NOTABLES: These leaders’ efforts strengthen all manner of area nonprofits. PAGE 15
CRAIN’S LIST: The largest local hospital and health systems. PAGE 12
CHICAGOBUSINESS.COM | NOVEMBER 21, 2022 | $3.50
DEVELOPERS ADAPT TO AFFORDABLE HOUSING
AS DEVELOPERS DRAW UP PLANS for thousands of new apartments in the West Loop, the neighborhood is emerging as a proving ground for Mayor Lori Lightfoot’s push to create more affordable housing and solve one of Chicago’s most intractable problems: segregation. The early signs are encouraging. In September, Chicago developer Sterling Bay broke ground on a 350-unit apartment tower in the Fulton Market District, with 20% of the total, or 70 units, set aside as affordable to people with low or moderate incomes. Later that month, Chicagobased Golub and a partner unveiled plans for a 42-story project a block away. Twenty percent, or 80, of its 400 apartments will be affordable. See AFFORDABLE on Page 26
Thanks to a new tax break from Springfield, more residential builders find they can set aside 20% of units and still make money I BY ALBY GALLUN
TODD WINTERS
Related Midwest’s 300-unit apartment tower at 900 W. Randolph St. will have 20% affordable units on-site.
Private-equity boom fades as lenders retreat Buyout firms struggle to finance deals without the cheap, plentiful debt that fueled outsize returns BY STEVE DANIELS A year that began with hope the private-equity party would rage on has seen the festivities fizzle out. Years of rock-bottom interest rates, coupled with abundant cash from institutional investors, powered a long boom in dealmaking by private-equity firms, including several major players in Chicago. Then came the Fed-
multibillion-dollar transeral Reserve’s war on inactions favored by firms flation. like Chicago’s Madison As interest rates leapt Dearborn Partners and more than 3 percentGTCR. age points in the past six The landscape is unfamonths, private-equity miliar, even to those who deals slowed to a trickle remember the 1980s. Vetcompared with the pace erans have experienced of recent years. Firms Bruce Hague higher interest rates beare struggling to find banks and other lenders willing fore, but haven’t seen rates rise so to finance deals, particularly the far so fast.
“I cannot recall as precipitous a change as is occurring right now,” says Bruce Hague, Chicago-based president of national commercial banking for CIBC U.S., who has worked on leveraged buyouts for decades. “I don’t think it’s done yet.” The question now is how long the rate hikes will last, and whether they will dim the appeal of private equity to the university
endowments, pension funds and other institutional investors that furnish the funds for dealmaking. The outsize investment returns that attracted investors to private equity depend heavily on plentiful cheap debt to finance buyouts. In a typical deal, the acquired company borrows at a substantial multiple of its annual cash flow to finance much of the purchase price. If all goes well over the next five years, that company will grow See PRIVATE EQUITY on Page 24
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THE TAKEAWAY
BOOTH INSIGHTS
This executive coach watched sitcoms to figure out ‘normal.’ PAGE 6
When the ground beneath you shifts, learn to wobble well. PAGE 9
11/18/22 3:26 PM