A Chicago investor has paid $47 million for a four-story building on the Magnificent Mile in a bet that historically low demand and property values have bottomed out on the city’s best-known retail avenue.
North American Real Estate on Thursday bought the retail and office building at 605 N. Michigan Ave., according to Savas Er, a principal at the retail development firm. The seller was Brookfield Properties.
Er declined to comment on the price, which people familiar with the deal said was about $47 million. That price is just a fraction of the $140 million it last sold for in December 2016 to shopping mall giant GGP.
Brookfield Properties has owned the building since its buyout of GGP in 2018.
The sale of 605 N. Michigan is the latest loss on the avenue for Brookfield and lender MetLife amid poor demand from retailers, high interest rates and other factors that have pushed down property values on the famous 1-mile retail corridor.
Er, however, said his firm sees big price resets as an opportunity for long-term profits, with well-capitalized new landlords able to be aggressive on leasing. That includes his firm’s plans to bring new tenants to the corner of Michigan Avenue and Ohio Street.
“With new buyers coming into the market at a lower basis, it will be easier to revive the avenue,” Er said. “This is a Main and Main corner on Michigan Avenue. We believe in Michigan Avenue, and we believe in Chicago.
“There are only so many high streets in the world, and this is one of them.”
Er said the firm is focused on making minor cosmetic improvements to the 68,000-square-foot building, which is known for its Gothic columns, and filling existing and potential vacancies.
Tenants include a Chase bank branch that has about two years left on its lease and a Colores Mexicanos arts and food shop that is on a short-term deal, Er said. Co-working firm Regus recently vacated the top floor.
The other tenants are a Sephora store and the office of architecture firm KTGY, Er said.
Vacant space on upper floors could be filled with office tenants, or incorporated into a multilevel retail deal, Er said. “It could be a good retail-entertainment kind of spot,” Er added.
Falling Values
The sale of 605 N. Michigan extends a string of losses for Brookfield and MetLife on the street.
Brookfield walked away from its investment in the Water Tower Place vertical mall in 2022, handing it back to MetLife. MetLife is now trying to fill retail vacancies, including a massive former Macy’s store, while also potentially leasing or selling upper floors for use as medical offices.
Another property where Brookfield was the owner and MetLife was the lender, a vacant retail building at 830 N. Michigan Ave., sold last year for $40 million. That was a fraction of the previous sale price of $166 million in 2013.
The latest deal for 605 N. Michigan was well below the value of an $80 million loan that MetLife issued on the property in November 2018, according to Cook County property records.
Brookfield did not respond to requests for comment from CoStar News. MetLife declined to comment.
In another recent sign of reduced values on the Mag Mile, JMB Realty recently refinanced the retail and office portions of the 66-story tower at 900 N. Michigan Ave. for $180 million. That deal required JMB, whose founders include Chicago billionaire Neil Bluhm, to kick in more than $56 million in new equity to cover the difference in a previous loan that matured, future leasing funds and other expenses.
Amid falling values, North American Real Estate has been a buyer in Chicago and the suburbs.
Acquisitions in the city have included paying almost $20 million for the landmark Flat Iron Arts Building in Wicker Park on the city’s North Side, a $15 million deal for a five-story retail and office building at 100-112 S. State St., and $4 million for a four-story retail and office building at 174 N. Michigan Ave.
For the Record
The seller was represented by Eastdil broker Michael Pagliari.