Clybourn Corridor retail property fetches $20 million
By: Micah Maidenberg
Two aggressive out-of-town investors have teamed up to buy a Clybourn Corridor retail property with a lot of vacant space, a risk and opportunity in a recovering retail leasing market.
A venture between New York-based Jenel Management Corp. and White Plains, N.Y.-based Acadia Realty Trust paid roughly $20 million for the 35,000-square-foot building at the northeast corner of Sheffield and North avenues, according to people familiar with the deal.
Restoration Hardware Holdings Inc. is the property’s largest tenant, with a two-floor, 15,440-squarefoot space. Sephora USA Inc. leases about 5,300 square feet. But more than 12,400 square feet — about 35 percent of the building — on the building’s upper floors has been empty since Z Gallerie Inc. closed its store there more than four years ago.
Finding a tenant for the upper-floor spaces will be a challenge for the Jenel/Acadia venture. While the Clybourn Corridor is one of the strongest retail areas in the city, many tenants still prefer first-floor stores, where they the can maximize visibility and access for shoppers.
Another risk: the possibility that Corte Madera, Calif.-based Restoration Hardware closes its store after opening a planned Gold Coast showroom. A spokeswoman for the housewares retailer declined to discuss the company’s plans for the Clybourn store.
“That’ll never be bad real estate,” Jason Gustaveson, a vice president of Chicago-based Stone Real Estate Corp., said of the building the Jenel/Acadia venture acquired. “I would think the upside is if Restoration leaves that they’d replace it with a little better rent. The challenge of making that property profitable is the upper level.”
First-floor rents in Clybourn Corridor can run as high as $60 a square foot, up more than 20 percent from two years ago, while upper-floor rents range from the low-to-high $20s per square foot, he said.
“We feel anything in that building can be leased to a good tenant,” said Joseph Dushey, vice president of leasing and acquisitions at Jenel. He noted that the upper-floor spaces above Sephora have a separate entrance.
Mr. Dushey confirmed that his firm partnered with Acadia in the deal but declined to discuss the price. The venture acquired the property from an affiliate of Barrington-based GK Development Inc., the developer of the property, which opened in 1999.
GK President Garo Kholamian also would not discuss pricing. An Acadia spokesman declined to comment. The deal illustrates the pricing power of Clybourn Corridor retail properties right now. At $20 million, the price would equate to about $595 per square foot, more than the nearly $500 per-square-foot price a fully leased retail building at 1415-1435 N. Kingsbury St. fetched earlier this year.
Mr. Kholamian said GK decided to sell the property as a part of the normal course of developing, holding and selling buildings. He did not know the total investment his firm put into the property. As recently as last year, a GK venture put a new, $13.6 million mortgage on the building, public records show.
“We found a price we were happy with,” he said. Richard Frolik, executive vice president in the Oak Brook office of CBRE Inc., and Christian Williams, first vice president in the office, represented GK in the deal.
The deal marks the first time Jenel and Acadia have teamed up here, Mr. Dushey said. Jenel is known for its bets on retail properties in neighborhoods like Bucktown and Lincoln Park but also has downtown holdings.
Acadia, a real estate investment trust, has taken big swings on retail buildings on the Magnificent Mile and the Gold Coast. The firm also has ventured into neighborhoods such as Lincoln Park.
“We both have been working on deals in the market, and basically we like them as a partner and they like us as a partner,” Mr. Dushey said of the two firms’ joint venture.