One of the biggest retail properties on Chicago’s Magnificent Mile has been voluntarily handed over to its lender in the latest sign that even the country’s best-known shopping avenues haven’t recovered from falling property values in recent years.
The Alaska Permanent Fund last month surrendered the Shops at North Bridge vertical mall via deeds in lieu of foreclosure with lender Pacific Life Insurance, according to Cook County property records. It is a move that allows a borrower to hand over possession of a property without going through the formal foreclosure process.
The move by the fund and its investment manager for the property, Dallas-based L&B Realty Advisors, comes almost three years after shopping-mall giant Macerich sold its 50% ownership stake in the North Michigan Avenue property for just $21 million to the fund, a small fraction of the $515 million that the partners paid in 2008.
That deal was completed just before real estate values throughout the country crashed in the Great Recession.
In 2014, the partners paid another $42 million for nearby land that the partners never developed as planned.
In 2022, the same year that Macerich gave up on the Shops at North Bridge, Brookfield Property Partners gave back the massive Water Tower Place vertical mall to its lender, Metropolitan Life Insurance.
The vertical malls are examples of high-profile properties on the Mag Mile and other top U.S. shopping corridors that have lost significant value since the onset of COVID-19 and, more recently, higher borrowing costs and other challenges.
There have been signs of a comeback in Chicago, with a Harry Potter-themed flagship and a huge store from Spanish clothing retailer Mango on the way to the Mag Mile.
Recent progress apparently isn’t enough to save the Alaska Permanent Fund, though. Its handover of the property is an apparent acknowledgement that the Shops at North Bridge is worth less than the value of a $375 million loan that the fund and Macerich took out from Pacific Life in a 2016 refinancing.
The Shops at North Bridge is a vertical mall at 520 N. Michigan, and it includes connected and other nearby office and parking properties on and around the Magnificent Mile.
Tenants include a Nordstrom department store alongside the vertical mall and a nearby Eataly food hall.
It’s unclear how much remains unpaid from the $375 million loan, or what the lender plans to do with the property. The Alaska Permanent Fund, L&B Realty Advisors and Pacific Life did not immediately respond to requests for comment from CoStar News on Thursday.
The fund is designed to invest Alaska’s surplus from resources such as oil and gas reserves, with residents receiving an annual dividend. Last year’s dividend was $1,312, according to the fund’s website.
As of June 30, the fund owned $9.3 billion in real estate and had a total value of almost $80.5 billion, according to an annual report.