R2, Goldman Sachs selling River North REI building

A joint venture of developer R2 Companies and investment giant Goldman Sachs is looking to offload a North Side retail building on the Chicago River that was converted from an industrial facility.

The venture has hired Chicago brokerage JLL to sell the 40,085-square-foot REI store at 1422 North Kingsbury Street, which has been a flagship location for the company that sells outdoor gear since 2019, Crain’s reported.

The sellers are hoping that REI’s long-term lease through 2034 and steady cash flow will help land a buyer. The listing comes at a time when commercial properties in Chicago, especially office and retail, are difficult to sell amid ballooning interest rates and poor performances among these real estate sectors since the pandemic hit. For retail, a surge of online shopping, accelerated by the public health crisis, has been Achilles’ heel. Nationwide, retail property sales through July were down 48 percent compared to the first seven months of 2022.

No asking price has been publicly revealed, but a person familiar with the listing expects offers to range from $20 million to $25 million, the outlet reported. The store’s net operating income is projected to top $1.2 million in 2024.

R2 is testing investor interest in net-leased properties, which are characterized by a single long-term tenant covering most operational costs. Such properties gained popularity during the pandemic due to their dependable cash flow, but inflation and hiked interest rates have since reduced their appeal.

JLL is highlighting the financial stability of REI and the property’s ideal location along the Chicago River, known as the “Wild Mile,” where recreational activities like kayaking and canoeing are popular.

Despite many investors steering clear of commercial real estate in Chicago, R2 CEO Matt Garrison is optimistic that the offering will stand out as one the better ones in a difficult market. Plus, his firm is in discussions to purchase the 41-story office tower at 150 North Michigan Avenue at a big discount from the $121 million that its current owner, CBRE Investment Management, paid for the building in 2017.

REI’s lease includes a 10 percent rent increase every five years, with the next hike scheduled for August 2024. The property also offers 58 heated parking spaces in an attached garage.

— Quinn Donoghue 

Read more

Chicago

R2 buying Michigan Avenue office tower for $70M as CBRE takes loss

Chicago

R2 Companies inks 54,000 sf in Goose Island office leases

Chicago

Tight lending, tough times sink commercial property sales