Crain's Chicago Business - 9/13/21

INSURANCE: Allstate wants to hike auto rates again. Will regulators allow it? PAGE 3

JOE CAHILL: Boeing should broaden its talent pool. PAGE 4

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Why ivermectin is a lose-lose for hospitals With COVID patients taking pleas for the dewormer to court, hospitals are forced to make a no-win choice

NEWSCOM

BY STEPHANIE GOLDBERG

Architect Helmut Jahn stands in front of a photo of O’Hare International Airport’s Terminal 1 in 2012.

What’s the future of Jahn without Helmut?

It’s the sort of metamorphosis other ‘starchitect’ firms have managed after the death of a marquee name, but this one faces special challenges. BY ALBY GALLUN

in business. But it could be especially IN AUGUST 2017, Helmut Jahn’s protetough for Jahn, which now lacks a charge and successor, Francisco Gonzalez ismatic, high-profile designer to carry Pulido, walked out the door, leaving to on Helmut Jahn’s legacy. start his own architecture firm. His deThe late architect groomed Gonzaparture, barely noticed then, carries lez Pulido for that role, elevating him greater significance today, nearly five to president of the firm in 2012. But the months after Jahn’s tragic death. two couldn’t reach an agreement on the Jahn’s Chicago architecture practice, simply named Jahn, faces an uncertain Francisco Gonzalez Pulido transition, and they broke up in 2017— amicably, according to Gonzalez Pulido, future following the loss of its 81-yearold leader to a bike accident in May. It’s a difficult now principal of Chicago-based FGP Atelier. transition for any firm that relies heavily on one person’s creative genius and star power to bring See JAHN on Page 22

Increasing pressure from COVID-19 patients and their families seeking unapproved treatments puts hospitals in a legal quandary.

Ivermectin has long been used to kill parasites in animals and humans. But despite being touted as a coronavirus cure by conservative media personalities, the anti-parasitic hasn’t proven to be safe or effective for COVID patients. Even so, some are demanding that hospitals administer the controversial drug—and they’re

taking their demands to court.

Hospitals could be forced to choose between defying a court order and administering an inappropriate medication, potentially exposing themselves to liability if patients have adverse reactions.

Some organizations will be compelled to find workarounds, like west suburban Elmhurst Hospital, which granted an unaffiliated physician emergency privileges to administer ivermectin on its premises. But no decision is without risk.

See IVERMECTIN on Page 14

New report details self-dealing at TRS

Inspector general finds teachers pension brass stood by as a former executive steered work to his company

BY A.D. QUIG A state investigative report on the Illinois Teachers’ Retirement System reveals conflicts of interest involving a former high-ranking official of the state’s largest employee pension plan, which has seen a string of senior executives depart in the past 16 months.

The report released Aug. 19 by the Office of the Executive Inspector General found that Jay Singh maintained ties to a TRS subcontractor while he served as chief information officer of the fund.

The continuing relationship with Singh3, a consulting firm that collected nearly $900,000 for its work on a TRS technology project, violated Jay Singh the fund’s conflict of interest policy, according to the report.

The OEIG also found that TRS executives took no steps to verify Singh’s assertion that he See TRS on Page 18

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2 September 13, 2021 • CRAIN’S CHICAGO BUSINESS

GREG HINZ ON POLITICS

Flummoxed by our property tax system?

S

financing, or TIF, that oughta-be-four-letter word that many Chicagoans have come to despise.

While the city has lots of TIF districts, the suburbs have dozens of their own.

And of the big tax hike in the six towns I asked about, TIFs soaked up half or more of the loot in three of the towns and a good chunk of it in the fourth. The money is going not to the village or the local school board, but to the TIF district for economic development incentives or whatever.

The bad news is that, since villages and school boards generally raised their overall tax extension 2% to 4%, all the other taxpayers in town have to make up what those in the TIF aren’t paying.

Ouch! The good news is that big TIF hikes generally occur only every third year, the year the pertinent section of the county is reassessed. Since the south and west suburbs were reassessed in the year Pappas’ report covered, Bellwood, et al., appeared to be outliers. But they almost certainly won’t be outliers in the next two years, when there will be no reassessment and TIF taxes will remain about constant.

There’s a different explanation for the big tax in Dixmoor IT CAN DRIVE PEOPLE WITH EVEN hikes and Robbins. AcADVANCED DEGREES INTO A RAGE. cording to Pappas, it’s because the value of properties there was out, looking at six towns in raised more in the reassessparticular: Bellwood, Cicero, ment than land and buildings Dixmoor, Ford Heights, Robin adjacent towns that share bins and University Park. So I the same school district. That asked the Pappas folks if they shifted the tax load. could break down the tax bill County Assessor Fritz by taxing authority. In other Kaegi’s office says he tried to words, of the additional do something about that, but $6.756 million billed collecthe Cook County Board of tively to property owners in Review changed his proBellwood, how much went to posed assessments, hitting the schools, the village and homeowners harder. The so on? If I knew that, I could Board of Review points the go ask those government finger right back, saying units why. nothing it did changed the Pappas’ office replied size of the total tax bill from that it doesn’t have all that all property owners collecdata, and referred me to the tively. Both say they’re just official who actually prepares doing their job in fairly valuthe extensions, County Clerk ing property.

Karen Yarbrough. YarMeanwhile, Pappas says brough’s office doesn’t colher report was just “a snaplect the data that way, either, shot in time” and that next but provided me a rough year’s report should resolve workaround. The problem any misimpression caused by was that Yarbrough’s annual the triennial reassessment. tax-hike figures for the six Got all that? As Civic Fedtowns came in a lot less than eration President Laurence Pappas’ did.

Msall summarizes, “We Why the difference? After have a complicated, convoa good two weeks going back luted property tax monster and forth, most of the answer here.” Amen. turns out to be tax-increment ir Isaac Newton formulated the laws of gravity and motion. Watson and Crick discovered the DNA double helix that is the blueprint of life. Albert Einstein propounded the theory of relativity.

Child’s play. If you want a subject that’s really tough to understand, something that drives people with even the most advanced degree into a screaming rage, take a look at Cook County’s near-indecipherable property tax system.

Here’s a story that makes the point.

A few weeks ago, County Treasurer Maria Pappas released the latest in a series of very solid reports on who pays what under our tax system. In other words, who really gets dinged. The news, as reported by outlets including Crain’s and the Chicago Tribune, was that the usual list of relatively impoverished towns in the south and west suburbs were once again getting whacked, with the total tax bill—or extension—up 10%, 20%, even 30% in towns where people can’t afford to pay more even in non-COVID times.

Why are officials asking for more taxes in such areas? I decided to try to find

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Why you’re seeing more shopsin-shops, like Ulta inside Target It’s an updated twist on an old retail concept, and retail experts say COVID has accelerated the trend

BY ADRIANNE PASQUARELLI When Ulta Beauty opened its small shops within 100 Target locations last month, many shoppers voiced approval. Social media commenters applauded the move, many calling it the “best thing” or “dangerous” for bank accounts. But Twitter user ­Ogbenyealu’s analysis was perhaps the most telling: “Yesterday I went into a Target that had the new Ulta concept store in it. Today I see that Disney is closing its standalone stores and opening smaller boutiques inside Target. So basically (Target) is about to become a whole ass mall. Like we didn’t spend enough money there already.”

The modern mall is here. New shop-in-shops concepts, including Target’s Ulta and Disney spaces and a recent partnership bringing Sephora into Kohl’s, are creating an updated twist on an old retail concept. In the past, such mini shops were more similar to a department store, with one larger brand offering a curated assortment of a smaller label. Now, large retailers are recognizing potential shopper synergies and banding together in a mutually beneficial partnership. Many, like Ulta and Target, work together on marketing and visuals that remain true to each retailer’s branding.

“Historically I think companies were wary of promoting their competitors, but we’re in an era of trying new things, reinventing business models and not being as threatened

An Ulta Beauty shop inside a Target store by change, especially when a similar concept has already happened with no adverse consequences,” says Sucharita Kodali, VP and principal analyst at Forrester, citing the multiyear success of Sephora within former retail partner JC Penney.

MACY'S TOYS WITH IDEA

That era of trying new things extends to Macy’s, the 163-year-old heritage department store. The company recently announced plans to bring small Toys R Us shops into 400 of its stores beginning next year.

Target’s Disney shops, which debuted in 2019, will triple in count to 160 by the end of this year—a move that comes as Disney shuts down stand-alone stores in high-profile locations such as along Chicago’s Magnificent Mile. Kohl’s introduced Sephora to shoppers at 70 of its 1,160 locations in August, with the eventual goal of hosting 850 sites; similarly, Target plans to extend its Ulta store

count beyond the 100 initial locations to 800.

“Feedback continues to be overwhelmingly positive,” says Shelley Haus, chief marketing officer at Bolingbrook-based Ulta, about the first two weeks of the partnership.

Retail experts say COVID-19 has accelerated the shop-in-shop trend. Consumers have been reluctant to shop in-person as frequently as they did before the coronavirus, and putting new brands within Target—which as an essential retailer has remained open and seen business boom throughout the pandemic—could attract more buyers.

“People are minimizing the stores they want to go to because of COVID or efficiency—this notion of onestop shopping is becoming a bigger deal,” says Barbara Kahn, a professor of marketing at the University of Pennsylvania’s Wharton School.

See SHOPS on Page 7

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How much will this energy bill cost you?

Pritzker says $4 to $5 a month. AARP says $15.

Both are probably wrong.

Auto insurers collide with a surprise foe in rate-hike quest Texas and Connecticut have rejected price hikes by Progressive and Geico. That should cast a chill over the C-suite of rival Allstate. Here’s why. BY STEVE DANIELS AUTO INSURERS BOOKED extraordinarily high profits last year as the pandemic kept cars off the roads, but now that driving is picking up again many of the largest insurers want to hike rates.

Some state insurance regulators are saying not so fast.

Insurance regulators in Texas and Connecticut recently rejected rate increases by Progressive and Geico, the fastest-growing auto insurers in the U.S.

The denials are a warning sign to rivals like Northbrook-based Allstate, which also plans to hike rates in certain states in response to higher claims costs but has been slower to move than Progressive.

The industry last year benefited greatly from the dramatic reduction in driving and accidents.

But traffic is coming back, and companies say the See DRIVING on Page 22

GETTY IMAGES

BY STEVE DANIELS

“THE LAST 12 MONTHS ARE NOT REPRESENTATIVE OF WHAT ANY OF US EXPECT IN THE NEXT 24.”

Joseph Lacher, CEO, Kemper

Sprout Social blossoms as a public company Why investors love this money-losing software maker

BY JOHN PLETZ Sprout Social is off to a better start than any other Chicago startup that has gone public in the past decade.

At just over $131 per share recently, Sprout shares were up 672% from their initial public offering price of $17 on Dec. 12, 2019. The second-best local performer was gene-therapy company AveXis, which rose 406% during a similar time frame before it was bought by drug giant Novartis.

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Founded 11 years ago by CEO Justyn Howard, Sprout makes software used by companies to manage social media accounts.

Fueled by strong results and investor optimism about the commercial potential of social media, Sprout’s stock is up 188% this year, the best performance of any Illinois stock, according to Bloomberg.

For now, Sprout seems to have solved a problem that has vexed other Chicago companies: how to deliver the growth that investors crave after going public.

From Groupon to GoHealth, more than one-third of the 16 local IPOs since 2011 that weren’t private-equity spinoffs or had market values under $500 million struggled in the first couple of years out of the gate.

Sprout also is getting the same rich valuations as West Coast software peers, something that has often eluded Chicago companies.

“The pandemic has really moved social up the priority stack for companies,” says Arjun Bhatia, an analyst at William Blair. “Sprout used to add 500 to 600 customers a quarter. Now it’s

more like 1,000 to 1,500 a quarter.”

Sprout’s revenue rose 41% in the second quarter to nearly $45 million, up from 27% growth in the same period a year ago. The company projects full-year revenue will grow by 37% to $182 million.

The company isn’t profitable, though its net loss narrowed by more than a third to $5.4 million in the second quarter. It’s now generating cash—about $4 million in the second quarter—rather than burning it.

“Profitability isn’t the No. 1 See SPROUT on Page 15

AARP Illinois estimates the energy bill state lawmakers are on the brink of finally passing will cost the average household $15 more a month on their electric bill. Gov. J.B. Pritzker’s administration says it’s between $4 and $5.

Who’s right?

A Crain’s analysis shows the reality is between the two, although people can have legitimate differences over what increases are due to the bill and what might have happened without it.

But there’s little doubt this ambitious initiative, which the state Senate is expected Monday to clear for Pritzker’s signature, will be the costliest to consumers of the many energy laws Springfield has enacted over the last 25 years.

Unlike some past efforts, which made utilities and their holding companies wealthier but managed at the same time to keep electric bill increases in the low single digits, this one will result in noticeably higher utility costs for average consumers.

By 2024, after expiration of Commonwealth Edison’s formula-rate system, the average household in northern Illinois will pay about $7.60 more per month for electricity just from the bill’s effects—a 9% increase over today, according to Crain’s analysis.

The typical single-family household (average residential usage in ComEd’s territory is skewed lower than other places due to the large number of apartments) would pay See ENERGY on Page 14

 SPROUT STOCK SOARS Illinois’ top-performing stock this year, Sprout Social has outpaced every other local startup that has gone public since 2011.

SPROUT SOCIAL STOCK PRICE $140 120

$131.27

Sept. 7, 2021

100 80 60 40 20 0

Jan. Apr. July Oct. Jan. Apr. July 2021 2020

Source: Yahoo Finance

9/10/21 4:06 PM

4 September 13, 2021 • CRAIN’S CHICAGO BUSINESS

ON BUSINESS

Time for Boeing to shop elsewhere for top talent

A

and the Starliner space capsule s it works to rebuild its failed its latest test with NASA. reputation after two fatal Some blame a culture that crashes of 737 Max jets, overemphasized financial results Boeing needs to demonstrate at the expense of engineering, a commitment to quality and manufacturing and quality. safety above short-term profits.

Investigations following the Here’s a way Boeing can show Max disasters brought to light it’s serious about that culturtroubling signs of cynicism and al change: Look beyond the go-along-to-get-along thinking in General Electric diaspora for the ranks. Some Boeing employhigh-level talent. ees spoke of manipulating safety In recent weeks, the Chicago-­ regulators, while others hesitated based planemaker has handed to raise quality concerns that two top posts to former GE execs. might imperil production timetaBoeing named David Joyce, onebles or financial targets. time head of GE’s aircraft engine In the end, quality lapses begat division, to its board Aug. 31. financial calamity. Costs related Another GE aviation alum, Brian to the Max crashes and subseWest, became Boeing’s chief quent grounding of the jet for 20 financial officer Aug. 27. months are expected to exceed Joyce and West join Boeing $20 billion. Boeing stock is down CEO David Calhoun, himself a by nearly half since the second GE veteran, as were two of his crash in March 2019. three most recent predecessors.

As Boeing faltered financially, The cross-pollination brought parallels to another once-vauntabout change at Boeing, which ed industrial giant emerged. GE was summarized succinctly by wowed Wall Street for decades, GE transplant and former Boeuntil it became clear that all those ing CEO Harry Stonecipher. quarterly earnings beats masked “When people say I changed serious underlying problems. the culture of Boeing, that Yet Boeing keeps handing big was the intent, so it’s run like jobs to former GE execs. There a business rather than a great are practical reasons for this. GE, which HERE’S A WAY IT CAN SHOW IT’S makes jet engines, is SERIOUS ABOUT CULTURAL CHANGE. one of the few large companies where executives can learn the comengineering firm,” he said in mercial aviation business.

2004, shortly before stepping Calhoun, Joyce and West down amid disclosures of an doubtless bring important skills inappropriate relationship with and knowledge to Boeing’s a subordinate. board and executive suite. CalOf course, every company houn and West also spent years should be run like a business. In at other companies after leaving the years that followed, Boeing GE. And it’s true that Boeing fulfilled that obligation and has hired far more directors and then some. Expanding profit senior executives from other margins, copious cash flows and companies. generous share buybacks made Still, newly hired GE veterans Boeing a Wall Street favorite. occupy three of the most influBetween 2005 and 2018, Boeing ential positions at Boeing. That’s shares soared 523%, nearly five plenty. times the rise in the S&P 500.

Looking elsewhere for top But Boeing struggled to meet leaders would help Boeing meet another important obligation: its most important challenge: making airplanes well. Trouble driving fundamental change started in the early 2000s with through all levels of the compathe disastrous decision to outny. Boeing also needs to consource most production of the vince aviation regulators and new 787 Dreamliner, a blunder airlines that quality and safety that spawned numerous manufacturing snafus and delayed the really are its top priorities.

Those are tough jobs for any jet’s debut by three years. The big company, especially one culmination came when flawed with as many internal and ex737 Max software caused two ternal constituencies as Boeing crashes that killed 346 people in has. Success requires not only 2018 and 2019. rhetoric from the top but also “Boeing has had problems consistent actions. with the last four commercial Hiring decisions show a airplane programs,” notes company’s true priorities and industry analyst Scott Hamilton intentions. Boeing’s reliance on at Leeham.

GE expats only raises doubts Mishaps continue to plague about its oft-stated vows to priBoeing. New quality issues oritize safety and quality over all have forced the company to other goals. Tapping other talent stop shipping 787s, the launch pools would put meaningful of a new 777X jumbo jet has action behind the promises. been delayed by three years,

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Bringing equity to the tech sector

After George Floyd’s murder, a group of tech execs sought to address inequities in their industry. That led to Fifth Star Funds. Co-founder Samir Mirza explains how it works.

BY EMILY DRAKE AND TODD CONNOR Chicago Comes Back is a weekly series on ChicagoBusiness.com providing leadership insights to help your business move forward, written by leadership consultants Emily Drake and Todd Connor.

Drake and Connor facilitate Crain’s Leadership Academy. Drake is a licensed therapist, owner of the Collective Academy and a leadership coach. Connor is the founder of Bunker Labs and the Collective Academy and is also a leadership consultant.

Check out previous installments at ChicagoBusiness.com/comesback.

As we focus on an equitable comeback for Chicago, we turn this week to Samir Mirza, co-founder and executive director of Fifth Star Funds, a venture philanthropy fund enabling the city of Chicago to be early investors—the “friends and family” capital—of Black tech founders.

EMILY DRAKE: While I’m immersed in learning in the diversity, equity and inclusion space, tech and venture philanthropy funds are areas where I don’t often find myself drawn or exploring. Something tells me you’ll change that.

Can you share why you started Fifth Star Funds? It sounds like it’s part of a personal mission of yours.

SAMIR MIRZA: It is. Chicago is home for me, and after spending time in leadership at Twitter and heading engineering teams, I saw room for me to use my talent to help others from underserved communities get engaged and successful in tech. With Fifth Star’s model, anyone can donate in any amount to the fund as a tax-deductible donation. We use these funds to invest in early-stage Black tech founders, and 100% of all returns from our investments are reinvested into the fund.

I didn’t do this alone, of course.

Eight other founders feel the same way I do, and we rallied together in the aftermath of the tragic murder of George Floyd. We had difficult conversations about our varying levels of privilege and reflecting on what we can do to battle the racial inequities that exist in our world of tech. We believe that having access to capital from affluent friends and family should not be a prerequisite to start a business.

TODD CONNOR: That’s an inspiring example of leading from where you are to contribute to changing systems that no longer work. And I know you have experience with leading through transitions. You built and scaled a technology company, sold it to Twitter and made that transition from a founder to working in a larger tech environment. What did you observe culturally in that process?

SM: I really value my time at Twitter because it taught me how to be a stronger product engineering leader. I was also able to witness the product being utilized by a diverse global user base as the #blacklives-

Samir Mirza

TECHCHICAGO VIA YOUTUBE

JOE CAHILL

CHICAGO COMES BACK

matter movement was born during my time there. But the diversity of the user base was not represented in the makeup of Twitter’s leadership, and I often thought about how much better the product could be if it was.

ED: Exposure is everything, for me, too. The more we know and experience, our wish is always that leaders can change and evolve as they know more. You’ve reflected on privilege—a “friends and family” round, for example, is in and of itself an act of privilege. How did you come into your own consciousness around privilege?

SM: When my startup TapCommerce was acquired by Twitter, I initially felt that I was deserving of this success. But upon deeper reflection, it was easy to see that a tiny portion of it was my hard work and it was mostly luck, timing and access to education, capital and networks. Also, being an Indian American, I reflected on the privileges I had growing up, such as winning favorable treatment from teachers who assumed I was smart because of the faulty model minority myth. I also had the safety net of my family to fall back on, so the risk of starting a business was minimal and I had ample time to have business failures and pivots before hitting on something that worked. Only by having a shot can you become a better entrepreneur, and we want to give Black founders that shot.

TC: Let’s talk about that. I think it would be really inspiring to hear what this is looking like in action, and our hope is for leaders who are looking for a “home” where they can make an impact that’s measurable might think about reaching

out to Fifth Star Funds. When you reflect on underrepresented people in tech, is there an investment you’re particularly proud of?

SM: I’d love to introduce more people to our model, and learn from them, too. Dismantling systems is a collaborative effort, so I’m excited to connect with more people in more industries. Fifth Star Fund’s first investment is with Christine Izuakor of Cyber Pop-up, a platform to help businesses hire on-demand cybersecurity talent.

When we met her, she had a working product, paying customers but was still running into obstacles raising capital from investors. Fifth Star was her first outside investment check, and she currently has a ton of momentum and traction.

ED: Amazing. Any final words to laypeople, investors and VCs about what we should collectively be doing differently?

SM: When you meet with a Black founder to invest in, check your biases at the door. Be objective in your evaluation of founders and don’t move the goalposts. Don’t pattern match as an investor, because this will keep you investing in the same kind of entrepreneur. Black founders have different experiences and challenges in building their businesses and thus have different strengths that are not taken into consideration by traditional investors. We believe funding entrepreneurs from different backgrounds will unlock high financial returns, since they are often tackling market opportunities that have traditionally been overlooked. We’re so excited to see the unique products they will build as the community comes together to support them.

9/10/21 2:22 PM

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space over the next few years.

Companies trying to shed office space after adjusting to employees working from home has pushed tenants to vacate far more office space than they have leased and occupied over the past 18 months. Tenants collectively left behind more space during the second quarter than during any full year on record, according to research from brokerage CBRE. ShopperTrak, which provides tools that retailers use to monitor foot traffic and shopping patterns, was acquired for $175 million in early 2016 by Tyco International, which subsequently merged with Cork, Ireland-based Johnson Controls. ShopperTrak has more than 300 employees locally and is now a brand within Johnson Controls’ Sensormatic Solutions analytics division.

ShopperTrak’s pending departure from Willis Tower will open up vacancy in a building that is now close to 95% leased, according to Telos Group. Willis

ShopperTrak is joining the herd of businesses moving their offices to the redeveloped Old Post Office, signing a lease for about half the space it occupies today in the Willis Tower nearby.

The retail analytics company has inked a deal for 28,217 square feet in the mammoth property at 433 W. Van Buren St., according to an announcement from leasing brokerage Telos Group. Terms of the lease were not disclosed, and a spokeswoman for ShopperTrak’s parent company, Johnson Controls, couldn’t be reached.

The space is almost 50% smaller than the roughly 52,000 square feet ShopperTrak has leased since 2012 on the 41st floor at Willis Tower.

The deal on the fourth and fifth floors of the Old Post Office adds to a long list of leasing victories for New York-based 601W, which has spent the past several years transforming the property into a modern office building and landing high-profile DEVELOPER 601W HAS SPENT tenants including Uber, Walgreens Boots Alliance, SEVERAL YEARS TRANSFORMING Cisco Systems, PepsiCo and Ferrara Candy. With THE OLD POST OFFICE INTO A the recent additions of ShopperTrak and Chica- MODERN OFFICE BUILDING AND go-based tech company LANDING HIGH-PROFILE TENANTS. CoinFlip, the building is now almost 90% leased, accord- Tower owner Blackstone Group is mostly done with a $700 miling to Telos Group.

For other downtown office lion-plus renovation of the city’s landlords, ShopperTrak’s move is tallest building that included a addition a mixed blessing. The good news 300,000-square-foot is that the company is making around its lower floors.

But the 110-story tower isn’t a new commitment to physical office space amid a COVID-19 immune from tenant retrenchpandemic that has gutted de- ment. Its largest occupant, Unitmand for workspace and pushed ed Airlines, disclosed earlier this vacancy to an all-time high. But year that it has executed an opShopperTrak is also dramatically tion to reduce its footprint in the downsizing to adjust to the rise building by 150,000 square feet, of remote work and the expecta- or nearly 20% of its space.

ShopperTrak is also not the tion that it won’t need as large an office footprint in the future, ac- first Willis Tower tenant to decording to a source familiar with fect for the Old Post Office. The the company’s plans. That’s a ma- Chicago Metropolitan Agency for jor headwind facing office land- Planning last year made the same lords as tenants approach lease move, ending a tenure at Willis expirations and options to reduce Tower that dated back to 2006.

9/10/21 2:21 PM

CRAIN’S CHICAGO BUSINESS • September 13, 2021 7

An updated twist on an old retail concept SHOPS from Page 2 The deals also give both participating brands access to new customers. A teen might accompany a parent on a shopping trip to a Kohl’s or Target, for example, just to visit the new beauty shops, suggests Beth Ann Kaminkow, global CEO at VMLY&R Commerce.

“The Gen Z or Next Gen oftentimes governs the choices that end up in the cart,” she says. “By having product that appeals to them, it means they’ll be in the store longer, they’ll be more willing to go on the trip and it will be a successful trip all around.”

Marketing such sites is a delicate balance of collaboration, much of it pre-determined by contracts.

Many shop-in-shops are simple real estate transactions in which a brand rents out a space from the larger store and is able to operate and brand it as they want. But some deals go deeper and include revenue-sharing arrangements such as the smaller store paying its host a percentage of sales. Marketing arrangements, including brand identity for the smaller shop, are also included in the contract stage.

COLLABORATION

At Target, each shop-in-shop is unique, according to a spokesman, who notes a “collaborative approach with all of them when it comes to branding and marketing.”

The mini Ulta stores are staffed by Target employees who were trained

by Ulta and also have enhanced lighting.

“Every aspect of the store experience was thoughtfully designed to celebrate this perfect pairing, including the unmistakable Ulta Beauty orange canopies and bold, vivid graphics beautifully woven into the existing Target store,” says Haus, noting that the Ulta and Target teams are working “in lock step” on marketing.

Kohl’s Sephora endeavor is similar. The retailers have collaborated on pop-up activations, social sweepstakes, influencer campaigns and prioritizing Sephora at Kohl’s messaging across channels, according to Greg Revelle, chief marketing officer at Kohl’s.

“These are complete Sephora shops in our stores, creating a fully branded experience for our customers,” says Revelle, adding that the 2,500-square-foot shops have specific fixtures and lighting—like a stand-alone Sephora.

At a time when all marketers are looking to strengthen consumer connections, the shop-in-shop concept gives brands more control over the customer experience than they would have if they just stocked products on shelves. The brand within the larger brand has the advantage of controlling its own logistics and branding.

“As we’re moving to this omnichannel world and the complexity of managing this 360-degree, 24/7 customer experience, it makes sense the store and brand wants to control that as much as possible,” says Kahn.

In addition, since most retailers now have their own media networks, marketing new shops is eas-

P007_CCB_20210913.indd 7

ier to do on existing channels like newsletters, email notifications and websites, according to Kaminkow.

Of course, retailers must also do their homework. A marketer like Sephora or Ulta would want to make sure a new shop-in-shop is not too stand-alone close to an existing ­ store, which could risk ­cannibalizing sales. In addition, brands must share consumer data in their relationship so that the mini store knows what products to stock for certain geographies and communities, experts say.

The stock is smaller and more curated, so brands need to make sure they are not wasting valuable shelf space with the wrong items.

Shop-in-shops can also boost loyalty programs. At Target, the Target Circle loyalty program is linked to Ulta’s Ultamate Rewards membership, so shoppers are able to earn points for both programs. The Sephora shop at Kohl’s follows a similar format with Kohl’s Rewards and Sephora’s Beauty Insider points.

Such offerings will be attractive to consumers looking for promotions and freebies, but is also valuable for marketers by providing more first-party data and customer access, experts say.

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REAL ESTATE AUCTIONS

OCTOBER 14, 2021 • ILLINOIS & MICHIGAN ROCKFORD, IL

MORTON GROVE, IL

ALL 6 OFFERINGS BELOW PREVIOUSLY PRICED IN BULK OVER $14,000,000 AND NOW HAVE SUGGESTED OPENING BIDS AS LOW AS $125,000

DEVELOPMENT OPPORTUNITY

RETAIL, RESTAURANT AND POSSIBLE SENIOR LIVING CHERRYVALE MALL OUTLOTS (Adjacent to Macy’s, Barnes & Noble, Menards, Walgreens, Schnuck’s, Burger King, Arby’s) The CherryVale Mall is the largest shopping mall in Northern Illinois outside of suburban Chicago. 29.22 Acres (2 parcels sold in bulk zoned commercial community) Previously Priced Over: $4,450,000 • Suggested Opening Bid: $1,100,000

LAND JUST SOUTH OF CHERRYVALE MALL & SCHNUCK’S GROCERY

6037 N. Lincoln • 1.5-1.6 Acres with plans for single-family and town home development.

Previously Valued To: $1,850,000 Suggested Opening Bid: $850,000

COLOMA, MICHIGAN

(SOUTHWEST MICHIGAN) 3 SEPARATE AUCTIONS

3.02 Acres (3 parcels sold in bulk zoned commercial general) Previously Priced To: $525,000 • Suggested Opening Bid: $125,000

55 FT. 2-SIDED BILLBOARD WITH MICHIGAN PERMIT

GUILFORD SQUARE OFFICE PARK

On I-94 near Exit 39. Situated on 9 Acres.

Suggested Opening Bid: $250,000

7.47 Acres near SEC Mulford and Guilford Rds. (3 parcels sold in bulk) Previously Valued Over: $1,000,000 • Suggested Opening Bid: $250,000

OFFICE/RETAIL PARCELS At Newburg and Bell School Rds. with I-90 frontage. 12.79 Acres (4 parcels sold in bulk) • Utilities in place Previously Valued To: $2,785,000 • SuggestedOpening Bid: $675,000

OFFICE/RETAIL/MULTI-FAMILY PARCELS At Newburg and Bell School Rds. with I-90 frontage. 46.72 Acres (3 parcels sold in bulk) Previously Valued Over: $3,000,000 • Suggested Opening Bid: $750,000

SINGLE-FAMILY/DUPLEX/RESIDENTIAL/ COMMERCIAL PARCELS Near I-90 & East State St./Guilford and Shiloh Roads 25.84 Acres Adjacent and within the Bello Reserve Residential Community Previously Valued To: $2,150,000 • Suggested Opening Bid: $525,000

40 ACRE PARCEL Zoned Agricultural with older home and barn at 2774 Park Road.

Suggested Opening Bid: $325,000

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Previously Valued To: $3,200,000 Suggested Opening Bid: $450,000

In conjunction with C BRE BROKER PARTICIPATION INVITED

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FOR INFORMATION CONTACT

Rick Levin & Associates, Inc. | since 1991 312.440.2000 | www.ricklevin.com 9/10/21 2:45 PM

8 September 13, 2021 • CRAIN’S CHICAGO BUSINESS

Landlord profits from Van Gogh show Chicago developer R2 sold the Germania Club building, site of the popular exhibit, for roughly $15M, about three years after buying it for $10M The producer of the “Immersive Van Gogh” exhibit in Old Town is paying rent to a new landlord after the sale of the property where the popular digital art show opened in February.

Chicago developer R2 sold the Germania Club building for about $15 million to an unidentified buyer from California, according to people familiar with the transaction. The sale generated a hefty return for R2, which acquired the 46,000-square-foot landmark property near North Avenue and Clark Street for $10 million about three years ago.

The addition of the Van Gogh exhibit just months ago boosted the Germania Club’s value. The show filled an upper-floor ballroom space formerly leased to a tenant that hosted weddings and other events there but had struggled to pay its rent.

Featuring massive projections of Vincent Van Gogh’s paintings, the art show has generated buzz and sell-out crowds—along with a new source of income for the building.

Lighthouse Immersive, the Toron-

to-based producer of the Van Gogh exhibit, signed a five-year lease for its space and plans more shows there after the show ends, stabilizing the property’s income stream.

Built in 1888 as a social club for German immigrants, the building at 108 W. Germania Place is listed on the National Register of Historic Places and is fully occupied, with other tenants including Lincoln Park Preschool and CorePower Yoga.

“The building is unique, the tenancy is unique,” said Danny Spitz, CEO and managing partner of Greenstone Partners, the Chicago-based brokerage that arranged the sale.

STEADY YIELD

The property also offers a relatively safe investment with a steady yield, a plus in a real estate market disrupted by the COVID-19 pandemic.

“After a year of ambiguity and fear, investors have been flocking to cash-flowing assets,” Spitz said.

R2 CEO Matt Garrison said he’s happy with the outcome, especially considering the difficulty of leasing space during the pandem-

COSTAR GROUP

BY ALBY GALLUN

The Germania Club building, built in 1888, is near North Avenue and Clark Street. ic. R2 had considered converting the Germania’s upper floors into creative office space but changed plans after connecting with a broker for Lighthouse Immersive last year.

Now, R2 is getting ready to put another property up for sale, a 140,000-square-foot former factory on Goose Island that it converted into office space. The building

at 1315 N. North Branch St. is 100% occupied, with tenants including CB2, Elite Staffing and Transportation One logistics. R2 has hired Cushman & Wakefield to sell the building, which is likely to fetch more than $50 million, Garrison said.

R2 also is busy with a major redevelopment of the former Morton Salt warehouse along the North

Branch of Chicago River. R2 and its partner, Chicago-based Blue Star Properties, are converting the building, known for its massive Morton Salt sign visible from the Kennedy Expressway, into a music and entertainment venue and a research and development center for Morton Salt. Construction has begun, with an opening planned for next summer, Garrison said.

Big banks are eating the little guys’ lunch right now

BY STEVE DANIELS Big Chicago banks are swimming in cash while community lenders are no longer sharing equally in what continues to be historically high deposit growth.

Cash stashed in local banks climbed 10% in the year that ended June 30, according to Federal Deposit Insurance Corp. data released Sept. 3. The increase was a slight surprise following the extraordinary 25% surge in deposits the year before, caused mainly by unprecedented federal relief to households and businesses.

Unlike the first half of 2020, when all banks shared in the shower of deposits, the biggest of the big are the primary beneficiaries now.

The 13 largest banks by deposits in the six-county Chicago market held 89% of deposits on June 30 compared with 81% the year before, according to the FDIC’s annual market share snapshot.

The remaining 11% of local deposits were spread among the 134 other banks that serve the market.

The year before they held 19%.

The shift was even more pronounced after excluding billions in main-branch deposits held by the three largest local banks—JPMorgan Chase, BMO Harris and Bank of America. Deposits held in central branches for national or

P008_CCB_20210913.indd 8

super-regional banks can skew retail market share because some of those deposits can be shifted each year among markets.

Leaving out the main-branch deposits, the 13 largest banks held 85% of local deposits. The year before they held 73% not counting the central-office figures.

DECLINE

For the smaller fry, deposits collectively fell 36% to $61 billion from $95 billion, according to the data. Those smaller banks held $57 billion in mid-2019, suggesting that for them last year’s sharp increase was due to the feds’ onetime rescue funds for consumers and businesses, who then plowed the cash into bank accounts.

Unlike the community banks, the biggest of the big kept growing in 2021, which may mean they’re benefiting more from a potentially lasting change in how customers bank. The pandemic has kept many branches temporarily closed, and consumers who hadn’t already gravitated to remote banking before COVID have grown used to handling basic transactions online.

That potentially hurts community banks, which market themselves as high-touch enterprises making top executives available to customers when there are complex

needs or issues to address.

The numbers at some of Chicago’s biggest banks were truly eye-popping. Local deposits at New York-based Chase, the largest retail and commercial bank in Chicago, increased 18% to $126 billion from $107 billion. Charlotte, N.C.based Bank of America’s local deposits rose 29% to $25.3 billion from $17.6 billion after discounting a substantial drop in mainbranch deposits.

CIBC Bank USA, the Chicago-­ based U.S. arm of Toronto-based CIBC, saw a 40% surge in deposits to $38 billion from $27 billion.

CIBC is primarily a bank for midsize businesses, so that likely reflects cash piling up from commercial clients.

For banks, there can be such a thing as too much cash. Loan demand among businesses and consumers is soft. Without lending opportunities, banks have to invest the excess deposits, and low-risk securities are yielding very little.

But flush coffers will give big banks a leg up on their smaller competitors once loan demand increases. Deposits are banks’ cheapest source of money; the more lenders have, the cheaper they can price their loans.

Chase CEO Jamie Dimon, speaking to analysts in July, described it this way: “The pump is primed,” he

BLOOMBERG

The Chicago area’s 13 largest banks held nearly $9 of every $10 in local deposits as of June 30, the FDIC says. The remaining 11% was spread among 134 others.

said. “The consumer, their house value is up, their stock value is up, their incomes are up, their savings are up. . . .And businesses equally are in good shape. . . .A lot of charts show corporate debt is higher than it was, but so is corporate cash.”

MARKET SHARES STEADY

In terms of individual banks’ market shares, the rankings ­haven’t changed in recent years.

After market leader Chase came BMO Harris, B of A, Chicago-based Northern Trust and Rosemont-based Wintrust Financial. All demonstrated substantial deposit gains with the exception of BMO Harris.

Deposits at BMO increased 3%.

Excluding customer cash kept in the main branch, they increased 5%.

BMO Harris says it hasn’t been prioritizing deposit gathering over the past year because of tepid loan demand. BMO, spokesman Patrick O’Herlihy says in an email, is “balancing deposit growth against our ongoing lending needs, while still looking to grow new customers and share of wallet with existing customers.”

Deposit growth has come to some of the most aggressive closers of bank branches like Chase and Bank of America, which likely will encourage more branch consolidation. As of June 30, the Chicago market had 2,073 bank branches, down nearly 5% from the year before. That’s the lowest total of bank locations in the six-county region in two decades, according to FDIC data.

9/10/21 2:28 PM

CRAIN’S CHICAGO BUSINESS • September 13, 2021 9

West Side apartments could fetch $120M-plus

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An improving market and the location near UIC could attract buyers to the 410-unit complex

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BY ALBY GALLUN The owners of a big West Side apartment complex have put the property up for sale, anticipating it will fetch more than $120 million amid a rising rental market.

A joint venture including Focus, a Chicago developer, and Atlanta-based Atlantic Residential has hired CBRE to sell Scio at Medical District, a two-tower, 410-unit property at 901 S. Ashland Ave. The property’s location, just west of the University of Illinois at Chicago and east of the Illinois Medical District, should attract strong interest from buyers, said John Jaeger, executive vice president in the Chicago office of CBRE. “There’s a lot of interest from investors to be near these massive medical centers that have steady, high-paying jobs,” he said.

Jaeger estimates Scio will sell for about $300,000 per unit, or $123 million. That’s far above its prior sale price of $55 million in 2004, according to Real Capital Analytics, a New Yorkbased research firm. But the complex, built in 1972, has undergone an extensive renovation in recent years, and its owners have obtained city approval to build another 254unit tower on the north side of the property, boosting its value further.

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The Scio at Medical District apartment complex.

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RENTS RISING

The improving Chicago apartment market should also help.

Rents and occupancies are rising from their pandemic lows last year, and more apartment investors are hunting for deals after pulling back in 2020. Aiming to capitalize on the opportunity, a growing group of landlords and developers have put their buildings on the market, but not many big properties have sold yet.

Scio is 97.3% leased, and net rents on new leases have risen 3.5% since June, according to a CBRE marketing brochure. The average apartment in the complex rents for $2,041 per month, or $2.46 per square foot.

Demand for apartments in Chicago has rebounded amid an improving economy, but supply isn’t increasing. Development slowed drastically amid the pandemic last year, and it hasn’t picked up much yet.

Rising demand and low supply should give landlords pricing power, Jaeger said. That includes Scio’s next owner.

“We think it’s going to get really good rent growth,” he said.

P009_CCB_20210913.indd 9

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9/10/21 2:27 PM

10 September 13, 2021 • CRAIN’S CHICAGO BUSINESS

R

EDITORIAL

omebody needs to step up and say something.”

Those are Angela Gregg’s words. Angela Gregg is the mother of Mychal Moultry Jr., the 4-year-old Alabama boy who was shot and killed in Woodlawn over the Labor Day weekend while visiting family and friends in Chicago. She spoke to the Chicago Tribune by phone on Sept. 7, somehow mustering the ability to speak—even to function—as she lived through a nightmare most parents can barely imagine: pleading with the public to help police track down the shooter or shooters responsible for her son’s death as he sat in a family friend’s apartment at about 9 p.m. on the evening of Sept. 3. Police found 27 spent shell casings outside the building on the 6500 block of South Ellis Avenue, evidence of not a few random shots. This was a spray of bullets.

To Gregg’s further horror, she’s discovered another harsh Chicago reality: Trust between the community and the police assigned to serve and protect them is at low ebb, and residents caught in the crossfire as gangs settle scores and cops patrol their turf are inclined to keep their heads down. “They murdered my baby,” Gregg told the Trib. “The police don’t know anything yet because no one is talking. No one is coming forward.”

Of course, Mychal Moultry is just one name on a long ledger of the deaths and life-changing traumas that take place in Chicago—particularly on the South and West sides—on a regular basis. He died on

NEWSCOM / ARMANDO L. SANCHEZ

“S

What’s the plan, mayor?

a particularly violent Labor Day weekend, in which a total of six people were killed and at least 67 people were shot within the city limits, eight of them children. And Mychal’s death comes on the heels of data showing Chicago just lived through the second-deadliest August on record, a month in which the city recorded 78 homicides, including the shooting of police officer Ella French.

And as the Chicago Sun-Times notes, Chicago has already seen more murders and shootings this year than in all of 2019. There

have been more than 3,100 shooting victims this year, up 9% from the 2,849 at this time last year and 69% above this point in 2019.

In June, Chicago Mayor Lori Lightfoot said during a heated press conference that violent crime was on “a downward trajectory,” asserting that June 2021 was less violent than June 2020. Her claim may have been technically correct—aggravated batteries, robberies and sexual assaults had indeed declined at that point—but the mayor and her police chief, Super-

intendent David Brown, were slicing the baloney mighty thin. At best, her response demonstrated a politician’s reflexive need to view everything in the most positive possible light. At worst, it communicated to those living with the daily threat of violence that the uppermost leadership of the city isn’t coming to the rescue.

The latest raft of data shows Chicago this year outpacing the levels of violence seen during the worst of the pandemic and in the previous “normal” year. It’s going to be tough for the mayor and the superintendent to make those numbers look rosy.

Violent crime in Chicago’s hardest-hit neighborhoods is scaring the hell out of the people who live there, and outbreaks of violence in places less commonly associated with such crimes—like, say, the Loop, where reports of seemingly random attacks on pedestrians are becoming more common, or North Michigan Avenue, where raids of shops are making headlines—only serve to further tarnish Chicago’s reputation on the national stage.

What’s exasperating, infuriating or depressing, depending on the day, is the sense that no one in a position of leadership at City Hall or at police headquarters has a plan to reverse this seemingly relentless wave of violence and destruction.

The bond between residents and police is utterly broken. The tally of deaths and injuries rises almost daily. Angela Gregg is right. Someone has to step up and say something. We’ve said it before and, sadly, we’ll likely have to say it again: What is the plan, mayor?

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YOUR VIEW

COVID era proves power of health care collaboration of activity that creates a flow of Innovation often is about continuous breakthroughs. bringing leaders together, then Medical districts have grown getting out of the way. The reinto their role as life science insources of anchor institutions novators. The Illinois Medical make breakthroughs possible.

District began 80 years ago as a Yet no one entity, public or state-chartered real estate deprivate, is in charge of solving velopment authority. Over the large, complex problems. In the years it expanded into research, COVID-19 contagion, the virus programs and technology comwas in charge. mercialization. In convening Chicago attacked the coromeetings with hospital CEOs, navirus through collaboration. Kate Schellinger is they shared interests and issues Joint efforts helped hospitals interim executive from community health needs live up to their community director of the assessments to parking and benefit responsibilities and set Illinois Medical transportation. a pattern for addressing popu- District.

The complex and fast-moving lation health issues from managed care to chronic disease management emergence of COVID-19 called the IMD to and community wellness. Medical dis- take a role we had sought long before the tricts provide all the elements needed for outbreak, that of convener. Our anchors— Rush University Medical Center, John H. a successful collaboration: Stroger Jr. Hospital, the Jesse Brown VA Creativity: Cross-functional teams genMedical Center and the University of Illierating new ideas and approaches. nois Hospital—needed a gathering force Connectivity: A high-functioning campus ecosystem with specialized life sci- around shared issues, from vaccination plans for employees and patients to coorence real estate assets and services. dinating frequent phone calls to make sure Confluence: A merging of several streams

our facilities had capacity and support.

However, while COVID-19 represents an acute issue at present, a host of chronic health problems await the same concerted response. The Chicago Loop shares a border with the IMD’s Near West Side neighborhood. Yet economic and social differences raise a wall between them despite our medical resources. Life expectancy on the Near West Side is 76 years, and 69 years in nearby North Lawndale and West Garfield Park, compared with an average of more than 82 years in the Loop—a striking contrast that drives our institutions’ leaders to look beyond the cutting edge confines of our medical campus.

Moving forward to close that gap is a daunting proposition. Working through West Side United, a coalition of hospitals, community organizations and educational institutions, we’ve begun to examine social determinants of health such as economic vitality, educational opportunities and neighborhood infrastructure. After all, our hospitals do not merely occupy a place in the communi-

ty, they must serve it.

Taking community care to the next level, medical districts have the opportunity to share learning and set an example for other health care leaders. The past year road-tested our ability to strengthen collaborative bonds. COVID-19 isn’t fully under arrest, but medical districts are better prepared to face whatever comes next.

Real estate development should not be overlooked as an avenue for medical districts to bend the curve of health care toward equity. New amenities and employee-centric development will make the IMD an even better place to work, live and play. That, too, will require us to harness the strength that comes through collaboration.

Whatever we build, hospital collaboration serves as our most logical and powerful starting point. I invite our industry colleagues to explore a broader calling to engage partners in health care’s thorniest issues. The power of collaboration is not a secret to be kept, but a recipe for success to be shared.

C

Peo

ple

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

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

9/10/21 2:41 PM

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CRAIN’S CHICAGO BUSINESS • September 13, 2021 11

LETTERS TO THE EDITOR

Who benefits from South Side golf courses?

R

egarding the proposal to merge the Jackson Park and South Shore golf courses into one PGA-level facility, (“Let these golf course backers play through,” Sept. 6), we pose some questions: Who benefits? It is important to remember that this proposal originated not with community residents or regular park users or even golfers, but with the University of Chicago as part of its 2014 private proposal to the Obama Foundation to locate in Jackson Park. The scope of the university’s offer to the Obama Foundation to remake Jackson Park into a Millennium Park-like activity center was evidenced first when the proposed golf course merger was announced by Mayor Emanuel

Chief executive officer KC Crain

Group publisher/executive editor Jim Kirk

Associate publisher Kate Van Etten

*** Editor Ann Dwyer

Creative director Thomas J. Linden

Assistant managing editor/ Joe Cahill columnist Assistant managing editor/digital Ann R. Weiler Assistant managing editor/ Cassandra West news features

Deputy digital editor Todd J. Behme

Digital design editor Jason McGregor

Associate creative director Karen Freese Zane

Copy chief Scott Williams

Deputy digital editor/ Robert Garcia audience and social media

Contributing editor Jan Parr

Political columnist Greg Hinz Senior reporters Steve Daniels

Alby Gallun John Pletz

Reporters Elyssa Cherney

Katherine Davis Danny Ecker Stephanie Goldberg Ally Marotti A.D. Quig Dennis Rodkin Steven R. Strahler

Contributing photographer John R. Boehm Researcher Sophie H. Rodgers *** Managing director/ Jill Heise marketing and events

Director of digital strategy Frank Sennett

Director of custom media Sarah Chow *** Production manager David Adair

in 2016, and then again when the plan for the Obama Presidential Center was unveiled five months later. Though touted as separate projects, they emerged from the same womb. The university stands to be the main beneficiary of both projects by elevating Hyde Park and its adjacent lakefront neighborhoods as attractive destinations for affluent residents.

Who loses? Regular users of the park. For local golfers who can now play an affordable round whenever they want, there has been no satisfactory guarantee that such easy access will continue. For nongolfers (and also the many golfers who use the parks in other ways) there will be a loss of access to well-used, treasured recreational spaces: the nature sanc-

tuary and the riding rink at the South Shore Cultural Center, the ball fields and picnic areas squeezed out first by the OPC and then the golf course expansion, the popular dog park displaced by an enlarged golf driving range.

Who pays? As with the OPC, the golf project has been represented as a gift to the city, with private donations of $25 million to pay for construction, as well as for youth programming.

In fact, the plan calls for the Park District to contribute $5 million and, rarely mentioned, requires two expensive underpasses and extensive shoreline stabilization work estimated in 2018 to cost taxpayers around $58 million.

Beyond the upfront costs to taxpayers, there are also potential liabilities down the line. The

long-term sustainability of the golf project has never been determined. In spite of repeated requests beginning in 2017, there has been no business plan that explains how all the elements and interests will fit together in one financially sustainable package. The risk is that, in a couple of years, after the glossy newness wears off, the expensively restructured golf course will be recognized as still flat, still squeezed in, with a still inconveniently located driving range, and attendance will decline.

That might be good for local golfers, but not for the bottom line or for taxpayers.

BRENDA NELMS and JACK SPICER Jackson Park Watch

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9/10/21 2:34 PM

12 September 13, 2021 • CRAIN’S CHICAGO BUSINESS

CRAIN’S LIST CHICAGO’S LARGEST LAW FIRMS Ranked by local attorneys as of June 30.

Chicago partners’ specialties

Banking

Business reorg. & credit

Corporate & securities

Health care

Insurance

Intellectual property

Labor

Litigation

Environmental & legislative

Municipal

Real estate

Taxation

2020 firmwide revenue (millions); 1-year change

Antitrust

No. of No. of local attorneys attorneys in U.S. as of as of Local 6/30/21; 6/30/21; 1-year world- Local associ- Local of Local change wide partners ates counsels paralegals

1

1

KIRKLAND & ELLIS LLP 300 N. LaSalle St., Chicago 60654; 312-862-2000; Kirkland.com

Jon A. Ballis Chairman

702 5.1%

2,406 2,894

340

362

NA

110

29

0

16

143

1

10

38

1

113

11

0

15

33

$4,830.01 16.3%

2

2

SIDLEY AUSTIN LLP 1 S. Dearborn St., Chicago 60603; 312-853-7000; Sidley.com

Larry A. Barden Chairman, management committee Teresa Wilton Harmon, Managing partner, Chicago

414 1,530 -7.4% 1,913

157

216

29

56

7

14

4

55

8

13

7

15

51

1

0

7

12

$2,462.9 5.4%

3

3

MAYER BROWN LLP 71 S. Wacker Drive, Chicago 60606; 312-782-0600; MayerBrown.com

Jon D. Van Gorp Chairman

388 2.1%

1,042 1,833

162

170

48

25

NA

33

7

27

NA

NA

10

NA

35

NA

NA

13

11

$1,520.0 2.4%

4

6

JENNER & BLOCK LLP 353 N. Clark St., Suite 4500, Chicago 60654; 312-222-9350; Jenner.com

Katya Jestin Randy E. Mehrberg Co-managing partners

244 -4.7%

449 470

98

90

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

$446.3 -0.4%

4

4

WINSTON & STRAWN LLP 35 W. Wacker Drive, Chicago 60601; 312-558-5600; Winston.com

Linda T. Coberly Chicago managing partner

244 -9.3%

803 880

111

114

11

24

12

16

2

45

1

NA

13

30

48

2

NA

2

5

$981.2 -3.1%

6

7

KATTEN 525 W. Monroe St., Chicago 60661; 312-902-5200; Katten.com

Gil M. Soffer Managing partner, Chicago

235 -2.9%

596 631

100

104

28

3

0

14

6

17

3

6

4

1

17

0

3

12

2

$646.6 -3.5%

7

5

MCDERMOTT WILL & EMERY LLP 444 W. Lake St., Chicago 60606; 312-372-2000; MWE.com

Michael Boykins Office managing ­partner

218 813 -16.5% 1,115

140

68

28

6

6

8

6

38

29

2

7

8

22

2

0

2

56

$1,381.8 17.9%

8

9

SEYFARTH SHAW LLP 233 S. Wacker Drive, Suite 8000, Chicago 60606; 312-460-5000; Seyfarth.com

Cory Hirsch Tracy Billows Chicago co-managing partners

203 -4.2%

911 970

107

49

36

17

3

0

13

12

48

0

5

48

22

5

0

14

3

$717.0 -0.0%

9

10

LATHAM & WATKINS LLP 330 N. Wabash Ave., Suite 2800, Chicago 60611; 312-876-7700; LW.com

Cathy A. Birkeland Chicago office managing partner

194 2.1%

1,991 3,015

60

123

12

17

1

8

4

21

5

3

9

3

17

14

0

4

5

$4,333.8 15.0%

10

8

BAKER MCKENZIE 300 E. Randolph St., Suite 5000, Chicago 60601; 312-861-8000; BakerMcKenzie.com

David Malliband Chicago office managing partner

192 643 -16.9% 4,699

92

82

18

NA

2

14

1

16

15

0

8

12

12

0

0

0

26

$2,899.0 -0.7%

11

14

GREENBERG TRAURIG LLP 77 W. Wacker Drive, Suite 3100, Chicago 60601; 312-456-8400; GTLaw.com

John F. Gibbons Rita M. Alliss Powers Co-managing shareholders

178 5.3%

1,829 2,274

94

64

18

16

0

7

1

18

0

0

17

3

31

2

1

18

3

$1,730.0 5.4%

12

11

DLA PIPER LLP 444 W. Lake St., Suite 900, Chicago 60606; 312-368-4000; DLAPiper.com

Raj N. Shah Jesse A. Criz Chicago co-managing partners

168 1,529 -7.7% 4,560

68

54

NA

NA

1

12

3

4

0

0

9

4

12

0

0

20

1

$3,133.8 0.7%

13

13

VEDDER PRICE 222 N. LaSalle St., Suite 2600, Chicago 60601; 312-609-7500; VedderPrice.com

Michael A. Nemeroff President, CEO

162 -4.7%

252 271

97

59

5

31

1

35

5

26

3

1

6

17

19

2

0

3

4

$255.0 0.0%

14

15

CHAPMAN AND CUTLER LLP 111 W. Monroe St., Chicago 60603; 312-845-3000; Chapman.com

Timothy P. Mohan 157 Chief executive partner -3.7%

222 222

104

37

16

12

0

40

15

18

27

0

0

1

8

8

20

7

6

$226.7 4.4%

14

16

JONES DAY 77 W. Wacker Drive, Suite 3500, Chicago 60601; 312-782-3939; JonesDay.com

Tina M. Tabacchi Partner in charge

157 1,553 -2.5% 2,422

62

79

13

2

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

$2,226.41 7.2%

16

12

SCHIFF HARDIN LLP 233 S. Wacker Drive, Suite 7100, Chicago 60606; 312-258-5545; SchiffHardin.com

Joseph Krasovec Managing partner

156 -9.3%

92

46

NA

NA

2

12

8

27

0

10

13

6

48

18

8

7

18

$174.0 -6.7%

17

17

REED SMITH LLP 10 S. Wacker Drive, 40th Floor, Chicago 60606; 312-207-1000; ReedSmith.com

Matthew J. Petersen Managing partner

133 1,126 -7.0% 1,815

59

57

16

11

0

3

1

14

10

6

6

1

19

0

0

1

8

$1,310.6 5.1%

18

18

FAEGRE DRINKER 191 N. Wacker Drive, Suite 3700, Chicago 60606; 312-569-1000; FaegreDrinker.com

Patrick M. Miller 132 1,152 James L. Sawyer -2.2% 1,194 Chicago office co-leaders

65

46

20

18

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

$937.0 -1.6%

19

19

HINSHAW & CULBERTSON LLP 151 N. Franklin St., Suite 2500, Chicago 60606; 312-704-3000; HinshawLaw.com

Peter D. Sullivan Chairman

94

34

2

15

0

7

4

15

19

13

5

23

52

10

4

8

5

$180.1 -6.5%

Law firm

P012-P013_CCB_20210913.indd 12

Local managing partner

130 -0.8%

219 219

409 409

9/9/21 9:23 AM

20

21

22

22

22

25

Includ specia

CRAIN’S CHICAGO BUSINESS • September 13, 2021 13

17.0 0%

Labor

Litigation

Environmental & legislative

Municipal

Real estate

Taxation

381.8 9%

Intellectual property

46.6 5%

Insurance

81.2 1%

Health care

46.3 4%

Corporate & securities

520.0 4%

2020 firmwide revenue (millions); 1-year change

Business reorg. & credit

462.9 4%

Chicago partners’ specialties

Banking

30.01 3%

No. of No. of local attorneys attorneys in U.S. as of as of Local 6/30/21; 6/30/21; 1-year world- Local associ- Local of Local change wide partners ates counsels paralegals

Antitrust

020 wide enue ions); ear nge

20

20

NEAL GERBER & EISENBERG LLP 2 N. LaSalle St., Suite 1700, Chicago 60602; 312-269-8000; NGE.com

Robert “Bobby” G. Gerber Managing partner

126 -3.1%

126 126

0

0

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA NA

21

20

SWANSON MARTIN & BELL LLP 330 N. Wabash Ave., Suite 3300, Chicago 60611; 312-321-9100; SMBTrials.com

Timothy G. Nickels Managing partner

125 -3.8%

132 132

852

37

3

20

0

5

2

4

27

1

6

3

84

2

1

1

0

NA NA

22

25

BARNES & THORNBURG 1 N. Wacker Drive, Suite 4400, Chicago 60606; 312-357-1313; BTLaw.com

Michael A. Carrillo Chicago office managing partner

122 8.0%

739 739

83

26

11

15

14

1

0

17

5

11

27

6

19

4

1

2

0

$506.21 8.5%

22

22

PERKINS COIE LLP 131 S. Dearborn St., Suite 1700, Chicago 60603; 312-324-8400; PerkinsCoie.com

Richard L. Sevcik Chicago office managing partner

122 0.8%

1,254 1,268

57

46

17

10

1

13

9

2

NA

NA

6

3

16

NA

NA

8

4

$1,001.5 7.1%

22

24

POLSINELLI PC 150 N. Riverside Plaza, Suite 3000, Chicago 60606; 312-819-1900; Polsinelli.com

Mary Clare Bonaccorsi 122 Office managing 7.0% ­partner, Chicago

888 888

80

38

4

11

0

10

NA

17

35

1

16

6

40

1

2

24

3

$618.3 6.5%

25

25

TAFT STETTINIUS & HOLLISTER LLP 111 E. Wacker Drive, Suite 2800, Chicago 60601; 312-527-4000; TaftLaw.com

Cezar M. Froelich Partner, chairman Paul T. Jenson Partner in charge

118 4.4%

621 621

63

30

21

9

1

6

7

16

0

3

10

11

24

1

4

11

3

$365.11 NA

Law firm

Local managing partner

Includes attorneys in the seven-county Chicago area: Cook, DuPage, Kane, Lake, McHenry and Will in Illinois and Lake in Indiana. All staff figures are as of June 30 unless otherwise noted. In the Chicago partners’ specialties section, partners in more than one specialty are counted in each area. NA: Not available. 1. From American Lawyer. 2. This figure accounts for 27 equity partners and 58 nonequity partners.

Researched by Sophie Rodgers (sophie.rodgers@crain.com)

333.8 0%

899.0 7%

730.0 4%

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133.8 7%

55.0 0%

Chicago In-Person Sessions

26.7 4%

October 1 - October 29

75%

26.41 2%

Detroit Hybrid Sessions

Manager to C-level Participants

74.0 7%

99%

434

310.6 1%

of Graduates Highly Recommend Participation

Alumni

37.0 6%

295

Participating Companies

80.1 5%

P012-P013_CCB_20210913.indd 13

September 29 - November 19

Virtual Sessions September 28 – December 14

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9/9/21 9:23 AM

14 September 13, 2021 • CRAIN’S CHICAGO BUSINESS

Hospitals face risks as COVID patients take their pleas for ivermectin to court “There are a lot of things I will ask a physician to do, but something I have never—and would never—ask them to do is administer a medication or provide certain treatment, particularly if it’s not what they want to do,” says Mary Lou Mastro, CEO of Edward-­ Elmhurst Health. “I’m not qualified to order them to do that. A judge is not qualified to do that.”

Still, Elmhurst Hospital complied when a DuPage County judge in late April ordered it to give ivermectin to a comatose patient at the request of the patient’s guardian.

Hospital clinicians refused to administer the drug, citing unknowns about how it might interact with the patient’s other treatments, and the patient’s family wouldn’t permit her to be transferred to another facility, says Christine Koman, claims counsel at Edward-Elmhurst Health. So Elmhurst allowed an unaffiliated doctor to do it.

During the COVID-19 pandemic, public health departments have encouraged hospitals to offer temporary privileges to doctors as a way to alleviate staffing shortages during outbreaks. But industry observers say it’s not a common practice for administering treatments that hospital clinicians aren’t willing to provide.

Illinois is among states that allow some patients with terminal illnesses to get investigational treatments that could help prolong their lives.

But whether such laws “can be used to compel a hospital to treat someone they don’t want to is a different issue,” says David Hyman, a professor at Georgetown Law. “It’s also, frankly, a function of how the judge feels about whether they want to get involved in this particular dispute

and how sympathetic they are to the plaintiffs versus the defendants.”

Judges have differing opinions, recent ivermectin cases show. An Illinois appellate court judge in July dismissed Elmhurst’s appeal, but two other judges declined to require hospitals to give ivermectin to COVID patients.

RULINGS

A Sangamon County judge last month sided with Memorial Medical Center in Springfield, blocking a hospitalized COVID patient from getting ivermectin. And an Ohio judge this month refused to order West Chester Hospital to treat a patient with ivermectin.

“Judges are not doctors or nurses.

We have gavels, not needles, vaccines or other medications,” Butler County Judge Michael Oster wrote in the Ohio case.

Such cases are unusual and, in most instances, patients will seek out doctors willing to provide unapproved treatments before taking hospitals to court.

“Nobody knows how this is going to play out,” Hyman says. “My bet is judges are not going to routinely start second-guessing medical decisions.”

Hospitals that comply with court orders to facilitate inappropriate treatments could face other legal jeopardy. Patients alleging harm from ivermectin could sue hospitals for negligence. Hospitals that administer inappropriate medication also could risk losing their standing with private accrediting organizations, some industry observers warn.

Elmhurst Hospital tried to minimize its legal risk by asking the patient’s estate to sign a waiver of liability. The form was never returned, Koman says.

“The nurses in COVID units

BLOOMBERG

IVERMECTIN from Page 1

are working incredibly hard,” says ­ astro. “It’s very complex. It’s inM tense. And now you have this disruption going on—and the family is creating a lot of disruption, which was adding to the stress and the anxiety of the team trying to take care of this patient.” Mastro notes that such disruption factored into the hospital’s decision to grant privileges to an unaffiliated physician.

Some experts urge hospitals to take a harder line.

“You don’t let the public determine what interventions to use,” says Arthur Caplan, a professor and director of the Division of Medical Ethics at New York University’s Grossman School of Medicine.

“When doctors around the country ask me what they should do if there’s a court order, I say defy it. It would be as if somebody said, ‘I’m going to order you to give bleach to a patient because the president liked that at one point.’ ” One local hospital is standing firm against a pressure campaign reportedly backed by QAnon, the network known for perpetuating conspiracy theories.

Amita Health Resurrection Medical Center Chicago in Norwood Park refuses to give the drug to a hospitalized COVID patient, despite calls and emails running “well into the hundreds” urging it to do so, spokeswoman Olga Solares says.

“Following FDA and CDC guidance, we do not prescribe or administer ivermectin for the treatment of COVID-19 at Amita Health,” Solares says.

Other large Chicago-area hospitals say some patients have asked about ivermectin, but they’re not administering the drug for the treatment of COVID-19, in accordance with the current FDA guidance.

“In the future, we may participate in a large clinical trial evaluating the efficacy of ivermectin for mild outpatient COVID-19,” University of Illinois Hospital Chief Quality Officer Dr. Susan Bleasdale says in an email.

PHARMACISTS

Pharmacies are also caught in the ivermectin crossfire, with prescriptions for the anti-parasitic drug up 24-fold, according to an

August CDC analysis.

While drugstore chain CVS doesn’t have a policy that restricts its pharmacies from filling prescriptions for ivermectin, “pharmacists are empowered to use their professional judgment when reviewing a prescription and a prescriber’s diagnosis,” spokeswoman Tara Burke says in an email.

Outside of hospitals, some people are turning to high-dose animal formulations of the drug, like injectables and pastes meant for horses and cows. The American Association of Poison Control Centers reports an uptick in adverse effects associated with the drug as a result.

“I am a little surprised, I guess, that there are people who want to take a veterinary medicine that is not FDA approved but then don’t want to take the vaccine that has had really widespread human trials and is approved,” Chicago Department of Public Health Commissioner Dr. Allison Arwady said recently. “If we ever get good news on ivermectin, we’ll be the first to be talking about it. But in the meantime, your doctor is not going to recommend it, and certainly you should never ever take a veterinary formula of a medication.”

Without indisputable evidence that ivermectin is safe and effective for the prevention or treatment of COVID-19, hospitals are likely to continue denying patients access to the drug. Some of those patients, or their families, can be expected to take the matter to court.

“It’s really troubling to see courts forcing hospitals to administer unproven treatments,” says Wendy Netter Epstein, a professor and associate dean of research at the DePaul University College of Law. “A patient’s right to choose their care was never meant to extend that far.”

How much is the energy bill really going to cost you? Here’s what we determined.

ENERGY from Page 3 an extra $10.19 per month by 2024.

(AARP’s analysis examined the effect on single-family households and looked ahead 10 years. Many of the new annual charges will last 10 years.)

The measure, aimed at eliminating carbon emissions from Illinois’ power production by 2045, looks to achieve that by charging ratepayers more to preserve existing nuclear plants in danger of closing ($140 million a year on average for five years for ComEd customers) and finance more solar and wind power ($275 million a year statewide) while also requiring all coal- and natural gas-fired plants to close over time.

Ratepayers also get charged more for a program to convert existing coal-plant sites downstate to solar fields ($47 million a year statewide) and to finance programs to transition communities and workers dependent on fossil fuel jobs to other industries ($180 million a year statewide).

Already enacted earlier this year is a law that charges each consumer—no matter how much or how

P014_CCB_20210913.indd 14

little power they consume—a flat fee to pay for increased financial assistance to low-income households. Those fees ratchet up from 48 cents a month in 2022 to 96 cents in 2025, where they cap out.

Ratepayers also will shell out more than they do now for Commonwealth Edison’s energy-efficiency programs. First enacted in the 2016 Future Energy Jobs Act, the efficiency program currently hikes ComEd rates by $50 million a year and is a major profit center for the utility. The bill would increase that by 50% to $75 million.

All those new charges will amount to close to $5 more on the average monthly household electric bill and $6.36 for the typical single-family household.

DELIVERY RATES

Where things get more subject to interpretation is what will happen to the ordinary delivery rates ComEd charges. A 2011 law— which ComEd last year admitted to hatching an elaborate bribery scheme to help pass—allowed the utility to change its rates each year via a formula over which state regulators had little say.

Outraged by the bribery admission, Pritzker and many lawmakers vowed to end formula rate-setting.

The bill doesn’t do that, but it does allow formula rates to expire after next year, as current law provides.

In their place, ComEd would be allowed to petition the Illinois Commerce Commission for a five-year rate plan encompassing planned capital spending and setting rates accordingly.

ComEd parent Exelon has told investors it expects ComEd’s delivery rate base—the sum of the equipment and investments made over the years with remaining useful lives—to total $15.3 billion in 2024, up from $12 billion last year.

If that happens—and if the utility’s returns are allowed to rise from lower formula-era returns to those enjoyed by Nicor Gas and other utilities—ComEd’s revenue would rise an estimated $363 million from now. (The analysis also assumes ComEd’s recoverable costs would rise 1% annually.)

A $363 million rate hike would amount to about $2.77 more per month for the average household and about $3.83 for the typical single-family home.

The Pritzker administration believes it’s unfair to include ComEd’s likely future rate hikes among the bill’s effects. The bill requires the ICC to audit ComEd’s past investments and eliminate those it determines shouldn’t have been made to recalibrate the rate base on which to set future profits.

The ICC also would have leeway now to set a new return on equity.

ASSUMPTIONS

The Pritzker administration also points out that no one can say what would happen if the formula system had been extended.

“There are assumptions here that have no basis in fact,” Pritzker spokeswoman Jordan Abudayyeh says in an email. “We don’t know what the base will be. The audit, followed by the multi-year rate plan, are designed to only spend money on the things that are needed, instead of what formula rates have been. It is a bit reckless to try to decipher what the ICC will do in terms of rate base several years down the road, after getting more information than they have ever had upon which to make grid decisions.”

Keeping ComEd rates from soaring even higher than they might have under the formula will be a challenge for regulators, however. The formula ties ComEd’s profits to long-term interest rates, which have been historically low for years. Freed from the formula, they will rise, even the governor’s staff allows.

To keep rates from soaring will mean saying no to many of the spending plans ComEd will put forward and surely argue are critical to work into the grid all the new renewable projects the bill finances—not to mention enabling electrification of buildings and cars.

To consumer advocates’ dismay, the measure retains some key elements of the discredited formula system, most notably “guaranteed profits,” the right for the utility to charge customers extra in a given year if it doesn’t earn what regulators provided for the previous year.

“They literally didn’t have to do anything,” says Abe Scarr, director of consumer advocacy group Illinois PIRG. “Formula rates were sunsetting. . . .We hope (the ICC) steps up and reins the spending in, but we have no reason to think it will.”

9/10/21 4:05 PM

CRAIN’S CHICAGO BUSINESS • September 13, 2021 15

Here’s why investors love money-losing software maker Sprout Social SPROUT from Page 3 priority for investors—it’s growth,” Bhatia says.

Sprout is adding new customers, and getting others to spend more money as it moves upmarket from its roots in small and midsize business to sign up big companies such as Kraft Heinz, Levi’s and Subaru. The number of customers spending more than $10,000 a year with Sprout grew 55% in the second quarter.

It’s the kind of business tech investors love nowadays: cloudbased software sold by subscription with little need for a large sales force to call on customers.

That’s why Sprout’s stock is trading at about 28 times projected 2022 revenue, nearly matching multiples of 29 for cloud-software companies Atlassian and Asana and 30 for e-commerce ­ software provider Shopify, says Robert W. Baird Equity Research analyst Robert Oliver.

Longer term, investors figure Sprout will benefit more than its competitors as social media sites evolve into venues for commercial transactions. Facebook now allows individuals and merchants to sell products directly from its platform with Shopify. TikTok followed suit, and Twitter has plans in the works.

Sprout recently formed a partner­hopify and launched ship with S new software to manage social commerce.

“It’s not exclusive,” Oliver says of the Shopify partnership. “But investors recognize when you look at the landscape, they’re uniquely positioned.”

Research firm eMarketer predicts social-commerce sales in the U.S. will grow 36% this year to $36.7 billion, compared with $58.7 billion for social media advertising.

category of best-in-class (software as a service) companies,” Oliver says. “With that valuation comes extra scrutiny, extra pressure. Now every single metric is going to absolutely matter.”

EXPECTATIONS

At some point, investors will expect consistent profitability, a hurdle that has tripped up other fast-growing startups, including Chicago’s Groupon.

Even with its record of double-digit growth, Sprout, valued at $6.7 billion, is a relatively small company that could attract a buyout offer from a tech giant such as

Salesforce. San Francisco-based Salesforce has acquired two social-media software companies in the past decade. In 2015, it bought Chicago-based Steelbrick for $300 million. This summer it paid $27.7 billion for software maker Slack.

“They’ve already shown an interest in this,” Oliver says. “It’s an absolute no-brainer.”

Barretto, a former Salesforce executive, declined to speculate on such a deal. “I don’t know how they think about (social today),” he says.

“We’re integrated into both the sales cloud and the service cloud, and we’ve got a lot of customers that are Salesforce customers.”

Ryan Barretto is president of Sprout Social.

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RIVALS APLENTY

Several rivals are chasing the same opportunity. The biggest is New York-based Sprinklr, which focuses on large corporate customers. Sprinklr’s first-quarter revenue was more than double Sprout’s at $111 million, but it grew about one-third slower. Also unprofitable, Sprinklr has seen its shares slip below their June IPO price. Other rivals include Vancouver, British Columbia-based Hootsuite, founded in 2008, which focuses more on small and midsize companies.

“If you add us and our competitors, it’s still single-digit penetration in a massive market,” says Ryan Barretto, Sprout’s president.

One of Sprout’s key advantages, analysts say, is adding new features such as social-media monitoring and analytics that drive up customer spending. Bhatia estimates Sprout’s new monitoring product, called Listen, nearly doubles a customer’s spending to between $10,000 and $12,000 annually.

Sprout has largely flown under the radar until now. With the surge in its stock price, the company’s management finds itself in the spotlight.

“The stock has been put in the

P015_CCB_20210913.indd 15

9/10/21 4:04 PM

ACCOUNTING MGO, Chicago MGO is pleased to announce that Sarah McGuire has been admitted as a partner.

She is a founder of the MGO-Chicago office and brings a strong background of auditing, accounting and advisory services. Sarah specializes in audit preparation, M&A, and financial accounting and advisory.

She focuses on a variety of industries including manufacturing, life sciences, technology, cannabis and other highgrowth companies ranging from startups to large multi-state operators.

ACCOUNTING / CONSULTING John Kasperek Co., Inc., Calumet City / Mokena Elizabeth Scott brings six years of governmental and nonprofit experience to JKC both as a former Village Administrator and Chief of Staff in the Chicagoland area. She also served as the Director of Special Projects for a nonprofit working closely with various governmental agencies to procure funding through government grants and private and public philanthropic organizations. Ms. Scott will provide a valuable knowledgebase and resource to clients as the firm’s Grants Research Specialist.

BANKING First Bank of Highland Park, Northbrook As one of the five largest privately held banks in Chicago, First Bank of Highland Park is proud to announce Jacqueline M. Kaiser has been promoted to Vice President, Deposit Operations and Wire Department Manager. Her primary role is the oversight of deposit and wire operations while ensuring accuracy and compliance with established bank policies and procedures. Jacquie has 18 years of financial expertise and joined the First Bank team in 2013.

HEALTH CARE University of Chicago Medicine, Chicago UChicago Medicine welcomes Daiquiri Lewers as Chief Marketing and Communications Officer.

A marketing leader with 25+ years of experience in brand strategy, integrated marketing and advertising development, Lewers excels at translating consumer insights and analytics to strategies that fuel growth and impact. She is leading efforts to build the institution’s brand, promote service lines, enhance strategic communications, and execute integrated marketing and physician engagement initiatives. Previously, she served as assistant vice president of brand & clinical services marketing at NorthShore University HealthSystem.

Lewers earned a bachelor of science in chemical engineering and an MBA in marketing and finance from Northwestern University.

P016_CCB_20210913_v2.indd 1

Advertising Section

PEOPLE ON THE MOVE

To place your listing, visit www.chicagobusiness.com/peoplemoves or, for more information, contact Debora Stein at 917.226.5470 / dstein@crain.com

BANKING

CONSTRUCTION

REAL ESTATE

Old Second National Bank, Aurora

Executive Construction, Chicago

Dennis Klaeser has been named to the Boards of Directors for Old Second Bancorp, Inc. and Old Second National Bank. Mr. Klaeser most recently served as Chief Financial Officer of TCF Financial Corporation (formerly Chemical Financial Corporation) and TCF National Bank from August 2016 until April 2020. He previously served as Chief Financial Officer and an Executive Managing Director of Talmer Bancorp, Inc. from May 2010 until Talmer Bancorp’s merger with Chemical Financial Corporation in August 2016. Mr. Klaeser was also a senior Midwest bank analyst with Raymond James. Mr. Klaeser was appointed as a Class II director for a term that will expire in 2024 and will serve on the Audit Committee and the Risk Committee of the Board.

Executive Construction is proud to announce the promotion of Dan Eby to Vice President. From his start as a carpenter 30+ years ago to veteran superintendent and mentor, Dan’s teamwork and integrity have earned the respect of peers, partners, and clients. In recent years, he’s been a critical field leader on the firm’s most notable interiors engagements, building over halfmillion sf of Old Post Office tenant spaces including Federal Home Loan Bank of Chicago, Ferrara Candy Company, and Uber.

Industrial Outdoor Ventures, Schaumburg

BANKING / FINANCE BMO Harris Bank, Chicago Jennifer Brown, a topproducing loan officer nationally, has joined BMO as Senior Mortgage Banker. Jennifer is among the top 1% of female mortgage producers in Illinois and the top 13% nationwide.

Jennifer will help customers make real financial progress while continuing to lead the loan origination industry and as BMO’s mortgage business continues to grow. She specializes in financing nationwide for physicians and dentists, jumbo loans, new construction and rehab loans.

Industrial Outdoor Ventures has promoted James Georgalas to Vice President of Finance. He works closely with the CFO and is responsible for all aspects of the company’s financial planning and analysis, investor relations and risk management. In addition, he partners with the Acquisitions and Development team on project investment analysis and feasibility as well with equity sponsors and lenders on reporting, acquisition approvals and financing. James joined IOV in 2019.

CONSTRUCTION Executive Construction, Chicago Executive Construction is proud to announce the promotion of Erin Fiegel to Vice President.

In just four years with the firm as Marketing Director – balancing strategic vision with a disciplined attitude of implementation – she has elevated department and company-wide internal operations; as well as enhanced communications and brand recognition. In addition to her marketing role, she’s a strategic plan leader focused on culture and engagement, including oversight of the firm’s non-profit Foundation.

CONSULTING

FINANCE Magnetar Capital, Evanston Magnetar Capital, a leading alternative asset manager based in Evanston, Ill., welcomed Stuart Davies as head of Business Development, Systematic Investing.

A 24-year industry veteran, Davies brings a wealth of alternative investment, client partnership and product innovation experience to Magnetar’s Systematic Investing team. Formerly, Davies was co-head of AB Custom Alternative Solutions at AllianceBernstein, which bought Ramius Alternative Solutions, a ~$3B business he co-led, in 2016.

Treacy & Company, Chicago

CONSTRUCTION SERVICES Gilbane Building Company, Chicago Gilbane, a top Chicago builder, welcomes Senior Executive Jessica Slack to our Chicago leadership team. Jessica will be focused on growing Gilbane’s business in the private sector, including commercial, life sciences/biopharma, consumer goods and industrial/manufacturing.

With over 15 years of experience in commercial real estate, AEC and owner’s representation, Jessica is excited to bring her expertise and passion to the Chicago construction community. Jessica is also a member of ULI Chicago.

DESIGN / BUILD Cannabis Facility Construction, Northbrook Cannabis Facility Construction (CFC), a national cannabis design-build leader and affiliated brand of Mosaic Construction, LLC, is pleased to welcome Robert Spence to its growing team.

Spence joins CFC from MSO 4Front Ventures where he was head of construction. He will leverage his 20 years of construction experience and cannabis industry knowledge to serve as Production Manager, leading the building of best-in-class cannabis facilities nationwide.

T&Co welcomes Gary Gebenlian as a Principal in our Chicago office. He has 20+ years of experience in growth strategy, venture building, and executive management. Gary helps clients create, implement, and sustain strategies for growth, value creation, differentiation, and disruption. Prior to joining T&Co, he co-founded a technology company, helped grow an early online-to-offline commerce pioneer business, and led marketing & ecommerce for a PE-backed B2B business that led to a sale.

LAW Nixon Peabody LLP, Chicago Gregg Dorman has over 35 years of experience representing international, national, and regional clients in connection with all aspects of complex commercial real estate transactions Dorman across industries and asset types, including retail, office, industrial, mixed-use, and sports venue projects, with a focus on shopping center-related acquisition, leasing, and development transactions.

Sotolongo Spenser Sotolongo focuses his practice on real estate financing, acquisitions, dispositions, leasing, and development. His clients include real estate investors, developers, and property owners.

Prior to joining NP, Spenser was an associate real estate attorney in the Chicago office of Quarles & Brady LLP.

LAW Croke Fairchild Morgan & Beres LLC, Chicago Emily Elisar joins Croke Fairchild Morgan & Beres as project manager, supporting clients and attorneys across the practice. Emily previously was Special Assistant to the Deputy Governor for Budget and Economy in the State of Illinois where she helped coordinate with business, government, and civic leaders during the state’s COVID-19 response and reopening. She has served as political director for several campaigns and guided grassroots organizing for multiple candidates for office in Illinois.

REAL ESTATE CRG, Chicago CRG is pleased to welcome Ciere Boatright as vice president of real estate and community development. Ciere will manage development, planning and community engagement for key projects, and lead innovation and inclusion efforts within Clayco’s Chicago Business Unit. Ciere joins CRG from Chicago Neighborhood Initiatives, Inc. where she was VP of real estate and inclusion, and managed the 180-acre Pullman Park development that generated over $400 million of new investment and nearly 1,800 jobs.

REAL ESTATE Industrial Outdoor Ventures, Schaumburg Industrial Outdoor Ventures has promoted Tina Torossian to Director of Due Diligence and Marketing. Tina leads and coordinates third parties for all due diligence activities related to acquisitions. Further, Tina runs point on IOV’s marketing and event planning including video production, website management and production of all IOV and joint venture collateral.

She joined IOV in 2019.

REAL ESTATE Industrial Outdoor Ventures, Schaumburg Industrial Outdoor Ventures has promoted Anthony DeLaurentis to Acquisitions Officer.

Anthony sources and underwrites acquisitions throughout the U.S. and plays a key role in analyzing market due diligence and post-closing asset integration. Additionally, Anthony is responsible for overseeing leasing activities on IOV’s value-add investments. He joined IOV in 2019.

NON-PROFIT Leadership Greater Chicago, Chicago Leadership Greater Chicago, the region’s premier civic leadership development organization, is pleased to announce the election of Teresa Wilton Harmon (Daniel Burnham Fellow) to its Board of Directors. Teresa is managing partner of the Sidley Austin LLP Chicago office, leading a team of 1,300 professionals, and a partner of Sidley’s Global Finance practice area, focusing on financial transactions and commercial law. She is also a nationally recognized speaker on the Uniform Commercial Code.

NON-PROFIT Leadership Greater Chicago, Chicago Leadership Greater Chicago, the region’s premier civic leadership development organization, is pleased to announce the election of Joshua Milberg (LGC Fellow since 2017) to its Board of Directors. Josh is Vice President, Technology Strategy & Transformation at Allstate Insurance Company leading the strategy, communications and learning to deliver broader transformation. He serves, and has served, on a number of nonprofit boards in the education, volunteerism and environment sectors.

RECRUITING Comhar Partners, Chicago Comhar Partners has announced the promotion of Nick Layton. As Principal, he will serve as a leader on the execution team and manage client and business relationships for the Chicago and Denver offices. Nick has helped spearhead the growth of the Denver office and mountain region, providing him with the experience and knowledge of the internal workings of the firm. Nick has 15 years of professional recruiting experience in the Private Equity, Consumer Products, and Industrial spaces.

9/8/21 8:59 AM

CHILDREN STILL FACE INCREASED RISK FOR HUNGER. The need for food remains high. And our children are particularly at risk; one in three households with children is facing hunger. It will outlast the pandemic— hundreds of thousands of families will still need our help. So we are developing a multi-year response to the challenge, an effort that will require continuing generosity from everyone.

HUNGER ACTION MONTH IS NOW. Please give generously, for all our neighbors.

DONATE NOW chicagosfoodbank.org/givenow

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Report details conflicts at retirement system TRS from Page 1 had ended his relationship with Singh3 when he joined the agency, even when urged to do so by an internal whistleblower. The report termed that omission “disconcerting.”

Singh joined TRS as CIO on Aug. 5, 2019. Prior to that, he was CEO of Singh3, a technology consulting firm that previously had won a subcontract on a major IT overhaul of TRS’ pension administration system, dubbed the Gemini Project. The OEIG found that Singh continued to get payments from the company after becoming a state employee and steered additional work to Singh3.

Months after he became TRS’ top technology officer, Singh was still listed as the CEO and registered agent of Singh3 with the Georgia Secretary of State’s Office, where the company was registered, according to the OEIG. His contact information was also still listed on the company’s website. Singh family members—who are not identified in the report—who were listed as officers in the company “owned the home where Mr. Singh lived,” the OEIG report said.

Bank records show $30,000 in payments from a Singh3 account to a credit card account that referenced “Jay Singh” during the first six months of his employment at TRS, according to the report.

Singh left TRS in April 2020. Neither he nor Singh3 responded to requests for comment.

The report on conflicts of interest in the TRS executive suite follows another investigation that led to the resignation of the agency’s previous executive director last year. Since the conflicts came to light internally at TRS, several top executives have left, and the launch of Gemini has been delayed.

TRS covers pensions for public school teachers outside Chicago and has a total membership of nearly 430,000. As one of many ailing pension funds across the state, TRS has only 40% of the funds it needs to meet an accrued liability of $135 billion.

Gemini was initially estimated to cost $35 million to $50 million. So far, TRS has spent $8 million on the project.

Singh3 won a TRS subcontract in October 2018 to manage the first phase of Gemini. Later, after he was hired as CIO, Singh used his position to channel additional work to Singh3, according to the report.

That included setting up interviews with Singh3 candidates, turning down candidates from other contractors and awarding new assignments to Singh3.

APPROVALS

Connect with Claudia Hippel at claudia.hippel@crain.com for more information.

P018_CCB_20210913.indd 18

TRS issued Task Order Requests for Personnel to businesses it had existing contracts with—a way to speed up hiring using preapproved contractors. Those contractors would submit candidates for TRS to choose from. After picking a candidate, TRS paid the contractor an agreed-upon hourly rate, and that contractor paid their employee or subcontractor.

According to the report, Singh

inserted himself into a task order Rupnik, who took over in August process for a part-time software 2020, said the incident was “disdeveloper, which ended with only heartening,” especially after prior one candidate being considered: a TRS scandals like shakedowns inSingh3 employee. The hourly rate volving TRS real estate investments for that position was subsequent- during the Blagojevich administraly boosted by then-Chief Financial tion. Formerly the chief investment Officer Jana Bergschneider from officer at TRS, Rupnik says controls $75 per hour to $105 per hour. Ac- for the agency’s investments were cording to the report, TRS’ internal not in place for procurement.

TRS has since created a commitauditor told the OEIG investigator that “at that time, Mr. Singh was in tee of senior personnel to review Ms. Bergschneider’s office every and document procurement deciworkday for half of the day.” Singh sions, implemented a whistleblowsigned off on another task order er hotline and is retraining emawarding a business analyst posi- ployees on conflict of interest and tion to a Singh3 candidate at a rate procurement policies. of $140 per hour.

The OEIG says a TRS employCONCERNS ee who isn’t named in the report Rupnik says the TRS board first brought up potential issues regard- learned of the issues involving ing Singh to leadership at the time: Singh in December 2019, after Human Resources Director Gina whistleblowers approached the Larkin, Chief Legal Counsel Mar- fund’s director of internal audit and cilene Dutton, Senior Legal Coun- risk, Stacy Smith. Smith informed sel and Ethics Officer Cynthia Fain, then-Executive Director Richard and CFO Bergschneider, who su- Ingram and the chair of the TRS pervised Singh. None responded to board’s Audit Committee of what requests for comment. she found, TRS spokesman Dave “It appears that managers be- Urbanek says. Ingram declined to lieved the issue was sufficiently comment. The board hired law firm dealt with by solely relying on Mr. Elrod Friedman to conduct an inSingh’s representation that he was ternal investigation, which wrapped severing ties with Singh3,” the report up in March 2020. says. “No action was taken or follow Urbanek says Singh was asked up conducted by TRS,” including to resign in April 2020. In a written asking Singh exactly how he ended response from TRS that is included his relationship with the compa- in the OEIG report, the fund says ny, who replaced him or whether a Singh was placed on TRS’ do-notconflict would exist if his relatives took over “HAVING A GROUP OF PEOPLE MAKING Singh3.

“TRS policy prohib- THE DECISION INSTEAD OF ONE its employees from having any interest, PERSON WOULD HAVE GONE A LONG financial or otherwise, WAY TOWARD PREVENTING THIS.” direct or indirect; engaging in any business, Kenneth Kriz, professor, transaction, and pro- University of Illinois Springfield fessional activity; or incurring any obligation that is in hire list as an employee, contracsubstantial conflict with the proper tor or subcontractor, and TRS also discharge of his or her duties or re- ended Singh3’s contract and placed sponsibilities to TRS membership,” the company on its list of prohibited the OEIG report points out. “TRS vendors. According to the Illinois employees are required to disclose comptroller, Singh was paid a toany relationship with a vendor un- tal of $225,000 as a state employee. der consideration or an official Singh3 collected $880,000 for TRS representative where such relation- work, the agency says. ship could call into question the TRS also sent a letter about the impartiality of the employee in the Singh incident to the Sangamon decision making process. The em- County state’s attorney, “pursuant ployee’s supervisor and the Ethics to a fraud provision in the Illinois Officer are to review the particulars Pension Code,” the OEIG report of the relationship to determine the says. appropriate course of action to enThere was general turnover in sure the selection process remains upper management after Singh’s fair and in the best interest of TRS.” resignation. Ingram, Bergschneider, Kenneth Kriz, a professor at the Dutton and Larkin all left TRS last University of Illinois Springfield year. Nearly all of those positions who focuses on public pension have since been filled. fund and government financial risk “The people that are no longer management, says TRS would have with the agency were involved in benefited from regular conflict of some way with the incident that the interest reporting and as much doc- OEIG investigated,” Urbanek says. umentation and disclosure as pos- However, the OEIG report contains sible, especially since Singh came no findings of wrongdoing by the from a company that did business individuals who left. with TRS. The scandal and the ensuing After reviewing the OEIG report, leadership turnover “have thrown a Kriz concluded “it was obvious that crimp into this first part of the projMr. Singh was able to kind of control ect,” Urbanek concedes. Gemini, the process for hiring from soup to first described in 2018 as “central to nuts. That should never be the case,” the future success of TRS,” launched he says. “Having a group of people the first phase of its rollout just after making the decision instead of one Labor Day, 14 months after the origperson would have gone a long way inally scheduled launch date. TRS toward preventing this.” does not have a timeline for when TRS Executive Director R. Stanley the full project will be complete.

9/10/21 4:03 PM

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M&A TRENDS

INSIGHTS ON TODAY’S DEAL LANDSCAPE Despite the continuing pandemic, M&A activity has surged so far in 2021, with no immediate signs of slowing. Three M&A advisors shared their insights on the current deal landscape with Crain’s Content Studio.

How is your organization involved in the M&A space?

Joshua A. Klein: Our M&A team acts as a legal advisor for buyers, sellers, stakeholders and management in all types of acquisition and disposition transactions. We partner with our clients to evaluate their business needs and objectives and then assemble the right team to guide the transaction efficiently and skillfully to completion. We represent primary stakeholders in structuring, planning, negotiating and closing complex M&A transactions in public, private and cross-border settings. We provide our clients with a value-add solution by leveraging our industry knowledge with deep experience in asset and stock transactions, mergers, leveraged buyouts, recapitalizations, roll-ups, spin-offs, “going private” transactions and acquisitions of controlling, minority and strategic interests.

John McNally: NFP has a primary role in three different aspects of M&A transactions. The first is pre-acquisition due diligence of the property and casualty and other operational insurance policies, employee benefits programs and retirement plans of acquisition target companies. We also de-risk M&A transactions with representation and warranty insurance (RWI), tax or contingent liability insurance, and directors and officers insurance on special purpose acquisition company (SPAC) deals, which raise capital through an IPO for the purpose

From our base here the Midwest, we maintain an M&A practice that’s truly national in scope.

What’s the number one M&A question or concern you’re hearing from clients?

McNally: The biggest concern from buyers has been the high level of competition for attractive assets, particular as we’re seeing the busiest M&A market ever following a lull in activity during Q2 and Q3 of 2020.

The RWI market in particular has had to scramble to keep up with the volume of deal activity and some very short post-exclusivity periods during which to finalize diligence and place deal insurance. The large number of SPACs in the M&A market has also contributed to the increased competition.

Doran: There are actually three, evenly-weighted concerns that we hear on a fairly consistent basis these days. The first concerns the impact of tax law changes; people wonder about the extent of any increase on capital gains taxes and when will this change become effective. The second concern is the continued uncertainty around the COVID pandemic, and its impact on supply chain and workforce constraints. The third concerns inflation and whether price increases are a temporary impact of imbalances caused by COVID, or whether a more systemic inflationary trend will take hold and bring with it a material rise in interest rates.

“MANY CLIENTS ASK HOW LONG THE TYPICAL M&A PROCESS TAKES AND WHETHER THE DEAL WILL CLOSE BEFORE THE CAPITAL GAINS TAX RATE RISES.” —JOSHUA A. KLEIN, NEAL GERBER EISENBERG of acquiring an existing operating company. Finally, we provide postclosing operational insurance, benefits programs and retirement plans for newly-acquired or merged companies, optimizing cost and quality over time.

William E. Doran: Benesch’s corporate law practice is heavily involved in M&A in the middle market across a variety of industries.

We represent corporate owners, entrepreneurs and family businesses, family offices and private equity investors. We have a robust private equity practice, representing a variety of committed funds as well as the independent sponsor community.

Klein: Many clients ask how long the typical M&A process takes and whether the deal will close before the capital gains tax rate rises. I closed a sale of a business last June, and we had many tax experts weighing in for the client regarding the political winds, including the likelihood that President Biden’s tax plan would make it through the Senate—because moderate Senators may not have the political capital to support it—and whether it could be retroactive to when the President first presented a general economic plan in April.

It definitely pushed the parties to accelerate resolving certain issues to beat the clock.

WILLIAM E. DORAN

Partner Benesch wdoran@beneschlaw.com 312-212-4970

What effect has the COVID-19 pandemic had on M&A activity?

Doran: In our experience, the pandemic has done little in terms of slowing the market. The private, middle-market M&A market has remained robust, while the resurgent public equity market and SPAC phenomenon has kept the public M&A market strong as well. We saw

JOSHUA A. KLEIN

JOHN MCNALLY

Partner Neal Gerber Eisenberg jklein@nge.com 312-269-8438

Managing Director M&A Risk Solutions Group NFP john.mcnally@nfp.com 203-940-3405

a short pause in activity in the second quarter of 2020, but ever since then we’ve seen a steady pace of interesting assignments as our clients have all remained active. Following the initial shock and slow down, the pace has been somewhat breathtaking, to be perfectly candid. The sharp rebound in market demand and economic activity in many sectors has fueled a very active M&A market that continues at a brisk pace. This

has created tons of work for M&A professionals in all sectors—from law to financial advisory to accounting to insurance and so on.

McNally: Besides the more than 70% drop in deal volume in Q2 of 2020, the biggest impact of COVID-19 that we’ve experienced was the ability to perform due diligence and transact M&A deals on a largely remote basis. The ability to

“Benesch was extremely responsive at a critically important time as we were completing two platform investments. The fact that they have both transportation industry knowledge and a strong M&A practice really helps them understand the full set of issues and how they interconnect.”

MARK FORNASIERO Managing Partner Clarendon Capital, LLC

MICHAEL RAUE Partner Clarendon Capital, LLC

MY BENESCH MY TEAM Learn more about our relationship with Clarendon Capital at beneschlaw.com/myteam.

www.beneschlaw.com © 2021 Benesch Friedlander Coplan & Aronoff LLP

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9/1/21 1:40 PM

9/10/21 3:43 PM

M&A TRENDS

INSIGHTS ON TODAY’S DEAL LANDSCAPE transact deals without extensive inperson management team meetings and physical inspection of plant, premises, and inventory pushed deal volume by Q4 of 2020 to greater than historic averages and 2021 has been the busiest year ever for the M&A insurance market.

Klein: We’ve seen multiple effects on M&A transactions. For example, valuations of certain target businesses have risen due to positive impacts on sales tied to their product line becoming more popular with work-from-home dynamics and social and travel restrictions. We’ve seen similar effects with businesses having a connection to rapid testing technology or delivery systems. On the other hand, the inability to travel has slowed down some transactions where buyers required on-site confirmatory due diligence at sellers’ overseas plants, factories and the like.

Have you experienced any busted deals as a result of COVID? Doran: Only one or two, and one was due to a business owner deciding to put the company’s sale on hold to focus on steering the business through the pandemic. The other was in an industry that was particularly hampered by the sudden lack of large, in-person meetings and events.

Klein: We had a deal that was put on ice and eventually terminated due to valuation concerns early in the pandemic, as well as frustration from the inability to conduct on-site due diligence at seller facilities. The seller believed in the true long-term value of his business, and was not going to accept a purchase price decrease for what he viewed as a temporary blip in terms of 2020 revenue. Instead, he moved on to operating his business until the right M&A opportunity came back to him, and we closed the sale of his business at his original value expectation in June 2021.

McNally: We saw a number of transactions abandoned in Q2 and Q3 of 2020 in particular, but also this year—often post-letter of intent and pre-signing where the loss of revenue or other business impact of COVID-19 on the acquisition target caused a material change in implied valuation. We’ve also seen a few abandoned deals come back to life with the original parties completing deals several months later.

Are you noticing trend differences between private equity/financial buyers and strategic buyers?

Klein: It’s become the norm for financial buyers and sellers to expect rep and warranty insurance and, depending on whether the

Successful mergers and acquisitions are a team effort.

When you partner with our nationally recognized M&A team, you will be guided by seasoned attorneys with broad industry experience from concept to closing. As you transform your business, we will provide thoughtful counsel tailored to your business objectives and focused on driving your business forward.

Our collaborative approach delivers results.

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deal is through a broker auction in a competitive situation, minimal or no indemnification beyond the insurance. But we had to painstakingly convince a European strategic buyer that insurance is an excellent trend for buyers and sellers for various reasons. And strategic buyers also push for more cost sharing of the insurance, while financial buyers tend to quickly assume it as a buyer cost.

McNally: From an insurance and due diligence perspective, we have not seen a particular divergence between private equity and strategic buyers over recent quarters. However, we’ve seen both doing more carveout acquisitions, and using RWI at historically high levels to de-risk their transactions.

Are you noticing any trends in buyers’ diligence?

Doran: Due diligence has become an increasingly longer and more involved process. The trend began before COVID, due in part to the evolution of RWI, and continues as buyers seek to understand the potential mid- and long-term impacts of COVID on their target businesses.

I also see an increasing use of a larger array of specialized outsourced diligence providers. Data security, state and local tax compliance and worker classification have also become more prominent topics of late.

Klein: We’ve certainly seen an increasing focus on areas such as cybersecurity, insurance and anticorruption compliance. Buyers and deal insurance underwriters are also

buyers having lots of committed capital to deploy and find returns.

The lower—less than $100 million in enterprise value—mid-market deal space has been extremely busy for us, including a high volume of platform add-on deals for private equity buyers, and carve-out deals for both private equity and strategic buyers. This is also a space where the increasing number of family office investors seems to have driven deal competition.

Doran: There’s a tremendous amount of capital available that’s seeking to be put to work. We remain in a relatively low-interest-rate environment. The U.S. economy continues to be on a growth trend with sustainable growth prospects. Disruptive economic and societal changes, accelerated by COVID, are creating new business

“DUE DILIGENCE HAS BECOME AN INCREASINGLY LONGER AND MORE INVOLVED PROCESS.” —WILLIAM E. DORAN, BENESCH Doran: We’re seeing a greater willingness by strategic buyers to embrace RWI insurance and participate in broader auctions.

Financial buyers continue to move much faster to closing, and RWI has accelerated this trend.

continuing to target compliance with employee classification rules and environmental concerns as key subject matters. And, though it’s not a trend, pre-closing tax matters are always a critical area for due diligence.

McNally: The most notable buyer diligence trend has been far more frequent use of IT, data security and cyber liability specialists, and a specialist firm or consultant in addition to the law firm’s IT specialist team. We’re seeing this on most deals now, even small ones of less than $50 million in enterprise value.

We’ve also heard reports about clients experiencing difficulty retaining advisors—particularly for quality of earnings reviews—given the increased M&A volume.

What factors are currently driving middle-market deal activity?

Klein: It felt like there was a shortterm COVID-induced pause in spring 2020 as companies focused on internal business issues as well as protecting valuation in the M&A conversation. But as soon as they navigated those rough waters, business owners looking for an exit came back to the market. And the excess “dry powder” of private equity capital looking for good middlemarket deals has been a driving force for years. So, while private equity capital investment took a COVID “time out,” it quickly returned to drive M&A over this past year.

McNally: The biggest factor is pentup demand following the COVIDinduced lull in 2020, with strategic buyers looking to add complementary functions or capability, and financial

models, new operational models and new business opportunities. Baby boomers continue to shift toward business exits, while the millennials are entering their time of business leadership, high investment and consumer activity, creating demandside stimulus and transactional opportunities.

How are family office investors impacting M&A? Klein: Family offices have become a formidable competitor to private equity funds in targeting M&A opportunities. And they have a different pitch to make to management beyond the sale price.

The key differentiating factor ties to the typical management equity “rollover” where management buys and/or earns equity in the buyer vehicle for the business. A family office buyer can pitch management on their long-term approach versus a five- to seven-year exit path for PE. That approach is a better match for certain management teams, even if it pushes their next exit valuation opportunity further down the road.

Doran: The family office has really come into its own over the last decade as a recognized and organized asset class. Many of these groups function with the equivalent activity of a small private equity fund or independent sponsor. The flexible investment mandate on terms and holding period is appealing to some sellers. This is creating even greater amounts of capital and competition in the M&A market.

McNally: The increasing number of family office investors seems to be driving deal competition. The

9/10/21 3:44 PM

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impact in our book has been on lower mid-market deals, especially those below $50 million in enterprise value, and appears to have contributed to the increased level of competition in that segment. Family office investors are “professionalizing” a lot of these smaller deals, with more third-party advisors—legal, tax, financial, IT— being deployed akin to larger private equity deals.

In light of the uptick in in cybersecurity breaches, how are you advising your clients regarding best practices?

Doran: We are advising clients— especially those in retail or that touch customer or third-party data—to review internal compliance policies, procedures and standard operating procedures. Many businesses have ignored these risks, but none can afford to anymore.

Klein: As it’s become such an important area of risk, information technology and cybersecurity are critical specialties for our deal team to offer clients in M&A transactions.

To address this as a firm, we’ve added attorneys with this specific expertise over the past few years so that we can advise clients regarding all key subject matters in a typical deal. With our recent M&A deals, those members of our team, along with our insurance coverage experts, are leading the due diligence in those areas, assessing the applicable provisions of the acquisition agreement and advising the client on both the risk and how to mitigate it going forward.

McNally: We recommend that buyers increase their focus on cyber liability insurance—both in terms of reviewing adequacy of existing target company coverage and any history of claims or breaches. We’ve also incorporated third-party data security consultants to enable a deep dive in our cyber liability insurance due diligence process. RWI insurers generally have an expectation of target companies having cyber liability insurance if full coverage of data security representations is expected, so having coverage in place has become a necessity on most deals.This has been complicated by an extreme hardening of the cyber market over the last 12 months, with price increases, higher policy retentions/deductibles and tighter coverage terms across all business segments and territories.

How do you see the potential tax law and tax rate changes being considered in Congress impacting the deal market?

McNally: It’s difficult to know with any certainty, but the potential

for increased capital gains taxes appears to have been a factor in the highest-ever deal volume we’ve seen throughout 2021, with Q3 the busiest yet. We expect a furious Q4 where efforts to complete deals will be very strong. On the other hand, we’ve seen some transactions stall on account of the uncertainty. In one instance, the buyer and seller agreed to split the cost of any additional taxes resulting from retroactive increase to the capital gains rate, allowing the transaction to proceed. We’ve also seen requests from both buyers and sellers to insure the risk of a retroactive capital gains rate increase. One insurer in the tax insurance market has been willing to offer this coverage.

Doran: Concern with tax law changes has created some additional deal activity as sellers seek to lock in capital gains at current rates.

However, based on the anticipated timing of upcoming tax changes, the period of “deals done under the wire” before rates increase may end up being fairly short.

Klein: As I described earlier, uncertainty regarding details of the President’s tax plan and whether it will be approved are encouraging companies to take advantage now of current tax rates before they potentially rise.

Where do you see the pace of transaction activity trending over the remainder of this year, six months from now, and for 2022?

McNally: We expect the rest of Q3 and Q4 to be the busiest M&A market our team has ever seen, with no reason to believe that 2022 will slow down substantially. Deal teams have adjusted to the constraints of operating under COVID-19 restrictions, and concerns about potentially increased capital gains tax rates have not been featured in our discussions with investors.

The large number of SPAC investors needing to complete deals should also help sustain larger mid-market and $1 billion-plus deals. Also, as most of our book is mid-market, increased antitrust/competition regulatory review should not be a substantial consideration.

Doran: We believe that deal activity will remain extremely strong for the remainder of this year and most if not all of 2022. The factors are all in line for a continued strong market and level of deal activity. Rising tax and interest rates will dampen this over time, and there’s always the risk of another business disruption due to COVID or an unforeseen geopolitical event. However, we believe that the prospects for continued robust M&A

“WE EXPECT THE REST OF Q3 AND Q4 TO BE THE BUSIEST M&A MARKET OUR TEAM HAS EVER SEEN, WITH NO REASON TO BELIEVE THAT 2022 WILL SLOW DOWN SUBSTANTIALLY.”

ABOUT THE PANELISTS WILLIAM E. DORAN is a partner at Benesch, an AmLaw 200 business law firm, where he specializes in mergers and acquisitions, general corporate and commercial transactions, private equity, and debt and equity finance. For over 30 years he has helped clients complete a variety of public and private transactions and navigate myriad business and legal challenges. He regularly provides responsive, thoughtful and effective advice to the leaders of business enterprises in a wide range of sizes and industries, often acting as the client’s principal legal counsel.

JOSHUA A. KLEIN is a partner at Neal Gerber Eisenberg, one of the largest single-office law firms in the nation, where he represents buyers and sellers in complex mergers and acquisitions involving middle-market and large businesses across numerous industries. He develops and implements comprehensive strategies for equity financing deals and reviews similar deals for private companies, family offices and high-net-worth individuals contemplating early and growth-stage investments. He has significant experience handling sophisticated venture capital transactions involving both lead investors and portfolio companies.

JOHN MCNALLY leads the M&A Risk Solutions Group at NFP, an insurance broker and consulting firm that provides employee benefits, specialized property and casualty, retirement and individual private client solutions. The group offers a full suite of insurance brokerage and advisory services for NFP’s private equity fund and corporate clients.

A lawyer and 20-year industry veteran, he previously led the transaction advisory practice at JLT Specialty USA and before that held various roles at AIG and Beazley Group in New York and London.

activity will remain strong in the nearto mid-term.

Klein: It will be interesting to see if the market will cool as the threat

of a capital gains tax hike becomes more likely in early 2022 along with rising interest rates and the cost of debt leverage. But the deal market has been so consistently hot for 13

months now that I could see it lasting at least through the remainder of 2021. I would even bet it will stay warm at least through the first half of 2022.

Acting today. Planning for tomorrow.

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22 September 13, 2021 • CRAIN’S CHICAGO BUSINESS

Helmut Jahn’s practice faces special challenges after death of marquee name JAHN from Page 1 “In his mind, he said this was the right thing to do,” he says. “In his heart, he wasn’t ready. He was never ready.”

Four years later, the leadership of Jahn’s practice must find a way to win prestigious commissions without either man that live up to its famous name. With celebrated works around the globe, the firm is best known here for buildings including United Airlines’ Terminal 1 at O’Hare International Airport, the Mansueto Library at the University of Chicago and the Thompson Center in the Loop.

In a recent open letter, Helmut Jahn’s son, Evan Jahn, now president of the firm, expressed confidence that more groundbreaking assignments are in its future.

“We will continue to cultivate our talented and diverse team, while inviting new thinkers and makers to join us,” he wrote. “We will continue to honor Helmut’s bold vision and his painstaking craftsmanship, while ambitiously pursuing new ways to learn, imagine, and create.”

Yet it’s not obvious who currently at the firm is ready to step out of Helmut Jahn’s shadow, assume a design-leader role and dazzle clients with big ideas. Evan Jahn, who declines to comment, is not an architect. In his LinkedIn profile, he describes himself as a “place-maker, urbanist and environmentalist,” listing work experience as a “virtual design and construction engineer,” “environmental and sustainable policy specialist” and “green analyst.”

A more obvious candidate could be one of Helmut Jahn’s most trusted colleagues, architect Philip Castillo, an executive vice president who

has worked for the firm since 1979.

The question is whether Castillo, regarded as a skilled technician who put Jahn’s ideas into practice, is suited for a frontman role. He declines to comment.

“Does he have the ability and the drive and the personality to make it work for himself?” asks Chicago architect Dirk Lohan. “I do not know the answers. Time will tell.”

FILING

The post-Helmut Jahn era has included at least one bump so far.

In August, a company owned and led by the architect filed for Chapter 7 bankruptcy protection. The firm, Jahn LLC, holds the lease for the architecture practice’s office at 35 E. Wacker Drive, but it is distinct from the operating design business, which operates under a different legal entity, Jahn Architecture Inc., according to Joseph Cohen, a lawyer for Jahn LLC. The bankruptcy filing serves a narrow purpose: to resolve a rent dispute with Jahn LLC’s landlord, he says.

Still, the filing sparked unwanted questions about the health of the architecture practice. In his letter, Evan Jahn acknowledged the filing “inadvertently sent a mixed signal.”

“Our intention was and remains to put the firm in a stronger position to invest in our capacity and our staff,” he wrote. “This financial strategy does not impact JAHN Architecture, Inc.’s ability to meet our current and future responsibilities with clients.”

The firm has at least one big current client: a joint venture between two New York developers, Time Equities and JK Equities, that plans a 74-story residential tower at 1000 S. Michigan Ave. designed by Jahn.

Foundation work for the project halted last year, and it’s unclear

whether the firms, which recently revised their plans, have the financing to resume construction. Time and JK Equities executives did not return calls.

Helmut Jahn “will be greatly missed but we look forward to carrying his legacy forward with the completion of 1000M,” Time Chairman and CEO Francis Greenburger said in a statement immediately after his death. “As part of his legacy he has left behind a very talented team of associates, including Philip Castillo, who we look forward to continuing our close association of many years.”

Aside from the Chicago high-rise and his efforts to save the Thompson Center from demolition, Helmut Jahn in his final years had designs in progress for buildings in Tampa, Fla.; Berlin; Frankfurt, Germany; and Moscow, according to Jahn’s website. He also designed an archives center for the Pritzker Military Museum & Library that’s under construction in Somers, Wis., just across the border.

From a workforce standpoint, Jahn’s practice is a lot smaller than it used to be. Gonzalez Pulido estimates about 160 people worked there before the 2008 financial crisis, with its headcount dropping to 80 by 2012. The firm reported 24 employees when it applied for loans totaling $922,349 through the federal government’s Paycheck Protection Program, created last year to assist businesses during the pandemic.

SURVIVAL

Plenty of architecture firms survive, and even thrive, after a visionary leader dies. Sixteen years after the death of Philip Johnson, the designer’s practice continues as PJAR Architects, a New York-based shop led by Alan Ritchie, who worked

with Johnson for more than 25 years.

London-based Zaha Hadid Architecture remains a global leader in the industry more than five years after the death of founder Zaha Hadid, a winner of the Pritzker Architecture Prize. Her longtime business partner, Patrik Schumacher, has led the firm as its senior designer, though his leadership has been marred by a bitter legal battle over Hadid’s estate.

When Ludwig Mies van der Rohe died in 1969, the iconic architect left his business to three partners, ­Joseph Fujikawa, Bruno Conterato and Dirk Lohan, Mies' grandson.

They worked together for more than a decade, changing the firm’s name to FCL Associates in 1975. A few years later, Lohan picked up a plum client, McDonald’s, which hired him to design its Oak Brook headquarters.

Johnson, Hadid and Mies prepared their firms for the next generation of leadership. Jahn revealed his plan in October 2012, announcing that he would share design leadership with Gonzalez Pulido. He also promoted his protege to president and changed the name of his firm from Murphy/Jahn to just Jahn.

“I’m not retiring, but the fact is that I’m 30 years older than Francisco,” Jahn, then 72, told the Chicago Tribune. “It’s probably a question of time when I will not be around, but we have never talked about a date.

It’s a signal that it’s the beginning of a change, but there is no timetable for this.”

Gonzalez Pulido, a native of Mexico, had developed a close working relationship with his German boss, working for the firm since 1999 and becoming partner in 2009.

“He has been my mentor, my friend, my adversary sometimes,

too,” Gonzalez Pulido says.

He explains how he pushed Jahn in the following years to expand into China and other overseas markets.

But by 2016, Gonzalez Pulido says, he was generating about 70% of the firm’s business, versus 30% for Jahn.

“What happened was that I became too big,” he says. “That was a problem for him.”

Still, Gonzalez Pulido wanted to take control of the practice and didn’t hesitate to let Jahn know.

“He was open to start moving that way,” Gonzalez Pulido says. “But he was also hesitant, naturally, because this was his life.”

Unable to reach an agreement, Gonzalez Pulido finally called it quits in May 2017.

“I came into his office and said, ‘Helmut, we’re done. I’m not going to buy you out. I’m going to sell you my stock and I’m going to move on,’ ” he says.

As uncomfortable as it was, Gonzalez Pulido recalls it being a “beautiful moment” between the two men, stressing how graciously Jahn handled it.

“He was a huge gentleman— huge, huge,” he says. “He was as big as you can be.”

Gonzalez Pulido remained good friends with Jahn after leaving the practice, and the two often discussed ways their firms could work together. He’s not sure what the future holds for his old company, but he speaks highly of Evan Jahn, calling him a “very intelligent man” with good intentions.

“When I think of the future of the firm, (Helmut Jahn) thought that he’s immortal—he thought, ‘I’m going to be here for another 10 years,’ ” Gonzalez Pulido says. “He left the way he lived life—he was a comet. He was unbelievable.”

Allstate wants to hike auto insurance rates again. Will state regulators allow it?

DRIVING from Page 3 average cost of each claim is substantially higher due to more highspeed accidents and inflation.

Losses have become harder for actuaries to forecast. Allstate and other rivals don’t want to wait to see profit margins eaten away before taking price action. At the same time, gaining market share is a top priority for Allstate, which has fallen behind Geico and Progressive in recent years.

The Texas Department of Insurance in July rejected Progressive’s nearly 5% average rate hike. In a July 26 letter, Melissa Hamilton, public counsel for the department’s Office of Public Insurance Counsel, wrote, “Progressive’s trend selections (in its filing) produce inflated estimates of loss ratios and claims costs. . . .Trends based on the data in the filings would have resulted in a rate decrease.”

The department is now seeking refunds, which Progressive so far is resisting, according to filings. The increase went into effect July 2 for new customers and Aug. 5 for renewing policyholders. A hearing is scheduled for early November for both the department and Progressive to make their cases.

P022_CCB_20210913.indd 22

For Progressive, based in suburban Cleveland, the stakes are high given Texas’ size. As of 2019, it was the second-largest auto insurer in the second-largest market in the country, with $3.1 billion in premiums, or a market share of just over 13%, according to department statistics. Texas alone made up 10% of Progressive’s premiums that year.

REJECTION

In Connecticut, regulators on Aug. 19 rebuffed Chevy Chase, Md.based Geico’s bid to raise rates by 6% on average, essentially accusing the company of ignoring the pandemic’s effects altogether.

“This filing is rejected as basically this is a 6% increase . . . using LOSS DATA through 12/31/2019,” the department said in its note. “This is NOT acceptable! The trend included data only through 3/31/2020. We require all filings to include experience through 2020 to include COVID experience of which you do not mention COVID-19 at all. The company will need to refile and include 2020 data and pandemic experience.”

Likewise, Connecticut is resisting Progressive’s filing for a 5.8% increase. “We are finding your rate change request to be excessive as we do not see that you have a rate need

at this time,” department actuary Susan Gozzo Andrews wrote to Progressive on July 12. The two sides are continuing to haggle.

Allstate has been slower to roll out rate hikes. In comments Aug. 5 to analysts, CEO Tom Wilson said he wasn’t worried about regulatory pushback when the time comes.

“With rental cars from $50 a day to $100 a day and used car prices going up 40%, regulators know you got to collect more money to take care of that,” he said.

Representatives of Progressive and Allstate didn’t respond to requests for comment.

Chicago-based Kemper, which insures mainly drivers with checkered driving records or who are otherwise deemed higher risks in 41 states plus Washington, D.C., reported a surprise $63 million loss in the second quarter. The company pinned most of the blame on faster-than-anticipated inflation in fixing cars damaged in accidents. CEO Joseph Lacher told investors he believed losses wouldn’t persist for long.

“A lot of it is global supply-chain related,” Lacher says in an interview. “All of these things are rippling through.”

Kemper is preparing to hike prices and also is tightening underwriting

guidelines for some policyholders.

Lacher doesn’t anticipate regulatory challenges—Texas accounted for 11% of Kemper’s auto premiums in 2020—but he acknowledges that it’s harder for both companies and agencies to analyze data that’s been so skewed by COVID. “The last 12 months are not representative of what any of us expect in the next 24,” he says.

Signs that “regulators are pushing back on rate increases following the exceptional results last year . . . will bode poorly for insurers like (Progressive) that need to raise rates and may not get them until more bad results are reported,” wrote J. Paul Newsome, an analyst at Piper Sandler, in an Aug. 18 report.

LIMITED POWER

Illinois, unlike Connecticut, Texas and many other states, gives its insurance director virtually no authority over rate-setting. Insurers simply must notify the department of rate changes and file their rationales.

So Progressive hiked premiums by nearly 3% on average in June for drivers in Illinois who buy online or over the phone. (Those who buy through an agent weren’t affected.)

So far, though, other large insurers haven’t followed suit here.

The regulatory resistance is a new wrinkle to the challenge of maintaining profit margins while remaining price-competitive. The other big impediment is Bloomington-based State Farm, the nation’s largest auto insurer. State Farm led the way last year with double-digit rate reductions throughout the country and shows little sign so far that it’s preparing to respond to higher losses the way Progressive is and Allstate says it will.

In the last six months, State Farm has imposed small single-digit increases in just two states—Maryland and New Mexico—as well as the District of Columbia. But the 3.4% average bump in Maryland followed a 14.6% decrease last year. And the 2.7% uptick in New Mexico came after a 12.2% cut last year, according to filings.

“We’re unable to speculate about future rate adjustments,” State Farm spokeswoman Angie Harrier says in an email. “We continue to make incremental adjustments based on driving behaviors to ensure the rates we have in place reflect anticipated driving and claim volume, and to minimize the impact to customers as much as possible. Even with these changes, State Farm auto rates remain below pre-COVID-19 levels.”

9/10/21 4:02 PM

CRAIN’S CHICAGO BUSINESS • September 13, 2021 23

A late-career Wright that ‘scoops in the light’ The St. Joseph, Mich., house, which the architect designed in 1950, is coming on the market for the first time in 25 years

VHT STUDIO PHOTOS

THE UPWARD-TILTING ROOF of this house designed by Frank Lloyd Wright “scoops the light off the lake,” said Gina Flamm, who since 1996 has owned the home on a Lake Michigan bluff in St. Joseph, Mich., with her husband, Arthur Wolak.

The house, on Old Lakeshore Road 95 miles from the Loop, is from late in Wright’s career— he was 83 when it was built, in 1950—which makes it more of a modern design than his Prairie-style homes and others from early in the 20th century.

On the outside, it’s essentially a ranch house with a jaunty hat on.

Inside, the details are quintessentially Wright: an artfully designed fireplace at the heart of the home, built-in furniture and abundant natural materials including brick and wood.

When Flamm, the head of a Michigan pickle firm her grandfather founded in 1917, and Wolak bought the house 25 years ago, the house was almost half a century old and in need of attention. “We started

BY DENNIS RODKIN

“THIS IS A HOUSE THAT MAKES MUSIC SOUND BETTER. IT MAKES FOOD TASTE BETTER.” Owner Gina Flamm

bringing in craftsmen right after we moved in,” she said.

Over the years, the couple replaced the roof with a hightech membrane that beats Wright’s notorious penchant for building leaky roofs, replaced all the old windows with energy-saving double-paned glass and yanked black marble flooring off a lake-facing terrace to take it back to Wright’s trademark shade of red.

The couple enjoyed the Wright atmosphere. “This is a house that makes music sound better,” Flamm says. “It makes food taste better.”

Late last year, Flamm handed over the reins of her grandfather’s pickle company to a longtime deputy. She and Wolak, who was also a Flamm Pickles employee, plan to divide their year between Michigan, Florida and Italy, giving them less time to enjoy life on the Lake Michigan bluff.

They listed the four-bedroom, 3,150-square-foot Wright house for sale Sept. 8.

The asking price is $1.96 million, and the listing agent is Anne Gain of @properties.

The asking price includes the furnishings and art.

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