Crain's Chicago Business

TECH TAKEAWAY:

THE SHOT TROOPS: Inside the Illinois National Guard’s inoculation mission. PAGE 8

Meet the CEO of software maker Relativity.

PAGE 6

CHICAGOBUSINESS.COM | MARCH 1, 2021 | $3.50

DINING POST-PANDEMIC Some of your favorite spots haven’t made it. Others have changed chefs, menus and decor. BY ALLY MAROTTI

JOHN R. BOEHM

IF ALL GOES WELL, Chicago restaurants could soon increase capacity to 50 percent after almost three months without indoor dining.

But as vaccines ramp up, diners making their way back downtown will find that not all of the business crowd’s favorites have survived, and that the survivors bear scars.

Menus have been changed, interiors revamped, furloughed staff have decamped to other locales. Tables will Nicole Flevaris, owner of Kinzie Chophouse

See RESTAURANTS on Page 21

Discover Card gets squeezed on 2 fronts While consumers float less debt from month to month, new competitors cut in on a lucrative line of business

A GALA SEASON LIKE NO OTHER The pandemic moved 2020’s fundraising season from big ballrooms to small screens. PAGE 12

BY STEVE DANIELS Discover Financial Services created the card that pays you back, but the credit card lender would like more of its customers to stop returning the favor so much.

For the first time in years, credit card loan balances are dropping at Riverwoods-based Discover. Unlike some larger card rivals such as JPMorgan Chase and Citigroup, which favor customers who pay their balances off each month, Dis-

cover relies heavily on consumer borrowing for its revenue and profit growth.

Early fears that the pandemic would result in mass borrower defaults haven’t come to pass.

It’s a far more preferable problem to have, but the issue for Discover now is that cardholders are paying down their debt more rapidly than the company expected.

Discover also is confronting a new product that is fast gaining See DISCOVER on Page 22

NEWSPAPER l VOL. 44, NO. 9 l COPYRIGHT 2021 CRAIN COMMUNICATIONS INC. l ALL RIGHTS RESERVED

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JOE CAHILL

REAL ESTATE

How Pritzker and Welch can gain public confidence. PAGE 4

This fast-selling midcentury has an indoor pool.

PAGE 23

2/26/21 4:20 PM

2 MARCH 1, 2021 • CRAIN’S CHICAGO BUSINESS

ON POLITICS

When ‘closing corporate loopholes’ goes wrong

I

turer who had been eyeing Illinois for an expansion.

Now, “I think they’ll end up in southern Wisconsin.”

The tax hike only adds to the “ticking (fiscal) bomb” that is Illinois’ $144 billion in unfunded pension liability here, says another relocation consultant, Boyd Co.’s Jack Boyd. Combined, his clients, including some now in Illinois, increasingly are looking at places such as Texas, he says.

In fairness to Pritzker, Illinois is not the only state to be moving its tax structure in his proposed direction, at least in part. For instance, according to the Tax Foundation, a Washington research group that’s fairly conservative but also frequently cited in economic circles, only 16 states grant the full accelerated depreciation that’s now in federal tax code. Pritzker’s proposed change there is worth $214 million a year.

On the other hand, the largest change the governor wants—capping deductions of corporate losses at $100,000 a year for three years, worth $314 million a year—would absolutely make Illinois an outlier relative to other states, says Taxpayers Federation of Illinois President Carol Portman. Such unis what WHAT’S ON THE TABLE NOW JUST predictability really irks business, she says. Beyond ISN’T VERY SMART. that, according to the Tax Foundation, Pritzker’s population and jobs have changes overall would reduce begun to drop not only stateIllinois’ business-tax-climate wide but in the metropolitan rating from a weak 36th of the area, and at a time when the 50 states to an even sadder state refuses to confront its 39th. ever-rising pension debt. Not What in some ways is most to mention Chicago’s murder concerning about all of this is and carjacking wave. Or what the aura of payback Pritzker Cook County Assessor Fritz and his aides seem to have Kaegi is up to. embraced. The message Outside experts I talked to seems to be: Hey, business, pretty much said the same you beat my graduated tax thing. Pritzker’s proposal, amendment, so now you have taken in the wake of the defeat to pay. of his vaunted graduated Pritkzer ought to know income-tax amendment in better. The graduated tax November, is just one more would have been paid strictly straw on the back of an alby individuals. His proposed ready staggering camel. loophole closings—includ“My very strong recoming a couple he signed off on mendation to the governor himself just a couple of years is table these (tax) changes,” ago—will affect not the rich says Dennis Donovan, the but where companies add and “D” in WDG Consulting, a move jobs.

New Jersey-based corporate Perhaps this is just a location firm. “Illinois has bargaining position, debeen suffering from a negative signed to force his foes to the business climate for years. . . bargaining table. Perhaps the .I think this will make some governor will end his snit and companies think twice about figure out a better way. I hope moving there.” In fact, one so. What’s on the table now of them is his client, says Donjust isn’t very smart. ovan, referring to a manufacheard a pretty hot rumor the other day. On checking, it proved to be wrong, or at least premature. But it nonetheless contained a gold nugget of truth at its core.

The rumor was that Chicago mortgage mogul Victor Ciardelli, concerned about soaring taxes and other matters, had quietly moved to Miami and soon will take with him the headquarters of his company, Guaranteed Rate.

Ciardelli’s response when I got him on the phone: No. Although he has been spending time in Florida lately, neither he nor the company has moved there and doing so would involve a lot of trouble.

But, he added, if Chicago’s crime rate keeps soaring and people keep fleeing the city, then, “the mismanagement of government is a real problem.”

I’d call that a warning.

And that’s the context of that big $932 million tax hike on business Gov. J.B. Pritzker is pushing as part of his proposed 2022 budget.

Pritzker calls the proposal “closing corporate loopholes.”

Arguably that’s true, at least in the sense that any tax break I don’t receive must be someone else’s undeserved loophole. But the proposal comes at the very time when

P002_CCB_20210301.indd 2

South Side Walgreens aims to boost vaccine access for locals A location in Bronzeville turned off its online scheduler to make sure nearby customers are given priority

BY ALLY MAROTTI Melanie Owens, a pharmacy manager at a Walgreens in Bronzeville, was a little uncertain about getting the vaccine.

It was January and the rollout was new. She says the development process felt rushed, and she didn’t trust information coming from the Trump administration. But then Owens started picking up extra shifts at vaccine clinics.

Walgreens was one of the pharmacy partners chosen by the federal government to vaccinate workers and residents at long-term care facilities. Owens didn’t even make it through her first shift before the residents, excited about building immunity to COVID-19, changed her mind.

“I think I vaccinated maybe 20 people before I was like, ‘OK, maybe I should give this a chance,’ ” she says.

Owens was vaccinated that day.

She says that as someone administering the vaccines, she felt a responsibility to protect herself and the patients. Seeing her opt in also swayed another Black woman working as an administrator at the clinic to get her vaccine, too, Owens says.

At Owens’ Walgreens location in Bronzeville, she hasn’t experienced many customers that are hesitant about the vaccine quite yet. So far, it’s just people that are eager to get it, wondering when they can schedule an appointment.

State and city officials are also concentrating on an equitable vaccine rollout. But so far, state data shows Black and Brown Illinoisans

are far less likely than whites to have been vaccinated, despite the fact that COVID-19 has disproportionately affected people of color.

The Illinois Department of Public Health reported last week that of the more than 2.5 million doses administered in the state, 68.7 percent have gone to white residents— who account for just 61 percent of the state’s population. Meanwhile, 7.9 percent of the doses have gone to Black residents and 8.3 percent have gone to Hispanic residents, who account for 14.6 percent and 17.5 percent of the population, respectively.

‘SLOTS WERE FILLING UP’

Retail pharmacies, including Walgreens, have been vocal about their ability to help with a more equitable rollout. Pharmacies are embedded in communities and often act as the main health care access point for people. They have existing relationships with community members, which could make it easier to get people in for a vaccine.

The Walgreens Owens’ works at has leveraged its relationships with customers in its vaccination efforts.

When it started scheduling COVID vaccines last month, it closed the online scheduling portal.

They “had us make our own schedule based on our normal customer base,” Owens says. “Slots were filling up with people that weren’t in the community, (who were) just trying to get the shots anywhere.”

The pharmacy was one of 450 Illinois Walgreens that began administering vaccines over Presidents Day weekend, as part of the

BLOOMBERG

GREG HINZ

Federal Retail Pharmacy Program.

The program, which the Biden administration announced in February, sends doses directly to its pharmacy partners. The allotment is separate from the doses the state gets from the federal government. It is also separate from the doses set aside for long-term care facilities.

Walgreens said when the program launched that the participating pharmacies would be concentrated in areas hit hardest by the pandemic, to help with a more equitable rollout. In Chicago, they were located largely in the South and West sides.

Walgreens is preparing to start administration of second doses through that program, says spokeswoman Erin Loverher. The pharmacy has been receiving about 480,000 vaccines a week through the program to distribute nationwide. About 39,300 were coming to Illinois each week.

Those numbers are expected to rise as soon as the week of March 8, as second doses become available, Loverher says. She did not have exact numbers.

The Biden administration recently announced that it would increase doses flowing through the Federal Retail Pharmacy Program to 2 million from 1 million.

Stephanie Goldberg contributed.

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2/26/21 3:30 PM

CRAIN’S CHICAGO BUSINESS • MARCH 1, 2021 3

Brown vows big rebound at Motorola

Tony Lindsay is the principal of North Wells Capital, which just inked a deal with a co-working provider.

CEO sees strong growth despite its customers’ uncertain finances

BY JOHN PLETZ

TODD WINTERS

Rising vacancy, sagging office demand drive a new embrace of shared space BY DANNY ECKER

HOW LANDLORDS LEARNED TO STOP WORRYING

AND LOVE CO-WORKING TENANTS LIKE MANY OFFICE LANDLORDS, Tony Lindsay has had doubts about the co-working craze.

Watching as WeWork and its shared office provider peers signed a barrage of big, long-term leases and subleased that space to companies that could rent it by the month, the principal of Chicago-based developer North Wells Capital sat on the sidelines—even losing out on some tenants that chose co-working over his firm’s River North properties.

“We were saying the other shoe is going to drop at some point,” if an economic downturn sud-

denly stripped co-working firms of their revenue, “and I don’t want to be stuck holding the bag,” Lindsay says.

Now, nearly a year into a COVID-19 crisis that has devastated some of the shared office sector’s biggest players and stung countless landlords, North Wells just inked one of its first new office tenants since the pandemic began in Chicago startup Workbox—a co-working provider.

Not that his opinion on co-working companies

“THE REALITY IS WE IDENTIFIED HAVING CO-WORKING IN OUR PORTFOLIO AS BEING REALLY ADVANTAGEOUS.”

See CO-WORKING on Page 19

Tony Lindsay, principal, North Wells Capital

Motorola Solutions CEO Greg Brown is promising a quick comeback from a rough year.

He predicts the supplier of telecommunications systems and equipment will post 7 to 8 percent revenue growth in 2021. That would be a sharp turnaround from last year’s 6 percent drop to $7.4 billion.

“I feel pretty good about the demand signals we see overall at this point for 2021,” Brown told analysts on Motorola’s fourth-quarter earnings call Feb. 4.

Still, Brown’s bold forecast comes amid continued uncertainty in the market for two-way radios and other Motorola offerings. The pandemic is weighing on government budgets, and some of the biggest private users of the company’s radios are struggling. To hit the target, Motorola needs to convince local public-safety agencies to spend scarce revenues on traditional radio equipment, and push for quick adoption of new video equipment and software.

Riding on the outcome is Motorola’s lagging stock price. Motorola shares rose 82 percent in the two years before the pandemic, easily outrunning the 25 percent increase for the S&P 500. But the stock has recovered more slowly than most from the COVID collapse last March, rising 47 percent while the S&P gained 71 percent.

At $180.26 early on Feb. 26, Motorola shares were down 1 percent from a pre-COVID peak of $182.97 See MOTOROLA on Page 20

That retail apocalypse?

It’s not on Oak Street.

‘Demand for space is less than normal, but it’s not horrific’ The coronavirus pandemic has turned the world of brickand-mortar retailing upside down, but it hasn’t shaken one investor’s faith in Chicago’s ritziest shopping strip: Oak Street.

The owner of the former Barneys store at Oak and Rush streets is investing in a major

P003_CCB_20210301.indd 3

makeover of the six-story building, which has sat largely empty since 2019, after the retailer filed for bankruptcy protection. The closing of Barneys, an anchor of the Gold Coast retail market since 1992, represented another step in the slow decline of physical retailing amid the growth of e-commerce.

Then came the pandemic, ri-

ots and looting of 2020, devastating blows to retailers all over the city, but especially on North Michigan Avenue. Though Oak Street didn’t dodge the storm, it has pulled through. The strip’s retail vacancy rate is actually lower than it was in 2019, according to Chicago brokerage See OAK STREET on Page 19

RENDERING COURTESY OF CBRE

BY ALBY GALLUN

The revamp of the former Barneys store in the Gold Coast will chop up the space for multiple tenants.

2/26/21 4:19 PM

4 MARCH 1, 2021 • CRAIN’S CHICAGO BUSINESS

JOE CAHILL

CHICAGO COMES BACK

ON BUSINESS

earn trust by showing a commitment to the common good.

Next, Pritzker, Welch and their party should go after the pension deficit itself. Before seeking more revenue from taxpayers, political leaders should do everything in their power to shrink pension obligations. That means attacking the driving force behind rising pension debt: compounded annual cost-of-living increases for pensioners.

Eliminating cost-of-living raises would require a constitutional amendment to delete a clause barring any diminution in pension benefits. Pritzker and legislative leaders declined to propose such an amendment when they asked voters to approve an amendment eliminating the state constitution’s provision that precludes graduated income tax rates. That omission sent a clear message about the Democrats’ priorities, and the likelihood that money from a graduated income tax would be spent responsibly.

If Pritzker and Welch are serious about winning trust, they’ll allow Illinoisans to vote on a standalone constitutional amendment repealing the so-called pension protection clause. To A MERE PROMISE TO ADDRESS build public support and PENSION FUNDING ISN’T ENOUGH. treat retirees fairly, such an amendment could be narrowly drawn to permit only repension obligations. ductions in future pension increasI’m glad a top state official reces under the COLA mechanism. ognizes the connection between Sure, public employee unions out-of-control pension debt and mistrust of government. But Welch are likely to fight any change in pensions. But it’s worth trying to should understand that a mere win their support. It can be done; promise to address pension fundArizona unions backed a narrow ing isn’t nearly enough to conamendment to a pension protecvince voters they can trust Illinois tion clause in that state’s constipoliticians with billions more tax tution. If unions won’t cooperate, dollars.

Pritzker and Welch should forge In Illinois, we know how much ahead anyway, as Rhode Island politicians’ promises are worth. officials—led by Democrat Gina Only their actions count. And the Raimondo—did in tackling a simiactions of leading Illinois Demolar pension crisis. crats continue to inspire mistrust.

Only after passing such an For example, Welch’s chamamendment and reducing the ber and the state Senate recently overall pension obligation can passed legislation increasing Chistate officials justifiably ask cago firefighters’ pensions. There taxpayers for money to close the was no reason to saddle taxpayers remaining gap. Would a graduated with an additional $850 million income tax be the right way to raise in pension costs, other than the the necessary revenue? Maybe. political imperatives of a caucus I’m not opposed to it on principle. beholden to public employee The vast majority of states with an unions. income tax charge higher rates on The firefighter pension bill now higher incomes. And the necessity awaits Gov. J.B. Pritzker’s signaof a constitutional amendment ture. That’s an opportunity for the would give voters the final say.

Democrat who engineered last Regardless of the revenue year’s failed push for a graduated income tax to start rebuilding trust source, lawmakers should raise only enough to fully fund penwith the electorate. sions on an actuarial basis. All Vetoing the firefighters’ pension proceeds should go to pensions, hike would be a small but importand the new tax should expire ant first step toward fiscal integrity when they’re fully funded. These in Springfield. It also would signal restrictions should be spelled out Pritzker’s willingness to put the in legislation or any necessary coninterests of the state as a whole stitutional amendment. above the demands of a powerful That’s how you win voters’ trust. interest group. Elected officials There was one encouraging note in Illinois House Speaker Chris Welch’s otherwise spit-take-inducing proposal to reload the graduated income tax proposal voters rejected last fall.

In floating that idea Feb. 24, Welch acknowledged the need to regain the trust of Illinoisans who made clear their unwillingness to hand more cash to a political class that steered the state into a financial abyss. To do so, he suggested— in vague terms—linking a graduated income tax to “pensions.” He was referring to the $144 billion in unfunded state employee pension obligations that Illinois politicians allowed to accumulate over the past few decades.

Welch appears to realize that government won’t win voters’ trust without addressing a pension funding crisis that’s devouring state finances. Legally required contributions to employee pension funds claimed 21 percent of the Illinois budget this year and will take even more in years to come. Yet the funding gap continues to grow because the state isn’t contributing the amount actuarially necessary to cover future

P004_CCB_20210301.indd 4

Seeking connection in this disconnected world?

BLOOMBERG

How Pritzker, Welch can regain trust

There’s an app for that, of course. But do you need more social media? Here are some pros and cons of other emerging platforms—and why trying new things matters.

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

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

Check out previous installments at ChicagoBusiness.com/comesback.

EMILY DRAKE: Come back, return, hybrid or even liquid: We’re using these words a lot, and sometimes I wonder if we should be practicing phrases like “clean slate,” “new beginnings” or “anything goes” as we get deeper into 2021. We say this a lot, and I know it’s hard to incorporate a new decision-making calculus every day, but I really don’t think we’re returning to anything—and I think that’s a good thing. It used to be that leadership means you capture a room.

But there’s no physical space to capture anymore. So, instead of looking at work as an amorphous “team,” we have an opportunity instead to look at each individual in front of us and honor their specific needs and desires.

spectful conversations. There are other innovations, too, like Plain Sight, a startup app out of Detroit that’s blending virtual with in-person communities.

TODD CONNOR: Well, there will be a return to in-person living, but you’re right: There’s a new calculus and a new liquidity to work.

Tim Leberecht at “House of Beautiful Business” said it best: “The pandemic made the ‘multiverse workplace’ a reality.”

You and I have been talking about the challenges of social media—and the latest entrant to the club, Clubhouse, the new invite-only, drop-in audio chat app on iPhone platforms—for this reason for a few weeks now. I know you’re skeptical, but I’m into it.

What bothers me with other social media—the permanent record, the anonymized sharing, the ability to be “lazy” and co-opt another person’s message—Clubhouse seems to have solved for that with more intimate, nuanced and re-

TC: Totally. I went for it full bore, and here’s why I think it matters: The meetings we’re having are conducted largely on video. The ability to listen in on an interesting conversation amongst experts or people from unrelated fields that does not feel formulaic seems so rare. So the audio boom that’s happening around Clubhouse— and soon to be Spaces on Twitter, and a competitor from Facebook, too—appeals when we’re in such a state of fatigue.

ED: I am skeptical, and I hear you.

I noticed I had major FOMO when others were joining, asking me if I joined (and I ultimately did), and not wanting to be the last person to adopt the next biggest thing.

I’m only human. But, for me, the skepticism is really born from a place of fatigue. Another platform that has no in-person component, when that’s what I want more than anything, and asking myself, “Will it satisfy an itch I didn’t know I had?” or “Will it create a new itch that I have to scratch?”

ED: I think about the leaders we work with, and I think about what they might ask: Isn’t it annoying?

To have to constantly adapt? To incorporate new platforms and ways of thinking? After all, we were just getting good at Twitter.

That’s one way to look at it—be-

grudge it, even—but here’s the thing: Contempt prior to investigation has no place in leadership.

It never did. If you investigate Clubhouse and opt out, cool. You tried it, and it didn’t land or fuel a focus of yours or your organization. But no one can hold disdain if they haven’t given it a whirl.

TC: Audio can be a great equalizer, too. What’s most interesting to observe is folks navigating how to host and moderate a respectful conversation, which is important skill-building that collectively we have let atrophy. We’ve often said that the harder and more powerful position is not to be the featured speaker for the fireside chat but to be the moderator of the conversation. Leaders at their best are often moderators, or facilitators, more than just deciders.

Clubhouse, to the extent it’s creating that capacity through audio discussion rooms, is building that capacity in people.

ED: The sentiment and strategy I appreciate the most is innovation—trying something, seeing what sticks and course-correcting as we go. I’m amazed regularly how leaders are doing this with increased resilience and tolerance for what 2021 has dealt already. All the while, there is no replacement for in-person engagement. The final word is, we will be in-person again, but everyone may not be in the room that would be otherwise.

TC: To be clear, I want to get back in-person. Our humanity, if not our company revenue targets, demand it. While I like to be an early adopter and will ride this Clubhouse train for a minute, I’m also comfortable being an early abandoner. That’s also part of being a leader: Knowing when the ideas or organizations to which you’ve previously affixed yourself no longer reflect the values of who you are and what you believe.

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6 MARCH 1, 2021 • CRAIN’S CHICAGO BUSINESS

THE TECH TAKEAWAY

Gamson, 46, is CEO of Relativity, a maker of legal and compliance software and one of the city’s largest tech employers.

He also is on the board of P33, a Chicago organization aimed at making the city a tech magnet. He and his wife live in the northern suburbs with their three children. By Laura Bianchi

> How did you prepare for a career in tech?

I was an art and comparative religions major.

An unexpected talent?

When I was living in Spain my junior year in college, some street performers taught me how to juggle for money. Since then I always have juggling balls within arm’s reach. I bought 100 for our employees at Relativity when I first joined as CEO.

>

How did you become successful?

Because the world is unfair.

As a white man who grew up in the suburbs with a great school system and parents who loved each other, I was raised in privilege. I had no experience for the jobs I got, but people reacted to what they saw in me and said, “I bet he can do it,” versus, “I need proof that she can do it, or that a person of color can do it.”

>

>

What is your current favorite piece of tech?

An electric hydrofoil surfboard called a Fliteboard. I took it out on the lake last summer. When it’s going fast enough, the hydrofoil lifts it out of the water. Crazy.

Why? Juggling is a great metaphor for something you feel is beyond your ability to do. It can be broken down into steps, and with a little help from someone who’s been there, it can be acquired as a new skill.

I have taught hundreds of people to juggle.

A piece of tech you dream about?

I can’t wait until we can project our memories on the wall for someone to experience as we recall them. It’s doable in our lifetime.

Most embarrassing career moment?

I was in Beijing, emailing back and forth from my phone, trying to close a really important candidate for a job. I tried to forward the candidate’s salary request to the head of HR but forwarded their current salary and compensation history to the whole company. Not my best work.

>

<

>

Ha! Then what?

A close friend was in computer science. The dotcom boom was happening when I graduated from college, and there were an extraordinary number of jobs available in tech. I also heard that tech was founded on meritocracy. Just work hard, and there was no limit to what you could achieve.

>

You applied for jobs without the right experience?

My parents believed in promoting high self-esteem and independent decision-making in their children. That worked. I grew up feeling I could do anything.

>

Mike Gamson

BMO Harris may be Toronto’s star, but it takes brunt of job cuts

BY STEVE DANIELS The U.S. arm of Canada’s BMO Financial Group, led by Chicago-based BMO Harris Bank, has shattered the record for how much it’s contributed to its parent’s profits.

U.S. operations accounted for 43 percent of Toronto-based BMO Financial’s adjusted earnings in its fiscal first quarter, which ended Jan. 31. The bank reported earnings on Feb. 23.

In fiscal 2020, the U.S. contributed 31 percent of adjusted earnings for the Canadian parent.

But, while BMO Harris and other U.S. businesses are providing virtually all the momentum behind the Canadian bank’s current success, they also are paying a higher price than their Canadian sister units in terms of cost-cutting and lost jobs.

BMO in its fiscal first quarter employed more than 1,000 fewer workers than it did a year earlier, according to investor disclosures. That amounts to nearly an 8 percent reduction in force, leaving BMO with 12,355 south

P006_CCB_20210301.indd 6

of the Canadian border.

Meanwhile, in Canada, where BMO employs more than double the number it does in the U.S., the bank reduced its workforce by a little over 4 percent.

In late 2019, when BMO Financial announced it would reduce jobs and cut costs in order to become more efficient, there was no indication the cuts would be borne more heavily in the U.S. The Chicago area has shouldered more than half the U.S. job losses. BMO employs about 6,500 locally, down about 550 from this time last year, according to a spokesman. That’s an 8 percent reduction.

A TOP PLAYER

BMO Harris is Chicago’s second-largest bank by deposits and one of its top commercial lenders.

The bank also is Wisconsin’s second-largest bank by deposits and has a retail presence in eight other states.

The cost-cutting has been hard for BMO’s Chicago workforce, but it’s been good for the Canadian parent’s bottom line.

MANUEL MARTINEZ

The U.S. accounted for a record-breaking 43 percent of fiscal first-quarter earnings for Canada’s BMO Financial Group. But partly at the price of more than 1,000 jobs.

BMO Harris Bank, led by CEO David Casper, and other U.S. businesses are providing virtually all of the momentum for their Canadian parent.

U.S. personal and commercial banking, which corresponds roughly with BMO Harris’ operations, generated $582 million in net income, up 66 percent from the same quarter the year before, when the bank’s net income was $351 million. Revenue was up only 7 percent year over year to $1.1 billion.

The much higher profitability was due to a 7 percent decline in expenses and a $138 million difference in what BMO reserved for future loan losses.

The 31 percent the U.S. contrib-

uted to BMO Financial’s profits last year was above historical averages. It wasn’t too many years ago that the U.S. would have been fortunate to provide 20 percent.

BMO Financial CEO Darryl White sees the U.S. as the bank’s growth engine for the foreseeable future.

“We’re looking at an increase in our view in the U.S., given the pace of the vaccine rollout as well as the higher probability of the stimulus package going through at this point,” White told analysts on the company’s Feb. 23 earnings call.

So naturally we have a very positive view on the U.S. We’re (projecting) 6 percent GDP growth for 2021.”

“In the U.S., it’s not really a demand issue, it’s a supply issue,” BMO Harris CEO David Casper told analysts. “We have a lot of our sectors that cannot get the inventory they need. . . .So as supplies open up, as inventories open up, it will just get better and better.”

Analysts didn’t ask about the disparate cost-cutting between the two countries, and a spokesman declines to comment.

2/26/21 3:32 PM

CRAIN’S CHICAGO BUSINESS • MARCH 1, 2021 7

COVID closed your building’s gym. Should you get a rent break?

Lawsuit alleges a luxury high-rise violated the city’s landlordtenant ordinance after shutting down many of its amenities of Peak Properties, which manages about 8,000 apartments in For an average rent of nearly Chicago. “Every lawyer in the city $2,700 per month, residents at the will pick up on that. There was not Streeter, a 49-story luxury high- a single landlord that didn’t shut rise in Streeterville, get to use the down amenities during the panbuilding’s fitness center, hot tubs, demic.”

Village Green closed most of steam rooms and complimentary Starbucks coffee bar. Should they the common areas at its Chicago get a discount if those amenities properties, including the Streetare shut down due to a pandemic? er, and suspended all resident Michelle Weisberg thinks so. events and classes on March 13, Weisberg, a tenant in the 481-unit when Gov. J.B. Pritzker issued his tower at 345 E. Ohio St., has sued, stay-home order, according to the arguing exactly that. The suit con- lawsuit. Some, but not all, of the tends that the owner and manager common areas and amenities at of the Streeter violated the city’s Village Green’s properties here landlord-tenant ordinance by not reopened at the end of June, and reducing her rent to account for some remain closed, the comtheir decision to close most of its plaint says.

Under the city’s landlord-tenant common-area amenities as the coronavirus spread last March. ordinance, “each Village Green Weisberg says she’s entitled to a tenant impacted by the closure of refund, but her landlords won’t common area amenities in each Village Green building located in give her one.

Believing she’s not the only Chicago, including The Streeter, tenant who feels that way, Weis- are entitled to a refund of the porberg is asking a judge to certify her tion of the rent for these closures case as a class-action complaint, due to the casualty,” the suit says.

The complaint alleges that Vilpotentially adding hundreds, if not thousands, of residents to the lage Green and the pension plan suit. That could put the building’s also ran afoul of the Illinois Conmanager on the hook for a large sumer Fraud & Deceptive Practices sum of money. The property man- Act because they failed to disclose ager, an affiliate of Southfield, to tenants that they had violated Mich.-based Village Green, man- the landlord-tenant ordinance.

Many apartment landlords have ages eight properties in Chicago, and their tenants should be in- tried to respond to residents uncluded in the suit, according to the happy over cutbacks in amenities. complaint, filed Feb. 16 in Cook Zucker estimates that about 100 tenants at Peak-managed buildCounty Circuit Court.

It’s a question many apartment ings have raised the issue with the dwellers have asked during the firm. Zucker placated a few with pandemic. People pay top dollar rent credits, but he offered the vast to live in some of the city’s most majority something else, like free expensive high-rises for the lo- online fitness or cooking classes.

“We would handle it on a casecation, the views and amenities that have only become more ex- by-case basis, and many times travagant over the past decade or we’d have to get very creative,” he so. A swimming pool and fitness says. “The first thing you want to center don’t cut it anymore: The do is figure out what’s getting their newest multifamily towers include goat.”

Peak also tried to foster gooddemonstration kitchens, game will with tenants by paying to bring iceA TENANT IS ASKING A JUDGE TO cream or coffee trucks its properties. The CERTIFY HER CASE AS A CLASS ACTION. to owner of some Peak buildings sprung for rooms, wine-tasting events, even gift certificates to local restaurants. One of Peak’s most popuboxing rings.

Those extras are worth some- lar COVID amenities was a truck thing, but how much? Weisberg’s staffed by bike mechanics who suit doesn’t state how much mon- would tune up tenants’ bikes oney she is seeking, and her attor- site, Zucker says. “People really neys did not respond to requests appreciated that,” he says.

Many big buildings are still refor comment. A Village Green executive declines to comment, as stricting tenant access to amenidoes a spokesman for the owner ties. Peak, for instance, manages of the Streeter, the State Teachers a reservation system to limit the number of people in fitness cenRetirement System of Ohio.

The case may go nowhere, but ters at its properties, Zucker says.

The lawsuit against Village Green if it gains some traction, copycat alleges that its decision to reduce suits could follow.

“There will be major implica- amenities has paid off financialtions if it goes somewhere,” says ly by reducing staffing and other Michael Zucker, managing partner costs it must absorb when they are

BY ALBY GALLUN

P007_CCB_20210301.indd 7

The fitness center at the Streeter. open. But the pandemic has increased other costs for landlords.

Zucker estimates that Peak’s cleaning expenses are about 10 percent higher than they were pre-COVID. Many downtown landlords have also suffered from big drops in occupancy and rent since last spring, though the market may be turning a corner. The Streeter’s occupancy rate has fallen to 87 percent, down from 91.6 percent a year ago, according to CoStar Group, a real estate data provider. Net rents at the building fell about 12 percent from the first quarter to the third quarter last year but are down about 5 percent now, according to CoStar.

Royal Bank offers commercial loans with attractive rates and terms.

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8 MARCH 1, 2021 • CRAIN’S CHICAGO BUSINESS

National Guard deploys the shot troops A LONG, STRANGE YEAR for the Illinois National Guard is culminating in one of its longest and strangest domestic deployments: injecting vaccines into hundreds of thousands of arms.

“There is no comparison” to this year, says Maj. Gen. Richard Neely, the adjutant general of the state of Illinois, director of the Illinois Department of Military Affairs and commander of both the Illinois Army and Air National Guard. In addition to the current vaccination campaign, the guard helped stand up large-scale testing sites, support mortuary operations in Cook County and deliver isolation pods for use at the McCormick Place alternate care facility. In between, guard members were deployed on flood and wildfire duty, responded to civil unrest in Chicago and flew to Washington, D.C., to protect the U.S. Capitol from insurrectionists.

Roughly a month into the mission, more than 1,000 service members were helping with the state’s COVID-19 vaccination effort, with authorization to call up another thousand. They staff 15 mass vaccination sites, assist local health departments and serve on mobile teams that will be deployed to communities with limited health care options, state prisons and independent-living facilities.

Guard members have already administered more than 150,000 doses, and their current pace is 11,000 doses per day. Early on, they were delivering 11 percent of all of the state’s shots.

The number of deployed service members and mass vaccination sites will only grow in the weeks to come. The effort takes close coordination between the state’s Department of Public Health, Emergency Management Agency and local health departments.

ACTIVATION

The federal activation of 47,000 National Guard personnel across the country to respond to the pandemic was the second-largest nationwide peacetime domestic activation after Hurricane Katrina in 2005, says Paul Grasmehr, reference coordinator at the Pritzker Military Museum & Library.

Illinois guard officials compare the scale of this mission to the response to the Great Flood of 1993—when 7,000 members were activated—and the deployment of the 2,600-member 33rd Infantry Brigade to Afghanistan in 2009.

“What we are very well trained to do is take the concept of a wicked problem and breaking it down,” says Col. Seth Hible, an operations officer whose full-time job is teaching at Lake Park High School in Roselle. Floods, storms and warzone deployments are well-worn sections of the National Guard playbook. But there was no script for a pandemic like this one.

In the fall, Neely told his team to think through the likely challenges of a mass vaccination program. “At that point IDPH hadn’t asked for

P008_CCB_20210301.indd 8

BY A.D. QUIG

PHOTOS BY JOHN R. BOEHM

Used to disaster and riot duty, the force mobilizes for vaccination campaign

The Illinois National Guard, commanded by Maj. Gen. Richard Neely, is deployed to several vaccination sites around the state, including this one at South Suburban College in South Holland. help, but we knew the vaccine was coming. It was going to be a large lift for any state.”

By the time Gov. J.B. Pritzker called in January, the guard had a plan. “Two days later, we briefed senior staff, and four days later we briefed the governor,” Neely recalls.

They would use 18-member military vaccination teams, or MVATs. Six members are medical personnel trained to give shots. The other 12 are support staffers who handle everything from crowd and traffic control to security, records input and registration, taking temperatures, observing people after they’ve received shots, or shuttling supplies and paperwork.

The guard has 52 MVATs today.

The first 25 were “organic,” Neely says, or all National Guard members. The rest are a mix of guard and contracted medical personnel to administer shots.

Early snags involved fusing military, medical and emergency management lingo, state and guard officials say. Having worked together on testing sites and having team members embedded in each other’s offices helped. Hible likened the collaboration to his work with State and Defense epartment officials in Afghanistan.

“IEMA, for the most part, is looking longer term to try and figure out how the guard will be relieved from this mission in about two or three months or however long it takes. IDPH is looking for the short-

er term, where to target our specific vaccination teams, and then we become the force generator that produces those teams and pushes them to the field,” Hible says. Local health departments give the teams their marching orders.

The state’s first mass vaccination site opened Jan. 26 at the Tinley Park Convention Center. It came together in roughly a week, says Cook County Health’s Ratna Kanumury, who is heading up vaccination coordination.

“It was rapid fire,” Kanumury says. “We did a site survey on Saturday (Jan. 16). By that Thursday, the contract was finalized. We had supplies delivered Friday evening, and we were unpacking boxes on Saturday,” setting up IT, testing walkie-talkies and working with pharmacy partners to ensure vaccine storage was adequate.

STAFFING

The guard is fully staffing the Tinley Park site with eight MVAT teams, supervised by Cook County Health. At full capacity, the site can vaccinate 3,500 people every day. Guard members are also helping at the county’s vaccination sites at Triton and South Suburban colleges and at several CCH clinics. The only difficulty has been training new staff as guard members complete their tours and others replace them.

Officials have opted to have some overlap so new members can

learn from those on the way out.

In Winnebago County, the guard is working alongside a volunteer medical reserve corps and public health workers at a vaccination site at Sandy Hollow, and it is rolling out mobile vaccination units going to workplaces to vaccinate teachers, grocery store clerks, transit drivers and workers in factories and food-processing plants.

“We’d been experiencing very high rates of infection and high rates of morbidity, mortality,” plus a lengthy mitigation shutdown, says Dr. Sandra Martell, Winnebago’s public health administrator.

“We knew we had to pick up the pace.”

Having civilians work alongside uniformed guard members helped alleviate any concerns by

those skeptical or scared of having the military involved in the effort, she says. Plus, guard members bring a lot from their civilian life; some know different languages or IT workarounds, for example.

Others are familiar faces from the local community.

Who picks up the tab? While governors control service members, the federal Department of Defense will pay until at least March 31. So far, the state has spent $2.4 million for medical staffing, supplies and equipment.

“We are expecting that this could cost as much as $100 million,” IEMA Deputy Director Scott Swinford says, which will be fully reimbursed. “We appreciate the federal government’s assistance monetarily and getting us through this.”

2/26/21 3:31 PM

MORE THAN EVER, OUR CHILDREN NEED US. Because of COVID-19, hunger has more than doubled. And children are particularly at risk; one in three households with children is facing hunger. As job loss and the continued economic downturn push more people to the end of their resources, many families are having to choose between paying bills or buying food.

In four decades of feeding our community, we have never faced a need so great.

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10 MARCH 1, 2021 • CRAIN’S CHICAGO BUSINESS

EDITORIAL

t may be too soon to take the weather-related infrastructure catastrophes of recent weeks in Texas and elsewhere down South as a cue to tout this state’s advantages as a place to do business. And yet, the comparisons can and should at some point be made.

After all, Chicago and Illinois have much to offer any company: A reliable electric delivery system fueled in part by nuclear power and connected to the wider grid beyond Illinois. A central location with highway and rail access to all points on the continent. Abundant fresh water via Lake Michigan. Two major airports: One, an international colossus touting direct connections throughout the globe; another close to downtown. Globally recognized universities, including the University of Chicago, Northwestern University and the University of Illinois. Five academic medical centers, plus the Shirley Ryan AbilityLab and Lurie Children’s Hospital, drawing talent and patients from around the world. Two federal research laboratories. A public transit system that few U.S. cities can match. A well-connected corporate leadership community with sincere interest in civic issues. A beautiful metro downtown and lakefront. Arts, culture, restaurants, museums, architecture, libraries. People who understand how to drive in snow.

Viewed through this lens, you have to ask why the story of Chicago and Illinois right now isn’t one of tremendous growth and possibility. And yet, the drumbeat of drain-circling data continues. As Crain’s columnist Greg Hinz recently reported, the Census Bureau estimates Illinois’ population has declined by roughly 250,000 over the past decade, or about

Illinois’ new speaker of the House, Chris Welch

ASSOCIATED PRESS

I

Illinois is its own worst enemy

2 percent, with much of that drop-off coming from economically challenged regions downstate. The demographers he interviewed for that report were quick to point out that other Rust Belt states haven’t exactly set the world on fire over that same span of time, either, but that’s cold comfort. Those states don’t have nearly the same attractions and advantages that Illinois can boast.

And that brings us to the cloud that hangs over us, obscuring each of the benefits listed above: our well-earned reputation for political dysfunction. The city and the state’s appalling financial condition are well-known, and

graft, cronyism and palm-greasing are such a tradition here that it’s become a brand: the Chicago Way. Meanwhile, the pension crisis is inescapably large, and yet we continue to elect people who seem unable or unwilling to do the work of fixing it.

A faint glimmer of hope emerged the other day, however, and Crain’s columnist Joe Cahill shines a light on it in this week’s issue. Illinois’ new speaker of the House, Chris Welch, seems to realize government won’t gain public confidence without addressing the pension funding crisis devouring state finances. Welch signaled as much when he acknowledged the

need to link a renewed graduated income tax proposal to pension funding. It’s a slim reed to hang hope on, to be sure, but it’s something: a sign that new leadership in the Statehouse may finally appreciate the gravity of the pension situation.

Cahill is right to argue that the next step Welch and Gov. J.B. Pritzker should take is to allow Illinoisans to vote on a standalone amendment repealing the so-called pension protection clause in the Illinois Constitution.

If that passed—and there’s reason to think it would—the state could begin defusing the pension bomb by limiting the cost-of-living increases that are currently inflating our pension obligations.

Similarly, Hinz correctly contends in this week’s issue that Pritzker is pushing a $932 million tax hike on business at precisely the wrong time, as population and jobs have begun to drop not only downstate but in the metropolitan area. He quotes corporate-location consultants who warn that such a tax increase now will make companies think twice about moving to Illinois—and will add momentum to those who are already here but thinking of pulling up stakes.

According to the Tax Foundation, the tax changes Pritzker advocates would reduce Illinois’ business-tax-climate rating from a weak 36th of the 50 states to an even less inspiring 39th.

Illinois has little hope of leveraging—or even retaining—all of its inherent strengths if we continue to undermine ourselves with tax and public pension policies that drive away business investment.

YOUR VIEW

It’s time to rethink heat in Chicago If ever there was an absolute certainty, it’s that the controversial Peoples Gas pipeline-replacement program is setting up Chicago residents for an economic disaster, unless we act now.

The company’s decades-long plan to replace gas mains throughout the city has more than tripled in projected costs, been plagued by delays and mismanagement and set the city back in fighting climate change. While that has proven profitable for Peoples Gas, it has become unaffordable and unworkable for consumers.

The average Chicago household is now paying more than $130 annually exclusively to finance Peoples’ pipeline-replacement program, and that is only going higher. The resulting squeeze on family budgets has been proven by the alarming proliferation of disconnection notices for service in the city.

In September 2020, roughly 30 percent of Peoples’ customers received disconnection warnings. Ponder that: Nearly 1 in 3 customers in Chicago can’t afford to pay their monthly gas bill—in the summertime.

It will only get worse.

Even if consumers could afford the pipe-replacement program, it is antitheti-

Brendan Reilly (left) is alderman of the 42nd Ward and president pro tem of the City Council. David Kolata is executive director of the Citizens Utility Board. cal to the city of Chicago’s climate change goals. Natural gas is a carbon-producing fuel and will have to be phased out for heating homes by 2050. As such, every lineal foot of new gas main line that Peoples Gas is permitted to install only further widens the carbon footprint chasm the city must bridge in order to meet our environmental objectives.

The answer might be under our feet.

Geothermal energy—which leverages the earth’s heat—is a proven and cost-effective option for keeping homes and businesses warm. The temperature underground stays

consistent year-round, and piping that energy to an electric heat pump makes for a more efficient and comfortable home than a gas furnace. As the technology advances and efficiency improves, the price tag for heat pumps has declined, a trajectory quite the opposite of the costly Peoples Gas system.

To date, this has not been a viable option for urban environments, as geothermal systems require pipe to be laid horizontally in a backyard or vertically in deep wells. There is simply not the space for that on private property in Chicago’s neighborhoods. This is where the city can step in.

Just as local government has granted a polluting, expensive heating company a charter to distribute their heat beneath our streets, the city should create the same opportunity for a new, carbon-free heating utility. It would use that same ground under our streets to deliver heat more cost-effectively to residents.

A modular, geothermal backbone underneath the city could allow residents to opt in to an energy alternative that better meets their needs and positions Chicago as a national leader in supporting communities being bankrupted by their gas utili-

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.

P010-P011_CCB_20210301.indd 10

ty. Unlike gas distribution, this backbone could be built a block or blocks at a time as demand grows—because it doesn’t need to be connected to a centralized interstate gas pipeline.

A potential additional benefit: Chicago could retain an equity share in the privately operated utility. This equity arrangement would create a new annual revenue stream for the city for use of our subterranean infrastructure. A potential win-win scenario.

The possibility of creating a geothermal utility will require discussion among a diverse group of stakeholders. But the eventual transition to electrified heat is inevitable, whether we act or not.

As the cost of the Peoples pipeline-replacement program skyrockets, demand for an affordable alternative will only grow.

The key questions are: Will we seize on this opportunity to use technology to reduce heating bills and our reliance on fossil fuels? Or will we allow Peoples Gas to charge consumers higher bills to build expensive new infrastructure that is soon to be obsolete?

Chicago utility customers deserve an answer to these questions, sooner than later.

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.

2/26/21 5:42 PM

CRAIN’S CHICAGO BUSINESS • MARCH 1, 2021 11

READERS RESPOND Readers responded to stories on ChicagoBusiness.com. Join the conversation: Tell us what you think on our Facebook page or on Twitter, @CrainsChicago.

“5 steps to faster COVID vaccinations in Illinois” (Feb. 12): Websites that aggregate the availability and

location of vaccine providers. User friendly websites. Volunteers to assist elderly who are not computer-savvy to make appointments and to provide safe transportation. Set up in community centers, schools, churches as vaccination centers in communities, just like voting, to get young people vaccinated easily and efficiently when their turn comes. Mobil units like blood donation vehicles outside places of work. Not rocket science. Let’s get this done the old fashioned way. Plan, mobilize, get shots in arms. —Barbara Stevens Via Facebook

“Illinois bids for NYSE data hub—but the door may be open to a bigger move” (Feb. 10): Sounds like another Amazon headquarters

story where cities and states compete for a race to the bottom. It will be tempests in teapots, and the end result will be the NYSE will stay put. —Greg Lydon Via Facebook

Not a chance. They are leaving because of

high taxes. Why move from one high tax area to another?

If they leave it would be for a lower tax place. Possibly even Las Vegas. Why Vegas?

Lots of fiber connections (high-speed net-

works) and no chances of natural disasters (hurricanes, floods, tornadoes, etc.) that can disrupt data centers.

Vegas gets the occasional aftershock when L.A. gets a quake, but it’s minimal in Las Vegas. —Thomas Payne Via Facebook “How one doctor fights the pandemic— profitably” (Feb. 12): Capitalism is what drives job creation and

tax dollars, two crucial issues this city desperately needs improvement on if it hopes to remaining a thriving area. So he’s previously praised for a rapid response in a time of need by Crain’s, and now bashed for profiting as a small-business owner? What changed?

It isn’t any business owner’s fault that their particular city/state cannot afford or

cut through red tape to efficiently use existing private citizen-funded infrastructure to rapidly distribute vaccines to the local community. I bet his testing sites could quickly pivot to distribute a couple thousand vaccines a day if they had access to enough doses. —Kevin Koenig Via Facebook This is no different than Walgreens or CVS,

except it’s a local entrepreneur. Good for him. —Rationalist @Chiiiicago Via Twitter “Apprenticeships are the catalyst for opportunity” (Feb. 12):

100%. We have a huge group of Americans

that should be part of the American dream.

We shouldn’t be importing workers when we should be investing in our own. —SPEN @papen_s Via Twitter

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12 MARCH 1, 2021 • CRAIN’S CHICAGO BUSINESS

A GALA

SEASON

LIKE NO OTHER

The pandemic took 2020’s fundraising season from big ballrooms to small screens—and for many organizations, it worked out just fine.

P012-P013_CCB_20210301.indd 12

JDRF’s virtual gala allowed guests from across the country to view the festivities. The event’s net stood at $8.56 million that night and later rose to $8.76 million.

JDRF ILLINOIS ONE DREAM

GALA—CLOSE TO HOME

Net: $8.76 million When: Dec. 12 Where: Virtual broadcast Attendance: 500 households Individual ticket: $525 suggested donation; dinner packages $750-$20,000 Of note: Thanks to a $1 million and $2 million gift and lower expenses, this event broke last year’s record net of $6.2 million. Programming featured a concert from singersongwriter John Ondrasik of Five For Fighting.

U.S. HOLOCAUST MEMORIAL MUSEUM “WHAT YOU DO MATTERS” RISA K. LAMBERT CHICAGO VIRTUAL EVENT Net: $4.15 million When: Sept. 15 Where: Museum’s website and Facebook page and YouTube Premiere Attendance: 2,000 households Individual ticket: $250 suggested donation Of note: Programming featured former white supremacist Derek Black; the luncheon honored Mally Zoberman Rutkoff, the daughter of two Holocaust survivors.

JUF LION LUNCHEON Net proceeds: $2.8 million When: Oct. 15 Where: Hosted on a custom website Attendance: 394 Individual ticket: $36/$72 with a delivered box lunch Of note: The virtual edition of this annual event featured psychotherapist and author Lori Gottlieb. Attendance was up 21 percent and the event raised $300,000 more than the year prior.

ST. IGNATIUS COLLEGE PREP GLORIAM Net: $2.5 million When: March 7 Where: St. Ignatius College Prep Attendance: 821 Individual ticket: $500 Of note: This annual event raises money for tuition-assistance scholarships. The event raised $500,000 more than in 2019, and a paddle raise accounted for $1.1 million of proceeds.

ILLINOIS HOLOCAUST MUSEUM 2020 HUMANITARIAN AWARDS DINNER Net: $2.4 million When: March 12 Where: Was scheduled to take place at Hyatt Regency Chicago Attendance: 1,700 expected before cancellation Individual ticket: $500 Of note: Organizers canceled due to COVID-19 and spent days calling sponsors and ticket holders. Only a few requested refunds, enabling the event to net just $100,000 less than in 2019.

AMERICAN HEART ASSOCIATION HEART BALL Net: $2.3 million When: June 25 Where: Zoom Attendance: 700 Individual ticket: Free Of note: The event attracted guests from around the country, who participated in an interactive chat.

Chicago-based band Maggie Speaks performed at the virtual after-party.

CHICAGO AUTO SHOW FIRST LOOK FOR CHARITY Net: $2.95 million When: Feb. 7 Where: McCormick Place Attendance: 8,508 Individual ticket: $275 Of note: The cocktail party, an annual affair that raises money for 18 Chicago charities, was one of the few in-real-life fundraising events of 2020, held before the pandemic started.

DIANE SMUTNY

Everything was set for the Illinois Holocaust Museum’s Humanitarian Awards Dinner to take place on March 12, 2020. Sponsors were lined up, the ballroom at the Hyatt Regency Chicago was booked, flowers and food were ordered, and guests were ready to enjoy the evening, which was expected to bring in north of $2 million.

The week before, the country felt the grip of COVID-19 beginning to squeeze. The idea of a ballroom packed with 1,700 people, among them nonagenarian Holocaust survivors, caused museum officials to reconsider. “We decided that the risk was much too high,” says CEO Susan Abrams.

Days before the dinner, Abrams and Ken Cooper, vice president of development, made hundreds of phone calls to sponsors and guests to tell them the event was off. Only a few requested refunds, so the museum went on to net $2.4 million, on par with prior years, from an event THE PANDEMIC SPURRED that did not happen.

Last March and the INDIVIDUAL DONORS AND coronavirus news kicked a gala season like no SPONSORS TO DONATE off other.

Organizations, MORE MONEY. . . . AS many with big moneymaking events already A BONUS, MANY planned, either canceled them or took them virtuNONPROFITS REACHED al, retooling big-ballroom NATIONAL AND EVEN festivities for the small screens of Zoom and GLOBAL AUDIENCES. YouTube.

The surprise? Net proceeds that surpassed or equaled those of in-person events. Overhead shrank, with no need to serve guests food and drink. The pandemic spurred individual donors and sponsors to donate more money, enabling quite a few organizations to offer free admission to galas (in normal times, individual tickets can be as much as $1,500). As a bonus, many nonprofits reached national and even global audiences with their virtual programs, particularly those recorded and posted on YouTube or another site after the event.

Virtuality created opportunity for new experiences, too. Field Museum’s CEO and newest curator took attendees on behind-the-scenes tours of rarefied museum space, a treat not possible with 800 real-live guests. The Museum of Science & Industry sent creativity kits to registered guests, enabling families to participate in its Columbian Ball, in calmer times a black-tie affair.

Drawbacks? Producing events “is a little more complicated” virtually, says David Kelly, president of Chicago-based Frost Productions, a production firm that handled several of 2020’s virtual fundraising events. Both clients and guests miss the energy and social elements of an in-real-life gala, and while virtual events have proven to be efficient fundraisers, “the desire is there to go back to the way things were,” Kelly says.

For the foreseeable future, the show will go on—on Zoom, YouTube and other virtual platforms. Here’s a look at the 20 highest-netting galas of 2020 and how organizations made the new normal work for them.

CLARK STREET COLLECTIVE

BY LISA BERTAGNOLI

One of the few in-real-life galas of 2020, St. Ignatius College Prep’s Gloriam netted $2.5 million for tuitionassistance scholarships.

2/25/21 11:11 AM

ANN & ROBERT H. LURIE CHILDREN’S HOSPITAL OF CHICAGO REIMAGINED CHILDREN’S BALL

MISERICORDIA HEART OF MERCY 60TH ANNUAL FAMILY ASSOCIATION BENEFIT

Net proceeds: $2.1 million When: Dec. 12 Where: Zoom Attendance: 94 networks/bubbles/ households/watch parties Individual ticket: Free Of note: Programming featuring Gio, a patient with myotubular myopathy, helped raise money for the hospital’s Children’s Research Fund.

Net: $1.405 million When: June 20 Where: YouTube Attendance: 3,000 Individual ticket: Free Of note: Misericordia parents planned and coordinated the event in about three months. Caroline Kennedy, Joe Maddon, Mike Ditka and Mayor Lori Lightfoot were among the boldface-name participants.

AFTER SCHOOL MATTERS CELEBRATING #ASMTOGETHER

CHICAGO COUNCIL ON GLOBAL AFFAIRS GLOBAL LEADERSHIP AWARDS DINNER

Net: $2 million When: Sept. 22 Where: YouTube Attendance: 2,300 views altogether (day of event and after) Individual ticket price: Free Of note: ASM generated excitement for the fundraiser by sharing videos from Chicago Bear Tarik Cohen and the Cubs’ Ian Happ on social media before the event.

KYLE FLUBACKER

CLARK STREET COLLECTIVE

CRAIN’S CHICAGO BUSINESS • MARCH 1, 2021 13

Jingmai O’Connor, left, associate curator of fossil reptiles, and Field CEO Julian Siggers led Field Museum gala guests on virtual behind-the-scenes tours of the museum.

AMERICAN RED CROSS OF ILLINOIS: HEROES BREAKFAST

AMERICAN CANCER SOCIETY DIGITAL DISCOVERY BALL Net: $1.9 million When: May 21 Where: Streamed on YouTube Attendance: 6,000-plus views Individual ticket: Free Of note: The virtual event helped bring more bidders to the online auction, a major source of funds for the event.

FIELD MUSEUM VIRTUAL NIGHT AT THE MUSEUM Net: $1.9 million When: Oct. 17 Where: YouTube and museum’s website Attendance: 700 households the night of; about 1,500 total Individual ticket: Free Of note: Programming featured curator-led, behind-the-scenes tours of rare fossils, the museum’s anthropology storage space and its private gem vault. Jane Goodall also made an appearance.

Hyatt CEO Mark Hoplamazian and investor Sam Zell spoke at the virtual Invest For Kids investors conference, which has raised $16 million over 12 years to support Chicago-area children’s charities.

CURE EPILEPSY UNITE TO CURE EPILEPSY Net: $1.84 million When: Sept. 24 Where: Facebook and YouTube Attendees: 7,100 Individual ticket: Free Of note: Programming featured musicians Eric Church and Nils Lofgren, Dr. Sanjay Gupta and “Hamilton” actor Miguel Cervantes with other Broadway stars.

COMBINED, THE EVENTS ON THIS LIST RAISED MORE THAN $47.2 MILLION. SEVENTEEN OF THESE EVENTS WERE HELD VIRTUALLY. THE SIZE OF THE GALAS RANGED FROM 94 HOUSEHOLDS TO

DIANE SMUTNY

8,508 PEOPLE.

Country music star Eric Church was one of several celebrities to appear at CURE Epilepsy’s Unite to CURE Epilepsy virtual fundraiser, which netted $1.84 million.

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Net: $1.837 million When: May 7 Where: Zoom Attendees: 500 Individual ticket: Sponsorship levels $5,000 to $100,000 Of note: Two large gifts helped the virtual event net almost $400,000 more than last year for breakfast, traditionally held at the Hilton Chicago. The 2020 Heroes were honored at the virtual event and on social media.

METROPOLITAN FAMILY SERVICES MPOWER THE NIGHT Net: $1.49 million When: Nov. 12 Where: Zoom and organization’s website Attendance: 2,608 registered guests Individual ticket: Free Of note: The event highlighted the effects of gun violence and how to establish and maintain peace in Chicago. Speakers included members of rival street organizations and leaders from street-outreach initiatives.

ADLER PLANETARIUM VIRTUAL CELESTIAL BALL Net: $1.45 million When: Sept. 12 Where: YouTube Premiere Attendance: 650 during the event; total of 1,700 watched the link within the first week Individual ticket: Free; suggested $25 donation Of note: Lower costs enabled Adler to net about the same as in past years. The virtual event also allowed families to participate in the festivities.

Net: $1.4 million When: Oct. 28 Where: YouTube Attendance: 1,300 YouTube views Individual ticket: Free Of note: Honorees included Chicago Community Trust CEO Dr. Helene Gayle; the no-cost individual ticket was thanks to support from 57 sponsors.

MUSEUM OF SCIENCE & INDUSTRY COLUMBIAN BALL Net: $1.4 million When: Oct. 10 Where: Event LiveStream site Attendance: 600 Individual ticket: $100; sponsorships $2,500 and up Of note: “Columbian Ball Kits” including a recipe for a signature cocktail, props for selfies and DIY projects helped engage participants in the virtual event.

12TH ANNUAL INVEST FOR KIDS CONFERENCE Net: $1.34 million When: Oct. 21 Where: Event site Attendance: 850 Individual ticket: $1,000 Of note: Appearances by Sam Zell and Hyatt Hotels CEO Mark Hoplamazian helped boost net for this annual investors conference, which has raised $16 million for Chicago-based children’s charities.

GASTRO-INTESTINAL RESEARCH FOUNDATION VIRTUAL BALL Net: $1.3 million When: July 25 Where: Zoom Attendance: 660 Individual ticket: Free; donations accepted Of note: Entertainment included an improv performance by Second City, live music, a paddle raise and a presentation by Dr. David T. Rubin, the foundation’s lead scientific adviser.

NOTES: Chart based on available information.

Some traditional events did not take place, for instance Shedd Aquarium’s and Lincoln Park Zoo’s galas, Make-A-Wish Illinois’ Wish Ball, Shirley Ryan AbilityLab’s Spark! and Big Shoulders Fund’s biennial Humanitarian Awards Dinner.

Sources: Crain’s research; data from nonprofits

2/25/21 11:11 AM

ARCHITECTURE HKS, Inc., Chicago HKS is pleased to announce the promotion of Bernie Woytek to Associate Principal.

As Project Manager at HKS, he has frequently been recognized for outstanding achievements and instrumental in growing our Mission Critical practice. Bernie is recognized for his strengths in addressing technical issues, engineering coordination and construction practices. Bernie successfully collaborates with HKS teams across all market sectors on technologyintensive projects around the world.

ARCHITECTURE / DESIGN Gensler, Chicago Gensler Chicago welcomes two senior leaders to its team.

Hassan Gardezi, AIA, OAA, NCARB, LEED GA joins as Healthcare Market Leader with over Gardezi 24 years of experience building and leading strong, multi-disciplinary teams for complex global healthcare projects. His proven communication, planning, management, and operations skills will be of direct benefit to clients and the firm’s Parrella healthcare practice.

Enza Parrella, IIDA joins as Workplace Account Leader, bringing three decades of experience as a strategic workplace planner, designer, and director. She has been accountable for millions of square feet of interior workplace environments, working with C-level leaders of Fortune 500 companies. Enza is active in DIFFA and City of Hope REACH.

PEOPLE ON THE MOVE

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

HEALTH CARE

LAW

Chartwell Financial Advisory, Chicago

Alden Management Services, Chicago

Freeborn & Peters LLP, Chicago

Ryan Rassin has joined Chartwell’s corporate finance team as a Director. Ryan will lead the execution of capital markets-related transactions, focusing on debt and equity placement, while also originating capital raising opportunities from lower- to middlemarket private equity firms. Ryan brings over 20 years of experience as a principal investor to Chartwell and has originated and structured capital solutions for clients for a variety of transaction types across numerous industries.

BCD International, Buffalo Grove CONSULTING HealthScape Advisors, Chicago HealthScape Advisors is pleased to welcome Kevin Mehta as a Managing Director.

Kevin is a recognized industry leader focused on helping payers, providers and employers operationalize their value-based healthcare programs. He brings a career of experience building innovative solutions and developing asset-based product offerings that focus on leveraging data to generate impactful insights, allowing payers and providers to focus on what matters most – the quadruple aim.

CannonDesign, Chicago Alexandra Shinewald, AIA, LEED AP BD+C, joins CannonDesign as Chicago Education Practice Leader. Alix is responsible for the continued growth of the office’s education practice, concentrating on STEM and S&T, and will serve as a member of the Chicago leadership team. “I’m excited to be part of CannonDesign and bring my experience to build upon its successful framework, to continue to grow the firm’s leadership in education and to create life-long partnerships with our clients.”

Freeborn & Peters LLP is pleased to announce that Partner Jill C. Anderson has been elected to the Firm’s Executive Committee.

Jill is a Partner in the Litigation Practice Group and CoLeader of the firm’s Closely Held Companies Team. Jill represents clients in appellate matters and all phases of litigation, with a particular focus on critical and dispositive trial motions in complex cases. Her experience includes a wide range of state and federal commercial matters and complex disputes.

Assessing global trends amid the pandemic, BCD saw their essential manufacturer position escalating. In recognition of his insight and supply chain strategy, which empowered BCD to exceed industry standards, Alexander Burgess has been promoted to Vice President, Global Supply Chain Operations.

BCD’s products support video surveillance technology utilized by the US Government, law enforcement, healthcare, and other key industries.

Burgess’ leadership has fostered worldwide expansion.

LAW Freeborn & Peters LLP, Chicago Freeborn & Peters LLP is pleased to announce that Partner Philip L. Comella has been elected to the Firm’s Executive Committee.

Phil is a Partner in the Litigation Practice Group and Leader of the Environment and Energy Practice Group. Phil’s practice spans both regulatory counseling and environmental-based litigation. He has over three decades of experience in environmental law, and focuses on the solid and hazardous waste industry.

FINANCIAL SERVICES JAG Capital Management / JA Glynn Private Wealth, Chicago & St. Louis JAG welcomes two new research analysts.

Cynthia Ma joins JAG as a Senior Fixed Income Analyst, conducting fundamental research for multiple strategies.

Ma She has 14 years of experience in the investment management industry, including several years as a senior credit analyst at Natixis Asset Management.

Cynthia earned an MBA in Finance from the University of Iowa. She O’Neil is a CFA® charterholder and a member of the CFA Society.

Tucker O’Neil joins JAG as a Junior Equity Research Analyst focusing on healthcare companies. He will also spearhead key data and technology initiatives across JAG’s equity strategies. Previously, Tucker spent four years working at FactSet Research Systems. He received his BS in Finance from Indiana University.

PROFESSIONAL STAFFING / RECRUITING Objective Paradigm, Chicago Objective Paradigm is pleased to announce that efforts to expand their family of specialized staffing and recruiting services firms will be led by new Chief Executive Officer, David Morgan. David brings a wealth of leadership and domain expertise to this role, having led multiple staffing organizations through significant growth and development.

David is taking the helm of the Objective Paradigm family of staffing and recruiting services firms at a critical point in their continued evolution.

REAL ESTATE Advocate Commercial Real Estate Advisors & ProTen Realty, Chicago Advocate Commercial Real Estate Advisors and ProTen Realty Group are pleased to announce the merger of their two firms.

The firm will continue under the Advocate name. Renee Betzelos, Betzelos Kurt Walsh, and Art Clamage co-founders of ProTen, will become Co-Managing Principal, Executive Vice President and Senior Managing Director, respectively, of Advocate. This combination brings Walsh together two of the Midwest’s most active commercial real estate firms focused solely on representing the interests of tenants.

It expands the service offerings and resources of the group with an eye toward continued growth. With offices in both Chicago and Detroit markets, the firm has seasoned professionals providing representation to clients on a national basis.

REAL ESTATE LAW

Lamar Johnson Collaborative, Chicago

ARCHITECTURE / ENGINEERING

Alden Management Services announces the promotion of Margo L. Marasa, MPH, BSN, LNHA to Chief Operating Officer. With more than a decade of leadership experience at Alden Management Services, Marasa’s extensive operational leadership and clinical skillset will allow her to focus greatly on day to day operations and outcomes while ensuring efficiency and a continued commitment to providing the best healthcare and senior living options for those served throughout The Alden Network.

INFO TECHNOLOGY

ARCHITECTURE / DESIGN

Lamar Johnson Collaborative welcomes Lesley Roth, AIA as Principal. In her 20-year career, Lesley’s professional training and practice include domestic and international architecture and urban design with an emphasis on public engagement, liveable communities and sustainability.

Lesley holds a Master’s in planning and policy from the University of Illinois at Chicago and a B.Arch from the University of Oregon. She is a certified urban planner and licensed architect in the state of Illinois.

Advertising Section

INVESTMENT

Thompson Coburn LLP, Chicago

Sandbox Industries / Sandbox Insurtech Ventures, Chicago

Lesley Wynes has been promoted to Thompson Coburn’s Chief Legal Talent Officer. In this role, Lesley will expand her recruiting efforts to all attorney hires, from lateral partners to associates and counsel and to law students selected for its summer associate program.

She will continue to develop and implement innovative integration programs for new partners, focused on building on attorneys’ individual strengths and connecting them with mentors and advocates across the Firm’s six offices.

Sandbox Industries and its insurtech investment platform, Sandbox Insurtech Ventures, is pleased to announce that Michelle Gouveia has been promoted to Vice President. For Sandbox Insurtech Ventures, Gouveia helps manage the team’s investments in Data Dimensions and Layr, and serves as a Board Observer for portfolio companies Gradient AI and Indico.

Prior to Sandbox, Gouveia was a Strategic Initiatives Manager at The Hartford Steam Boiler Inspection and Insurance Company (HSB).

PHARMACEUTICAL Orphazyme, Chicago LAW Elrod Freidman LLP, Chicago Liz Butler has joined Elrod Friedman LLP, focusing her practice on land use, zoning, entitlements, urban planning, public incentives, historic preservation, economic development, and general real estate transactions. Prior to joining Elrod Friedman, Liz was in the land use group at DLA Piper. She began her professional career in the public sector as a municipal planner in the Dallas, Texas metro area.

Sulin Shah joined Orphazyme as U.S. General Counsel and a member of the company’s U.S. leadership team.

Orphazyme is preparing to launch its first rare disease treatment. Shah earned his JD at Northwestern University and has more than 15 years of global healthcare experience. Orphazyme is a late-stage biopharmaceutical company with its U.S. headquarters in Chicago and its global offices in Copenhagen, Denmark.

Project Management Advisors, Inc., Chicago Douglas Daniels joins Project Management Advisors, Inc. (PMA) as Director of Human Resources. A veteran of the world’s most wellknown consulting firms, Daniels will play an instrumental role in supporting PMA’s continued growth.

He will lead the human resources team in recruiting, onboarding, and advancing top talent, with an immediate focus on creating a holistic DEI strategy and implementing a career development platform to broaden and deepen the firm’s talent pool and service capabilities.

TECHNOLOGY Numerator, Chicago Numerator, a data and tech company serving the market research industry, announced that Bridgette Heller joined its Board of Directors as of January 2021. Heller has held senior executive leadership roles at Danone, Merck & Co., Johnson & Johnson and Kraft Heinz over her 35-year career, and is a Board Member at Novartis, Dexcom, Aramark and Newman’s Own. Heller also serves on the Board of Trustees at Northwestern University, and is the CEO/Co-Founder of the Shirley Proctor Puller Foundation.

CRAIN’S CHICAGO BUSINESS • MARCH 1, 2021 15

Exelon mulling Texas exit after winter disaster

The energy giant will pay millions for the failure of three large gas plants during the reliability crisis last month as, which together accounted for about 30,000 megawatts, was a critExelon is considering pulling out ical part of the multiday outages.

Exelon’s three plants make up more of the Texas market.

On a day in which the Chica- than 10 percent of the total that go-based energy giant disclosed were offline.

The event alone is a major conlong-anticipated plans to break itself up, the company found its posi- tributor to what’s shaping up as tive news—at least to the ears of in- a disappointing earnings perforvestors—overshadowed somewhat mance in 2021. Exelon’s adjusted by the disaster in Texas last month operating earnings guidance for when power plants failed and large 2021 ranges from $2.60 per share to swaths of the state froze in the dark $3.00 per share. For last year, it posted $3.22. for days.

Exelon expects the hit to earnings Exelon estimated the hit to earnings from operational failures of from Texas alone to be about 20 three large natural gas-fired power cents per share. And that’s only after plants in Texas to be between $560 it takes mitigation measures that the million and $710 million after tax. company hopes will trim $410 milThe before-tax cost is up to $950 lion to $490 million from the price tag for the failure. million.

Among those actions: “deferral “This loss is not acceptable to us,” CEO Chris Crane said Feb. 24 on the of selected non-essential mainteearnings call with analysts. “We are nance.” The company provided no detail on what that meant, with a power-plant busiEXELON ESTIMATED THE EARNINGS but ness with its largest presence HIT TO BE BETWEEN $560 MILLION in Illinois, Exelon effectively appears to be planning to AND $710 MILLION AFTER TAX. put off projects at its Illinois nuclear plants to compenevaluating all options with respect sate for the failure in Texas.

“The implication that Exelon to our (Texas) business.”

The three plants, which together would cut corners at its nuclear fagenerate more than 3,500 mega- cilities to offset costs incurred as a watts, failed to deliver for significant result of the Texas storms is absurd,” portions of three days last month. a spokesman said in an email. “ExThe failure of gas plants across Tex- elon Generation does not cut cor-

BY STEVE DANIELS

Last month’s energy crisis in Texas left more than 4 million homes and businesses without heat, light and water during a deep winter freeze. ners where safety is concerned.”

The spokesman didn’t address whether maintenance otherwise planned at Illinois nukes was being delayed due to the heavy Texas losses.

For Crane, who joined Exelon’s predecessor as a nuclear-plant boss in the late 1990s and moved up the ranks within the generation division, the Texas fiasco struck at the heart of one of Exelon’s consistent selling points to investors and policymakers—its top-tier operational record. The company consistently puts out press releases when its nuclear plants function through extreme weather events in the North.

In fact, it did so Feb. 22 in response to the cold and snow that struck Illinois as part of the same weather system that pounded Texas.

“We want to be a reliable provider,” Crane told analysts.

Crane referred on the earnings call to metallurgical, pressure and instrument issues as part of the

problem at the plants in Texas, although he didn’t elaborate. The company also cited difficulties in procuring gas during a period in which many wells weren’t operating and there was heavy heating demand. Generators in Texas have come under heavy criticism since the outages for failing to properly winterize their facilities.

Crane said Exelon took some steps along those lines after an unusual freeze a few years ago, but they weren’t enough.

Unlike the multistate grid that includes northern Illinois, Texas’ market doesn’t require consumers to pay power generators a “capacity” charge in return for a pledge to deliver during days of the year when demand is highest. Those charges, which are embedded in the overall cost households and businesses pay for electricity, help cover the cost of girding for extreme weather in other parts of the country, Crane said.

Texas has contemplated introducing such charges in the past, but it hasn’t happened thanks in part to opposition from large industrial power users. Crane said the response of Texas to the disaster in terms of overhauling its market system would determine what direction Exelon takes in the state.

“We want to participate in a market that’s designed to not only protect the consumers . . . but allow us to make the investments and operate our plants safely and reliably,” Crane said.

Exelon has 3,619 megawatts of capacity in Texas—mainly the gas plants but also some wind and solar facilities. That’s 11 percent of Exelon’s total U.S. capacity of 31,594 megawatts.

With Exelon now planning to spin off its power-generation unit from its regulated utilities like Commonwealth Edison, exiting the Texas market would make for a substantially smaller stand-alone company.

Groupon now listing entire HQ for sublease But the daily deals company says it still plans to maintain an office at 600 W. Chicago Ave.

BY DANNY ECKER Ten months after putting half of its River North headquarters up for sublease, Groupon has now listed the rest of it.

The daily deals company last week added another 144,000 square feet to its offering at 600 W. Chicago Ave., adding to the tsunami of office space downtown tenants are trying to offload as COVID-19 forces them to rethink their workspace needs.

Groupon generated one of the first big headlines in that trend in late April when it listed nearly 150,000 square feet on the third floor at its headquarters amid plans for sweeping furloughs and job cuts. Now brokerage CBRE is

P015_CCB_20210301.indd 15

marketing all of the nearly 300,000 square feet Groupon occupies on a lease that runs through at least January 2024, making it the largest block of contiguous space available for sublease in the city, according to real estate information company CoStar Group.

But Groupon doesn’t plan to entirely abandon its footprint there.

“We intend to maintain an office on whichever floor isn’t subleased,” Groupon spokesman Nick Halliwell says in a statement.

Halliwell doesn’t specify what prompted the new listing for the building’s fourth floor. But Groupon is likely among the many companies looking to save on real estate costs now and betting they won’t need as much office space in the future after nearly a year of operating with employees working from home. As of early last month, 5.3 million square feet of downtown office space was on the sublease market, almost twice as much as there was a year before, according to brokerage CBRE.

Some of that may ultimately come off the market as companies return to offices in greater numbers, perhaps as soon as later this year. But it’s still giving landlords fits as an indication of softening demand while vacancy soars to a record high.

Especially painful for building owners with large vacancies: Tech companies, which drove a lot of the record-high leasing demand before the pandemic, account for the lion’s share of the sublease offerings. In addition to Groupon, that crowd includes names like Uber, Facebook, Glassdoor and Yelp.

Groupon was hit especially hard at the onset of the pandemic, which coincided with the exit of former CEO Rich Williams in March. Interim CEO Aaron Cooper has tried to stabilize its core business of offering online deals from local merchants while the company has also been in major cost-cutting mode. Groupon disclosed about 1,200 job cuts—

600 W. Chicago Ave. about 19 percent of its total workforce—as of the end of September.

That’s less than half the 2,800 jobs the company said in April that it expected to cut by the end of 2021.

Groupon executives told analysts in October that the company was on track to save $140 million from its job cuts and furloughs.

Groupon leases about 375,000 square feet through January 2026—with a termination option

two years before that—and has its name adorning the outside of the building at 600 W. Chicago. Groupon subleases some of that space to data-analytics software and services company Uptake Technologies, which is led by Groupon co-founder Brad Keywell.

CBRE brokers Paul Reaumond and Todd Lippman are marketing the 600 W. Chicago space on behalf of Groupon.

2/26/21 3:38 PM

16 MARCH 1, 2021 • CRAIN’S CHICAGO BUSINESS

Developers plan Fulton Market, Union Park apartments Sterling Bay proposes 320-unit tower around the corner from McDonald’s headquarters, while Marquette plans 210-unit project next to the Ashland Avenue CTA station

BY ALBY GALLUN Plans for another 530 apartments west of downtown are moving forward as the multifamily market begins to pull out of a severe COVID-induced slump.

In the Fulton Market District, Chicago developer Sterling Bay wants to build a 320-unit tower at 160 N. Morgan St., just around the corner from the McDonald’s headquarters. It would be the first apartment project in the neighborhood for Sterling Bay, one of the busiest developers in the area, with a focus on office buildings and hotels.

Farther west, Naperville developer Marquette has proposed 210 units at 140 N. Ashland Ave., on the west side of Union Park. It would be Marquette’s fifth multifamily building in the area, part of a concentrated investment by the developer around the 14-acre park.

“That’s like the final piece of the puzzle for me,” says Marquette President and Chief Investment Officer Darren Sloniger. “I think it will be really transformative.”

Sterling Bay and Marquette are seeking the city’s approval for the projects after one of the worst years for downtown apartment landlords in recent memory. Occupancies and rents in and around the central business district plunged in 2020 as many downtown businesses required their employees to work remotely. Living close to the office lost its value, especially with

so many downtown restaurants and bars shut down, and demand for apartments fell.

But recent data suggests that the market is bottoming out and poised for a recovery in 2021. Last year, as some tenants moved out of the Mason, a 263-unit building Marquette developed on the west end of the Fulton Market neighborhood, the property’s occupancy dropped below 90 percent, Sloniger says. It’s back above 90 percent now.

The building “is starting to lease up like crazy,” he says. “The last week to two weeks, it has really picked up.”

A NEW WAVE?

A recovery could usher in another wave of apartment construction in the greater downtown after a retrenchment in 2020. With fewer projects getting underway over the past year, developers will add just 1,300 apartments to the downtown market in 2022, down from 2,800 this year and the lowest total since 2012, according to Integra Realty Resources, an appraisal and consulting firm. But that number is likely to jump in 2023 and beyond if the economy and market bounce back, as many expect.

At 160 N. Morgan, Sterling Bay plans a 320-unit apartment tower designed by Chicago-based bKL Architecture that would rise 380 feet, according to a zoning application filed with the Chicago City Council.

To comply with the city’s afford-

A rendering of an apartment building Marquette has proposed at 140 N. Ashland Ave. able-housing ordinance, Sterling Bay would set aside 32 apartments as affordable to residents at income levels below the Chicago-area median income. It would also invest in another 32 affordable units off-site.

Sterling Bay aims to “raise the bar for neighborhood residential and bring our ‘live-work-play’ vision for the submarket full circle,” according to a statement from the company.

Farther west, Marquette plans its 210-unit project on a property it has agreed to buy from the Women’s Treatment Center, a substance-abuse clinic. The developer would keep a five-story building on the site and convert it into apartments, tear down a three-story structure there and construct a 12-story building in its place, according to another zoning application. Marquette would set aside 21 of the apartments as affordable and provide another 21 affordable units off-site.

Designed by Brininstool & Lynch, the project is west of Ogden Avenue, the western boundary of the Fulton Market District, and a good 15-to-20-minute walk from the trendy neighborhood’s core. But residential development is expected to creep west toward the United Center as land becomes scarce and rents rise in Fulton Market.

Marquette is investing heavily in the area, with 1,042 apartments completed, under construction or in planning there. It started with the Mason, at 180 N. Ada St., which opened in 2019. Last year, it broke ground on two projects, a 278-unit building at 1400 W. Randolph St. and a 243-unit development at 1454 W. Randolph. Marquette also is converting an office building at 1436 W. Randolph into 48 apartments.

Union Park offers a major amenity for residents, and Marquette’s projects will energize and bring a

sense of security to a neighborhood “that just doesn’t feel safe,” Sloniger says. Marquette would build its Ashland building right next to a CTA station, a plus for residents.

It should also be a bonus for tenants at the Mason, but many of them now walk the longer distance east to the Morgan Street CTA stop, more confident about their safety by taking that route, Sloniger says.

Both Marquette and Sterling Bay need the Chicago Plan Commission and City Council to approve zoning changes for their projects. They also need construction financing.

Marquette’s development, which Sloniger estimated would cost about $75 million, sits in an opportunity zone, where investors can receive federal tax breaks for backing real estate projects. But Marquette hasn’t decided if it will seek financing from an opportunity-zone investor, Sloniger says. He aims to break ground as soon as July.

Shopping center landlord InvenTrust names its next CEO

Chief Financial Officer Daniel Busch, who takes over the top job in August, will have to figure out a path forward for the company as more consumers shop online

BY ALBY GALLUN The longtime top executive of InvenTrust Properties, a big shopping center landlord, is retiring, relinquishing the job to the company’s chief financial officer, a former research analyst who joined InvenTrust in 2019.

Thomas McGuinness, 65, will step down in August as CEO of the Downers Grove-based real estate investment trust, which has named Daniel “DJ” Busch as his successor, InvenTrust says in a statement.

Busch assumed the job of president on Feb. 22 from McGuinness, who also plans to retire from the company’s board in May 2022.

McGuinness has led the company since 2012, most recently navigating it through a severe downturn in the shopping center market due to the coronavirus pandemic.

Though the business has stabilized, Busch will have to figure out a path forward in a brick-and-mortar retail market facing an uncertain future as more consumers shop online.

“Our resilience over the last year

P016_CCB_20210301.indd 16

amidst a challenging and unprecedented environment is a testament to our strategy and the strength of our business model,” Busch says in the statement. “I look forward to taking on this new role and working with the Board and management team to propel InvenTrust to further success and drive shareholder value.”

Through a spokesman, McGuinness and Busch decline to comment beyond the statement.

Founded in 2004 as Inland American Real Estate Trust, the company was once the biggest U.S. REIT not listed on a stock exchange. Backed by nearly $8 billion in equity raised by its sponsor, Oak Brook-based Inland Group, Inland American at one point owned hotels, student housing, office buildings and even private prisons.

But the REIT, which changed its name to InvenTrust in 2015, has sold off big chunks of its portfolio and now focuses on shopping centers anchored by grocery stores. It owned 65 retail properties totaling 9.7 million square feet, mainly

in Texas and the Southeast, at the end of 2020, according to the company’s annual report. InvenTrust owns no properties in Illinois.

The pandemic has been especially cruel to retail landlords amid a wave of store closings and retail bankruptcies. Many shoppers shifted their purchases online, and many retailers stopped paying rent.

AVOIDING THE WORST

InvenTrust avoided the worst of the storm due to its reliance on grocery stores and other so-called essential retailers, which have survived and, in some cases, thrived over the past year. The REIT plans to increase its dividend in April.

But the company’s value fell 8 percent last year, according to an annual estimate performed by an advisory firm, and its share repurchase program is suspended.

That’s a problem for investors who want to sell their stock. Because the company’s shares aren’t listed, they can’t sell them on an exchange. InvenTrust executives have discussed the possibility of a

Incoming CEO Daniel “DJ” Busch, left, and the retiring Thomas McGuinness stock listing or sale of the company to allow shareholders to cash out.

Many investors will surely wonder if that’s more likely to happen with Busch in the CEO seat.

Busch joined InvenTrust as executive vice president, CFO and treasurer in September 2019. Prior to that, he was managing director of Green Street Advisors, a California research firm that specializes in REIT stocks. He has an undergraduate degree from Cornell University and an MBA from New York University.

“With a strong foundation in place, I believe now is the right

time to transition the CEO role and DJ is the right person to guide InvenTrust forward through the Company’s next stage of our life cycle,” McGuinness says in the statement. “DJ is an enthusiastic and engaging leader with a unique perspective on our industry.”

Mike Phillips, senior vice president and chief accounting officer at InvenTrust, will take over as CFO and treasurer when Busch becomes CEO in August. The InvenTrust board also named Christy David, the company’s chief investment officer and general counsel, as chief operating officer.

2/26/21 3:34 PM

LA

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CRAIN’S WEBCAST

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TRANSPORTATION

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EVENT SERIES

Thursday, March 11 | 2-3 p.m.

Modernizing Illinois’ Transportation Infrastructure Is it time for bold ideas around Illinois’ transportation infrastructure investment? Join us for an in-depth discussion with local business leaders on how the state could modernize transportation projects to strengthen our economy and build resilience for the challenges and growth we face now and in the future.

Speakers

Moderator

MarySue Barrett President Metropolitan Planning Council

Jack Lavin President & CEO Chicagoland Chamber of Commerce

Kelly R. Welsh President, Civic Committee Commercial Club of Chicago

Greg Hinz Crain’s Chicago Business

Register at ChicagoBusiness.com/TransportationSeries $25 per person | Includes access to webcast and archived recording Sponsored by

#TransportationSeries @CrainsChicago Questions? Contact ccbevents@crain.com

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18 MARCH 1, 2021 • CRAIN’S CHICAGO BUSINESS

Abbott’s former, current CEOs took home a combined $40 million last year The hefty payout came in the same year that COVID tests boosted the company’s sales Abbott Laboratories’ former and current chief executives raked in a combined $40 million in 2020, as COVID tests boosted company sales.

Miles White, who stepped down as CEO last March but stayed on as Abbott’s executive chairman, received a total of $19.8 million in 2020, according to the North Chicago medical device maker’s filing with the Securities & Exchange Commission. That’s 28 percent less than White’s total compensa-

tion in 2019, the last full year he served as CEO and chairman.

Meanwhile, Robert Ford, who took the reins from White, pocketed a total of $20.5 million last year—72 percent more than he made in 2019 when he was chief operating officer, the filing says.

BLOOMBERG

BY STEPHANIE GOLDBERG

MULTIPLES

Ford’s total pay is 266 times higher than that of Abbott’s median employee, which was $77,594 in 2020, according to the filing. Abbott has 109,000 employees in more than 160

countries, but 2,579 workers in Egypt, Indonesia, Israel and Pakistan were excluded in identifying the company’s median employee.

The hefty combined payout for Abbott’s top executives came in the same year that company sales increased 8 percent to $34.6 billion. The uptick

was driven largely by diagnostic tests that detect current and recent COVID-19 infections, which accounted for 11 percent of total sales.

Hard kombucha is on the rise in Chicago Luna Bay Booch just launched an alcoholic kombucha product at Mariano’s, as the fermented tea trend blazes a trail from the West Coast to the Midwest Hard kombucha is on the upswing in Chicago, and the trend is being driven, in part, by Luna Bay Booch.

The Chicago-based company launched at Mariano’s last month and will soon be on shelves at 28 of the grocery chain’s locations.

It is the first alcoholic kombucha Mariano’s has sold.

Luna Bay also hit shelves at select Illinois Target locations in January and plans to launch with delivery service GoPuff soon. Already, Luna Bay is sold in Illinois at Whole Foods, Fresh Thyme, Fresh Market, Binny’s Beverage Depot, Garfield’s Beverage and Foxtrot Market.

Luna Bay CEO and co-founder Bridget Connelly sees potential in her hometown market.

“I think Chicago’s going to be the second-largest market for hard kombucha,” she says. “There is such an opportunity there, and there is such a health conscious community there that I don’t think is really recognized.”

The kombucha trend started on the nonalcoholic side, with the fermented tea blazing a trail from the West Coast to the Midwest over the past decade. Most kombucha brands promise probiotics to improve gut health and plenty of bubbly flavor. Much of the caffeine and sugar is burned off during the fermentation process, which also appeals to health-con-

P018_CCB_20210301.indd 18

scious consumers.

It appears the boozy version is following in the footsteps of its nonalcoholic sibling. There’s a twist to the trend: When kombucha first took off, some producers had trouble keeping the alcohol content down.

U.S. sales of hard kombucha increased to more than $57.5 million in the last year, according to data from research firm Nielsen.

That’s up from almost $10.7 million two years ago.

YOUNGER CONSUMERS

The desire for nonalcoholic kombucha has cooled in the past year, as consumers were on the go less and gravitated toward the basics, says Duane Stanford, editor and publisher of drinks industry newsletter Beverage Digest. But hard kombucha also taps into the hard seltzer craze, which isn’t expected to slow down.

Hard kombucha brands will likely find a natural market ready and waiting in Chicago, where “people probably understand kombucha and know what it’s all about,” he says. “Those are some of the younger consumers who are really gravitating toward hard seltzer as well.”

Retailers should like selling it, too, largely because hard kombucha is a premium product with higher margins, Stanford says.

The new category also faces challenges. Premium price points might create a ceiling for reaching

LUNA BAY

BY ALLY MAROTTI

consumers, Stanford says. And those who aren’t familiar with kombucha might need some convincing.

Mariano’s spokeswoman Amanda Puck says the chain has devoted large refrigerated sections to Luna Bay and is selling several flavors.

“Many of our shoppers enjoy kombucha,” she says in an emailed statement. “(Luna Bay) is unique and in line with the successful hard seltzer category, with low ABV and easy to enjoy with their great flavors.”

Luna Bay uses a yerba mate tea base. Its products are gluten-free, plant-based and low in sugar and have an alcohol by volume of 6 percent. Flavors include ginger lemon, hibiscus lavender, palo

santo blueberry, lychee lime (which has a lower ABV at 4.5 percent) and seasonal flavor orange persimmon.

Still, there’s a seasonality issue here. Chicago is cold half the year—weather that doesn’t exactly invoke cravings for light and fruity drinks.

Luna Bay’s seasonal flavors have helped with that, says Dylan Melvin, beverage director at retailer Foxtrot Market, which has carried the company’s products since fall 2019.

“There’s only so much you can do to deter the softness of midwinter, but there are ways and one of those ways is to be hyper-seasonal,” he says. “Their persimmon smash was a step in the right direction.”

Melvin says Foxtrot, which just raised $42 million and is eyeing an expansion, is bullish on the hard kombucha category. In baseline sales, Foxtrot sells more hard kombucha than it does domestic beer, he says. The retailer plans to increase the number of hard kombucha products it sells from eight to 15.

Luna Bay’s Connelly declines to comment on the company’s revenue but says sales have roughly quadrupled in the last year. The company expected to have 10 employees by the end of February. It sells its products in 10 states and plans to add more this year.

Chicago is the leading market, Connelly says.

“You’ll see more of us around Chicago,” she says.

2/26/21 3:34 PM

CRAIN’S CHICAGO BUSINESS • MARCH 1, 2021 19

OAK STREET from Page 3 Stone Real Estate.

“The demand for space is less than normal, but it’s not horrific,” says John Vance, a principal at Stone.

That passes for good news these days. So does the Barneys redevelopment, a major undertaking

by ASB Real Estate Investments, a Bethesda, Md.-based investor backing the venture that paid $155 million in 2013 for the property at 1-15 E. Oak St. The project is both a vote of confidence in the Gold Coast and an acknowledgment that the retail business has changed forever.

Rather than seeking a single retailer to take the entire 95,000-squarefoot building—a long shot considering the struggles of department stores—ASB is chopping up the space for multiple tenants.

ASB’s broker, CBRE, is marketing the upper floors to office rather than retail tenants, recognizing that most retailers today only want firstor second-floor space and won’t pay much for anything higher. ASB is removing a sweeping staircase rising to the top of the building and filling in a lot of the “open, dramatic space,” that works in a store but not in an office, says CBRE Senior Vice President Luke Molloy, head of the brokerage team leasing the retail space.

“It needs a pretty significant reworking,” he says. It’s “basically a total gut job.”

CBRE is courting restaurant operators for the former Fred’s restaurant space on the building’s sixth floor and has received “quite a bit of interest” for it already, Molloy says. He expects the office space to lease to tenants including boutique investment firms, family offices and health care businesses.

That leaves CBRE with only about 10,000 square feet of ground-floor retail space to fill, a manageable task in the current market. ASB is reconfiguring the base of the building for multiple tenants and squaring off its rounded entrance at the corner of Rush and Oak. Citibank, which operates a 5,000-square-foot bank branch along State Street, is the building’s only current tenant.

ASB declines to discuss the Barneys project or say how much it will cost. The firm recently paid off a $68 million mortgage on the building that was set to mature in May. “This mixed-use property is located on what we consider to be the best corner within Chicago’s Gold Coast and we look forward to announcing more details of our plan in the coming months,” ASB Senior Vice President Nicolas Franzetti said in a statement. “We have been pleased with the strong interest in the space we have received to date.”

VALUATION

Yet even if ASB fills up the building, it will have a hard time bringing its valuation back up to the $155 million the firm paid for it in 2013. One reason: Office tenants pay a lot less for space than retailers do, so the building is unlikely to generate the $10.3 million in net operating income it did before Barneys went out of business.

“No matter what, you’re not going to replace the Barneys’ rent,” says Greg Kirsch, executive managing director in the Chicago office of Cushman & Wakefield.

Oak Street, the core of a Gold Coast shopping district that includes Rush and Walton streets, has been a longtime destination for retailers that cater to upper-crust shoppers, with tenants like Hermes, Harry Winston, Prada and Armani. In recent years,

ZAC OSGOOD

Chicago’s Oak Street shopping district remains relatively strong in pandemic

A venture backed by Bethesda, Md.-based ASB Real Estate Investments paid $155 million in 2013 for the property at 1-15 E. Oak St. landlords there have benefited from a migration away from Michigan Avenue, poaching Magnificent Mile retailers like Chanel, Van Cleef & Arpels and Anne Fontaine. The Oak Street retail vacancy rate stands at 9.8 percent today, down from 12.4 percent in 2019, according to Stone.

The Mag Mile, on the other hand, already struggling before the pandemic, is hurting even more now.

Gap recently closed its flagship store on the boulevard, and Macy’s is shutting down its department store at Water Tower Place.

“Things are looking very good for Oak Street,” says Joseph Dushey, vice president at Jenel Real Estate, a New York-based investor that owns three properties there, including one leased to Hermes across from Barneys. “I can’t say the same thing for Michigan Avenue.”

The divergence may reflect the gap between the wealthy and everyone else that has widened since the pandemic. The Mag Mile attracts more middle-income shoppers, many who are feeling financially strapped, and relies heavily on tourism, which has cratered since the coronavirus spread here last year.

Many Michigan Avenue retailers also face fierce online competition.

Many of the rich shoppers who frequent Oak Street boutiques, meanwhile, have added to their wealth as financial markets have recovered and their investment portfolios have grown.

“They survived very well,” Vance says. “The customer that has been more affected by COVID is the Mag Mile customer.”

Oak Street retailers are also less vulnerable to the e-commerce

threat because their clientele won’t buy a $5,000 watch or $1,000 shawl online. They want an in-person experience with a high level of customer service, Vance says.

Still, Vance and Kirsch say the current market can’t support the rents Oak Street landlords are seeking. Retailers can afford rents equating to 10 to 20 percent of their sales, but the average asking rent on Oak Street, about $350 per square foot, works out to a higher percentage for many.

“Landlords have just not come off their pre-COVID asking rents, and I think they should,” Kirsch says.

It’s not for a lack of trying by retailers, Vance says.

“Tenants are coming in and saying, ‘I’ll do a deal, but this is COVID,’ ” he says. “‘My rents need to reflect that.’ ”

More downtown landlords are warming to the idea of co-working space CO-WORKING from Page 3 has changed much with the industry’s fast-growing players taking it on the chin. Giants WeWork—one of the biggest users of office space in downtown Chicago—and Regus have been shuttering locations nationwide while much of the workforce operates remotely. New York-based co-working firm Knotel, valued at more than $1 billion in 2019, filed for Chapter 11 bankruptcy in January.

“Jumping into the realm of co-working is something we didn’t take lightly,” says Lindsay, whose deal with Workbox included more than 15,000 square feet at 306 W. Erie St. “But the reality is we identified having co-working in our portfolio as being really advantageous to respond to the market in almost any way possible.”

Rising vacancy and the foggy future of office demand are pushing landlords to embrace shared workspace providers in ways they were reluctant to do before, industry experts say. With companies lost on how much office space they’ll need in a post-pandemic world, demand for workspace that can be leased on flexible, short-term deals is expected to soar as tenants dip their toes

P019_CCB_20210301.indd 19

back into the office market pool.

Many landlords are preparing for that by turning to co-working specialists for help. But the model is changing: Instead of inking traditional leases, more landlords are signing co-working providers as consultants or management partners, forging revenue-sharing deals to manage their flexible office space. As opposed to a co-working company paying rent, for example, it would get a fee for managing the space and split profits from shared office leases with the property’s owner—akin to the hotel world, where investors own properties but hire major brands like Marriott or Hyatt to manage them.

Workbox will pay some rent but also share some of the profits from tenants it brings in above a certain threshold, Lindsay says, calling it “the symbiotic relationship that we were looking for.”

It’s not a new formula—New York-based Industrious, which recently signed on to manage a full floor of co-working space at Willis Tower, has signed such management agreements for several years and is trying to convert its legacy leases into landlord partnerships.

But it’s now becoming a more popular strategy as landlords stare

down the most competitive environment in recent memory, says Michael Kloppenburg, a senior consultant in the flexible office practice at brokerage Avison Young who works with landlords on implementing shared office strategies.

“We’re seeing some experimentation going on” from landlords that resisted co-working before but are now gravitating toward deals “whereby they control the space but they outsource management expertise to someone that’s got a history of doing it,” he says.

GUN-SHY

Some landlords have a bad taste in their mouth after their co-working operator tenants got crushed by the pandemic, leaving their buildings with heavily divided space that would be expensive to repurpose into something other than shared offices. More than 10 percent of the roughly 5,800 pre-pandemic co-working locations nationwide have gone dark from issues like lease defaults or bankruptcies, according to an estimate from Chicago-based shared office provider Novel Coworking.

But even those whose co-working tenants collapsed recognize tenants will crave lease flexibility coming

out of the pandemic. Skokie-based Next Realty recently signed brokerage Stream Realty Partners to take over leasing of an 80,000-squarefoot office that co-working brand Spaces abandoned in January at 620 N. LaSalle Drive. Stream will install its own flexible office brand, Rapid, in part of the space.

“The optionality for a company that is in flux about its office demands (makes) this an ideal solution,” Next Realty President and Chief Operating Officer Marc Blum says. “I think this concept is here to stay. It will supplement your traditional office space, and I believe there will be demand for a very long time.”

Stream’s brokerage rivals are also diving deeper into co-working space management to meet landlords’ needs. CBRE recently paid $200 million for a 35 percent stake in Industrious and will integrate its own co-working brand into the company’s operations. Regus parent IWG also bought a majority stake in the Wing, a female-focused shared office provider. Real estate firm Newmark is acquiring Knotel’s assets.

Yet some landlords are still hesitant to add co-working to their buildings for the same reason they

were before the pandemic: Their investors—and more importantly, lenders—still see co-working space as a big risk. Many have a hard time understanding the return on investment for co-working space that may have highly volatile occupancy, a metric they usually rely on to justify putting new capital into a building, says Mara Hauser, founder and CEO of suburban shared office provider 25N Coworking.

“There are still hurdles there,” says Hauser, who estimates her work consulting landlords on their flexible workspace strategy has doubled since the start of the pandemic.

She foresees investor and lender sentiment on co-working changing over time with so many companies demanding shorter lease terms after the pandemic. But it remains a tough sell for now.

“They’re going to a lender saying ‘we want $130 to $150 per (square) foot to build out the space, but we have no idea how we’re going to get that money back,’ ” Hauser says.

“It’s an amenity space . . . so you’re talking to lenders about value and revenue generation that will occur from an amenity space. In the past, amenity spaces didn’t bring in revenue.”

2/26/21 5:36 PM

20 MARCH 1, 2021 • CRAIN’S CHICAGO BUSINESS

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REVENUE BREAKDOWN $7.0 million

$927 million Video

2018

2019

2020 $6.0 billion

6.0 5.0 4.0

3.0

3.0

2.0

2.0

1.0

1.0

0 LEGAL SERVICES

REVENUE SHARE, 2020 $487 million Software

2017

2018

2019

2020

$6.0 billion Radio

0

$927 million

$487 million Software

Radio

Video

Source: Company filings

Why CEO expects a big rebound at Motorola

8000 7000

MOTOROLA from Page 3

6000

on March 4, 2020.

The economic fallout from the pandemic highlights the importance of Brown’s aggressive moves into video and software, which generated $1.4 billion, or 20 percent of total revenue last year. It also underscores Motorola’s continued reliance on radio equipment for the remaining 80 percent.

“Investors want to be more comfortable that government spending for (radio) networks is recovering,” says Louie DiPalma, an analyst at William Blair. “While cloud software and video are exciting growth opportunities for Motorola, (radio equipment) represents 80 percent of revenue and is the biggest needle mover.”

With an estimated 70 percent of the U.S. market for two-way radios, Motorola dominates the business. It grows slowly, about 2 to 3 percent annually in normal times, estimates analyst Keith Housum at Northcoast Research in Cleveland.

Motorola expects radio sales will increase by mid-single digits this year, while its video-related business grows in the high teens. Sales of command center software, which ties together an increasingly complex array of products for police and fire departments, are expected to rise more than 20 percent.

5000

MARGINS

Motorola’s software and services carry a profit margin of about 25 percent, compared with about 16.5 percent for its hardware.

The radio business is on the mend, Brown told analysts. Radio orders soared to record levels in North America in the fourth quarter, including a $122 million contract with Nassau County, New York.

“I think there has been pent-up demand,” Brown told a questioner.

But the economic recovery from COVID-19 has been uneven and slow for many Motorola customers. S&P Global Ratings warns that “with a winter COVID spike and a slower economy going into 2021, it will likely take local governments longer to recover to pre-recession revenue levels. A slower pace will translate into slower revenue recovery for many, resulting in more cuts to restore budgetary balance.

This includes delaying capital

4000 3000 2000 1000 0

Motorola Solutions now is selling its own body cameras for police, and it hopes new radios that have smartphone features and cellular and Wi-Fi capabilities will help perk up sales. projects which can result in grow- maker of Tasers. But the market is too big to pass up at $500 million, ing deferred maintenance.”

The White House has proposed including evidence-management $350 billion in additional funding software, Brown told analysts. “I for state and local governments in think we have a great opportunity its latest pandemic-relief package, to take share and be a competitive, which would help alleviate budget compelling number two,” he said.

Jack Molloy, Motorola’s execpressure.

Motorola maintains that public utive vice president for products safety equipment is “need-to-have and sales, says orders for body technology” that is less vulnerable cameras increased more than 60 to budget cuts than other types of percent in each of the past two quarters. Total revenue from video spending.

Motorola’s sales of two-way radi- products and services grew 31 peros to corporate customers, which cent last year as radio sales fell off fell $300 million, or about one- 11 percent.

Motorola has built its video third, last year, are more vulnerable. “Airlines, hospitality and utili- and software businesses largely through acquisition. Overall, ties are still hurting,” Housum says.

The company hopes a new radio Brown did five deals last year for that also has smartphone features and cellular and Wi-Fi capabilities will “INVESTORS WANT TO BE MORE help perk up sales.

COMFORTABLE THAT GOVERNMENT Motorola is pushing hard into video cameras SPENDING FOR (RADIO) NETWORKS for schools, businesses and other customers, IS RECOVERING.” which grew more than 45 percent last year. The Louie DiPalma, analyst, William Blair company also is selling its own body cameras for police, $282 million. Analysts expect more.

“I could see them making an thanks to the 2019 acquisition of international software acquisition WatchGuard for $271 million.

Starting this year, Motorola also or video-surveillance acquisition,” offers the capability to manage ev- Housum says.

Brown says he’ll balance interidence, including video footage, as part of its command-center nal R&D with M&A. “We continue software product for emergency to scan acquisition opportunities.

They’ll probably be more around dispatch centers.

Body cameras are dominated by video security, software and serAxon, the Scottsdale, Ariz.-based vices.”

2/26/21 4:54 PM

CRAIN’S CHICAGO BUSINESS • MARCH 1, 2021 21

Some of your favorite dining spots haven’t made it. Others have changed.

RESTAURANTS from Page 1

MEETINGS

A few blocks away, Kinzie Chophouse is also offering its private event rooms for business meetings, says owner Nicole Flevaris. There’s even a second entrance those customers can use.

“In the bigger private rooms, we can socially distance and everyone feels safe,” Flevaris says.

An added perk is the privacy, she says. With fewer people allowed in the restaurant, dining rooms are quieter, and eavesdropping easier.

“If I’m having a private conversation, I don’t want people to be in earshot,” she says.

Still, downtown restaurant operators say few business diners have returned. People are still working from home as the vaccine rollout gains speed, and that continues to be a detriment to places that thrived off business lunches, convention traffic and corporate credit cards.

The state has given no indication of when Chicago’s convention business might return. Gov. J.B. Pritzker said Feb. 24 that 1 in 7 Illinoisans had received their first vaccine dose, and the state has the capacity to administer about 60,000 doses a

P021_CCB_20210301.indd 21

Downtown restaurant scorecard Here's where some business favorites stand:

Beacon Tavern—Permanently closed.

Bellemore—Closed until further notice.

Coco Pazzo—Open.

Cooper’s Hawk Esquire Chicago— Takeout and delivery only.

Free Rein—Permanently closed.

Frontera Grill—Open for lunch and dinner.

The Gage—Open.

THE DEARBORN

GT Fish & Oyster—Open for dinner. No date set for lunch return.

The Dearborn in the Loop, below, is planning a March reopening with a revamped menu. It is owned by sisters Clodagh Lawless, left, and Amy Lawless.

Gene & Georgetti—Open for lunch and dinner.

Italian Village Restaurants—Only the Village is open. No reopening dates set for Vivere or La Cantina.

Lawry’s—Permanently closed.

Monteverde—Open for carryout and delivery.

Morton’s on State Street—Permanently closed.

Ocean Prime—Open for dinner.

Pacific Standard Time—Permanently closed.

Petterino’s—Closed; has not announced reopening plans.

Purple Pig—Open for lunch and dinner.

Topolobampo—Open.

Volare—Open for dinner.

day. By mid-March, he expects that to increase to 100,000 doses a day.

“The corporate world’s going to come back,” says David Flom, managing partner at Chicago Cut. “It’s just going to take a little time.”

Chicago Cut closed before Christmas and doesn’t plan to reopen until April. That has given the riverfront steakhouse time to tinker with menus.

Flom says they are sourcing different fish for new menu items, like fresh Florida grouper, branzino caught off the coast of Greece and lobster tail from an island between South America and Africa. Vegetables will be paired together, instead of serving just broccoli or just asparagus.

“If you leave restaurateurs at home, they get bored,” he says.

“We all cook every day. We all think about, ‘What would this taste like?

What would that taste like?’ ” The wine and cocktail menus are also changing, Flom says. Executives tasted 300 wines last week as they revamp their wine-by-the glass program. Flom tried a blueberry vodka recently that he plans to pair with lemonade in a new summer cocktail offering.

The decade-old restaurant also remodeled the wood floors, kitchen and private dining rooms.

NONNINA

be more spaced out, and some business groups might be ushered into private dining areas.

A handful of decades-old steakhouses, including Lawry’s the Prime Rib, Ruth’s Chris Steak House and Morton’s original State Street location, closed permanently.

Happy hour spots like the Beacon Tavern behind the Wrigley Building are gone. Other restaurants—particularly some in the Loop that also catered to the theater crowd, like Petterino’s—shut down and have not announced reopening plans. For many restaurants that have closed temporarily, it remains unclear whether the closure will become permanent.

New sanitation protocols are expected to stick around. Some restaurants conduct temperature checks at the door or have designated employees for disinfecting surfaces. It is habit at this point, operators say, and masks are part of the uniform.

There’s also a newfound flexibility at restaurants, especially when it comes to customers who are wining and dining clients, says Kim Giguere-Lapine, chief marketing officer of Smith & Wollensky Restaurant Group.

Previously, if a customer wanted to book a room at Smith & Wollensky, they would have had to put down “a sizable” nonrefundable deposit, Giguere-Lapine says. That is no longer the case.

“Quite simply, the demand is not as high, so we can be a little bit more flexible,” she says. “Just like the airlines. If you need to change a flight because of a COVID issue, they let you change it.”

Smith & Wollensky started offering space for professionals to conduct remote meetings last fall, before indoor dining ceased.

Those offerings are still available, Giguere-Lapine says.

Joe Bazzi, general manager of Nonnina, says a new menu better optimizes ingredients.

The slow winter gave chefs at Gibsons Bar & Steakhouse on Rush Street and its sister restaurant, Hugo’s Frog Bar & Fish House, time to adjust their recipes, too, says John Colletti, managing partner at Gibsons Restaurant Group.

TWEAKS

It’s in the basics, like housebaked hamburger buns and madefrom-scratch sauces, where the tweaks will be noticeable. The chefs corrected recipe changes that had happened over time, he says.

Other hot spots for business professionals streamlined their menus

for another reason: cost-efficiency.

Restaurants have struggled to pay rent, bills and payroll for months, and limited capacity isn’t enough to get many out of hot water.

In a pre-pandemic world, many restaurants would not hesitate to spend hundreds of dollars on an ingredient, says Joe Bazzi, general manager of Nonnina in River North. “Now you scrutinize every $30 you spend because that’s the difference between paying rent and not paying rent.”

The restaurant recently got a new chef and rolled out a new menu

that Bazzi says better optimizes ingredients. The fried calamari and grilled octopus that show up on the antipasto menu could also be used in a seafood pasta. The breaded eggplant atop a salad can also go in a sandwich served at Nonnina’s sub shop next door.

But business diners will also notice menus aren’t quite as skimpy as they were when restaurants were slashing costs last summer, with no end to the pandemic in sight.

Back then, the Dearborn in the Loop was down about 75 percent in sales, says Clodagh Lawless, who owns the restaurant with her sister, Amy. The chef had to peel off highcost dishes, and eventually the menu “was just a shell of its prior self,” she says.

The Dearborn shut down in early November and is planning a March reopening. The new menu will still have some of its customer favorites, like fish and chips and the burger, but also feature new items, like pizza and confit rabbit poutine.

The upcoming changes, and trickling of customers back into the Loop, have her feeling hopeful.

“We can see light at the end of the tunnel,” Lawless says. “It’s dim, but it’s there, and that’s what we’re going toward.”

2/26/21 4:29 PM

22 MARCH 1, 2021 • CRAIN’S CHICAGO BUSINESS

How credit card giant Discover Financial is getting squeezed on two fronts DISCOVER from Page 1 traction with merchants selling appliances, exercise equipment, electronics and other high-end products. Consumers in their 20s and 30s, in particular, are gravitating toward “buy now/pay later” arrangements made available when they buy online. These services allow consumers to pay for products via a set fee each month, and in some cases to do so without paying interest.

San Francisco-based Affirm, the fintech launched by University of Illinois at Urbana-Champaign graduate and PayPal co-founder Max Levchin, has led the way, but it has plenty of imitators. Since Affirm’s highly anticipated initial public offering Jan. 13, shares have nearly doubled, reinforcing Wall Street’s belief that growth in buy now/pay later will continue to soar.

Since Discover reported fourthquarter earnings on Jan. 20, its stock has fallen more than 5 percent in contrast to direct competitors like Capital One Financial and Chase, which have gained in that time.

The trend eats away directly at Discover’s business model. Consumers who before would have borrowed on their cards to finance refrigerator or Peloton purchases now have an option that’s often

cheaper and easier to understand—and available with the click of their mouse right on the merchant’s website.

Discover’s card loans as of Jan. 31 were down 9 percent from the same time a year earlier, to $69.3 billion, according to a Securities & Exchange Commission filing.

Card loans had been on a steady rise for years until the beginning of last year. Even before the pandemic, in the first two months of 2020, loan levels were falling; COVID accelerated the deterioration.

Discover executives are projecting loans will grow “modestly” this year. But in a Feb. 25 Q&A with analyst Moshe Orenbuch of Credit Suisse, Chief Financial Officer John Greene acknowledged growth isn’t likely until the second half of the year.

“There’s tons of (consumer) liquidity,” he said. “There is another round of stimulus that’s likely going to happen.”

SAVINGS

Consumer lenders like Discover have noted throughout the pandemic that many customers are socking stimulus away in savings or using it to pay down debt.

In Discover’s case, loan payment rates were 0.5 percent higher than it projected for January, Greene said.

The kinds of experiences, like

vacations, that middle-class consumers often finance with their credit cards largely haven’t been happening. That leaves mainly products, which consumers increasingly have other options to finance.

For Discover, the timing is bad.

The company invented the cashback credit card in the 1980s, but it decided several years ago that the rewards rivals were offering to entice big-spending consumers who routinely pay their monthly balances were too rich. It focused instead on white-collar consumers with good credit who borrowed on their cards.

With unemployment low in the lead-up to COVID, that was a good strategy. Net income grew from $2 billion in 2017 to $2.7 billion in 2018 and $2.9 billion in 2019. In 2020, it fell to $1.1 billion, largely due to heavy reserves Discover set aside for potential loan losses, which mostly didn’t occur.

Discover isn’t alone in its loangrowth woes. Capital One, which traditionally is willing to lend to consumers with credit scores below Discover’s, saw its card balances drop 18 percent year over year as of Jan. 31.

Both card companies are wondering what to do about the buy now/pay later phenomenon. So far, “We’ve been watching it, and we’re not dismissive of it whatso-

ever,” Greene said. But “we haven’t seen any impacts . . . in terms of our card balances and personal-loan balances.”

Discover is considering whether to offer the product as an option itself. Likewise, Capital One CEO Richard Fairbank told analysts on Jan. 26, “What’s striking here is the way . . . it’s got shelf space right there on the (e-commerce) checkout page—some of the elegance of the digital technology, and interestingly financially how this marketplace works, because the striking thing to me is that right now merchants are actually paying the bill as opposed to consumers.”

Capital One also is looking at how to get in the game.

TECH SUPPORT

Plenty of fintech firms want to help, including Amount, the Chicago-based spinoff from online consumer lender Avant. Amount is in discussions with several banks about serving as the technology behind buy now/pay later programs, CEO Adam Hughes says in an interview.

“I think every single major credit card company will have a buy now/pay later product to offer their merchants within six months,” he predicts.

For Discover and the rest, the issue may end up being not if, but when. Speed is important. Mer-

w REVERSAL OF FORTUNE Discover’s credit card loan balances were growing smartly until the pandemic hit and consumers reacted by paying down debt.

CREDIT CARD LOAN BALANCES $80.0 billion

$69.3 billion

70.0 60.0 50.0 40.0 30.0 20.0 10.0 0

2017 2018 2019 2020 2021

As of Jan. 31 for each year Source: SEC filings

chants will form their alliances with providers, as Peloton already has done to some notoriety with Affirm.

Greene was asked on the Feb. 25 call what Discover has learned over the course of the pandemic.

One of the two things he mentioned was that decision-making in the fast-evolving consumer lending industry can be—and needs to be—sped up.

“You may think things are predictable,” he said, “but they’re not.”

2021

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CRAIN’S CHICAGO BUSINESS • MARCH 1, 2021 23

This fast-selling midcentury has an indoor pool A woman who sang opera professionally and ran the Flash Cab company after her husband died in 1988 had owned the home in Niles’ Bunker Hill neighborhood since 1966. It sold in seven days. cause of COVID,” Blaskovits says. The buyers are not yet identified in public records, and A modern split-level with an indoor Blaskovits declines to name them.

The street-facing side of the house looks pool, in one family’s hands for more than half a century, is the latest midcentury like a typical split-level, only bigger and with more windows. In fact it’s U-shaped, home in the area to sell fast.

The six-bedroom, 5,000-square-foot with two sides for living and the third house on Concord Lane in Niles was on housing the swimming pool wing. Intethe market at $779,000 for just seven days rior finishes include walnut paneling, a in December before going under contract floating staircase and a wall of shutters that open to connect the kitchto the eventual buyer. The sale en and family room—all de riclosed Feb. 22 at $681,500.

HOMES IN gueur for the midcentury style.

The house, which has its origBuilt in 1966, it was designed inal slate floors, fieldstone fire- NILES SOLD IN by architect Lloyd Churchman place, wood-paneled walls and period sky blue-bathroom fix- AN AVERAGE OF for Kay and Arthur Dickholtz.

In 1945, Arthur Dickholtz tures, is in Bunker Hill, a neigh77 DAYS ON founded what would become borhood of about eight square blocks with forest preserve on THE MARKET Flash Cab to employ World War II veterans like himself. three sides and several archiIN 2020.

After he died in 1988, Kay tecturally distinct midcentury Dickholtz ran the 250-car firm. homes.

Homes in Niles sold in an average of 77 As a female executive in a mostly male days on the market in 2020, according to business, she earned headlines like “Fare Midwest Real Estate Data and the Chicago Maiden.”

“Kay was a pioneering woman in busiAssociation of Realtors, and even faster, 54 days, in January 2021. Midcentury houses ness,” says Cam Benson, an @properties have regularly sold faster than the norm agent and friend of Kay Dickholtz who in their locales, prompting Crain’s to call represented the home. Kay Dickholtz died midcentury the hottest housing style of in July at age 95. According to her obituary, she sang opera professionally in her 2020.

While the Concord Lane house’s buyers younger years.

In the house’s first few days on the weren’t specifically searching for midcentury, they were instantly taken with market, “we had three showings a day,” this one’s “open living concept and lots of Benson says, “and we got multiple offers. big windows,” which are hallmarks of the There were so many people who wanted style, says their agent, Greg Blaskovits of this house.”

Blaskovits says his clients will do some MCF Realty Group.

Large windows bringing in abundant day- updating, but “it’s mostly cosmetic, not light and a pool are particularly appealing the big things” like utilities and roof, which “when everyone is at home stuck inside be- were all in good condition, he says.

VHT STUDIOS PHOTOS

BY DENNIS RODKIN

MORE PHOTOS ONLINE: ChicagoBusiness.com/residential-real-estate

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