Naperville Plaza sold for 44% more than it did at the end of 2020, a sign of how much the real estate investment market has changed.
A Chicago investment ﬁrm has sold a Naperville shopping center for more than $52 million, a deal that illustrates how much the real estate investment world has changed since the depths of the pandemic in 2020.
Northpond Partners sold Naperville Plaza, a 115,000-square-foot property at the corner of Gartner Road and Washington Street, to Regency Centers, a Jacksonville, Fla.-based real estate investment trust.
The investment worked out especially well for Northpond, which acquired the shopping center in December 2020, when the COVID-19 pandemic was ranging and the outlook for the real estate market, especially retail properties, looked especially shaky. Northpond paid $36.5 million, a price that reﬂected the wariness of investors at the time.
Regency said it paid $52.4 million for the property, a 44% increase in value over just 16 months. But the REIT likes the property’s prospects.
“Naperville Plaza is an ideal Regency acquisition due it its tenant mix, high barriers to entry, and connection with the local community,” Nick Koglin, a Regency vice president,said in a statement.
The sale also illustrates the power of products people buy in stores, not online. Naperville Plaza is leased chieﬂy to necessity-based tenants and restaurants: Two grocers, Casey’s Foods and Trader Joe’s, occupy nearly 41,000 square feet combined, with an Oswald’s Pharmacy, Firestone auto shop, Sherwin-Williams paint store and many more smaller tenants rounding out the mix.
While e-commerce competition has hurt owners of malls leased to tenants that sell apparel and other goods consumers like to buy online, grocery-anchored shopping centers have held up well over the past several years.
Naperville Plaza is about 96% leased, according to real estate provider CoStar Group.The property jumped in value chieﬂy because the investment market improved, not because of any major turnaround executed by Northpond.
In one sign of the market shift, Northpond’s 2020 price worked out to a ﬁrst-year return, or capitalization rate, of 6.7%, according to Real Capital Analytics, a New York-based research ﬁrm. Higher capitalization rates reﬂect a perceived greater risk for buyers—and lower prices for sellers. Regency’s capitalization rate: just 5%.
Northpond executives did not respond to requests for comment. The ﬁrm’s other local investments include the Shops on Elm Place, a Highland Park shopping center; Glenbrook Marketplace, a shopping center in Glenview; and the former Lawry’s steakhouse in River North.
Regency, meanwhile, now owns 11 shopping centers in the Chicago area, including Mellody Farm in Vernon Hills, Westchester Commons in Westchester and Clybourn Commons on Chicago’s Near North Side.
CBRE brokered the sale for Northpond.