A vertical shopping mall in the center of Chicago’s Loop business district is for sale, a move that puts a high-profile retail property on the market during a slowdown in sales throughout the country.
Los Angeles-based CIM Group has hired JLL brokers to sell the five-story Block 37 mall, according to marketing materials from the brokerage.
To complete a sale, CIM Group will need to overcome rising interest rates and other factors that have slowed real estate deals throughout the country. In Chicago, that has led to $1.9 billion in total retail property sales so far in 2023, on pace to fall well short of the $4.7 billion volume last year and $4 billion in 2021, according to CoStar data.
But the deal offers upside for investors who are confident in the return of major city centers from the effects of COVID-19. It’s also a rare opportunity to own a highly recognizable retail property in the center of one of the country’s largest cities.
CIM Group has owned the 277,654-square-foot mall since 2012, when it bought the mall at 108 N. State St. out of foreclosure for almost $84 million, according to Cook County property records. The seller was Bank of America, which took back the property from its developer, Joseph Freed & Associates, which completed the project in 2009.
CIM Group added a 690-unit apartment tower atop the mall, called the Marquee at Block 37. It sold a 51% stake in that property for Canadian investor Morguard for just over $135 million in December 2019.
The apartment tower is not part of the newly listed retail offering, which is about 70% leased, according to JLL. Tenants include AMC Theatres, Five Iron Golf, First Ascent Climbing & Fitness, Zara, Sephora, Anthropologie, Magnolia Bakery and the Dearborn restaurant.
Lower levels are connected to the Pedway, Chicago's enclosed, below-ground walkway that includes access to retail and train stations.
CIM Group is a frequent investor in Chicago real estate, including its redevelopment of Tribune Tower on the Magnificent Mile with local partner Golub & Co.
It is unclear how much CIM Group expects in a sale. The firm did not immediately respond to a request to comment from CoStar News on Monday.
It is seeking a sale when some top retail areas in the city are struggling. That includes the Mag Mile east of State Street, which has historically high vacancy.
Because of that, vertical mall pioneer Water Tower Place could be destined for a significant reduction in size.
Owner Metropolitan Life Insurance was previously the property’s lender before taking back the eight-story mall from Brookfield Property Partners last year. In a sign of low retail demand, MetLife is now looking to sell or lease the top five floors for nonretail use, such as medical offices or traditional office space.
A new Block 37 owner would have to overcome the effects of reduced office use, which has some developers eyeing conversions of some older buildings on and around LaSalle Street into new uses such as affordable apartments.
JLL is emphasizing new investments in the Loop near Block 37, including Google’s plans to buy and occupy the formerly state-owned James R. Thompson Center.
It has been about a year and a half since the last office sale of more than $50 million in downtown Chicago.
For the Record
JLL brokers Keely Polczynski, Michael Nieder, Dave Monahan and Caity Tirakian are representing CIM Group in the sale.