Crain's Chicago Business - 10/25/21 by crainschicago

MOST INNOVATIVE COMPANIES: See which area firms are on the cutting edge. PAGE 15

BUSINESS OF CANNABIS: Firms want changes to lottery system. PAGE 18

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FORUM POLICE MISCONDUCT

VIOLATIONS

Deere walkout highlights union power in Illinois The state’s first big industrial walkout in 26 years comes as Pritzker is trying to attract EV makers When the John Deere factory in East Moline is humming, the constant rumble of giant machines leaving the plant can be felt throughout the Watertown neighborhood. The steady flow of combines and other equipment slowed to a trickle after 10,000 members of the United Auto Workers went on strike this month, the rumble replaced by honking of horns as passersby show support for picketers. The first strike at Deere in 35 years, and the first large-scale walkout at a major manufacturer in Illinois since a Caterpillar strike ended in 1995, is generating national headlines just as the

OF TRUST Sworn to ‘serve and protect,’ the Chicago Police Department, under a federal court-enforced consent decree since 2019, has a disturbing pattern of misconduct cases in communities of color. With several layers of oversight now in place, can the CPD be reformed? | PAGE 21 FIND THE COMPLETE SERIES ONLINE

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JOHN PLETZ

BY JOHN PLETZ

Striking United Auto Workers walk the picket line outside a John Deere factory in East Moliine. state makes a play for new factories. Gov. J.B. Pritzker is vying with right-to-work states such as Tennessee and Texas, as well See LABOR on Page 31

Brewer chases a big number at Walgreens New CEO aims for double-digit earnings growth BY STEPHANIE GOLDBERG Walgreens Boots Alliance CEO Roz Brewer has set an unprecedented goal as the drugstore chain reinvents itself as an integrated health care company. Brewer, who took the helm in March, told a Wall Street audience the transformation will turn Walgreens into a growth machine within a few years. Her target of

11% to 13% long-term growth in earnings per share is four times the company’s average pace over the past decade. To deliver, she’ll have to integrate a collection of newly acquired health care businesses into a synergistic whole that grows far faster and more profitably than Walgreens’ current See WALGREENS on Page 33

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REAL ESTATE

YOUR VIEW

Second-home towns tangle with short-term rentals. PAGE 3

Cook County’s legal aid program supports landlords, too. PAGE 10

10/22/21 4:28 PM

2 OCTOBER 25, 2021 • CRAIN’S CHICAGO BUSINESS

Royal flush for Lightfoot on a Chicago casino?

t a time when she really could use some good news, Mayor Lori Lightfoot stands to have one of the best days of her tenure on Oct. 29. That’s when bids are due for the long proposed Chicago casino—centerpiece of city efforts to pay off hundreds of millions of dollars in old pension debt—and it looks she may just roll boxcars. But while the overall prognosis looks good for Lightfoot, there are more rumors swirling around this one than at a political convention. It’s potentially millionaires versus billionaires, big-name Chicago developers competing with counterparts from the coasts, and maybe lakefront preservationists battling big-name investors. Building a casino, of course, has been a dream of Chicago mayors since at least the early Richard M. Daley years. “People need jobs. If you don’t provide them jobs going into the next century, what are we going to do, set everybody on relief

that to three for sure and a good shot at a fourth. None of the three wants to tip their hand. All declined or failed to reply to requests for comment. But the three reportedly are Chicago billionaire Neil Bluhm in association with a unit of Related Midwest, Bally’s and, it appears, Hard Rock. How good their bids are won’t be known for sure until details are disclosed. But one insider tells me that all three are solid propositions and legitimate attempts to win the casino for their bidders. Bluhm has hooked up with Related Midwest for a casino that presumably would go on the real estate firm’s property for the 78 development on the south side of Roosevelt at Clark along the south branch of the Chicago River. Gossip among insiders suggests one of the other two bidders will likely propose using land in or around the former Chicago Tribune property at Chicago Avenue near Halsted Street, which has

GREG HINZ ON POLITICS

the advantage of being close to both the Michigan Avenue hotel district and tony North Side neighborhoods just to the north where people of means may be looking for an excuse to get out of the house for a while. The most interesting talk, though, involves property farther to the east: either the obsolete Lakeshore East building in the McCormick Place campus—perhaps just for a temporary casino while the permanent one is built—or on developer Bob Dunn’s budding One Central project that would rise on a platform over Metra Electric tracks just west of Soldier Field. Dunn’s spokesman declined to comment. The agency that owns and operates McCormick Place,

the Metropolitan Pier & Exposition Authority, denies through a spokeswoman that it has struck or discussed a casino deal with anyone. Other intrigue comes from the continuing saga over whether the Bears will or will not end up vacating Soldier Field, whether there’s any way park advocates will countenance a casino anywhere near the lakefront, and the many hands the always adroit Mr. Blum is prepared to play. Remember, Bluhm lately has been business partners with Churchill Downs, which has a contract to sell its Arlington track to the Bears. We ought to get some clarity soon. Meanwhile, competition is good—especially in this space.

What Chicago needs: A people’s map

nyone paying a bit of attention to local news knows Englewood is a Chicago neighborhood where a lot of shootings occur and where there are plenty of struggles. It gets more bad press than most. But Englewood is more than that. It’s also a community where many people who care are working hard to try to improve it. That fact hit home one early Saturday morning in September when the Chicago Advisory Redistricting Commission gathered to listen to residents’ needs and concerns. Linda Austin beamed as she spoke about efforts to rebuild housing and clean up the area around 1600 South Green St. “We’re trying to get rid of the graffiti, the abandoned houses. We got too many churches, too many liquor stores,” she said. “We just have to make sure that, when you think of a community, especially in Englewood, you want to make sure that you can be proud of where you live.” But if Linda Austin needs help with cleanup or housing rehab work, she might have to reach out to six different aldermen because Englewood currently is split up among six different wards. Resident Rodney Johnson, of One Health Englewood, said other nearby neighborhoods make up the majority of many of those wards and that results in his community being neglected. “If you’re only 35% of the ward, then you cannot hold the actual person accountable for your community,” he said. “As of now, more people vote outside of their community than vote inside a community. So, it’s all lip service.” The 13 independent commission residents from throughout Chicago who listened to people in Englewood, Chinatown, West Rogers Park and many more neighborhoods talk about their communities were not paying lip service. After 41 open and livestreamed

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(or) unemployment?” Daley put it. Ergo, the mayors asked and asked and asked, and the Illinois Legislature said no and no and no. Until, that is, Lightfoot—on her second try—was able to pass enabling legislation that had tax rates low enough to make a big casino/entertainment district economically feasible. Lightfoot’s misfortune was that the approval came just as COVID-19 hit, raising questions about the future of any big public space that had lots of people salivating from slot machine to slot machine and roulette wheel to roulette wheel. But to their credit, Team Lightfoot appears to have gone out and done a pretty good job of selling the city at a time of difficulty. Good for them. As I previously reported, the city has expected to have as many as five bidders by the deadline, with three likely and a fourth probable. Multiple sources with firsthand knowledge now have upgraded

training sessions, meetings and hearings from June to October, the commissioners worked diligently to honor, as best they could, what Chicagoans said they wanted for their neighborhoods. They created a map for Chicago, by Chicagoans. And now, if 10 of the 50 council members in Chicago can be persuaded to support the people’s map, Chicagoans could get a chance to vote in an election next year to determine whether they prefer that map or those drawn in a closed back room, the traditional city ward mapping process. With 77 Chicago neighborhoods, but 50 wards created by law in Chicago, keeping all communities whole, like Englewood, wasn’t possible, but commissioners “worked diligently to unify communities that have been split up for political spoils,” noted Commissioner Mike Strode of the South Deering neighborhood. Other communities they were able to keep mostly whole in their ward map are Austin, Avondale, Back of the Yards and Logan Square. Throughout the past four months, these diverse, yet typical Chicagoans worked together to focus representation for the next 10 years on their neighbors and what they want and need. They tweaked borders in Rogers Park to better align with school boundaries. They made the difficult choice to redraw some borders south of the Loop to create the city’s first Asian majority population ward. They listened and responded when Phyllis Logan, first vice president of the NAACP West Side branch, told them, “East and West Garfield, North Lawndale, the Greater Austin area are three minority majority black communities on the West Side. We have access to the Green and the Blue transit lines and local major bus lines. Many use public transportation to get to the downtown Chicago area, both ma-

jor airports, jobs and the lakefront. We need to keep our three minority majority communities as they are.” People of different races, ethnicities and faiths from all over Chicago talked about keeping their kids safe, affordable housing, convenient transit, access to healthy food, good schools, the need for safe spaces for children and seniors to walk and ride bikes. They understood how a better ward map could improve the chances of making these things happen. Typical residents from every region of the city came together and invested the time in open gatherings to listen to their neighbors and create the people’s map.

MADELEINE DOUBEK ON GOVERNMENT

“This is historic,” Commissioner Graciela Covarrubias of Avondale said when the work was done. “Never before have the people of Chicago been given a seat at the table to chart a possible future for themselves. Never before has their work been conducted with them, on nights and weekends, in full view of any resident who wanted to join.” Shouldn’t that history be

honored? Shouldn’t the people of Chicago get the chance to vote and choose which ward map will best work for them for the next 10 years? Madeleine Doubek is executive director of Change Illinois, a nonpartisan nonprofit advocating for ethical government. It is supporting the work of the Chicago commission.

97% OF OUR CURRENT C U STO M E R S R A N K T H E I R S AT I S FAC T I O N W I T H U S A S “ E XC E L L E N T ” O R “A B O V E AV E R AG E .” B E Y O U R B A N K E R ’ S T O P P R I O R I T Y. W I N T R U ST.CO M / P R I O R I T Y

Banking products provided by Wintrust Financial Corp. banks. Source: 2021 Coalition Greenwich Market Tracking Program

10/22/21 3:25 PM

CRAIN’S CHICAGO BUSINESS • OCTOBER 25, 2021 3

Bank buyer faces new lending bias claims

Ginny Cook, shown here at Parson’s in Andersonville, is director of events, programming and partnerships at Land & Sea Dept.

Indiana’s Old National hit with lawsuit as it prepares to take over First Midwest

JOHN R. BOEHM

BY STEVE DANIELS

Companies are going to party—but not like it’s 2019 How COVID has changed the traditional holiday bash THE HOLIDAY PARTY AT JELLYVISION was always a banger pre-pandemic. The maker of HR software would rent out Joe’s on Weed Street, and the office band would play—accountant on bass, IT guy on drums. Last year, the party was virtual. Jellyvision is bringing back an in-person celebration this year, but it will be tamer, says CEO Amanda Lannert. A sit-down dinner is planned in a larger venue, and it will be kept well under capacity. It is set for early December, so remote employees flying in can get

BY ALLY MAROTTI

through the airport before the rush. After a year of digital holiday parties, in-person soirees are making a comeback. But festivities will be smaller this year, sometimes with a virtual option. Some companies are inviting only their vaccinated staffers or offering rapid tests at the door. Though not every company wants to risk a real-life get-together, many are eager to connect See PARTIES on Page 33

“WORK IS FOR SURE HAPPENING. I’M NOT SURE ENOUGH JOY IS HAPPENING, SO WE THINK IT’S IMPORTANT TO GET PEOPLE TOGETHER.” Amanda Lannert, CEO, Jellyvision

The Evansville, Ind.-based acquirer of First Midwest Bank is battling new allegations of discrimination against Black mortgage borrowers in Indianapolis as the deal awaits final regulatory approval. A lawsuit filed against Old National Bank earlier this month by an Indiana fair-housing group casts a spotlight on the bank’s lending practices at a time when the issue of credit availability to minorities has drawn far greater attention from policymakers in Chicago and elsewhere. Old National currently has no presence here; its $2.2 billion buyout of First Midwest will make Chicago its biggest market by far among numerous Midwestern cities in a single stroke. Old National CEO Jim Ryan categorically denies any wrongdoing by the bank. At the same time, however, Old National has refused to negotiate an agreement with fair housing and other advocacy groups to improve access to credit in disadvantaged communities it serves—a customary aspect of bank mergers this size. First Midwest CEO Michael Scudder describes his bank’s low-premium deal with Old National as a “merger of equals.” The reason he didn’t seek higher bids from any of a likely large number of banks that would have been interested, he has said, was because First Midwest and Old National are so unusually well-aligned culturally. Chicago-based First Midwest is primarily a business lender, but See FIRST MIDWEST on Page 32

Second-home towns tangle with short-term rentals It’s not just New Buffalo. Places like Lake Geneva have also wrestled with homeowners eyeing profits and community members who feel overwhelmed by transient guests.

Lake Geneva

ATRAMOS VIA FLICKR

BY DENNIS RODKIN

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From his California office, Ulrik Binzer looks at this fall’s skirmish in New Buffalo, Mich., over whether to stop the spread of Airbnb-style short-term rentals and sees, in its simplest form, a replay of what dozens of his other clients have been through. “The major theme is that the financial gains from short-term

rentals are concentrated among the owners of these properties, but the costs are paid by the whole neighborhood, the whole community,” Binzer says. An executive at the government-services vendor Granicus, Binzer deals primarily with its software systems that municipal governments and others use for licensing and monitoring short-term rentals. The clash is heightened, Binzer

says, by the fact that the gains are mostly dollars, a tangible thing, while some of the losses “are hard to quantify but are very real: the loss of the kind of community people value living in, where you know the people who are in the houses around you. They’re not transients who will be replaced next weekend by somebody else.” Short-term See AIRBNB on Page 34

10/22/21 4:36 PM

JOE CAHILL ON BUSINESS

Here’s one health crisis that’s entirely preventable

accepting Chicago Fire Department ambulances. A purge of Medicaid rolls when redeterminations resume could send more safety nets over the financial edge. But it doesn’t have to happen, provided state officials follow one simple rule: Go slow. Take the time to make sure people no longer qualify for coverage before kicking them off Medicaid. Many beneficiaries are expelled during redetermination not because they no longer meet the criteria for coverage, but for administrative or process-related issues. Some don’t return their redetermination forms, which are sometimes mailed to wrong addresses. Others don’t fill out the form properly or completely. Illinois should keep this in mind as redeterminations ramp up again. Rather than summarily booting anyone who misses the deadline for returning redetermination forms, make the effort to ensure that forms were sent to current addresses. During the pandemic, many people moved from their last address on file with the state. If a form comes back incomplete, reach out to help the MORE SAFETY NET HOSPITALS person fill in the blanks. Simplifying forms and MAY BE SENT OVER THE EDGE. streamlining processes would help, too. Yes, this will add time to the as those who don’t have coverage redetermination process. But from an employer and can’t afwrapping up redetermination ford to purchase insurance in the as quickly as possible shouldn’t commercial market. be the goal. There should be no People without medical inrush to revoke medical coverage surance are more likely to forgo from the most vulnerable peomedical care, with predictable ple in Illinois. Rather, the aim results. Injuries and chronic conof redetermination should be ditions like diabetes go untreated, ensuring that all eligible people leading to complications. Preretain their Medicaid insurance. ventive care that might have kept Haste would only increase the health problems from developing number of qualified people who goes out the window. lose coverage for administrative The result is unnecessary reasons. A careful, gradual culling suffering and death. There’s of people who no longer qualify also a financial toll, as hospitals would minimize erroneous reend up providing emergency jections while easing the blow to care to patients who can’t pay. patients and hospitals. A sudden, The burden of unpaid care falls large-scale expulsion would maghardest on so-called safety net nify disruption for both. People hospitals in the state’s poorest need time to appeal rejections areas, which depend heavily on and seek out alternate sources of Medicaid for payment. insurance. Hospitals need time to Safety net hospitals already shore up their finances against a teeter on the brink of insolvency. decline in Medicaid payments. It doesn’t take much to tip one The federal government, over. Recent years have seen the which oversees Medicaid, can closing of Westlake Hospital in help Illinois and other states Melrose Park and MetroSouth avoid a crash landing. The Community Hospital in Blue Centers for Medicare & MedicIsland. Mercy Hospital in Chicago aid Services recently told states narrowly averted closure when an they can take up to 12 months to out-of-state buyer agreed to pay complete redetermination. The $1 for the 169-year-old hospital. feds also could give states more The loss of safety net hospitals time to prepare by extending reverberates throughout the the emergency declaration by local health care system. For 90 days, as it has done six times example, the emergency room since January 2020. at University of Illinois Hospital With the right approach, this on the Near West Side has been health crisis can be prevented. swamped since Mercy stopped he end of the COVID-19 public health emergency threatens the health of nearly 300,000 people in Illinois. You read that right. I’ll explain. Illinois and other states will resume annual eligibility reviews for the Medicaid health insurance program when the federal health emergency declaration expires Dec. 31. Medicaid rolls have grown by 30% to 2.7 million since the annual “redetermination” process was suspended early last year. As my colleague Stephanie Goldberg reported in Crain’s last week, Medicaid coverage is expected to drop sharply when redetermination starts up again. Cook County Health, a major provider of Medicaid coverage through its CountyCare plan, predicts a 15% decline by November 2022. If the state’s other Medicaid managed care plans were to see just a 10% falloff by next September, more than 270,000 Illinois residents would lose health insurance. These are the people least able to find coverage elsewhere. Medicaid covers the disabled, as well

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Buried in overdue heating bills as price shock looms Peoples Gas had six months to dig out of a deep hole of bad debt due in part to pandemic restrictions on shutoffs and collections. Unlike other local utilities, the record isn’t much better than it was last winter—and this year will be costly. BY STEVE DANIELS Nearly 170,000 Chicago households are more than 30 days behind on their natural gas bills to the tune of $734 apiece on average as the city heads into the costliest home-heating season in well over a decade. Peoples Gas, which delivers the fuel in the city of Chicago, has made little progress on a large pile of unpaid debt since January 2021 when data first emerged on how much area customers were behind on their utility bills. All local utilities saw significant increases in consumer debt as the companies were compelled to halt shutoffs for nonpayment during the pandemic. The state’s moratorium on power and gas disconnections expired in April. But beginning in November, shutoffs again will be discontinued, as they are every winter through March. That gave utilities a scant few months to chip away at the mountain of debt. The issue matters to local consumers because they ultimately pay for bills utilities can’t collect. Under state law, the utilities shoulder none of those costs and pass them along in customers’ monthly bills. In Chicago, there have been clear signs for several years that a growing slice of the population just can’t afford their heating bills, and the pandemic exacerbated that effect. More than 1 in 5 Chicago households are over 30 days late on their heating bills as of Sept. 30, and cumulatively they owe $126 million, according to data Peoples submitted Oct. 15 to the Illinois Commerce Commission. Last January, 176,142 households in Chicago were delinquent more than 30 days, collectively owing $124 million.

REPORTS

Beginning this month, utilities are required to file reports with the ICC on late payments and shutoffs public under the broad energy bill Gov. J.B. Pritzker signed into law last month. The costs Chicagoans pay for Peoples to deliver the fuel have been steadily rising each year thanks to unprecedented capital spending on an overhaul of the city’s natural gas system that has been consistently behind schedule and over budget. The affordability pressures would have been worse in previous years had the fuel cost itself not been unusually low. This upcoming winter, however, gas costs are about double what they were last season. Consumer advocates are bracing for a significant increase in unpaid bills with average heating bills

ISTOCK

4 OCTOBER 25, 2021 • CRAIN’S CHICAGO BUSINESS

likely to be hundreds higher over the five-month heating season. Nicor Gas, which serves most of Chicago’s suburbs, has more residential customers behind on their bills than in January. But the overall debt has fallen considerably. Some 192,099 households among the 2 million Nicor serves are more than 30 days late, and they together account for $40 million in debt, or $208 per household, according to Nicor’s Oct. 15 filing. In January, there were 158,894 such households, but the total debt was close to $54 million, or $340 average per customer. Commonwealth Edison reduced the number of households seriously behind on their bills by 38% to 236,554 from 379,416 in January. The total in unpaid bills from those customers was $56 million versus $82 million in January. ComEd and Nicor show signs of digging out of the pandemic-induced payment problems, but whether Peoples’ customer base can recover is a different issue. The pain is focused in large part on low-income neighborhoods on the South and West sides. In the ZIP code for Englewood, for example, more than half the households are past due by more than 30 days. On average, each owes Peoples more than $1,050, according to the data Peoples submitted. In January, slightly fewer Englewood households were under water, but it was still more than half. The average each customer was behind was $987. In the South Side neighborhood of Greater Grand Crossing, 38% of households are at least 30 days behind on their gas for a total of $7.9 million, or $865 on av-

erage for each customer. In North Lawndale on the West Side, 4,692 households, or 45% in the ZIP code, are behind by more than a month for a total of $4 million, or $853 per customer on average.

PROGRESS

Peoples emphasizes that it’s made progress on unpaid bills since April when the moratorium was lifted. Total debt then was $149 million, or $831 per household, compared with $126 million, or $734 on average, at the end of September. That information isn’t public for the other utilities, so it can’t be compared. Peoples spokesman David Schwartz also notes that there’s more federal energy assistance available this year and that consumers who can’t pay their bills need to reach out to the utility. Asked whether the company believes there is a heating bill crisis, he doesn’t answer directly. “The natural gas commodity market fluctuates like any other marketplace, and industries across the full spectrum of the economy are experiencing supply chain issues and rising prices. Natural gas utilities have no control over price fluctuations, and we do not profit on the gas we purchase for our customers,” he says in an email. Peoples also takes issue with comparing its record to ComEd and Nicor, far larger utilities serving suburban as well as urban areas. Regarding infrastructure spending that consumer advocates contend is out of control, Schwartz responds, “We’re not going to let what happened in Texas last winter—a failed system and no heat— happen here.”

10/22/21 3:27 PM

¬21 in 2021 We’ve increased our U.S. minimum hourly wage to $21 as a next step toward $25 by 2025. Bank of America has raised our minimum rate of pay for all U.S. employees to $21/hour — the next step toward $25 by 2025. Over the past four years, we have led the way by increasing our minimum hourly wage 40%. Being a great place to work starts with investing in the people who serve our clients. Providing strong pay and competitive benefits to support our employees and their families helps us attract and retain strong talent. Our actions demonstrate our continuing commitment to sustain job growth and economic stability for the thousands of individuals working in support of each other, our clients and the communities where we work and live. We will continue our efforts to make a difference and serve as a catalyst for others to do the same. What would you like the power to do?®

Paul Lambert President, Bank of America Chicago

Learn more at bankofamerica.com/chicago

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6 OCTOBER 25, 2021 • CRAIN’S CHICAGO BUSINESS

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This house on Beach Avenue in Wicker Park sold for $875,000 in September.

Chicago’s home price boom is over

‘The market feels like it’s starting to take a breath’

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BY DENNIS RODKIN For the second month in a row, the median price of homes sold in the city of Chicago barely moved in September, a clear sign that the home price boom has ended. The median price of homes sold in Chicago was $320,000 last month, according to data released last week by Illinois Realtors. That’s a decline of 0.7% from the same time a year ago, or essentially flat. A month ago, the group’s data showed the median price was unchanged from a year earlier. In a 10-month stretch that began in August 2020, the median home price in Chicago was up at least 10% eight times. May was the last double-digit month. For the larger metro area, a nine-county region, prices are not yet flat but have been growing by significantly less than they were earlier the year. The median September sale price in the metro area was $290,000, or 5.5% more than in September 2020. The metro area had double-digit price increases for 12 consecutive months, ending in July, at 12.3%. “The market feels like it’s starting to take a breath after a breakneck pace all year, which is great news for buyers,” Antje Gehrken, president of the Chicago Association of Realtors and president and designated managing broker of A.R.E. Partners in Chicago, said in comments that accompanied the data. The slowdown in price growth is not entirely surprising, because sizable increases now on top of those a year ago would mean runaway prices. Even so, it shows that the Chicago-area housing market has lost much of the electricity

it was showing in the first part of 2021. Nationwide, the surge is still on. The median September sale price nationally was $352,800, up 13.3% from a year earlier, according to data released separately this morning by the National Association of Realtors.

HOME SALES OFF

Another sign of the lost local fizz is that home sales also are down, but only compared with the fiery market of 2020. In Chicago, 2,611 homes sold in September, down 0.9% from a year earlier and for the second month sales were essentially flat with 2020. But in the three years prior to the pandemic, 2017 through 2019, an average of 2,134 homes sold in September. Compared with that, September 2021’s sales were up 22%. In the metro area, 11,653 homes sold in September, down 0.7% from a year ago, or flat. Compared with the three-year average September sales tally, 9,166, there were 27% more home sales in September 2021. Nationwide, home sales were down 2.7% from September 2020. The NAR report does not show nationwide sales data for the years prior to the pandemic. Year to date in 2021, Chicago-area home sales are running well ahead of 2020, which reflects the fact that the boom didn’t show up in closed sales data until July 2020. So far in 2021, 104,422 homes have sold in the metro area, 21% more than for the same period in 2020. In Chicago, 25,837 homes sold in the first nine months of 2021, an increase of more than 34% from the same period in 2020.

10/22/21 3:27 PM

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8 OCTOBER 25, 2021 • CRAIN’S CHICAGO BUSINESS

Sales surge at local stores and restaurants BY ALBY GALLUN With coronavirus cases falling and vaccinations rising, consumers flocked to local stores and restaurants in the first half of the year, pushing retail sales here well past even pre-pandemic levels. In a stunning turnaround, retail sales in the Chicago area jumped to $72 billion in the first six months of 2021, up 32.5% from the year-earlier period, according to Melaniphy & Associates. After being cooped up at home for months, people spent liberally in stores, especially on clothes, and started eating out again. “As we predicted, there was a lot of pent-up demand,” said John Melaniphy, president of the Chicago-based consulting firm. After a 9% drop in 2020, the sales rebound was expected— Melaniphy forecast a 6% increase for all of 2021—but the magnitude of the increase wasn’t. Not only did first-half sales blow past

second half of the year. The impact of federal stimulus spending is starting to wear off and the rise of the delta variant, which wasn’t a concern until summer, should take some of the froth out of the market, he said. “The consumer is going to be a little more cautious going forward,” Melaniphy said.

CLOTHES HORSES

Caution wasn’t on consumers’ minds in the first half of the year. Local apparel sales jumped 121.5% from 2020, to $2.46 billion, the biggest increase among 10 retail categories tracked by Melaniphy. The firm compiles its figures from state Department of Revenue data. Some consumers bought clothes to get ready to go back to the office, or for their first trip in a while. “Usually you don’t go on vacation in tattered clothes,” Melaniphy said. But apparel is the second-smallest retail category. Sales in the biggest, drug miscellaneous stores, “A LOT OF THE PENT-UP DEMAND and rose more than 71%, to $16.60 billion. It’s a broad HAS BEEN MET. IT’S GOING TO segment, including drugMODERATE NOW.” stores like Walgreens and specialty retailers that sell John Melaniphy, president, everything from gift cards Melaniphy & Associates to sporting goods. Many of the stores are in shop2020 levels, they also exceeded ping centers that were closed for sales for the first half of 2019 by months in the early months of the pandemic. 16.5%. The recent figures also illusThat’s a major achievement, but Melaniphy expects a slower trate the shift in food consump-

tion caused by the pandemic. With more people eating at home in 2020, sales rose 6.4% at grocery stores, one of only two categories with an increase last year, according to Melaniphy. But sales fell 30.8% at restaurants and bars. Many restaurants closed for good. As the pandemic eased in the spring, more people started going out, pushing sales at restaurants and bars up 21.6% through the end of June. Sales fell 3.4% at grocery stores, the lone category in the minus column. The improved retail market comes as good news to owners of shopping centers and other retail properties that have suffered during the pandemic as tenants have closed stores and stopped paying rent. The casualties include properties like the Arboretum of South Barrington and Lincolnwood Town Center mall, which are both facing foreclosure. But with total sales up nearly 33% at midyear, a record year for retailers here seems well within reach. But Melaniphy is being cautious, sticking with his forecast of a 6% rise for 2021 overall. Most consumers have spent their stimulus checks, and rising inflation is making some uneasy, he said. Supply chain problems are gumming up the economy. The Conference Board’s consumer confidence index fell to a seven-month low in September. “A lot of the pent-up demand has been met,” Melaniphy said. “It’s going to moderate now.”

ISTOCK

Consumers splurged on clothes and ate and drank more at restaurants and bars in the first half of 2021, new data shows. The lone loser? Grocery stores.

RINGING REGISTERS Retail sales in the Chicago area surged beyond pre-pandemic levels in the first half of the year. (Sales data in billions of dollars.) Metro area First half First half First half total 2019 2020 2021

Percentage change 2020-2021

Drugs and miscellaneous stores

$10.13

$9.69

$16.60

71.2%

Automotive and gas stations

$13.22

$11.38

$15.65

37.5%

Food stores

$8.23

$8.89

$8.58

Restaurants and bars

$9.29

$6.50

$7.91

21.6%

Agriculture and all others

$6.24

$5.65

$7.32

29.6%

General merchandise

$5.06

$4.51

$5.14

14.0%

Home improvement

$2.98

$3.36

$3.80

13.1%

Furniture and electronics

$2.79

$2.09

$2.98

42.2%

Apparel

$2.38

$1.11

$2.46

Manufacturers

$1.39

$1.17

$1.56

33.6%

Total

$61.71

$54.35

$72.00

32.5%

-3.4%

121.5%

Source: Melaniphy & Associates

Civic Opera House building owner hit with foreclosure suit At $195 million, it’s the biggest case of downtown office distress in years BY DANNY ECKER The owner of the Civic Opera House building is set to turn over operations to a real estate services firm as it faces a $195 million foreclosure lawsuit on the property, the biggest case of downtown office distress in years. A Cook County Circuit Court judge this week is expected to appoint Transwestern as the receiver for the 915,000-square-foot art deco landmark at 20 N. Wacker Drive, according to county court records and a statement from the building’s owner, a venture led by New York developer 601W and Nanuet, N.Y.based Berkley Properties. The move comes more than two months after lender Wells Fargo filed the foreclosure complaint against the venture of Berkley and 601W, the latter of which is best known for transforming the Old Post Office into a modern office building. The suit alleged the owners defaulted on a $164 million loan tied to the property by failing to make monthly loan payments since

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May. Wells Fargo represents investors in the 2015 mortgage, which was packaged with other loans and sold off to commercial mortgage-backed securities investors. The complaint is one of the highest-profile foreclosure lawsuits involving a downtown property since the onset of the COVID-19 pandemic, which has battered the office market as companies rethink their workspace needs. Rampant space-shedding among businesses embracing remote work and a lack of new leases and move-ins over the past 19 months have driven up the vacancy rate to a record high 20% at the end of last month, according to data from brokerage CBRE. Buildings whose tenants have continued to pay rent and are locked in to long-term leases haven’t felt the sting as badly. But the pandemic hurt two of the largest tenants at the 44-story Civic Opera House building in co-working providers Bond Collective and TeamWorking at TechNexus, which combined occupy 14% of the building. Many of the other users in the

building, which is mostly filled with smaller tenants, “have been negatively impacted to the extent that they have been and continue to be unable to pay their rent,” the owners said in the statement. That piled onto a pre-COVID challenge of filling the space left behind in 2018 by the building’s former largest tenant, law firm Cassiday Schade. The property’s net cash flows in 2019 and 2020 were $61.8 million and $65.8 million, respectively, well below Berkley’s $81.3 million in annual debt service, according to Bloomberg loan data.

STILL ‘RE-NEGOTIATING’

As the foreclosure process continues, Berkley and 601W said in the statement that ownership will continue “re-negotiating the financial terms of the building’s mortgage” with Rialto Capital, a Miami-based special servicer that monitors the loan on behalf of CMBS bondholders. A Rialto spokesperson couldn’t be reached. In addition to the outstanding loan balance, Wells Fargo alleged

in the foreclosure complaint that the owners owed $28.3 million in various fees, plus late charges and default interest that brings the total amount owed to nearly $195 million. Whether or not the owners are able to hold onto the building, they likely saw a significant windfall when they refinanced with the current loan. The venture paid $126 million for the building in 2012, when the property was less than 75% leased. The owners then spent almost $6 million renovating the building’s lobby and common areas and added a 6,000-square-foot rooftop deck, which helped as they lured new tenants and brought the building up to more than 92% leased when it took out the new mortgage, loan documents show. That refinancing allowed them to pull new equity out of the building and showed how much its value had surged. The property was appraised at $220 million at the time, Bloomberg loan data show. The owners’ statement said they have spent more than $30 million on renovations and leasing commissions at the building since 2012. They also spent another $10 million over the past two years to continue paying its loan despite a drop-off in

rent payments from tenants, according to the statement. The property’s appraised value has been decimated by the pandemic, falling to $165 million in February, according to Bloomberg data. In addition to its pending role as the property’s receiver, Transwestern is expected to oversee management and leasing at the building while the foreclosure lawsuit proceeds, according to Berkley. A Transwestern spokeswoman declined to comment. Chicago has not seen the large wave of foreclosures that some predicted would come as the pandemic hammered major property sectors, though more distress may be coming as banks lose patience and federal aid programs wear off. The highest-profile foreclosure complaints downtown over the past couple of years have come against the owners of the Palmer House Hilton and JW Marriott Chicago hotels, both of which are still pending. In the office sector, the owner of a mostly vacant 487,000-square-foot office building at 401 S. State St. handed the building over to its lender last year after it was hit with a $48 million foreclosure suit.

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10 OCTOBER 25, 2021 • CRAIN’S CHICAGO BUSINESS

EDITORIAL

Shining a brighter light on police misconduct

CRAIN’S ILLUSTRATION

o much has been said and written about Chicago’s crime problem—a situation that’s generated lurid headlines and cast a harsh spotlight on a city long known for racial strife—it’s easy to forget that there are actual solutions, proven approaches that have helped other major metros to effectively reduce violence while also bringing wrongdoers to justice. In this week’s issue, our monthly public policy series, Crain’s Forum, takes a deep look at one aspect of the problem that persists in Chicago, and which seems least likely to change: police misconduct. A robust and well-trained police force is, of course, a necessary ingredient to big-city life. All communities need brave men and women who are dedicated to keeping the peace and upholding the law. It’s in many ways the toughest job there is. We expect a lot of our police—too much, actually, in that on any given shift on any given day, police officers can be involved in everything from investigating a homicide to intervening in a domestic dispute to calming angry drivers at the scene of a fender bender. The job is dangerous. It’s mentally challenging. Most of us would never want to do it. Few of us could hack it even if we tried. All that said, it’s also abundantly clear that the epidemic of violence that’s gripped this city is intensified, not alleviated, when trust between police and the community they’re sworn to serve and protect breaks down. And as the Forum this week explains in compelling detail, that trust—especially between police and Black and Brown people in this city—is at a low point. While turf wars between gangs, the drug trade, readily available guns on the streets, the grinding cycle of poverty, inadequate education and a host of other factors can be tallied on one side of the ledger as causes for Chicago’s violence problem, police misconduct has to

be accounted for on the other side. What is police misconduct, exactly? Public justice advocates tend to define it as practices that encompass illegal or unethical actions or the violation of individuals’ constitutional rights by police officers in the exercise of their duties. That’s the broadest take. But on the granular level, it looks pretty much like what’s described in Crain’s contributor Deborah Shelton’s report: Cops storming into the homes of Black and Brown people with guns drawn, shouting epithets, using excessive force; pulling over motorists for no apparent reason other than they’re driving while Black; and, in the most notorious case of former Cmdr. Jon Burge and his crew, cops torturing Black men into confessing to crimes that they now say they didn’t commit.

When stories like the Burge disgrace emerge in the press, we hear a lot about "bad apples," and how the alternative to tough policing is to simply let criminals run riot in the streets. The truth is, police misconduct is a corrosive element that undermines every effort to build a better working relationship between law enforcement and neighborhood residents who desperately want better protection from crime. As Deborah Witzburg, Chicago's deputy inspector general for public safety, puts it to Shelton in Crain's Forum, misconduct is embedded in the system of policing. "Police misconduct is not a problem of a few bad apples," Witzburg says. "And it is not a problem that we are going to discipline our way out of. There are bad actors, there

are people who break the rules. Those people must be disciplined in a fair and swift and transparent way. That does not, however, solve the problem of police misconduct. There are large-scale cultural issues which require a long view of change and reform, probably generational change." To spark that cultural change, one thing that's needed is more transparency. Another is accountability. The Invisible Institute, a Chicago nonprofit, has compiled a database of nearly 250,000 complaints to city agencies against Chicago police officers between 1988 and 2018. Its analysis found that only 7% of complaints resulted in discipline. The overwhelming majority of complaints, more than 90%, were determined to be unsubstantiated or unfounded. Until residents feel their complaints about police abuse are going to be taken seriously, their distrust of the system will persist, perpetuating the cycle of violence that can only be reversed if residents and police work together. One shred of positive news in that direction comes from the Civilian Office of Police Accountability, created after the uproar over the suppression of the Laquan McDonald shooting video. COPA received more complaints and notifications in 2020 than in any of the last five years, Shelton reports. In 2020, COPA concluded 277 cases and issued findings on 1,737 allegations of misconduct. Of the findings, 38% were sustained. The case sustained rate has been on an upward trend since 2016, perhaps reflecting that people have a better understanding of how to file complaints and how the system works. That evidence of incremental progress may be a thin reed to pin one's hopes on. But against the backdrop of crime that's worrying everyone in this city, we'll take any hopeful signs we can get.

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YOUR VIEW

Man and

County legal aid program supports landlords, too

Gene and

mother of four lost her job at the start of the pandemic and couldn’t pay the rent. She was worried that her children would abruptly lose the only home they’d known for five years and didn’t know where they would end up. Her landlord was worried, too. He was a small property owner who didn’t have a lawyer, did not speak English as his first language, and didn’t fully understand the eviction moratoriums enacted due to the coronavirus pandemic. The landlord didn’t want to hurt his longtime tenant and her family but didn’t know how to pay his bills. This is a sad and all-too-common story here in Cook County. Since the start of the pandemic, many residents have faced financial insecurity. Some lost work or had to leave their jobs due to childcare or medical issues. Many fell behind on rental payments. To help struggling families stay in their homes and mitigate the spread of the pandemic, federal, state and local authorities placed moratoriums on evictions. These

Timothy C. Evans is chief judge of the Circuit Court of Cook County.

Toni Preckwinkle is Cook County Board president.

moratoriums have helped many renters stay safely housed during the pandemic. Yet this situation has also had a financial impact on landlords, especially “mom and pop” operators who rely on rents for income. Bills still have to be paid, and buildings still need to be kept up, and that takes money. Now that the eviction moratoriums have ended, folks are wondering what comes next.

Many landlords treat evictions as a last resort and understand the consequences they bring. To avoid a situation that is painful for everyone involved, we are asking landlords to take advantage of available alternatives before going to court with evictions. By doing so, landlords may be able to save themselves time and money while helping to keep Cook County families in their homes. You can find these alternatives through Cook County Legal Aid for Housing & Debt, or CCLAHD, launched last November in partnership among Cook County, the Circuit Court of Cook County, the Chicago Bar Association and many legal aid nonprofits. By offering tenants and landlords free legal aid, mediation services and connections to other resources, including rental assistance up to $25,000, CCLAHD’s Early Resolution Program aims to help tenants and landlords work out a resolution instead of going to court. Mediation provides a chance for a landlord and tenant to resolve issues with the help of a neutral third party.

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

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CCLAHD has already helped thousands of Cook County landlords and tenants—including the mom of four and landlord we profiled earlier. After reaching out for help, both became clients of the Early Resolution Program, which mediated a settlement agreement between them that allowed the family enough time to find alternative housing and move without the mom having an eviction on her credit record. At the same time, the landlord was able to find another tenant who could pay. Having free legal advice available to both parties helped create a mutually satisfactory arrangement and saved everybody stress and money. As a community, we cannot allow the current pandemic to further increase inequities due to housing insecurity or further burden small-business owners who are already struggling. In Cook County, everyone deserves a fair shake in getting the help they need. To work out a resolution with your tenant, visit CookCountyLegalAid.org.

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

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CRAIN’S CHICAGO BUSINESS • OCTOBER 25, 2021 11

YOUR VIEW

Infrastructure bill would ease flood risk

T Dallas Alley is director of land use and development for the city of Fairview Heights and recipient of the 2015 Illinois Floodplain Manager of the Year Award.

he devastation of Hurricane Ida, along with numerous flooding and severe weather events across Illinois this year, come as painful reminders that communities must be proactive in building for a future with more risk. Flooding has now outpaced other natural disasters as the most common and costliest we face. Our communities see ruined homes, shuttered businesses, impassible roads and highways, and disruptions to supply chains. That is why it is important that the U.S. Senate recently took action by

passing the Infrastructure Investment & Jobs Act. This bipartisan legislation makes a historic commitment toward improving the ability of the nation’s infrastructure, such as its roads and bridges, to withstand flooding while also supporting local programs designed to improve flood resilience. There are a number of critical items in this legislation that would benefit Illinois. For one, the creation of a $8.7 billion transportation resilience grant program to support local actions that reduce the vulnerability of roads, bridges and other transportation as-

sets to natural disasters. It’s a fiscally smart proposal, because it’s cheaper to build infrastructure right the first time than to constantly repair damage. The Senate bill also incorporates nature-based solutions. Rain gardens, bioswales, wetlands and living shorelines are often cheaper to implement and repair, and they are just as impactful toward reducing flooding as hardened infrastructure such as steel and concrete bulkheads. Lastly, an area of deep concern is homes that repeatedly flood. These risky homes put people in harm’s way,

challenge our first responders and in the end cost all of us because we all pay for recovery through taxes. That’s why the Senate legislation includes an additional $4.5 billion in FEMA disaster programs to support local efforts to help residents move into safer homes and fund other flood prevention measures like floodproofing basements, building higher floodwalls and right-sizing storm sewers. The infrastructure we build today has to be built to withstand a future of worsening weather. The infrastructure bill makes progress toward better preparing us all for these threats.

CRAIN’S CHICAGO BUSINESS

Chief executive officer KC Crain Group publisher/executive editor Jim Kirk Associate publisher Kate Van Etten

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12 OCTOBER 25, 2021 • CRAIN’S CHICAGO BUSINESS

Sterling Bay puts Hyatt House Chicago up for sale BY DANNY ECKER After taking a big financial haircut on a hotel in the Gold Coast, Sterling Bay is hoping for a more profitable outcome on one it built along the southern edge of the Fulton Market District. The developer has hired the Chicago office of brokerage Jones Lang LaSalle to sell the 200-room Hyatt House Chicago in the West Loop at 105 N. May St., according to a marketing flyer for the property. There is no asking price listed for the hotel, which opened in June 2019 next to McDonald’s global headquarters a year after the fast-food giant moved to the trendy former meatpacking corridor. But bids from prospective buyers will reveal how investors weigh the risk of acquiring a hotel in a downtown hospitality market that continues to be hammered by the COVID-19 pandemic against the upside of buying a property in a fast-growing neighborhood with major corporate tenants. The hotel was appraised at nearly $80 million, or $400,000 per room, when Sterling Bay opened the property and paid off its construction loan with a new $61 million mortgage, according to a Bloomberg report tied to the loan. The current mortgage was packaged with other loans and sold off to commercial mort-

gage-backed securities investors. But the public health crisis’ assault on downtown hotels spoiled its first year of operation and is still casting doubt on when or if business travel to the city will return to pre-pandemic levels. Average occupancy of 22% at the Hyatt House Chicago in 2020 translated into negative net cash flow of about $563,000, well below the $2.1 million Sterling Bay owed in debt service for the year, according to Bloomberg loan data. Those figures could make it hard for a buyer to justify paying close to the property’s 2019 appraised value, which would dwarf the price of any other downtown hotel sold during the pandemic on a priceper-room basis. Yet the hotel, the first Hyatt House to open in the city of Chicago, has distinct advantages over much of its local competition based on its location and strong ties to the home of the Golden Arches. McDonald’s, which generates business for the hotel through visits from clients and trainees in its Hamburger University program, has an agreement to rent rooms for at least 12,000 nightly stays in 2022, according to the JLL flyer. The company is also negotiating a three-year extension of an annual room block arrangement, the flyer said, which would signal a significant commitment

to the return of in-person work, training and business travel coming out of the pandemic. Also working in the hotel’s favor is that select-service brands like Hyatt House have also been much quicker to recover from the crisis than larger, full-service properties that rely more heavily on group business and events. Hyatt House Chicago includes a small amount of meeting space and 4,700 square feet of ground-floor retail space that is available for lease, according to the flyer. JLL is also playing up other corporate demand generators coming as Fulton Market continues its office leasing streak. Companies including Kimberly-Clark, Calamos Investments and Tock have signed new leases this year, belying a relatively sluggish stretch of leasing elsewhere downtown.

CALCULATED WAGERS

The Hyatt House Chicago listing comes a few weeks after a joint venture led by Sterling Bay sold the Talbott hotel in the Gold Coast for close to $55 million. That deal completed a substantial loss for the developer and its ownership partners against the roughly $67 million they had invested in the property, including the $51 million purchase price in 2015. A Sterling Bay spokeswoman did not provide a comment on the

COSTAR GROUP

The listing will reveal how investors weigh the risk of betting on the pandemic-stung hospitality sector against the upside of buying into Fulton Market, a thriving former meatpacking neighborhood in the West Loop

The Hyatt House Chicago at 105 N. May St. Hyatt House Chicago listing. Local hotels have forged a slow-moving recovery from the initial COVID blow last year. Revenue per available room at downtown hotels that were open in August, a key performance metric that accounts for both room rate and occupancy, averaged $105.22, according to hospitality data and analytics company STR. That was almost twice as much as the average three months before and dwarfed the $30 average from August 2020, but was still well below the nearly $175 average in August 2019, STR data shows. Though pandemic fallout has triggered foreclosure lawsuits against the owners of some large properties downtown, including the Palmer House Hilton and JW

Marriott Chicago, some investors have purchased hotels in calculated wagers on a post-COVID comeback for the downtown hospitality sector. Hotel sales in the Chicago area during the first eight months of the year totaled nearly $475 million, according to data from research firm Real Capital Analytics. That was almost triple the sales volume from the same period in 2020 and slightly ahead of the same stretch in 2019. In addition to the Talbott deal, Chicago-based Oxford Capital Group paid more than $72 million in August for the Thompson Chicago hotel in the Gold Coast. Adam McGaughy and John Nugent in the JLL Chicago office are marketing Hyatt House Chicago on behalf of Sterling Bay.

Insurance brokerage doubles West Loop space BY DANNY ECKER Less than three months after its parent company went public, Pat Ryan’s wholesale insurance business is more than doubling its downtown office space to make room for a run of recent hires and plans for more. In one of the larger expansions of downtown office space since the start of the COVID-19 pandemic, insurance brokerage RT Specialty has leased 83,228 square feet at 540 W. Madison St., according to a statement from the Chicago office of Savills, which negotiated the deal on behalf of the company. The space on the eighth and ninth floors of the 31-story building is more than twice the size of the roughly 38,000 square feet the company has occupied for the past four years down the street at 500 W. Monroe St. RT’s recent headcount growth is unclear, and a spokeswoman for the company couldn’t be reached. But Savills said the firm has recently grown to 275 employees— up from 146 when it last expanded its Chicago office in 2017—and

P012_CCB_20211025.indd 12

the company plans to continue to grow its local workforce. The new office will provide space to house more than 400 workers, according to the brokerage.

RETHINKING SPACE

The expansion signals a big commitment to in-person office work while many companies rethink their workspace needs during the public health crisis, often shedding space to adapt to the rise of remote work. Space cutbacks and a lack of new moveins have steadily pushed up the downtown office vacancy rate to a record high 20% at the end of last month, according to data from brokerage CBRE. That has pushed landlords to offer generous packages of concessions like free rent and cash for office buildouts, as well as flexibility built into leases to account for post-COVID uncertainty. RT acknowledged the importance of having employees work together in person and took advantage of that leverage with its new deal, said Savills Vice Chairman Robert Sevim.

“It’s a commitment to ensure that the role of the office is to amplify the power of in-person working. Their business has succeeded in so many ways from their work in person over the years,” Sevim said. “They are designing a space where people will want to come to work because it’s going to be a compelling environment.” RT’s deal is a win for Boca Raton, Fla.-based Third Millennium Group, which has owned the nearly 1.2 million-square-foot building at 540 W. Madison since 2012. Including RT, the building is now 90% leased, according to Telos Group, which oversees leasing at the property. RT is leaving behind a Monroe Street building that is 96% leased, according to real estate information company CoStar Group. The brokerage first subleased space in the building close to a decade ago and later leased directly from the building in a deal that runs through May 2026, according to CoStar data. Sevim said RT will have some of that lease term remaining in the building, but did not provide details.

COSTAR GROUP

RT Specialty has inked one of the larger downtown office expansions since the COVID pandemic began as companies evaluate workspace needs

540 W. Madison St. The 44-story building is owned by San Francisco-based Spear Street Capital, which bought it for $412 million in 2019. RT is a division of Ryan Specialty Group, the specialty insurance company that Aon founder Pat Ryan formed in 2010. RSG raised more than $1.3 billion in its initial public offering in July, when it began trading on the New York Stock Exchange for just under $24 per

share. The company’s stock price closed Oct. 19 at just more than $37. RSG is one of the largest single tenants at Two Prudential Plaza in the East Loop. Sevim and Adam Southard of Savills represented RT Specialty in the lease. Telos brokers Jamey Dix and Colton Riemenschneider represented Third Millennium Group.

10/22/21 3:42 PM

CRAIN’S CHICAGO BUSINESS • OCTOBER 25, 2021 13

Is Willis Tower worth 78% more? Fritz Kaegi thinks so. BY ALBY GALLUN The owners of some of the biggest and best-known high-rises in downtown Chicago received unpleasant, but not unexpected, news in the mail this month: Their assessments shot up this year, potentially setting the stage for big property tax hikes in 2022. Cook County Assessor Fritz Kaegi estimated the market value of Willis Tower, the city’s tallest building, at $1.24 billion, up 78% from 2020. The value of the Aon Center more than doubled, to $886 million. He valued the apartments in Aqua Tower at $95.4 million, up 30%. The recent assessment notices for a big section of downtown Chicago may rankle some landlords who feel picked on by Kaegi, but they mostly represent a continuation of his campaign to shake up the assessor’s office that began when he took office in 2018. He hit owners of commercial properties in the suburbs with big assessment increases in 2019 and 2020 and moved on to the city this year. Kaegi contends he’s just trying to fix a broken assessment process and correct the mistakes

ties jumped 82.6%. As a result, owners of apartments, hotels, office buildings and other commercial properties will shoulder more of the property tax burden. Nonresidential properties now account for 85% of the total assessed value in South Chicago Township, which stretches from the river past Pershing Road to the south and Pulaski Road to the west. That’s up from 78% in 2018. But homeowners should be happy. Their share of South Chicago tax burden fell to 15% from 22% in 2018.

VACANCY RATE

What makes no sense to Parang is that Kaegi’s office has hiked assessed values for office buildings during a pandemic that has pushed the downtown office market into its worst slump in decades. The downtown office vacancy rate rose to a record high of 20% in the third quarter, according to CBRE. Kaegi’s critics grouse that Kaegi is hiking commercial assessments to curry favor with homeowners, a key constituency as he seeks re-election in 2022. In the zero-sum math of property taxes, if more of the tax burden shifts onto commercial landlords, KAEGI’S CRITICS GROUSE THAT KAEGI property taxes for could IS HIKING COMMERCIAL ASSESSMENTS homeowners rise only slightly TO CURRY FAVOR WITH HOMEOWNERS, next year and possibly even fall for A KEY CONSTITUENCY AS HE SEEKS some. Residential property taxes rose RE-ELECTION IN 2022. 1.3% this year, but commercial taxes of his predecessor, Joe Berrios, jumped 6.2%. who drastically undervalued But Kaegi’s office says it’s focommercial properties. Land- cused on one thing: accuracy. lords gripe that rising assess- Downtown commercial assessments—and property taxes—are ments are rising so much today chasing investors out of Chicago because Berrios assessed them and imperiling the region’s busi- at a fraction of their true market ness climate. value in 2018, partly because he “It’s not objective, and it makes was too cozy with property-tax no sense,” says Farzin Parang, ex- appeals attorneys, according to ecutive director of the Building Kaegi supporters. Scott Smith, Owners and Managers Associa- a spokesman for the assessor, tion of Chicago. “It’s very political dismisses the criticism from Pato us. He’s constantly pitting busi- rang. ness versus residents.” “Lobbyists tend to see most things as politically motivated or favoring one group over anDOWNTOWN Kaegi’s office recently wrapped other,” he said. “But the days of up its job where the stakes are favoritism in the assessor’s ofthe highest, in downtown Chi- fice are over. We have a team of cago, the location of the coun- data-driven professionals who ty’s biggest and most valuable have made our work more acproperties. In the township of curate than before. Third-party South Chicago, which includes studies and reporting, including downtown south of the Chicago Crain’s, supports the accuracy of River, the total assessed value of our work.” An examination of some troresidential properties rose 10.5% from 2018, the last time they were phy buildings in downtown Chiassessed, according to Kaegi’s cago illustrate his point. When Berrios assessed the Willis Towoffice. But the total assessed val- er in 2018, his office assigned the ue of nonresidential proper- skyscraper a final market value

P013_CCB_20211025.indd 13

of $697 million. Yet Blackstone paid more than twice that amount, $1.5 billion, when it bought the 110-story building at 233 S. Wacker Drive three years earlier. Since then, the big New York investment firm has spent another $500 million in a major redevelopment of the high-rise. So a 78% increase in value, to $1.24 billion, doesn’t seem excessive. Moreover, the new value also is still well below its 2018 appraised value of $1.78 billion in 2018, when Blackstone refinanced the building, according to securities filings. Even if the property has lost value during the pandemic, Kaegi’s estimate of $1.24 billion seems low, not high. A Blackstone spokeswoman declined to comment. Kaegi also jacked up the value of the 474 apartments in Aqua, the curvy 82-story skyscraper in the Lakeshore East development. But the assessor’s estimate of $95.4 million is still well below its value in 2019, when it last sold. Los Angeles-based Ares Management acquired the building in a deal that valued it at about $254 million, nearly three times what the assessor says it’s worth. The owner of the Aon Center, however, may have a case if it chooses to appeal its assessment. A venture led by New York-based 601W paid $712 million for the 83-story building in 2015. The property at 200 E. Randolph St. was appraised at $824 million when 601W refinanced it in 2018. With an estimated value of $886 million, Kaegi’s office may have missed the mark on the high side. That’s what the appeals process is for. In the coming weeks, attorneys for downtown landlords will be busy trying to get assessed values reduced by filing appeals with the assessor’s office. If they’re not satisfied there, they can appeal to the county Board of Review, which has slashed assessments in suburban Cook County, or to the Illinois Property Tax Appeal Board. As hard as he is trying to change the way the county assesses properties, Fritz Kaegi doesn’t have the final say on what they’re worth. Kaegi isn’t finished assessing Chicago. His office has wrapped up five out of eight townships in city, including North Chicago, which encompasses downtown north of the Chicago River. Then, under the county’s triennial assessment process, he’ll move on to north suburban Cook County in 2022. He’ll also be busy with another job: his campaign for re-election.

WIKIMEDIA COMMONS

In a now-familiar pattern, the Cook County assessor has jacked up assessments on Willis Tower, Aon Center and other trophy properties in downtown Chicago

Willis Tower, from left, Aon Center and Aqua

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10/22/21 3:19 PM

14 OCTOBER 25, 2021 • CRAIN’S CHICAGO BUSINESS

PEOPLE ON THE MOVE

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

ACCOUNTING

BANKING / FINANCE

CONSTRUCTION

NON-PROFIT

REAL ESTATE

ORBA, Chicago

Wintrust Financial Markets and Funds Group, Chicago

ACCEND Construction, Chicago

TASC, Inc., Chicago

Bridge Industrial, Chicago

ACCEND Construction is thrilled to announce that Dan Polito has been promoted to Project Executive. Dan is responsible for developing staff and creating high performing teams that deliver on all client expectations, managing and overseeing every project from start to finish and ensuring success throughout the entire construction process. He brings over 10 years of tenant improvement construction experience and market expertise, making him an invaluable asset to the team.

Malik Nevels, JD, has joined TASC, Inc. (Treatment Alternatives for Safe Communities) as Chief Operating Officer. In this role, he will lead TASC’s statewide services for 30,000 youth and adults annually across Illinois, advocating for people in justice and family service systems to help them achieve wellness in the community. Nevels has more than 20 years’ professional experience in justice advocacy and executive leadership. He earned his JD from the University of Illinois and his BA from UIC.

Bridge Industrial welcomes Ben Bischmann as Senior Vice President of National Operations & Asset Management. In this role, Bischmann will leverage 15+ years of experience to manage Bridge’s national portfolio consisting of 89 buildings and 22.6M square feet. He will further lead the development and institution of strategic operations, capital improvements and other best practices, as well as oversee day-today property management for the Chicago region — the firm’s largest regional portfolio.

ORBA, one of Chicago’s largest public accounting firms, welcomes Michelle Ambriz and Dante Cecala to the firm’s Audit Group. Michelle Ambriz is skilled in Ambriz preparing individual, trust and business tax returns, performing audit procedures and compliance testing, and conducting tax research. Dante Cecala is highly skilled in preparing monthly financial statement reports, Cecala managing accounts payable and accounts receivable, and performing monthly reconciliations.

Wintrust is pleased to add Mike King as Managing Director of the Wintrust Financial Markets and Funds Group. In this role, Mike will focus nationally on developing commercial relationships with asset managers, proprietary trading firms, broker dealers, FCMs, and financial exchanges. Mike has over 17 years of banking experience primarily focused on the financial markets.

FINANCIAL SERVICES BANKING / FINANCE Wintrust Mortgage Warehouse Lending, Chicago

ACCOUNTING ORBA, Chicago ORBA, one of Chicago’s largest public accounting firms, welcomes Daniel Kraus and Mannu Sekhon to the firm’s Audit Group. Daniel Kraus is proficient in preparing financial Kraus statements, analyzing general ledger entries and income statements, and reconciling bank sheets. He is also well versed in managing audits and reviews for businesses across a number of industries. Mannu Sekhon is skilled in Sekhon various aspects of financial reporting and accounting, including tax return preparation and tax research. She also has experience in the banking industry, having helped clients manage their bank accounts and their finances as an associate banker.

Wintrust is excited to welcome Cindy Zuckerman as senior vice president of Mortgage Warehouse Lending. Cindy brings over 25 years of lending experience and domain expertise in housing finance and relationship building. Wintrust has been partnering with Midwestern mortgage bankers for over two decades. With Cindy’s guidance, Wintrust is poised to bring national awareness to its robust warehouse lending solutions.

P014_CCB_20211025_v4.indd 1

NON-PROFIT Thresholds, Chicago Thresholds is pleased to welcome Chicago local Mike Faley as our new General Counsel. Mike comes to Thresholds from Seyfarth Shaw. He has 20 years of experience representing clients that include healthcare providers, universities, and nonprofit organizations. Mike obtained his JD from the University of Illinois Chicago School of Law where he now teaches as an adjunct professor, and is also a CPA. He served for 12 years on the Board of Directors of the Domestic Violence Legal Clinic. Thresholds is thrilled to have Mike on our team as we continue to expand integrated healthcare and housing opportunities. Thresholds is a mental health and substance use treatment provider serving 7000 clients annually.

WEALTH MANAGEMENT Strategic Wealth Partners, Deerfield Strategic Wealth Partners, an independent wealth management firm, is delighted to announce the hiring of Michael Garrison, CFA®, CFP®, as Director of Investments and Wealth Advisor. With nearly 20 years of experience, Mike will serve on the firm’s investment committee, work closely with firm leadership, and provide comprehensive and actionable financial guidance to clients. Previously, Mike was a Director at BMO Family Office where he developed portfolios for ultra-highnet-worth clients.

Duff & Phelps, A Kroll Business, Chicago

FitzGerald, Chicago

To order frames or plaques of profiles contact Lauren Melesio at lmelesio@crain.com or 212-210-0707

LGIM America (LGIMA) is pleased to announce that James (Jimmy) Veneruso, CFA, FRM, CAIA, has joined the firm as a Senior Defined Contribution Strategist. In this role, he manages the design, creation and build out of defined contribution investment solutions, with a heavy focus on retirement income/decumulation and fixed income strategies, for the US Defined Contribution market. Jimmy has 15 years of investment management experience within the financial services/defined contribution industry.

INVESTMENT BANKING

ARCHITECTURE / DESIGN

Kristen Larkin, ASID, WELL AP has been made an equity partner of FitzGerald and elevated to the role of Principal. Since 2016 she has been the firm’s Interior Design Director and plays a key role in the firm’s Business Development & Marketing and DEI committees. Kristen leads multifamily and commercial projects throughout the country, most recently several locations for online retailer Chewy—from new corporate headquarters to distribution and manufacturing facilities.

LGIM America, Chicago

CONSTRUCTION Focus, Chicago Focus, a leading Chicagobased developer & general contractor, is pleased to announce the appointment of Kirk McLawhorn to the role of Senior Project Manager. With over 15 years of industry experience, Kirk has managed & delivered projects valued at over $484M across Illinois. His project experience ranges from major ground up residential and commercial towers to adaptive reuse & historic renovations. As a Senior Project manager, Kirk is responsible for overseeing Focus’ largest construction projects from concept through closeout & will manage a team of office & field staff. Prior to joining Focus, Kirk was a Senior Project Manager with Lendlease & currently serves as an associate board member for the Academy for Urban School Leadership.

Duff & Phelps, A Kroll Business, the world’s premier provider of services and digital products related to valuation, governance, risk and transparency and a leading middle-market transactions advisor, is pleased to announce that David Blowers, Jr. has been appointed as chief growth officer of the firm’s Corporate Finance practice. In this role, David will drive operations growth strategy and focus on datadriven analysis in deal executions for global corporate finance clients.

LAW Ropes & Gray LLP, Chicago Greg Bauer, a nationally recognized leveraged finance lawyer, has joined Ropes & Gray’s 100-lawyer Chicago office–a team known for “talented, sophisticated problem solvers” who “understand what is important to clients,” according to Chambers USA in its 2021 guide. The firm continues to expand its leveraged finance practice in the Midwest, complementing a world-class team of private equity and M&A business advisers.

COMPANIES ON THE MOVE

ADVERTISING SECTION

To place your listing, visit www.chicagobusiness.com/companymoves or contact Debora Stein at 917.226.5470 / dstein@crain.com ANNIVERSARIES & OTHER MILESTONES

HEADQUARTERS MOVES & NEW OFFICES

The Horton Group Orland Park, IL 708-845-3000 www.thehortongroup.com

Apple Growth Partners Chicago, IL 866-67-APPLE www.applegrowth.com

The Horton Group, one of the largest privately held insurance brokers in the United States, celebrates its 50th anniversary this year. Horton was founded in 1971 as an eightperson agency in Orland Park.

Apple Growth Partners (AGP), award-winning accounting and business advisory firm, proudly announces the firm has expanded services to businesses in the state of Illinois, with professionals now practicing in Chicago.

Today, there are approximately 400 employees across six states, specializing in insurance, employee benefits and risk advisory solutions. Horton will share memories on its LinkedIn, Twitter, Instagram and Facebook pages throughout the year. To learn more, follow Horton on social media.

The Chicago office is the first extension of the firm to be located outside of Northeastern Ohio. Spearheading the Chicago team is Dirk Ahlbeck, CPA, tax principal and AGP’s national restaurant practice lead.

10/20/21 11:23 AM

CRAIN’S CHICAGO BUSINESS • OCTOBER 25, 2021 15

Innovation comes in all forms: a tennis racket or football helmet, an office chair or desk, a garage door, a candy wrapper or software. Those are all items patented last year by Chicago-area companies that are at the top of their game. The inventors range from startups, such as Narrative Science, NuCurrent and Uptake Technol-

ogies, to iconic names, such as Riddell, Wrigley, Wilson and Bankers Box. They’re among Chicago’s Most Innovative Companies. Several have been on our previous lists over the past 10 years, demonstrating that for some, innovation isn’t a goal; it’s a way of doing business. Though the types of innovation in this year’s list vary widely, there are common

THE TOP 50

1. NARRATIVE SCIENCE

1. Narrative Science 2. Riddell 3. Hollister 4. NuCurrent 5. Fellowes 6. Uptake Technologies 7. Sage Products/Stryker 8. Mars Wrigley 9. Chamberlain Group/Duchossois Group 10. Wilson Sporting Goods 11. Vyaire Medical 12. Triteq Lock & Security 13. Mead Johnson Nutrition 14. M&R Printing Equipment 15. Conagra Foods 16. Pregis Innovative Packaging 17. Baxter International 18. The William M. Yarbrough Foundation 19. Allstate + Arity International 20. Acco Brands 21. Hillrom 22. ISCO International 23. RTC Industries 24. Mondelez International 25. Medline Industries 26. Henry Crown & Co. 27. Kraft Heinz 28. Radio Flyer 29. Signode Industrial Group 30. Stepan 31. Prince Castle 32. Vaxcel International 33. John Bean Technologies 34. Ideal Industries 35. Exelon 36. Parasol Medical 37. Cortland Capital Market Services 38. Knowles 39. Flexterra 40. Groupon 41. SRAM 42. Methode Electronics 43. Colson Associates 44. R.R. Donnelley & Sons 45. Scholle IPN 46. CME Group 47. Boler 48. Abbott Laboratories 49. Transform SR Brands 50. Encore Packaging Source: Ocean Tomo

P015-P017_CCB_20211025.indd 15

threads. The COVID-19 pandemic hasn’t dampened the commitment to innovation, but it has changed how it gets done, in some ways for the better. The pace of invention is speeding up, as product cycles shorten and customer preferences change rapidly. Companies are driven to innovate in how they make and package their products. Sustainability is now

a driving force in research and development. This list is compiled in partnership with Ocean Tomo, an intellectual property advisory, investment-banking and consulting firm, which evaluates the patents produced each year by Chicago-area companies and ranks them based on quality. | STORIES BY JOHN PLETZ

What it does: Artificial-intelligence software for business | Patents last year: 13

Stuart Frankel is on a mission to get rid of the dashboard. Long a staple of the data analytics software used by companies to absorb information about everything from sales to supply chain, the dashboard is holding back business intelligence, says the CEO of Narrative Science. “Our view is dashboards are antiquated,” says Frankel, who co-founded the artificial-intelligence software company based in Chicago in 2010. “The dirty secret is very few people use dashboards. So we took a step back a few years ago and said: ‘No matter what we do, as long as we’re beholden to the dashboard, we knew we wouldn’t be able to change the experience for business users.’ ” The company’s Lexio product, launched last year, looks more like a social media newsfeed than a traditional dashboard. It

pulls information from analytics and data platforms already in use by a company— such as Salesforce, Tableau or Snowflake. “We were inspired by Twitter, Apple News and Netflix,” Frankel says. He believes businesses should have “the same consumption experience that we do at home.” It’s harder than it sounds. Narrative Science software engineers developed a capability called “write like me” that learns how individual businesses communicate—the metrics they care about and how they describe them. “Write like me” is one of the patents that propelled Narrative Science to the top

spot on this year’s Most Innovative Companies list. It also led the list in 2018. Narrative Science has been teaching machines to think and write like humans since it spun out of Northwestern University. The company, which employs about 75 people, operates in a niche of artificial intelligence called natural-language generation. It has amassed a total of 45 patents. It has been at the crossroads of two major trends: artificial intelligence and the democratization of data within businesses. International Data Corp. says spending on AI systems will more than double by 2025 to $204 billion. Narrative Science’s expertise in speech is part of the broader evolution of AI and computing. “If you’re in an office with other people, you use a keyboard,” says Mark Hasegawa-Johnson, a professor at the University of Illinois at Urbana-Champaign. “If you’re at home, doing dishes, you use speech. The goal is to move seamlessly back and forth.”

2. RIDDELL What it does: Sports equipment | Patents last year: 8

Riddell, which started making football helmets in the 1930s, thinks one way for them to better protect players’ heads is to make them fit better. The Des Plaines-based company, which is the top seller of football helmets, has been making custom-fitting helmets for professional and top college teams for a few years. Now it wants to customize helmets for the masses. “We can make the technology available to youth groups, high schools and colleges without the resources of professional teams or major universities,” says research and development manager Vittorio Bologna. Two innovations are making it possible. Advances in 3D-printing technology and manufacturing processes allow Riddell to make build-tofit foam inserts inside a helmet. Technology for scanning a player’s head evolved from large machines to

portable devices to a mobile phone app. “It wasn’t straightforward,” says Thad Ide, senior vice president of research and product development at Riddell. “You can make a custom version of anything. The trick is adapting it for mass production.” The company plans to roll out the new, build-to-fit technology and helmets next year. Customization is just one of the innovations in the patents awarded to Riddell last year. Other advances involve improvements in making the external shell of helmets more flexible in key areas, as well as a flexible face guard and quick-release face mask system. Riddell, which was founded in 1929, has a long history of innovation. It developed the first plastic football helmet and the web-suspension system that made its way into military helmets during World War II. It was in the Top 10 of Crain’s Most Innovative Companies lists in 2018 and 2014.

10/21/21 4:44 PM

16 OCTOBER 25, 2021 • CRAIN’S CHICAGO BUSINESS

MOST INNOVATIVE COMPANIES

3. HOLLISTER

4. NUCURRENT

What it does: Medical products | Patents last year: 15

What it does: Wireless power technology | Patents last year: 5

For medical products maker Hollister, which has R&D teams and customers scattered around the globe, innovation traditionally meant a lot of in-person collaboration. But COVID-19 changed all that. So the company adapted by using virtual-reality cameras and headsets to allow engineers in Chicago, Ireland and Denmark to work remotely with each other and customers, says Paola Wisner, vice president of research and development. “It accelerated our collaboration.” There were unexpected upsides to using cameras, says Seamus Fitzpatrick, Hollister’s senior director of research and development. “We could see customers using our prototypes, and we were able to re-review things in a more precise way because we had it on tape. You also can access more diversity of thought with virtual tools because you can include more people.” The 100-yearold company based in Libertyville is a patent powerhouse that has been among the Top 10 of Crain’s Most Innovative Companies list three years in a row. Among its patents issued in 2020 was a flip-top container that makes it easier to access a catheter and return it after use. “The simplest solution for a container is one that twists open and closed,” Fitzpatrick says. “A lot of customers have difficulty with hand movement and making a twisting motion, so we thought about how to make it easier. Maybe we can eliminate the twisting motion altogether.” While they were at it, engineers also made the container more eco-friendly, using a plastic that’s more easily recycled. “Environmental sustainability isn’t an excuse to have inferior products,” Fitzpatrick says.

NuCurrent keeps finding ways to make wireless charging better. The company, which topped our Most Innovative Companies list in 2019, received patents last year for improvements that allow faster wireless transmission of power and data to devices, more than doubling the amount of power delivered and quadrupling the amount of data traveling to a device. It allows product designers to ditch copper and plug-in connectors, reducing the size and weight of devices. NuCurrent got its start at a Northwestern University business plan competition, just as the idea of wireless charging of phones and other devices was starting to catch on. Its technology made its way into products starting in 2015. Since then, the company has been making steady advances in capabilities and solving new problems. One recent innovation detects interference between a charging unit and a device, which can lead to heat buildup. “It’s a big concern for smartphones, industrial chargers or kitchen devices,” says founder and CEO Jacob Babcock. The company also received patents last year for developing a way to transmit power through metal without generating excess heat. Previously, companies had to use materials such as plastic or wood if they wanted to allow wireless charging. “It allows companies to build products with a metal housing—devices such as headphones, wearables, automotive and health care devices,” Babcock says. With 16 U.S. patents, NuCurrent has come a long way since it was founded in 2009. It has 50 employees and big-name customers, such as Honeywell, Klipsch, Dish Network, Spalding and Whoop.

va er

CME Group

Abbott Laboratories

456

Ideal Industries

Deere

451

Brunswick

Caterpillar

402

AbbVie

Illinois Tool Works

341

Allscripts Healthcare Solutions

Motorola Solutions

234

Littelfuse

HERE Holding

167

SRAM

Allstate + Arity International

148

Transform SR Brands

Zebra Technologies

124

Aptargroup

Dover

119

Panduit

Northwestern University

117

Robert Bosch Tool

Hillrom

113

Walgreens Boots Alliance

Groupon

105

ISCO International

University of Chicago

100

Middleby

Tenneco

Mondelez International

University of Illinois

Idex

Baxter International

Amsted Industries

Trading Technologies International

Thoma Bravo

Medline Industries

Life Spine + Spinal Generations

Source: Ocean Tomo

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5. FELLOWES What it does: Office furniture | Patents last year: 5

Fellowes has evolved from making office work easier to making it easier to work in the office. The company that introduced the cardboard Bankers Box over a century ago, and then moved on to paper shredders, lately has been reinventing office furniture with standing desks, chairs and other accessories. It developed a unique office chair called the Elea, with a suspended seat. “We built a chair from the ground up,” says John Fellowes, the fourth-generation CEO. “It’s a combination of an exercise ball and a high-design chair. We looked at anatomy and arrived at the main goal of taking a stagnant process and bringing motion into it.” The company chose a lateral scissor design for one of its adjustable-height desktop stands for computers, because it provided leverage and stability without moving the device toward or away from the user.

They’re just some of the new products that have come out of the innovation hub at the company’s Itasca headquarters. The family-owned company, founded in 1917, has 2,000 employees in 17 locations around the world. “Almost all of our product development is done in-house,” Fellowes says. The company weathered the pandemic surprisingly well because many of its products helped employees make the switch to remote work. Also benefiting is its air-purification business, which was launched in 2013, after executives noticed people with asthma and allergies had air purifiers at home but not at work. “We’re a hundred-year-old business,” Fellowes says. “If you have things that just continue, one day you’re going wake up and they’re not relevant. You have to be constantly purging or challenging the way that you do things in order to stay relevant.”

6. UPTAKE TECHNOLOGIES Uptake Technologies keeps dialing up new algorithms to help industrial customers figure out what’s not working. The company developed ways to predict when equipment—such as wind turbines, locomotives and trucks—would fail based on historical patterns. Now it’s come up with ways for companies to spot underperforming equipment, such as wind turbines in a large wind farm. It’s just one of the patents that has put Uptake on Crain’s Most Innovative Companies list for the second year in a row. “The focus is on overall productivity, making sure that each turbine can produce all the energy it’s capable of,” says Brian Silva, director of data science at Uptake. Companies can increase the output of a wind farm by 1%-2% by identifying turbines that aren’t producing as much power as others around them. The improvement can translate into $250,000 to $500,000 in additional revenue annually for a wind farm. It’s a big deal to Uptake’s customers, such as Berkshire Hathaway Energy. Uptake says it’s also saving money for customers, such as trucking company United Road, by predicting equipment

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What it does: Data analytics software | Patents last year: 16

COMPANIES WITH THE MOST PATENTS Boeing

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failures through data analysis and modeling. “They reduced roadside breakdowns 26%, which works out to about $3,400 per truck,” Silva says. As companies use more sensors to monitor equipment, they’ve got access to more data about individual machines. The challenge for Uptake is gathering that data and figuring out how to make sense of it by using algorithms to focus on specific trends quickly enough that companies can act on them. Uptake, which was founded by startup entrepreneur and early Groupon backer Brad Keywell, has been awarded 44 patents since it launched in 2014, says CEO Kayne Grau.

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CRAIN’S CHICAGO BUSINESS • OCTOBER 25, 2021 17

10. WILSON SPORTING GOODS

7. SAGE PRODUCTS/STRYKER What it does: Medical products | Patents last year: 10

The company, based in Cary, was founded in 1971 by Vince Foglia and Paul Hills. Over time, it created a highly respected new-product development operation, moving into new businesses. Sage created a line of patient hygiene and preoperative products, along with devices related to reducing pressure sores. Sage grew to about 700 employees and nearly $300 million in annual sales in 2012, when it was acquired for $1 billion by Chicago-based private-equity firm Madison Dearborn Partners. Stryker, a medical-device company based in Kalamazoo, Mich., acquired the company for nearly $2.8 billion in 2016.

What it does: Sports equipment Patents last year: 15

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Sage Products has long history of innovation, stretching back to sharps containers for needle disposal in the early 1980s. These days, it’s reinventing the way hospital patients are moved, using inflatable sheets with handles and straps, reducing strain and injuries for staff. Sage also makes self-dispensing, single-use toothbrushes and oral-care products for patients who are unable to brush their own teeth. “Sage has been consistently filing new patent applications and creating new product categories in patient safety, infection control and preventative care,” says James Malackowski, CEO of Ocean Tomo.

8. MARS WRIGLEY

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What it does: Gum and candy Patents last year: 6

In the gum and candy business, what you leave behind is becoming almost as important as what you consume. “People will not only choose the product based on taste, but also on packaging,” says Chris Rowe, Chicago-based head of global R&D at Mars Wrigley, the world’s largest gum maker. “They want products sustainably packed. We’ve invested millions in that over the past few years.” The team at Wrigley, which works from a facility on Goose Island, is credited with a half-dozen patents last year, ranging from gum to packaging. They’re continuing a long history of innovation at Wrigley, which was acquired by Mars in 2008. Its breakthroughs include sugar-free gum, envelope-style flat packages and the introduction of plastic flip-top containers for gum. R&D workers at Mars Wrigley are coming up with ways to make packaging for everything from chocolate to gum more eco-friendly. “People are consuming our products on the go,” Rowe says. “It’s not always easy to find a place to recycle them.” The company recently launched a product in Europe with packaging that was 90% paper-based. It also came up with new technology, which Skittles debuted in Europe, that is more desirable to recyclers because it uses a single layer of packaging rather than multiple layers. It’s the type of broad innovation—from

products to processing and packaging— that comes from the company’s Chicago R&D center, where headcount is expected to increase about 10% in the next year.

“Chicago will get more and different types of innovation in the future—things that might play out over a longer time period,” Rowe says.

9. CHAMBERLAIN GROUP/DUCHOSSOIS GROUP What it does: Garage door openers | Patents last year: 18

A decade ago, Chamberlain Group paired the garage door opener with the smartphone. Since then, its myQ smart hub added Wi-Fi, Amazon Prime, a camera and a doggie door. The Oak Brook-based company, part of Duchossois Group, has been a pioneer in smart home technology. It’s likely one of the reasons that private-equity firm Blackstone is paying $5 billion for the garage door company. Chamberlain received 18 U.S. patents last year for innovations related to its garage doors. “They’ve been the leader for a very long time, since back when the smart

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home wasn’t even a market,” says Adam Wright, a senior analyst at International Data Corp. in Boston. “MyQ was the first available, do-it-yourself solution. Until very recently, you’d be hard pressed to find a Wi-Fi-enabled garage door that wasn’t from Chamberlain or LiftMaster. MyQ was the only solution for a very long time.” MyQ is part of the broader smart home market in the U.S. that IDC estimates will top $100 billion this year. “Looking forward, I would suspect Chamberlain is looking to monetize the smart home market beyond the garage door opener,” Wright says.

To develop a new tennis racket for today’s players, Wilson reached back to an old idea. The sporting goods manufacturer wanted to make the head of the racket flex laterally to adapt to a new generation of players who are stronger and hitting balls with a much more vertical swing. The additional flex allows the ball to stay on the strings slightly longer, producing more top spin. So the company changed the way it assembled the layers of carbon fiber used to make the racket. As aircraft and race car makers have known, carbon fiber gets much of its strength and rigidity from the way the fibers are laid out before they’re fused together. The result was the Clash racket, which since it was introduced two years ago has become the bestseller in the world. It’s just one of the innovations found in patents issued to Wilson last year, which has returned the company to Crain’s Most Innovative Companies list for a third time. Other advances include baseball bats with adjustable knobs, making it easier for batters to choke up, and adjustable end caps with different weight inserts, which can change the feel of bat as it’s being swung. The company has about 70 employees at its state-of-the-art innovation center in Rosemont, where it can deconstruct the physics of a tennis ball or racket. The innovation behind the Clash racket came from Bill Severa, the c o m p a n y ’s director of advanced R&D for racket sports. “He has been playing with the concept since the early 90s,” says Bob Thurman, vice president of Wilson Labs. “It required us to work with our manufacturing partners to manufacture it completely differently.” Thurman says the pace of innovation is accelerating, putting pressure on R&D teams to innovate faster. “Consumers’ needs and wants shift very rapidly,” he says. “A product used to stay in market for three to five years. Now it’s one or two years.”

10/21/21 4:44 PM

18 OCTOBER 25, 2021 • CRAIN’S CHICAGO BUSINESS

BUSINESS OF CANNABIS

THE MORE YOU PLAY, THE MORE YOU WIN

Some firms applied for retail pot shop licenses dozens of times at $2,500 a crack. Is a lottery really the best way? BY JOHN PLETZ

the citizens of Illinois,” says Chris Carmichael, who sued the Illinois Department of Financial & Professional Regulation to stop the licenses from being awarded. His client, Well-Being Holistic Group, submitted four applications but didn’t win a license. “Someone with 100 tickets has a lot better shot than someone who has one,” he says. “It benefits the wealthy people with resources. It doesn’t spread the licenses around.” Winning a lottery comes down to simple probability. The more chances you have, the more likely you are to win. “We put more submissions in the same (region) than normal, because of the probabilities,” says Michael Mayes, CEO of Quantum 9, a Chicago-based consulting firm. “It was a gamble. We advised (clients) to submit as many as possible.” One of his clients, whom he declined to disclose, submitted 75 applications and won six licenses. Another, who submitted four, won one license. JOHN R. BOEHM

etting a long-awaited shot at breaking into the business of selling weed in Illinois came down to luck of the draw. Instead of handing out licenses to the top scorers, as it did in 2015 for medical cannabis dispensaries, the state used a lottery to choose who will be allowed to open 185 new retail pot shops. A lucky few won big: 10 applicants won 25% of the licenses, leaving hard feelings and litigation among hundreds who came up short and leading a top state lawmaker to call for an overhaul of a process that’s been dogged by delays and controversy from the start. “Lotteries cannot be the model we use anymore. We have to learn from the past,” says Rep. LaShawn Ford, a Democrat from the West Side who was involved in revising the state’s marijuana law. “I don’t think the public has the confidence in the lottery process. A simple process of awarding it is better. We don’t have lotteries for liquor licenses.” He plans to introduce legislation to change the process of awarding licenses in the new session of the Illinois General Assembly that starts in January. Gov. J.B. Pritzker isn’t signaling whether he supports a change. “For the next round of licenses, we will continue to work closely with stakeholders, community leaders and members of the General Assembly to create an efficient application process that addresses equity challenges and ensures this new industry benefits and reinvests in communities hardest hit by the failed war on drugs," his top cannabis adviser, Toi Hutchinson, said in a statement. The results weren’t what anyone expected when Pritzker signed Illinois’ recreational marijuana law in June 2019, which

State Rep. LaShawn Ford: “I don’t think the public has confidence in the lottery process.” The idea of a lottery emerged in December 2019, as a tie-breaker, just before the state began taking applications. “It was a huge perversion of what was put forth in the original law,” says Irina Dashevsky, a partner at Greenspoon Marder in Chicago, whose clients previously sued over the scoring process and preferences given to military veterans. “There was no mention of a lottery. The fact that a competitive-licensing process was reduced to lotteries is a real twist. If you’re going to end up with a lottery again, you should be upfront

“LOTTERIES CANNOT BE THE MODEL WE USE ANYMORE. WE HAVE TO LEARN FROM THE PAST.” Rep. LaShawn Ford, a Democrat from the West Side

made history for its focus on “social equity,” or diversifying ownership of an industry that was largely white and male. The law laid out in detail a licensing process that gave preference to people from neighborhoods hit hard by poverty, violence and the war on drugs, as well as those impacted by arrests for low-level marijuana crimes.

about it and tell people they’re buying balls in a lottery.” The lottery shouldn’t have come as a surprise, says Bryan Zises, co-owner of Dispensary 33, which won a retail license when Illinois launched its medical marijuana program. Like many existing cannabis operators, he helped several teams apply for licenses. Six of them submitted 25 applications

each. One team won five licenses, another won four, another won three, and two others won two each. “We expected a lottery once the state published the tie-breaker rules,” Zises says. “It wasn’t me reading the tea leaves. It was well-telegraphed to everybody.” It wasn’t just one lottery, like a Powerball or Mega Millions. Licenses were awarded by geography, across 17 districts, with a drawing for each, and there were three lotteries. The result was 51 individual drawings, and savvy applicants tilted the odds in their favor by submitting multiple applications in individual drawings. Botavi Wellness was one of three applicants that submitted the maximum number of applications allowed, 75, and came away big winners. Botavi won the most licenses, with seven. Blounts & Moore, a team affiliated with a cannabis operator in Washington, D.C., won six licenses. World of Weed, a team affiliated with a marijuana retailer of the same name based in Tacoma, Wash., also won six licenses. Attempts to reach Botavi, Blounts & Moore and World of Weed were unsuccessful.

Of 11 applicants that won three or more dispensary licenses, five had the maximum 75 applications. “The strategy for winning a lottery is to get as many applications in as you can,” says Jonathan Udell, an Arizona attorney who represents clients applying for cannabis licenses in various states. Under the rules in the original Illinois recreational marijuana statute, dispensary licenses were divided among 17 regions of the state, varying by population. Social equity applicants could submit one application for each license at a cost of $2,500 each. Botavi, Blounts & Moore and World of Weed each spent $187,500 applying for licenses. That works out to $26,786 for each license Botavi won; Blounts & Moore and World of Weed each paid $31,250 per license. KAP-JG won six licenses on just 15 applications, which works out to $6,250 a license. It’s an attractive return on investment, considering each license could be worth $5 million apiece, insiders say, or up to $20 million once they’re turned into profitable stores with strong sales. “The idea of the law was to spread the wealth out across all

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WHAT WERE THE ODDS?

At Crain's request, Craig Marderstein, who teaches probabilities and statistics at Fordham University, analyzed the largest drawing: the competition for 47 licenses awarded in the Chicago region by 135 applicants who received perfect scores on their applications. The rules allowed people to submit as many applications as there were licenses in a particular region. Because most applicants submitted multiple applications, there were 901 applications for 47 licenses. For someone who submitted the maximum 47 applications, their odds of winning at least one license were 92.5%, he says. KAP-JG, on the other hand, with just 13 chances, had about a 50% chance of winning once. In the marijuana business, the real money lies in having more than one license. Herbal Remedies Dispensaries, for example, sold a pair of successful retail dispensaries for about $30 million. “The odds of people winning multiple licenses seems nearly impossible,” says Carmichael, whose clients sued over the lottery results. “The numbers don’t add up. It doesn’t look right.” Marderstein figures that Botavi and World of Weed, with 47 applications apiece, each had roughly a 44% chance of winning

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three or more times in the lottery for 47 Chicago-area licenses. By winning four of the 47 licenses with just 13 applications, KAPJG defied the odds, which were less than half of 0.5%, or about 1 in 200. “That doesn’t mean the lottery is a fraud,” Marderstein says. “They got extremely lucky. Everyone’s allowed to get lucky sometimes. People win lotteries where the odds are 1 in a million.” Edie Moore, a cannabis activist and former executive director of the Chicago chapter of the National Organization for the Reform of Marijuana Laws, which lobbied on the cannabis legislation, was part of the KAP-JG group. “It was surprising,” Moore says of winning six licenses. “We’re ecstatic and a little overwhelmed. I didn’t do any math on it. We knew the more applications you had in, the better your odds. We knew you could put in up to 75 applications. We put in what we could afford to put in. It was just luck.” Moore says she was involved in several teams that qualified for the lotteries. Only one team won.

WHY USE A LOTTERY?

Several states have turned to lotteries to hand out lucrative licenses, including Washington, Arizona, Rhode Island and Connecticut, as well as municipalities in California, South Dakota and Maine.

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that legalized recreational marijuana. When initial results were announced for the competition for the initial 75 dispensary licenses— just 21 applicants, including some with ties to politicians and prominent business owners, achieved perfect scores—it set off a round of complaints about mistakes and inconsistencies. Black and Latino leaders questioned whether the process would fail to meet the social-equity goals of the original legislation to bring more minority business owners into a white, male-dominated industry. After corrections and rescoring, the number of perfect applications rose to 135. Legislators added two lotteries to issue a combined 110 new licenses, allowing applicants who had received at least 85%of the points available to participate, widening the pool to roughly 600 applicants. In the additional lotteries, the state reduced the maximum number of licenses that could be won by a single applicant from 10 to two, creating a wider pool of winners. Still, the lotteries have drawn criticism. They were done by computer, as the Illinois Lottery is now, rather than a public event with numbers or balls picked from a machine. The state says it will use software to simulate the computerized lottery for several applicants that were mistakenly left out of the initial drawings.

Greenspoon Marder’s Irina Dashevsky: “It was a huge perversion of . . . the original law.” A half-dozen lawsuits have been filed in Cook and DuPage counties, alleging that applicants were improperly left out or that the scoring criteria was unconstitutional. The final award of the licenses is on hold because of pending litigation. The state has 205 more licenses available before reaching its statu-

CANNABIS THOUGHT LEADER Q&A

tory limit of 500. It plans to issue 50 licenses by the end of next year. “We have to come up with a brand-new process for this,” Ford says. “No one wants an outside agency scoring applications. No one’s going to want to have a lottery again. Republicans and Democrats, the governor—everyone’s looking for a better way.”

SPONSORS

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10/21/21 2:33 PM

22 OCTOBER 25, 2021 • CRAIN’S CHICAGO BUSINESS

Who polices the Chicago Police Department? Multiple structures and mechanisms are in place to review and investigate allegations of misconduct. Each has distinct roles and responsibilities, but not all can discipline:

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EMPOWERING COMMUNITIES FOR PUBLIC SAFETY ORDINANCE (PASSED IN JULY)

CHICAGO POLICE DEPARTMENT BUREAU OF INTERNAL AFFAIRS w Investigates allegations of criminal misconduct, operational violations, theft of money or property, planting of drugs, substance abuse, etc.

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CITY OF CHICAGO CIVILIAN OFFICE OF POLICE ACCOUNTABILITY w Investigates complaints about: - Bias-based verbal abuse - Coercion - Death or serious bodily injury in custody - Domestic violence - Excessive force - Improper search and seizure - Firearm discharge - Taser discharge that results in death or serious bodily injury - Pattern or practices of misconduct - Unlawful denial or access to counsel w Identifies and addresses patterns of police misconduct w Makes policy recommendations to improve CPD and reduce incidents of police misconduct, including recommending discipline

CITY OF CHICAGO OFFICE OF INSPECTOR GENERAL w Reviews and audits the policies, procedures, programs and practices of CPD, COPA and the Chicago Police Board, looking at systemic issues w Analyzes data, issues public reports and makes recommendations in an effort to: - Increase public safety - Promote constitutional policing practices that safeguard civil liberties and civil rights - Ensure accountability of the police force, which builds stronger police-community relations

CHICAGO POLICE BOARD w Decides disciplinary matters involving allegations of serious misconduct w Has the responsibility to: - Decide disciplinary cases when the police superintendent files charges to discharge a sworn officer - Rule on disagreements between the chief administrator of the Civilian Office of Police Accountability and the police superintendent regarding the discipline of an officer w Holds monthly public meetings where the public can ask questions and make comments to the board, police superintendent and COPA chief administrator

Sources: COPA: Jurisdiction—Civilian Office of Police Accountability; CPD Bureau of Internal Affairs; Police Board: City of Chicago—Police Discipline; OIG: Frequently asked questions—Office of Inspector General; State’s Attorney: Law Enforcement Accountability Division; Independent Monitoring Team

LAW ENFORCEMENT ACCOUNTABILITY DIVISION, COOK COUNTY STATE’S ATTORNEY OFFICE w Reviews investigations, determines whether criminal charges are appropriate and prosecutes police officers charged with criminal offenses

INDEPENDENT MONITORING TEAM, CHICAGO POLICE DEPARTMENT CONSENT DECREE w Assesses CPD’s and the city’s compliance with the consent decree, which requires CPD to provide constitutional policing that respects the rights of all Chicagoans, builds community trust and promotes community and officer safety

w The City of Chicago Community Commission for Public Safety and Accountability A seven-member body will be appointed by the mayor from among candidates recommended by a nominating committee and confirmed by the City Council. The commission will: - Play a central role in selecting and removing the police superintendent, COPA chief administrator and Police Board members - Collaborate with CPD, COPA and the Police Board on policy - Establish goals and evaluate progress for CPD, COPA and the Police Board to ensure accountability to the community - Promote community engagement and transparency

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w District councils Three-member councils will be publicly elected in each police district for the purposes of: - Building connections between CPD and the community - Collaborating in the development and implementation of community policing initiatives - Ensuring regular community input for efforts of the Community Commission for Public Safety and Accountability - Ensuring that within each police district a forum exists for residents to address concerns about policing in the district - Ensuring the independence and increasing the legitimacy of the commission by participating in the selection of its members

The evolving states of policing across the U.S. From Virginia to California, municipalities and school districts reassess how officers interact with the public

Earlier this year, the Los Ange-

les Unified School District voted to cut its police detail, reducing the number of armed officers in its schools. It joins a long list of districts that have cut back the number of officers in their buildings either through suspending or cutting back on the use of local police departments or reducing their own policing staff. Those districts include Seattle, Milwaukee, Portland, Ore., Oakland, Calif., and Columbus, Ohio, among others. In Illinois, the Oak Park-River Forest High School board eliminated its police officer position in 2020. Some districts plan to reallocate policing funds to hire more mental health professionals.

In November 2020, Virginia

lawmakers passed a bill that prohibits police from stopping cars for equipment violations like a broken light or tinted windows. In July 2020, in California, the

city of Berkeley passed legislation shifting traffic enforcement duties from the Police Department to a new agency of unarmed civil employees, reportedly the first city in the nation to do so.

In Eugene, Ore., mental health

providers in city vehicles provide initial contact and transport for people who are intoxicated, mentally ill or disoriented, diverting 5% to 8% of calls from police. The Police Department funds the program.

In Los Angeles County, co-re-

sponder teams of mental health providers and police jointly respond to mental health-related calls. The Los Angeles County Sheriff’s Department reported

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Some municipalities are restricting or removing officers from work that can lead to fraught interactions with the public. Here are a few examples:

Los Angeles police officers patrol Ocean Front Walk in Venice. in 2020 that “Level-1” force or greater would have been very likely during 434 crises were it not for the specialized units. At least 34 lives were spared during potential deadly force encounters, including 14 very high-risk incidents. The teams resolved 51 incidents without having to sum-

mon a tactical team. They de-escalated 243 incidents at police stations or court lockups, 84% with no use of force necessary. In November 2020, San Fran-

cisco launched the first phase of a new program in which crisis response teams instead of police are

sent to handle mental health calls. The Street Crisis Response Team, a pilot program, is part of the city’s efforts to develop alternatives to police response to nonviolent calls and fundamentally change the way the city handles public safety. —Deborah Shelton

JIM KIRK PUBLISHER • ANN DWYER EDITOR • CASSANDRA WEST FORUM EDITOR • THOMAS J. LINDEN CREATIVE DIRECTOR • JASON McGREGOR DIGITAL DESIGN DIRECTOR • KAREN FREESE ZANE ASSOCIATE CREATIVE DIRECTOR • SCOTT WILLIAMS COPY CHIEF

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CRAIN’S CHICAGO BUSINESS • OCTOBER 25, 2021 23

STANDARDS AND ACCOUNTABILITY

missing. The appeals court acolice are not above the cepted that the officers stole the law. I know this after money but found no previous case serving the Chicago Powhere officers had been held liable lice Department as an officer for committing such a theft. As for over 30 years. Unfortua result, the court ruled that the nately, when the public hears officers could not be sued. about qualified immunity, Every time cases like that hit the or QI—a court-made legal news—which happens often—Chiconcept that requires a court cagoans learn to mistrust policing to dismiss a civil lawsuit as an institution and officers as against any government offiRetired officer individuals. Our residents then cial unless there is a “clearly David Franco fear that the police will use the established” precedent—it served for 31 years badge as an excuse to commit makes them feel that we are with the Chicago above the law, which alienPolice Department. crimes against them with impunity. Since our job is to protect the ates us from the people we He is a speaker for same people from harm, it is only serve and protect. the Law Enforcelogical that impunity for misconIn instances where QI is ment Action duct makes our jobs harder. In invoked, the situations must Partnership, a many communities, this lack of be almost identical for a nonprofit group of accountability and distrust can judge to allow a suit to go to police, prosecutors also create fear of law enforcetrial. Simply put, because and other law enment, meaning that witnesses to no two situations are exactly forcement officials and victims of crimes do not come alike, this is an unreasonable who speak from forward and criminals on the street standard for accountability. firsthand experiescape justice. In a highly publicized ence to improve The vast majority of us agree case from California, police the criminal justice policing needs “major changes” officers searched the homes system. pertaining to accountability and of Micah Jessop and Brittan transparency, with a genuine return to the Ashjian. During the search, up to $100,000 principles of community policing. That in cash and $125,000 in rare coins went

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discussion should start with qualified immunity, because two-thirds of Americans know it needs an overhaul. Without reforming qualified immunity, police will continue to be separated from the public. But make no mistake about it, the police are the public and the public are the police. Ending qualified immunity will begin to rebuild trust with the community. Studies show that when communities place more trust in the police, public safety benefits, because people are more willing to help police solve serious and violent crimes. The recent experiences of Colorado and New Mexico demonstrate that QI reform is possible without putting the livelihood of individual officers at risk. In reality, officers are already protected when they act reasonably under the Constitution. Even when a court does find that an officer has violated someone’s constitutional rights, 99.8% of the time, the officer does not pay a dime—the city foots the bill. States that have made QI reforms have not seen an exodus of police officers, despite fears this might happen. That makes sense, because officers who acted reasonably do not need to rely on QI—96% of unsuccessful lawsuits against officers are dismissed for other reasons, not QI. The

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Qualified immunity serves no one P

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police officers that I have known have law enforcement and public service ingrained in their DNA. They simply will not leave the force because of QI reforms. Other states and municipalities are also coming through with efforts aimed at ending this divide between police and the public. It may be a delicate balance, but these states show us that we can prioritize the safety of our communities without sacrificing legal protections for law enforcement officers who make mistakes. By reforming qualified immunity, we can restore faith in our institutions and begin mending relationships with communities adversely affected by the status quo, making it easier for law enforcement to prevent and solve crime. Together, we have to be able to hold law enforcement accountable so law enforcement is better at holding themselves accountable.

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The Great Lakes — a fifth of the world’s fresh water. We’re invested in protecting this vital resource for generations to come. Learn more about our efforts to support policies that ensure all people in the Great Lakes region have clean water from lake to tap.

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Joycefdn.org

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10/21/21 2:33 PM

24 OCTOBER 25, 2021 • CRAIN’S CHICAGO BUSINESS

REBUILDING CONFIDENCE

Police reform is the path to reducing Chicago’s violence M

charged with a crime. ayor Lori Lightfoot Rather than resurrect failed and other city officials policies of the past, the mayor recently responded to and the Chicago City Council constituent pressure over the should recognize that they have a spike in gun violence that Chicahighly effective tool for reducing go experienced in recent months. violence at their disposal—reHeadlines splashed across newsforming CPD to ensure effective papers capturing the numbers evidence-based policing that is of shootings and murders each accountable to the public. weekend creates pressure at the It is no mystery that CPD is highest political level that action Colleen K. desperately in need of reform. must be taken—soon. Connell is the Poor oversight and mismanagePressure on public policyexecutive director makers can be good. However, of ACLU of Illinois. ment of CPD for decades has resulted in dismally low rates for pressure also creates an environsolving homicides in the city each year. In ment where bad decisions are reached and 2020, less than half of all homicides were bad policies are pursued. That is what we solved. CPD’s ineffectiveness is exacerare seeing in the city. bated by patterns of biased policing and In September, the mayor announced excessive use of force. The killing in 2014 of a plan to use the failed strategy of civil Laquan McDonald by a CPD officer led to a asset forfeiture to address gun violence in scathing U.S. Department of Justice report Chicago. The mayor and others promised that identified massive problems in CPD that these civil lawsuits would be used to and laid out a series of steps that CPD must “go after” the property of so-called gang take to address these flaws. leaders in Chicago, but history shows In the wake of the DOJ’s investigation, that the results are bound to miss on that three separate lawsuits targeted CPD patpromise. The Chicago Police Department terns of biased policing and excessive force has failed to meet its goal of replacing a against people of color and people with disgang database that was so flawed it listed abilities—both of which contribute to inefsenior citizens and people who had never fective policing. After two years of litigation, been involved in any criminal activity. And a federal court in January 2019 approved a civil asset forfeiture at the state level had to consent decree aimed at fixing many of the be reformed in 2017 after it was repeatedly shortcomings challenged in the litigation, misused to seize property from those never

Mayor Lori Lightfoot including the ways that police are trained, supervised and held accountable. These reform efforts recognize the inexorable link between reducing violence and two critically important changes that are needed: First, ensuring that policing is based on evidence of crime—not bias or stereotypes; and second, building stronger, more cooperative relations between police and the communities they serve. Reform that builds public confidence in police serving the community—and reduces

excessive use of force that sows the seeds of distrust and resentment in Black and Brown communities—is tied to reducing violence. Tragically, the city continues to fall short on the opportunity to make meaningful reform. Over the course of two-plus years, CPD consistently missed more than two-thirds of the deadlines for making the changes they agreed to under the federal consent decree. Despite repeated claims that they will “do better,” the pace of reform is stalled. As a tragic consequence, things

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POSSIBILITIES

The ‘split-second’ fallacy

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Former Minneapolis police officer Derek Chauvin listens as the judge announces his sentence of 22½ years in prison for the murder of George Floyd in Minneapolis. cago Police Superintendent David Brown said what police officials so often say on such occasions: “Our officers must make split-second decisions when it comes to the use of deadly force.” The logic of the “split second”—the notion that great deference must be given the perceptions and judgments of an officer acting in the heat of the moment—is enshrined in constitutional law and has powerfully shaped public discourse about police use of deadly force. Yet there is reason to hope a new paradigm is beginning to emerge. Consider how often the police killings that

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tem of policing does not depend he conviction of Minneon individual racists. apolis police officer Derek Seen in this light, the most Chauvin for the murder of telling cases are not the obvious George Floyd—like the earlier atrocities, but those in which conviction of Chicago police ofavoidable deaths result from ficer Jason Van Dyke for the murofficers doing the job they have der of Laquan McDonald—may been trained and acculturated to prove a watershed not because do. Two recent police killings in it brought about significant Chicago illustrate the point. change, but because it did not. On March 29, 13-year-old Trials of individual officers are Jamie Kalven is Adam Toledo was fatally shot by necessary. Beyond the demands a writer, human an officer after a foot pursuit that of justice in the individual case, rights activist and began when he took off running they have symbolic importance, founder of the as the officers arrived on the sustaining the hope that true Invisible Institute, scene in response to an alert accountability is possible. Imagwhich received from the ShotSpotter gunfire ine the impact had the Chauvin the 2021 Pulitzer detection technology. Obeying verdict gone the other way. But Prize for National the officer’s command, Toledo the occasional guilty verdict Reporting. had stopped running, dropped does not in itself change systems the gun he was carrying and was raising his and cultures. hands above his head when he was shot. That individuals such as Derek Chauvin Then, two days later, after another frantic are in law enforcement is a problem, but foot pursuit, an officer fatally shot 22-year-old it is not the problem. You could purge all Anthony Alvarez in the back, as he fled with a known racists from policing, but the mode gun in one hand and a cellphone in the other. of law enforcement widely practiced in The officers had sought to question him for Black and Latino neighborhoods would allegedly driving on a suspended license. continue to produce intolerable outcomes. In response to the Toledo shooting, ChiIn other words, the operation of a racist sys-

have commanded public attention in recent years have arisen from minor, if not trivial, law enforcement occasions. A man selling loose cigarettes (Eric Garner). A child playing with a toy gun in the vicinity of a playground (Tamir Rice). A man suspected of passing a counterfeit $20 bill (George Floyd). A teenager with a pocketknife wandering the streets in a daze (Laquan McDonald). And so on. Again and again, police have manufactured the split-second situation in which they then respond with deadly force. The first order of business is thus to reduce the number of unnecessary encoun-

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ters b bers be p duct outc by m Amo to su purs prac what able form ciate of po Fo one esca pola up fo and es to prod to de and profe Th insis unde scru to sta City the S

CRAIN’S CHICAGO BUSINESS • OCTOBER 25, 2021 25

UNFULFILLED PROMISES

Build trust? Start by enacting the police-reform measures already OK’d.

are not getting better for many neighborhoods across the city—either in better policing or reduction of violence. Police reform is challenging. Nobody doubts that. But reform cannot be achieved by making public pronouncements touting policies that have failed in the past. Mayor Lightfoot needs to roll up her sleeves and commit to the police reform process—a hard process—to curb the violence in the city. It will take more than a press conference. It will take substantive change inside CPD.

s of own nce.

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ters between police and community members—i.e., interactions that are unlikely to be productive, are likely to be counterproductive and run the risk of catastrophic outcomes. That objective can be pursued by means of rigorous cost/benefit analysis. Among the areas that might be subjected to such analysis are foot and vehicular pursuits, traffic enforcement, dragnet practices such as stop-and-frisk (under whatever name), the notoriously unreliable ShotSpotter technology and various forms of “quality of life” enforcement associated with the “broken windows” theory of policing. Following this logic where it leads, one finds oneself on new ground, having escaped the cramped confines of our polarized discourse. The possibility opens up for advocates of defunding the police and those calling for more police resources to address violent crime to engage in productive debate with a common goal: to delineate the limits of law enforcement and to demand the highest standards of professionalism within those limits. This will only happen if we, as citizens, insist that our elected representatives undertake such granular, evidence-based scrutiny of police operations. A good place to start would be the scheduled Nov. 12 City Council hearing on whether to cancel the ShotSpotter contract.

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Chicago police work at the scene where an officer shot a person in the leg on July 25.

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police misconduct, before they esearch consistently shows could even be put into effect. By that communities of color now, 16 of the SAFE-T Act policdon’t trust police to treat ing provisions were supposed to them equitably, given the dispabe enacted, including important rate ways police use force, police use-of-force restrictions, data colinability to prevent and solve lection and record-keeping, and homicides in these communities, a review of qualified immunity. and a lack of accountability for The public deserves an update on bad police behavior. any progress made in implementBut there’s another, more subtle ing these provisions. This type of driver of this distrust—unfulfilled Quintin Williams (from left) is a program officer overseeing transparency is key in establishing promises. To begin building the the Justice Reform portfolio at the Joyce Foundation. Cara trust and legitimacy in the comtrust we need, officials have to Hendrickson is executive director of Business and Professional munity. show they’re serious about implePeople for the Public Interest. Garien Gatewood is the director The promise of these reforms is menting the meaningful reforms of the Illinois Justice Project. The Joyce Foundation is a sponsor unrealized at a moment when the to which they’ve already agreed. of Crain’s Forum. stakes couldn’t be higher. RecogSome of the most sweeping ress perpetuates the well-earned skepticism nizing this, advocates, community leaders national policing reforms in recent memand government leaders are working to that CPD is capable of reform, even under ory have occurred in Illinois. They include ensure robust implementation. For examoversight by a federal court. An important the General Assembly’s passage of justice sign of good faith would be for CPD to com- ple, stakeholders have formed Justice 20/20, reforms, adoption of civilian police overan alliance that works throughout Illinois ply with provisions requiring community sight in Chicago, alternative emergency to bring peace and healing to our comparticipation and input. response programs and, before all of that, munities. Justice 20/20 calls for changes in the 2019 federal consent decree that laid out policing, a more equitable pretrial system, w The monumental Empowering Commua far-reaching blueprint for reforming the a re-entry system led by system-impacted nities for Public Safety ordinance, passed Chicago Police Department. people and equitable public safety for all by the City Council in July, creates a vehicle These are milestone reforms with the poIllinoisans regardless of their race or ZIP for direct community partnership in police tential to significantly impact public safety. oversight in the city’s 22 police districts. This code. However, if not implemented in practice to We need more partners and allies to join is the most democratic approach to police reflect their original intent, these hard-won efforts like Justice 20/20 to bring about oversight in the country, but to meet its and highly touted victories will be in vain, transformative change. We have a shared potential, the city must swiftly establish an further damaging community morale and interim community commission and lay the responsibility to embrace the vision behind deepening the fractured relationships with these reforms and guard against retrenchgroundwork for the district councils. It also police. Here are three critical opportunities ment, inertia or check-the-box enactment requires financial investment by the city. for the city of Chicago and Illinois to get that fails to embed these changes in our reform right: systems. w Some of the most significant policing These reforms are just the beginning. reforms happened at the state level, where w The historic 2019 consent decree sets There is much more work to do to reduce the Illinois Legislative Black Caucus led the out specific reforms and deadlines, to be the societal harms perpetuated by our crimassessed by an independent monitor. These passage of the Safety, Accountability, Fairinal legal system. However, future opportuness & Equity-Today Act, or SAFE-T Act, in reforms include establishing better lines January. But without steadfast and thought- nities for change may be impacted by the of communication with the community, implementation of the reforms already won. which is vital to changing the way police op- ful implementation, these robust legislative The consequence of missing the opporaccomplishments are vulnerable to erosion. erate in Chicago. However, the latest monitunity—a continuing lack of trust, even in Less than a year after passage, subsequent toring report reveals that CPD continues to the possibility of reform—is too big and legislation curtailed critical elements, such struggle to forge positive relationships with perilous to allow. the communities it serves. This lack of prog- as police use of force and standards for

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26 OCTOBER 25, 2021 • CRAIN’S CHICAGO BUSINESS

Continued from Page 21 ously served as president of the Chicago Police Board and chair of the city’s Police Accountability Task Force. “We’ve made remarkable progress in a very short period of time. But we’re still on that journey, and we will be for the foreseeable future.”

LONG-STANDING ‘PATTERN’

In 2015, Chicago became the first U.S. city to establish a fund to provide reparations to victims of police torture. For 20 years, former CPD Cmdr. Jon Burge and his “Midnight Crew” of detectives reportedly tortured more than 120 Black men to force confessions for crimes they say they didn’t commit. That same year, the U.S. Department of Justice launched a probe of CPD, releasing a report in January 2017 that found a long-standing, pervasive “pattern or practice” of civil rights abuses. The 12,000-member Police Department currently operates under a federal court-enforced consent decree overseen by an independent monitoring team. The agreement between the state and city requires changes in community policing; impartial policing; crisis intervention; use of force; recruitment; hiring; training; supervision and promotions; officer wellness ‘WORK IN PROGRESS’ In a meeting with the Crain’s ed- and support; accountability and itorial board in September, Mayor transparency; and data collection, Lori Lightfoot was asked about the analysis and management. The goal is to ensure full comstate of relations between police and communities of color, partic- pliance with the law and promote ularly Black communities. She de- community and officer safety and trust-building between officers and scribed it as “a work in progress.” “We’re not going to be able to communities. The independent monitoring erase a long history that dates back to the beginning of policing, team’s latest report filed in early Ocand particularly some of the noto- tober said the city and CPD had met rious cases of abuses and excesses some level of compliance in about in our city,” Lightfoot said. “We’re half of the 266 paragraphs in the denot going to be able to erase that cree requirements; 19 were in full in 2½ years’ time under one may- compliance. The report expressed or. We’ve got to be consistent and concerns about the CPD’s data coldelicate and diligent and inten- lection, management and analysis tional, and really build those re- and its community engagement lationships, one relationship at a efforts. The monitoring team also pointtime. That is really what’s going to ed out that CPD missed a Septurn the tide.” The mayor noted that CPD re- tember deadline for a new policy cently reformed its search warrant, restricting foot chases, struggling use-of-force and foot pursuit poli- “to reliably report foot-pursuit data cies. And she praised the depart- and create a data-driven policy.” ment’s community engagement Foot pursuits were identified as a efforts, such as Police Superinten- major concern in the findings of the dent David Brown’s push for more Justice Department investigation neighborhood involvement by offi- that led to the consent decree. Relations between Black comcers. Lightfoot recently announced munities and are FROM 1988 TO 2018, ONLY 7% OF THE NEARLY police “not as bad as 250,000 COMPLAINTS FILED AGAINST CHICAGO some people might want POLICE OFFICERS RESULTED IN DISCIPLINE. to believe but could always The Invisible Institute be better,” says John a new community-police media- Catanzara Jr., president of Fraternal tion pilot program to address some Order of Police Lodge 7, which repmisconduct complaints, and CPD resents the majority of CPD officers. “The average citizen in these unveiled a new community policcommunities, they want the police ing strategy. “We’re bringing the community there, they want more police, they more and more into the process don’t want less police,” he says. of oversight of our Police Depart- “They want their neighborhood ment,” said Lightfoot, who previ- safer.”

P021-P028_CCB_20211025.indd 26

Ebony Tate, left, with members of her extended family, including her mother, Cynthia Eason, center rear, at their home, which in 2018 was wrongly raided by Chicago police.

ASSOCIATED PRESS

less than a third of the city’s population. Black officers make up 20% of the police force. The case of Tate and her family is an example of the unprofessional, disrespectful and destructive encounters alleged in formal complaints and lawsuits. “I definitely think that racism plays a big role in how they can point guns at little kids and say some of the things that they say,” says Chicago civil rights attorney Al Hofeld Jr., who represents Tate and her family. Police officials declined to be interviewed for this story, despite being asked multiple times over several weeks and after questions were submitted in advance as requested. Instead, a spokesperson provided the following statement: “Growing community trust is a pillar of the Chicago Police Department as we work to not only reform, but transform CPD. The Department is committed to policing that is constitutional and equitable for the diverse communities we serve. We are focused on building strong partnerships with block clubs, community-based organizations and street outreach organizations in neighborhoods citywide.”

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TRUST

Racial disparities in policing also persist outside of Chicago. The Illinois Traffic & Pedestrian Stops Study, released earlier this year, found that police statewide continue to stop Black drivers at rates far higher than their percentage of local driving populations. In 2020, a Black driver was more than 2.7 times more likely to be stopped for a traffic offense than a white driver. The ACLU of Illinois says racial disparities continue, even though motorists of all races regularly violate traffic laws, whether it is driving 1 to 5 mph over the posted speed limit or changing lanes without signaling. Black drivers in Champaign were 4.8 times more likely to be stopped, and 7 times more likely in Chicago, 11.5 times more likely in Aurora and 28 times more likely in Waukegan.

Traffic stops by Chicago police exploded from 2015 to 2019, from about 86,000 to nearly 600,000, a sevenfold increase, says Nusrat Jahan Choudhury, legal director of the ACLU of Illinois. City data reported under the Illinois Traffic & Pedestrian Stop Statistical Study Act show that weapons are recovered in 0.11% or less of these stops every year, Choudhury said in an interview in August. “You have mostly Black drivers who are being pulled over for traffic stops, mostly resulting in verbal warnings, with very few guns being recovered and no explanation from the city as to why so many traffic stops are being conducted predominantly targeting Black people,” she says. “It raises serious concerns about what the city is doing here, especially given the history of ra-

Left: Alton Logan wipes away tears during a press conference in 2009. Logan, who was wrongfully imprisoned for 26 years, filed a federal lawsuit against the city of Chicago and former CPD Cmdr. Jon Burge. Above: John Catanzara Jr., president of Fraternal Order of Police Lodge 7. cially biased policing and excessive force.”

‘NOT A FEW BAD APPLES’

In Chicago, misconduct is embedded in the system of policing, says Deborah Witzburg, Chicago’s deputy inspector general for public safety. “Police misconduct is not a problem of a few bad apples,” she says. “And it is not a problem that we are going to discipline our way out of. There are bad actors, there are people who break the rules. Those people must be disciplined in a fair and swift and transparent way. That does not, however, solve the problem of police misconduct. There are large-scale cultural issues which require a long view of change and reform, probably generational change.” An example, Witzburg says, is the

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CRAIN’S CHICAGO BUSINESS • OCTOBER 25, 2021 27

RACIAL PROFILING OF ILLINOIS DRIVERS According to the Illinois Traffic & Pedestrian Stops Study, Black or African American drivers were 2.7 times more likely to be pulled over for a traffic stop than white drivers. The following looks at the traffic stop rate per 10,000 people in Illinois. TRAFFIC STOPS PER 10,000 PEOPLE IN ILLINOIS Black or African American 3,380

ALEX GARCIA

Hispanic or Latino 1,963

ASSOCIATED PRESS

ALEX GARCIA

Andrea Kersten, the interim chief administrator of the Civilian Office of Police Accountability, says Chicago is a model for what the structure of civilian oversight can look like.

failure of officers to report the misconduct of peers, widely known as the code of silence. It’s concerning, she adds, that many cases in which settlements and court judgments are paid out for alleged misconduct were never investigated for disciplinary purposes. Chicago’s Inspector General’s Office has advocated for a public database of closed police discipline investigations, because “it’s really hard to meaningfully analyze and learn from information that is not all in one place,” Witzburg says. A proposal in the City Council to create a central repository never came to a vote.

‘MORE TRANSPARENCY’

The Invisible Institute, a Chicago nonprofit journalism production company that helps citizens to hold public institutions accountable, has compiled a database of almost 250,000 complaints to city agencies against Chicago police officers between 1988 and 2018. Its analysis found that only 7% of complaints resulted in discipline. The overwhelming majority of complaints, more than 90%, were determined to be unsubstantiated or unfounded, says Trina Reynolds-Tyler, data analyst at the institute’s Citizens Police Data Project, an open source, free and publicly accessible database of digitized police disciplinary records. “There’s no way all of these people made up these stories,” she says. While civil rights attorney Jon Loevy’s law firm, Loevy & Loevy,

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fought for years for greater transparency about complaints, he says CPD fought to maintain secrecy. After a judge ordered the release of a graphic video of teenager Laquan McDonald being shot 16 times on a city street, more complaint documents have been made public, “so now there is more transparency into allegations of police misconduct, and I believe that’s helping,” he says. Even so, “there’s the sparring between the police union and the administration about how protective the system is going to be, and there’s room for the city to negotiate harder there,” he adds. The Civilian Office of Police Accountability, or COPA, was created after the uproar over suppression of the McDonald shooting video. Jason Van Dyke, the officer who shot and killed McDonald, was convicted in 2018 of second-degree murder and 16 counts of aggravated battery. COPA received more complaints and notifications in 2020 than in any of the last five years. In 2020, COPA concluded 277 cases and issued findings on 1,737 allegations of misconduct. Of the total closed cases with findings, 38% were sustained. The case sustained rate has been on an upward trend since 2016. Andrea Kersten, interim chief administrator of COPA, says it’s not clear why. People might have a better understanding of how to file complaints and how the system works, and a greater trust in the system, she says. Improper search or seizure and excessive force made up 62% of the total allegations reported to COPA last year. The number of allegations is extremely low given the millions of interactions between police and the public every year, maintains the police union’s Catanzara, who has been suspended from the force and faces a November Police Board hearing to determine whether he will be fired. He is accused of vio-

lating department rules on 18 occasions, most of them related to posts on social media. Charles Wilson, national chairman of the National Association of Black Law Enforcement Officers, says racism is ingrained in institutions of policing. “The system actually has been doing what it was meant to do,” says Wilson, a former police chief in Ohio. He says officers should no longer be trained to be warriors instead of guardians. Police often approach interactions with people of color with an attitude of judgment and bias, instead of a commitment to treat everyone with respect and dignity, he says, but officers can build trust. “If what you want is legitimacy in the community, you have to go out and embrace that community,” Wilson says. “It helps when the people you hire are from the community. It helps when you engage in activities with the community.” At the same time, he says that police work is difficult, stressful and inherently dangerous. The vast majority of the nation’s police officers “want to go to work, do their jobs, hopefully help somebody, and go home unbruised at the end of the day,” Wilson says. Jackie Baldwin, a Chicago activist, says reform doesn’t have to pit residents against police. “Good officers deserve to be protected from bad officers, too,” she says. “And they deserve to be able to be good officers.” Baldwin, a longtime South Side resident, worked for the passage of the Empowering Communities for Public Safety ordinance approved by the City Council in July. The ordinance creates a civilian oversight commission and elected councils in every police district, which she says will give communities greater say over policing in their communities. “Hopefully that leads to a safer community,” says Baldwin, a community organizer with the Jewish Council on Urban Affairs, part of a

coalition that pushed for the ordinance.

‘BEYOND POLICING’

Tate, whose apartment was raided in 2018, filed a civil lawsuit against 27 police officers and the city of Chicago shortly after the raid. Among other charges, the suit accuses police of unlawful search, excessive force and intentional and/ or negligent infliction of emotional distress. Officers left the Back of the Yards home in shambles without apologizing for their mistake or explaining how the family could get help from the city to pay for repairs to the apartment or replace broken items, including the children’s toys. During the chaos, an ambulance was called for Tate, who suffered a severe panic attack. She says her children are now easily frightened. They became so upset while watching a movie with depictions of SWAT officers that the TV had to be turned off. “I had always raised my kids, ‘If you are ever in trouble and you need someone, you can always call the police; they will help you,’ ” says Tate’s mother, Eason. “I wouldn’t tell them that now.” Hofeld has represented 32 children who had guns pointed at them at close range—including at their heads or chests—or who witnessed guns being aimed at their parents or grandparents. The vast majority—10 of 13 pending cases—were “wrong raid” cases in which the target of the search warrant had no connection with the family or their residence, he says. Two cases settled with the city of Chicago before trial, one for $2.5 million. “This has been going on for decades in Chicago, and there’s been a silent mass traumatization of a lot of kids of color from the way they execute search warrants, including pointing guns at the kids and their family members,” Hofeld says. See TRUST on Page 28

White 1,390 Asian 944 Note: 95% confidence interval Source: Illinois Department of Transportation

FEW CONSEQUENCES From 1988 to 2018, nearly a quarter of a million allegations of misconduct were filed against Chicago police officers. Of those, only 17,130 complaints resulted in disciplinary action. POLICE MISCONDUCT INVESTIGATION RESULTS 1988 to 2018

4,854

17,130

Sustained: No disciplined

Sustained: Disciplined

227,798 Unsustained

Source: The Invisible Institute

MONEY FOR THE POLICE More than a third of the entire city of Chicago’s 2022 corporate operating budget goes to policing.

36.1% 63.9%

Policing

All other departments

Note: Policing figure includes the Chicago Police Department as well as the Chicago Police Board, Civilian Office of Police Accountability, Office of Public Safety Administration and the Community Commission for Public Safety & Accountability. The Police Department on its own accounts for 34.8% of the total city budget. Source: City of Chicago, Crain’s reporting

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28 OCTOBER 25, 2021 • CRAIN’S CHICAGO BUSINESS

Continued from Page 27

“Gun pointing is something that needs to change.” Locally and nationally, there have been calls to drastically reduce police budgets with the aim of ending militarization of police and redirecting funds to education, housing, mental health care and other social services. “We are investing in policing and surveillance,” says Tynetta Hill-Muhammad, an activist with Black Youth Project 100, “and it’s only creating a culture of more policing and surveillance when we know that the communities that have the most police are not the safest. It is the communities that have the most resources.” Low-income minority communities face a triple hit. Residents are more likely to be victimized. As taxpayers, they help foot the bill. And misconduct drains the city’s coffers, swallowing funds for services greatly needed in under-resourced areas. Chicago paid about $538 million in police misconduct settlements and court judgments between 2010 and the end of July, plus $71 million in associated court fees and costs. As a result, there’s insufficient funding for after-school, violence prevention, job training and other critical programs, says Ald. Byron Sigcho-Lopez, who represents the racially diverse 25th Ward. “We cannot find resources because we have to pay millions of dollars in police misconduct settlements,” he says, adding that ending misconduct is the fiscally responsible thing to do. Sigcho-Lopez was one of eight

aldermen who voted against the latest police union contract in September because they said it lacked enough accountability measures. If the city is to address the root causes of violence and public safety, he adds, “we have to make sure that we talk beyond policing.”

PRACTICAL SOLUTIONS

Despite the formidable challenges, many reformers are optimistic about achieving meaningful change. Kersten, of COPA, says the city is a national model for what the structure of civilian oversight can look like. “We have depth and breadth in our system that doesn’t really exist in a lot of other places,” she says. COPA is “not the beginning or the end of police reform. We are a portion of it,” she adds. “All parts of our system have to be working together, and that is the goal.” Reform is resource intensive and time consuming. Witzburg says the Police Department must be adequately resourced and prioritized to implement new policies and better training, which involves being administratively and operationally equipped to carry out an enormous task. “There are tremendous opportunities for change, there are problems that need fixing, and there are practical solutions on the table to address some of these problems,” she says. “But that’s not enough if there is not simultaneously the political will to move forward.” Reform can’t come soon enough for many Chicagoans.

ALEX GARCIA

TRUST

Michael Liggins sued the city of Chicago and two police detectives for wrongful arrest, detention and prosecution. He was acquitted in 2019. Michael Liggins, a supervisor assistant in quality assurance at a meat company, says that in 2014, he was framed by police officers for a 2008 homicide he didn’t commit. He spent five years in Cook County Jail awaiting trial before he was acquitted in 2019. During his incarceration, he was stabbed twice. His only child was born, and his mother and uncle died. In a lawsuit filed against the city and two police detectives for wrongful arrest, detention and prosecution, he says police fabricated evidence and coerced one

witness and manipulated another to falsely identify him six years after the killing, despite the fact he did not match the description of the perpetrator and didn’t know anything about the crime. “I was definitely shocked,” says Liggins, now 32. “That was like the last thing I thought I’d get questions about, them thinking I killed a person.” That wasn’t his first negative encounter with police. He says he has been harassed, slapped across the face and struck on his genitals by officers without provocation, including a time when he was threat-

ened with arrest for what he says the officer called “walking while Black.” He awaited the verdict in his murder trial with his hands folded on the defendant’s table, mindful of the judge’s admonishment against displays of emotion. The words “not guilty” rang out as his eyes were fixed on the courtroom clock. He was anticipating the time when he would walk free. “I don’t want my son to experience police brutality, none of the things that I experienced in my life,” Liggins says. “I don’t want him to go through what I went through.”

‘We need community oversight. This is a start.’ An organizer behind a city ordinance on civilian oversight of Chicago police says she also has ‘a deep respect for what officers do’ Jackie Baldwin is a community organizer with the Jewish Council on Urban Affairs, part of a coalition of community groups that advocated for a police reform ordinance passed by the City Council in July. Here she explains why she pushed for the ordinance, which creates elected three-member councils of community residents in each of Chicago’s 22 police districts and an appointed seven-member Community Commission for Public Safety & Accountability, appointed by the mayor, that will oversee policy for CPD, among other responsibilities. This transcript has been edited for length and clarity. CRAIN’S: Why was it important to create a civilian oversight commission? BALDWIN: It was needed because there was no real accountability for officers. There was the Civilian Office of Police Accountability, but there was a serious lag in cases

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JOHN R. BOEHM

BY DEBORAH SHELTON

Jackie Baldwin being investigated. There were lots of complaints from people that they couldn’t file complaints anonymously. The ordinance allows people to elect district council representatives who will have a say on policing in their communities. That’s a huge change. What else needs to happen to improve public safety? One thing that really bothered me as we pushed this ordinance was the way that people acted like

this ordinance was anti-police. When we try to make sure people are held accountable for misconduct, that’s not anti-police. That’s pro-community. And it should send a message to the police that we understand you have a job to do. But you cannot mistreat people. You cannot rob people of their dignity. You cannot plant evidence to win a case. And we must hold people at every level accountable when that kind of stuff happens. If CPD had greater diversity, especially more Black officers, would that end misconduct? Putting more Black and Brown officers into lead positions within CPD would be good. But I’ve seen Black and Brown officers not be very nice, either. A lot of it goes back to the “us versus them” mentality. I think we need to shine more light on officers, especially Black and Brown officers who are invested in their communities, who are running programs and doing youth outreach so that

people can see a different side to what police do. Where do you stand on defunding the police? We have to re-evaluate the job that we ask the police to do. We’re asking them to suit up like Robocop. Is that really what we want police to be in our community? Yes, we must abolish the system as it exists today. Now, how do we get there? That’s still a work in progress. When you give community oversight, like this ordinance does— when you ask the community to be the stakeholders in that system, and you look at things like restorative justice programs and giving people a say on who represents them on the commission, then the community has a greater stake in governance. Hopefully that leads to a safer community. Why did you get involved in police accountability issues? I’m the daughter of a man who more than 70 years ago was incarcerated for a crime he didn’t

commit in Oklahoma. Luckily, my father was able to be released on appeal, and they eventually found the person who was guilty. Decades later, I’ve witnessed my nephews being harassed by police. I’ve heard them complain about being pulled over unreasonably. One of my nephews got pulled over because the police wanted to know why he had such a nice car. Little things like that rubbed me the wrong way. But I was torn, to be honest, because I am also the granddaughter of one of the first Black officers in Wichita, Kansas. I have a deep respect for what officers do. How hopeful are you about ending police misconduct now that the ordinance has passed? We need community oversight. This is a start. Every opportunity we have to create safer communities is an opportunity we should take. This ordinance doesn’t take power away from the mayor. But it gives the community more of a say than the community has ever had before.

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Once-vacant warehouse sells for $30 million

McKesson leased the entire building in Manteno last year as it prepared to ship vaccine supply kits across the nation. Now the company is paying rent to a new landlord, but no one knows how long the pharmaceutical distributor will stick around. wasn’t an option. Provender founder and CEO Neil Johnson is happy to take on that risk, confident he’ll be able to find one or multiple tenants to lease the building if McKesson moves out. The industrial market is arguably the strongest commercial real estate sector these days, and the Manteno warehouse is temperature-controlled, with infrastructure for refrigeration or freezer uses. Demand for cold-storage warehouses is especially strong these days among food manufacturers and grocery chains. Provender sees plenty of opportunity in the Chicago food storage market, buying its first property here, a 141,000-square-foot food processing facility in Berkeley, in May 2020. The firm now owns four food-related buildings totaling 906,000 square feet. The Manteno warehouse also comes with something COSTAR GROUP

a year, the building’s owner, Sherman Oaks, As the federal government Calif.-based Cardinal was putting the pieces in place Industrial has cashed to distribute COVID-19 vac- out, selling the propcines last year, good fortune erty for $30 million to visited the owner of a big ware- another California inhouse in Manteno, about 50 vestment firm, Provender Partners. miles south of Chicago. It’s another big The 570,000-square-foot building was empty after los- deal in a busy year for ing its two tenants about a year industrial property earlier. Along came McKesson, sales in the Chicago This Manteno warehouse sold for $30 million. a big pharmaceutical distrib- area, but the Manteutor working with the Centers no sale won’t go down as one dinal collected from the buildfor Disease Control & Preven- of Cardinal’s best, said George ing over 13 years, the firm still tion on its vaccine rollout. Hicker, Cardinal Industrial’s came out ahead. But Hicker’s In August 2020, Irving, Tex- founder and president. Though not celebrating. The investment was “good as-based McKesson signed a landing McKesson was a coup, lease for the entire warehouse, the company’s lease expires enough,” he said. “It wasn’t next October, great.” that DEMAND FOR COLD-STORAGE WAREHOUSES meaning the building RISKS Cardinal decided to sell the IS ESPECIALLY STRONG THESE DAYS AMONG could be empty again in just property now because its $19.7 FOOD MANUFACTURERS AND GROCERY a year. million mortgage matures next P r o v e n d e r May and Cardinal’s lender CHAINS. Partners has wouldn’t extend the due date where as many as 600 workers factored that risk into its price, until the end of the McKesson would assemble and ship vac- which was less than the $33.5 lease in October, he said. With million that Cardinal paid for the entire property at risk of cine supply kits. Now, after collecting rent the property way back in 2008. being vacant a year from now, from McKesson for more than Including all the rent that Car- refinancing with a new loan

BY ALBY GALLUN

else that’s valuable: land. It includes 50 acres that already are zoned for 620,000 square feet of industrial space. Provender could expand the existing building or construct a new one next door for another tenant. McKesson, meanwhile, is still hiring at the warehouse, advertising on its website for “material handler” jobs that start at $17.45 per hour. Workers in Manteno don’t handle COVID-19 vaccines; instead they package “ancillary supply kits” that include surgical masks, syringes, alcohol prep pads and vaccination record cards, according to the company’s website. Whether the company moves out next October or extends its lease could depend on the future course of the pandemic, which remains an unknown to everyone, including McKesson. A company spokesman didn’t return a phone call. “I don’t know what they’re going to do,” Johnson said. “I don’t even think they know what they’re going to do.”

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CRAIN’S CHICAGO BUSINESS • OCTOBER 25, 2021 31

State’s first big industrial walkout in 26 years comes as Illinois woos EV makers sion in manufacturing projects related to electric vehicles. Korean-based technology companies, such as Samsung SDI, SK Innovation and LG Energy Solution, and automakers including Ford, GM, Stellantis and Toyota, as well as electric vehicle upstarts such as Rivian and Tesla, all have announced new projects or are in the process of picking locations for them.

LABOR from Page 1 as Midwest neighbors, for electric vehicle and battery plants that could bring billions in new investment and thousands of high-paying jobs. As Illinois tries to propel its century-old automotive and heavy equipment manufacturing forward for another generation, it must grapple with its past. The Deere strike “puts the spotlight on Illinois not being a right-to-work state,” says John Boyd, a principal at the Boyd Company, a site-selection consultant in Boca Raton, Fla., that has worked on electric-vehicle

INFRASTRUCTURE

The manufacturing infrastructure in Illinois can’t be ignored, given the sheer number of projects in play amid the industry’s abrupt turn toward electric ve“(WORKERS) FEEL LIKE KARMA’S PLAYING hicles planned the next OUT A LITTLE, AND THIS IS A MOMENT TO over decade. “These are RESET THE STANDARD.” time-sensitive Bob Bruno, director, labor education program, projects,” Boyd University of Illinois at Urbana-Champaign says. “The reason Rivian is in manufacturing projects. “Most Illinois is because of an empty searches prioritize right-to- Mitsubishi plant.” work states: Tennessee, KenStill, labor costs, one of the bigtucky, Texas.” gest factors in operating costs for Pritzker’s office didn’t re- big manufacturing projects, are spond to a request for comment about 20% higher in Illinois than for this story. Tennessee, which recently landThe uptick in labor unrest ed EV plants from GM and Ford. at Deere and elsewhere comes Boyd notes that Toyota is conamid an unprecedented explo- sidering Missouri, Kentucky,

Indiana, Alabama or Texas for a $1.3 billion battery plant. About 15% of Illinois workers are represented by unions, triple the amount in Tennessee, according to Bureau of Labor Statistics data. Labor unrest had been largely forgotten until recently. Few of the striking workers at Deere were with the company during its last walkout. Deere is one of nearly 200 strikes nationwide this year, from nurses to food manufacturers, according to researchers at the Cornell University School of Industrial and Labor Relations. The Deere walkout shows how COVID-19 has unleashed simmering worker resentments that have piled up across industries and geographies over decades. It’s a reminder to manufacturers, who have held the upper hand in decades of negotiations, how quickly the tables can turn. “When 90% of workers vote down a contract, that tells you something,” says Bob Bruno, director of the labor education program at the University of Illinois at Urbana-Champaign, referring to the vote on a proposed contract by UAW members at Deere. Workers rejected a contract that included 11% in raises over six years, as well as the return of annual cost-of-living adjust-

ments that could push increases to 20%. On the picket line outside a factory that makes combines that sell for $800,000, workers said the wage increase felt stingy for a company that’s enjoying record profits and surging sales. They say hourly pay is just above $20 for most workers. The company puts it at $26 to $30, including profit sharing and incentive pay. Deere has been one of the winners during a pandemic still plaguing many other sectors. Earnings are forecast to be 75% higher this year, reaching $5.9 billion on 24% higher sales of $44.2 billion, according to Bloomberg data. Deere CEO John May received a pay package valued at $15.6 million in 2020.

ers were allowed to work from home. Couple that with the lowest unemployment rate among the state’s metro areas, 5.1% in August, and workers see an opportunity to hold out for more. “They feel like karma’s playing out a little, and this is a moment to reset the standard. It probably took something as dramatic as a global pandemic,” Bruno says. After the walkout began on Oct. 14, the two sides resumed bargaining. “We remain committed to hearing our employees’ priorities and continuing talks until the strike is resolved,” the company said in a statement. Less than a week into the strike, the economic impact isn’t being felt yet, but it lurks below the surface. That’s especially true in Moline, Deere’s headquarters since 1848. Founder John Deere was the town’s second mayor, and the company name is on local roads and buildings, its signature green and yellow colors dotting the landscape. “It’s in our interest as a city to see the matter resolved,” says City Administrator Bob Vitas. “We don’t take sides. We don’t want to be in the headlines three months from now with it still not being settled.” Neither does the state.

COMPLAINTS

Deere’s proposal to deny pensions to workers hired after Nov. 1 angered employees still resentful of a recently expired two-tier wage system that paid newer union members less than longer-tenured colleagues. COVID-19 fueled new complaints among workers. Deemed “essential workers” under pandemic mitigation guidelines, Deere factory hands were required to work assembly lines and risk infection, while oth-

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First Midwest buyer accused of lending bias FIRST MIDWEST from Page 3 its mortgage lending is substantial as well. It originated $200 million of home loans in the third quarter and $813 million in all of 2020, according to Securities & Exchange Commission filings. The lawsuit filed Oct. 6 in federal court in Indianapolis by the Fair Housing Center of Central Indiana comes at a tricky time for the banks. They’ve obtained approval for the deal from the U.S. Office of the Comptroller of the Currency but still are waiting on the Federal Reserve. Advocacy groups have petitioned the Fed to block the deal in light of Old National’s unwillingness to negotiate. Well over a dozen groups now are preparing to sign a new letter in opposition based on the lawsuit’s assertions, says Jesse Van Tol, CEO of the National Community Reinvestment Coalition in Washington, D.C. Principal among those is that just 37, or 1.6%, of 2,250 mortgages Old National made in the Indianapolis metropolitan statistical area in 2019 and 2020 were to Black homebuyers. Blacks make up 15% of the population. Other banks in the market reflect that. Nearly 15% of the home loans made by Old National’s four closest peer banks in Marion County, which includes Indianapolis, were to Black borrowers, according to the lawsuit. “Wow, to make that few loans, you almost have to be trying,” Van Tol says.

‘VERY CONCERNING’

Angst over Old National’s Chicago entry has reached City Hall. “It’s very concerning that Old National would be buying out First Midwest, especially given the current case,” says 48th Ward Ald. Harry Osterman, who chairs the Chicago City Council’s Housing Committee. He says the city is monitoring the transaction. Van Tol, who has led numerous negotiations over community lending commitments with bank acquirers over the years, says he twice was effectively told when trying to get the bank to engage that Old National wasn’t interested. The first, he says, was a polite rejection by Old National’s executive in charge of community reinvestment, who doubles as its marketing director. The second was with Ryan, who responded that he’d think about it and get back to Van Tol but never did. Ryan doesn’t dispute that account. When asked why the bank wouldn’t negotiate a customary community deal, Ryan says in an emailed statement, “Community benefits agreements may make sense in some circumstances and are typically implemented at the discretion of each bank. Here, however, we did not feel it was necessary to enter into a community benefits agreement.” He points to solid Community Reinvestment Act ratings for both banks and says, “We always

embrace the opportunity to engage, serve and support community groups and nonprofit organizations, and we will continue to do so.”

REASONING

w FAIR LENDER? An Oct. 6 lawsuit against Evansville, Ind.-based Old National Bank alleges discrimination against Black borrowers in home lending. Here are some principal allegations.

For Old National, entry into Chicago is the reason for the Just 37, or 1.6%, of mortgages made to First Midwest deal. For decades, Black homebuyers in Indianapolis MSA in Old National’s leaders were 2019 and 2020. asked about their interest in Chicago given the bank’s presence 17 of 21 bank branches in Indianapolis MSA in many other Midwestern cities. are in census tracts less than 10% Black. Former CEO Bob Jones repeatedly said he had no desire. In 2010, Old National had two branches “Somebody recently asked us, in census tracts with majority Black ‘How do you guys plan to be a populations; today, it has none. Midwest powerhouse with no Chicago presence?’ I thought it No mortgage lending operation in any of was a pretty interesting questhe four branches in plus-10% Black tion, right?” Ryan, Jones’ succesneighborhoods. sor, told analysts on June 1 when the First Midwest deal was anIn visits by two plaintiff-hired white and nounced. Black mortgage applicants, Blacks were Ryan will be CEO of the comtreated worse. bined banks, which will retain the Old National name, if and In Marion County (which includes Indiawhen the deal is completed. napolis), 4% of Old National mortgages Scudder will be executive chairwere to Blacks; all other banks were 13%. man for three years. Combined Source: Fair Housing Center of Central Indiana comthe two banks currently have $46 plaint in U.S. District Court in Indianapolis billion in assets, nearly the size of Rosemont-based Wintrust Fiacted on the deal, Ryan told annancial. The news on Old National’s alysts that he expects eventual lending record in Indianapolis approval. “Like many other bank raises questions for First Mid- holding companies, we’re in the west about the thoroughness queue,” he said. “We think we’ve of its due diligence before the answered any questions they deal was struck. Old National have for us. . . .They’re not waithasn’t disputed the numbers, ing on any new information from and they’re from public sources. us.” Another significant local bank Indianapolis is Old National’s third-largest market among nine deal in the works—Aurora-based significant Midwestern areas it Old Second’s $322 million pending buyout of Lombard-based serves. “Each bank conducted exten- West Suburban Bank—was ansive due diligence prior to en- nounced nearly two months aftering into an agreement,” Ryan ter First Midwest’s but already says in an emailed statement. has both OCC and Fed approv“We strongly and categorically al. It awaits a shareholder vote deny the claims brought up in on Nov. 30. Shareholders have the lawsuit and strongly believe approved the Old National-First they do not accurately reflect the Midwest tie-up. “This (lawsuit) is painting the values, character and practices Federal Reserve into a corner,” of Old National.” In comments to analysts on says Horacio Mendez, CEO of Oct. 19, Ryan dismissed Fair Chicago-based Woodstock InstiHousing Center of Central Indi- tute, a 48-year-old fair-lending ana as a group “with a history of organization. “I don’t believe filing lawsuits alleging lend- “THIS (LAWSUIT) IS PAINTING THE FEDERAL ing discrimiRESERVE INTO A CORNER. . . .I THINK THEY nation.” Mark SandHAVE TO DENY THIS APPLICATION.” er, First Midwest presi- Horacio Mendez, CEO, Woodstock Institute dent, will be president of Old National fol- this is a delay. I think they have lowing the deal. In an emailed to deny this application.” The two recent Chicago bankstatement, he says, “Other than the name on the door, nothing ing deals of a similar scale to is changing in Chicago. . . .First First Midwest’s both featured Midwest has a strong and active community lending deals. ToCIBC reached community development pro- ronto-based gram, as evidenced by our 25- agreement with Woodstock and plus year consecutive outstand- others on $3 billion in additioning CRA rating by the Federal al CRA-related lending and inReserve. We have a successful vestment and also committed to lending track record in Chicago, opening two branches in low- to providing more than $377 mil- moderate-income areas when it lion of CRA-qualified communi- bought Chicago-based Privatety development loans and more Bancorp in 2017. Van Tol led the negotiation than $800,000 in CRA grants to underserved communities in with Cincinnati-based Fifth 2020. This commitment will ex- Third on a similar $2 billion agreement when it purchased pand after the merger.” Asked why the Fed hadn’t yet Chicago’s MB Financial in 2019.

10/22/21 4:37 PM

CRAIN’S CHICAGO BUSINESS • OCTOBER 25, 2021 33

Walgreens CEO Brewer’s earnings growth agenda calls for rapid acceleration cies and home health patients ordering durable medical equipmix of pharmacy and retail oper- ment like scooters and lift chairs. In addition to bolstering pharations. “Roz’s tenure as CEO will be de- macy and retail sales, the goal is fined by WBA’s move deeper into to drive traffic to Walgreens’ new healthcare as it becomes a provid- Health Corners, which include er and care coordinator,” Evercore in-person and digital offerings ISI analyst Elizabeth Anderson like a caregiver app and support writes. “If well-executed, WBA has for those managing chronic cona number of new growth verticals ditions. “The pandemic definitely gave that alone will be additive to revenue growth/margins and could WBA a chance to step up like nevhave a positive feedback mecha- er before and we’ve delivered in so nism into the core pharmacy busi- many ways, but we’re absolutely just getting started in terms of how ness.” In the past few months, the na- we can mobilize to solve big comtion’s second-largest drugstore plex problems,” Brewer said at an chain—with $132.5 billion in investor conference this month. “I revenue—has acquired majority believe we have some tremendous stakes in three health care com- underlying momentum within panies: It spent $5.2 billion on this business and the pandemic primary care provider VillageMD, has further proven the importance with plans to put medical clinics of pharmacies in local communiin 1,000 of Walgreens’ 9,000 stores ties around the world.” But Deerfieldbased Walgreens’ “I BELIEVE WE HAVE SOME TREMENDOUS new businessUNDERLYING MOMENTUM WITHIN THIS es are subject to the same forces squeezing profit BUSINESS.” margins at comRoz Brewer, CEO, Walgreens Boots Alliance panies throughout the health care Walgreens’ by 2027; it spent $330 million on sector—including post-acute and home care provid- pharmacy, which accounts for er CareCentrix; and $970 million more than three-quarters of its on specialty pharmacy company U.S. sales. Primary care providers like Shields Health Solutions, which works with hospital systems on VillageMD face price pressures pharmacy operations, coordinat- from government health plans ing care for patients with complex and private insurers that are gaining more power as they consoliconditions. Brewer hopes Walgreens’ var- date. VillageMD will need high paious businesses will feed off each tient volumes to offset the margin other, with doctors sending pre- squeeze. “There are a lot of sectors in scriptions to Walgreens pharmaWALGREENS from Page 1

health care that have low profit margins but are very profitable because they can take advantage of large volumes,” says Dr. Joel Shalowitz, an adjunct professor at Northwestern University’s Feinberg School of Medicine. Patient volumes and hoped-for synergies will depend in part on health insurers, which influence what doctors their members see and where they buy their prescriptions. Insurers and industry middlemen called pharmacy benefit managers, or PBMs, often steer patients to a preferred pharmacy chain over others, potentially limiting Walgreens’ pool of potential customers.

COMPETITION

Walgreens’ archrival CVS Health owns Aetna, one of the largest health insurers, and CVS Caremark, one of the top PBMs. CVS is pursuing the same health care-focused strategy as Walgreens, with clinics in its stores and a slate of new health services. Whether Aetna will cover visits to clinics owned by its top competitor is an open question. Similarly, CVS Caremark may incentivize customers to get their prescriptions from CVS. Walgreens, for its part, has contracts with various insurers, and CFO James Kehoe touts its lack of an insurance company as an advantage. “We don’t have an insurance company directing what we’re going to do locally,” Kehoe told investors. “Our only interest is consumer health and that’s why we believe our approach is unique and differentiated in the market.”

w UNPRECEDENTED GROWTH GOALS Walgreens Boots Alliance CEO Roz Brewer’s target of 11% to 13% long-term growth in earnings per share is four times the company’s average pace over the past decade. ADJUSTED EARNINGS PER SHARE GROWTH 50% 40 30 11% to 13%

20 10 0 -10 -20 -30

-14.4% ‘12

‘13

‘14

‘15

‘16

‘17

‘18

Note: 2015 growth reflects the combination of Walgreens and Alliance Boots Source: Walgreens Boots Alliance

Kehoe said health care investments, including additional acquisitions, will drive growth, predicting “high-teens” annual revenue increases in the Walgreens Health segment after 2024. The company expects adjusted EPS growth of 11% to 13% after 2024, he said. That would be a dramatic turnaround after three straight years of declining adjusted EPS, including a 14.1% drop in fiscal 2021. Brewer is aiming for a growth rate closer to that of UnitedHealth Group, which owns the nation’s largest health insurer and a network of more than 50,000 doctors. Even CVS Health saw earnings per share grow an average of just 10.6% over the last 10 years, including a big boost in 2018 following its merger with health insurer Aetna. “I doubt they can achieve that kind of growth,” says professor

‘19

‘20

‘21 Post-‘24 goal

Erik Gordon of the University of Michigan’s Ross School of Business. “Walgreens isn’t the only company that does this.” At the same time she’s managing this transformation and stitching together health-focused investments, Brewer will be conducting a $1.3 billion cost-cutting campaign. Adding pressure is the fact that Walgreens isn’t the only retail pharmacy betting big on health care. CVS Health is launching HealthHubs to offer an expanded range of health care services. And Walmart is rolling out health centers, in addition to a partnership with Oak Street Health, a Chicago-based network of primary care centers. “All of these very large players are looking at vertical integration in a different way,” Shalowitz says, “but eventually may end up with the same components.”

Holiday parties return after COVID hiatus. Here’s how things have changed. PARTIES from Page 3 employees who have been isolated for almost two years. Companies see office parties as a way to build esprit de corps and instill loyalty among workers. That bonding is more important than ever this year amid a tight labor market and a job exodus so massive it has been dubbed the Great Resignation. This year’s holiday gatherings could be the first time many workers meet face to face after working remotely since early 2020. “The cultural capital of Jellyvision is co-workers who know each other, really enjoy each other and have each others’ back,” Lannert says. “Work is for sure happening. I’m not sure enough

season will recoup some of those losses. In many cases, companies are spending more to make sure the events happen and that they’re safe. Budgets are higher for larger venues or swankier offerings, and some are building in a financial cushion for last-minute cancellations.

LESSONS

M1 Finance learned that lesson when it hosted a summer party. People canceled at the last minute, and M1 lost some of its deposit, says Maria Selvaggio, vice president of people. Having an in-person option is worth the planning hiccups. The Chicago investment services company grew to 300 people from 40 during the pandemic, of whom live outside “PEOPLE ARE JUST WAITING TO SEE 30% the city. Some will fly in to meet co-workers. WHAT HAPPENS IN THE COLDER Those up-in-the-air RSVPs have party planMONTHS.” ners booking later, too. Erin Koss, regional sales manager, Roka Akor They’re watching COVID case counts and monijoy is happening, so we think it’s toring changes in public health important to get people together.” restrictions. Yet delay is risky, since they’re Restaurants, too, yearn for the annual tradition to return. Dev- competing for venues with a astated by the pandemic, the in- backlog of weddings and other dustry hopes a blowout holiday events still working to resched-

P033_CCB_20211025.indd 33

ule after 2020 cancellations. “People are just waiting to see what happens in the colder months,” says Erin Koss, regional sales manager at Japanese steakhouse Roka Akor, which has locations in River North, Oak Brook and Skokie. By early October, Roka usually would have booked several parties that reserved the whole restaurant for 300 people or more. Not this year. Koss declines to comment on exactly how many such parties are booked but says it’s much fewer than 2019. Small parties reign supreme. And Roka is offering an incentive to party planners: Book a November or December party by Oct. 31 and get a free omakase tasting for two, valued at $200. The story is similar at restaurants and event venues throughout the city. Before COVID-19, companies would book venues as early as August or September, particularly those planning large downtown gatherings. But in-person parties were all but prohibited last year as Chicago banned indoor dining and discouraged gatherings of more than six people. The restrictions ravaged restaurant finances, driving

many out of business. A strong holiday season would help survivors recover. The fourth quarter is typically restaurants’ most lucrative time. Holiday celebrations generate immediate revenue and serve as good marketing tools to drive new diners in during the first quarter, usually a slow period. Dates continue filling up as October progresses, easing some concerns. But restaurants and other venues face another challenge: staffing shortages. Workers left the industry in droves during the pandemic. Even if restaurants book a healthy slate of parties, there’s no guarantee they’ll have enough staff to handle the business.

CANCELLATIONS

Restaurants are taking steps to protect their fragile finances against last-minute cancellations. Land & Sea Dept., the group behind Parson’s, Longman & Eagle and other eateries, changed the booking policy for its restaurants and bars at the Chicago Athletic Association. Before, it required a 20% deposit that was nonrefundable if an event was canceled 14 days out, says Ginny Cook, director of events, programming and

partnerships. Now the deposit is 25%, nonrefundable 30 days out. “It can be pretty devastating when, repeatedly, you’ve done all this work and the revenue just vanishes,” Cook says. Flexibility is essential this year. Companies are open to compromise, like having parties at neighborhood restaurants instead of downtown. Some are staying hyperlocal. One-quarter of the holiday parties that restaurant and music venue group 16 on Center has booked are in-office. Nilesbased beverage maker Imbibe is having its holiday party at a nearby warehouse it owns. And law firm Willkie Farr & Gallagher will stick with a tried-and-true pandemic solution: the heated outdoor venue. The firm launched its Chicago office in March 2020, so skipping an in-person holiday gathering was not an option, says Midwest Chairman Craig Martin. “We’re very confident that we can do it responsibly and safely and in a fun way,” he says. “It’s not so often that you launch a new office of a law firm in Chicago and you do so during a global pandemic and you grow to more than 50 lawyers in 18 months. There’s a lot to celebrate for us.”

10/22/21 4:23 PM

34 OCTOBER 25, 2021 • CRAIN’S CHICAGO BUSINESS

Airbnb-style rentals at issue in New Buffalo, other area vacation destinations AIRBNB from Page 3 rentals are generally anything less than a month, but typically a few days to a week. Granicus has worked with at least 300 municipalities that struggled over short-term rentals, Binzer says, and in the past few years the states around Chicago—Wisconsin, Michigan and Indiana—have been a growing piece of the portfolio, as “a lot of places within driving distance of Chicago,” he says, have signed on for help putting a lid on short-term rentals. From a handful several years ago, it’s grown to about 38 governments in those three states, Binzer says, though he declines to say what towns are his clients. The

fee, a city administrator said the amount would cover the costs of administering the program, including any new hires it required. Operators said it was an excessive fee.

LAWSUIT

The Milwaukee-based Wisconsin Institute for Law & Liberty, or WILL, sued over the fee, which Luke Berg, WILL’s deputy counsel, says is 20 times what any other municipality charged. Also in the rules were a provision for warrantless searches and a requirement that each short-term rental owner install a lockbox that city personnel could access at any time. “They violated the Fourth Amendment,” which protects against unreason“WHEN (RENTAL) NUMBERS GO UP, THAT able search and seizure, Berg says. The MEANS THERE’S LESS OPPORTUNITY FOR rules were dropped and the fee cut to PEOPLE TO LIVE HERE.” $750. That’s not low Darwin Watson, city manager, New Buffalo, Mich. enough for WILL, spread of short-term rentals has which is now representing a trio also sparked crackdowns in places of short-term rental owners in a like Massachusetts’ Cape Cod and case challenging the fee. “Most Barcelona, Spain, which this sum- cities around the state charge $100 mer banned single-room, short- to $200 for a license,” Berg said. “Some charge more. We want Lake term rentals. Three years ago, when officials Geneva to provide evidence that in Lake Geneva approved a $2,000 can justify charging $750.” The licensing fee is $25 in Egg fee for an annual short-term rental

Harbor, Wis., 225 miles northwest of Lake Geneva. Next year it goes up to $50. In that Door County village, the owner of a short-term rental is required to either live within 75 miles of the property or have a registered manager within 25 miles. “We’re a small village. We don’t have a police force,” says Megan Swayer, village administrator in Egg Harbor, population 252. “We need to know that if there’s a problem, somebody can be on site in an hour or so.” Like all the towns in the Door County tourism zone, Egg Harbor charges a 5.5% room tax on shortterm rentals, the same as hotels and other accommodations. Thus the owners of short-term rentals can’t be said to be siphoning money out of the town without helping support it, a charge that has surfaced several times in the New Buffalo meetings. Putting the owners of shortterm rentals on an equal footing, with regards to taxation, is an echo of a problem that New Buffalo’s mayor, John Humphrey, has with short-term rentals. In New Buffalo now, a few dozen short-term rentals with permits are in areas of the town zoned exclusively for residential use. That’s essentially an illegal commercial use of a residential property, Humphrey told Crain’s in September. He’s

advancing zoning changes that would prohibit new permits in residential zones. In commercial zones, permitting would reopen with the end of a moratorium on new permits that is scheduled to expire in December. Humphrey declined to comment for this article. When Heather Gradowski was growing up in Northwest Indiana in the 1970s and 1980s, her family often spent time in New Buffalo and other towns in the crescent along the southeastern edge of Lake Michigan that is now called Harbor Country. New Buffalo, Gradowski says, “has always been this beautiful small town that became a tourist town in the summer.”

WIDESPREAD

A big difference now is that short-term rentals are seemingly everywhere in the town of 1,800 permanent residents 70 miles from downtown Chicago, and in the pandemic era, when people can work remotely and need getaways, it’s not only summertime when the population swells. Within New Buffalo’s 3 square miles are 148 short-term rentals, City Manager Darwin Watson said at a municipal meeting in October. He said it’s equal to 1 for every 20 lots. In a Chicago neighborhood of single-family homes,

that would be about one shortterm rental on every two blocks. Watson said 85 additional permit applications are waiting for the end of New Buffalo’s moratorium—first declared in May 2020 and recently extended into December 2021, while city officials consider adopting new ordinances that would limit the number of permits. If all were allowed, Watson told the meeting, 1 in every 13 houses in New Buffalo would have a short-term rental permit. “When those numbers go up, that means there’s less opportunity for people to live here,” Watson said at the meeting. Gradowski, now a Coldwell Banker real estate agent, and her husband, Chad, own a short-term rental property in New Buffalo, about 10 miles south of their home in Saywer, Mich. “I do have skin in the game,” Gradowski says. She says the town needs “common sense regulations that keep everyone safe,” including enforceable limits on occupancy numbers, parking and noise. At the same time, Gradowski says, “I feel like there’s a message being put out there that if we don’t get this under control the entire city of New Buffalo will turn into short-term rentals. I think that’s not very likely. There’s a lot of hyperbole out there.”

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CRAIN’S CHICAGO BUSINESS • OCTOBER 25, 2021 35

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CLASSIFIED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312-659-0076 REPRINTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212-210-0707 editor@chicagobusiness.com

JENNIFER AMES PHOTOS

sustainably built mansion on the Gold Coast, now quietly for sale at $10.2 million, draws its heating and cooling from inside the earth, collects rainwater from the roof to fill its pond and mitigates hot days by automatically adjusting its blinds. Built in 2010 on Scott Street, the house was the first new-construction single-family home in Illinois to be certified LEED Gold by the U.S. Green Building Council, according to Jenny Ames, the Engel & Volkers agent representing it. The LEED program emphasizes reduced energy use and environmental impact and toxins. The house, five bedrooms and contemporary in style except for a steampunk game room, is not listed publicly. Ames provided Crain’s readers a peek. “It was purposely designed for healthy living,” Ames said in an email. “Anyone who cares about living in a healthy environment (or in a house that is good for our environment) will be pleased.” The house uses a geothermal system that draws on the steady temperatures underground for heat in winter and cooling in summer. It has a green roof, interior staircases that double as light wells and insulation made from low-toxicity soy, and it was painted and finished with products low in volatile organic compounds, or VOCs. Rainwater that falls on the house stays on-site, held in a cistern, from which it’s used to water the yard, planters on the terrace and the green roof, and to keep the courtyard pond full. Ames said there’s “true green space,” an actual ground-level backyard, which isn’t common in the tightly packed Gold Coast, where decks and terraces are the norm. Inside the house, “the natural light is amazing,” Ames said. Through Ames, the sellers of the home declined to comment. In 2007 they bought the site, about 1.9 times the size of Chicago’s typical 25-by-125-foot lot, using a legal trust that conceals their names. Public records do not show the amount they spent to demolish the old and build this new house on the site. The green features could give the property an advantage in the Gold Coast market, where several more traditionally styled mansions have lingered unsold for years. While buyers have paid $10 million or more for downtown penthouses or mansions in Lincoln Park and on the North Shore in the past few years, the current era’s highest sale price for a Gold Coast home is a $7.5 million purchase in 2017. The same year, a residential mansion on Dearborn Street went for $12 million, but the purchaser was the Latin School of Chicago, not homeowners.

Vol. 44, No. 43 – Crain’s Chicago Business (ISSN 0149-6956) is published weekly, except for the last week in December, at 150 N. Michigan Ave., Chicago, IL 60601-3806. $3.50 a copy, $169 a year. Outside the United States, add $50 a year for surface mail. Periodicals postage paid at Chicago, Ill. Postmaster: Send address changes to Crain’s Chicago Business, PO Box 433282, Palm Coast, FL 32143-9688. Four weeks’ notice required for change of address. © Entire contents copyright 2021 by Crain Communications Inc. All rights reserved.

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