CHICAGO-An Israeli investment firm has acquired a six-story, 94,600-square-foot retail property located at 1-15 East Oak St. for $117 million. The Tel Aviv-based buyer closed the deal on an all-cash basis, paying $1,200 per square foot for the property, which is leased primarily to Barneys of New York and Citibank.
The deal represents one of the largest retail investment sales transactions in Chicago this year, according to Guy Ponticiello, managing director and head of Jones Lang LaSalle’s Corporate Finance & Net Lease team. He marketed the property along with Bruce Miller, managing director of investment sales, and Dave Hendrickson, managing director of real estate investment banking.
Ponticiello says the price per square foot is “pretty near the top of the heap” for retail properties in the city. “This building is in a great, irreplaceable location,” he contends, pointing out that the building is situated in Chicago’s prestigious Gold Coast/North Michigan Avenue neighborhood across the street from Prada. “Oak Street is the Chicago equivalent of Rodeo Drive.”
Despite the property’s desirable location, Ponticello admits to GlobeSt.com that the deal was challenging for several reasons – most notably, Barneys credit profile. “Barneys is a non-investment grade tenant, and the retailer took a hit during the recession,” he notes. “It was a challenging credit to underwrite.”
Moreover, the property was foreclosed upon by Anglo Irish Bank, which was seized by the Ireland government in 2009. Anglo Irish Bank provided the financing for the build-to-suit asset construction of the property for Barneys New York and foreclosed on its $93-million loan to well-known Chicago developers. The bank valued the property at $100 million.
The Barneys property represents the Israeli investor’s first acquisition in Chicago, although it purchased the 452 Fifth Avenue & One West 39th Street in New York City for $330 million in May 2010. “They like the quality real estate, and we sold them on the underlying cash flow, as well as the property and sector’s potential,” Ponticiello says, adding that the Barneys property offers rent escalations and appreciation over time.
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