Crain's Chicago Business, October 9, 2023

HOMEOWNERSHIP GETS HARDER

Illinois’ EV future rides on the UAW’s next deal

The contracts that Ford, GM and Stellantis eventually sign with the union will go a long way toward setting their electric strategy

As the United Auto Workers strike continues, Detroit’s three major automakers have more to fear than the immediate nancial pain of idle factories, such as Ford’s Torrence Avenue assembly plant. e worry also runs deep for states reliant on the Detroit ree and the drive toward electric vehicles.

e deals that Ford, General Motors and Stellantis eventually make with the union will go a long way toward determining their electric futures, according to industry experts. e UAW wants a raise and boost to benets re ecting record pro ts they have helped the automakers earn in recent years. e companies want a deal that doesn’t chain them to labor costs that cripple their competitiveness with electric vehicle maker Tesla, transplant automakers and fast-rising EV startups such as Rivian.

“ is is a de ning period for Detroit and the future of the auto industry as we rmly believe that

if GM, Ford, Stellantis accept anything close to the deal on the table the future will be very bleak for the U.S. auto industry,” Dan Ives, managing director at Wedbush Securities, said Sept. 27 in a research note to clients.

Chicago homeowners may well end up paying a big price for the deep decline that’s hit the vacancy- lled downtown o ce market.

According to a new analysis prepared exclusively for Crain’s by the Mansueto Institute for Urban Innovation and the Center for Municipal Finance at the University of Chicago, the property

tax bill paid by the average Chicago homeowner could rise hundreds of dollars a year as o ce tower owners pay less because of the depressed value of their property. Homeowners e ectively would pick up a bigger share of the tax load.

For instance, if the tax value of downtown o ce buildings drops 20% — a gure that’s substantially lower than actual reality, according to some industry experts

— the bill for the typical Chicago home would rise from $5,244 to $5,424. If there’s a 40% decline, the average residential bill would go up almost 10%, from $5,244 to $5,723, assuming taxing bodies don’t change their gross levy, the study found.

e ndings underline the challenge facing Mayor Brandon Johnson, who has vowed to freeze

Argo Tea has a new owner, and it wants to re-establish cafes in Chicago. PAGE 4

PAGE 7

Obtaining pay raises, ending two-tier wages and restoring cost-of-living increases are sticking points that spurred the strike. But the overall stakes are much higher than that. e wrong deal could sink the automakers — and as the automotive industry goes, so goes the Rust Belt. at’s why states like Michigan and Illinois within it, many of which have massive down payments on new EV battery plants, are watching the strike play out with their economic futures at the forefront.

Joseph Lopez, executive director of the Spanish Coalition for Housing.

Kurt Nagl and John Pletz

Impact of Chicago Ford plant strike is already spreading

We will soon learn what Johnson really intends

Former Mayor Rahm

Emanuel once famously declared that a good politician “never (lets) a good crisis go to waste.” We’re about to nd out how good of a politician Chicago’s current mayor is. is coming Wednesday is budget day for Mayor Brandon Johnson, the rst opportunity he’ll have to truly lay out his tax and spending priorities when he’s scheduled to unveil his proposed 2024 budget. True to Rahm’s dictum, there are crises galore on his scal plate.

As of last month, Johnson had an estimated $538 million hole to ll. e cost of dealing with an in ux of refugees from Venezuela and other points south is well into nine gures and is rising fast as more immigrants are bused in

daily. e central business district, the cash cow that provides over a quarter of the city’s property tax revenue, is in trouble, plagued by vacancies that are driving down property values. e progressive coalition that put Johnson into o ce is eager to see progress on the big spending and investment promises he made, lest he become another Lori Lightfoot. Federal COVID relief dollars are almost gone. And while the number of murders and shootings in the city is nally declining, the number of car thefts, robberies and other horrors is soaring, according to the CPD. How to deal with all of that? If he follows Emanuel’s dictum, Johnson will use some of those harsh realities to play o one faction against the other. For instance, pushing the business community to dig a little deeper while simultaneously telling his progressive allies that, while they may get an hors d’oeuvres or two

now, the main course may have to wait a while, something his City Council allies seem to have been hinting at recently. Overall, it looks like an absolutely fascinating budget. Here are some things to keep an eye on:

How many vacancies in city staffing will Johnson keep open, and how many of them will be police? Appropriating money for positions you never intend to fill and then spending the money elsewhere or keeping it to fill budget holes is a mayoral trick as old as cities. Johnson has promised not to “cut” police spending, but will keeping the force at its current depressed staffing level while neighborhoods from Chatham to Lincoln Park, Pilsen and Austin are crying for more cops will be a dangerous roll of the dice. Take a close look Wednesday at the fine print of what Johnson actually proposes.

How much genuinely new spending on social equity and related projects will the budget actually include, and how will it be paid for? at question is posed by Sarah Wetmore over at the Civic Federation, and she’s absolutely correct to ask it. Any big spending plan that only lasts a year or two will come across as stunt more than policy. It’s worth noting that Johnson made his path harder by quietly bowing to wishes from his allies in the Chicago Teachers Union to resume paying costs of non-teaching Chicago Public Schools sta out of the city budget, costing $45 million a year.

Johnson recently announced the city will forgo annual in ation hikes in the property tax. ough that action won’t get much applause from bond-rating agencies, it got a big thumbs up from Jack Levin, CEO of the Chicagoland Chamber of Commerce, who also praises Johnson’s move to put extra money into

pensions. But Levin is worried about other tax hikes — levies on digital ads and hotel rooms are rumored — as well as related progressive initiatives to raise the tipped wage for restaurant workers, more than triple the transfer tax on sales of most commercial property and increase paid time o from ve days to 15 for all Chicago workers. Such actions “are not going to create jobs,” says Lavin.

Will an expected huge drawdown of reserves from the city’s tax increment nancing districts leave them with enough money to do their job? Like on LaSalle Street, where plans to convert old o ce buildings to residential use will be stillborn if needed TIF funding is diverted to other spending.

It will take a real magician to pull all of this o . Maybe Johnson — and I’m not talking Earvin Johnson, either — has the magic. We’ll see.

BDO announces employee stock ownership plan

The company will become one of the largest professional services rms in the country to offer an ESOP

Brandon Dupré

Chicago-based accounting giant BDO USA announced its intention to establish an employee stock ownership plan, or ESOP, which would make it one of the largest professional services rms in the country to make the move.

e decision could set the stage for others to follow as the fear of relinquishing ownership to private-equity rms hungry for pro ts and eager to cut costs grows.

“It’s about turning around the profession, which is under siege from private equity,” said Stephen Ferrara, BDO’s chief nancial o cer. “With an ESOP, employees get to build wealth; they have equity in the rm and are rewarded for contributing to our success.”

Not only will the move protect the company from private equity, but Ferrara believes it will also help attract younger talent to an industry in need of it.

“If you look at the accounting profession, younger people think it’s boring,” he said. “And they’re migrating to nance and private equity as alternatives to the accounting profession. We need to shake it up and do something di erent if we’re going to continue to thrive as an industry.”

BDO currently employs 12,000 professionals across more than 75 o ces nationwide, according to its website. Crain’s research shows BDO is the seventh-largest accounting rm in the Chicago area, with about 800 people employed here as of 2022. It made a little over $2 billion in

rmwide revenue in 2021.

ESOPs have been especially popular with architecture and engineering rms, as well as other professional services industries, but BDO represents the largest accounting rm to make the leap, said Andrew Stump , a shareholder at law rm Butzel Long who has written academic papers on ESOPs.

“If you’re looking for a way to transfer ownership and come up with the asset nancing necessary to transfer ownership without putting the equity in the hands of a purely nancial investor who’s a stranger to your business, then this is the way you do it,” he said.

An ESOP functions as a company’s retirement plan established as a trust, which is then used to secure a loan that keeps equity in the hands of its employees.

But, as Stump points out, the risks can be especially high because retirement plans are tied up in the company rather than diversi ed.

“ e problems are ultimately squared,” he said. “ e risk of your company having a badnancial outcome: Not only is your current job at risk, but your retirement savings are tied to the same risk.”

A local example

For an example of the downside of an ESOP, look no further than the Chicago Tribune. Real estate mogul Sam Zell engineered a leveraged buyout of the much larger Tribune media company in a 2007 ESOP transaction. e largest-ever ESOP acquisi-

tion of a newspaper saddled the company with more than $13 billion in debt just before the economy collapsed in the Great Recession and newspaper revenues nose-dived. By December 2008, the company had led for bankruptcy protection, wiping out the ESOP’s investment.

But Ferrara believes the risk is worth the reward because it’s a bet on yourself and the company.

“You’re not in control of your own destiny with private equity calling the shots,” he said. “We’ve been successful over the last 12 years because we’ve been very entrepreneurial and we’ve been willing to try new things.”

BDO retained Stout, a global investment bank and advisory rm, and law rm McDermott Will & Emery to help lead the transition to an ESOP.

Greg Hinz

Stephen Ferrara

Invenergy inks massive HQ expansion

The company is adding around 84,000 square feet to its lease and working on a plan to create a clean energy innovation hub in the tower

Danny Ecker

One of the largest independent clean energy producers in the world is adding about 84,000 square feet to its Wacker Drive headquarters, a rare massive expansion of workspace and a deal that could tee up the creation of a new clean energy innovation hub in downtown Chicago.

Theaters make ‘unprecedented’ request for more city funding

With attendance and revenues plummeting, local stages are pleading for more money from a battered city budget

I

As Chicago Mayor Brandon Johnson works to close a yawning budget gap, he’s under pressure to nd more money for the city’s performing arts sector, which still hasn’t recovered from the COVID-19 pandemic.

To aid struggling Chicago theaters, Claire Rice, executive director of Arts Alliance Illinois, the state’s top arts advocacy group, is asking Johnson to tap the city’s corporate fund for nearly 35% of the Chicago Department of Cultural A airs & Special Events’ $81 million annual budget, an unprecedented move for a department traditionally funded primarily by other sources.

“Right now, with a new administration and a new mayor, there’s a moment for the city to plant a ag in the ground and demonstrate the mayor’s commitment to our creative economy,” said Rice, con rming that she made the funding request directly to the mayor’s o ce.

See THEATERS on Page 22

By Brandon Dupré

Season-ticket purchases, a pillar of the industry’s business model, dropped 65% over the past four years, as attendance at Chicago theaters fell nearly 60%.

In a move that bucks the trend of companies slashing o ce space in the wake of the COVID-19 pandemic, Invenergy has inked a long-term extension of its lease at 1 S. Wacker Drive and increased its footprint to around 180,000 square feet in the building, a company spokesman con rmed. e three- oor expansion forti es the renewable power company’s position as the 40-story tower’s largest tenant. It also comes a few months after Invenergy announced privateequity giant Blackstone Group was adding $1 billion in new backing for the company to the $3 billion it had invested in it over the previous two years.

e lease expansion is a much-needed moment of celebration for downtown o ce landlords as they grapple with a remote work movement that has pushed vacancy to a record high and fueled a wave of distressed properties. Invenergy’s recommitment to in-person o ce work — one of the largest expansions by a downtown o ce user since

the COVID-19 pandemic began — could be a con dence booster for building owners sick of watching big tenants cut back on space.

One such owner is New Yorkbased real estate rm 601W, which owns the 1.2 millionsquare-foot Wacker Drive tower and is getting a critical lifeline from Invenergy’s expansion and lease extension. 601W has been

Invenergy develops, owns and operates big renewable and other clean energy facilities around the world.

trying to ll a big block of empty space in the West Loop tower since its previous largest tenant, consulting rm RSM, moved out in 2021. e landlord is also dealing with close to $260 million in debt on the building that has a oating interest rate, meaning its borrowing costs have jumped over the past year and pushed its debt service well above the amount of cash ow the building generates.

“As we continue to expand our operations throughout the

See INVENERGY on Page 22

Wells Fargo plans major retail push in Chicago

The bank plans to grow from seven branches to at least 30 locally

John Pletz

Wells Fargo plans to roughly quadruple its retail presence in the Chicago area in the next several years, opening more than 20 new branches.

The San Francisco-based bank is the nation’s fourth largest, but it’s No. 12 in Chicago and the suburbs, with seven branches and about 1.5% of deposits, according to Federal Deposit Insurance Corp. data. Wells Fargo said it plans to have at least 30 local branches in the coming years but didn’t specify a time frame.

e rst new branch will open

downtown next month, the bank said. It also plans to open branches in Bronzeville and Bridgeport. Wells Fargo previously led plans with the O ce of the Comptroller of the Currency to open locations in Old Town and in Glencoe, Crain’s reported.

It’s a contrarian bet by CEO Charles Scharf: Wells Fargo is opening branches here at a time when others are closing them.

Scharf says banks need brickand-mortar branches as well as mobile apps and other digital banking tools.

“People who are not in the business still question what the

future of branches is,” he told Crain’s. “Our experience is you’ve got to have both. People want to physically go into someplace, especially when they’re making a decision regarding their nancial life, whether it’s a loan or whether it’s an investment. ey want to see people.”

Greater competition

Wells Fargo entered the Chicago retail-banking market in 2010 through the acquisition of Wachovia. Although it has just a handful of retail branches, the bank has more than 1,000 employees in Chicago, including 350 to 400 nancial advisers. In

the Chicago area, its commercial business is larger than its consumer banking share.

“As we looked at our retail footprint, we said, ‘What are the most important markets in the country?’ ” says Scharf. “Where should we have higher share, given what we have to o er? Chicago scores at the top of that list.” at means Wells Fargo will be facing o with giants such as JPMorgan Chase, the largest player in the market, with about 23% of deposits, according to FDIC data, followed by BMO and Bank of America. It also will be in greater competition with locally based banks such as Wintrust Financial.

Scharf knows the Chicago

market from his days as chiefnancial o cer at Bank One in the early 2000s and later as head of retail nancial services at JPMorgan Chase.

Wells Fargo is making its push at a time when high interest rates have banks competing aggressively for deposits, and consumers and businesses are nervous about high borrowing costs.

“Consumers and businesses always need someone to talk to,” Scharf says. “We’re not trying to time the economy to gure out when the right time to grow is. . . .By the time we get to scale in any one of these branches, we’ll likely be back to a di erent kind of lending environment.”

“Lookingglass Alice” at the Lookingglass Theatre in 2022.

LOOKINGGLASS THEATRE

Argo Tea’s new owner wants to re-establish cafes

Planting Hope, a company that makes sesame milk and other sustainable food products, is hoping to license new locations in Chicago

Ally Marotti

Years after Argo Tea’s parent shuttered its cafes and declared bankruptcy, a sesame milk company is working to breathe new life into the brand.

Chicago-based Planting Hope, which makes sustainable foods and beverages, acquired assets of Argo Tea in a deal that closed in August. Included were licenses for Argo’s eight remaining cafes, all of which are on college campuses and managed by food service operators such as Aramark and Sodexo.

“What we saw was the opportunity to take the cafe concept to the next level,” said Planting Hope CEO and co-founder Julia Stamberger.

Planting Hope has already put its sesame milk barista blend on menus at the Argo Tea locations — including a limited-time toasted black sesame latte — and has added some of its other products, such as Mozaics Real Veggie Chips. e idea is to add sustainable products into Argo’s o erings, targeting Gen Z college students and developing an “Argo 2.0.”

e company also expects to expand once again into Chicago, targeting managed locations at hospitals and other such locales, Stamberger said.

“We’ve got a great . . . baked-in

test bed through these eight cafes where we will re ne what is the new Argo. Once we have that dialed in, yes, absolutely, let’s expand,” she said. “We want to see more Argo back in Chicago.”

Two boyhood friends from Armenia opened the rst Argo Tea cafe in Chicago in 2003. It opened company-operated and licensed locations over the next two decades, with 50 cafes at its height. It also launched a line of ready-todrink teas that were sold across the country in Walgreens and other convenience stores.

Ownership changes

Caribou Co ee invested in Argo Tea in 2016 and began opening tri-branded stores with Einstein Bros. Bagels. en in January 2020, Golden Fleece Beverages paid $1.6 million to buy Argo’s debt from Caribou. A month later, Golden Fleece bought the rest of Argo’s assets in a public auction with a credit bid of $9 million.

Golden Fleece was formed strictly to purchase Argo’s debt in early 2020, and its co-founder was former Walgreens CEO Greg Wasson. Golden Fleece began exiting cafe ownership and operation, instead focusing on the licensed cafes and ready-to-drink teas. When COVID hit, Golden Fleece closed all its retail operations, selling some, shuttering others and

transferring some companyowned shops to licensees.

In October 2021, Golden Fleece led for Chapter 11 bankruptcy protection and set about reorganizing the company. A court document that laid out the company’s reorganization plan said 93% of Argo’s revenue at the time came from packaged goods. More than 80% of that was earned by selling products to Walgreens and Kwik Trip.

Argo was in nancial trouble from a previous battle with a landlord, according to court documents, and the pandemic did not help the situation. e bankruptcy case stretched into 2022.

Planting Hope came across the potential Argo deal through a mutual shareholder, Stamberger said. Planting Hope did not pay cash for the deal. Instead, it entered into an agreement with Argo shareholders in which they nance a loan of up to $1 million for working capital. After the loan is funded, shareholders will receive a revenue share on Argo products and intellectual property, according to a news release announcing the deal. Planting Hope also assumed some debt.

Argo’s ready-to-drink tea products will be phased out.

Planting Hope launched seven years ago and has its o ces in Uptown. It is focused on sustainable

and natural foods. Its sesame milk, for example, uses sesame seed pulp that was pressed for oil and otherwise would have been discarded. Sesame is pestresistant, helps soil and requires much less water than the almonds used in almond milk. e company also makes Right Rice, a protein- and ber-rich product that replaces emissions-heavy white rice.

e company trades on the Canadian Venture Exchange and does about $12 million in annual revenue. For Planting Hope, being able to scale its consumer products at the cafes can help accelerate its path to pro tability, Stamberger said.

Planting Hope does not plan to

operate any of Argo’s cafes. It receives royalty on gross sales and gets distributor markups on products it supplies directly to the cafes.

e company also acquired intellectual property and plans to spin out some of Argo’s creations into products.

For example, Argo made a natural form of bubble tea from fermented coconut water. Stamberger said the company plans to roll out that product, which it calls Bijoux, or “jewels” in French, to food service operators.

“It’s not in our DNA to own and operate and sta cafes,” she said. “However, it is very much in our DNA to supply food service operators with great brands and great products, and Argo is both.”

East Coast investor buys Buffalo Grove apartments

It’s a tricky time to get a loan for a big commercial real estate purchase with interest rates relatively high and lenders tightening up. So a New Jersey investor bought a Bu alo Grove apartment complex by taking over the seller’s mortgage.

A venture a liated with Lakewood, N.J.-based investor Jason Weiss paid nearly $25.3 million for the 154-unit Bu alo Creek Apartments at 70 S. Bu alo Grove Road in the northern suburb, according to spokesmen for real estate services rm Northmarq, which brokered the sale. e Weiss venture assumed the loan of the seller, a joint venture of Chicago-based Ravine Park Partners and LV Property Management.

In a slow period for commercial real estate transactions, the deal shows the appeal of a longterm, xed-interest rate mortgage that a buyer can take over as part of a purchase. e Weiss venture has assumed debt with a 4.67% interest rate, according to Northmarq, far lower than it would likely be if it were taking out a new loan today. e mort-

gage also doesn’t mature until August 2033.

e sale also highlights investor demand for suburban apartments — even older properties like Bu alo Creek that are predominantly used for workforce housing — as rents sit at an alltime high. Median net rent at apartments across the suburbs during the second quarter was up 5.4% over the same period last year and 23.3% higher than the second quarter of 2021, according to data from appraisal and consulting rm Integra Realty Resources.

e deal nets a pro t for Ravine Park and LV Property Management, which paid $11.4 million for Bu alo Creek in 2011. Another suburban investor had previously tried to convert the units into condos a couple of years before that, but only sold six of them before losing the property to foreclosure in the heart of the Great Recession.

Ravine Park and LV restored the complex’s status as apartments, putting roughly $4 million into a variety of capital improvements such as new roofs and windows, hallway renovations and electrical service upgrades, said Ravine Park co-founder Greg Moyer.

Ravine Park and LV were able to return money to investors when they re nanced the complex in 2013. ey added a $2.3 million supplemental loan to the previous $9.4 million loan they took out to purchase and renovate the property, Moyer said. e owners then capitalized on the property’s appreciation when they re nanced it with the 15-year mortgage in 2018. It’s common for landlords to renance to pull equity out of a property without selling it. at long-term, xed 4.67% interest rate loan might not have looked great early in the COVID-19 pandemic, when debt was even cheaper. But interest rate hikes over the past year have ipped that perspective, as buyers today can’t get such a low cost of capital.

O ering a long-term assumable loan “takes out a variable from the sale process,” said Northmarq Associate Vice President Alex Malzone, who marketed the property on behalf of Ravine Park and LV. “Buyers are cautious (today) with interest rates being volatile.”

Tax bene t

Ravine Park was founded by Moyer and Chicago investor Je Annenberg. Local investor David

Nankin owns LV Property Management.

e complex near the intersection of Bu alo Grove Road and Lake Cook Road is 98% leased. Northmarq said the sale price to Weiss implies a rst-year return, or capitalization rate, of just more than 5% based on the property’s net operating income over the past 12 months. at equates to nearly $1.3 million in net operating income during Weiss’ rst year of ownership.

Weiss didn’t respond to a request for comment. Northmarq said Weiss’ family investment rm acquired the property through a

1031 exchange, a tax bene t that allows real estate investors to avoid paying taxes on a property sale if they use proceeds from the sale to buy a similar property.

Other ventures a liated with the Weiss family also own apartment properties totaling 236 units in Yorkville and Oak Forest, according to Northmarq.

Apartment sales nationwide have dramatically slowed this year amid higher interest rates. Total sales through the rst eight months of the year were down 67% from the same period in 2022 to $74.6 billion, according to data from research rm MSCI Real Assets.

The sale of the 154-unit complex shows the value of having a long-term, xed-rate mortgage after a year of interest rate hikes

The Buffalo Creek Apartments at 70 S. Buffalo Grove Road COSTAR GROUP

An Argo Tea cafe at George Mason University I COURTESY OF ARGO TEA

Danny Ecker

A Chicagoan to know: Kimberly Dowdell of HOK

Dowdell, 40, is an architect and principal at HOK’s Chicago studio, one of the global rm’s 26 locations. On Dec. 15, she begins her term as the rst Black woman elected president of the American Institute of Architects in the organization’s 166-year history. Dowdell has residences in Detroit and Chicago’s Loop. I By Laura

Bianchi

MIDWE ST WOMEN IN CANNABIS AWA RD S

A goal as incoming AIA president?

Every city in America should have a chief architect working with the mayor to protect the health, safety and welfare of the public and eliminate disparities.

An example?

The National Institutes of Health identi ed a 30-year gap in life expectancy between Chicago’s South Side and Chicago’s more af uent Loop. The way we design communities contributes to that gap.

Your early years?

I grew up in Detroit during the ’80s, after the ravages of the 1967 riots and the suburban ight of the ’70s. Crime was at an all-time high, and many buildings were abandoned during my childhood.

Your home life?

My grandmother played a major role in raising me because my parents struggled with health and nancial issues. Thankfully, my extended family made sure that I always had what I needed, and later, I received a scholarship to a boarding high school in suburban Detroit.

Why architecture?

I had an epiphany when I was 11 and dreaming of becoming a doctor. I was riding past the grand old J.L. Hudson’s department store in downtown Detroit. It had transitioned from being “the place” to shop and see Santa in its heyday to becoming deteriorated and boarded up in 1983. I had just learned about architecture at school and realized that as an architect, I could x that building and perhaps spark redevelopment. I would be like a doctor for the built environment.

Your superpower?

I’m un appable, probably because of my childhood experiences, riding city buses, witnessing the ghts and poverty. I learned to remain composed and focused on excelling academically.

An example?

Once I was asked to speak at an architectural event where I was one of the few Black women there. I joined a group of people at their table for lunch, and someone asked if I was part of the entertainment.

Ha! It was super awkward, but I played it cool and said, “Nope, I’m an architect, just like you.”

An early career gaffe?

At 24, I had just started working at HOK’s New York studio and was eager for a project with major impact. When I heard that the Smithsonian needed an architect to design the National Museum of African American History & Culture, I sent an email to the person in charge, completely bypassing the usual chain of command.

How did that go?

Not so great. My mentor told me that he appreciated my gusto, but I needed to talk to him rst about future pursuits. He is still my mentor today.

Art Institute again under re over disputed ownership of artwork

New York of cials have ‘seized in place’ an Egon Schiele drawing housed at the museum that’s believed to have been stolen by Nazis

e Art Institute of Chicago has once again found itself in the middle of a debate over the provenance of one of its artworks.

e Manhattan District Attorney’s O ce last month issued a series of warrants for art created by Austrian expressionist Egon Schiele and stolen by the Nazis during World War II. While ve museums and collectors in the U.S. voluntarily returned seven pieces of art from the stolen collection, the Art Institute of Chicago is one of three museums digging in its heels over ownership of the remaining three items.

is is not the rst time the Art Institute has faced an ownership issue. A recent investigation by Crain’s and ProPublica found that at least four pieces from one of the museum’s collections have evidence that they may have been looted from Nepal and exported illegally, including an inscribed gilt-copper necklace that the Nepali government wants returned.

In recent years, museums have faced a reckoning over how to deal with looted items in their collections. From public pressure, possible litigation or their own sense of justice, more and more museums have returned such items. Still, others have maintained their

ownership in the face of opposition.

“When you see the number of institutions recently that have agreed to voluntarily return artwork without getting into technical legal defenses, you have to ask why is the Art Institute an outlier,” said Patty Gerstenblith, a distinguished research professor of law specializing in cultural heritage law at DePaul University.

New York o cials are working

to return Schiele’s piece entitled “Russian War Prisoner” from the Art Institute to the heirs of its former owner, Fritz Grünbaum, a celebrated Jewish art patron and cabaret performer who was killed in the Holocaust. At the same time, the museum is ensnared in a legal battle over the artwork with those heirs.

Fighting on two fronts over ownership of the drawing, the museum maintains its provenance.

In an emailed statement, the Art Institute of Chicago said it is condent in its “legal acquisition and lawful possession of this work,” adding that “the piece is the subject of civil litigation in federal court, where this dispute is being properly litigated and where we are also defending our legal ownership.” e museum con rmed that “Russian War Prisoner” is still in its custody.

New York o cials said the artwork was “seized in place” until it can arrange for the drawing to be transported safely to New York. Prosecutors there found evidence that Schiele’s stolen works had passed through the hands of a Manhattan art dealer, which they said gave them jurisdiction, leading to the warrants. It’s unclear whether New York o cials intend to remove “Russian War Prisoner”

Impact of Chicago Ford plant strike is already spreading

e UAW strike that reached the Ford plant on Chicago’s South Side Sept. 29 didn’t take long to spread.

Once assembly plants go dark, nearby suppliers soon get idled. at means the pain of the rst United Auto Workers union strike at Torrence Avenue since 1976 will quickly extend beyond the 6,000 people who make Ford Explorers and Lincoln Aviator SUVs.

e strike’s ripple e ects have already reached Ford’s stamping plant in Chicago Heights. e company announced Oct. 2 that it laid o 243 workers from the site. e plant currently employs about 1,000 workers. Among other suppliers in the Ford assembly plant’s impact radius, which also covers part of Indiana, is a supplier park that includes companies such as Autokiniton, formerly called Tower International, which makes front-end assemblies and rear oor pans, and Dakkota Integrated Systems, which supplies interior parts to Ford.

Lear employs more than 800 peo-

ple making seats at a factory in Hammond, which is expected to be impacted quickly. LM Manufacturing, a seating maker in Detroit, laid o workers less than a week after the strike began at a nearby plant that makes the Ford Bronco.

Urbana-based parts maker FlexN-Gate employs a few hundred at an injection-molding factory that supplies the Torrence Avenue plant.

After the UAW strike began Sept. 15 at three assembly plants — one operated by each of the Detroit ree — layo s quickly spread, idling several other factories.

About twice as many workers nationwide are employed making parts than vehicles themselves, according to U.S. Bureau of Labor Statistics data. In Illinois, it’s about 50% higher, with about 22,000 workers at parts makers, compared with nearly 15,000 in vehicle production.

e current UAW strike is unique because it involves all three big automakers but only a handful of their plants, rather than a complete walkout that would immediately idle all of one com-

pany’s factories or all of the plants operated by the Detroit ree. e auto-industry supply chain also looks di erent coming out of the pandemic, which makes it hard to predict exactly how the strike’s impacts will be felt. Automakers were among those hit hardest by supply-chain problems, notably a shortage of computer chips needed to make vehicles, which crimped production and sent prices soaring.

“On the backside of the pandemic, we’re operating on a justin-case mentality, rather than just in time, so we have increased supply,” says Abe Eshkenazi, CEO of the Association for Supply Chain Management in Chicago. “Companies already had higher inventories and greater bu er stocks.”

Ordinarily, higher inventory levels would lead suppliers to more quickly idle workers if the plants that they supply stop making vehicles because of a strike. But the suppliers also will feel more pressure than normal to keep employees on the payroll, Eshkenazi says, “because of the tight labor market.”

from the Art Institute’s possession while the matter is still being disputed in court.

Other works not returned

According to the Art Institute’s records, “Russian War Prisoner” was sold to the museum by B.C. Holland in 1966 at an unknown price. In an obituary that appeared in the Chicago Tribune in 1994, Holland was described as “an antiques dealer’s son and World War II bomber pilot who became one of Chicago’s premier art dealers.”

New York o cials contend that the artwork, along with Grünbaum’s entire collection, was inventoried and then impounded in a Nazi-controlled warehouse in 1938 and was later sold to nance the party.

“We are returning these beauti-

ful works, these drawings, to their rightful owners, to the family,” Manhattan District Attorney Alvin Bragg said at a Sept. 20 press conference announcing the return of seven Schiele artworks to Grünbaum’s heirs. “ is incredible art collection was stolen by the Nazi regime.”

e other two Schiele artworks that have yet to be returned to New York are “Portrait of a Man,” a pencil-on-paper drawing at the Carnegie Museum of Art in Pennsylvania, and “Girl With Black Hair,” a watercolor and pencilon-paper work at Oberlin College in Ohio.

Douglas Cohen, a spokesperson for the Manhattan District Attorney’s O ce, said the department does not have any further comment, citing the ongoing investigation.

Workers at the automaker’s Chicago Heights stamping plant have been laid off, and other suppliers nearby will feel the pain next

Brandon Dupré

Art Institute of Chicago I ALAMY

John Pletz

“Russian War Prisoner” (1916) an Egon Schiele work, is currently at the Art Institute of Chicago. I ART INSTITUTE

A cottage lled with handicraft and memories

The third-generation owners don’t live nearby and are letting go of the bungalow on Channel Lake built in 1914 I

By Dennis Rodkin

In the 1910s, Dave Cook’s grandparents, Frank and Hanna Karg, used to travel 70 miles from their home in Chicago’s Jackson Park Highlands out to their lake home near the Wisconsin border in Antioch. Family lore says they would make most of the trip by train and the last part by horse and buggy.

e waterfront cottage in Antioch eventually went to the Kargs’ daughter—Cook’s mother, Barbara—who was raising her kids in Rogers Park and took them to the old cottage often. Cook has sepia-tinted memories of family and friends gathering there on the shore of Channel Lake and the contrast between daily life in builtup Rogers Park and his time in the beauty of the Chain O’Lakes.

“Being able to go out in boats, water skiing and shing,” Cook says, “snowmobiling in the winter, exploring the lakes and open space. For a young boy growing up in the city, it was a di erent

place, a special place.”

Cook’s mother, who eventually made the cottage her full-time home, died in December and left the house to Cook and his siblings. ey all live in di erent states, he says, and have made the tough decision to sell the cottage that has been in the family since 1914. It’s lled with original nishes. Beadboard lines the walls and ceilings of most rooms, and several light xtures, including the pair hanging in the porch seen in the photo above, are original, says Cook, who lives near San Diego. Only the kitchen, bath and utilities have ever been changed, he says.

e four-bedroom, roughly 1,430-square-foot cottage is just under an acre on Spring Grove Road. It has 300 feet of lake frontage and a dock. e property went on the market Sept. 28, with an asking price of $940,000. It’s represented by Jamie Hering of Coldwell Banker Realty.

LARGEST COMMERCIAL BUILDING SALES CRAIN'S LIST

left: No. 3, Chicago Tribune Freedom

W. Chicago Ave.; No. 4, North Water Apartments, 340 E. North Water St.; No. 6, Lake Meadows Apartments, 3233 S.King Drive; and No. 9, Bourbon Square of Palatine, 500 E. Constitution

Palatine.

Chicago needs federal backup now to deal with the migrant crisis

Ask Cook County Board President Toni Preckwinkle what she and other local o cials need most to cope with the Chicago area’s escalating migrant crisis, and she’ll tell you in her characteristic point-blank style: Money. Federal money.

The frustration she expressed toward Washington during a routine budget-review meeting with Crain’s Editorial Board on Oct. 5 carried faint echoes of similar gripes that bubbled up the previous week between progressives on Chicago’s City Council and Gov. J.B. Pritzker. That’s when Mayor Brandon Johnson’s floor leader, Ald. Carlos Ramirez-Rosa, publicly added his voice to criticism of the Pritzker administration’s efforts to locate and finance the opening of shelters for the rapidly rising flow of migrants being bused from the Texas border to Chicago.

And Preckwinkle’s words also sounded very much like Pritzker’s own plea to President Joe Biden, expressed in a letter sent Oct. 2 seeking more funding, the further streamlining of work permits and a federal takeover of the now-haphazard transportation of buses from the Mexico border to Democrat-led cities, an in ux that’s creating an “untenable situation for Illinois,” as Pritzker put it.

In that same meeting with Crain’s, Preckwinkle described a recent trip to Washington in which she and her team met with nearly every member of the Illinois congressional delegation. Securing federal funding to help feed, shelter, immunize and otherwise aid the thousands of migrants being shipped here was a top priority in these conversations. What Preckwinkle came away with, unfortunately, were pledges to get more work

PERSONAL VIEW

permits for those who qualify — helpful, she noted, but a far cry from the cold, hard dollars she and the mayor and the governor really need to meet urgent needs as the tally of migrants bused into Illinois exceeds 17,000 souls — and with nearly 1,200 more arriving in Chicago per day.

Pritzker noted in his letter to Biden that his administration has been forced to dedicate more than $330 million to provide humanitarian aid since Texas Gov. Greg Abbott started sending busloads of migrants to Chicago and Illinois 13 months ago. e governor recently announced $41.5 million in awards to

Chicago and other local governments to help deal with the ground-level needs, but Preckwinkle argues those funds represent a drop in the bucket compared to the $2.2 million in monthly costs to the county and $31.5 million in monthly costs to the city to provide for these newcomers.

Preckwinkle, Pritzker and Johnson are correct in arguing that immigration policy is a federal issue — and that the humanitarian emergency created as Venezuelans and others in the thousands ee their homes seeking asylum and a better life here is one that requires a coherent and coordinated federal response. And though they should have natural allies in Washington — with a largely Democratic congressional delegation and a White House occupied by a Democrat — these three Democrats are hard-pressed to get what they need and want from D.C. e current impasse over leadership in the U.S. House of Representatives only adds to the sense of futility, as it promises to delay any funding action on an issue that’s become a political ashpoint.

All of which means it’s well past time for Illinois’ congressional delegation — our representatives in the Capitol — to turn up the pressure on the Biden administration to dedicate more federal resources to a situation that Illinois Deputy Gov. Sol Flores described in an interview as a “major humanitarian crisis that we have never experienced before in the modern age of this city.”

We can argue later about whether it’s right or wrong for Chicagoans to have been thrust into this crisis to begin with. For now, the focus should be on surging federal resources to the city, county and state.

Bring Chicago Home provides little hope for the homeless and is a major pain for the rest of the city

During the mayoral campaign, then-candidate Brandon Johnson vowed not to raise property taxes. Now Mayor Brandon Johnson is trying to do just that — under the guise of his Bring Chicago Home plan. His real estate tax proposal threatens to topple the city’s real estate market and fails to address Chicago’s desperate homelessness problems.

Over the last several years, government actions and market conditions have combined to create a housing a ordability

crisis in Chicago. e city’s unhoused population continues to grow while precious federal resources are left untouched by city o cials. Even those residents with housing face growing instability as the city fails to prioritize increasing housing supply.

Bring Chicago Home will raise real estate transfer taxes on certain properties. While not collected each year like property taxes, the plan means another property tax that targets any increase in the value of

a property at the time of sale. e proposal comes at a time when Chicago’s real estate market is currently maintaining a delicate balancing act, ghting to avoid the “urban doom loop” that can already be seen in other major U.S. cities. ere are signs of growing stress on the commercial and residential markets.

Earlier this year, the city broke a record when o ce vacancies reached an all-time high of 22.6%, and the situation could worsen. Across the country, almost $1.5

trillion in commercial mortgages, underwritten with historically low interest rates, are due to mature in the next few years with rates now two to three times higher.

In Chicago, those economic pressures have already led to building owners simply walking away from landmark buildings, turning the keys over to their lenders for properties such as the Board of Trade Building, the Civic Opera House and the See HOMELESS on Page 11

Recently arrived migrants rest in a makeshift shelter operated by the city of Chicago at O’Hare International Airport. I NEWSCOM

Renters don’t trust what landlords say about a ordability

During the 2023 mayoral runo , a picture went viral on social media of an apartment with a Brandon Johnson sign in the window, above a giant Paul Vallas sign planted on the lawn by the building owner. As usual, a picture was worth a thousand words: renters for Johnson vs. landlords for Vallas.

Now, as the Bring Chicago Home campaign ramps up, we’re in yet another round of the battle between the renter and landlord classes. Bring Chicago Home would reform Chicago’s real estate transfer tax by creating a tax cut for property sales below $1 million and a progressive increase — higher tax rates on more expensive properties — on sales of properties valued at over $1 million, with the new revenue paying for a ordable housing and essential services to end homelessness. With the referendum headed to the City Council for a vote to put it on the ballot in March, the Neigh-

HOMELESS

From Page 10

Burnham Center. Homeowners and renters in the city will share the property tax burden resulting from any bankrupted buildings.

Residential sales have slowed, too, down 26% this year compared to the same time last year, with housing inventory plummeting over 30% in the same period.

Collectively, these factors have led to the city’s worst a ordability gap in the last 15 years and record-high residential rent increases.

Johnson administration ocials have failed to provide an explanation for why they have not developed a plan to spend all the federal funds allocated to Chicago for ghting homelessness. ey also failed to complete a full audit of the existing spending to gauge the e ectiveness, before asking for new revenue.

e city’s unhoused residents deserve a detailed plan for how federal, state and local resources will be used to help them. All our city’s residents deserve a comprehensive strategy that will create more housing opportunity and affordability. Realtors want to be part of the solution and hope to be included in future conversations.

Even with its “progressive” structure, the Bring Chicago Home plan will only bring added pressure to what is already a precarious market and, rather than addressing the real needs of the unhoused, will exacerbate the housing instability many in the city are already facing.

Jeff Baker is CEO of Illinois Realtors, a voluntary trade association with 50,000 members from around the state.

Michelle Mills Clement is CEO of the Chicago Association of Realtors, which represents more than 17,000 members.

borhood Building Owners Alliance has now published a survey saying that a majority of landlords would raise rents in response to the e ort.

So when the Neighborhood Building Owners Alliance starts wringing its hands and saying, “What about the renters?” you’ll have to forgive my skepticism. e alliance represents 600 members who own more than 180,000 rental units, an average of 300 rental units per landlord. ese are not mom-and-pop landlords who rent their garden units. ese are powerful political interests who for

generations have raised rents, donated to landlord-friendly politicians and ferociously lobbied against any e ort to tax any portion of their pro ts. ey are not credible messengers on what’s best for renters like me.

ere’s plenty of evidence to suggest that Bring Chicago Home will not, in fact, result in rising rents for the overwhelming majority of Chicagoans. Because of the graduated tax structure, most property sales will actually experience a decrease in their transaction taxes, including 94% of all two- to four-unit, multifamily

buildings. In fact, two-thirds of the projected revenue will come from properties worth more than $10 million — not mom-and-pop multifamily homes, but large buildings with hundreds of rental units. Sound familiar?

Bring Chicago Home is a carefully considered, soundly constructed policy that is good for the overwhelming majority of renters and homeowners in our city, but that’s not what matters to organizations like the Neighborhood Building Owners Alliance and landlords. What matters to them is their ability to keep making a

pro t by raising rents, cutting costs, and pushing out poor and working-class people when we can no longer a ord to live in their investment properties.

at’s why big landlords are attacking Bring Chicago Home, and it’s why we shouldn’t trust a single thing they say about it.

Anthony J. Perkins, a housing leader with One Northside and the Bring Chicago Home campaign, is a disabled senior citizen who currently lives in a Chicago Housing Authority senior housing building in Edgewater.

Most landlords say they would raise rent to deal with transfer tax hike

Rents could go up by as much as $100 a month per apartment in buildings that get sold

Dennis Rodkin

If the increased transfer tax that Mayor Brandon Johnson has endorsed goes through, rents would go up by as much as $100 a month per apartment in buildings that get sold, according to a new report from a property owners association.

Tracii Randolph owns a threeunit rental building in Bronzeville whose value is beneath the horizon for an increase in transfer taxes if she were to sell, but she said landlords who are subject to it “will absolutely” pass the increased tax along in the form of higher rent.

Many apartment renters “don’t understand at all that this would a ect them,” Randolph said.

Under Johnson’s mid-September proposal to revamp the transfer tax, a one-time charge paid at the time a property is sold, buyers paying $1.5 million or more for residential or commercial property would pay an increased transfer tax to help fund initiatives to ght homelessness.

e proposal would boost the transfer tax on the total purchase price over $1 million, and boost it again for the portion that is over $1.5 million. It also drops the transfer tax on the portion of the price that is below $1 million.

Buying a property at $1.5 million would incur a $16,000 trans-

fer tax, compared to the $11,250 that a buyer pays now. If the city adds $4,750 to the cost of acquisition, according to the Neighborhood Building Owners Alliance, its member landlords who purchase property “would all need to increase rents,” its report says.

“People who say, ‘Oh, 3%. What’s the big deal?’ don’t understand what it costs” to operate apartments, said NBOA President Mike Glasser. His rm, Magellen Properties, owns about 280 rental units, one-quarter of them in the city, he said.

“ ree percent could be your whole return on investment in the rst year,” Glasser said. “ at’s a signi cant hit.”

Opposition to tax hike

Of 250 owners of Chicago apartments that the NBOA and Chicago multifamily brokerage Kiser Group surveyed, 74%, or about 185, said they would raise rents to make up the di erence.

It’s a little surprising that the gure isn’t 100%, given that the total cost of acquisition is a key part of any landlord’s calculation of the rents to be charged.

“I’ve spoken to a few people who’ve said they’re holding their (rental) property to pass down to the next generation, so it wouldn’t have any e ect on them,” Glasser said.

Randolph said she would expect to see property owners’ investments in rehab and upgrades curtailed should the transfer tax go up. If a buyer “has a larger chunk of money coming out of that transaction,” Randolph said, “they’re going to want to pay less for it.”

Anticipating that, she said, landlords who plan to sell in the foreseeable future will cut down their spending on the property to keep its sale price lower.

Johnson, who supported the “Bring Chicago Home” e ort to use a transfer tax increase in the ght against homelessness, introduced his version of the plan in September. Crain’s reported at the time that if it’s approved by the City Council, it will go to a citywide referendum on the March ballot.

e move has sparked the real

estate industry to mount its opposition to an increase. Earlier this month, Illinois Realtors began a postcard campaign urging property owners to oppose the increase. Now, NBOA’s report adds to the opposition.

e lethargic state of the postCOVID downtown property market signals that “more tax increases are going to come to property in the neighborhoods to make up the losses,” Glasser said. e prospect of adding higher transfer taxes “is another punch in the gut,” he said.

e NBOA is an advocacy group that represents 11 associations of property owners around the city and suburbs. Its member groups are in Austin, Edgewater, Rogers Park and other areas. e 600 members of the group own more than 180,000 rental units in 6,000 buildings.

This Michelin-starred restaurant just launched an elite membership for diners

Michelin-starred Esmé launched a membership program, hoping to rope in loyal diners and secure revenue as ne-dining restaurants continue to face margin pressures.

e Esmé Elite Dining Pass starts at $650 per person and includes three tasting-menu dinners, plus perks like cooking classes, private tastings, meet and greets with featured artists, and direct booking.

ere are two higher tiers to the membership — for $1,100 and $1,300 per person — that tack on various wine pairings to the three included dinners.

Fine-dining restaurants were hit particularly hard during the pandemic, as tasting menus failed to translate into carryout o erings. Revenue at ne-dining restaurants dropped 51% in 2020, according to data from market research rm Technomic. ey recovered over the next two years, with revenues increasing 50% in 2021 and 19% in

2022. Technomic projects revenues will increase 5% this year. But matched against in ation of food prices away from home, which is up about 6.5% from last year, ne-dining restaurants’ bottom lines remain under pressure.

Having a membership program helps alleviate that pressure, said Katrina Bravo, who opened the 42seat Esmé with her husband, chef Jenner Tomaska, in 2021.

“It’s set revenue. It’s money you know you can count on,” she said.

“Coming out of COVID, with the economy, with in ation, it is, for a restaurant, a lifesaver to have income you can count on.”

e dining pass is an evolution of Esmé’s year-old season-ticket program, Bravo said. e season-ticket program was an idea borrowed from Nick Kokonas at Alinea Group, where Bravo used to do marketing and Tomaska was the chef at Next. It was a genius idea, but Bravo said she started to notice demand among

Esmé’s diners was evolving.

“ ere was this kind of shift post COVID,” she said. “People are really looking for experience-based bene ts and community-based bene ts.”

Bravo is providing the booking service herself, to help provide an exclusive feeling to members.

ere’s also a referral program involved: If you get 10 people to make reservations at Esmé (referring someone to the dining pass counts as three), Jenner will come cook for you in your home.

Marketing

e Lincoln Park restaurant is marketing its memberships toward regulars, but also to business folks looking to wine and dine clients, friend groups, gift givers and auctioneers.

Esmé has about 167 members under the old season-pass program, Bravo said. About 50 people have bought dining passes under the new program, which launched

a few weeks ago. She anticipates previous members will convert to this new program as their old passes expire. ere will be no limit on how many people can become members.

ere is certainly a market for higher-end loyalty programs, said David Henkes, senior principal at market research rm Technomic. If restaurants can build a program that bene ts the customer and creates regulars out of higher-networth diners, there can be a halo e ect that helps margins.

“ e higher income is everybody’s most desirable customer,” he said.

Esmé, a ne-dining restaurant in Lincoln Park, hopes that the new program will help to build loyalty and secure some set revenue

Ally Marotti

This seven-unit apartment building on Winthrop Avenue in Uptown is for sale at just under $2 million. I KALE REALTY

Esmé DANIEL KELLEGHAN PHOTOGRAPHY

Homeownership gets harder

Higher interest rates, ‘banking deserts’ compound racial disparities in mortgage lending I By

For Chicagoans of color, the path to homeownership has become even more rocky. Higher interest rates combined with increasing home prices make a ordability harder.

Programs across the city are trying to ease the path. Classes are available to help to prepare prospective homeowners for the homebuying journey. ere’s assistance for those who qualify for grants that ease the sting of large down payments and monthly mortgage costs.

“We not only get them into their homes but provide ongoing education, post-purchase,” says Joseph Lopez, executive di-

rector the Spanish Coalition for Housing, among a host of Chicago organizations on the front lines. “We engage with homeowners on property maintenance, accessing grants and understanding how to maximize tax exemptions.”

Borrowing costs more for people of color

But buying a house is only one of the hurdles.

In Chicago and nationwide, African American and Latino borrowers pay more for loans to buy homes, purchase cars and

start businesses than their white neighbors. And as the U.S. Federal Reserve considers raising interest rates again this year, more pain could be in store.

Lenders are denying a higher percentage of Black Chicagoans’ mortgage applications (27%) than they are of Latinos’ (20%) and whites’ (11%). And of those who are approved, African American and Latino borrowers are generally paying more for their loans through what lenders call loan level pricing adjustments, or LLPAs.

ese fees hit people who have risk factors such as a lower credit score, a high debt-to-income ratio or who are borrow-

Eric Gwinn

ing an amount that’s close to the value of the home. ese LLPAs push up the interest rate that borrowers must pay. And they can snowball to push applicants of color closer to being denied.

Neighborhoods with lower numbers of applications and higher mortgage denial rates are e ectively considered “mortgage deserts.”

Meanwhile, institutions are lending heavily to homebuyers in Chicago’s predominantly white neighborhoods.

Of the $14 billion in mortgages to

“We’ve seen down-payment assistance increase dramatically over the past ve years, as much as $30,000 for quali ed homebuyers,” says Joseph Lopez, executive director of the Spanish Coalition for Housing. GEOFFREY BLACK

Predatory lending drains a massive amount of wealth from Black and Latino families

Homeownership has been the primary means for most American families to build generational wealth. Owning a home builds stability and a sense of community. For decades, however, racial discrimination in housing and mortgagenancing robbed many Black and Latino families of the opportunity to own a home, creating a racial gap that has barely changed from the levels of more than 50 years ago. Predatory mortgage lending practices have also drained trillions of dollars in wealth, especially from Black and Latino families. Access to safe, accessible and affordable housing is crucial, and closing the homeownership gap is essential to closing the racial wealth gap. But how do we make it happen?

Creating equal credit opportunities is a critical rst step. Community development nancial organizations like Self-Help Federal Credit Union know people can do great things when they have equitable nancial opportunities. We know from experience that we can change the statistics and build strong communities through fair, a ordable access to mortgage nancing. Yet many communities of color are being un-

fairly shut out of the system. Here’s why. Both Black and Latino families face two key barriers when it comes to achieving the American dream of homeownership — credit scores and mortgage down payments.

Credit is now more constrained than it has been in a generation. Instead of xing the damage done by subprime lending and

its disproportionate impact on communities of color, lenders responded after thenancial crisis by closing o options by limiting lending and increasing prices for borrowers with lower credit scores or lower down payments. For a variety of reasons, borrowers of color, families with moderate incomes, and

rst-time homebuyers tend to have both lower credit scores and fewer resources to put toward a down payment. Without generations of nancial security to fall back on, many must work harder to catch up to the levels of wealth enjoyed by their white peers.

is past spring, the Center for Responsible Lending released new research that highlights this challenge. “Hardship for Renters” calculates how long it would take renters to save for a down payment and closing costs to buy a median-priced house.

According to the study, if a Latino household earning $46,640 — the national median income in 2019 — saved 5%, it would take around 11 years for them to save $26,000 — enough to put 5% down and afford the associated closing costs of a median-priced $321,500 home.

Whether it’s creating products explicitly for these underserved communities or providing more access to credit, the important thing is to make progress happen. Increasing access to products for rst-generation homebuyers that o er zero down payment mortgages and low closing costs, like SelfHelp’s Equity Boost, go a long way to reversing the economic disparities that keep communities from reaching prosperity. But there should be more. Instead of locking them out, these communities deserve their fair share of the American Dream. It’s time to bring the bene ts of homeownership to more families.

A six-pillar community and a ordable-lending strategy

We believe our business is stronger when our economy is more inclusive, which is why in 2020, JPMorgan Chase announced its $30 billion Racial Equity Commitment to help close the racial wealth gap and advance economic inclusion. A critical area of focus included in the commitment is tackling historic inequalities around homeownership, particularly in underserved communities.

We’re taking action to increase equity, a ordability and access to housing by expanding our lending overall and committing an incremental $12 billion above our 2019 business results toward the purchase and re nance of home loans in majority Black, Hispanic and Latino communities across the wealth spectrum.  We’ve implemented a six-pillar community and a ordable lending strategy that focuses on people, presence, products, partnerships, promotion and policy. Highlights of these strategies include:

Providing access to credit, meeting home nancing needs and bringing costs down. We do this via enhanced home lending products, including low down payment options like FHA and VA, conforming and jumbo loans. We created a $5,000 Chase Homebuyer Grant available in 15,000 census tracts across the nation — including

nearly 700 in Chicagoland and throughout the South and West sides of Chicago. We also expanded our Community Lending Program incentive to regional mortgage lenders that originate in majority Black and Hispanic/Latino communities across all Chase markets.

Creating awareness and dispelling myths about homeownership. Nationwide we’ve hired new community home lending advis-

ers who focus on serving homebuyers in underserved communities, including 16 new adviser positions in Chicago. ese individuals earn a base salary — they’re not commission-based — to support customers and help lift up communities.

Hiring and developing leaders. In addition to hiring more home lending advisers, we’ve taken steps to help diversify the pipeline of individuals entering the appraisal

industry. Chase Home Lending has committed $3 million to the Appraisal Diversity Initiative, which will cover costs for training and tools needed to enter the eld for approximately 700 trainees.

Serving customers when, where and how they want to be served. Chase has the most extensive branch and ATM network in Chicagoland. Our branch employees are more than just bank employees — they’re community members who care deeply about the people they serve. Whether a customer is a veteran, a rst-time homebuyer or someone unfamiliar with banking, we have the resources and are committed to be the bank for all.

We are looking to the future and building upon our e orts with additional investments. Upon meeting our $400 million commitment toward Low Income Housing Tax Credits, we increased our commitment to include an incremental $400 million annually, totaling $2 billion over ve years in investments toward the construction and rehabilitation of a ordable rental housing. We’re also increasing funding for the construction and rehabilitation of a ordable housing for low- and moderate-income households by $2 billion and have committed $500 million in a ordable housing preservation funds.

Our unwavering belief in the transformative power of homeownership drives us to continue forging partnerships, enhancing products and strengthening community ties. e journey ahead is long, but we remain dedicated to fostering an equitable future.

Felton Ellington is a community lending manager for Chase in Chicago.

Rodolfo Medina is market president at Self-Help Federal Credit Union.

GETTY IMAGES BLOOMBERG

CHA program offers residents a path ‘to pursue your dream’

Eric Gwinn

COMMENTARY

Apologies can’t erase scars of discriminatory practices

Chicago, undeniably a world-class city, o ers a captivating blend of unique architecture, access to stunning rivers and lakes, and a tantalizing array of culinary experiences. For tourists, Chicago’s allure is boundless, o ering a rich tapestry of sights and sensations. However, for some residents hailing from less a uent communities, their Chicago experience is markedly di erent.

ese residents see Chicago through a lens colored by disinvestment, a perspective shaped by years of grappling with the oppressive weight of inequality. For them, renting an apartment is commonplace, while homeownership and securing a mortgage remain elusive dreams.

How do we know this?

Why make such claims?

e National Association of Real Estate Brokers annually compiles the “State of Housing in Black America” report. is exhaustive report delves into the sobering realities and stark statistics that hinder Black families from achieving the dream of homeownership.

As of the rst quarter of 2023, the Black homeownership rate languished at 44%. Astonishingly, this gure trails behind the Black homeownership rate recorded in 1968 when the Fair Housing Act was enacted into law. e bitter irony here is that 1968 was a time when overt discrimination in the real estate market was alarmingly widespread. During the 1930s, the federal government institutionalized redlining — a discriminatory practice that denied mortgage credit to communities and individuals based solely on their racial background, disregarding their nancial capacity to repay loans. e establishment of federal housing nance institutions further exacerbated this disparity, o ering substantialnancial support to non-Hispanic Whites while denying access to Black Americans. Consequently, the homeownership gap be-

tween these two groups has only grown wider over the past eight decades.

e history of real estate practices in the United States is a complex and often troubling one, particularly when it comes to issues of race and racism. One of the most troubling aspects of this history is the way in which African Americans have been excluded from the real estate market, both as practitioners and as homeowners. is exclusion has had a devastating impact on the ability of African American families to build and maintain generational wealth.

is exclusion has had a ripple e ect through generations, as African American families were unable to pass down the wealth that comes with property ownership.

In recent years, recognition of the harms caused by these practices has grown. Many organizations, including some in the real estate industry, have issued apologies for their historic complicity in racism and have committed to working toward greater equity and inclusion.

As the president of the Dearborn Realtist Board, the local Chicago chapter of the National Association of Real Estate Brokers, we appreciate the acknowledgement and value continued e orts to partner. However, we must recognize that an apology cannot erase the scars in icted by decades of discriminatory practices. ese systemic biases have sown the seeds of disinvestment in our communities, culminating in what we can now identify as “Mortgage Deserts.” I would de ne a mortgage desert as an area that consists predominantly of renters and lacks substantial investment in business corridors.

e same fervor that once fueled discriminatory practices must now be channeled into fostering equity and inclusion. Equity is the antidote to the wounds in icted by years of injustice, the missing piece of the puzzle. e systemic practices that endured for decades must be supplanted by a commitment to a fair and inclusive housing market, one that heals our communities and makes them whole. A market that makes access to capital and investment available and accessible to all.

Turning the dream of owning a home into a reality sometimes requires financial and technical assistance. Chicago provides both as a way to help low-income residents navigate the road to homeownership. For people living in Chicago Housing Authority residences, the Choose to Own and Down Payment Assistance programs provide guidance and money to ease the often stressful journey.

The Choose to Own program has helped more than 800 CHA households buy their own homes since its inception in 2002.

Choose to Own lets families use their housing subsidy to buy a home, and it provides monthly assistance with a portion of their mortgage payments for up to 15 years, or 30 years if the buyer is elderly or disabled.

Making the move from public housing to owning a home can seem daunting, says former CHA resident Ruth Brown. She went with a different option than Choose to Own, but she understands what families are feeling when they’re considering making the leap.

“ ey have good jobs, but they’re afraid — ‘If I get a mortgage and lose my job, how will I survive?’ ” Burns says. “If they lose their job while living in CHA, then CHA will adjust your rent. Staying put is a safety net. It takes courage to pursue your dream home.”

Families who live in public housing or have housing choice vouchers (subsidies for living in Section 8 housing) must meet income and savings requirements before applying to the CHA program. If they are approved, the CHA

Rates of denial

connects them with a team of counselors as well as legal and real estate professionals to help them through the sometimes-bewildering process of buying a home.

Counseling and understanding

First comes financial counseling on budgeting, money management and credit-score burnishing. Once they prequalify for a mortgage, they meet with real estate professionals to look for homes throughout the city. The CHA says families in the Choose to Own program have bought homes in 59 of Chicago’s 77 community areas over the program’s two decades in existence.

Then an adviser helps them with understanding the mountain of paperwork that must be signed. And finally, families get the keys to their new home.

Last year, 64 families purchased homes through Choose to Own, according to a CHA report.

Choose to Own is one of two homeownership pathways for CHA families.

e other is the Down Payment Assistance program. It provides a grant of up to $20,000 toward the purchase of a home. Participants must be below the income limits and able to contribute $3,000 of their own money.

e program is for rst-time buyers who will buy in the city and use the home as a primary residence.

CHA residents and holders of housing-choice vouchers can get their own home if they make a plan, stay committed and move one step at a time, Burns says. “Have a job, a work history. Save money. Make sure you don’t have debt. Make sure everything is paid up and on time and nd a bank to have a business relationship. You have to take a chance.”

On average, 14.44% of Black homebuyers are denied a mortgage, compared with 9.14% across the overall population.

Mortgage denial-rate spreads

For Black borrowers vs. overall mortgage borrowers

Sanina Ellison Jones is president of the Dearborn Realtist Board and a real estate broker.

The Choose to Own program has helped more than 800 CHA households buy their own homes since its inception in 2002

MORTGAGE DESERTS

come. Paying a bigger-than-necessary car note adds to their debt burden, which raises their interest rate if they decide to buy a home.

Black applicants denied mortgages at a higher rate

piled under the Home Mortgage Disclosure Act.

borrowers who identi ed themselves on their applications by race/ethnicity, $12 billion went to Chicago’s 33 predominantly white neighborhoods, while $1.3 billion went to the 30 predominantly Black neighborhoods.

ree predominantly white neighborhoods — Lakeview, Lincoln Park and the Near North Side — attracted nearly $4.6 billion, more than three times the investment in all the city’s predominantly Black communities combined.

‘Banking deserts’ costlier

Residents in many of those predominantly Black neighborhoods are less likely to have a bank relationship, which can a ect them when they want to buy a car, a home or start a business.

Chicago’s predominantly Black communities are clustered on the South and West sides, and as a result of decades of redlining and disinvestment, they are among the poorest areas of the city. ese areas have fewer bank branches, according to a 2019 analysis by Northeastern Illinois University economist Scott Hegerty. “Unbanked” residents rely heavily on high-interest payday loans, prepaid credit cards and other costly nonbank resources, as revealed in the 2021 FDIC National Survey of Unbanked and Underbanked Households.

Without bank accounts or any contact with a bank, it’s di cult to build credit or save for a down payment. at boosts the LLPAs — the loan level pricing adjustments — that mortgage lenders impose on risky borrowers. It also means that for some, buying a car through a costly auto dealership loan is the only option for private transportation.

Getting a car loan also is costly for people of color. Research by Jonathan Lanning, a former economist with the Chicago Federal Reserve, points to strong evidence of racial discrimination when auto loans are nanced by car dealerships. Dealer loans make up about 80% of U.S. auto loans, creating a $1.4 trillion market, according to Experian, the multinational data analytics and consumer credit reporting company.

e analysis of millions of auto loans found that Asian, Black and Latino borrowers paid a higher markup than did whites in the region that includes Illinois, Indiana, Michigan, Ohio and Wisconsin.

Federal data shows 60% of African Americans and about half of Latinos have low to moderate in-

Small-business loans feel out of reach

Buying a car or a house doesn’t have the potential to build wealth that owning a business can hold. But when it comes to seeking capital for a startup, Black entrepreneurs have all but given up on applying for small-business loans.

ey expect to be turned down, reported a 2020 working paper on access to capital published by the National Bureau of Economic Research. “Black founders in the top quartile of the credit score distribution are more than twice as likely to report a fear of denial than white founders with below median credit scores,” the working paper reported.

e paper’s authors also said Black startups start smaller and stay smaller than their white counterparts over the rst eight years of their existence.

In Chicago, small businesses in upper-income areas received a disproportionately bigger share of the loan volume, according to the Urban Institute. Meanwhile, businesses in low- and moderate-income areas saw lenders originate a disproportionately low percentage of loans.

Homing in on the homebuying journey

Ruth Burns, 64, wasn’t thinking about cars or small businesses when she was ready to leave her Chicago Housing Authority apartment for good.

All she wanted was to buy a nice home in a quiet neighborhood, a place that she and her husband could call their own. But reality quickly set in.

“In the market, I found a new home was unreachable if you’re making low pay,” says Burns, 64, who works for Catholic Charities as an advocate for the elderly. Not sure where to turn next, she connected with Neighborhood Housing Services of Chicago. NHS offers counseling and education for prospective buyers.

Burns learned the importance of having good credit — “Your score is going to speak well for you” — and about the di erent kinds of interest rates — “Is there a balloon payment?” It was tough.

“Looking for a home is supposed to be a happy time,” she recalls. “But it was just grievous.”

But with the help of homeowner workshops and educational seminars, she persevered. rough the Chicago Housing Trust — which acquires a ordable homes/units in new developments and sells

them at a subsidized price — she and her husband bought a condo in Logan Square. ey’re now in their second year of homeownership.

e couple really wish they could own the home without restrictions, but a 30-year restrictive covenant ensures the condo stays at an a ordable price long term, according to the Housing Trust.

Overall, though, Burns is glad to have a new home and is adjusting to her new life.

at’s the result that housing advocates across Chicago are seeking. ey work with lenders, grant-makers and government agencies to help prospective homeowners get down-payment assistance and other resources.

“We’ve seen down-payment assistance increase dramatically over the past ve years, as much as $30,000 for quali ed homebuyers,” says Lopez, of the Spanish Coalition for Housing. SCH o ers orientations and workshops as well as nancial resources that help renters become buyers.

One example he points to is the IHDAccess Forgivable Loan from the Illinois Housing Development Authority. It provides up to $6,000 in assistance for down payment and closing costs that’s forgiven monthly over a 10-year period. Homeowners don’t have to pay back the $6,000 if they use that loan to buy a house that they stay in for 10 years.

Housing advocates seek to boost homeownership across Chicago, and especially among people of color. Nearly 34% of African American Chicagoans own a home, trailing the share of Asians (46.1%), Latinos (45.6%) and whites (51.5%).

Some of that is because of the costs of borrowing that people of color face. Part of that is because of income. Of the 36 neighborhoods with at least 65% of residents with low to moderate incomes, 25 are predominantly Black. Ten are predominantly Lati-

Borrowers of color and housing experts believe there has to be a better way.

Rethinking the system for making home loans

NHS Chicago and the Woodstock Institute are working together with big lenders, real estate agents and appraisers on an ambitious project to reinvent how mortgage loans are made. A big part of it is rethinking what loan o cers consider when packaging the loans.

Can risk-related fees — those interest rate-boosting loan level pricing adjustments — be done away with?

no, although Black and Latino residents each make up about 30% of Chicago’s population.

But that shouldn’t hold back would-be homeowners, experts say.

“Lenders think it’s an income problem. It’s a rate problem,” says Sarah Brune, director of communication and policy at Neighborhood Housing Services of Chicago, or NHS Chicago.

Even high-income Black homeowners receive higher interest rates than low-income white homeowners, according to an analysis of U.S. housing data by the Joint Center for Housing Studies at Harvard University. e research showed that homeowners with incomes from $30,000 to $45,000 had the largest di erence in interest rates by income and race. Black homeowners in this category received interest rates of 4.506%, the highest among all categories. Interest rates for white homeowners in the same income category were 4.213%.

e di erence meant Black homeowners paid more than $1,000 a month more on their mortgage payments and over $12,000 more in interest over the duration of the mortgage. ose numbers are based on a home at the U.S. median price of $324,900 in the third quarter of 2020, with a 30-year xed-rate FHA mortgage and a 3% down payment ($9,747).

ere’s more evidence that people of color are on an uneven playing eld. Mortgage applicants of all races receive fewer denials if they have a white co-applicant, according to a report from the Federal Reserve Bank of Minneapolis.

Black applicants ling alone were rejected at a rate of 6.1%, while white solo applicants were denied at a rate of 3.1%. Among dual applicants, 4.5% of Asians were denied, while the number for dual whites was 2.1%, the lowest of all categories. e results came in an analysis of 2018-21 data com-

Can o ering low down payment options lower private mortgage insurance, which adds hundreds of dollars or more to the monthly mortgage payment?

Yes, NHS Chicago says.

“We o ered a 3%-down loan product that performed just as well as other conventional loan products,” Brune says. “We believe 3% can be very successful for lenders. We want homeownership to be equitably a ordable to Black and Brown prospective homeowners.”

“We’ve seen a heightened interest in homeownership,” says Lopez, of the Spanish Coalition for Housing. “Basic household needs have increased, but oftentimes income hasn’t.”

NHS Chicago, the Spanish Coalition for Housing and a variety of other organizations throughout Chicago counsel would-be homebuyers. Clients learn how to repair their credit, understand and negotiate the buying process and maximize public assistance from local and state housing agencies.

As new homeowner Ruth Burns says, education is a necessary wake-up call: “ e person who gets their rst car isn’t thinking about the interest rate. You’re thinking about how good that drive will feel.”

At the end of the day, though, the house they can a ord might not be in the neighborhood they want. Finding a home in a right- t neighborhood might require moving to the suburbs, for example. Buyers must be exible, with mortgage interest rates at 21-year highs and Chicago-area home prices rising 4.24% year over year.

“We need a thriving, well-educated population that has opportunity,” says Horacio Mendez, executive director of the Woodstock Institute. “We have an unbalanced system, and we would all be better o if we gured out a way to make things better.

“Whether they’re in a dinghy or a yacht, fewer people complain about what’s going on if the water is rising for everyone.”

AI and IP: Leveraging opportunities for your business

ERIC KRISCHKE

Partner

312-212-4978 ekrischke@beneschlaw.com

ERIC KRISCHKE focuses his practices on counseling clients on all aspects of intellectual property law with a focus on patents. He has more than two decades of comprehensive experience providing effective counseling and advice to clients on global IP portfolio management; infringement, validity, and risk management; patent and trademark procurement and enforcement; licensing, acquisitions, and dispute resolution; due diligence and pre-litigation investigations; product development; landscape, non-infringement, and patentability review and opinions; and patent litigation and post-grant review. He has extensive knowledge in a broad range of technologies and industries, including water-dispersible/water-soluble, sustainable materials, medical devices, electronic devices, lighting systems, imaging systems, software, aircraft engines, automotive, sustainable energy, home appliances, and sports equipment.

Arti cial intelligence (AI) is rapidly transforming the world around us, and intellectual property (IP) is no exception. AI is being used to create new and innovative products and services, and it is also being used to enhance the e ciency and e ectiveness of IP management. While this new technology may pose some risks, Benesch Intellectual Property Partner Eric Krischke says business owners can bene t from utilizing AI to build, manage, and protect their IP assets.

How does generative AI impact intellectual property?

Generative AI is having a signi cant impact on intellectual property. We are seeing it being used to create entirely new IP, including AIgenerated art, music, and literature, and even to create new inventions and technologies. It is also being used to improve the e ciency and e ectiveness of intellectual property management. AI can help automate tasks like patent searching, trademark monitoring, and copyright infringement detection, which in turn can free up time to focus on more strategic tasks.

AI can also be utilized to improve the accuracy and e ciency of IP due diligence. For example, AI can be used to search through large volumes of data to identify potential IP risks, such as con icting trademarks or patents. is can help businesses make informed decisions regarding when to invest in new IP vs. when to avoid doing so. Additionally, AI can be used to identify and combat IP Infringement. AI-powered watermarking and ngerprinting technologies, for instance, may be utilized to protect IP and help

from a growth or monetization perspective while also identifying any potential risks posed by AI. For example, is there competitive space in which to build or strengthen your IP assets? Do you have any IP assets that are easily counterfeited or copied using AIpowered tools?

educate your employees on the opportunities AI provides and the risks posed by AI, as well as their obligations under your IP protection plan.

Finally, given how rapidly this space is evolving, you want to stay informed and up-to-date on the

growth and/or monetization opportunities.

Additionally, whether in the context of business or other purposes, know your source or origin before distributing or otherwise using intellectual property. is is important to avoid infringing on the IP rights of others, especially because AI can be used to create deepfakes and other forms of counterfeit IP.

businesses identify and prosecute counterfeiters and other infringers.

What legal and ethical challenges need to be addressed in the age of AIpowered IP?

Inventorship, Authorship and Ownership. Who owns AIgenerated IP? Is it the creator of the AI algorithm? e person who provided the training data? Or is it the individual who commissioned the AI to create the work? ese are complex questions that have not yet been de nitively answered by the law.

Copyright protection for AIgenerated material is another challenge. Can AI be considered an author? Are these “original works” copyright protectable? If so, what are the criteria for copyright protection? ese questions are also being hotly debated without clear answers at this point. Additionally, who is liable for AI-generated IP infringement?

Finally, there are a number of ethical implications that come with AI-powered IP. ere is very real concern regarding AI being used to create deepfakes and other forms of disinformation, or even to develop autonomous weapons systems. We need to have open and honest conversations about these ethical challenges to develop responsible and ethical guidelines when it comes to Arti cial Intelligence.

What advice would you give to business leaders to prepare for the future of intellectual property in the age of AI?

First, review your IP portfolio to determine IP assets that have value

Second, develop an IP protection plan with an experienced IP attorney that includes speci c policies and procedures for protecting your IP assets and addressing AI-related risks. Your plan should set forth how to identify AI-powered growth opportunities and prevent AIpowered IP infringement, as well as how to protect your IP assets from being used to create harmful or unethical products or services, for example. It is also important to

latest trends and developments with AI to help identify potential opportunities while also being proactive when it comes to potential threats to your IP assets.

Any other tips to keep in mind?

e key is to nd ways to leverage this technology to your advantage to avoid running the risk of being le behind. Utilize AI to get a head start on your competition by learning which IP assets provide

To further protect your own intellectual property, a rmatively le for copyright protection for your outwardly facing works. is will give you the right to sue in federal court if your copyright is infringed, and it will also make it easier to recover attorneys’ fees and statutory damages if you are successful in your lawsuit.

Our team’s collective capabilities in areas such as mechanical, chemical, electrical, software and biomedical engineering, biochemistry, and bioengineering, coupled with our diverse individual experiences and insights, make us uniquely equipped to protect what’s distinctively yours.

beneschlaw.com

LEFT TO RIGHT: Kal K. Shah, Cristina Q. Almendarez, Ziyong “Sean” Li, Eric Krischke, Mircea Tipescu, Manish K. Mehta, Shandice Sluch, Simeon G. Papacostas, Charanjit Brahma, Louie Constantinou, Sydney E. Allen, Samuel J. Ruggio, Michael S. Weinstein, Tracey L. Starck

Your IP isn’t like anyone else’s. Neither is our IP Litigation team. Highly diverse. Uniquely Benesch.

“AI is being used to create new and innovative products and services, and it is also being used to enhance the ef ciency and effectiveness of IP management.”

Using litigation funding for patent enforcement

BOB SURRETTE is a Shareholder and President of McAndrews, Held & Malloy. He focuses on the resolution of intellectual property (IP) and technology-related disputes.

Bob has extensive experience in preparing and bringing to trial complex IP cases. He also advises clients on transactions involving IP and technology, including mergers, asset transfers and licensing.

Here are some common questions regarding litigation funding:

• What is it?

President

McAndrews, Held & Malloy 312-775-8206 bsurrette@mcandrews-ip.com

He serves on the Illinois Institute of Technology Board of Trustees and the Chicago-Kent College of Law Board of Advisors. He is a past president of both the Chicago-Kent Alumni Board of Directors and the Richard Linn American Inn of Court. In 2021, he was named to Crain’s Chicago Business Notable Gen X Leaders in Accounting, Consulting & Law.

Patent infringement can threaten a company’s pro ts and, in some cases, even threaten its very survival. But patent enforcement is expensive. For example, the cost to litigate a patent case in the U.S. with greater than $25 million at stake can easily exceed $10 million in attorneys’ fees in some jurisdictions, according to a 2021 survey by the American Intellectual Property Lawyer’s Association.

These high costs can discourage even well-capitalized companies

from protecting their intellectual property through enforcement actions. As a result, third-party litigation funding has become a popular option for companies both small and large. For example, in 2021 litigation funders provided approximately $812 million for patent cases, and industry observers estimate that 30% of patent litigation cases are now funded through litigation funding. A majority of those deals involved investments in a portfolio of cases or patents.

Litigation funding is an arrangement by which a funder that is not a party to a lawsuit provides funding to a litigant or law rm in exchange for an interest in the potential recovery in the lawsuit. e details of the nancial arrangement are based on the potential value of the litigation. Litigation funders are typically private entities that obtain investment capital from a variety of investors.

• Who uses litigation funding?

Plainti s – individuals or companies instigating lawsuits – use it to fund litigation expenses and provide working capital. Attorneys serve as custodians of funds for all of the litigation’s stakeholders and distribute those funds accordingly. In some cases, law rms representing multiple plainti s on contingency fee arrangements (this is not common in patent cases) may also receive legal nancing directly.

• Why is litigation funding used?

Litigation funding can hedge nancial risk to the litigant or law rm. It also helps undercapitalized

EXCEPTIONALLY DRIVEN

to deliver smart and practical solutions to your complex IP challenges.

Focused on all aspects of the procurement, litigation and leveraging of IP rights, McAndrews has built a distinguished reputation by assembling an exceptionally talented team with an unrelenting drive to deliver. Our attorneys, patent agents and scientific advisors offer our clients an intense concentration on IP and complex technology law, as well as strong business sense and strategic ability. Experience our approach to extraordinary, personalized service and our passion for the practice of IP law.

plainti s pursue meritorious cases by nancing key litigation expenses, including expert witness fees, and enables greater access to top legal resources. In some instances, funding provides capital injections for alreadyled cases that experience funding constraints, and it can reduce the risk that clients will run out of money during litigation. Further, litigation funding enables attorneys and law rms to o er more exible payment arrangements to prospective clients.

• How does the litigation funding process work?

e entity bringing the claim will provide the funder with information about the matter. Using this information, the funder will consider the strengths and weaknesses of the client’s case and the likelihood of success. Funders also consider the ability of the opposing party to pay, thus gauging the likelihood of recovery. Based on these perceived factors, the investor may contribute the capital necessary to pursue the lawsuit. Litigation funding typically involves an agreement that contains the funder’s identity, investment amount, payment schedule and whether the funder may exercise any strategic control over the litigation. Moreover, litigation funding is usually a non-recourse investment, meaning the litigation funder only receives payment if the case is favorably resolved. e funder usually gets

• What are other things an entity considering litigation funding in the patent space should keep in mind?

In the event of a successful outcome, the fee to the litigation funder will be taken from the patent owner’s damage award. It is therefore crucial to have su cient margin between the level of funding required and the expected level of damages.

In addition, some court jurisdictions require disclosure of the agreement between the patent owner and the funder during the phase of the litigation where the parties exchange information, commonly known as the discovery phase. If a party wishes to keep its funding under wraps, that may not be possible in some jurisdictions.

erefore, a party must be vigilant in what it discloses to a litigation funder. It is best to disclose publicly available information, and disclosure should be no broader than necessary to outline the operative facts, issues and procedural posture of the case. If the funder seeks a party’s con dential information, the party’s attorney should advise of the risks of disclosure and obtain informed consent to disclose information to the funder. e attorney should also take appropriate steps to limit the risks that disclosure will a ect a waiver of attorney-client privilege or workproduct protection.

mcandrews-ip.com

paid before the attorneys and the claimant. Parties do not have to repay the funder if their lawsuit is not successful. Parties that win their cases will generally repay the funder the amount funded plus a return on their investment as outlined in the agreement governing the terms of the funding.

• When may a party seek litigation funding?

A party may seek funding at all stages of a case, from before a complaint is led to a er nal judgment is entered. Most commonly, funding happens before the complaint is led, with the patent owner and law rm needing funding to proceed with the litigation. Other times, the patent owner and law rm may have launched litigation without funding, but their nancial situation changed mid-litigation, causing them to seek additional capital to nance discovery or trial.

ere is a limited pool of patent cases that are likely to qualify for litigation funding. But companies with a strong patent position, clear evidence of infringement, a substantial monetary claim and an opponent from which a judgment can be collected will likely be able to attract a funder.

BOB SURRETTE

“Patent infringement can threaten a company’s pro ts and, in some cases, even threaten its very survival.”

Intellectual Property rights in creative works and inventions created with the assistance of AI

have human-like conversations with a chatbot. Generative AI models of this type are trained on vast amounts of information from the internet, including websites, books, news articles and other databases. Generative AI is a form of machine learning that is able to produce text, video, images, and other types of content like essays, code, graphic art and even shopping and to-do lists.

appears that those portions would still be copyrightable. It could be di cult, however, to ascertain where the AI tool’s contribution begins and ends.

Can an AI program be the sole “inventor” on a patent?

Short answer: No.

conception can occur only in the mind of an inventor, i.e., a natural person, as aler v. Vidal explained, courts may conclude that an AI tool cannot be a “joint inventor” for the same reasons it cannot be the sole inventor on a patent.

JEFF MOTE

Partner Taft Law

312-836-4118

JEFF MOTE has a wideranging intellectual property litigation and counseling practice focusing on the protection, enforcement, and defense of intellectual property rights. He has litigated patent, copyright, trademark, unfair competition, and trade secret cases throughout the US and before the USPTO for a broad range of clients.

Generative AI can be a game changer for your business. Programmed correctly, these tools can churn out new and innovative solutions for the business. But what about intellectual property protection for such solutions? is article focuses on who may own intellectual property rights in written, graphic, and computer works and solutions created entirely or in part using generative AI technologies.

Can an AI program be the “author” of a written or artistic work for obtaining a copyright?

Short answer: No

Under the current U.S. patent law, speci cally 35 U.S.C. § 100, an inventor is de ned as an “individual” who contributes to the conception of an invention. As AI systems are not individuals or natural persons, they do not meet this de nition. e Court of Appeals for the Federal Circuit, which decides appeals in patent cases, has interpreted the Patent Act as extending patent protection only to natural persons.

Can AI be a “joint inventor” on a patent?

Short answer: probably not without a change in the patent law.

In February 2023, the United States Patent & Trademark O ce (USPTO) invited comments from patent stakeholders about how AI is contributing to their innovation and how that may impact the patentability of AI-assisted inventions. Many responses indicated a belief that AI is not capable of conception. For example, the High Tech Inventors Alliance (HTIA) urged that “AI is simply a tool … capable of aiding a human inventor” and that “AI systems lack the capacity for independent conception of inventions and that humans are involved in a way that quali es them to be inventors.”

Are AI-assisted human inventions patent-eligible?

who would be considered a joint inventor, is the invention patentable under current patent laws?”

HTIA answered that “[t]he contribution of the AI system does not prevent patentability due to the existence of the human inventor.” Pharmaceutical Research and Manufacturers of America wrote that “AI does not have intellectual domination over its output” and that “[i]t is the human being whose curiosity, inquiries, and input lead to the analysis and meaningful conclusions which give rise to inventorship.”

e USPTO has not yet formulated its policy regarding AI-assisted inventions. Nor have the courts or legislature, which will ultimately have the last say.

JAIMIN SHAH

Associate Attorney

Taft Law

312-836-4171

JAIMIN SHAH is an intellectual property litigator focusing on patent and trademark cases in federal courts. His experience is industry-agnostic, spanning a range of diverse technology areas. Jaimin brings depth and maturity to his litigation practice due, in part, to his prior in-house experience and judicial externships.

Doomsday tales involving arti cial intelligence (AI) running amok have been around for decades. Some examples include: Philip K. Dick’s “Do Androids Dream of Electric Sheep?” (the inspiration for the Blade Runner lms), Isaac Asimov’s “I, Robot,” and Arthur C. Clarke’s “2001: a Space Odyssey.” But we are perhaps just now entering a golden age of AI with generative AI tools such as ChatGPT—a natural language processing tool driven by AI technology—allowing users to

Unless there is a change in the copyright statute, the Copyright O ce and the courts have so far taken the position that “authorship” requires human creation. For example, on August 18, 2023, the U.S. District Court for the District of Columbia held in aler v. Perlmutter that the U.S. Copyright O ce acted properly in refusing to register a copyright in an AI-generated visual artwork that the applicant indicated was created absent any human involvement.

aler appealed. e district court concluded that authorship of copyright, under the U.S. Copyright Act and copyright decisions dating back to the 1800s, requires human creation and that the Copyright O ce did not err in refusing registration as aler had disclaimed human involvement. According to the district court judge: “Human authorship is a bedrock requirement of copyright.”

Of course, the logical follow-up question is how much human involvement is necessary for AIgenerated content to be covered under copyright laws?

Does use of an AI generated contribution to a written or artistic work render the work noncopyrightable?

Short answer: Probably not.

e mere use of an AI tool to create some but not all of a written or artistic work should not necessarily infect the work such that no portion of it can be copyrightable. Provided the non-AI contributions would be independently copyrightable, it

Conception, as de ned by the law, is “the formation in the mind of the inventor of a de nite and permanent idea of the complete and operative invention as it is therea er to be applied in practice.” Because

Short answer: It’s unclear.

One of the questions asked by the USPTO in its request for comments is: “If an AI system contributes to an invention at the same level as a human

is material is for general information purposes only and should not be construed as legal advice or any other advice on any speci c facts or circumstances. No one should act or refrain from acting based upon any information herein without seeking professional legal advice. Ta Stettinius & Hollister LLP (Ta ) makes no warranties, representations, or claims of any kind concerning the content herein. Ta and the contributing presenters or authors expressly disclaim all liability to any person in respect of the consequences of anything done or not done in reliance upon the use of contents included herein.

OFFICES

From Page 1

the city’s gross annual property tax levy, but is pushing a hike in the real estate transfer tax that o ce owners say will put more pressure on already sinking property values.

Jason Lee, senior adviser to the mayor, said in an interview that the ndings are interesting, but added that property values are “volatile” and can reverse course if the right action is taken. “We’re committed to increasing the values by boosting demand for downtown o ces,” Lee said.

But the head of a trade group which represents owners of downtown commercial property said that, with o ce vacancy downtown at a 75-year high, the U of C data tracks what he’s seeing and, if anything, understates the situation.

A good half of downtown o ce towers now are “in trouble,” facing potential mortgage default and related woes, said Farzin Parang, executive director of the Building Owners and Managers Association of Chicago. In fact, property values downtown have declined as much as 80%, Parang said.

Downtown o ce sales have almost totally dried up in the past year, as the market tries to nd the new normal. But signs of big trouble exist, with the Civic Opera Building, a 43-story tower at 30 N. LaSalle and a 1.4 million-squarefoot o ce building at 175 W. Jackson Blvd. all facing foreclosure. In the rst signi cant Loop deal in more than a year, the 29-story ofce building at 230 W. Monroe St. recently sold for 63% less than the price it fetched nine years ago.

Christopher Berry, director of the Mansueto Institute for Urban Innovation, said he doubts the overall decline is as steep as Parang estimates, but pointed to a recent Boston Consulting Group study which projected a decline of 35% to 45% in lost o ce-building values here.

Berry’s bottom line: “Everyone will have to pay if downtown takes a hit. It wouldn’t be a back-breaking increase for residential property owners, but people would feel it for sure.” And passing the proposed real estate transfer tax hike “would contribute to the overall decline in downtown values.” e hike would move the tax on sales from .75% now to a 3% marginal rate on the portion of a property’s selling price that exceeds $1.5 million, with proceeds going to homeless services.

Zero-sum game

e new study is based on the fact that Chicago’s property tax system is a sort of zero-sum game. e city Board of Education and other taxing bodies annually ask for a set amount of taxes, the gross levy. e bill then is allocated among individual taxpayers, based on the value of their property. If one owner pays less, because the tax value of their property has dropped, other owners have to pick up the di erence unless their value has dropped, too. is can change if governments reduce their levy. But in Chicago, that almost never happens, with Chicago Public Schools, in particular, raising its levy as much as is legally allowed almost every year.

Working from that fact, the U of C analysis looked at who would pay what, depending on how much the value of downtown ofces and other commercial property declined. at’s important, because those properties paid 26.4% of the total Chicago property tax bill in 2021, the last year for which full gures are available, according to the Center for Municipal Finance.

If downtown values slipped only 10% and everything else remained the same, the impact on the average homeowner would be relatively small, with an increase of just $43 a year, the study found.

e gure is so low because, at the 10% level, most of the need for new revenues would be paid by tax increment nancing districts,

which comprise more than a fth of the city’s total tax base.

But the TIF impact declines with higher reductions in downtown real estate values.

e hike in average residential bills jumps from $43 to $180 with a 20% drop in downtown commercial values, to $326 at the 30% level and $479 at 40%. Put a di erent way, the share of the total tax bill paid by owners of downtown commercial property if their values dropped 40% would plummet from 26.4% of the citywide bill to 17.3%. e shift of the tax load from downtown commercial to other types of real estate, primarily residential, would top $700 million a year.

Whether that actually occurs will depend on how tax assessment o cials respond to a downtown vacancy rate that now exceeds 25%. Cook County Assessor Fritz Kaegi has tended to raise downtown valuations, arguing that big o ce owners received special treatment from his predecessors. But the county Board of Review, which hears appeals of Kaegi’s proposed valuations, has largely reversed many of his increases.

e entire city is due to be reassessed in 2024, with taxes based on those new values due in 2025. But individual building owners can ask for a new valuation every year, and Kaegi can change his assessments on a case-by-case basis each year.

Kaegi’s o ce failed to respond to a request for comment, but the decline in values could put him in a political hot spot. e assessor’s increases in downtown values reected his belief that such properties traditionally were undervalued, relative to actual market sales. at allowed him to lighten the tax burden on homeowners when selling prices of o ce buildings were rising. But with the commercial market now headed the other way, will the assessor be willing to reverse course and potentially provoke home-owning voters?

OUR READERS ARE 125% MORE LIKELY TO INFLUENCE OFFICE SPACE DECISIONS

A good half of downtown of ce towers now are “in trouble,” facing potential mortgage default and related woes, said Farzin Parang, executive director of the Building Owners & Managers Association of Chicago. I FILE PHOTO

BANKING

Republic Bank of Chicago, Oak Brook

Republic Bancorp is pleased to welcome Daniel G. Coman as Executive Vice President and General Counsel for Republic Bank and its Af liate Companies.

Joining the Bank on January 8, 2024, Dan brings over 30 years of experience to the Bank’s leadership team with an extensive background in managing and providing professional services at the law rm he founded and as an Equity Partner in an AMLAW 200 rm. Dan has extensive expertise and insight into the needs of small and middle-market companies, their owners, and other stakeholders. In addition to holding a law degree and being admitted to the Illinois Bar, Dan is a Registered CPA, a Licensed Real Estate Managing Broker, and holds an MBA from the University of Illinois – Urbana-Champaign.

CONSTRUCTION

LG Group, Chicago

Andrew Hoppe joins LG Builders, the construction arm of LG Group, as a Project Executive. He brings 19 years of commercial construction experience to the company with a background in Tenant Improvement and renovation projects both in Chicago and Nationally. At LG, Andrew will support the growth of the company’s commercial construction group in and outside of Chicago, with a focus on of ce and retail interiors by leading business development, pre-construction planning, and project execution.

EDUCATION

Teach For America, Chicago

Levin Ginsburg, Chicago

CONSTRUCTION

Bulley & Andrews, Chicago

Bulley & Andrews (B&A) is pleased to announce the promotion of Kirstin Starkey, SHRM-SCP, to Vice President, Human Resources. Starkey joined B&A in 2016. During her tenure, she has played a pivotal role in talent recruitment, engagement and retention, professional development and elevating B&A’s diversity, equity, and inclusion efforts.

Starkey Marquez

Bulley & Andrews has promoted Greg Marquez, CHST, CRIS, to Vice President, Safety & Risk Management. With 20+ years of experience, Marquez is an expert in the design and implementation of safety programs, staff training, and risk mitigation. Under his leadership, B&A has earned several major safety awards including the CAGC’s Safety Excellence Award in 2021 and the Safety Innovation Award in 2022.

EDUCATION

City Colleges of Chicago, Chicago

Veronica Herrero has accepted an expanded role at City Colleges of Chicago (CCC) as Executive Vice Chancellor, Chief Institutional Advancement Of cer & Chief of Staff. She will also serve as President of the City Colleges of Chicago Foundation. Her full portfolio includes private and public fundraising, marketing and communications, government & community relations, and critical teams focused on excellence and equity. Veronica will remain caretaker of CCC’s strategic plan and guide local, national, public and private partnerships in all sectors. “It’s an honor to serve at an equity-focused institution that provides upward economic mobility for Chicagoans, and ensures students nd the support they need and deserve so they are successful.”

In a continued effort to deepen and expand its partnerships, advance public affairs priorities, and grow the regional education leadership pipeline, Teach For America Greater Chicago–Northwest Indiana appointed two new board members to its regional advisory board. Brian Malkin is a Principal at GCM Grosvenor, a $70bn+ alternative asset management investment rm headquartered in Chicago, and Luke Marker is a Managing Director at GTCR Private Equity Firm, a leading private equity rm in Chicago.

Malkin Marker

McDonald Hopkins LLC, Chicago

McDonald Hopkins is pleased to announce that Daniel Borek has been elected to the rm’s membership. Borek is based in Chicago and a Member of the rm’s Executive Compensation and Governance Practice Group. He is licensed in both Florida and Illinois. Borek represents companies, executives, founders and management teams in connection with equity and incentive compensation arrangements, change in control transactions, and other private equity and corporate events.

Levin Ginsburg is pleased to announce that Camila Kaplunov has joined the rm as an Associate Attorney. Ms. Kaplunov is a graduate of Loyola University Chicago School of Law and George Washington University. Camila will focus her practice on all phases of real estate transactions, as well as general corporate and business matters.

McDonald Hopkins LLC, Chicago

McDonald Hopkins is pleased to announce that Jacob Radecki has been elected to the rm’s membership. As part of the rm’s Litigation Department, Jacob represents clients in a broad range of complex civil litigation matters, including commercial contract disputes, shareholder litigation, data privacy, and class action defense. In addition to his business litigation and trial experience, Jacob represents clients in corporate criminal defense and enforcement-related litigation.

REAL ESTATE

Hiffman National, Oakbrook Terrace

Hiffman National celebrates Thomas Murphy in his promotion to Senior Vice President. Murphy joined Hiffman in 2012 with over 20 years of experience in property management. He formed the Project Services group in 2019 utilizing his multiple engineering degrees, which has grown to eight people across three cities: Chicago, Houston, and Dallas, supporting over 100 projects in 2022 and exceeding $55M, including property inspections, large-scale tenant improvements, and base building capital work.

WEALTH MANAGEMENT

BMO Family Of ce, Chicago

BMO Family Of ce welcomes Michael Goldberg as Managing Director in Chicago. Michael serves as the team lead for the Financial Sponsors practice within BMO Family Of ce and BMO Wealth Management.  He works exclusively with Private Equity industry professionals to create bespoke solutions around liquidity, cash management and wealth transfer. Michael joined the organization in 2020 and has over 20 years of experience in the nancial services industry.

LAW FIRM

LAW FIRM

INVENERGY

country and across the globe, we need additional space to accommodate new members of our world class team,” Invenergy President and Corporate Business Leader Jim Murphy said in a statement. “The expansion of our Chicago headquarters reflects our rapid growth and our ambitious plans for Invenergy’s future. We look forward to the many ways our expanded office will support our team as we continue building innovating solutions for a clean energy future.”

Invenergy also might not be done expanding in the building. In a move that could help raise Chicago’s profile in the renewable energy sector, the company is working with city of Chicago officials on a plan to build out an innovation hub in the building that would be akin to tech incubator 1871, but for the clean energy industry, according to sources familiar with the plan. Details of that concept, including the city’s role and when it would be created, were not immediately available. But the space would be in addition to Invenergy’s office expansion, sources said.

Invenergy develops, owns and operates big renewable and other clean energy facilities around the world. Founded in 2001 by Michael Polsky — the billionaire who went on to help launch the Polsky Center for Entrepreneurship and Innovation at the University of Chicago — Invenergy along with Blackstone and Canadian pension fund CDPQ, announced in August that it had

THEATERS

From Page 3

But DCASE isn’t the only city department that could bene t from increased funding as the city faces a $538 million budget shortfall in scal 2024, which includes an estimated $200 million for expenses tied to the care of migrants. Meeting other critical needs while also nding more dollars for performing arts would require hard budgetary choices.

Around 40% of DCASE’s budget is tied to the city’s hotel occupancy tax, with the remainder coming from private, state and federal grants, many of which are ending, including a one-time $16 million grant from the federal government.

As those external sources dry up, Rice is calling on the city to allocate $25 million from its corporate fund, the most DCASE has ever received from the main operating fund that supports basic city services. e previous administration dedicated $10 million from the corporate fund for DCASE each of the last two years.

e big ask re ects a nancial crisis for Chicago theaters starkly outlined in a recent DCASE study. Season-ticket purchases, a pillar of the industry’s business model, dropped 65% over the past four years, as attendance at Chicago theaters fell nearly 60%. At the

acquired the $1.5 billion renewable power portfolio of Columbus, Ohio-based utility holding company American Electric Power, adding 14 wind farms and other solar energy projects to its portfolio.

Landlord trouble

An Invenergy spokesman said in a statement that the company has added more than 1,300 employees globally over the past

same time, in ation has driven up the cost of staging performances.

eater operators have responded with cutbacks, including layo s at prominent venues such as Steppenwolf and Lookingglass eatre.

Encouraging moves

DCASE Commissioner Erin Harkey acknowledges the dire traits facing the industry. She won’t say how much money she requested from the city but expressed “some con dence” that, regardless of what the mayor gives, there will be a focus on theaters in her department’s next budget.

Johnson’s spokesman didn’t respond to questions about how much he is willing to give DCASE out of the corporate budget.

Signaling his concern, Johnson, along with DCASE, convened a group of theater leaders in August, including nonpro ts and philanthropy groups as well as business organizations, to address the state of Chicago’s theater sector, which includes both downtown and neighborhood stages.

While the gathering was mostly a listening session, with theaters airing their concerns, Roche Schulfer, Goodman eatre’s executive director and CEO, is encouraged by the move.

“It’s positive that the mayor and Commissioner Harkey brought the industry as well as other key

five years, and that the company today operates more than 200 clean energy projects across four continents. The company has about 900 employees in Chicago, the spokesman said.

601W paid $310 million in late 2018 for the tower at 1 S. Wacker, according to Cook County property records. The $260 million loan was packaged with other mortgages and sold off to commercial mortgage-backed secu -

rities investors, making much of the building’s financial information publicly available.

That financial picture has gotten worse for 601W over the past few years, with revenue falling and the interest rate on its mortgage rising. The building was 74% leased and generated more than $16.5 million in net cash flow in 2019, well above 601W’s $11.8 million in debt service for that year, according to

Bloomberg data tied to the loan. Last year, its net cash flow totaled less than $10.3 million, while its debt service for the year was $12.5 million. 601W’s monthly debt payments have increased by almost 60% over the past year, Bloomberg loan data shows.

The mortgage was originally slated to mature in December 2021, but 601W has executed extension options to push back the maturity to December 2023, according to Bloomberg loan data.

A spokesman for 601W couldn’t be reached.

The Invenergy deal also comes a few months after 601W struck another lease to help with financial trouble at Aon Center, the 83-story building it has owned since 2015. 601W earlier this year was staring down a potential default on a $678 million CMBS debt package tied to the city’s second-tallest office building that was due to mature on July 1. But the landlord inked a lease extension with insurance giant Aon — albeit one that reduced its square footage by around 25% — that helped 601W negotiate a four-year extension on its maturity date.

601W may be best known locally for its redevelopment of the Old Post Office into a modern office building. The developer is also underway with a $265 million project to refurbish a former Northern Trust office building at 801 S. Canal St. into a multitenant office property known as Canal Station.

CBRE brokers Brad Serot and Bill Sheehy negotiated the lease expansion on behalf of Invenergy. Telos Group’s JD Parcheta and Nikki Kern represented 601W.

campaign called Go Live Chicago, which promoted attending live performances like concerts, theater and dance.

“Fall will o cially be theater season,” said Jason Lesniewicz, senior director of cultural tourism at Choose Chicago. “We really want to focus our dollars and our attention on theater and drive as many ticket sales to theater shows happening across the Chicagoland area as possible.”

Other cities are moving to shore up theaters facing the same nancial pressures a ecting Chicago venues. New York City has pledged $241 million of its $107 billion 2024 budget to its cultural a airs department, slightly up from the previous year, to help the struggling industry. e city also created a Live Performance Industry Council to address the ongoing challenges for the sector.

players together,” Schulfer said.

“ ere’s no quick x to any of this and it will require everyone working together.”

Harkey said the department plans to convene more working groups in the future to address the concerns of the city’s theaters. While acknowledging the need for funding, she said that the city is working to enlist business and philanthropic groups in an e ort to support ailing theaters “because there isn’t just one solution.”

One of the steps the department has taken is to commission a marketing campaign to promote Chicago theaters beginning this fall. Choose Chicago, the city’s tourism arm which receives some funding from DCASE, will lead the e ort that will include live plays on city streets, as well as billboards and targeted social media ads. e tourism organization said its total budget for the fall theater campaign is over $200,000, nearly double what was spent on the spring

In Chicago, performing arts advocates say helping theaters also could help solve one of Johnson’s most urgent challenges: revitalizing a downtown area hammered by rising crime fears and the slow return of workers to o ces.

“ e arts are incredible economic drivers for downtown businesses,” said Chicago Symphony Orchestra Association President Je Alexander. “Our patrons will go to a restaurant before a show, stay downtown in a hotel and pay for transport. We all help each other.”

1 S. Wacker Drive I COSTAR GROUP

“Villette” at the Lookingglass Theatre I LOOKINGGLASS THEATRE

UAW President Shawn Fain has demanded raises of more than 40% over a four-year contract, roughly in line with what pilots have negotiated with major U.S. airlines. He points to billions of dollars in pro ts and the massive salaries of CEOs as he attempts to claw back concessions the union made during the industry’s bankruptcy era.

Fain has plenty of data to support his push. Stellantis made $18 billion in net income last year and GM took in $10 billion. While Ford’s bottom line took a hit in 2022, it recorded $18 billion in net income the year prior.

Meanwhile, company executives have reaped rewards. e highest paid of the trio is GM CEO Mary Barra, who took home a pay package worth just less than $29 million in 2022 — 362 times that of the median GM employee. At the same time, UAW pay has stagnated, with autoworker pay topping out at $32 per hour after annual increases of 3% since 2019.

President Joe Biden visited a picket line in metro Detroit recently to deliver this message to its members: “You deserve what you’ve earned, and you’ve earned a hell of a lot more than what you’re getting paid now.”

Automakers don’t disagree a raise is in order for its 150,000 UAW-represented workers; the problem is the size of the ask, said Glenn Stevens, executive director of MICHauto, a nonpro t launched in 2007 to grow Michigan’s auto industry.

“From their perspective, they can’t let the labor situation drive costs up too much,” Stevens said. “ ere’s a lot of pressure on them to make sure that they’re able to fund that and control all of their costs as they try to win market share in the burgeoning EV market.”

e automakers and the union have to balance yesterday’s nancials with tomorrow’s needs.

“Last year was the peak year for the production of internalcombustion engines in this country,” said Daron Gi ord, a senior partner in Plante Moran’s mobility practice in metro Detroit. “It’s already declining. It’s just a matter of how fast does it decline. “ e long-term for the UAW is the next negotiating cycle. In four more years, there’s going to be a lot of plant closures. ere’s going to be consolidation.”

EVs have 30% to 40% fewer parts than their ICE counterparts, which will reduce the amount of labor needed by carmakers themselves, but Gi ord said new jobs created by EVs should o set those lost positions. As transmission and engine plants go extinct, more domestic manufacturing of EVrelated parts, such as batteries and electric-drive components, will bring more jobs to the country. Automation will eliminate some jobs but create others in maintaining equipment.

“ e overall number of workers — if you go all the way down through the supply chain — probably looks about the same,” Gi ord said.

Still, Donald Trump and others have played to the fears of job losses

because of the Biden administration’s push for more EVs. Trump, campaigning for a second term as U.S. president, spoke to supporters at a non-union auto supplier in Macomb County recently, working to win over blue-collar voters.

Trump told supporters that electric vehicles would “spell the death of the U.S. auto industry” because they cost too much and consumers don’t want them.

Automakers are trying to catch a falling knife with one hand and reach for the stars with the other.

“EV volumes are going to increase pretty dramatically,” Gi ord added. “ is is where all the OEMs’ capital spending is going because they’re playing catch-up to Tesla on EV technology. Some of the money the UAW wants . . . is going to take away from (automakers’) ability to invest. at’s a problem.”

Texas-based Tesla already has a signi cant cost advantage over the Detroit ree, as do foreign automakers. Ford, GM and Stellantis pay $66 an hour in wages and benets per worker, according to industry data compiled by the Federal Reserve Bank of Chicago. at’s compared with about $55 for nonunion carmakers while Tesla is believed to be as low as $45.

‘Growing nightmare’

If the Detroit ree meet the UAW’s demands, labor costs would soar to $136 per employee, costing the companies up to $8 billion each, according to an analysis by Colin Langan of with Wells Fargo. Taking a deal as it stands now would drive up the price of an EV by $3,000 to $5,000, Wedbush estimates, at a time when new cars are already una ordable to many and as automakers struggle to make money on EVs.

“ is is . . . an almost impossible decision that could change the future of the Detroit automakers in our view,” Ives said. “Let’s be clear: is is a growing nightmare situation.”

e stakes are high in the Rust Belt because despite years of southern migration by auto companies, particularly Asian and European brands, the Midwest still has the highest concentration of autoworkers in the country. Michigan, Indiana and Ohio have twice as many

who specializes in labor. “I think you’re going to see signi cant job losses. I think that companies are taking advantage of the situation in knowing that producing EVs is much more labor-e cient.”

Ford brought the issue front and center recently when it said it would pause construction of its planned $3.5 billion battery plant in Marshall. e plant, which is to be wholly owned by the Dearborn-based automaker with a licensing agreement with Chinese giant CATL, had been eyed for organizing almost as soon as it was announced.

Ford said it was “pausing work and limiting spending” until it felt con dent about operating the plant “competitively.” Gov. Gretchen Whitmer and the Michigan Economic Development Corp., which facilitated around $1.7 billion of incentives for the project, indicated that they hope the project will resume once Ford makes a deal with the UAW.

ChicagoBusiness.com

President and CEO KCCrain

Group publisher Jim Kirk, (312) 397-5503 or jkirk@crain.com

Editor Ann Dwyer

Managing editor Aly Brumback

Creative director Thomas J. Linden

Director of audience and engagement

Elizabeth Couch

Assistant managing editor/enterprise Joe Cahill

Assistant managing editor/special projects

Ann R. Weiler

Assistant managing editor/news features

Cassandra West

Deputy digital editor Robert Garcia

Associate creative director Karen Freese Zane

Digital design editor Jason McGregor

Art directors

Kayla Byler Carolyn McClain, Joanna Metzger

Senior digital news designer Stephanie Swearngin

Copy chief Scott Williams

Copy editors

Todd J. Behme,Beth Jachman,Tanya Meyer

Political columnist Greg Hinz

auto jobs — 333,780 last year, according to Bureau of Labor Statistics data — as Tennessee, Kentucky and Alabama. Together, Michigan, Indiana, Ohio and Illinois accounted for 45% of auto-manufacturing jobs nationwide last year.

In communities across the Midwest, the question of whether they’ll remain auto-manufacturing hubs beyond the next contract looms large in current negotiations. Automakers are deciding which communities will make EVs, batteries and other critical parts.

e fate of plants such as the Stellantis factory in Belvidere, Ill., which made Jeep Cherokees until it was idled in February, is among those up in the air. Whether it becomes a giant parts-distribution center or a site that makes EVs is expected to be determined in this contract cycle.

“ at is the question — what, when and how many,” said Matt Frantzen, president of UAW Local 1268, which represents about 1,300 workers at the Belvidere plant.

Chris Pena, president of UAW Local 551 at Ford’s assembly plant on the south side of Chicago, calls EVs “the elephant in the room” during negotiations.

“It’s inevitable,” he said of the shift to EVs.

Workers at the Torrence Avenue plant in Chicago, which makes hybrid Ford Explorer and Aviator SUVs, already are experiencing it.

“We’ve been transitioning for some time,” Pena said. “We know the EV market is the next step. It will drastically change our work . . . to jobs that are more technical. Wages need to re ect it.”

e UAW has demanded a “fair and equitable transition” to EVs and has been clear about its desire to organize the battery factories cropping up around the U.S. In most cases, those plants are owned by a joint venture with an Asian battery maker and not subject to the union’s national contracts with the Detroit ree.

In a major win, Fain said Friday that GM agreed to put battery manufacturing under the UAW contract.

“I would say that EV is the principal driver of what’s going on with these discussions,” said Marick Masters, a business professor at Wayne State University in Detroit

Some look at the automaker’s move as a shrewd bargaining strategy. With Ford appearing to edge closer to a deal than its competitors, the company could be using the plant as leverage against further UAW demands. Fain didn’t mince words with his opinion of the decision, calling it “a shameful, barely veiled threat by Ford to cut jobs.”

Battery plant incentives

On Sept. 29, after the UAW expanded its strike, Ford CEO Jim Farley accused the union of “holding the (contract) deal hostage over battery plants,” and that despite progress made in other areas, the two sides are clashing on EVs and battery plants.

Ford announced the pause in Marshall on the eve of Biden’s visit to metro Detroit picket lines and as the federal government is poised to clarify rules on whether “foreign entities of concern” such as China can participate in federally subsidized EV manufacturing. at decision will have far-reaching consequences.

Michigan and Illinois have hundreds of millions of dollars in incentives riding on battery plants by Gotion High-Tech, often criticized for its ties to the Chinese Communist Party. In Michigan, Gotion plans a $2.4 billion EV battery parts plant near Big Rapids that executives said they hope will remain non-unionized and that some locals are wary of for its ties to China. e Republican Party of Illinois has alleged that the $2 billion EV battery plant scheduled to open next year in downstate Manteno, Ill., is a front for Chinese communists to spy on key U.S. military installations.

Ford’s EV battery factory pause could be more than a ploy, said Erik Gordon, business professor at the University of Michigan. “Ford is probably re-running the numbers and is guring out, what do the economics of a battery plant in Marshall look like if it is a UAW plant at the new pay scale that we’re facing, and no temp workers, no tier workers. . . . e economics of that plant might look very di erent than the economics that were projected six months ago.”

Kurt Nagl writes for Crain’s Detroit Business. John Pletz writes for Crain’s Chicago Business.

Notables coordinator Ashley Maahs Newsroom (312) 649-5200 or editor@chicagobusiness.com

SENIOR REPORTERS

Ally Marotti, John Pletz, Dennis Rodkin

REPORTERS

Katherine Davis, Brandon Dupré, Danny Ecker, Leigh Giangreco, Jack Grieve, Corli Jay, Justin Laurence, Steven R. Strahler

Researcher Sophie H. Rodgers

ADVERTISING

Senior vice president of sales Susan Jacobs (312) 649-5492 or susan.jacobs@crain.com

Sales director Sarah Chow (312) 280-3172 or schow@crain.com

Events manager/account executive

Christine Rozmanich

Events specialist Kaari Kafer

Account executives

Linda Gamber, Claudia Hippel, Menia Pappas, Bridget Sevcik, Laura Warren

Sales administration manager Brittany Brown

People on the Move manager Debora Stein

Classi ed sales Suzanne Janik, (313) 446-0455 or sjanik@crain.com

Inside sales Isabel Foster

CRAIN’S CONTENT STUDIO

Senior director of Crain’s Content Studio Kristin Bull, (313) 446-1608 or kbull@crain.com

Crain’s Content Studio manager Jordan Dziura

Custom content coordinator Allison Russotto

PRODUCTION

Vice president, product Kevin Skaggs

Product manager Tim Simpson

Digital designer Christine Balch

Production manager David Adair CUSTOMER SERVICE (887) 812-1590 Reprints

Crain’s Chicago Business is published by Crain Communications Inc.

Chairman Keith E.Crain

Vice chairman Mary Kay Crain

President and CEO KCCrain

Senior executive VP Chris Crain

Chief Financial Of cer Robert Recchia

G.D. Crain Jr. Founder (1885-1973)

Mrs. G.D. Crain Jr. Chairman (1911-1996)

Editorial & Business Of ces

130 E Randolph St., Suite 3200, Chicago, IL 60601 (312) 649-5200

Workers at Ford’s Torrence Avenue assembly plant on Chicago’s Far South Side join the UAW picket line on Sept. 30. I BLOOMBERG