Starwood Lists Fully Occupied Magnificent Mile Retail

Starwood Property Trust is looking for a buyer for one of downtown Chicago’s most prominent retail condominium spaces after bringing the prime spot out of the doldrums fully occupied.

The 30,000-square-foot, two-story space at the base of the 452-key LondonHouse hotel, at 360 North Michigan Avenue on Chicago’s Magnificent Mile, is up for grabs, Real Estate Alert reported. Bids could attract more than $40 million, or about $1,333 per square foot. The property is in the 21-story London Guarantee & Accident Building, built in 1923.

Starwood placed a $42 million senior loan in 2023 on the space, called the Shops at the LondonHouse, on nonaccrual status when the retail space was in foreclosure.

Hello Kitty Cafe, one of six in North America, is slated to open at the property this year. Panda Express also signed a long-term lease. Other tenants include seafood restaurant Ocean Prime and hamburger chain Smashburger, after the landlords made deals during the pandemic when little other retail action was occurring.

The hotel portion of the property was sold in 2016 by John Rutledge’s Oxford Capital Group and TPG Angelo Gordon for $315 million to German investment manager Union Investment Real Estate, setting a record price per room at the time of $697,000. Not a bad return on investment, as the joint owners purchased the landmark property in 2013 for $53 million.

Comparable retail condo sales in Chicago in terms of size and value are rarities. Across the Chicago River, Invesco Real Estate paid $3,925 per square foot for the 20,000-square-foot Apple Store at 401 North Michigan Avenue — that’s $78.5 million — in 2019.

Chicago retail is suffering greatly in the Magnificent Mile, where major retailers have exited, leaving the vacancy rate at about 25 percent. However, retail development across the Chicago metro is down 77 percent from five years ago, according to JLL. And some pockets, such as Gold Coast and certain suburban markets are still thriving.

— Eric Weilbacher