The deal offers another sign that the investment market for big retail properties is stirring again after grinding to a halt during the pandemic.
A California investment firm with a growing appetite for Chicago-area shopping centers has acquired its fourth property here: Bricktown Square on the city’s West Side.
NewMark Merrill said it bought the 292,300-square-foot shopping center at the corner of Fullerton and Narraganset avenues from Chicago-based Bonnie Investment Group. The deal offers another sign that the investment market for big retail properties is stirring again after grinding to a halt during the coronavirus pandemic.
NewMark started pursuing Bricktown Square more than two years ago, but couldn’t reach a deal before the pandemic hit, said Sandy Sigal, president and CEO of the Woodland Hills, Calif.-based company.
The Montclare property has lost a few tenants since then, including an Old Country Buffet that occupied 9,500 square feet, but it survived the crisis without too much trauma. Bricktown Square was 94 percent occupied at the end of 2020, down from 98 percent a year earlier, according to public filings. Its tenants include Ross Dress for Less, Harbor Freight Tools, Aldi Stores, XSport Fitness and Farmer’s Best Fresh Market.
Though NewMark doesn’t have a lot of vacant space to fill, it plans a facelift for the property, which is showing the effects of deferred maintenance, Sigal said. He wants to install new signage and lighting, fix up its mechanical systems and generally give it a “more modern look.”
“A center of this caliber and in this community needs to be updated to reflect the tenants that are there,” he said.
Sigal declined to say how much NewMark paid for the shopping center, and the price has yet to appear in Cook County property records. A Bonnie executive did not respond to requests for comment. An executive at CBRE, which brokered the deal, declined to disclose a price.
A Bonnie venture paid $27 million for Bricktown Square in 2004 and refinanced it twice, most recently in 2012, when it took out a $35.5 million mortgage on the property. The property was appraised at $47.9 million at the time, according to public filings.
Much of the shopping center’s financial data is public because Bonnie refinanced it with a loan that was packaged into a commercial mortgage-backed securities (CMBS) offering. CMBS are bonds that trade publicly.
Net operating income at Bricktown Square fell 21 percent last year, to $2.0 million, according to a public filing. The property’s performance has declined since 2013, when its net operating income peaked at $3.4 million.
Bricktown Square also suffered major blows before the pandemic, when two tenants, Sports Authority and Toys R Us, liquidated in bankruptcy and closed their stores there. But Bonnie managed to fill most of the empty space and didn’t miss a loan payment. Bonnie paid off its $30 million mortgage balance in the sale to NewMark, which financed its acquisition with a $25.3 million loan, Sigal said.
Sales of retail properties plunged last year as many chains closed and landlords struggled to collect rent. The declines have continued into 2021: Retail real estate sales totaled $11.4 billion through April, down 24 percent from the same period a year earlier, according to New York-based research firm Real Capital Analytics.
But investment activity is starting to pick up, especially among shopping centers with grocery stores and other necessity-based retailers. In April, for instance, Evanston Plaza, a grocery-anchored 212,000-square-foot shopping center in Evanston, sold for $36.2 million, more than double what it traded for in 2014.
NewMark owns more than 85 shopping centers in California, Colorado, Washington and Illinois. Many of NewMark’s properties already have recovered fully from the pandemic, including Stony Island Plaza on the city’s South Side, which it acquired in late 2019, Sigal said.
In the Chicago area, NewMark also owns Winston Plaza in Melrose Park and Stratford Crossing in Bloomingdale. Sigal is eager to buy more shopping centers here.
“We’re definitely a looker,” he said.
Sigal is seeking meat-and-potatoes opportunities, favoring properties in highly populated and often ethnic neighborhoods with a Dollar Tree or Ross store over fancier ones with a Nordstrom Rack or Whole Foods Market.
“We love highly dense centers that either are well-anchored or have the potential to be well-anchored,” he said.
From chicagobusiness.com. Click here for the full article.