The investment worked particularly well for Northpond, which acquired the mall in December 2020, as the COVID-19 pandemic spread and the outlook for the real estate market, particularly retail, looked particularly shaky. Northpond paid $36.5 million, a price that reflected investor wariness at the time.
Regency said it paid $52.4 million for the property, a 44% increase in value in just 16 months. But the REIT likes the property’s prospects.
“Naperville Plaza is an ideal acquisition for Regency because of its diversity of tenants, high barriers to entry and connection to the local community,” Nick Koglin, vice president of Regency, said in a statement.
The sale also illustrates the power of products that people buy in stores, not online. Naperville Plaza is leased primarily to tenants and restaurants out of necessity: Two grocers, Casey’s Foods and Trader Joe’s, occupy nearly 41,000 square feet combined, along with an Oswald’s pharmacy, a Firestone auto store, a Sherwin- Williams and many other small tenants rounding out the mix.
While e-commerce competition has hurt tenant mall owners who sell clothes and other goods consumers like to shop online, grocery-anchored malls have held up well in recent years. .
Naperville Plaza is about 96% leased, according to real estate provider CoStar Group. The property jumped in value primarily because the investment market improved, not because of a major turnaround executed by Northpond.
In a sign of market shifts, Northpond’s 2020 price hit a first-year yield or cap rate of 6.7%, according to Real Capital Analytics, a New York-based research firm. Higher cap rates reflect higher perceived risk for buyers and lower prices for sellers. Regency cap rate: only 5%.
Northpond executives did not respond to requests for comment. The company’s other local investments include the Shops on Elm Place, a shopping center in Highland Park; Glenbrook Marketplace, a shopping center in Glenview; and the former Lawry steakhouse in River North.
Regency, meanwhile, now owns 11 malls in the Chicago area, including Mellody Farm in Vernon Hills, Westchester Commons in Westchester and Clybourn Common’s on Chicago’s Near North Side.
CBRE negotiated the sale of Northpond.