Chicago’s famous Magnificent Mile shopping strip is still reeling from the pandemic, but some investors are capitalizing on heavily discounted properties as sellers cut their losses.
A joint venture of Farpoint Development and Saxony Capital is nearing a deal to pay around $40 million for the vacant 17,400-square-foot building at 830 North Michigan Avenue, Crain’s reported. That’s about $2,300 per square foot.
If the sale is completed, it would be a staggeringly low purchase price, reflecting the troubled state of the Mag Mile, as empty storefronts plague the once-vibrant strip. The vacancy rate on Michigan Avenue is hovering around 30 percent. That’s nearly double what it was in 2019, before the pandemic fueled an increase of online shopping and wrecked the city’s retail sector.
For seller Brookfield Properties, the sale would equate to a brutal loss. The firm took over the property in 2018 through its acquisition of GGP, which paid $166 million for the six-story building in 2013. Brookfield inherited an $85 million loan that GGP took out from MetLife in 2014 and was set to mature in July 2020. Brookfield then received a one-year extension in exchange for paying down the loan balance to $73 million. The loan maturity was extended once again, but terms of that deal and the remaining balance are unclear.
The 830 North Michigan building has been empty since Japanese clothing chain Uniqlo vacated the space almost two years ago. It’s unclear what Farpoint and Saxony’s plans are for the site, but they’ll likely repurpose it, the outlet reported.
Many Mag Mile landlords are at a crossroads. Some are holding out faith that tourism and foot-traffic will return to pre-pandemic levels and reignite the retail sector, while others look to redevelop their holdings for new uses, such as residential or entertainment. At 845 North Michigan, MetLife — which took over the 818,000-square-foot site after Brookfield surrendered it last year via deed-in-lieu of foreclosure — is weighing a medical conversion of the building’s upper floors.
Other Michigan Avenue properties to change hands in recent months include Silvestri Investments’s $94 million purchase of the four-story building at 737 North Michigan, and, in another loss for Brookfield, the firm surrendered the Water Tower Place shopping mall to its lender last year with more than $300 million owed on a loan against the property.
— Quinn Donoghue
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