Two decades after cleaning up a former paint manufacturing site on Chicago’s North Side and building retail structures for tenants including Best Buy and Kohl’s, a Chicago developer is looking to sell the complex for more than $72 million.
Baker Development is seeking a sale of the Elston Retail Collection, CEO Warren Baker said.
The buildings at 2100, 2140, 2184 and 2196 N. Elston Ave. total 189,204 square feet. The property is fully leased to four tenants: Best Buy, Kohl’s, BMO Bank and Chicago Speech Therapy.
The deal is an opportunity to buy a triple-net-leased property along the edge of the wealthy Bucktown and Lincoln Park neighborhoods with a weighted average lease term of 5.3 years, according to a property brochure. It is near the long-planned Lincoln Yards megadevelopment, the Kennedy Expressway and the Chicago River.
The asking price is just under $72.5 million.
“This is generational real estate in Chicago,” said Boulder Group broker Jimmy Goodman, who is representing the seller.
The buyer has the option of assuming approximately $58 million in existing debt on the property at a below-market interest rate of 3.65%, according to the brochure.
Leases expire between 2030 and 2035, with each lease including multiple extension options with rent escalations.
The list price represents a 7% cap rate, or initial rate of return, according to the brochure. Net operating income is nearly $4.6 million per year.
“We’ve had a 20-year run and never a missed rent payment,” Baker said. “If you like Chicago and you like retail, this one checks every box. I would venture to call this property irreplaceable.”
Chicago Speech Therapy’s recently signed 10-year lease will fill an 8,500-square-foot structure previously leased to Bubbles Academy.
A sale would end a lengthy hold period by the developer, which assembled dozens of industrial and residential parcels totaling nearly 11 acres, conducted environmental remediation, rezoned the property and constructed the buildings beginning in 2004.
The zoning change was part of a broader move at the time to set aside a strip of land to allow retail development within an area long designated for industrial use.
Since then, industrial-focused zoning has been lifted in a much larger, 760-acre area running along the river between the Loop business district and the North Side, paving the way for new projects such as residential developments. That includes the Triangle Square apartment complex developed across the street in recent years and the stalled, mixed-use Lincoln Yards.
A new team of developers, Chicago-based JDL Development and Boca Raton, Florida-based Kayne Anderson Real Estate, now plans almost 3,300 residences on the northern portion of the Lincoln Yards site. Their project is called Foundry Park in a nod to the area’s manufacturing past.
“That will bring more residents to an already dense and infill area,” Goodman said.
Shift to Arizona
Baker said his firm is selling the property as part of a shift in focus to industrial development in the Phoenix area, where the company also has an office.
Baker Development sold the 191-unit Elevate Lincoln Park apartment building this year for almost $114 million. That sale to Tishman Speyer also included the assumption of a low-interest-rate loan with a $78.6 million balance.
Baker Development sought a sale of the Elston retail property in 2019 before instead refinancing it with a $70 million loan from a Citigroup affiliate that year, Cook County property records show.
That loan, with a remaining balance of about $58 million, matures in November 2029, according to the brochure.
The property includes a three-story parking garage with 580 spaces and 320 surface parking spaces.
“There are bigger deals transacting and more institutional capital being deployed,” Goodman said of the property sales market. “With the recent interest-rate cut and the potential for more cuts, investors are a little more eager to transact. It’s a good time to sell.”