, $1.5 billion; Chicago-based confectioner Mondelez Inter national, $1.5 billion; and ADM, $1.2Stockbillion.buybacks have been a longtime target of Democrats. “I hate stock buybacks,” Senate Majority Leader Chuck Schum er, D-N.Y., said Aug. 5, according to Politico. “I think they’re one of the most self-serving things that corporate America does. Instead of investing in work ers and in training and in re search and in equipment, they simply—they don’t do a thing to make their company better, and they arti cially raise the stock price by just reducing the num ber of Analystsshares.”are divided on how much, if at all, the new tax will deter companies from repur chasing their own shares. e 1% tax is relatively modest, but still some believe more companies will hike their dividends rather than buy back so much stock. Taxes on dividends, of course, are the responsibility of sharehold ers who receive the cash payouts, not the companies themselves. Perhaps more important about the buyback tax than its amount is that it exists at all. Increasing it now will serve as yet another rev enue possibility whenever Con gress returns to the tax code. e minimum tax was bitterly opposed by the U.S. Chamber of Commerce, but few companies spoke out individually before the Senate voted. One that did was Chicago-based Exelon, one of the nation’s largest utility hold ing companies and parent of Commonwealth Edison. e version unveiled July 27 by Sen. Joe Manchin, D-W.Va., and Schumer, to the shock of virtually everyone else in the na tion’s capital who believed a tax bill was unlikely before the mid term elections, would have cost Exelon over $300 million more annually beginning in 2023, CEO Chris Crane told analysts on Aug. 3.

Some big local companies could pay a lot more in taxes under new federal bill “It sucks that gas is so expen sive, but we probably still come out ahead, not spending $300 a night on a hotel,” says Chris Ward, who nonetheless main tains he has no regrets about the purchase. “I wouldn’t plan on going cross-country right now.” RV demand cooled as gas pric es rose this year. Shipments fell 12% in June, the rst meaningful decline since the early days of the pandemic in May 2020, ac cording to the RV Industry Asso ciation. e group predicts ship ments will sag 8.4% in 2022 after surging 48% to a record 600,240 vehicles between 2019 and 2021. “Sales have slowed down in the past few weeks because of gas prices,” says Patrick Cattell, parts manager at Art’s RV Sales in Glen Ellyn. “ is spring, demand was crazy. We could have sold 10 times the amount of inventory if we could have gotten it.” Slumping sales signal the fad ing of an unprecedented boom that lifted not only local deal ers like Art’s RV but nationwide players like Lincolnshire-based Camping World, the country’s largest RV seller, with 185 dealer ships and service centers. On top of higher gas prices, the RV market is contending with the Federal Reserve’s campaign to contain in ation by raising inter est rates. Higher rates make RVs less a ordable for buyers who need loans to acquire vehicles that can cost hundreds of thou sands of dollars. At the same time, invento ry levels are rising as factories work their way through the order backlogs of the past two years. Increasing supply in both the new vehicle market and the used market—where more owners are selling o recently acquired RVs—combines with slowing de mand to put pressure on pro t margins.Camping World doubled down on used RVs when demand took o , racking up 71% higher reve nue last year on 30% higher vol ume, while revenue from new RVs rose 17%. e company gets most of its revenue from selling towable RVs, which have been hit harder than large, drivable vehicles. As with so many industries in a bifurcating economy, the RV market is diverging into a highend segment largely una ect ed by economic pressures and a lower end that’s bearing the brunt of rising prices. “If you have $200,000 to put into a vehicle, the cost of fuel isn’t a ecting you,” says Greg Drozd of EpicVans in Addison, which specializes in turning MercedesBenz Sprinter cargo vans into custom RVs. But the bulk of the industry’s sales are tow-along campers pur chased for $25,000 to $40,000 by middle- and working-class wage earners and retirees who are struggling with in ation. “People buy more on monthly payments than on sticker price,” says John Healy, an analyst at Northcoast Research. “ e mar ket is still quite elevated. But compared to the last 18 months, we’re seeing sales cooling.”

Camping World said Aug. 3 that it sold 15% fewer new RVs on a same-store basis in the second quarter. CEO Marcus Lemonis told analysts the decline was even higher for other dealers. Camping World’s used-RV unit sales were up 4%. “We’re having to work hard er for that transaction,” he said. “We’re having to move people around. And in some cases, they’re having to move people to a lower-priced unit to ensure that a ordability is right for them.” e company wants to lower the average price of an RV on its lot by $1,000 next year. e company warned in its annual report earlier this year that “the industry has seen an in ux of new rst-time partici pants because RVs allow people to travel in a safe and social ly distant manner during the COVID crisis. ese trends may not continue in the future.”

BLOOMBERG

BUYING, NOW SELLING Some owners, having scratched their RV itch, are selling. Christopher Kennedy of Os wego bought a drivable mid size RV two years ago. He crisscrossed the country with his wife and four children, putting on 18,500 miles as they traveled between far- ung sites rang ing from a prairie homestead in South Dakota to Disney World. e RV became a hub for family bonding and a mobile remote schoolroom for the kids, while Kennedy took Zoom calls from the road in his role as CEO of a small biotech company. Now the kids are back in school in person, and the RV is gone. “ e kids are about to start hockey. We aren’t going to put the miles on it,” says Kennedy, who recently sold the Coachmen RV on Craigslist for $79,000, about $10,000 less than he paid for it. Deryle Jensen, who runs a forsale-by-owner website called RVWheelator.com, says he’s already seeing signs of a slow down. “I watch the number of units that get advertised on RV Trader, Craigslist and others. e numbers are going up.” the provision were in e ect now. Under the bill, buybacks won’t be taxed until next year, which some analysts say will incentiv ize companies to buy back more stock this year than they would have otherwise. An Abbott spokeswoman didn’t respond to requests for comment.eU.S. corporate tax rate is 21%. is bill doesn’t change that. But many companies’ e ec tive tax rates are well below that percentage even though they also must pay state income taxes. e causes are varied and usually listed by companies in their SEC documents.Firmswith international op erations often see lower taxes thanks to what they pay abroad. Various tax breaks in the U.S. code also contribute, as do tax bene ts from losses in previous years.Before last-minute changes were made to the minimum tax language, the congressional Joint Committee on Taxation es timated that 150 U.S. companies would be a ected. Analysts have pegged the pharma and tech industries as particularly vulner able.

RV demand cooled as gas prices rose this year. Shipments fell 12% in June, the rst meaningful decline since the early days of the pandemic in May 2020, according to the RV Industry Association.

MIXED REACTIONS “Higher tax would ultimately limit our ability to invest in in frastructure needed to accom modate the clean energy our customers want and our jurisdic tions are pursuing,” he said. e entire utility industry echoed his complaints, and its trade group, the Edison Electric Institute, worked on changes to soften the blow. Asked Aug. 8 how the nancials now look for Exelon, spokesman Nick Alexopulos emailed, “We are studying the changes in the latest version of the legislation. However, we are not o ering a new estimate of the impact on Exelon until the leg islation progresses through the House and we fully understand the proposed tax applications. We are committed to working with Congress and other stake holders to ensure it aligns with what we all want to achieve: a cleaner, more resilient, more re liable and a ordable grid.” EEI sounded more enthusias tic. “We commend Senate lead ers for their e orts to engage stakeholders and for their will ingness to return to the negoti ating table time and time again until they could reach agreement on the policy solution that works best for the American people,” EEI President Tom Kuhn said in a statement.

CRAIN’S CHICAGO BUSINESS • A UGUS T 15, 2022 19

TAKE IT OR LEAVE IT

Anticompetitive contract provi sions with insurers such as all-ornothing clauses are some of the biggest drivers of price increases, researchHealthshows.systems realized that as they grew, they could demand that insurers include all their hospitals, physician networks and related businesses in their contracts or else they would take their busi ness elsewhere, researchers said. Insurers then would have to in clude low-quality and high-priced hospitals they’d otherwise exclude from their networks. e FTC has cited anticompet itive contract provisions as one of its areas of focus as it revamps its merger guidelines. In 2021, Sutter Health, a not-for-pro t health sys tem in Northern California, paid $575 million to settle allegations that it bullied payers to include all of its facilities in their networks. Sutter’s prices were much higher than all other California hospitals from 2003 to 2016, a 2018 study published in Health A airs found. “If there is independent evi dence that Advocate Aurora has done all-or-nothing contracting, that would be a big indicator of the association between higher mar ket share and higher prices,” said Glenn Melnick, a health econom ics and policy professor at the Uni versity of Southern California and the author of the 2018 study. Economists expect regulators to be more wary of these large hospi tal tie-ups, as hospital spending ac counts for about a third of the $4.1 trillion annual U.S. health care bill. Alex Kacik writes for Crain’s sister publication Modern Healthcare.

20 AUGUST 15, 2022 • CRAIN’S CHICAGO BUSINESS CLASSIFIEDS To place your listing, contact Suzanne Janik at (313) 446-0455 or email sjanik@crain.com .www.chicagobusiness.com/classi eds OUR READERS ARE 125% MORE LIKELY TO INFLUENCE OFFICE SPACE DECISIONS Find your next corporate tenantor leaser. Connect with Suzanne Janik at sjanik@crain.com for more information. BUSINESS FOR SALE REAL ESTATE CAREER OPPORTUNITIESCAREER OPPORTUNITIESCAREER OPPORTUNITIES CAREER OPPORTUNITIESCAREER OPPORTUNITIES ChicagoBusiness.com AUCTIONS advertising opportunities available To advertise contact Suzanne Janik sjanik@crain.comat(313)446-0455

OUTPACING STATE AVERAGES In 2016, Advocate Aurora Wis consin hospitals charged com mercial insurers 318% of what they would’ve billed Medicare for the same inpatient and outpatient services, and the state average was 286%, according to the Rand data that researchers adjusted for di erences in patient acuity and labor costs. While Advocate Auro ra’s prices dropped in 2017, they jumped to 369% of Medicare re imbursement levels in 2020, when the statewide average was 307%. “Advocate Aurora’s prices being 300% above Medicare is notable. After the merger with Atrium, they could go even higher,” said Chris topher Whaley, a Rand policy re searcher.AnAdvocate Aurora spokesper son questioned the integrity of the data, noting that the combined health systems’ clinical expertise and an integrated delivery model have driven improvements in safe ty, quality and accessibility while controlling costs. Factors other than pricing should be considered when evaluating mergers, such as savings from value-based care models, capital improvements and hiring trends, the spokesperson said in a statement. A di erent scenario has played out in Illinois. e Rand data shows Advocate Aurora’s Illinois hospitals charged insurers 228% of what it charged Medicare in 2020, when the state average was 253%. at mirrored pricing trends in 2018 and 2019. e Chicago area is a more com petitive market than Milwaukee, said Nathan Ray, who leads the health care merger and acquisition division at consultancy West Mon roe. “ ere’s a little more leeway in Wisconsin because Advocate Auro ra has in certain areas more domi nance and cachet,” he said. Charlotte, N.C., where Atrium is based, has a more concentrated hospital market than the Chicago and Milwaukee markets, according to the Health Care Cost Institute. e relatively less competitive Charlotte market could explain why Atrium’s inpatient and outpatient prices were above state averages, economists said. Atrium charged commercial insurers 299% of what they would’ve charged Medicare for the same inpatient and outpatient services in 2020, when the state av erage was Notably,266%.Atrium’s prices stayed relatively consistent from 2018 to 2020. Atrium did not reply to re quests for comment. e American Hospital Associ ation has criticized Rand’s sample size and data accuracy. While the Rand data controls for variation in labor costs and patient acuity, it does not account for the services o ered at hospitals, investments in new equipment, community ben e t or charity care policies, econo mistsEconomistsnoted. and policy experts at tribute the price increases to Advo cate Aurora’s growing market share. “I do know there is revenue from scale and bargaining power. I also know that running a hospital can be really lucrative, especially if you have a monopoly nearby,” said Barak Richman, a law and busi ness administration professor at DukeUrielUniversity.Pharmacy and Uriel Phar macy Health & Welfare Plan, which led the Wisconsin suit, allege that Advocate Aurora charges more than competitors for routine services like a colonoscopy with a biopsy, which costs $10,700 at Advocate Aurora compared with $4,700 at Froedtert & the Medical College of Wisconsin. e complaint included a range of allegations, from forcing all-ornothing contracts on employers and making employed physicians sign noncompete contracts to re jecting any reference-based pric ingInmodels.itsmotion to dismiss the lawsuit, Advocate Aurora said the “groundless claims are little more than a hodgepodge of stale me dia reports taken out of context and vague assertions based on unattributable sources—spaghetti thrown against the wall with the hope it somehow sticks.” Uriel has until Sept. 27 to respond, accord ing to court lings. Some experts see little connection between 2018’s Advocate-Aurora merger and increased prices. “I do not think Advocate Aurora’s increas es were material or attributable to the merger,” industry consultant Je Goldsmith said. Most health systems are going to charge commercial insurers at least twice as much as Medicare, West Monroe’s Ray said. “ e question is whether charging two times or three times Medicare is egregious. e answer is a very big, ‘it depends,’ ” he said. “Quality and service networks play a role in achieving high contracted rates, as does competition scarcity. It’s not necessarily always because of Whetherconsolidation.”theprice increases are at tributable to the merger, price hikes often trigger regulatory enforce ment. e FTC has challenged three health system mergers—Lifespan and Care New England Health Sys tem; RWJBarnabas Health and St. Peter’s Healthcare System; and HCA Healthcare and Steward Health Care System—this year based primarily on the proposed transactions’ po tential to increase prices and hike premiums and patient copays. e health systems nixed their proposed combinations.

Hospital merger could trigger increased prices Advocate Aurora hospitals in Wis consin have consistently charged commercial insurers higher-thanaverage prices since Advocate Health Care and Aurora Health Care merged in 2018, according to a Modern Healthcare analysis of data from Rand, a not-for-pro t research rm. Economists, researchers and state lawmakers expect similar pricing trends as the health sys tem expands its footprint, although limited data exists on cross-market mergers and the e ect on prices. e Rand data shows a strong indication of Advocate Aurora us ing its market power to increase prices, said Gerard Anderson, a health policy professor at Johns Hopkins University who reviewed Rand’s ndings. “It’s probable that the Atrium merger will give Advocate Aurora more power to raise its prices be cause there are no real economies of scale for most services,” he said. “ e reason why you merge is to gain market power.” e pending transaction is the latest attempt to form a sprawling national hospital chain. Regional hospital systems are targeting other large operators in non-overlapping states, claiming they must grow to mitigate low reimbursement levels, strict regulations and chronic sta ing constraints, among other issues. While the Federal Trade Commis sion typically only challenges hos pital mergers that share common territories, regulators are revamping their guidelines to scrutinize hospi tal transactions more closely as most cities in large metropolitan areas al ready have highly concentrated hos pitalStatemarkets.regulators are also increas ingly“Researchwary. consistently shows mergers and acquisitions do not deliver on hospital executives’ promises, but instead trigger higher costs, reduced access and the same or lower level of care,” North Caro lina Treasurer Dale Folwell said in a statement after the merger was announced. “Consumers of health care, and the taxpayers who pick up the tab for tax-exempt, multibil lion-dollar investment companies disguised as nonpro t hospitals, which are run by multimillionaire executives, ultimately will pay the cost of this ill-advised merger.”

ADVOCATE AURORA from Page 3

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22 AUGUST 15, 2022 • CRAIN’S CHICAGO BUSINESS

Chicago office landlords facing recession hope workers return to downtown in the Chicago area have unloaded nearly as much offce space since the beginning of the pandemic as they did in the wake of the Great Financial Crisis. OVER YET? absorption Lang LaSalle 2009-2010 2020 million -0.98 million -2.68 million -2.86

to presentNET ABSORPTION IN SQUARE FEET -1.27

Companies

But others see an economic slowdown di erently: Smaller bottom lines and a softening job market could shift leverage from employees toward employers, who might start pushing workers harder to return to o ces more frequently to boost productivi ty. More people showing up to o ces could, in turn, slow the trend of space-shedding that has jacked up o ce vacancy. e competing narratives are starting to play out across Chi cago after consecutive quarters of negative economic growth, with the immediate and longterm stability of the local o ce market at stake. Hard times for companies could worsen the pain for landlords and hamper downtown foot tra c needed to support hungry retailers and oth er businesses. But if a recession proves to have little impact on of ce demand, it could signal a sil ver lining to the work-from-home trend: that workplace exibility eases the impact of economic swings on the o ce market. “I think we’re likely to see a lit tle more control over getting peo ple back in the o ce once there aren’t two jobs for every worker out there,” says Steven Joseph, president & CEO of tenant repre sentation rm CBIZ Gibraltar. “I don’t think that’s going to neces sarily drive (o ce) demand, but it may slow some of the bleeding.”

Crain’s senior reporter John Pletz contributed. from Page 1

O ce developers say they’ve never seen a recession boost of ce demand, but an economic slowdown could remind com panies and employees why they have an o ce in the rst place. Steven Galanis, CEO of vid eo shoutout company Cameo, abandoned his company’s 40,000-square-foot o ce early in the pandemic and said he didn’t plan on leasing another one, cit ing his company’s productivity at the time and the bene ts of be ing able to hire talent no matter where they live. But sales productivity fell late last year, and the compa ny in May laid o one-fourth of its sta , reducing headcount to about 350. In an e ort to jumpstart business, the company last month moved into a new 10,000-square-foot o ce at 620 N. LaSalle Drive and now is en couraging its Chicago sales team to work in the o ce at least three days per week. “A year ago, you couldn’t be the company that said, ‘I want people back in the o ce’ when everyone was saying ‘we’re going to be re mote forever.’ I think the pendu lum is swinging back. A lot of tech companies saw productivity hits last year like we did,” Galanis says. Not all companies can call workers back to the o ce so eas ily, however. Human resources software company Jellyvision went from almost all of its em ployees working out of its Near North Side o ce to 30% of its employees now living outside of the Chicago area. “If we said, ‘Come back to the o ce,’ we’d lose a third of our business,” Jellyvision CEO Amanda Lannert says. With less than a dozen people coming into her 200-plus-seat o ce most days, she has no plans to make a new commitment to a large traditional o ce space, even if a recession sets in. “Work is clearly being done e ectively at home.”

Recessions usually depress of ce demand, as companies cut back on real estate to conserve cash. During the staggeringly steep recession that followed the 2008 nancial crisis, the amount of leased o ce space in the Chicago dropped by 3.9 mil lion square feet in 2009 and 2010 combined, according to data from real estate services rms CBRE and Jones Lang LaSalle. But the current downturn fol lows 2½ years of rampant space cutbacks from remote work. e Chicago area has seen leased o ce space fall by 3.8 million square feet since the beginning of 2020, suggesting to some that much of the reduction that would normally happen in a recession already“Peoplehas.scaled back like it was a recession before an actual re cession,” says Adam Showalter, managing director in Chicago for o ce leasing agency Stream Re alty Partners. Demand has even grown recently: Net absorption, which measures the change in the amount of leased and oc cupied space compared with the prior period, was positive downtown during each of the past three quarters, according to CBRE. In the suburbs, it was pos itive during the second quarter for the rst time since 2019, JLL dataStill,shows.many companies haven’t had a lease expiration or option to renegotiate their o ce deal since the start of the pandemic, meaning the impact of the remote work trend could linger for years. Among the recent additions to the list of tenants in the market for smaller o ces, UnitedHealth Group subsidiary Optum is va cating a 300,000-square-foot of ce building in Schaumburg and is hunting for just 50,000 square feet. An Optum spokesman did not respond to a request for comment.

OFFICES

 IS THE WORST

Note: Net

is the change in the amount of leased and occupied space compared with the prior Sources:period. CBRE, Jones

million SDowntownuburbs AERIALSCAPES.COM

DECISIONS Companies evaluating their workspace today are doing so against an uglier economic back drop than those that have had lease expirations over the past couple years, but it’s too soon to say how it will in uence de cision-making, says Savills Vice Chairman Robert Sevim, who ne gotiates leases for o ce tenants. “You may have this weird par adigm of people (coming into o ces more) to demonstrate their value, and companies say ing they need to cut space” to re duce expenses, Sevim says. “It’s going to be an interesting movie to watch, and I think we’re going to see it over the next 12 months.”

postage paid at Chicago, Ill Postmaster: Send address changes to Crain’s Chicago Business, PO Box 433282, Palm Coast, FL 32143-9688 Four weeks’ notice required for change of address. © Entire contents copyright 2022 by Crain Communications Inc. All rights reserved.

PHOTOSCOMPASS BY

Cottage built by ‘world’s richest woman’ sells Edith Rockefeller McCormick, who endowed the Brook eld Zoo and supported James Joyce while he wrote “Ulysses,” partnered with a pair of developers to build many Chicago-area houses, including this one I ACotswold-style cottage built in 1927 in Highland Park as part of the ambitious plans of Edith Rockefeller McCormick, known at the time as the world’s richest woman, sold quickly. e house, whose cedar shingle roof suggests an old-time thatched roof and whose interior is trimmed with wood, stone and tile nishes intact from the 1920s, sold for $750,000, the full asking price. Sellers Lauren Plenner and Tony Simone, who had owned the four-bedroom house on Hill Road since 1996, put it on the market June 23, represented by Janet Borden of Compass. e house went under contract six days later, and the transaction closed Aug. 1. With a partial log exterior, a tall stone chimney and a hefty wood front door, the house “has a very lodge-y, in-the-woods kind of a feel ing,” Plenner said. It’s in contrast to the more conventional tri-levels, ranch houses and colonials in the neighborhood. e buyers “were absolutely drawn to the character and the story of the house,” said Eric Booth, the @properties Christie’s International Real Estate agent who represented them. e buyers are not yet iden ti ed in public records. “ ey really love the way the house is now,” Booth said, “and they plan to keep it the way it is.”

HOW TO CONTACT CRAIN’S CHICAGO BUSINESS

ere are only two other houses in the 200-acre neighborhood that were built in the 1920s by Edwin Krenn and Edward Dato, a pair of developers whose nancial backing came from McCormick. Born into the Rockefeller oil fortune and marrying into Chicago’s McCormick farm harvester fortune, she was believed to be the world’s richest woman, Time magazine reported in 1932. McCormick was an in uential woman for her era, according to the 2020 biography, “Edith: e Rogue Rockefeller McCormick,” by An drea Friederici Ross. Not only did she endow the Brook eld Zoo, but as Friederici Ross puts it on her website, “she worked with Carl Jung. She supported James Joyce as he wrote ‘Ulysses,’ she ate o Napo leon’s plates and wore Catherine the Great’s pearls (and) she helped curb scarlet fever.” DENNIS RODKIN

CRAIN’S CHICAGO BUSINESS • A UGUS T 15, 2022 23 EDITORIAL 312-649-5200 CUSTOMER SERVICE 877-812-1590 ADVERTISING 312-649-5492 CLASSIFIED 312-659-0076 REPRINTS 212-210-0707 editor@chicagobusiness.com Vol. 45, No. 32 – Crain’s Chicago Business (ISSN 0149-6956) is published weekly, except for the rst week of July and the last week of December, at 130 E Randolph St , Suite 3200, Chicago, IL 60601 $3 50 a copy, $169 a year Outside the United States, add $50 a year for surface mail Periodicals

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