Hubbard Street exits suburban Chicago retail turnaround with $76M sale

Oak Lawn’s former Kmart store vacated in 2018 is home to new tenants after redevelopment

AEW's Jeff Furber with Oak Lawn Commons (AEW, Hubbard Street Group)
AEW's Jeff Furber with Oak Lawn Commons (AEW, Hubbard Street Group)

John McLinden’s Hubbard Street Group exited a turnaround of a suburban Chicago retail strip it repositioned at a cost of at least $40 million after Kmart vacated a large portion in 2018.

Boston investment firm AEW Capital Management bought the Oak Lawn Commons property in the southwest suburb of Oak Lawn from affiliates of Hubbard for $76 million, according to public records.

The deal is the latest example of a renewed interest in big boxes and the ability to find value by turning them into smaller spaces. Suburbs are leading the retail recovery in the Chicago area as downtown areas such as the Loop and sections of the Magnificent Mile suffer from fewer office workers and a lack of foreign tourism while the pandemic lingers.

Hubbard’s repositioning of the 140,000-square-foot property was fueled by a $40 million loan that the company and its Chicago-based partner, Keeler Real Estate, landed in 2019. That followed the venture’s 2018 purchase of the property for about $10 million after Kmart closed its store there along with dozens of others across the nation.

The property sold to AEW for a little less than Oak Lawn City Manager Thomas Phelan had hoped.

“We were told by retail investment experts that the property should sell for more than $80 million, which would make it one of the most valuable retail properties — on a price per square-foot basis — in the suburban Chicagoland area,” Phelan told the Chicago Tribune in January, when the property was marketed for sale.

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With Kmart out, the property at the busy intersection of 95th Street and Pulaski Road is now fully leased with a new set of tenants including Amazon Fresh, Duly Health Care, LA Fitness, Panera Bread, Shake Shack and Longhorn Steakhouse, according to Hubbard’s website.

AEW declined to comment and Hubbard didn’t return a request for comment.

In the year ending in March, there were 70 percent more retail property trades in the Chicago area than in the prior 12 months. The increase resulted in the most sales of retail properties for $1 million or more in the metro area than in any year since at least 2000, with a total of 830 deals for $3.5 billion, according to brokerage Marcus & Millichap.

In January, AEW also added to its Chicago-area holdings with an $18.4 million suburban warehouse purchase in Arlington Heights.