Thank-You 9th District Police

I don’t usually post reactions to recent events - I'm not the quickest blogger in the world. But I want to broadcast a public thank you to the officers of the 9th District for how you handled the demonstration last night: cool and professional. I bet you’ll handle the NATO protests the same way.

I think there are some good reasons for peaceful demonstration, and some of them will be represented this week-end. That’s why last night was insulting.

I read they were protesting capitalism and the ‘police state.’ From the sidewalk it felt like they’d marched in to protest the neighborhood in general. And to amplify some jumbled video they saw on You Tube. I saw that video – it didn’t sound to me like the scene it’s supposed to have captured. It sounded like edgy banter encouraged along by the guy making the video. I could be wrong, I wasn’t there, you can probably hear what you're inclined to hear on that recording.

I was there last night. Thanks to the police for calmly deflecting what sometimes looked like a lot of 19 year olds hoping for a fight. And thanks to the neighbors for not taking the bait.

Pulaski Savings Bank and the Original Fair Lending Model

Pulaski Savings Bank was founded in 1890, just three years before the first savings and loan crisis. Its name has changed, it first opened as Pulaski Loan and Building Association of the 6th Ward. So has its address and its storefront. But behind the 1950s remodel, it continues to thrive, doing the same kind of lending it has always done.

Jane Rogocki, Executive Vice President and Operations Officer, started working at Pulaski Savings when she was 16. When she was a child, and her mother, a widow, tried to buy a home on May Street, a local commercial bank turned her down. “They didn’t lend to widows living on social security income,” Jane says. Pulaski Savings Bank gave her the loan to buy the house.

Savings banks have a heritage of making loans like that. Thrifts got their start in the early 19th Century, when bankers provided services for wealthy people. The building & loan association was devised as a lever for the working man to build wealth for himself.

David Mason, author of From Buildings & Loans to Bailouts, a history of the movement, gives a succinct account of how it worked in an article linked on the sidebar.

You’d buy shares on installment payments – when you’d paid them off, you could take out a loan for the face value of the shares. You’d keep making the monthly payments – they’d be applied to principle and interest. That was a novelty. 19th century mortgages were short term, interest only loans – if you couldn’t pay off the loan, or refinance it, at the end of the term, you’d forfeit the house.

Furthermore, the interest you paid at a bank went to profits for the bank’s owners. Building and loans were mutually owned by the depositors themselves. Profits from the loans were distributed back to members’ share balances.

The savings and loan model took off at the end of the 19th century, as the urban working class multiplied. Its success inspired a for-profit variation. Bankers and industrialists hired agents to organize local chapters and drum up deposits, which were sent on to the central office and used to make loans. The national building and loans paid higher interest rates to attract deposits, and generous salaries to their officers. They could afford to be generous as long as their membership kept growing. An economic downturn in 1893 stalled membership growth, and the national B&Ls collapsed in a wave.

The savings industry came out more organized. State regulations were passed, and a national trade association was created, promoting uniform practices in accounting, appraisals and loans.

By 1930, the first year of the Great Depression, there were over 900 building and loans in Illinois, according to the US Building and Loan League’s Blue Book for that year. (The movement would begin to promote themselves as Savings and Loans in the 1930s.) Collectively, they had $470 million in assets. That was up $22 million from 1929.

Some thrifts lost on loans in the depression, but not as quickly or dramatically as other banks. Partly because their model restricted withdrawals. Mason reports that between 1931 and 1932, almost 20% of US banks failed. Compared to 2% of its savings and loans.

There were 11 Building & Loans listed with Bridgeport addresses. Three of them have survived in some form. Aside from Pulaski Savings of the 6th Ward at 3156 S. Morgan, there was Washington Polish S&L at 2845 South Archer (Washington Federal is at 2869 S. Archer today). The Silver Crown Building and Loan and the Rovnost Homestead Association shared an address at 555 West 31st Street, which now belongs to the Southwest Chapter Credit Union.

There were another 40 B&Ls in Pilsen, but Pulaski Savings on Morgan Street, with $3 million in assets, was by far the largest. Between Pilsen and Bridgeport, 4 other associations had just over $1 million in assets each. The average size for B&Ls in Illinois, as listed by the Blue Book, was $500,000 in assets.

Roger Budny by the Vault

Roger Budny is Pulaski Savings Bank’s current President and Chairman. His father started working at Pulaski Savings Bank in 1939. Roger grew up in a Bridgeport built, at least partly, by the mutualist model of the savings and loan.

Roger describes the Bridgeport of his youth as having “a European philosophy of community.” People didn’t have cars or fancy houses but “everyone was working, everyone was doing well.” They worked at the stockyards or the Johnson pipe works. They shopped at stores within blocks of their homes.

He has a program St. Mary’s published when they built a gymnasium in 1941. The advertisements illustrate the community structure he remembers – mostly between Morgan Street and Racine. There were 4 different delis on Morgan itself and more “fancy meats” on Aberdeen. Katzman’s sold dry goods, Kaplan’s sold liquor, the Eagle Tavern on Racine sold White Eagle Beer (brewed in Bridgeport) and promised “tables for ladies.” There were multiple candy shops and paint stores; Roger remembers a small manufacturer of venetian blinds where the Pulaski Savings’ parking lot is now.

It all thrived on a different kind of credit. People didn’t have plastic in their pocket, they had an account at the local store. The owner of the currency exchange on 31st Street west of Halsted did loans on the side. “He probably did them out of his pocket,” Roger says. “He trusted you. You’d sign a piece of paper that would say ‘I owe you.’”

It’s impossible to do that kind of lending now. “It’s killing some of the businesses on Halsted Street,” Jane says. Local lenders would make loans based on undocumented income if they knew the borrower was good for the cash. “You can’t do that anymore,” she says. “You can’t explain to a regulator ‘they come in and pay cash every week.’”

Relationship lending is probably easier to manage when a neighborhood is highly local. Jane and Roger remember Bridgeport being so local that people could do business in their own fragment of it. People east of Halsted went to their own lenders, like the Southwest Chapter Credit Union on 31st, Street. “A lot of them probably didn’t know we were here,” Jane recalls. “We didn’t advertise.”

Roger still talks warmly of “fraternalism and trust,” the old virtues of a savings and loan movement organized for social uplift. He likes to say Pulaski’s lending isn’t based on “who you know,” but it’s not based on credit scores either. “We don’t allow them in the building.” They look at the whole person. They run a full credit report to catch anything the borrower hasn’t told them. But if problems show up in the credit report, that doesn’t mean they can’t make a loan. “We look at what may have happened to cause the problem,” Roger says.

Pulaski’s whole person underwriting appears to work. Pulaski has had only 1 foreclosure during the crisis, “and our delinquencies are miniscule compared to everyone else,” Roger boasts. (Accurately, according to reports filed with the FDIC.)

Vault Detail


This isn’t the first crisis Pulaski Savings has weathered in Roger’s career.

A spiral of inflation and high interest rates in the 1980s made business hard for thrifts, whose assets were locked into long term loans, which paid in at fixed rate of interest, while rates paid out on deposits spiked.

Since the Depression, when competition for deposits may have helped banks fail, regulators had maintained caps on rates banks could pay out. Initially, thrifts were exempt from limits on the grounds they weren’t in direct competition with banks; after 1966, they were allowed to offer rates a quarter percent higher than commercial banks, to compensate for other restrictions (they weren’t allowed to offer checking accounts, or commercial loans). In 1980, Congress passed a round of deregulation that phased out those caps.

In 1982, they lifted restrictions on the types of loans S&L’s might make, freeing them to pursue more lucrative loans to pay for deposits. Deregulation opened the door into markets where they had little expertise, and occasionally into outright fraud. Nationally, assets held by savings and loans multiplied in the 1980s (from $604 billion in 1980 to $1.187 trillion in 1989), but almost 1,400 of them disappeared during the same period.

The Woodstock Institute, a fair lending advocate, gives an idea of how these trends played out in Bridgeport. In 1985, the first year Woodstock published its Community Lending Fact Book, there were 309 residential loans reported in Bridgeport. Pulaski made 18 of them. District National, which later became Chicago Community Bank, made 45. In fact, loans by value that year were heavily concentrated in District National’s census tract. But most of the loans made in Bridgeport were made by banks and S&Ls, only 43 were made by independent mortgage bankers.

By 1995, there were 429 loans made in Bridgeport, a 39% increase, and they were worth 3 times as much. They were also more geographically diffuse. But only 74 of them were made by banks or S&Ls, the rest were made by independent mortgage bankers. Chicago Community Bank’s lending was down to 26 loans that year. Pulaski Savings’ was up to 24.

Independent mortgage bankers, and brokers, sold loans to government agencies, or private investors, as soon as they made them, then used the capital to make new loans. “That’s where our [most recent] problems started,” Roger observes today. “They have no skin in the game.”

The federal government created a resale market for loans intentionally during the Great Depression. Fannie Mae would buy home loans, so banks would be more willing to extend long term mortgages (since they weren’t stuck holding the loans). A secondary market also helped distribute capital from rich areas to poorer ones, since banks in low-capital areas could sell their loans, and reinvest the proceeds.

Innovations in the 1970s and 80s made secondary market even more liquid. First, Ginnie Mae began pooling loans and selling slices as mortgage backed securities. Fannie Mae had been selling who loans, a more cumbersome process. Later, collateralized debt obligations divided up a pool of loans into slices with specific risk and payment characteristics.

These were also the years when shareholder capitalists were critical of traditional savings and loans for drawing “uninformed” depositors, and being run by managers with no incentive to maximize returns. Meanwhile, the new instruments added layers of transactions between home buyers and the investors who ended up holding their loans.

The S&Ls themselves responded to new pressures and opportunities in different ways. Some began to act more like mortgage bankers, selling their loans to make more loans faster. Others closed down their loan departments altogether and put their capital in securities for safe keeping.

By 2005, there were 1,051 residential loans made in Bridgeport, worth $226 million. Big banks and mortgage companies were moving to the top of Woodstock’s Bridgeport lender’s list. For 3 years between 2006 and 2008, Wells Fargo, Citimortgage, Countrywide and JP Morgan Chase were Bridgeport’s top residential lenders. But by 2009, they had disappeared.

The Easter Bunny, and Reflections of Morgan Street in the Window

Through decades of excitement, Pulaski Savings Bank steered a middle ground. In 1995, at the tail end of the Savings and Loan crisis, more than half its portfolio was squirreled away in securities. But it was still making loans. In fact, it made 30% more loans in Bridgeport that year than it had in 1985. Today, Pulaski reports $48.5 million in assets (their 1930 assets would be worth $38 million today) and they still maintain a careful portion in reserve – almost 30% as of 2011 – but they’ve moved 58% of their assets into portfolio mortgage loans.

Roger says under the direction of Pulaski's board, they’ve stuck close to their roots. They now offer checking accounts and ATM services, and they have 1 commercial loan, but they never embraced commercial lending like some of their peers did. “We’re here to help people save, and to buy homes.”

They also never bought loans from brokers, or financed investors who were buying to flip. Pulaski holds its loans on its books. So more turnover just makes more paperwork. They also require 20% down payments, and scrutinize their loans closely.

But ultimately, that’s an advantage to the customer, Roger observes. If a customer accidentally overdraws his account, he gets a phone call; if a borrower has a problem, “he doesn’t have to figure out where his loan is.”

“When he signs the papers, we tell them right up front, if you’re beginning to feel a squeeze or a problem, call. We can help you one way or another.”

Pulaski Savings Bank is a mutual, it is owned by its depositors and mortgage holders, and its managers haven’t forgotten that. “I want them to be successful,” Roger says. “We want the community to be viable.”

UV Awazu's Custom Metal Shop

UV and Daughter Ingrid by Dad's First Saw

UV Awazu does custom metal fabrication from a shop in Bridgeport’s old Central Manufacturing District, at a significant intersection of Chicago’s bike cult and its small-industry renaissance.

There’ve probably always been small fabricators who do precise custom work, where half the job is figuring out the best way to do it. And there have long been urban cyclists, maybe also bike messengers racing alleycats in their off hours. But bicyclic culture in Chicago began to accelerate in the late 1990s, sometime around the launch of Chicago Critical Mass. Something happened in its old manufacturing buildings around the same time.

Ken Dunn bought a 1920s era parking garage at 6100 S. Blackstone, and housed the Resource Center there, in the 1970s. It was an incubator of sorts. There was a book and clothing exchange, a community garden, a co-operative workshop, and a curbside recycling program, which Dunn eventually moved to 7800 S. Dorchester and built into a waste-stream fueled economic development engine.

But by the late 1980s when Chicago artist Dan Peterman took up a studio at the Blackstone building, many of the other ventures had disappeared or were in decline. Peterman’s Wikipedia entry describes him as an artist and a practitioner of ‘adaptive reuse’ before everyone else was doing it. He once installed a bus inside one of Dunn’s giant compost heaps -- the heat from decay kept it warm all winter and they let a couple homeless men sleep in it at night.

There was also a big pile of bikes that attracted neighborhood kids, and there was talk of restoring old bikes to useful lives, a concept that didn’t get off the ground until Peterman bought the Blackstone building from the Resource Center in 1994. He wanted to get the incubator started again. And he wanted to tweak the model.

They launched Blackstone Bicycle Works under the corporate umbrella of the Resource Center, and got a grant from Richard Driehaus. The shop would teach bike mechanics and other job skills to neighborhood youth, and also operate a retail shop. Peterman rented the rest of the space to a mix of social and business ventures: a small furniture maker called Big Fish, Wong Lee’s Auto Parts, Jamie Calvin’s Neighborhood Resource Center, also Monk Parakeet, an arts program, and The Baffler magazine.

Peterman says there had been artists staking out a frontiersman lifestyle in old fireproof buildings where they could make stuff for years when he bought the Blackstone building. But those buildings were basically cheap subdivisions let for low rents, they weren’t set up to incubate businesses per se, and “they tended to stay in the art world.” The Blackstone building would be different. It’s evolved over the years, it’s called the Experimental Station now. Peterman saw it as a managed ecosystem operating on principles of mutualism – as opposed to principles like survival of the fittest, or “parasitism,” a business model the Experimental Station describes as “the ‘I'm going to exploit all of the resources that you offer as cheaply as I can’ mentality.”

It made a difference that Blackstone’s reinvention was happening in the 1990s. The urban atmosphere was different than when Peterman first rented his studio from Dunn. In the 1980s, Chicago’s population was still shrinking, its buildings, especially its industrial buildings, were emptying out.

By the 1990s, the back to the city movement was visible on the street. The population of urban art students was growing too. At Columbia College, for example, enrollment was about 2,000 in 1975. By 1990, it was about 6,500. Today there are about 12,000 students enrolled in degree programs at Columbia -- it’s one of the largest arts colleges in the US. The School of the Art Institute enrolls another 2,000.

When Peterman, Dunn and Calvin first launched Blackstone Bicycle Works in 1994, they hired Andy Gregg to run it. Gregg was an art student in Michigan, but he had a friend at the School of the Art Institute who had got to know Dan Peterman. Greg was virtually raised in bike shops. Peterman says he was softspoken, and had a certain cool factor that helped charm the neighborhood kids.

While in Chicago, Gregg took up racing with bike couriers. He never worked as a courier himself, but he excelled at alleycats, unsanctioned street races, which is hard to do if you come from out of town. You’ll never know the streets like a courier does.

His cycling acquaintance would sometimes show up at the shop. UV was one of them. Today neither one can put their finger on when UV started working at Blackstone, though Gregg acknowledges he would have been the one to hire him. It was sometime between 1996 and 1998. UV was an art student, a cyclist and a racer. Soon it was Andy coming in #1 in Chicago messenger races, and UV coming in #2.

The kids at Blackstone appreciated that. Blackstone tied some of the Woodlawn kids into the youth program for XXX Racing, then a fledgling sanctioned race team sponsored by Yojimbo’s Garage.


Meanwhile, back at Blackstone, UV was learning how to weld. He says it was Andy Gregg who inspired him to start building beautiful things from metal scrap. Gregg was becoming known around town for furniture he made from wheel rims, upholstered with inner tubes -- he’d made a prototype as an art student -- it fit with the Blackstone aesthetic. You can see an early example of one of Gregg’s lounge chairs at Yojimbo’s Garage. Gregg made the bar stools for The Handlebar. Lance Armstrong’s bike shop also owns a few.

Eventually, Gregg would move back to Michigan, where rents are cheaper and off road riding is better. He’s refined his wheel rim furniture and sells it through the internet as far away as Singapore. He’ll still build you furniture from your own parts, if you’re sentimentally attached. And he says he still consults UV for technical expertise in metal work.

A Classic Gregg Lounge Chair

Even back when UV first started building choppers from scrap bikes down at Blackstone, long before he made his living in fabrication, he was known as a perfectionist. There is a strain of chopper bicycle enthusiasts who appreciate the hacked together aesthetic. “I was reacting against that,” UV recalls. “There was a group of people who’d ride together, and they’d laugh about how their bikes would break on the ride.” He would never build something that might threaten the safety of the person using it. But more aesthetically speaking, he couldn’t stand to build something that might break.

For awhile, there was talk of expanding the Blackstone program to include bicycle frame building, partly to accommodate older kids who were ready to learn new skills. Blackstone sponsored UV to study frame building at the Urban Bike Institute in Oregon. In the end, Peterman says implementing a metalworking program was just too complex for Blackstone. UV says he thought about framebuilding professionally, but this was in 2001, he concluded it wasn’t commercially viable.

2001 was also the year the Blackstone building suffered a catastrophic fire, and took years to rebuild. UV kept Blackstone Bicycle Works going from a semi-trailer for awhile. Meanwhile, his metal working business began to evolve.

He launched it with a $3,000 on a 0% interest for 12 months credit card deal -- he started with a saw and a welding machine. He built his business doing fancy custom jobs for wealthy patrons. For awhile he supplemented his income coordinating deliveries for Bari’s sandwich shop. Then a friend moved to Denver and handed over his steadiest client, a wealthy individual with a “really expensive habit” for renovating homes – he told UV he’d finished 60 of them in his lifetime.

A steady patron helped UV transition to full time metal work. In 2006 he moved his business into Bubbly Dynamics in Bridgeport. “That’s when I began doing it full time, versus doing some jobs on the side, out of my house.”

Bubbly’s owner, John Edel, was an industrial designer who was making his living building virtual environments. He bought the real world warehouse in 2002, and was doing the renovations himself, like an exceptionally ambitious home improvement project. His gradual pace, and his creative disposition, let him maximize use of waste stream recycled materials – some of them came right to his door through a deal he’d struck with a waste hauler who would park half filled dumpsters in Edel’s loading yard over night – and free labor from his tenants who’d lend their skills in lieu of rent.

The end result is a small business incubator built out with great care and with a mutualistic culture. Once installed, the tenants would swap skills, or occasionally employ each other to complete big jobs.

UV and Edel were acquainted through bike circles. Edel sometimes rides a high wheel. He was also an early member of a chopper bike gang called the Rat Patrol – he let them set up shop in his basement. When UV moved in as a tenant in 2006, his skills were so helpful he didn’t pay rent to Edel for a long time. If you visit Bubbly today you can see his handiwork in the staircases and doorframes, and especially in the showcase hand railings, assembled to look like cascades of bubbles in stainless and frosted glass.

UV did other jobs. For instance, he taught himself to apply powder coat – an enamel-like finish for metal objects that’s not mixed with toxic solvents. The powder is applied electrostatically and cured with heat. At first, he was doing it manually, using heat lamps and a hand held temperature sensor. Eventually he built a cabinet to simplify the process. It’s basically a big convection oven, assembled from steel plate, with a control panel he built into a modified toolbox.

UV’s known for his careful detail work. He can create special effects through layers of pigment, he can fade colors into each other from one end of a frame to the next. If he doesn’t like how it comes out, he’ll strip it and do it again.

UV Powder Coat Detail

2008 turned out to be a transition year. His client with the house habit had just finished his first new construction project. “It was very high end,” UV recalls. He put it on the market just before the economy collapsed, which slowed him down for awhile.

But by year end, UV had met Rocky Levy, of Icon Modern furniture. “It was totally random,” UV recalls. Levy was looking for a fabricator to build metal bases for a new account. UV had just powder-coated a bike for a friend of a friend of Levy’s wife.

Icon Modern makes furniture from reclaimed urban wood. Reclaimed wood has emerged as a small industry itself. Its rescues good wood from the waste stream, and the furniture comes with a backstory. Icon Modern advertises that in a lot of cases “we can tell you where your table ‘grew up’.”

Levy says they buy wood from the Rebuilding Exchange, which deconstructs old buildings as an alternative to demolition. The Exchange opened in Chicago in 2009. He also has 3 to 4 sawyers who harvest wood from urban trees that have been taken down for other reasons. A lot of them have been infested by Emerald Ash Borer – the scars will be left visible in the finished furniture. Levy says they once sawed open an ancient oak and found a bullet lodged deep inside the trunk – they had sawed it exactly in half. Counting rings they calculated someone had shot the tree about 80 years ago. They left it in the table top.

In 2008, Icon won an account with Starbucks to furnish tables for their midwestern stores. Big retail chains renovate stores on a regular cycle – they work their way through all the stores and by the time they are finished, the early renovations are ready for a new look. Often, that new look means replacing the old furniture, but Icon Modern sold Starbucks on furniture they could spruce up, not replace. The table tops are an inch and a half thick – they can be sanded down and refinished. “And UV builds the bases like tanks,” Levy says.

“I don’t skimp on structural integrity,” UV says, and he’s particularly careful about tables. “People do really stupid things on tables.” He imagines employees standing on them after hours, or even an elderly customer having a heart attack, and sitting down abruptly. “I think of random stuff that could happen, because that’s how life is.”

Levy says in 3 years, they’ve built furniture for 450 stores – they might supply 1 – 5 tables per store. Almost every table is different. That places the job at a spot just between custom and mass production that might pique the interest of large fabricators, but makes them hesitate to do it. UV’s got the flexibility to modify each table, though the job sometimes pushes the envelope of what he can produce.

He hired 3 employees, and trains them to do the welds he wants, exactly the way he wants it done. “I’ve developed a certain way of doing tables. It’s cost effective...if we stick to it. Otherwise we’re wasting labor.

“When I tell other welders how much time it takes us to build these,” he adds, “they’re impressed.”

Though sometimes they still modify a design to work with his equipment. Icon Modern’s latest tables resemble airplane wings: the original design was shaped like an ellipse. In consultation with UV, Levy modified it to a tear drop shape, so the weld is done where the flat sheets come together, and so UV could make it. He bends the quarter inch steel on a slip roller, but “I wouldn’t have been able to do a tight radius bend.”

Levy accepts that as part of the process of using a small local producer. For some of his conscientious corporate clients, the small local producer is part of the appeal. “Just because something could be done, doesn’t mean you should have it done,” especially if it means sourcing it further afield.

And his small local producer can also do his “super custom” work. Levy describes a decorative screen of antique nails he designed for Roka, a sushi restaurant. He had a source for antique iron nails, so he incorporated them into a 40 by 8 foot tapestry that UV engineered.

A Small Swatch from Roka's Nail Tapestry

On UV’s end, volume and time may have tempered his perfectionist instincts.

Once the steel table bases are built, they clean off the oil with acetone and use a torch to burn off lint, and any moisture in the pores of the metal that might seed rust later on. Then they cover the raw steel with lacquer.

UV says the raw steel look is very popular now. But he can’t help adding that “really, if you’re looking for durability, lacquer over raw steel isn’t the way to go.”

A few years ago, he was building steel table bases for the library in IIT’s Crown Hall – a Mies Van der Rowe landmark. He did it the way it ought to be done, which involved primers, toxic solvents and expensive paint, even though the client wanted the look of raw steel. “We have him the look,” UV says, “but we gave him a really tough finish.

“In hindsight, it was over the top.”


While his shop at Bubbly Dynamics is packed to its limits, UV says he’s resisted the temptation to move, because he thinks of the Starbuck’s contract as a once in a lifetime job – particularly since they’re building the tables so they won’t have to be replaced. If he moved to a larger space, he’d fill it with more equipment.

“Maybe I’d pull in more business,” he says. In fact, he has done projects for Icon Modern’s other conscientious corporate clients, like Whole Foods and Google. "But it was a level of risk I wasn’t willing to take.”

Now his wife, Kelly, has landed a great job in Columbia, Missouri – they’ll move there with their young daughter, Ingrid, this spring. So he is selling his Chicago business in 2 parts.

Angela Chan has bought his powder coat business. Her boyfriend, Owen Lloyd, builds bike frames – in fact he founded the frame builder’s co-op that also rents space at Bubbly Dynamics. Before he leaves, UV is training her to do powder coating so she can keep the quality up.

Down in Missouri he plans to start out slow, and see what builds. First thing, he would like to build a cargo bike with seats for a toddler or two, while he’s still got free time.

Karma Yacht Sales Grows Boating

Lou Sandoval and Jack Buoscio, co-owners of Karma Yacht Sales at 3635 South Halsted, returned from the Strictly Sail winter boat show bustling with leads. Winter is the season when people buy yachts, and boat sales reflect consumer confidence. Apparently consumer confidence has been rousing itself.

Boat sales began to step up in 2011, according to Spader, a franchise and consultancy. During the consumer-confidence bust, used boats flooded the market. But last year, dealer inventories of used boats dropped, and sales of new boats rose 3 times as fast as sales of used boats did.

Jack says the first to start buying again were people who had the money to buy all along, they never lost it -- they were the 45 to 50 foot yacht crowd. Now, people in the 35 to 40 foot crowd are following them back into the water.

If it surprises you to find a yacht dealer on Halsted Street in Bridgeport, Jack and Lou are quick to point out that sailing isn’t just a rich man’s sport. Though they say it is a sport for the forward looking. “Sailing a boat isn’t like driving a car,” Jack says “you have to plan several steps ahead.” They named their business for the principle that “waves of good fortune follow admirable actions.” And when they are not selling yachts, they are actively trying to bring the sport to a broader demographic. Lou, who lives in Bridgeport, is interested in doing something similar for Halsted Street.

Jack and Lou grew up on Chicago’s south side, in close proximity to the lake. Jack’s father was a school teacher, Lou’s was a steel worker. Lou first experienced sailing in the scouts, Jack discovered he had what they call the ‘water gene’ later in life.

Lou Sandoval and Jack Buoscio Outside the Office

As adults, they bought their first boat together with some friends while they were still employed in their corporate careers. It was a 26-foot 1978 craft “with a yellow hull and a Brady Bunch interior,” Lou recalls. They sailed it until they calculated they were ploughing enough into repairs and maintenance that they might as well buy a new boat. They did their homework and decided to buy a Beneteau.

Benjamin Beneteau started building fishing boats in 1884. His grandchildren pioneered in pleasure boats. Today, Beneteau is the largest builder of sailing yachts in the world. Even Benjamin’s fishing boats had names like “Poursuivante” (Pursuer) and “Vanquer des Jaloux” (Vanquisher of the Jealous). The brand is still known for speed and performance, and a reasonable price. For a new, 50-foot Beneteau, a reasonable price may be half a million dollars. Karma Yacht Sales also brokers used boats -- a smaller, older boat can be bought for the price of a car.

Jack and Lou bought their first Beneteau in 1999. By 2002 they were ready to trade their corporate careers for entrepreneurship. They’d struck up a friendship with Joe and Elaine Darby, owners of Darfin Yachts, who represented Beneteau on Lake Michigan. Jack eventually quit his corporate job to sell boats through Darfin full-time. Lou had once had a side venture managing yachts for clients he met through his corporate job – when he was doing sales for Abbott pharmaceuticals – they tended to be heads of surgery with a lot more money than time.

The Darby’s ran Darfin from their home near Midway airport.When they expressed interest in selling their dealership, Jack and Lou decided to buy it. They set up shop in Pilsen first, they acquired their building in Bridgeport in 2007.

There is still a portion of their customer base that rarely travels south of Madison Street. But Bridgeport is equidistant between Crowley’s 95th Street Yacht Yard, where they keep their inventory, and Burnham Harbor downtown. And Karma will be even better poised when the new 31st Street Harbor comes online this May.

Jack estimates there are 6 to 7 sailboat dealers in the Lake Michigan market, but only 2 or 3 of them have actually invested in inventory. The others will sell you boats out of catalogues. Karma also employs 2-3 service technicians so they can guarantee reliable service on boats they sell.

They typically start the season with 4 boats on hand in representative sizes – some customers will order variations based on their models, but by late summer, they hope to be selling the last of their inventory.

A wavering customer can visit Beneteau’s US manufacturing plant in Marion, South Carolina, where 300 families build boats in a 21-step assembly process. It’s a convincing experience. Buyers sometimes visit their own boat as it is being built.

Nationally, new boat sales have waxed and waned with the economy over decades, but sales of new sailboats began to drop steadily after 2000. That may reflect the aging of the traditional yacht demographic. It does not measure trade in used boats, and Lou says sales of new yachts have been steadier in Chicago than they have been nationally.

Karma opened during the dotcom bust, and has weathered the banking crisis. At the height of it, sales shifted toward cash transactions, (from about 20% toward 40% of sales) but that’s not because marine lenders weren’t willing to make loans. Jack says financing for sailboats is still readily available.

In fact that’s a point of some pride for sailors: in the past 5 years, foreclosures hit the world of boat finance too. But 98% of those were foreclosures on motorboats. Only 2% were on sailboats, according to GE Capital, which lends to both dealers and consumers.

Jack and Lou say it’s not that sailboat owners are richer, they believe it reflects the careful instincts of the sailor, who must calculate the wind to change his course. Sailboats don’t appeal to the sportsman impatient to press a button, drop the throttle or hit the gas.

And sailboats tend to hold their value, even in crisis – they may depreciate 2-3% a year. Jack describes a customer who inherited some money 4 years ago. He considered investing in stocks, or in a vacation home, but ultimately decided to buy a boat. Two years later, he was very happy with that decision. “He came back to tell us ‘The stocks I was going to buy are down 40%, the cottage is down to half its value in 2 years,” Jack recalls, “but the boat held 94% of its value.’”

Boat loans are often amortized over 20 years – which means you can buy a yacht the price of a house for payments similar to those for a nice car. That is why Jack and Lou’s typical customer doesn’t have to be rich. Karma’s customers include police officers and school teachers, who enjoy their summers off.

The storied ‘water gene’ – which differentiates the person who goes out on a boat and isn’t all that impressed from the one who absolutely loves it – may be widely dispersed. But old social dynamics still impinge on its expression. “Grow Boating” is an industry initiative to promote the boating lifestyle.

Lou attended a Grow Boating assembly last year. It brought 160 luminaries from across boating types and industry sectors. Lou says only 15 of them were women, and he was one of 5 minorities. He believes the boat-owning grassroots is more diverse, even if that diversity is still filtering up through industry leadership. As of 2009 there were roughly 375,000 registered boats in Illinois, about 1 for every 13 households in the state, suggesting he is probably right.

Karma Yacht Sales has an activist streak – its owners are current on issues that impact their industry and advocate for measures that help it along. Locally, they have approached the public schools and city colleges about developing educational programs that might use sailing to demonstrate classroom concepts in physics and math, or offer vocational training in fiberglass and diesel mechanics – skills that could grow a local sailing industry, and are transferable to other industries as well.

Lou moved his family to Bridgeport in 2006, so he tends to see opportunities for action here too. He lived in Wicker Park for 9 years, and was active in the Chamber of Commerce that raised Wicker Park’s retail profile – he’d like to see similar efforts in Bridgeport. Wicker Park used a Special Service Area to generate revenues that merchants could invest as a group. Just as important, they coordinated their marketing efforts and used electronic media – something Bridgeport’s retail old-guard has been slow to embrace.

This summer, when the new marina opens at 31st Street, non-boaters may also feel the boost. Chicago harbors generate more than $30 million in annual revenue for the Park District, and help support 100s of jobs hospitality sector jobs.
Last year, about 5,000 boats docked at the city’s 9 marinas. The Park District has cited growing demand to justify substantial hikes in harbor fees over the last 10 years.

The new harbor at 31st Street will add 1,000 slips to the city’s inventory, according to Westrec Marinas, which operates the harbors for the Park District. Jack and Lou anticipate a salutary effect on harbor fees, not to mention new points of entry for Chicagoans just discovering their affinity for the water.