Acadia Realty Trust announced the core-portfolio acquisition of an 88.4% interest in 840 N Michigan Ave, an 87,000 square foot, four-story street-retail property located in Chicago, Illinois, for $144.3 million.
“Our core portfolio growth strategy centers on the selection of high-quality, retail real estate locations, primarily in our nation’s top urban markets, where we are able to achieve strong rental growth, today, and where we believe we are better positioned to create outsized shareholder value over the next 5, 10, and 15 years,” stated Kenneth F. Bernstein, President and CEO of Acadia Realty Trust. “Since 2010, we have more than doubled the size of our core portfolio, in a manner consistent with this strategy, equating to a compounded annual growth rate in excess of 20%. Including this transaction, our 2014 core acquisition volume now totals $450.4 million, consistent with our upwardly-revised guidance. Given retailing’s continued evolution, urban/street retail’s more robust growth profile, and the relative pricing of alternative investments, we remain active acquirers of these types of high-barrier-to-entry, irreplaceable assets. In fact, we are very pleased with our 2015 pipeline, which has already begun to take shape.”
The Magnificent Mile is the stretch of Michigan Ave that runs from the Chicago River north to Oak St within Chicago’s Gold Coast. Known for its luxury and mainstream retailers and world-class hotels, restaurants, and residential condominiums, the Magnificent Mile is the premier tourist and shopping destination in Chicago.
840 N Michigan Ave anchors a prime corner of the Magnificent Mile and is located directly across the street from Water Tower Place. The property is 100% occupied by H&M and Verizon. H&M has operated at the property since 2003 and recently committed to a new 10-year term that expands its selling space by approximately 10,000 square feet into the below-grade concourse level. Its flagship store now totals 59,500 square feet. Verizon selected this location to create its newest two-level Destination Store, which – at approximately 10,000 square feet of selling space – is reportedly its largest store in the country and one of only two such experience stores.
“Flagship locations, such as 840 N Michigan Ave, located in live-work-play-visit cities, enable our retailers to pair highly-visible branding with access to thousands of shoppers daily. In our experience, retailers have been highly motivated to invest their own dollars to uniquely merchandise these flagship stores,” stated Joel Braun, Executive Vice President and Chief Investment Officer of Acadia Realty Trust. “We are excited to be partnering on this transaction with four of the property’s original developers and existing owners – Nancy Pacher, Camille Julmy, and Bob Wislow of CBRE|U.S. Equities Realty, along with Doris Holleb. We share their enthusiasm for the Magnificent Mile and are committed to together maintaining this property’s top-tier status, as they certainly have during their 35 years of ownership.”
“In 1979, U.S. Equities Realty partnered with Marshall Holleb and Robert Gerstein to purchase the former Bonwit Teller building, which, at the time, housed Crate & Barrel’s flagship store. Then, in 1990, that same partnership completely demolished, reimagined, and modernized the property to create flagship space for the trio of Escada, FAO Schwarz, and Waterstones Booksellers,” stated Camille Julmy, Vice Chairman of CBRE, Inc. “More recently, we worked with H&M to increase their selling space at this productive store and also brought in Verizon, whose engaging Destination Store concept also suits this landmark location. Following the successful completion of this most recent re-tenanting, we felt that the time was right to recapitalize. Given its complementary, high-street portfolio and extensive footprint in Chicago’s Gold Coast and Lincoln Park neighborhoods, Acadia was a natural choice as our majority partner. We look forward to a long relationship with them.”
Acadia acquired this asset in a private negotiation and funded its investment using a combination of cash, operating partnership units (“OP units”), and the assumption of $48.6 million of pro-rata debt secured by the property. 840 N Michigan Ave is the third street-retail property that Acadia has acquired using OP units over the past 12 months.
Acadia and CBRE|U.S. Equities Realty will jointly provide property management services. CBRE|U.S. Equities Realty, along with Doris Holleb and Robert Gerstein, represented the sellers in this transaction.