Palatine Plaza, Chicago, IL

Property Type
Retail, Strip Center

Region
Midwest

Strategy
Develop-to-Core

Investment Structure
Joint Venture

Acquired
2Q 2016 Square

Footage
12,700

Number of Tenants
3

Tenant Sector
Restaurants, Consumer Electronics, Furniture

Type of Lease
Net

Disposition Price
$8,100,000

 

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Palatine, IL




Investment Summary
We acquired this asset off-market by touring and analyzing the market, then proactively contacting the owner. The asset was 1.5 acres of vacant land on the intersection of the market’s two preeminent thoroughfares with outstanding visibility. We subdivided the parcel to construct 3 buildings on 3 parcels with long-term, corporately backed leases. Located in the 3rd largest U.S. metro, this affluent submarket is approximately 30 miles from Chicago’s CBD and characterized by a diversified economy and deep labor pool. The asset is situated in the middle of 850,000 square feet of retail space that is anchored by Walmart, Target, TJ Maxx, HomeGoods, Petco, Aldi, Hobby Lobby and Ross among many others. We closed the acquisition with executed leases, approved permits, a guaranteed-maximum construction contract, and financing in-place. We employed a Develop-to-Core asset investment strategy, thus we planned to sell the asset soon after the tenant opens.

Value Creation
Acquired the asset off-market. Executed one 15-year and two 10-year net leases with creditworthy national tenants, realizing an average rent of $38 psf. Subdivided the acquired acreage into 3 parcels. Obtained Tax Increment Financing from the jurisdiction. Constructed three new buildings, with the tenants opening for business on schedule. Exceeded the targeted sales price by 3%.

Performance
Going-in cap rate 7.1%
Loan to value 68%
Net IRR 17%
Disposition date 1Q 2018
Term held (quarters) 7