Brokers Buy 500,000 SF Lincoln Mall
By Mark RudaOriginal article: GlobeSt.com
MATTESON, IL-Realty America Group has acquired 358,840 sf of
in-line space at Lincoln Mall as well as 148,030 sf vacated more than two years
ago by bankrupt retailer Montgomery Ward. The Dallas-based commercial real
estate owners and financiers have hired Jones Lang LaSalle to boost occupancy,
now at 50%, to 95% over the next two years.
While the purchase price remains
confidential, the property was acquired for less than the $25 million that a
Walnut, Creek, CA-based partnership paid for it in 1998, when Finova financed
the deal with an $18-million mortgage. Realty America Group had been marketing
the 30-year-old property but decided late last year to make its own bid. The
in-line space was generating $2.4 million in net operating income last year,
according to Realty America Group's offering.
Regardless of the price, it is
a far cry from the $90 million that Colorado Public Employees Retirement System
paid for the mall 10 years ago. The pension fund spent another $35 million in
improvements, notes Realty America Group principal Kip Sowden. The quality of
the improvements was a key factor in the decision to buy the mall, adds
principal Jeffrey C. Berry.
The new owners also have worked on a tax
increment financing and sales tax rebate package that could make Lincoln Mall
space more attractive. "Tenants who are paying triple-net rent could be in the
top 10% in the US in sales but their taxes were killing their bottom line,"
Sowden explains, adding the incentive package is still in the works. "It's never
really been a function of sales for the tenants, but excessive operating
costs."
Property taxes for the parcels Realty America Group acquired were
$1.17 million last year, down 64% from two years before. The Cook County
Assessor's most recent market value for the parcels was $10.5 million, with 80%
of that value in the 80 acres of land. Part of the problem, Sowden says, is the
rich price paid by the Colorado pension fund skewed assessments in subsequent
years.
Demographics in the growing area, including new homes being built in
the upper-income range, also were a factor. "We saw tremendous potential, not
only because the physical plant was in excellent condition, but the mall had two
absentee owners over the last 10 years," Berry adds. "You really need a hands-on
owner in there to fix the problem."
The mall's other anchors are Sears,
Roebuck & Co. and Carson Pirie Scott, but the retailers own that space,
which total 319,000 sf. In addition, an anchor spot formerly occupied by
JCPenney may see a return by that retailer.
"We brought in what we believe is
the top management and leasing team in the country to start the turn-around,"
Sowden tells GlobeSt.com, noting that Altanta-based Steve Silverstein led the
repositioning of the Ford City shopping center. "Obviously, it will be a
challenge. But the demographics of the area are working very strong in our
favor."
Sowden tells GlobeSt.com Realty America Group plans to sign the
existing anchors to long-term operating covenants and bring back JCPenney.