Follows $97 million acquisition of The Shoppes at Webb Gin and $17 million acquisition of Sweetgrass Corner earlier this year by Baltimore-based real estate company
Continental Realty Corporation (CRC), a Baltimore-based real estate investment and management company, has entered the suburban Chicago real estate market with its acquisition of a portfolio of five shopping centers comprising over 900,000 square feet of gross leasable area. The grocery-anchored and necessity-based assets located in Cicero, Mount Prospect, Naperville, and Palatine, Illinois were acquired from DiMucci Companies for $93.6 million. Tucker Development, a Chicago-based real estate and development firm, acted as an acquisition and development consultant on the transaction. The portfolio was cumulatively 84% occupied at the time of the sale, leased by national retailers such as Sam’s Club, The Home Depot, Jewel-Osco, Kroger, Walgreens and Ross Dress for Less.
The portfolio was purchased on behalf of Continental Realty Opportunistic Retail Investment Fund I, a private equity fund formed last year and focused on acquiring value-add and income-producing retail properties in targeted submarkets throughout the United States. This represents the fifth retail acquisition for the Fund, following the $97 million purchase earlier this summer of The Shoppes at Webb Gin, a 330,000 square foot lifestyle center located in the Atlanta market. The fund also acquired Banks Crossing, a 255,000 square foot center located in Fayetteville, Georgia, for $24.35 million this spring.
CRC entered the Michigan real estate market last fall with the $34 million acquisition of Oakland Plaza and Oakland Square, located in Troy and collectively consisting of nearly 392,000 square feet of retail space. Continental Realty’s Opportunistic Retail FundI, acquired both assets as its inaugural acquisition.
Strong core tenancy and compelling value-add opportunities drove acquisition decision
“The acquisition of the suburban Chicago grocery anchored retail portfolio is well aligned with our overall investment thesis and is an opportunity to own and operate an institutional-quality real estate portfolio featuring a strong line up of grocery, drug store and necessity-based users, combined with strong value-add potential,” stated Josh Dinstein, Senior Vice President, Acquisitions for Continental Realty Corporation. “Each center is strategically located in dense infill areas with high barriers to entry, and we were able to acquire the portfolio substantially below replacement cost.
“There are multiple paths to value with the ability to deliver strong risk-adjusted yields to our investors. This includes leasing nearly 150,000 square feet of inherited vacancies, monetizing several existing outparcel opportunities, and implementing our asset management strategy to achieve improved cost efficiencies,” Dinstein added.
Property descriptions
- Cicero Marketplace: anchored by The Home Depot, Sam’s Club, Target and Food 4 Less, is a 392,000 square foot center located at 3027 S. Cicero Avenue between 26th and 31st streets in Cicero. According to Placer.ai, a market research company that reports on consumer behavior by compiling store visit data, the center includes the number one trafficked Sam’s Club in the United States and a Food 4 Less supermarket that ranks in the top quartile for traffic within its nationwide chain. More than 900,000 consumers reside within a five-mile radius of the center, with an average household income approaching $70,000.
- Northwest Shopping Center: anchored by Jewel-Oscosupermarket, is a 101,000 square foot center located at 425-569 E. Dundee Road in Palatine. The population within a five-mile radius is more than 240,000, with an average household income exceeding $125,000.
- Golf Plaza II Shopping Center: a 145,000 square foot retail center anchored by Walgreens and KD Market; Walgreens ranks in the top quartile for traffic within its national chain. The center is located at 1000-1080 S. Elmhurst Road in Mount Prospect and nearly 280,000 consumers reside within a five-mile radius, with an average household income exceeding $94,000.
- Fox River Commons: a 241,000 square foot shopping center located at 808 S. Route 59 in Naperville, represents approximately 26% of the portfolio’s gross leasable area. Existing tenants include International Fresh Market and Outback Steakhouse. It is positioned at the intersection of W. Ogden Avenue (Route 34) and IL Route 59, and more than 271,000 consumers reside within a five-mile radius, with an average household income approaching $130,000.
- English Valley Shopping Center: a 24,000 square foot unanchored strip center located at 237-285 W. Dundee Road in Palatine. The center includes a mix of long-term service and F&B tenants such as Kiddie City, Rosati’s Pizza and Angel’s. Nearly 230,000 consumers reside within a five-mile radius and the average annual income within a three-mile radius is nearly $110,000.
Approximately 39% of the total gross leasable area across the portfolio is occupied by grocery or drug stores. The average population located within a five-mile radius of the five centers is 384,000 and the average household income is nearly $106,000. Each center is located between 10 and 35 miles from the downtown Chicago area.
Chicago’s retail market, at nearly $120 billion in annual sales, is third largest in the country
With approximately 8.9 million residents, Chicago is the third largest metropolitan statistical area (MSA) in the United States and 22nd largest in the world. According to Moody’s Analytics, the Chicago MSA was rated the top US market for economic diversity, and Chicago’s retail market is ranked as the third largest economy in the nation with nearly $120 billion in annual retail sales.
According to the Economic Recovery Dashboard published by World Business Chicago, a public-private economic development agency, consumer spending in the Chicago area has increased 20.1% since January 2020, ranking it ahead of New York City (13.3%) and Houston (15.6%). The Gross Domestic Product in the Chicago MSA rose 1.3% in the past quarter to $782 billion. During the month of June, Amazon posted more than 3,700 unique jobs, followed by the University of Chicago (more than 3,000), Northwestern Memorial Healthcare (more than 2,800) and Ascension (more than 2,500).
CRC intends to add value to expand internal rate of return
“Our expansion into the Chicago suburbs was opportunity-driven, given the portfolio’s irreplaceable assets and strategic positioning,” stated JM Schapiro, CEO of Continental Realty Corporation.
“Our decision to enter the suburban Chicago market with a portfolio of this size will enable us to immediately leverage economies of scale. We intend to target the restaurant, soft goods, entertainment, and medical categories to fill existing vacancies with users that bring long-term value and enhanced energy to the center and the surrounding communities. We believe there is demand for retail space in each of these respective submarkets and, utilizing our strong broker and tenant relationships, we intend to significantly enhance the tenant mix across the portfolio.”
“We were glad to help CRC through this process as we believe the portfolio is a unique opportunity to purchase a sizable footprint in excellent Chicago-area geographies that contains various paths and optionality to unlock additional value,” stated Aaron Tucker, President & CIO of Tucker Development. “The portfolio has an exciting combination of high-quality long-term tenancy and opportunistic vacancy.”
Headquartered in Baltimore, Maryland and founded in 1960, CRC is a full-service commercial real estate and investment company focused on acquiring and operating retail and multifamily properties. The privately held firm owns and manages a diversified portfolio of retail centers consisting of more than seven million square feet of commercial space and approximately 9,000 apartment homes across 11 states, with a portfolio value exceeding $3.3 billion. For additional information, visit www.crcrealty.com.
Headquartered in Chicago, Illinois and founded in 1996, Tucker Development is a full service commercial real estate developer, management company and investor. The family-owned firm owns, develops and manages mixed-use and retail assets. The firm has been involved with over six million square feet of transactions and over $1 billion in total deal capitalizations.
