The deal comes on top of what has been a busy year for local shopping center sales, even as rising inflation and interest rates and turbulent financial markets have disrupted commercial real estate over the past few years. last months. Malls, especially those with grocery stores or other retailers less vulnerable to e-commerce competition, have mostly recovered from the trauma of the COVID-19 pandemic, although many are now attracting prices means.
Marshfield Plaza was expected to sell for about $40 million, but the company that bought the property paid $30.2 million, or about $116 per square foot, according to the deed. Christian Williams, one of the CBRE brokers who arranged the sale, attributed the price drop to two factors.
First, property hit the market in February, just before financial markets plummeted and interest rates jumped, spooking many investors. Second, Marshfield Plaza is eligible for more than $9 million in tax increment funding payments from the city, an incentive factored into the $40 million price estimate. But PGIM received a payment of about $1.8 million in April, reducing the amount remaining for a future buyer, Williams said.
Representatives for PGIM did not respond to a request for comment. Mehrdad Mottahedeh, the head of the company that acquired the mall, did not call back.
Mottahedeh is an executive at Allied Dynamics, a turbine manufacturer based in Farmingdale, NY. His firm acquired the business through a 1031 exchange, a transaction that allows investors to defer capital gains taxes on the sale of one property if they reinvest the proceeds in another, said Williams. Mottahedeh’s group, which financed the acquisition with a $21 million loan from Wells Fargo Bank, owns no other properties in the Chicago area.
At $30.2 million, the company paid the highest price for a South Side mall since June 2021, when Dallas-based Tabani Group paid $30.5 million for the mall. Chatham Ridge, a 175,800 square foot property in Chatham on the south side.
Mall sales have picked up in the Chicago area over the past year. Local deal volume jumped to $1.56 billion last year from $778 million in 2020, according to MSCI Real Capital Analytics, a New York-based research firm. With sales totaling $993 million through the first half of 2022, the deal volume is on track to eclipse last year’s total.
Marshfield Plaza, which stretches from 115th to 119th Streets on the west side of I-57, has rebounded from multiple setbacks in recent years. Target closed a department store there in 2018. Although Target owned the store and did not pay rent to PGIM, the closure was a blow to retailers neighboring the mall who depended on Target to attract shoppers to their stores. .
The store sat empty until a Chicago investment firm, DL3 Realty, bought it and turned it into the Blue Cross & Blue Shield community center and office, selling the property for $20 million to an investor. New Yorkers last year.
Marshall’s also closed its Marshfield Plaza store in 2019. But dd’s Discounts leased the 26,000 square foot space last year. Discount clothing chain Forman Mills has also agreed to take over 64,000 square feet of space in the Burlington property, which is not renewing the lease for the space which expires next February.
The mall “has taken pieces over the years,” said Williams, senior vice president at CBRE. PGIM “did a very good job of stabilizing.”
Marshfield Plaza was 94.1% occupancy at the end of the second quarter, down from 85.6% two years earlier, according to real estate data provider CoStar Group. The property includes a Jewel-Osco grocery store and pharmacy which are separately owned and were not part of the sale.