Crain's Chicago Business by crainschicago

CHICAGO BOOTH INSIGHTS: One underexplored path to entrepreneurship. PAGE 8

ORPHE DIVOUNGUY: Federal stimulus isn’t a free pass. PAGE 2

CHICAGOBUSINESS.COM | MARCH 15, 2021 | $3.50

JOE CAHILL ON BUSINESS

A POST-COVID PIVOT IS POSSIBLE, CHICAGO

As the city marks the anniversary of the Great Shutdown, the time for talk is over. A brief window of opportunity is opening to reposition the regional economy for a new era. from-home arrangements have become widely accepted among employers, companies have learned to do business remotely, restaurants have embraced take-out and delivery as essential sales channels, and consumers shop online more extensively than ever. These trends will outlast the pandemic. See CAHILL on Page 22

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A YEAR AFTER COVID-19 forced Chicago and most of the world into economic lockdown, glimpses of a post-pandemic recovery are coming into view. As vaccination numbers rise, we’re starting to see the features of an economic landscape permanently altered by the worst contagion in modern times. These new realities will shape Chicago’s destiny for decades. In many ways, the new world is already here: Work-

SPACs stack the deck to favor insiders

THE WEALTH GAP

‘Founder’s shares’ position big-name promoters for massive returns on minuscule investments

MAKING THE

GAME FAIR

BY JOHN PLETZ

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How the enormous disparity in fortunes of white and Black Chicagoans came about, and what’s being done to try to remedy it. PAGE 15

It seems like everybody who’s anybody is hatching a SPAC these days, and for good reason. They could get very rich very fast. Veteran CEOs, renowned dealmakers and even celebrities have convinced public investors to give them hundreds of millions of dollars to buy businesses through special-purpose acquisition companies.

Among the Chicago business luminaries announcing or completing SPAC deals in the past several weeks are former Walgreens CEO Greg Wasson, tech CEO and investor Sam Yagan and marijuana mogul Joe Caltabiano. They join billionaire real estate investor Sam Zell, Chicago Cubs Chairman Tom Ricketts and former Boeing CEO Dennis Muilenburg. See SPACs on Page 20

CRAIN’S LIST

THE TAKEAWAY

A look at the area’s largest physician groups.

The chair of City Colleges looks back on a long, colorful life.

PAGE 9

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PAGE 6

3/12/21 2:41 PM

2 MARCH 15, 2021 • CRAIN’S CHICAGO BUSINESS

CTA has to clean up its act

police presence all but invisible. Unless the CTA ramps up its game, downtown Chicago never will really recover, even when COVID goes away. People just aren’t going to ride a system that is dirty, dark and scary. Are you listening, Mayor Lori Lightfoot? Now, I have to start by saying that the CTA has somehow been able to continue more or less normal service for the past year. Even as 1,200 of its workers became ill, the trains and buses kept rolling, and that was no mean feat. Congrats! But that no longer is enough. In the past couple of months of taking the DOWNTOWN WON’T RECOVER WITHOUT train home at night, I’ve SAFE, USER-FRIENDLY TRANSPORT. seen dozens of people smoking tobacco Transit Authority, especially its rapid and other products, and dozens of transit operations, are a big, crashing people sprawled out over several mess at the moment, with the tubes seats, with their wordly possessions filthy and stained with graffiti, eleva- plunked beside them. (They have tors and escalators out of operation, my sympathy, but you just can’t live cars converted into rolling homeless on the CTA.) I’ve seen public urination inside a train. Even today, it’s shelters, rules about eating and impossible to board a car in which smoking seemingly forgotten, and ’m an unabashed public transit lover. I remember as a kid asking my mother if we could sit in the first car and watch the train whoosh through the headlight-lit tunnel. The first time I was in London, I found time to meet with someone from London Transport to compare notes. Even today, tucked into my wallet next to my Ventra card are similar ducats from Singapore, Barcelona, Tokyo, New York, Sydney and San Francisco. But I’ve got to tell the truth. And the truth is that our own Chicago

every person is wearing a mask. I’ve seen one police officer. O-N-E. “There should be a lot more security out here,” says Eric Dixon, president and business agent for Amalgamated Transit Union Local 308. And the filth! Until a crew came by the other day at the Lake Street subway stop on the Red Line, decals warning people to keep 6 feet apart were so dirty you couldn’t read what they said. Ditto almost every other section of the downtown Red Line subway. “I know what you’re describing,” sighs Metropolitan Planning Council President MarySue Barrett. “Providing special support systems is important now.” Now, CTA says there are reasons for some of this. For instance, says spokesman Brian Steele, deep cleaning crews can’t work on subway station platforms until the weather reliably is above 40 degrees. Elevators and escalators are being fixed. The mezzanine subway level is mopped twice daily and contact surfaces frequently

GREG HINZ ON POLITICS

sanitized, Steele adds. And while security is the job of the Chicago Police Department, “some of what you’ve seen is the result of fewer people riding,” which leads to less social pressure to follow rules. CPD has assigned 200 people to its transit unit, and says the number of reported crimes has dropped 59 percent this year—about what ridership is down compared to normal. With a new control center able to tap the city’s camera network, it was possible for police to really crack down on violent incidents, arresting an attempted rapist just last week and earlier busting up a pickpocketing ring that’s been working for decades, says the unit’s new head, Commander Matthew Cline. However, CPD won’t say how

many of those 200 officers are on the street at any one time. It can’t be many; 200 officers divided by three shifts a day and working five days a week doesn’t come out to much in a big city. Cline candidly concedes he needs more. “We’re stretched thin.” At least he’s trying. And so is the CTA, though I have to say that Metra, through events like its recent “come back downtown” conference with an office group, seems to be trying harder. But it’s not enough. Downtown won’t recover and prosper without safe, user-friendly transport. Neither will those new Invest South/ West call centers that Lightfoot has been able to open up in job-needy outlying neighborhoods. Step it up. Please.

Federal stimulus needs to be an opportunity, not a free pass

otal income in the U.S. rose in 2020. That’s surprising until you consider the federal government stimulus was poorly targeted: It was not limited to the unemployed and to struggling businesses. Much of this stimulus money helped raise the level of aggregate savings to a mind-blowing $3.9 trillion last quarter, according to Bureau of Economic Analysis data. That’s 20 percent of disposable income—the highest personal savings rate since World War II. Another round of stimulus will also prop up states, which will give Springfield lawmakers a break this budgeting season. But they need to store the jubilation and invest the windfall wisely. Illinois still faces real dangers, and state leaders cannot count on another bailout to rescue them again. Progress on the vaccine, pent-up consumer demand and “excess” savings will be inflationary. If inflation expectations were to change drastically, actual inflation could rise by more than expected, thus triggering a harsh response by the central bank that would leave highly indebted states, such as Illinois, with much higher borrowing costs. Inflation is expected to remain tame, but even a modest rise in inflation will have implications for the state’s debt. This is because inflation reduces the real returns to savings. In turn, bondholders demand higher yields as compensation for the expected loss of purchasing power associated with higher inflation. Higher yields mean higher borrowing costs. As the cost of debt grows,

state spending on education, social services and other essential government functions will continue to get crowded out. In addition, research shows states tend to significantly increase their discretionary spending over the long run when they receive unconditional transfers from the federal government. In Illinois, that’s a recipe for disaster: State lawmakers tend to fund projects that provide little or no value for taxpayers. Old habits die hard. Without reforms, the intractable growth in pension benefits, and rampant corruption combined with poor accounting practices mean Illinois could easily end up in a worse place even after a multibillion-dollar infusion of federal aid. With a shrinking tax base and a return to normal interest rates, the state could soon be drowning in debt again. Structural problems need structural reforms. The state should aim to do two things: First, enact a constitutional amendment that reduces the growth rate of the state’s pension liabilities; and second, do everything in its power to grow the tax base. Growing the tax base doesn’t require a miracle cure. The Fraser Institute’s labor market freedom index provides a road map. Research shows labor market freedom is linked to higher population growth, lower unemployment and less income inequality. States with fewer labor market regulations are better able to adjust to conditions. In addition, the evidence suggests Americans migrate toward states with less restrictive labor laws, and

CORRECTION A March 8 article about Peoria’s coronavirus vaccination rate gave an incorrect location for an inoculation center operated by OSF. It is at a clinic on Knoxville Avenue. In Notable Health Care Heroes on March 8, the profile of Dr. Gamilah Pierre should have said she was former OB-GYN department chair at Silver Cross Hospital when she worked to get N95 masks for all staff.

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less dependence on public employment. During the past four decades, a 1 percentage point rise in publicsector employment was linked to a 0.2 percentage point higher unemployment rate. That suggests, on average, too generous public-sector employment contracts reduce opportunities for everyone else. If Gov. J.B. Pritzker is serious about reducing income inequality and reversing Illinois’ exodus, he must work with lawmakers to abandon unfair collective bargaining that has benefited a few at the expense of everyone else. This broken system pushed Illinois into a

ORPHE DIVOUNGUY ON THE ECONOMY

$317 billion pension hole that led to disinvestment and fueled the state’s persistent population decline. The need for a constitutional amendment to allow for structural pension reforms has never been greater. Illinois politicians are tempted to view the $13 billion federal aid

package as a get-out-of-jail-free pass—but if they don’t use this opportunity to fix the pre-COVID policy problems, the state’s financial situation will deteriorate Crain’s contributor Orphe Divounguy is chief economist at the Illinois Policy Institute.

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– Frank Campise, JAB Real Estate Inc. Banking products provided by Wintrust Financial Corp. banks.

3/12/21 11:13 AM

CRAIN’S CHICAGO BUSINESS • MARCH 15, 2021 3

Vaccine push squeezes Horizon

Paul Alivisatos will take over as president of the University of Chicago in September.

Drugmaker’s blockbuster elbowed out of production BY STEPHANIE GOLDBERG

co-founder of civic-tech group P33, says U of C’s choice of a technologist was more or less foreordained, as universities increasingly look to the tech ecosystem to gain or maintain elite status and boost fundraising. He says Northwestern University could be next, in the wake of Morton Schapiro’s pending retirement as president. Robert Zimmer, a mathematician, set the stage for Alivisatos by betting the farm during his 15 years as president on a debt-fueled expansion of the university’s physical plant and its faculty and undergraduate college. His push into science was

Invoking the Defense Production Act is helping increase supply of badly needed COVID-19 vaccines, bringing the U.S. one step closer to ending the pandemic— but as one local drug company has learned, there’s a catch. The government mandate to prioritize vaccine production at a biologics manufacturing facility has led to a shortage of Horizon Therapeutics’ top-selling product, a new remedy for thyroid eye disease. Tepezza was on track for $850 million in sales last year, until contract manufacturer Catalent was forced to stop making the intravenous drug. “We’re happy that vaccine manufacturing and vaccinations are accelerating, but there are costs to it,” says Horizon CEO Tim Walbert. With Tepezza on ice, Horizon is losing hundreds of millions in revenue, and patients can’t get the only approved treatment for a rare disease that causes bulging eyes and vision problems. The Tepezza shutdown also shows how the nation’s push to maximize COVID-19 vaccine production siphons off resources, holding back innovation in some areas and preventing some patients from getting drugs they need. President Joe Biden’s vow that the U.S. will have enough vaccines for all adults by the end of May could put additional pressure on facilities to divert manufacturing capacity. “It’s a difficult balancing act,” says Tarek Abdallah, assistant professor of operations at Northwestern University’s Kellogg School of Management. “Clearly the people

See ALIVISATOS on Page 21

See HORIZON on Page 21

SILICON VALLEY COMES TO HYDE PARK

THOUGH DESCRIBED AS SOFT-SPOKEN and even introverted, the next president of the University of Chicago promises to have a loud say in the region’s collaborative tech efforts after he arrives in September. Can Armand Paul Alivisatos, who goes by his middle name, deliver? The chemist and former national lab director, currently provost at the University of California, Berkeley, has shown he can turn research into commercial products and build companies, the very thing tech consortiums like Chicago’s Discovery Partners Institute and P33 aim to do with academic partners. Chris Gladwin, a tech entrepreneur and

“HE’S GOT THE IVORY TOWER CRED, BUT HE’S SHOWN HOW TO GET THOSE IDEAS OUT INTO THE REAL WORLD.” Michael Franklin, computer science chair, University of Chicago

CHRIS POLYDOROFF

The next president of the U of C, a chemist and former national lab director, promises to be a major player in the region’s collaborative tech efforts BY STEVEN R. STRAHLER

Chicagoans in for a shock as winter utility bills come due Late payments to Peoples Gas, ComEd surge, intensified by COVID BY STEVE DANIELS Nearly 3 in 10 Chicago households were behind on their heating bills as of January, and that was before an unusually cold and snowy February that’s apt to result in some unpleasant surprises when people open their bills this month. The amount of money Chicagoans were late paying Peoples Gas, as well as electricity distrib-

P003_CCB_20210315.indd 3

utor Commonwealth Edison, totaled $197 million, according to utility reports submitted to the Illinois Commerce Commission. That was up 23 percent from $160 million at the same point last year, on the eve of the pandemic that led to moratoriums on utility collections enforcement for most of 2020. The data, requested from utilities late last year by the ICC, was obtained by Illinois

PIRG, a consumer advocate. For Peoples, the high number of Chicagoans unable or unwilling to pay their heating bills is nothing new. Slightly fewer Chicago households were late paying their bills in January than they were a year before, reflecting the larger amount of financial aid available since the pandemic for struggling See UTILITY BILLS on Page 12

 UNPAID UTILITY BILLS Households behind on their utility bills are piling up increasing amounts of bad debt, with nearly 1 in 3 Chicagoans behind on heating to the tune of more than $600 each. TOTAL RESIDENTIAL ARREARAGES, JANUARY Peoples Gas (Chicago)

Total customers

Nicor Gas (suburbs)

Customers behind on bills

818,289 2.1 million 3.7 million

29% 8% 9%

Commonwealth Edison (areawide)

Arrearages

Average per customer

$146.5 million $53.9 million $120.8 million

$628 $340 $347

Source: Utility submissions to the Illinois Commerce Commission

3/12/21 2:40 PM

4 MARCH 15, 2021 • CRAIN’S CHICAGO BUSINESS

Former CME leader Jack Sandner dies at 79

CHICAGO COMES BACK

BY STEVEN R. STRAHLER

What jobs might vanish after the pandemic?

One forecast highlights the ways tech will make some workers extinct. Companies would be wise to consider ways to help employees establish a sense of control. 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. TODD CONNOR: The McKinsey Global Institute is out with a report this week that previews some devastating potential effects of COVID-19 on the post-pandemic world of work. One finding across eight focus countries, including the U.S., is that more than 100 million workers, or one in every 16, will need to find a new occupation postCOVID, accelerating pre-pandemic trends spurred by automation, AI and other technology adoptions. In particular, they looked at jobs where physical proximity is required and many of those jobs will be re-tooled or automated. EMILY DRAKE: The report is revealing, indeed. So we need to be asking ourselves: If your work requires you to be in close proximity with people, are you at risk of losing your job? What strikes me is that many of the people we have heralded as “essential workers,” often working low-wage jobs, are the same people affected by job loss. Under the umbrella of innovation, we will find ways to automate their roles, deliver the products, implement technology and do other things that disrupt the livelihoods, and lives, of retail workers, customer service agents, restaurant employees and warehouse workers.

ALAMY

Jack Sandner, whose epic battles with Leo Melamed over leadership of the Chicago Mercantile Exchange reflected and defined the tumult and outsider status of the city’s futures markets, has died. He was 79. Sandner died March 11 at Northwestern Memorial Hospital after suffering a stroke in late February at his Lake Bluff home, according to his son Chris. “It’s a sad, sad day,” Melamed said in a statement. Sandner chaired the Merc in three stints during the 1980s and 1990s and was on the board in 2002 when it became the first exchange to go public, setting the stage for acquisition of its once-dominant rival, the Chicago Board of Trade. “He was a true visionary who made many contributions to our industry,” CME Group Chairman and CEO Terry Duffy said in a statement. “It was with sheer grit and determination that he also steadied the organization through some of the biggest crises of the day including the Gold and Silver crisis of 1980 and the Black Monday crash of 1987.” He was a feisty, bantam figure who boxed in 60 amateur bouts and won a Golden Gloves title. He was also a lawyer who borrowed money to buy a Merc membership after going to a holiday party in Melamed’s office—where he became involved in a fistfight. “I was pretty wired and not too measured at the time.” Sandner headed the Merc in 1987, when Chicago’s exchanges were accused of exacerbating the stock market crash. “We were Darth Vader,” Sandner recalled in an interview with John Lothian News. He fought back, testifying before Congress. His take on the exchanges’ alleged responsibility for the crash: “It’s not the tail wagging the dog. It’s the

hair on the tail wagging the dog. It’s ludicrous.” Another threat to the exchanges emerged in the late 1980s when federal agents posed as traders in an undercover sting operation. Indicted were 46 Merc and CBOT traders who were charged with racketeering and fraud and lying to agents. Sandner claimed more corruption could be found at a hot dog stand, “but it was a real, real bad period,” he said in the interview. Sandner and Melamed were an unmatched pair of egos personifying the two dominant ethnic cultures of local traders. Sandner was Chicago Irish, Melamed a Jewish refugee from Poland. “Leo and I were always friends, but there was always some issues,” Sandner said in the Lothian interview. They worked together to modernize the Merc, introducing an early version of electronic trading three decades ago to get ahead of a trend that would decimate traditional open-outcry trading pits. In a 2018 Tribune story, Melamed deemed Sandner crucial to the Merc’s success as it overtook and ultimately swallowed the CBOT. Sandner grew up in various South Side neighborhoods and attended Chicago Vocational and Leo High schools, according to businessman Andrew McKenna Sr. Sandner was fond of relating how, after graduating from Southern Illinois University, he talked his way into the University of Notre Dame’s law school after the deadline for admission. Despite his success, “he was an ordinary guy, and that’s the way he wanted to be remembered,” says McKenna. Sandner and his wife, Carole, adopted eight children. “He worked hard with a number of people to make sure the industry grew and we were treated fairly in Washington,” says Scott Early, a former CME general counsel.

Jack Sandner, from left, Leo Melamed and Terry Duffy ring the opening bell on the agriculture floor of the Chicago Board of Trade building in 2007 on the first official trading day of the newly formed CME Group.

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He was a giant of the Merc who helped lead the group as it became the first U.S. exchange to go public

TC: I sense some sadness in you, or maybe that’s anger, and I feel some as well. The report predicts that the same communities and classes of people who have been disproportionately affected by the pandemic, and other disasters in our coun-

try, will be centered and ignored yet again. These essential roles so often require physical proximity, and even if they can’t be automated—like jobs performed at gyms, hair salons, home health care, hospitals and clinics, and schools—no doubt they will be changed. ED: I suppose if you’re an entrepreneur, you can look at this list and see opportunity against the broad thesis: that where people are required to come together to work, there are opportunities for improvement. And while I’m all for getting better, I’m not for getting better from a starting point of systems that don’t work to provide baseline equality. I’m always going to be the voice that is bearish about how innovation affects the whole of us: Where we optimize efficiency, we may have to switch careers, and even further never have to see people, and automate anything that can be automated. That hardly sounds aspirational. TC: I would agree. I suppose a question that emerges around these trends is, what other innovations might arise to combat the effects of our trajectory, on how we interact as humans? Could the next disruption be an employee-owned competitor to Amazon that seeks to compete, but with a shared ethos of employees wanting to define value differently? Beyond efficiency and stock price? Will the markets begin to judge companies, as an extension of our consumer judgments, for practices that con-

tribute to this dislocation? Will we see small communes emerge as an antidote to this change? These are, of course, speculative. More predictable is the political turmoil that is sure to follow if people feel unheard, unseen. ED: Putting on my therapist lens, I do worry about the human construct here. There is a tension between these trends, which are global—supply chains that are global, economies that are globally bound, and efficiencies that are globally realized—and the very local lives that we all live. The neighbor next door. The blighted property down the street. The main street in town that has lost all of its retail tenants. It’s discordant for people. Unwinding this is not simple, or maybe not even doable, but it matters how we support people through this as an existential challenge—and support has to involve government, companies, investors and leaders. TC: We’ve always known that technology disrupts practices and professions, and in some ways that is the sister of innovation and progress. What feels new is the speed and immediacy with which this will happen. That we can write this in 2021 and know that by 2030 these dislocations will be permanent, demands a greater urgency for how we discuss, prepare, adjust or mitigate the effects of this. Companies, to bring this home, would be wise to think about helping employees establish a locus of control over their own lives. ED: I do think control is at the heart of this. People need some semblance of influence, or will find it through unproductive means. Companies that create environments in which people feel empowered will persevere, and do so with the co-authorship of their teams.

3/12/21 1:59 PM

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6 MARCH 15, 2021 • CRAIN’S CHICAGO BUSINESS

THE TAKEAWAY

Walter Massey Massey, a physicist, was director of Argonne National Laboratory and president of alma mater Morehouse College and of the School of the Art Institute of Chicago. At 82 and chair of City Colleges of Chicago, he’s penned a memoir, “In the Eye of the Storm,” about his year chairing the Bank of America board during the financial crisis. By Steven R. Strahler

> You drop a few names: Spike, Oprah, Denzel, Queen Elizabeth. Going back to Morehouse as president really put me in a position to become deeply involved in the Black community, which I had not been for years. Spike Lee is an alumnus, Oprah a major donor and Denzel is a parent. I happened to meet the queen at the invitation of President (George W.) Bush at a dinner the president hosted in London.

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You used an outhouse and bathed in a galvanized tub. True. We got our first indoor bathroom and toilet—oh, I must have been in the fourth grade. It was fantastic.

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Growing up in Mississippi, you said you had a happy upbringing but knew your place in the racial order, which included the back of the bus when traveling across town to school. I was never beaten or physically threatened in my childhood, but there was always the fear that it could happen, like walking on a tightrope.

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Why did the B of A board turn to you? I was knowledgeable about the board, board relations. I was also one of the longest-serving board members there. It turned out to be a full-time job, which I didn’t anticipate. We didn’t know when I took the job the Federal Reserve would put restrictions on what we could do and lay out a framework for things we had to do.

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P006_CCB_20210315.indd 6

You recount that when then-University of Chicago president Hanna Gray recruited you to run Argonne in 1979, you had managed fewer than a hundred employees as a Brown University dean, compared with the lab’s 5,200. What did she see in you? When she received an honorary degree at Brown, I was her faculty host. She saw how much I was liked and respected at Brown. I think she took a gamble on my management skills and experience. She took away from that experience that at least I was a leader and someone people liked working with.

What’s your take on race relations today? There’s been tremendous progress, especially measured against where I started off. What is distressing, there seems to be a significant portion of the society more overtly racist than anything I’ve seen since I left Mississippi. It’s very frightening in some ways.

3/12/21 12:19 PM

One year ago, COVID-19 changed our community. Today, we honor all of the lives lost during the pandemic and acknowledge those serving our community. Thank you to our many supporters, volunteers, staff and community partners – especially those on the front line – who have helped us meet the rising need. Demand for food assistance is still soaring, but your hard work and generosity are powering a daily response to hunger. The need is great. Together we are Greater.

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8 MARCH 15, 2021 • CRAIN’S CHICAGO BUSINESS

‘Entrepreneurship through acquisition’ The right partnerships offer opportunities for businesses to grow faster and more strategically

P008_CCB_20210315.indd 8

they’re using it to catapult forward the businesses they join. They come armed with capital, deep and strategic networks from the prestigious institutions where they have earned their degrees, and a good amount of hustle and grit. Once on board, they can help identify several paths to help grow a small business: additional strategic acquisitions and partnerships, investment into technology and infrastructure, investment in strategic talent, and business development, to name a few.

Mark Agnew and Brian O’Connor are adjunct associate professors of entrepreneurship in the University of Chicago’s Booth School of Business. Agnew is the former president of Lou Malnati’s. O’Connor is the founder and managing partner of NextGen Growth Partners. Together, they teach the Entrepreneurship Through Acquisition class at Booth.

LOCAL EXAMPLE

Dave Newberry, president and CEO of ConData Global in Oak Brook, is a great local example. Newberry, a recent Booth MBA graduate, led the merger of ConData, a global leader in freight auditing, and TNL Global, which specializes in related parcel auditing. The companies essentially do similar things—audit companies to look for efficiencies and save their clients money. ConData’s acquisi-

Advice for small businesses and entrepreneurs in partnership with the University of Chicago Booth School of Business.

tion added complementary pieces to its own business, and the company now has an expanded client base to work with. As the companies blend, they’ll develop efficiencies

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mall businesses are always looking to grow, but owners might not understand their full scope of possibilities these days. They might purchase a new piece of equipment or make a hire or two. There’s nothing wrong with those approaches, but as business educators, we’ve seen tremendous growth opportunities in “entrepreneurship through acquisition.” Small-business owners looking for larger growth opportunities might consider partnering with early-career, entrepreneurial business leaders such as those coming out of local top-tier MBA programs like Chicago Booth. Depending on the owner’s objectives, these deals can include the sale of all, some or none of the small business. While these MBA graduates traditionally would be starting their own businesses, many are now considering bringing their talents to small and midsize businesses. Their education gives them cutting-edge knowledge about innovation, and

that enable them to better serve their customers on a more cost-effective basis. This is a new avenue for growth for small businesses, and we know small-business owners may be hesitant to consider whether they’re in a position to go down this road. Our advice: Take the call from the ambitious MBA grad who expresses interest in your business, or start to develop some relationships with the talented entrepreneurs in this

ecosystem. There may be opportunities to grow more quickly than you once thought and mitigate the risk that many fear comes with entrepreneurship through acquisition. And check out resources that offer up-to-date information on these ideas. We suggest Chicago Booth’s Polsky Center for Entrepreneurship & Innovation, which has an “Entrepreneurship Through Acquisition” podcast series, among many other resources.

3/12/21 12:18 PM

CRAIN’S CHICAGO BUSINESS • MARCH 15, 2021 9

CRAIN’S LIST CHICAGO’S LARGEST PHYSICIAN GROUPS Ranked by 2020 net revenue. Crain’s estimates are in gray. 2020 rank Physician group

Practice administrator

FY 2020 net revenue (millions); % change from FY 2019

Physicians

Boardcertified physicians

Hospital inpatient admissions

Outpatient visits

Managed care contracts

Capitated or covered individuals

Form of organization

ADVOCATE MEDICAL GROUP 3075 Highland Parkway, Suite 600, Downers Grove 60515 630-572-9393; AdvocateHealth.com/AMG

Dr. Vincent Bufalino Chief medical group officer

$1,585.0 4.7%

1,797

92,115

3,897,000

110

234,834

Nonprofit corporation

DUPAGE MEDICAL GROUP 3010 Highland Parkway, Suite 800, Downers Grove 60515 630-469-9200; DuPageMedicalGroup.com

Steve Nelson CEO

$1,100.0 NC

743

740

25,982

3,100,000

72,587

For-profit corporation

NORTHWESTERN MEDICAL GROUP 211 E. Ontario St., Suite 1600, Chicago 60611 312-926-8400; NMG.NM.org

Dr. Howard Chrisman President

$1,012.8 1.5%

1,821

1,711

45,188

1,637,751

143

1,170

Nonprofit corporation

NORTHSHORE UNIVERSITY HEALTHSYSTEM MEDICAL GROUP 1301 Central St., Suite 301, Evanston 60201 847-570-5272; NorthShore.org

Dr. Joseph Golbus President

$615.1 -5.1%

938

895

37,322

947,742

48,900

Faculty practice plan

RUSH UNIVERSITY MEDICAL GROUP 1725 W. Harrison St., Suite 364, Chicago 60612 312-942-5000; Rush.edu

Shannon Driscoll Associate vice president, practice operations

$380.5 -0.6%

791

735

29,904

576,279

Nonprofit corporation

LOYOLA MEDICAL GROUP 2160 S. First Ave., Maywood 60153 708-216-9000; LoyolaMedicine.org

Dr. Richard K. Freeman Regional chief clinical officer

$337.9 -3.6%

741

41,456

1,178,037

131

36,105

Faculty practice plan

UNIVERSITY OF CHICAGO PHYSICIANS GROUP 5841 S. Maryland Ave., Chicago 60637 773-834-2390; UChicagoMedicine.org

Mamoon Nawabi Executive director, revenue cycle

$313.8 2.7%

1,026

906

32,178

588,927

118

11,214

Faculty practice plan

ILLINOIS BONE & JOINT INSTITUTE LLC 900 Rand Road, Suite 300, Des Plaines 60016 847-375-3984; IBJI.com

Andre Blom CEO

$280.0 37.3%

157

For-profit corporation

AMITA HEALTH MEDICAL GROUP 200 S. Wacker Drive, Chicago 60606 844-366-0610; AmitaHealth.org

Dr. Reinhold Llerena, President, Drew Palumbo, Chief operating officer

$268.4 -1.1%

692

629

32,461

1,553,219

139

29,272

Nonprofit corporation

NORTHWESTERN MEDICINE REGIONAL MEDICAL GROUP 25 N. Winfield Road, Winfield 60190 630-933-2374; RMG.NM.org

Dr. Patrick Towne President

$233.4 -4.0%

641

606

42,351

1,072,001

143

29,303

Nonprofit corporation

EDWARD-ELMHURST MEDICAL GROUPS 4201 Winfield Road, Warrenville 60555 630-527-3000; EEHealth.org

Dr. Daniel Sullivan Chief physician executive and executive VP, physician and ambulatory network

$205.9 1.7%

371

61,061

1,038,958

29,289

Nonprofit corporation

CHILDREN’S HOSPITAL OF CHICAGO FACULTY PRACTICE PLAN 737 N. Michigan Ave., Suite 2040, Chicago 60611 312-227-6413; LurieChildrens.org

Dr. John Walkup President

$201.0 8.6%

1,086

1,003

10,655

627,281

Faculty practice plan

UNIVERSITY OF ILLINOIS AT CHICAGO MEDICAL SERVICE PLAN 1919 W. Taylor Ave., Suite 823, Chicago 60612 312-413-1350; Hospital.UIC.edu

Dr. Heather Prendergast Interim executive director, physician group

$149.3 -30.0%

816

719

16,798

433,590

205

23,742

Nonprofit association

NEPHROLOGY ASSOCIATES OF NORTHERN ILLINOIS/INDIANA 120 W. 22nd St., Oak Brook 60523 630-573-5000; NephDocs.com

Brian J. O’Dea CEO

$102.8 19.5%

132

47,550

61,000

9,800

For-profit corporation

ILLINOIS GASTROENTEROLOGY GROUP 1415 S. Arlington Heights Road, Arlington Heights 60005 312-331-0927; IllinoisGastro.com

Michael Cline Chief operating officer

$94.3 63.5%

21,000

156,000

280,000

Partnership

NORTHWEST COMMUNITY HEALTH MEDICAL GROUP1 3040 W. Salt Creek Lane, Arlington Heights 60005 847-618-3475; NCH.org/MedicalGroup

Margie Rumpsa Executive director

$80.0 NC

225

Nonprofit corporation

New HUMBOLDT PARK HEALTH PARTNERS2 1044 N. Mozart St., Suite 100, Chicago 60622 773-292-8200; HPH.care

Dr. Abha Agrawal Chief medical officer

$70.0 3.1%

103

5,805

21,582

2,177

Nonprofit corporation

New SINAI MEDICAL GROUP 1500 S. California Ave. , Suite F105, Chicago 60608 773-257-2273; Sinai.org

Edward Carne President

$59.3 -5.2%

344

267

15,473

96,821

14,019

Nonprofit corporation

CARDIAC SURGERY ASSOCIATES 2650 Warrenville Road, Suite 280, Downers Grove 60515 630-324-7900; OpenHeart.net

John Barakat Chief financial officer, chief operating officer

$40.0 -7.4%

For-profit corporation

MIDWEST CENTER FOR WOMEN’S HEALTHCARE 2801 Lakeside Drive, Suite 209, Bannockburn 60015 847-562-1410; MCWHC.com

Heidi J. Spears CEO

$36.4 -9.3%

4,822

148,182

Partnership

New PEDIATRUST 2215 Sanders Road, Suite 105, Northbrook 60089 224-330-6300; PediaTrust.com

Kathleen McTigue CEO

$31.5 -6.9%

153,000

Partnership

New ILLINOIS DERMATOLOGY INSTITUTE LLC 903 Commerce Drive, Suite 333, Oak Brook 60523 847-769-3528; IllinoisDerm.com

James Wonnacott CEO

$30.0 NC

150,000

Partnership

$25.3 -12.6%

3,393

33,000

Nonprofit corporation

SHIRLEY RYAN ABILITYLAB 355 E. Erie St., Chicago 60611 312-238-1000; SRALab.org

Joan Berta Director, physician practice

VISTA PHYSICIAN GROUP 200 S. Greenleaf St., Suite A, Gurnee 60031 847-599-1142; VistaPhysicianGroup.com

Clifford L. Moudy II Executive director

$8.9 1.8%

1,947

55,424

2,095

For-profit corporation

ADVANCED FOOT & ANKLE 70 E. Lake St., Suite 1102, Chicago 60601 312-372-1160; AdvFoot.org

Patrice Cooper Chief operating officer

$2.8 -9.0%

4,000

1,200

Partnership

To qualify, groups must be located in the seven-county area of Cook, DuPage, Kane, Lake (Ill.), Lake (Ind.), McHenry and Will counties. Net revenue is net of contractual allowances, bad accounts and charity care. “Covered individuals” is the number of people for whom an amount is paid to cover medical services over a specified period. NA: Not available. NC: No change. 1. On Jan. 1, 2021, Northwest Community Healthcare became a subsidiary of NorthShore University HealthSystem. 2. Formerly Norwegian Physicians Group.

Researched by Chuck Soder (researcher@chicagobusiness.com)

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3/12/21 12:18 PM

10 MARCH 15, 2021 • CRAIN’S CHICAGO BUSINESS

EDITORIAL

s Crain’s columnist Joe Cahill puts it so eloquently in this week’s issue, the end of the pandemic, now tantalizingly near, represents a once-in-a-lifetime opportunity for Chicago and its leadership to think anew about the regional economy and adapt to new realities. The skill sets that once made Chicago great—our trading savvy, our talent for building big things, our entrepreneurial drive, cultural bona fides, health care leadership, logistics know-how, university firepower and marketing chops—are among the assets that will help the local economy rebuild after a historic setback. But these talents can’t be directed toward rebuilding the economy that was. They must be leveraged to build the economy that will be—a world where cutting-edge technology, intellectual capital, lightning-fast efficiency, green credentials as well as values like diversity, equity and inclusion will be the qualities that win investment and growth. Of course, an enormous infusion of federal money will have its own effect on the Chicago-area economy, and here, too, our leaders must not allow yesterday’s habits of thought and deed to shape future actions. Our elected officials—Gov. J.B. Pritzker and Chicago Mayor Lori Lightfoot—must seize this opportunity to put the city and state’s financial affairs in the best possible order. Paying down debts and fulfilling IOUs is not the sort of spending that’s splashy, but it’s the kind that can go a long way toward repairing our battered fiscal image. Proof of that effect is already starting to emerge: On the same day Pres-

which is earmarked to receive $7.5 billion to shore up its budget and pay off old bills. The Pritzker administration is expected first to pay off more than $2 billion in outstanding loans from the Federal Reserve, Hinz reports, and to reduce its backlog of unpaid local bills. The city of Chicago, meanwhile, is in for roughly $1.8 billion. The Regional Transportation Authority: $1.5 billion. The Lightfoot administration is also likely to use a large portion of its federal allotment to pay off debts. Officials

OUR ELECTED OFFICIALS MUST SEIZE THIS OPPORTUNITY TO PUT THE CITY AND STATE’S FINANCIAL AFFAIRS IN THE BEST POSSIBLE ORDER. GETTY IMAGES

Don’t blow this federal bailout, please

President Joe Biden signs the $1.9 trillion COVID relief bill into law. ident Joe Biden signed the American Rescue Plan, Moody’s Investors Service upgraded Chicago Public Schools’ debt slightly, citing the prospect that federal aid will help stabilize the still-junk-rated school system’s finances. With luck, more such upgrades are in the offing for all local government bodies, as new federal money helps put budgets back into balance. Even before the $1.9 trillion federal

COVID relief bill was signed into law on March 11, Crain’s columnist Greg Hinz enumerated how the money is going to be distributed locally. Aside from dollars being funneled to individuals and businesses—for example, about 11 million Illinoisans will get stimulus checks of up to $1,400 each, Hinz figures—local governments and agencies are big winners. The single largest chunk of the local stimulus will go to the state of Illinois,

had planned to balance much of her 2021 budget by refinancing $500 million in debt and deferring repayment costs years into the future, a tactic known as scoop and toss. But they also said they’d hold off until seeing what, if anything, Biden was able to get out of Congress. Some progressive members of the City Council already have been urging that any new money be spent, not saved or used as a substitute for borrowing. Lightfoot should stand firm that repairing the city’s finances, balanced with smart investments in infrastructure, are the best way to position Chicago for the economy of the future, not the money-wasting, slow-motion deterioration of the past.

YOUR VIEW

I would love a Target on the Mag Mile

mall’s owner, which is reportedike many people who keep ly in negotiations with Target. up on Chicago retailing, I “I’m like, ‘What are you thinking, woke up last week to specBrookfield?’ ” she said. ulation that a Target might go In her view, Brookfield is so into Macy’s space in Water Tower desperate for a tenant that “they Place. would take anybody who would “Wow,” was my first thought. give them a dollar to get into the “What a fantastic idea for the building,” Pappas said. neighborhood!” I meant both the Embarrassing? Cue the sound Gold Coast, where I used to live, Micheline Maynard and Streeterville, where I worked is an author and of a record scratch. writer in Ann ArAs a former resident of 900 N. at WBEZ on Navy Pier. Lake Shore Drive, one of Mies Then I read on and learned bor, Mich., who that Cook County Treasurer Ma- was senior editor van der Rohe’s Four Black Boxes, let me put it as simply as his arria Pappas, also a Water Tower of the Changing chitecture. neighbor, did not share my en- Gears public radio project, based An urban Target is not embarthusiasm. rassing. Urban Targets meet the “How embarrassing is this to at WBEZ. needs of today’s city dwellers, the the city?” Pappas said during an interview March 5 on WGN. “I’m trying to way the original wave of Chicago departfigure out what is magnificent on the Mag- ment stores, like Marshall Field, Carson Pirie Scott and Goldbatt’s did in the 20th nificent Mile about Target. It’s disgusting.” She called out Brookfield Properties, the century.

For anyone with a short memory, Wa- our college town drugstores didn’t have. Walgreens didn’t seem a bit incongruter Tower Place opened in 1976 with Lord & Taylor as the anchor store to the north, ous on the elegant street; it seemed necessary. I often thought how lucky the resMarshall Field to the south. To a young shopper like me, it was re- idents of its apartment building were to tail heaven, and a reason in itself to take have a Walgreens downstairs. I feel the same way now about a Target the train from Ann Arbor to Chicago. My mother and I would drop off our bags at the Park Hyatt, stroll to Michigan Avenue, and head URBAN TARGETS MEET THE NEEDS OF north. TODAY’S CITY DWELLERS, THE WAY THE We could spend an entire afternoon at Water Tower, shop- ORIGINAL WAVE OF CHICAGO DEPARTMENT ping until we dropped. When we finished with Field’s, we’d head STORES DID IN THE 20TH CENTURY. to Lord & Taylor. Somewhere along the way, we’d get a snack, usually in on the Magnificent Mile. Imagine how convenient it will be for Field’s food section upstairs. But here’s something else. On our way Gold Coasters as well as tourists and busiback to the hotel, we often popped into Wal- ness travelers to pop in. People stressed for greens at 757 N. Michigan Ave., for snacks time can place orders in advance and coland forgotten hair spray and to look at the lect them at customer service. That’s what I did when I lived in Boston, vast section of makeup and toiletries that

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

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3/12/21 2:04 PM

CRAIN’S CHICAGO BUSINESS • MARCH 15, 2021 11

YOUR VIEW Continued I cut my teeth in the retail world. I worked at Jacobson’s department stores in Ann Arbor and East Lansing when I was in high school and college. Decades ago, my mother sold shoes at Field’s in the Loop, in between her real job in the blood bank at Cook County Hospital and her studies at what was then Roosevelt College. I would like nothing more than for the Magnificent Mile to look like it did when Water Tower Place was bustling, when Stanley Korshak supplied elegant dresses to my mother and her friends, and when I could spend hours in the cafe at Borders Books & Music, dreaming about the day when I’d become a writer. But cities change. Retailing changes. About the only constant on Michigan

Avenue has been the Drake Hotel. Crate & Barrel is gone, replaced by Starbucks Reserve. Even Topshop, which replaced Borders, disappeared. While the pandemic has hastened the damage, the shift has been underway for years. When I lived at 900 N. Lake Shore last decade, I only went to Water Tower for two purposes: to eat or to see theater. Shopping? I did that online or elsewhere, like the Target at South Clark Street and Roosevelt Road. So yes, put an urban Target in Water Tower Place. Give the neighborhood something useful that both visitors and residents can enjoy. And realize that to keep people coming to cities, they have to meet their shopping needs, not only the image you’d like a street to project.

Water Tower Place

JOHN R. BOEHM

where I had two urban Targets within walking distance. One was at Packard’s Corner, a block from my office at WBUR on Commonwealth Avenue, the other near Fenway Park, an easy stop on the way home, or before a ballgame. Those Targets kept my money in Boston and meant I didn’t have to go to a suburb. The one near Boston University is in a renovated historic building, which is what Target has done with its store in the Loop. As my friend Peter Sagal, the host of “Wait Wait . . . Don’t Tell Me” on public radio, pointed out on Twitter, “Target has already saved the Louis Sullivan facade of the old Carson Pirie Scott store by making it a viable retail operation in the Loop. C’mon, people.”

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3/12/21 2:04 PM

12 MARCH 15, 2021 • CRAIN’S CHICAGO BUSINESS

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ly a function of the pandemic and the moratoriums for most of the last year on shut-offs. “Because ComEd temporarily suspended disconnections last year, particularly for low-income customers and customers who express hardship, and temporarily waived late-payment fees, past-due balances are trending higher,” spokesman Paul Elsberg says in an email. “Our goal is to keep every ComEd customer connected and provide assistance where needed, and it is important that customers who can afford to pay their bills continue to do so to prevent higher past-due amounts from causing rates to increase for all customers.”

consumers. The difference now is that the hardship cases are in worse shape. The average arrearage is far greater, totaling $629 per customer versus $518 in January 2020. Chicagoans collectively owed Peoples $147 million for their late bills; the figure was $128 million a year before. They owed ComEd $50 million, up 56 percent from $32 million in early 2020. Peoples is under fire for heating bills rising solely due to the utility’s slow-progressing and costly infrastructure program to update aging gas pipes in the city, as well as to convert the system to medium pressure. To finance the work, state law allows gas utilities to slap a monthly HARDEST HIT surcharge on its bills, which for PeoChicago’s heating affordabiliples now totals well over $10. That’s ty crisis is hitting the South and on top of the cost of gas and delivery. West sides most acutely. Two out Legislation to phase out the sur- of every 3 households not already charge, which currently will sun- on utility-payment assistance in set in 2023, was reintroduced in Englewood’s ZIP code were delinthe House and Senate last month. quent on their heating bills in Jan“This year has made clear that we uary, according to the data. Two need to restore utility oversight in of every 5 were late by more than Illinois,” House sponsor Joyce Ma- four months. Collectively, past-due son, D-Gurnee, said in a March 10 totals in that neighborhood alone release. “As families are tightening from those customers approached their belts, we can no longer allow $5 million, more than $952 for each unaccountable utility spending to account on average. raise heating bills unchecked.” In North Lawndale on the West Gov. J.B. Pritzker also supports Side, nearly half of the households ending the surcharge authority, are delinquent and nearly a quarter which gas utilities like Peoples con- are late by more than four months. tinue to insist is needed to perform The average delinquent account is work aimed at making the system safer. Advocates including “THIS YEAR HAS MADE CLEAR THAT PIRG and the Citizens Utility WE NEED TO RESTORE UTILITY Board are backing the initiative, but in recent years sim- OVERSIGHT IN ILLINOIS.” ilar bills to halt the lightly regulated rate hikes haven’t State Rep. Joyce Mason, D-Gurnee progressed thanks in large part to opposition from unions $692. In Woodlawn on the South whose members benefit from the Side, 55 percent of households are infrastructure work. late, and 31 percent by more than Peoples, which serves more than four months. Households are be818,000 residential customers in the hind by $676 on average. city, accounted for 45 percent of all Given that the average household delinquent utility bills in the Chi- Peoples bill last year was $1,128, cago area when including ComEd those arrearages signal that many and much larger suburban gas util- residents weren’t paying virtually ity Nicor. ComEd serves 3.7 million any of their gas bills. households throughout northern Of course, the pandemic only has Illinois, and Nicor serves 2.1 million worsened what already was a crisis households. in communities like Englewood. In “The comparison to ComEd and January 2020, before COVID struck, Nicor is not appropriate in this more than half of Englewood case. . . .We have very different cus- households were delinquent on tomer bases and counts,” Peoples their Peoples bill to the tune of $849 spokeswoman Danisha Hall says in each on average. Peoples has said in an email. the past it treated disconnections as a last resort and hoped that repeated shut-off warnings would prompt COLLECTIONS If collection activity resumes as delinquent customers to negotiate scheduled next month, Peoples payment plans. Informal discussions are underconsiders 116,000 of the 233,409 delinquent households eligible way between the utilities, consumfor warnings and shut-offs, 1 in er advocates and the ICC on how 10 residential accounts, she says. to handle the unpaid utility bills, That corresponds almost exactly as well as what to do in the future. to the number of households that State law allows utilities to pass are more than four months late, along all their costs of uncollectible although Hall says the threshold bills to ratepayers in a surcharge. Says ComEd’s Elsberg, “We’re for launching collections is an undisclosed dollar amount, not how continuing to work with a broad set many months behind a customer is. of groups in the state on new proFor ComEd, which in recent years posals that we hope will provide has been considerably more aggres- carefully designed support, more sive than Peoples in cutting off ser- customer protections and the most vice to customers who don’t pay, flexible terms for our vulnerable the increase in unpaid bills is main- customers.”

3/12/21 2:44 PM

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P015-P019_CCB_20210315.indd 15

3/12/21 12:22 PM

16 MARCH 15, 2021 • CRAIN’S CHICAGO BUSINESS

CRAIN’S CHICAGO BUSINESS

COMMUNITY VOICES

Our economy is not a zero-sum game I

Helene D. Gayle is president and CEO of the Chicago Community Trust, which is a sponsor of Crain’s Equity.

can’t claim to be a sports expert, but I know that the Bears, Bulls and Blackhawks wouldn’t be very competitive if they left two-thirds of their players on the bench every game. Yet, as Chicago fights to come back from the impacts of the COVID-19 pandemic, that’s precisely what we’re doing—by allowing the wealth gap with Black and Latinx residents to persist. As local economies everywhere struggle to recover, Chicago’s is lagging the nation. Even more worrisome, one-third of Chicago’s young people don’t see their futures here. In rebuilding our economy, both now and for the long term, we need to make sure that everybody is in the game. When it comes to growing our local economy, all Chicagoans are teammates. The more who participate, the more we produce and the better everyone does. Conversely, the more people who are excluded from opportunity, the more difficult it is for our region to compete. We’re playing the game shorthanded, but it doesn’t have to be this way. Government can help by adopting policies that expand the pie and spread the wealth. Developing innovative approaches like child savings accounts, expanding job training programs and ensuring a living wage will result in more workers who pay

taxes, spend money and contribute to more stable neighborhoods. The private sector has a major role to play, as well. Businesses can expand the pool of people from which they hire. Aon and Accenture are examples of local companies that are bringing people to the workforce from non-traditional backgrounds. Initiatives such as OneTen, through which businesses have committed to hiring one million Black Americans over the next 10 years in family-sustaining jobs, can play an important role. Businesses also can use their dollars differently. For example, depositing their money in banks that make a point of lending in disinvested communities will encourage more banks to start serving Black- and Latinx-owned businesses and entrepreneurs. And by procuring more products and services from vendors owned by people of color, as the University of Chicago has begun, local enterprises can enable those businesses to succeed. The COVID-19 pandemic has shut down large portions of Chicago’s economy. Service industries, such as hotels and restaurants, have been particularly hard hit. Recognizing the negative impact on workers and small businesses, governments at every level have stepped up with strong rescue plans. We’ve seen major investments in

our health care system and expanded unemployment benefits for laid-off workers. The federal Paycheck Protection Program has provided billions of dollars to keep workers on the payroll and small businesses from closing their doors for good. State and city lending programs have followed suit. While imperfect, the result of these changes has meant far less economic damage and joblessness than was forecast and hopes for a quicker recovery when the pandemic finally ends. We should learn from this experience by maintaining the momentum after COVID, making sure that our economy continues to expand. Let’s bring this same commitment to solving the conditions that constrain our economic future. Address-

ing the health care gap. Increasing opportunities to grow household wealth. Investing more in disinvested neighborhoods. Engaging communities that do not typically have a seat at the table. All of these actions will grow our economy and improve the quality of life for all. Our economy is not a zero-sum game. When those who traditionally are left out get the chance to succeed, we all do better. Their progress doesn’t come at someone else’s expense. Instead, everybody gains. So as Chicago rebuilds its economy after the ravages of the coronavirus, we should be guided by the principles of equity, opportunity and prosperity. Let’s put our strongest team on the field by making sure that everyone plays.

Blacks lag in investing in stocks, saving for retirement But an Ariel-Schwab survey finds a rising number of younger Black people are getting into the market for the first time BY WENDELL HUTSON Black people continue to lag behind their white peers when it comes to investing in the stock market, saving for retirement and building long-term wealth. Those are the findings from a new Ariel-Schwab Black Investor survey, released last month. One reason for the disparity is trust, which historically has been a major factor within the Black community when it comes to investing. Blacks (23 percent) and whites (20 percent) are similar in their belief that financial services firms cannot be trusted, but only 35 percent of Black investors surveyed said they felt respected by financial institutions versus 62 percent for white investors. All the more reason why Blacks (21 percent) are less likely to work with financial advisers as opposed to whites (45 percent). Black participation in the stock market in 2020 stood at its lowest

P015-P019_CCB_20210315.indd 16

level since Ariel Investments, a Chicago-based investment firm, conducted its first survey in 1998. Mellody Hobson, co-CEO of Ariel, noted that 51 percent of whites say they have inherited wealth, compared with just 23 percent of Blacks. Not surprisingly, the pandemic played a big part in how investors, both Black and white, performed in 2020 but clearly impacted Blacks more, the survey found. More Blacks reported cutting spending on both extras (50 percent versus 41 percent for whites) and basics (19 percent versus 13 percent). Since the pandemic began last year, student loan providers reported higher loan deferrals from Blacks (16 percent) than whites (5 percent). While Blacks save $393 overall per month, whites are saving 76 percent more, $693 per month. That number does not change much for upper-income Blacks

HOW COVID-19 IMPACTED FINANCES BLACK AMERICANS

WHITE AMERICANS 50%

Cut spending/extras

41%

19%

Cut spending/basics Dipped into emergency fund

18%

Financially supported family/friends

18% 16%

Delayed/deferred student loan payment

12%

Borrowed money from plan*

Asked family/friends for financial support

13% 10% 13% 5% 5% 4%

*For 401(k) participants. Source: Ariel-Schwab Black Investor survey

earning $100,000 per year. The survey found that those earners save or invest much less than whites with the same income. For decades Blacks (63 percent) have gotten their first taste of investments through a 401(k) plan. And while ownership rates of 401(k) plans are now similar between Blacks (53 percent) and whites (55 percent), savings rates remain unequal. Whites invest 26 percent more per month ($291) in

401(k) accounts than Blacks ($231). Blacks are less likely than whites to have a written will, financial plans or retirement plans, the survey found. White (44 percent) and Black Americans (33 percent) said that preparing for retirement is their most important financial goal. The trends could be changing: Blacks (63 percent) under age 40 (mainly new investors) are now investing in the stock market as

much as whites. In 2020, three times as many Black investors as white investors (15 percent versus 5 percent) reported investing in the stock market for the first time. And 29 percent of Blacks were new to investing, compared with 16 percent for whites. The online survey, conducted by Helical Research, was done in December 2020 and included 2,104 Americans age 18 and older whose 2019 income was $50,000 or higher.

3/12/21 1:56 PM

CRAIN’S CHICAGO BUSINESS • MARCH 15, 2021 17

The toll of racism in Chicago’s real estate market How contract selling—a ‘color tax’—devastated Black homeowners BY WHET MOSER The legacy of racism in Chicago’s real estate market has been told extensively in recent years. But what was its toll? In 2019, a consortium of researchers from Duke University, the University of Illinois at Chicago, and Loyola University Chicago put a number to it: $3 billion to $4 billion was extracted from Black communities in the city in the 1950s and Bruce Orenstein 1960s through the practice of contract selling, a rent-to-own model that Black families were forced into by public policy and private markets. Between 75 percent and 95 percent of all homes sold to Black buyers during those decades were on contract. Unable to get mortgages, prevented from moving into white neighborhoods by violent resistance, contract buyers typically paid 84 percent markups on the houses they could buy, at several points more in interest. On average, Black families paid $587 more per month as a result—what the report calls a “color tax.” That meant less money in retirement accounts, less money for education, and less money to maintain those houses. Those who couldn’t keep up with the additional expense could be evicted easily with no equity from their investment. We spoke with Bruce Orenstein, the study’s project director, about the effects of redlining and contract buying on families, neighborhoods and cities. Orenstein, artist in residence at the Samuel DuBois Cook Center on Social Equity at Duke University, is producing a documentary series, “Shame of Chicago: The Segregation of an American City.” CRAIN’S: How does redlining force Black families into contract selling? ORENSTEIN: In the 1950s and ’60s, you’ve got this post-WWII economic boom, and owning a home became the centerpiece of the American Dream. But the real estate industry, whose policy was federal policy, had determined that certain neighborhoods were not worthy of investment. In those neighborhoods, Black families were unable to take advantage of federally backed loans that allowed white people to enter the middle class. They’re working at the post office. They’re working in the education system,

P015-P019_CCB_20210315.indd 17

This Chicago Tribune photo used in the documentary shows a crowd on the South Side confronting police over evictions in the 1970s. it’s an easy process for a predatory contract seller to get them evicted. It only cost like $4.50 to go to court and file an eviction contract. Whereas if someone had a mortgage, there would be a whole process to protect the homeowner. What does that do to a neighborhood?

The Chicago Commission on Human Relations has a map of attacks on Blacks moving into white neighborhoods around the 1950s. working in government. They’re doctors, lawyers. An educated, Black middle class is burgeoning during these years. But they can’t get loans from banks because of the determination of these redlining policies. Why not move into non-redlined neighborhoods? It was reinforced by violence. Bombings that took place as Black families tried to move into white neighborhoods, year after year after year. The segregation was enforced by policies, but also people’s attitudes. Underlying it all was the threat of violence. What does this do to the market? If Black families wanted a home, they would have to turn to contracts. The contract seller would scare a white family out

of a neighborhood, and they would make some money off of the white family because they were able to buy low, and they were able to turn around and sell their house for 80 percent or 90 percent or more. Black families were willing to pay that because there wasn’t any alternative for owning a home. So they paid this extra kind of color tax. It was a forced market in which people selling the contracts were able to charge those exorbitant rates. What’s the problem with contract selling? In a contract, you don’t get any equity. You pay it off at the end of the contract, or halfway through. And you have none of the safeguards that people who had mortgages have. Oftentimes, if they missed a payment or two,

Contracts bled families of their disposable income so that they had little money to invest otherwise. And they had a hard time getting repairs, because they were always having to meet this monthly contract bill. This was pretty old housing stock to begin with that needed repair in the first place. And on top of that, in order to get more income, they would often divide up their house into other units and rent out rooms. So the neighborhood became way overpopulated. At the same time, you have redlining, which meant that the banks were not investing in the businesses and the community. You couldn’t get a loan even if you had the money. Let’s say you’re a contract owner. You couldn’t go to a bank and get a loan to improve your property, because your community was redlined. So the disinvestment that took place on top of the fact that so many families were struggling. What does that look like to an individual family? My parents grew up in Lawn-

dale and eventually purchased a home in Skokie in 1962, just a couple years’ difference between when Clyde Ross (a subject of the documentary) purchased his home in Lawndale. My father and mother paid $27,000 for a brand new three-bedroom, two-bath house in Skokie. Clyde Ross paid $27,000 for his greystone in Lawndale. My parents paid less on their mortgage than Clyde Ross paid on his contract, even though Clyde Ross made more money than my father made. My father drove a cab and later on had a small delivery service, which was him in his station wagon. Clyde Ross put more money down on his house in Lawndale than my father had to put down on his house in Skokie, and had a higher interest rate. In the 1980s, my mother sold our house for over $300,000. Today, Clyde’s house still isn’t worth $200,000. Chicago has gotten a lot of focus for its history of redlining and contract selling. Were things worse here? I don’t think that’s true at all. I think it happened all over the country. Because the redlining maps, and the policies, and the practices in the banking and real estate industry were similar—in Milwaukee, Detroit, Cleveland, Baltimore, all over urban centers. We’re the only ones to do a study that measures it, but we’ve had inquiries from other cities on how to go about doing that kind of research.

3/12/21 12:22 PM

18 MARCH 15, 2021 • CRAIN’S CHICAGO BUSINESS

CRAIN’S CHICAGO BUSINESS

Continued from Page 15

researchers at Duke University in collaboration with policy groups at the University of Illinois at Chicago, Roosevelt University and Loyola University Chicago found the contracts cost Black families in Chicago between $3 billion and $4 billion in wealth. There were more subtle forces at work, too. Although Black veterans returning from service in World War II were eligible for tuition assistance under the GI Bill, they were barred from enrolling in state universities in the South. And although Black workers technically were eligible for Social Security benefits, the system barred agricultural workers, who were disproportionately Black. And white families rarely paid Social Security benefits for domestic workers, also disproportionately African American and Hispanic. In the early 2000s housing bubble, predatory lenders steered low-income families to subprime loans with excessive interest rates, prepayment penalties or other onerous terms that disproportionately hurt Black and Hispanic borrowers. That legacy hindered opportunities to build wealth through homeownership, buying stocks or simply building savings. In Chicago the home ownership rate among Black families was only 34 percent for the five years ending in 2019, compared to 45 percent for all households and 51 percent for white families, according to the St. Louis Fed. National data for the fourth quarter of 2020 from the St. Louis Fed shows 44 percent of Black families owning homes, lagging the 66 percent ownership for all households and 75 percent for white families. Moreover, typical Black-owned homes are worth about 37 percent less than typical homes in the market, according to a report released earlier this year by Zillow. The gap between the value of Black-owned homes and the overall value of homes in the region is larger than in any of the other 10-largest U.S. metropoli-

tan areas, the report said. “At the end of the day, the challenge to home ownership is meeting the underwriting conditions,” says Lowell Ricketts, lead analyst at the Center for Household Financial Stability. “You need enough wealth for a down payment.” The language that frames the discussion of poverty isn’t helpful, says Audra Wilson, CEO of the Shriver Center on Poverty Law. “It’s accusatory and assumes people are responsible for the conditions in which they find themselves,” Wilson says. The terminology has existed for centuries. In Elizabethan England, poor people were either worthy, such as widows and orphans, or unworthy, the shiftless and lazy. Modern-day narratives are racially charged, Wilson notes, pointing to the stereotype of the Cadillac-driving welfare queen. Then there’s a double standard: Is government aid a handout or an investment? Settlers in the American frontier received tracks of land under the Homestead Act that enabled them to build wealth. The government subsidizes many industries: corn and soybean farmers, oil and gas exploration and air and rail transportation. “There are plenty of points in history where we’ve made strategic investments in the population for a benefit,” Wilson says.

THE FUTURE IS STEM

Shrinking the wealth gap, or at least improving the income and wealth of minority families, requires a variety of strategies, a fresh mindset and persistence, experts say. It’s not that there’s been a lack of effort in the past—dozens if not hundreds of nonprofits aim to fill gaps in education, job training and community development. Past efforts have suffered from a lack of coordination and scale, Wilson says. There have been successes that changed people’s lives, such as the Affordable Care Act. Initiatives have to be more concentrated, deliberate and re-

JOHN R. BOEHM

WEALTH

Audra Wilson, CEO of the Shriver Center on Poverty Law, says the language that frames the discussion of poverty isn’t helpful. fined, she says. Education is a key piece of the equation, and disparities begin early. The ability to read proficiently by fourth grade is a powerful predictor of future success, according to the nonprofit Advance Illinois. In 2017, just 15 percent of Black students read proficiently by fourth grade compared to 22 percent of Latino students and 47 percent of white students. Just 2 out of every 10 students from low-income homes read at grade level by fourth grade, compared to half of their more affluent classmates. There’s progress at the secondary level, with three-quarters of Black students graduating high school, up 7 percentage points since 2012. For Latinos and students from low-income households, the graduation rates are even higher. Between third and eighth grades, the academic growth of Black and Latino students equals or outpaces their white peers, says Melissa Figueira, senior policy adviser at Advance Illinois. “But the current rate of growth while significant, is neither far-reaching nor fast enough to

make up for opportunity gaps (the barriers they face due to race, ethnicity or socioeconomic circumstances) and resource inequities and prepare all students for college and careers,” Figueira says. Education is absolutely necessary but insufficient to address the wealth gap, says Brian Fabes, managing director of the Corporate Coalition, which seeks to reduce severe inequities in the Chicago region. “If parents are working two low-wage jobs and keep getting laid off, how do they find the time and knowledge to guide their school-age children and also gain access to educational opportunities to find better jobs for themselves?” Community organizations are trying to fill gaps at Chicago Public Schools and other districts to focus middle and high school students on career opportunities, particularly in STEM fields. The nonprofit Lumity brings African American and Hispanic professionals to talk about their career journeys and opportunities in technology. Lumity also brings students to area companies, which helps students “start seeing their future

and possible career paths,” says executive director Kara Kennedy. “We took a group to CDW headquarters (in Vernon Hills) and you could see which of the workspaces—warehouse, office and sales room—resonated. The exposure enables students to fine-tune their interests and home in on what they want to do.” Guiding high school graduates to higher education and/or good-paying jobs that offer a career path is critical, experts say. The average median household income for Black families in 2017 was $40,258, about 60 percent of the average income for a white family of $68,145, according to Skills for Chicagoland’s Future and the Economic Policy Institute. The average unemployment rate for African Americans last year was 14.4 percent, outpacing Hispanics at 12 percent and the general population at 9.1 percent, according to the Illinois Department of Employment Security. Black and Latino workers were hit hard because large numbers work in industries punished by the pandemic such as restaurants, hospitality and travel, says Rick-

DISPARITY BY THE NUMBERS White

Black

Hispanic

MEDIAN FAMILY’S WEALTH, 2019

PERCENTAGES OF HOUSEHOLDS THAT ARE MILLIONAIRES, 2019

Each block equals $1,000

MEDIAN HOUSEHOLD WEALTH BY RACE/ETHNICITY AND EDUCATION, 2019 15%

500,000

400,000

200,000

8% $38,000 $23,000

18% 12%

$298,000

300,000

PERCENTAGES OF FAMILIES THAT WERE IN DEBT, 2019

$184,000

$597,000

$600,000

100,000 0

$132,000

$115,000 $47,000

$10,000 $8,000

Less than high school

$47,000 $14,000 High school

$45,000 $43,000 Associate

$77,000 $51,000 Bachelor’s

$243,000 $115,000

Postgraduate

Source: Federal Reserve Bank of St. Louis

P015-P019_CCB_20210315.indd 18

3/12/21 12:22 PM

etts of the St. Louis Fed. One way to reduce the gap: Black-owned companies hiring Black employees. African American-owned AGB, which offers guard and patrol services, fingerprinting and cybersecurity, recruits workers from impoverished neighborhoods: 92 percent of employees are minority, and 76 percent live in communities where unemployment is 40 percent or higher. AGB, which stands for “always giving back,” was founded 20 years ago on the South Side by John Griffin Jr. and his wife, Denitra Griffin, and has grown to more than 800 employees. It serves Fortune 100 companies, utilities, government agencies and retailers. “My husband and I tell companies, ‘When you contract with us, you are helping to bridge the wealth gap,’ ” Denitra Griffin says. “We hire African American people. We develop and train them and offer livable wages.” Equally important, Griffin says, is offering a career path. “From the first day of onboarding, we show employees the opportunities for them to grow,” Griffin says. They can be promoted in rank and responsibility or to a position at headquarters. One employee who started as a security officer earning $14 an hour is now a regional director of operations managing revenue of $2 million. The company generated revenue of $28.4 million in 2019 and ranks No. 23 on the Crain’s list of Chicago’s biggest minority-owned businesses. Revenue grew 17.1 percent from the year before.

REBUILDING FROM THE GROUND UP

Lakes States. “We have to focus on creating opportunities, so residents can look to a better future,” Mitchell says. Improving income and wealth also requires revitalizing South and West Side neighborhoods that have been hollowed by the loss of manufacturing jobs and an exodus of Black residents to the suburbs, surrounding counties and the South. Entire communities thrived around steel mills and factories that paid good, solid wages with which you could raise a family, says Wilson of the Shriver Center. When the plants closed there was nothing to replace them and communities on the South Side became blighted as businesses shuttered and the downtown areas became “frozen in time,” Wilson says. Community development in these neighborhoods is complicated and requires multiple layers of capital such as tax credits and tax-increment financing district designation. The nonprofit Chicago Neighborhood Initiatives spent the better part of a decade on a revitalization of the Pullman neighborhood, coordinating $370 million in investment and creating 1,500 jobs. The initiative attracted a Walmart, a Whole Foods distribution center and a plant operated by a manufacturer of green cleaning products. CNI teamed with other groups on the development of an Englewood retail center anchored by a Whole Foods Market that opened in 2016. And it’s working with a team of developers on the Bronzeville Lakefront project that includes redevelopment of the former Michael Reese Hospital. “We need to rebuild communities from the ground up and from within,” says CNI President David Doig, a veteran of community development and former superintendent of the Chicago Park District. “That way you start to bring population, jobs and retail back so people that live there can benefit and not feel that they have to leave

Large corporate employees also are trying to move the needle. Companies in the Chicago Apprentice Network that was founded by Aon, Accenture and Zurich offer full-time, entry-level jobs to full-time students at community colleges. More than 40 companies recently were offering 800 apprentice roles. The nonprofit Skills for Chicagoland’s Future recruits and trains THERE’S OPTIMISM ABOUT A NEW unemployed and unERA OF MORE OPPORTUNITY. deremployed Cook County job seekers for dozens of companies. Since its to get what they need.” There’s optimism that the start in 2012, it has placed more than 8,000 workers for 100 em- turbulence of 2020 will usher ployers including Bank of Amer- in an era of more opportunity. ica, CDW, McDonald’s, PepsiCo The Floyd killing highlighted the inequities that exist but also esand Walgreens. AT&T in 2018 opened a call tablished a platform where Africenter in the Horner Park neigh- can Americans can speak openborhood and staffed it with ly of the challenges, says Denitra employees recruited from 19 Griffin of AGB. “The good thing is that there’s neighborhoods on the South and West sides most affected by willingness to be open, to high unemployment and gun vi- change and to listen,” she says. olence. The telecom giant hired “I think there’s substance bemore than 600 workers from hind the changed behavior. It’s these neighborhoods for jobs not just checking the box. This is at call centers and retail stores, providing a glimpse to people of says Eileen Mitchell, president what success can look like and of AT&T Illinois and AT&T Great change your life.”

P015-P019_CCB_20210315.indd 19

COMMUNITY VOICES

Concrete ways to help bridge the wealth gap that invest in the African American community.

The wealth gap—better described as a chasm—is well documented. We asked two local executives for concrete suggestions about how businesspeople and government can help bridge it. Jessica Droste Yagan, who notes that Chicago is one of the most segregated cities in America with some of the most devastating inequalities in access to education, health care and transportation, is CEO of Impact Engine. Impact Engine is a Chicago-based venture-capital and private-equity firm investing in companies driving positive impacts in education, economic empowerment, health and environmental sustainability. Here are her ideas: w Invest in or make deposits at banks or Community Development Financial Institutions (CDFIs) which serve underinvested neighborhoods. w Invest in local funds that are intentionally aligning financial and social returns. w Hire LiftUp Enterprises, Cleanslate, Purpose Workforce or other organizations offering employment to those who have been left out. w Be proactive in helping your low-wage workers sustain themselves. If you can’t pay more, think about practices like paying wages more often (so they can avoid payday loans) or making

w Create a health care fund that will subsidize health care for companies located in the African American community.

Jessica Droste Yagan and Ronald E. Damper scheduling more flexible (knowing most minimum-wage workers have to work multiple jobs). w Use your purchasing power to buy from local Black or Latinx businesses, or businesses like B corporations that proactively manage their impacts on the community. From Ronald E. Damper, founder and president of Damron Enterprises, which operates Damron Packaging & Logistics in Chicago: 1. Increase the number of job opportunities in the African American community by offering low-cost loans to small businesses w SBA (Forgivable) loans similar to those triggered by COVID. Create programs to do this all year long. w Eliminate penalties for 401(k) withdrawals for workers in the African American community. w Reduce taxes for companies

2. African American entrepreneurs cannot get access to capital. Create a consortium bank to piggyback on the Community Reinvestment Act. 3. Create programs to increase the number of African American high school graduates. w A program similar to the Peace Corps, earned repayment amortization (ERA), in which student debt would be forgiven for time spent working in African American communities. 4. Reduce incarceration rates for nonviolent offenses. 5. Establish phased-in minimum wage increase. 6. Commit to a holistic governmental approach with specific departments addressing specific issues. We need a task force comprised of departments of commerce, housing and banking to develop solutions for these issues. 7. Tie executive compensation to diversity and inclusion goals. For this effort to advance, it must start at the top and be incentivized for real top-down commitment.

GETTY IMAGES

JOHN R. BOEHM

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Follow Our Victories !

BLOOMBERG

CAREER OPPORTUNITIES

SPAC founders raise money for acquisitions in public offerings of SPAC shares. In most cases, they get 20 percent of the SPAC for $25,000, or less than 1 cent per share, while outside investors typically pay $10 a share. Sponsors also generally put up $5 million to $10 million for warrants to buy 3 percent to 4 percent of the SPAC shares at or slightly above the IPO price, usually $11.50 per share. The founder’s shares and warrants become worthless if the SPAC doesn’t find an acquisition within two years, unless shareholders agree to an extension. But if sponsors close a deal, they’re in line for a big payday after a lock-up period, which usually lasts a year. “They basically pay a fair price for the warrants but give themselves stock for next to nothing,” says Jay Ritter, a finance professor at the University of Florida’s Warrington School of Business. “On average they’ve been really great deals for the sponsors. Even though some wind up with no merger, and the sponsor loses everything, others resulted in hundreds of percent returns.” More than 200 new SPACs have been announced so far this year, pitting these teams against each other in a race to find deals before their time runs out. A hedge fund mogul and a former SEC chairman have questioned whether such allor-nothing propositions create fundamental conflicts of interest that should be disclosed or even disallowed. Insurers, meanwhile, are demanding higher premiums for directors and officers policies. Hedge fund manager Bill Ackman calls founder’s shares “egregious” and didn’t include them when he floated one of the biggest SPAC deals, last summer’s $4 billion Pershing Square Tontine Holdings offering. “SPACs are a compensation scheme, like people used to say about hedge funds, but it’s even worse,” Ackman told Institutional

w THE SPAC TSUNAMI Special-purpose acquisition companies once were a small part of the IPO market. Now they dominate. IPOs

Percentage of total that are SPACs Total IPOs 500 456 400

MONEY RAISED

Percentage of total that are SPACs $200 billion

Total raised $167.7

150

300 189

200

232

265 211

77%

111

$49.4 50

100 12% 18% 20% 28% 0 ‘16 ‘17 ‘18 ‘19

$90.9

100

54%

‘20

‘21

$24.3 15% ‘16

$60.8 $62.5

49%

72%

20% 18% 22% ‘17

‘18

‘19

‘20

‘21

Source: Dealogic

Investor. “In a hedge fund, you get 15 to 20 percent of the profit,” he said. “Here you get 20 percent of the company.” Tontine insiders put up $65 million for warrants priced at $24, compared with the $20 price investors paid for their shares in the IPO. “Our sponsor and our independent directors will only participate in the value of our company if our stock price is at least 20 percent higher than the initial offering price,” the company’s filing says. Caltabiano and his fellow sponsors of Choice Consolidation, a Chicago-based cannabis SPAC that raised $172 million, bought $37.5 million worth of shares at the offer price, in addition to $5 million for warrants, as well as the founder’s shares that cost $25,000. The sponsor group of Wasson’s SPAC, Foresight Acquisition, got founder’s shares and bought $8.3 million worth of shares at the offer price in a $325 million IPO. “We felt it was important to show our commitment to the deal by putting in an outsize amount of capital and putting our money where our mouth is,” says Caltabiano, co-founder of Chicago cannabis company Cresco Labs. “There’s certainly a financial reward to sponsors putting together a SPAC, no doubt,” he acknowledges. “But there’s a risk you don’t find a transaction.” The potential windfall from nearly free founder’s shares, as well as the millions they pay for warrants, gives sponsors a powerful incentive to find deals. Some fear the

incentive could be too strong. “The sponsor has a choice: If the SPAC liquidates, they get no value from their shares, and they lose the up-front investment they made. If the SPAC merges, they get shares that will almost certainly be worth much more than the sponsor paid for them, even if those shares drop well below $10 per share,” says Michael Ohlrogge, an assistant professor at New York University School of Law, who co-authored a study on SPACs. “Basically, there’s absolutely no reason for a SPAC sponsor to ever let the SPAC liquidate, if the sponsor can possibly avoid it.” Jay Clayton, former chairman of the Securities & Exchange Commission, raised the issue last fall. “One of the areas in the SPAC space I’m particularly focused on, and my colleagues are particularly focused on, is the incentives and compensation to the SPAC sponsors,” he said in a CNBC interview Sept. 24. “How much of the equity do they have now? How much of the equity do they have at the time of the IPO-like transaction? What are their incentives? We want to make sure investors understand those things.” The SEC issued guidelines in December focused on increased disclosures regarding insiders’ ownership and conflicts of interest. Potential conflicts haven’t dampened the enthusiasm for SPACs, which accounted for 1 in 5 IPOs in 2018 but now make up nearly 4 out of 5 initial public offerings, according to research firm Dealogic.

3/12/21 2:49 PM

CRAIN’S CHICAGO BUSINESS • MARCH 15, 2021 21

Horizon loses millions in sales as feds commandeer drug production capacity HORIZON from Page 3 that need that drug are getting disadvantaged by this. But on the other end, vaccines are getting produced at a bigger quantity and more efficiently.” Catalent last year agreed to fill and package vials of Moderna’s vaccine at its Bloomington, Ind., facility that makes Tepezza. But devoting more resources to vaccine production, as required by Operation Warp Speed under the Defense Production Act, meant Catalent had to stop manufacturing Horizon’s rare disease drug in late November, less than a year after it hit the market. Horizon in December announced it would delay new patients from starting the treatment to conserve supply for existing users. But the drug was completely out of stock by the end of 2020. Walbert won’t estimate how many Tepezza patients have been affected but notes that several thousand were on the drug last year and says a “significant number” had to stop treatment. Since demand for Tepezza was so strong during its first year on the market, Horizon wasn’t able to build up its inventory, Jefferies analyst David Steinberg says. For many drugs, companies will stockpile six months’ worth of supply so they can withstand a temporary setback like this one, he says. In addition to denying patients the only drug approved to treat their debilitating condition, the shortage also deprives Horizon of sales. Approved by the Food & Drug Administration on Jan. 21, 2020, Tepezza contributed $820 million in net sales during the year—more than 23 times Horizon’s initial forecast and 37 per-

w DRUG DEFERRED The government mandate to prioritize vaccine production has led to a shortage of Horizon Therapeutics’ top-selling product. The shortage deprives Horizon of sales, and patients can’t get the only approved treatment for thyroid eye disease, which causes bulging eyes and vision problems. TEPEZZA NET SALES $350 million 300 250 200 150 100

$90 million

50 0

Q1 Q2 Q3 Q4 Q1 2020 2020 2020 2020 2021*

*Wall Street estimate. Tepezza was approved by the FDA on Jan. 21, 2020. Source: SEC filings

cent of the company’s total net sales of $2.2 billion. In the fourth quarter alone, net sales of Tepezza were $344 million, a 20 percent increase from the third quarter. Walbert estimates sales would have climbed more than 30 percent without the supply disruption. “To be able to have the launch we had with Tepezza in the face of this pandemic is even more impressive,” Walbert says. “Without the pandemic we believe we would have done over $1 billion in 2020.” If there’s a silver lining for Horizon, it’s the lack of competition for Tepezza, which costs roughly

Horizon in December announced it would delay new patients from starting Tepezza treatment to conserve supply for existing users. $200,000 for a six-month course of treatment. With no competing remedy available, Horizon doesn’t have to worry about a rival capitalizing on its production hiatus. “If there was competition it would be a different story,” Steinberg says. “That’s why I’d say in the long term this will be viewed as a blip, because no one is able to step into this void and supply patients.” Horizon is hoping a new highspeed vaccine production line in the works at Catalent will open up capacity, enabling the contract manufacturer to resume production of Tepezza in the second quarter. Horizon also is working to get

FDA approval to produce the drug at a higher rate than before. Separately, the company aims to have a second contract manufacturer up and running by year-end. “Because pharmaceutical companies are now prioritizing stuff related to the vaccine, they don’t have enough capacity to produce other types of pharmaceutical products, which is an expected trade-off,” Abdallah says. “The only way you can mitigate the effect on those products getting low priority is to increase capacity, and that’s something that takes a while. It’s not clear we can get away without having to incur those trade-offs.”

U of C’s next president positioned to scale up tech efforts ALIVISATOS from Page 3 highlighted by a new school of molecular engineering. This won’t be the first time Alivisatos is taking the lead from Zimmer. The two met on campus four decades ago in a math course Zimmer taught in real analysis. (Alivisatos recalls he got a B or B-plus.) Alivisatos’ experience as director of Lawrence Berkeley National Laboratory until 2016 figures to inform the U of C’s management roles at Argonne National Laboratory and Fermilab and improve the comfort zone of their owner, the U.S. Department of Energy. Argonne’s contract comes up for extension this year and goes out to bid in 2026. Berkeley has done a better job than Argonne in stewarding flagship projects, says U of C physics professor Peter Littlewood, a former Argonne director: “The university and the labs really need to be teaming together to help those along.” Alivisatos, 61, will join a cadre of Hyde Parkers carrying cell phones with the 510 Silicon Valley area code, a legacy of their days at Berkeley and Lawrence Berkeley Lab. Among them: Matthew Tirrell, whom Zimmer recruited from Berkeley to start

P021_CCB_20210315.indd 21

the molecular engineering school a decade ago, and Michael Franklin, chair of a reinvigorated computer science department. According to these profs, Alivisatos is positioned to scale up efforts in quantum information science, brain research and renewable energy, while pursuing more collaboration with universities arcing from Urbana to DeKalb. “He’ll be a strong agent in developing relationships with major companies,” adds Tirrell. “We haven’t sold ourselves to the world of tech as well as we might. Paul will really catalyze that because of his experience and his name.”

HOMECOMING

To a certain extent, the Chicago native (who moved to Greece at 10 or 11 to live with an uncle’s family after the death of his mother) will be returning home four decades after graduating from the U of C with a chemistry degree. Of the trustees who gave him the nod, nearly a dozen were on campus then. Financier Byron Trott and Brady Dougan, who endowed a professorship in molecular engineering, were classmates of Alivisatos. Andrew Alper, former board chair,

was a year ahead. Alivisatos specializes in nanoscience, the study of extraordinarily tiny matter and how it can be manipulated to form new materials or speed computation. His personal lab at Berkeley turned out research into quantum dot crystals for video display screens and spawned two startup companies, one sold to a larger firm and another whose accumulated revenue has topped $250 million. “He’s got the ivory tower cred, but he’s shown how to get those ideas out into the real world,” says Franklin. When he won a chemistry prize in 2019, Alivisatos described his research into using nanocrystals and sunlight to make fuel out of water, something that reflects the Biden administration’s interest in renewable energy projects. “We’re off on a crazy quest right now . . . for new kinds of engines,” Alivisatos said in a video in which he resembles a thoughtful version of the late manic comic Charles Nelson Reilly. A more immediate example of nanoscience at work has been rapid development of coronavirus vaccines.

“It’s like decades of nanoscience all together!” exclaims Teri Odom, who chairs Northwestern University’s chemistry department and edits Nano Letters, a journal Alivisatos co-founded. “It’s a big translational success . . . that is changing the world, literally,” she says. Meanwhile, P33, named after Chicago’s centennial World’s Fair in 1933 and goals for 2033, is working on quantum connections between industry and academia and a startup accelerator. Tirrell envisions his molecular engineering school, with 32 faculty members, doubling in size over the next decade. Along with the science, Alivisatos, of course, will inherit fiscal and other challenges of leading a university during a pandemic. Under Zimmer, revenue doubled, but debt grew even faster; in fiscal 2020 it exceeded operating revenue. Alivisatos may find some relief in Zimmer becoming chancellor and tending to high-touch donors who were a factor in the endowment almost doubling in size since he took the reins in 2006. In the video, Alivisatos reported that he likes to bike and take photographs. Nanoscience is never far away, though: His wife, Nicole,

As more facilities join the vaccine production effort, contract manufacturers might have more leeway to produce other drugs. Deerfield-based Baxter International’s BioPharma Solutions, which specializes in injectable pharmaceuticals, has entered into an agreement with Moderna to help manufacture up to 90 million COVID-19 vaccines. Provided Horizon gets FDA approval to increase the production rate of Tepezza, it expects the drug to generate net sales of more than $1.2 billion in 2021. It estimates annual net sales of the drug could peak at more than $3.5 billion globally in the long term.

w MATH PROOF The numbers show a transformed University of Chicago awaiting Paul Alivisatos when he succeeds Robert Zimmer as president. OPERATING REVENUE FY 2006 FY 2020

$2.2 billion $5.0 billion

OPERATING SURPLUS/DEFICIT FY 2006 $10.8 million FY 2020 $185.4 million

DEBT (NOTES/BONDS) FY 2006

$1.5 billion

FY 2020

$5.2 billion

ENDOWMENT FY 2006 FY 2020

$4.8 billion $8.2 billion

Note: Figures include UChicago Medicine Source: University of Chicago

whom he met at Berkeley, also was involved in the birth of Nano Letters. And his physician sister Regina is married to Princeton University’s chair of chemical and biological engineering.

3/12/21 2:56 PM

22 MARCH 15, 2021 • CRAIN’S CHICAGO BUSINESS

Chicago has a window of opportunity to reinvent its post-COVID economy The time for talk and preparation is over. Chicago needs to activate its post-COVID agenda. A brief window of opportunity is opening to reposition the regional economy for a new era. Critical to the effort is a recognition of how the viral crisis has permanently altered the economy and how those changes affect Chicago. Adapting to new realities should be the goal, not re-creating an old normal that isn’t coming back. Some sectors won’t be the growth engines they once were. Others will rise in their place. Michigan Avenue and suburban shopping malls may never draw the crowds they attracted before COVID. But Chicago’s transportation and warehousing sector is poised to capitalize on the continuing rise of e-commerce. Shifts like that reverberate across the local economy, affecting everything from employment to municipal finance. To respond effectively, we need a comprehensive regional game plan and a high level of collaboration among business groups, governmental bodies and others with a stake in metropolitan Chicago’s future. Chicago launched such an effort last year when Mayor Lori Lightfoot commissioned a recovery task force comprising dozens of local organizations and leaders. In July, the group produced a sweeping report with 17 major recommendations. “We’re taking this very seriously because the mayor wants us to recover more quickly than we did from the 2008 recession,” says Deputy Mayor Samir Mayekar, who’s overseeing the city’s recovery effort. The state of Illinois is sticking with Gov. J.B. Pritzker’s pre-COVID five-year economic plan, adapted to address coronavirus effects. “The key pillars of that plan are still solid,” says Sylvia Garcia, the newly appointed director of the Illinois Department of Commerce & Economic Opportunity. Both the city and state empha-

Bureau of Labor Statistics shows joblessness in the Chicago area was 8.7 percent in December, well below April’s 16.4 percent peak but more than twice the rate before COVID struck. Getting people back to work will help jump-start the economy. But many jobs eliminated in the pandemic aren’t coming back. So we have to help idled workers make the connections and build the skills they need to shift into growth sectors.

COMING SURGE

Small businesses and workers who bore the brunt of COVID’s economic impact can take encouragement from the likelihood of a growth surge in coming months. Expanding immunity and receding health restrictions seem certain to unleash pent-up demand as a $1.9 trillion federal stimulus program rains cash on the country. But the economic damage of a calamity that left metropolitan Chicago down more than 300,000 jobs won’t disappear overnight. Toia predicts restaurants won’t return to pre-pandemic levels until 2023. Business travel—a key segment of Chicago’s economy—is also on a long runway, with United Airlines CEO Scott Kirby warning corporate travel won’t fully recover for three years. Sectors that have thrived during the pandemic face a potential slowdown. Packaged-foods makers like Kraft Heinz, Mondelez and Conagra, along with Jewel and other grocery chains, made hay as bunkered consumers ate more meals at home. Sales could slide when people start dining out again. Chicago’s greatest challenge is sustaining growth after the adrenaline of pent-up demand and stimulus money wears off. A cleareyed acceptance of reality and a longterm vision of future opportunities are keys to meeting that challenge. Take brick-and-mortar retailing, historically a major source of jobs and tax revenues. But foot traffic on Chicago’s premier shopping strip, Michigan Avenue, was down 40 to 60 percent during the past year, according to Kimberly Bares, CEO of the Magnificent Mile Association. “MY GUESS IS WITHIN 18 MONTHS TO Macy’s is closing its TWO YEARS, THE VITALITY OF (MICHIGAN Water Tower Place store, and AmeriAVENUE) WILL RETURN.” can Girl is dramatically shrinking its Kimberly Bares, CEO, Magnificent Mile Association space at the Mag size equity in their approach to Mile’s flagship mall. The street has economic recovery, as well as a fo- lost 22 stores and restaurants since cus on helping workers and small March 2020, the Mag Mile Associbusinesses in sectors hardest hit by ation says. COVID-19-related effects. RestauSuburban malls and downtowns rants, for example, saw about 5,000 have suffered a similar wave of of 25,000 establishments close and closings. 124,000 of 590,000 workers lose Will retailing bounce back? Very their jobs, according to Sam Toia, likely, but probably with a differCEO of the Illinois Restaurant As- ent business model. Shopping sociation. corridors and malls besieged by Short-term help for these busi- online competition need reinvennesses is essential to stabilize the tion. Water Tower owner Brookeconomy. More dollars appear to field plans to reconfigure the mall, be coming in the form of federal carving up big spaces like Macy’s aid for restaurants and other small for smaller shops and converting businesses hit hard by shutdowns. upper levels to nonretail uses. Bringing down unemployment Bares acknowledges that retailquickly should be another priority. ers without a strong online comThe most recent data from the U.S. ponent don’t have much of a fu-

P022-P023_CCB_20210315.indd 22

MAURICE SMITH, CEO, HCSC WHAT’S SOMETHING YOU DISCOVERED ABOUT YOURSELF AS A LEADER DURING THIS CRISIS? JOHN R. BOEHM

CAHILL from Page 1

Michigan Avenue is likely to bounce back, but probably with a different business model. ture. She predicts a shift to more “experiential” retail like the Apple store and says pandemic-era adaptations like curbside pickup and virtual appointments are here to stay. “My guess is within 18 months to two years, the vitality of the district will return,” Bares says. Flexibility will be essential, and it may include hard-to-swallow changes like a Target logo on Chicago’s flagship mall. As Brookfield told my colleague Alby Gallun, redesigning old malls also requires support from the city, county assessor, retailers and the surrounding community.

CONVENTIONS VITAL

Key to recovery for local restaurants, retailers, hotels and others is a revival of the convention industry. While in-person gatherings may not return to pre-pandemic highs, conventions are still an economic catalyst. An encouraging sign came March 10 when Deputy Gov. Dan Hynes told my colleague Greg Hinz the state is prepared to ease restrictions so conventions can be held this summer. The Loop is another economic engine in need of an overhaul. As lockdowns sent office workers home, occupancy rates in downtown towers plunged about 85 percent, and foot traffic in the central business district fell by two-thirds, according to the Loop Alliance. The depopulation of downtown devastated public transit and the myriad shops, restaurants and other businesses that serve office workers. Although occupancy is expected to rise as immunity spreads, it’s unlikely to reach pre-COVID levels anytime soon. Employers are moving toward hybrid working arrangements in which workers spend some working hours at home and come to the office less often. “In our surveys, a lot of (employers) say, ‘We aren’t going to be back 100 percent in the office,’ ” says Jack Lavin, CEO of the Chicagoland Chamber of Commerce. Lavin says Chicago needs to give people more reasons to come downtown,

recommending more festivals and other events. Office building owners also will look to repurpose properties. One possibility is converting office space into labs for a growing life sciences industry. What city landlords beset by higher vacancies don’t need is a higher property tax bill. But that may be what they get, as Cook County Assessor Fritz Kaegi turns to downtown in the next phase of his effort to address historic imbalances in property tax burdens by shifting more of the load to commercial properties. Both the city and state aim to bolster industries where we have an edge. High on that list is transportation and distribution. As the nation’s freight shipping hub, Chicago has long played a central role in moving goods around the country. Employment in the sector has boomed with the rise in e-commerce, as intermodal rail yards and warehouses sprouted across the region. Growth in the sector shows no sign of slackening. The challenge is maintaining Chicago’s lead as other areas vie for a piece of the action. Removing obstacles to growth will help keep rival regions at bay. We need to fully fund and finish the CREATE project aimed at unsnarling the railroad bottlenecks that delay freight trains passing through the region. And officials need to facilitate critical infrastructure improvements; for example, an industrial park with 10,000 jobs could rise in Will County if the state clears the way for a bridge linking two intermodal yards. Other sectors targeted for growth include life sciences and advanced computing. Lake County has a large concentration of major pharmaceutical companies including Abbott Laboratories, AbbVie and Baxter International. In information technology, our two national laboratories—Fermilab and Argonne—have an inside track on the next big thing: quantum computing. We need to foster the connections that will turn

I gained a deeper appreciation of the energy and insights I derive from daily in-person interaction with colleagues, including casual elevator and cafeteria conversations. Those un-curated conversations reveal a lot about what’s on employees’ minds. research breakthroughs into local businesses and jobs. An underappreciated strength of our region is a deep, diverse talent pool spanning a range of industries. We have the skilled workers that companies need to compete in an economy where talent has become a competitive differentiator. Our history of attracting immigrants means we also have workers from all over the world, an important consideration for companies competing in global markets. Our challenge is keeping those workers here. Too often, graduates of our world-class universities leave on the next flight out of O’Hare. Creative incentives like the recently announced state program to pay off student debt for new homebuyers could help keep them in Illinois. The list of Illinois’ strengths as a business location goes on—high levels of digital connectivity, global travel connections at O’Hare and highly reliable, low-cost electricity, to name a few. Unfortunately, serious weaknesses threaten to follow us into the post-COVID era. To fully capitalize on the expected economic recovery, Illinois needs to take on deep-seated problems our leaders have ducked for years. Foremost among those problems are chronic fiscal deficits at the state and local level. These are a deterrent to companies considering a move here and a spur to companies leaving. Massive public pension funding shortfalls hang over us like a sword of Damocles, while unsustainably high property tax burdens drain household and corporate coffers. The state needs a serious plan to reduce pension debt and ease the property tax burden. Comprehensive fiscal reform also would include new revenue sources such as an expanded sales tax that covers more services.

3/12/21 2:45 PM

MICHELE GHEE, CEO, EBONY THIS PAST YEAR, YOU SURVIVED COVID. WHAT EFFECT DID ALL THAT HAVE ON YOU? It just made me look at everything different. It made me look at leadership different, made me look at the world different. . . .It ripped the Band-Aid off all the systemic injustices that had been going on and I felt every inch of that. It woke the world up. Crime is another issue Chicago must confront. Nothing scares away residents and businesses like crime and the perception of crime. A recent surge of armed carjackings, on top of last summer’s downtown looting, feeds a growing sense that Chicago is too dangerous. If we can tackle these challenges, our economic strengths will come to the fore, setting the stage for a strong recovery when COVID recedes. As states and cities around the country start to emerge from lockdowns, some throwing the doors open wide and others taking a more measured approach, it’s important to send the message that Chicago and Illinois are reopening. “They’ve got to devote significant money to an ambitious campaign at both the city and state,” says Paul O’Connor of POChicago Consulting. As head of the city’s World Business Chicago economic development agency, O’Connor led the successful campaign to land Boeing’s headquarters in 2001. He says Chicago needs a forward-looking theme emphasizing its digital assets, global connections and talent pool. Except for the money part, Michael Fassnacht is thinking along the same lines. The interim head of World Business Chicago is working on a marketing offensive that won’t include expensive ad buys. Instead, he’s relying on donated services from ad agencies and “earned media” from events like the recent announcement that fans will be allowed at Wrigley Field and Guaranteed Rate

THAD WONG, CO-CEO, @PROPERTIES WHAT IS SOMETHING YOU LEARNED THAT YOU APPLIED TO YOUR WORK LIFE? The pandemic did not affect people equally. It affected the poor significantly harder than it affected the rich. I really saw for the first time that some people, some parts of the country, could not be bothered by injustice and inequality, and this was painful to see. I think COVID fatigue contributed to the divisiveness, where everything was politicized. It was a public health concern, not a political issue, but people were divided on it, and they were divided on racial inequality. I have a visceral response to intolerance, but I had to figure out how to respond in an articulate way knowing we have 3,500 agents we work with. We have Democrats, we have Republicans, we have extreme left and extreme right. When I’m speaking to our agents, my politics are irrelevant, but my values aren’t. Everyone wants to know the values of the people they’re working for. But because values became more political, it became more challenging to communicate our values of tolerance without sounding political. Field when baseball season opens next month. Fassnacht says he’s developing an overarching theme and industry-targeted messaging that eschews dated cliches like “City of the Big Shoulders” and “the City That Works” in favor of “a more authentic expression of Chicago” that emphasizes equity and diversity. Here’s an authentic message: Don’t blow this opportunity to shape Chicago’s future. Stephanie Goldberg, Ally Marotti and Dennis Rodkin contributed.

HOW TO CONTACT CRAIN’S CHICAGO BUSINESS EDITORIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312-649-5200 CUSTOMER SERVICE . . . . . . . . . . . . . . . . . . 877-812-1590 ADVERTISING . . . . . . . . . . . . . . . . . . . . . . . . . 312-649-5492

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VHT STUDIOS PHOTOS

CRAIN’S CHICAGO BUSINESS • MARCH 15, 2021 23

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

A Gold Coast co-op that’s straight out of the Jazz Age

Nate Berkus’ firm revamped this two-story unit in a 1920s building to be both modern and true to its vintage BY DENNIS RODKIN ALL THE HOMES that Michiganders Randi Williams and Dale Watchowski have ever owned have been from the Jazz Age, the 1920s. “It seems to be our era,” Williams tells Crain’s. So when their daughter was in law school in Chicago and they wanted to buy a place for long-term visits here, they gravitated toward a Gold Coast co-op straight out of the 1920s. It’s a two-story unit within 40-50 W. Schiller St., a pair of buildings designed by architect Andrew Rebori and built in 1924. Connected by a walled courtyard, the buildings have a classical brick exterior but interiors that exude 1920s style with their bands of windows, curvaceous interior staircases, Juliet balconies on the inside looking over the foyer, and other details. The couple then brought in interior designer Lauren Buxbaum Gordon, a partner in designer-tothe-stars Nate Berkus’ firm whose designs, including one for her own former Gold Coast home, are stylish and dramatic. Gordon’s approach to the couple’s two-bedroom unit: Paint it black. Window frames, kitchen cabinets, an original skylight and even one whole bathroom are done in black, mostly lacquer, with a gleam suited to the 1920s. Williams and Watchowski’s daughter is now working in Charleston, S.C., and the parents have purchased a house there from the 1750s, breaking their long-term preference for the Roaring ’20s. Their Schiller Street unit will come on the market sometime next week, represented by Sophia Worden of Berkshire Hathaway HomeServices Chicago. Worden says the asking price, $950,000, is for the home and all its furnishings. Worden says it could also be sold without the furnishings at a to-be-negotiated price.

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

Vol. 44, No. 11 – Crain’s Chicago Business (ISSN 0149-6956) is published weekly, except for the last week in December, at 150 N. Michigan Ave., Chicago, IL 60601-3806. $3.50 a copy, $169 a year. Outside the United States, add $50 a year for surface mail. Periodicals postage paid at Chicago, Ill. Postmaster: Send address changes to Crain’s Chicago Business, PO Box 433282, Palm Coast, FL 32143-9688. Four weeks’ notice required for change of address. © Entire contents copyright 2021 by Crain Communications Inc. All rights reserved.

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