Geneva Commons Shopping Center Sells for $120 million
LaSalle Investment Management has acquired a defaulted shopping center in Geneva for less than its seller paid for it eight years ago, a reminder that many suburban retail properties are still worth less than they were before the crash.
LaSalle, the investment unit of Chicago-based Jones Lang LaSalle Inc., recently paid around $120 million for Geneva Commons, a 438,000-square-foot property near Randall and Bircher roads, said people familiar with the transaction.
That’s less than the $127.3 million that two partnerships advised by Atlanta-based Invesco Ltd. paid for the property back in 2005, according to the Kane County Recorder of Deeds.
Falling rents after the crash likely pushed Geneva Commons’ value lower in spite of its strong tenant lineup and proximity to wealthy suburban shoppers, said Evan Halkias, senior director in the Chicago office of Cushman & Wakefield Inc.
Invesco “probably had some tenants reset down to market rents,” Mr. Halkias said.
Net cash flow before debt service at Geneva Commons peaked at about $9.3 million in 2006 but dropped more than 26 percent, to $6.8 million, by 2012, according to Bloomberg L.P. reports about a loan on the property, part of a commercial mortgage-backed securities (CMBS) offering.
Geneva Commons also lost retailers, with occupancy slipping from 98 percent in 2007 to 93 percent last year, the Bloomberg reports show. Current tenants include a 77,906-square-foot Dick’s Sporting Goods outlet and a 36,000-square-foot Crate & Barrel store.
LaSalle’s challenge is now to fill in empty spaces in a competitive leasing environment along Randall Road, Mr. Halkias said.
The retail vacancy rate in Kane County was 10.3 percent in the second quarter, down from 11.5 percent a year ago, according to data from the Chicago office of CBRE Inc.
A LaSalle spokeswoman did not return calls seeking comment. An Invesco spokesman declined to comment.
LaSalle’s deal for Geneva Commons also illustrates how lenders and investors are cleaning up the financial mess after the financial crisis of 2008-2009.
The delinquency rate for Chicago-area CMBS retail loans was 10.5 percent in August, down from 12.1 percent in July but up from 9.8 percent a year ago, according to data from New York-based research firm Trepp LLC.
Although the Bloomberg reports show that net cash flow before debt service at Geneva Commons exceeded loan payments for each year from 2003 to 2012, the Invesco entities defaulted on the debt by failing to pay off a $76 million CMBS loan on the property when it matured in May.
Invesco and two servicers of the defaulted loan, Needham, Mass.-based CWCapital Asset Management LLC and Horsham, Pa.-based Berkadia Commercial Mortgage LLC, worked out a forbearance agreement, forestalling a foreclosure lawsuit, according to the Bloomberg loan reports.
Now, CMBS investors can expect a full payoff because of LaSalle’s acquisition, the reports say.
Source: ChicagoRealEstateDaily Micah Maidenberg September 04, 2013