Centerpointe of Woodridge, a 466,400-square-foot property at Woodward Avenue and 75th Street, is now more than half empty, another example highlighting the creative destruction underway in retailing amid changing demographics and the e-commerce boom. The owners of several suburban Chicago shopping centers are struggling to fill big chunks of space after losing retailers like Toys R Us, Carson’s and Sears.
Representatives of Centerpointe’s owner, an investor group organized by former Phoenix-based real estate firm Cole Capital, had been trying to negotiate a break on the shopping center’s $29.4 million mortgage with a loan servicer. But they recently decided to relinquish ownership through a so-called deed-in-lieu of foreclosure, the real estate finance equivalent of waving a white flag, according to a Bloomberg loan report.
“The borrower was originally seeking a loan modification due to the departure of J.C. Penney and Sam’s Club, however they have since changed course and have agreed to grant Lender a deed-in-lieu of foreclosure for the property,” the report says.
A spokeswoman for Torchlight Loan Services, the New York-based servicer overseeing the Centerpointe loan, declined to comment. Torchlight services the loan on behalf of investors who own commercial mortgage-backed securities (CMBS) secured by the loan.
Though retail sales have risen in Chicago this year, brick-and-mortar retailing faces an uncertain future as more people shop online. Many chains are closing stores and some, like Carson’s and Toys R Us, have folded. The retailers that are expanding are opening fewer and smaller stores than they normally would during an economic boom. The Chicago-area retail vacancy rate, at 11.1 percent, is roughly where it was during the last recession, according to CBRE.
JCPenney said in March 2017 that it would close its 104,200-square-foot store at Centerpointe, and Sam’s Club closed its 139,500-square-foot store there in June. The Sam’s lease expired in November, but JCPenney’s lease doesn’t end until 2027, according to the Bloomberg report. The property also includes a Home Depot, which recently renewed a lease for its 110,600-square-foot store.
The shopping center generated net cash flow before debt service of $2.7 million in 2017, more than enough to cover loan payments of $1.5 million, according to the report. But the property was appraised in August at just $18.8 million, down from $45.6 million in 2007 and well below the $29.4 million owed on it, the report said. That means investors who own the mortgage bonds backed by the property’s loan face a major loss on their investment. The loan matures in 2027.