Goldman Sachs cashes in on Gold Coast investment

Goldman Sachs’ real estate arm is cashing in on Chicago’s Gold Coast.

It recouped just about all of its $23 million purchase from 2015 of a mixed-use building by selling the ground-floor retail portion of a property at 1165 North Clark Street while holding onto the rest of the eight-story property’s office space, a person familiar with the deal said.

The 18,000-square-foot retail section, leased to CVS for 20 more years, sold for $21.3 million, or about $1,180 per square foot. The buyer was YFP, a limited liability company registered in South Carolina to Jeffrey S. Yager. Attempts to reach Yager and YFP were not successful.

The deal sets up a significant profit for Goldman if it decides to move on from the 82,000 square feet of offices above CVS. Goldman paid $22.8 million for the entire 110,000-square-foot building in 2015, when it bought the property for more than double what Chicago landlord R2 had paid less than two years before.

Goldman’s goal was to strike a long-term retail deal, and it did just that, with the property’s rising value a reflection of CVS’s commitment. The pharmacy chain has been a tenant since 1992 and extended its lease through 2041 in 2016. The terms include a rental increase in the 16th year and four 10-year options that could extend the lease through 2083 with a 10 percent increase in each option, according to a listing.

The office portion of the property Goldman is hanging onto, though, is more vacant than at the time the firm bought it, when it was 95 percent full. While the building still carries enough value to provide Goldman a payday if it decides to sell, more than a quarter of the office space, or nearly 26,000 square feet, is on the market for between $36.50 and $38.50 per square foot, a CBRE listing shows.

The property’s value has risen with a wave of development that swept through the Gold Coast since Goldman took over the property. There’s also been a display of resilience by nearby retail assets during the pandemic.

Within a block of the Clark Street building since Goldman bought it, a $37 million renovation of the Red Line station at Clark and Division has been completed, as was a 390-unit apartment tower above a Jewel Osco grocery that was expanded as part of a 2017 project by developer Steve Fifield at 1201 North LaSalle Street. Developer Fred Latsko also finished a project that added 98 apartments atop an office building at 1201 North Clark.

A few blocks to the east, restaurants in the Rush and Division district have been doing well amid the pandemic and to the southeast, Oak Street shops have become Chicago’s most popular luxury retail strip. The property rented to Chanel and Van Cleef & Arpels at 57-65 East Oak Street was sold by Jenel Management last year for $4,165 per square foot, the third most for a retail property in Chicago even as the health crisis was stretching into its third year.

Michael Kaider of CBRE represented Goldman in the Clark Street retail sale of the CVS-leased store.

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