Hersch Klaff seeks South Loop retail buyer for $11M

Hersch Klaff, the Albertson’s grocery chain board member and real estate investor who once bid to buy the Chicago Cubs and fell short, is selling a fully leased South Loop asset.

An LLC tied to Klaff’s firm Klaff Realty hired Marcus & Millichap to find a buyer for the 25,000-square-foot shopping center at 542 West Roosevelt Road, the Chicago Business Journal reported. Brokers Mitchell Kiven and Nicholas Kanich are representing the sellers.

In addition to the $11 million asking price, the buyers can also take control of the debt on the property as the $5.2 million mortgage is assumable, according to the brokers and public records. “This opportunity is best suited for an investor looking for a modest amount of leverage,” Kiven told the outlet.

Klaff, who described himself as “very risk averse” in a Chicago Tribune profile that called him a “big game hunter in a retail jungle,” has found success by buying undervalued and mismanaged properties and redeveloping them.

“I like to buy good stuff,” Klaff told the paper for the profile. “It just doesn’t look good.”

The loan on the property has a 3.89 percent interest rate, which is lower than the 6.5 percent a borrower would likely get today, the brokers said, as the Federal Reserve Bank recently raised interest rates for a fourth consecutive three-quarter point.

The shopping center is located across I-90 from the University of Illinois Chicago campus and fully occupied with six tenants. Anchor tenant Chicago Uniform Company occupies 8,500 square feet.

Brick and mortar retail may be taking a turn for the better. The head of the nation’s largest mall owner, Simon Property Group CEO David Simon, recently spoke out against what he’s calling a “negative mall narrative.” He said on the REIT’s third-quarter earnings call that “many have tried to kill off physical retail real estate and in particular enclosed malls,” but the company’s ample dividends paid to shareholders during the pandemic is a sign that it has become “stronger and more profitable.”

In August, data from CBRE found that vacant anchor retail space in the Chicago area dropped 16 percent to 13.2 million square feet this year from its 2020 peak of 15.7 million. CBRE said the anchor vacancy rate is still 60 percent higher than in 2016 and rents have dropped to an average of $9.53 per square foot, down from the most recent peak of $12 in 2017.