Insurer hunts for exit from Old Town Square shopping center

Iowa-based owner ready to cash out with property locked up in long-term leases

CBRE's Christian Williams, Richard Frolik and George Good with 424 West Division Street
CBRE's Christian Williams, Richard Frolik and George Good with 424 West Division Street (CBRE, Google Maps, Getty)

A North Side shopping center with high occupancy levels is testing whether retail buyers will take a chance on Chicago while demand in the sector is stronger than other commercial real estate classes that have been depressed more rapidly by rising interest rates.

Iowa-based Principal Insurance is selling the 87,000-square-foot Old Town Square shopping center at 424 West Division Street, after 21 years of ownership, CoStar reported. The landlord hired CBRE brokers Richard Frolik, George Good and Christian Williams to market the property.

Principal bought the 5.4-acre property in 2001 for about $19.8 million, though it’s unclear how much the company expects to fetch from the sale. Old Town Square offers some attractive qualities for prospective buyers, though.

The complex is 97 percent leased, and its anchor tenant, grocery chain Jewel-Osco, just signed a 10-year lease extension after increasing its sales performance in 2022, the CBRE marketing materials said. The lease runs through September 2033, with six options for five-year extensions. The average lease term at the property is almost nine years, including a 10-year lease for Wells Fargo and a recently signed 10-year lease with Domino’s Pizza.

Heightened development activity in the area could raise the property’s value in some investors’ eyes. There’s two residential projects each planned for less than a mile away from Old Town Square: to the northwest, developer CityPads is building a $40 million apartment complex in the Near North Side community at 1535 North Fremont Street, and to the south, Draper & Kramer is bringing a 129-unit apartment to 330 West Chestnut Street.

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Nationally, retail sales volume reached $99.8 billion in 2022, beating the previous year’s $88 billion, according to CoStar reported. Yet, retail transactions began to slow again toward the end of last year as rising interest rates and fears of a recession gripped the market. There have been $18.1 billion in such transactions so far this year, with slowdowns felt in every major market.

In the Chicago area, there have been a combined $3.6 billion in retail property sales over the past 12 months, and about $920 million in sales have been completed so far this year.

— Quinn Donoghue

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