The retail space attached to a pair of Chicago’s most recognizable towers has a new owner.
Pebblebrook Hotel Trust said Friday that it sold the retail space in the Marina City condos complex as well as two parking facilities for $30 million. The sale provided further evidence that the post-pandemic recovery of Chicago’s retail sector is outpacing the office market.
Although the buyer was not listed in Pebblebrook’s announcement, Crain’s reported that it was California-based Sperry Equities. The properties are adjacent to the Pebblebrook’s Hotel Chicago, and retail tenants include steakhouse Smith & Wollensky and ping pong hangout Spin. Another restaurant, Legal Sea Foods, is expected to open at the property next year.
Maryland-based Pebblebrook in May hired JLL brokers Adam McGaughy and John Nugent to market the 354-room Hotel Chicago at 333 North Dearborn Street and the retail and parking portions of the historic Marina City towers next door. The hotel does not appear to be included in the sale to Sperry.
The Marina City listing included 146,000 square feet of dining, entertainment and retail and two 450-stall parking garages. In a win for Pebblebrook, the parking and retail properties were sold together despite the marketing material stating that they could be sold separately.
It was one of seven property sales the company completed in 2023, totaling $330 million, according to a news release. Proceeds will go toward “general corporate purposes,” which could include paying off debt and repurchasing company shares.
Pebblebrook followed a trend of other hotel landlords, including owners of the Virgin Hotel Chicago and the Blackstone Hotel, which attempted to sell their properties as the city’s hospitality sector made a comeback. Pebblebrook this fall also listed another hotel, the 752-room Westin Michigan Avenue Chicago at 909 North Michigan Avenue, for sale with JLL.
However, high interest rates and a tight lending climate have hindered deal closures this year.
Retail, though, has been a small bright spot on Chicago’s commercial real estate scene this year.
Last month, landlords Feil Organization and Nakash landed a $55 million loan for 645 North Michigan Avenue. The pair previously secured a loan for the property for $65 million in late 2013. Feil controls 75 percent of the property while Spiegelman holds the remaining 25 percent, the previous mortgage showed.
While it’s unclear what drove the new loan to a lower amount than the previous debt, the refinancing serves as a vote of confidence in the ability of the Magnificent Mile to recover. It also illustrates the benefits of a diverse roster of tenants, considering the building’s mix of retail and medical office uses.
The 12-story, 200,000-square-foot building’s ground floor has been home to a pair of luxury retailers, Salvatore Ferregamo and Ermenegildo Zegna, since the late 1990s. And it is bolstered by leases with Northwestern University and medical offices on the upper levels.
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