After trip through foreclosure, Glen Town Center has new Owner

(Crain’s, May 21, 2014) – About eight months after being repossessed by its lender, the Glen Town Center retail development in Glenview sold. The amount was for a fraction of what was owed on the property when it fell into foreclosure.

dicks sporting goods - glen town center new owner

(Crain’s, May 21, 2014) – Dick’s Sporting Goods is among the stores at Glen Town Center in Glenview.

A venture of Dallas-based Tabani Group Inc. paid an affiliate of U.S. Bank N.A. nearly $25 million for the 267,000-square-foot shopping center on the site of the former Glenview Naval Air Station near Lake Avenue and Patriot Boulevard, according to a person familiar with the deal. A Tabani spokeswoman confirmed the acquisition but declined to say what the company paid.

The sale represents a big loss for investors who own mortgage bonds backed by the debt on the property. U.S. Bank said Glen Town Center’s developer, an affiliate of San Diego-based OliverMcMillan LLC, owed $55.6 million when the lender filed to foreclose on a defaulted commercial mortgage-backed securities (CMBS) loan almost two years ago. The property was seized through a foreclosure sale in September.

Oliver McMillan borrowed the money on the Glen in 2006. This was when a robust economy and retail market prompted landlords to take out loans. These loans were taken out with the expectation that rent growth and tenancy at their properties would remain strong. Instead, the market crashed, and retail property values plunged.

BIG HAIRCUTS

“This is not an uncommon story,” said Joseph McBride, an analyst at New York-based research firm Trepp LLC. For delinquent CMBS loans on retail properties originated before the crash, “when you did see a revaluation, it was as much as a 50 percent haircut on the appraised value.”

The Glen generated about $1.7 million in net cash flow before debt payments in 2013. Less than the $3 million in debt payments due that year, according to a Bloomberg L.P. report about the loan. Net cash flow is up 14% vs. the 2010 bottom but still 50% less than 2006’s total of $3.3 million.

The deal is Tabani’s first acquisition in the Chicago market. The company owns 21 retail properties. Some of these include shopping centers and huge malls. Markets in Texas, Cincinnati, and suburban Indianapolis, according to its website.

‘VERY EXCITED’

“We’re very excited about the acquisition,” the spokeswoman said. “The Glen Town Center is a prime shopping destination for the area.”

For Tabani, the question is whether the firm can latch on to a retail market recovery that favors the strongest properties in the best locations.

Despite the Glen’s Main Street-style design and its proximity to affluent consumers in the northern suburbs, the property has struggled over the years — even before the crash — in part, because it’s considered difficult to get to. Tabani will carry out an “aggressive” marketing campaign for the Glen. Tabani plans to organize more events at the property to draw in additional shoppers, the spokeswoman said.

Buying the Glen at a low value gives Tabani the flexibility to offer attractive rents to retailers. All while continuing to generate a decent return.

CAN ‘GET CREATIVE’

It gives the company the chance “to get creative with tenants and offer up incentives to attract groups that may not otherwise have gone there, if they were looking at similar rents along a more accessible and visible corridor like Willow or Waukegan road,” said broker Michael Marks, senior director in the Chicago office of Cushman & Wakefield Inc. who focuses on retail property sales.

The current tenant lineup at the Glen includes Dick’s Sporting Goods, a Yard House restaurant and Ulta Salon, Cosmetics & Fragrance Inc. A Von Maur department store, a movie theater and nearby apartments are owned separately.

In 2011 the occupancy rate at the property was 84 percent, but Chicago-based RESoltuions, a receiver that managed the property starting in late 2012, during the foreclosure proceedings, signed several new tenants, boosting the rate to 90 percent as of late last year.

A spokeswoman for Minneapolis-based U.S. Bank declined to comment; the lender filed the foreclosure suit. In addition, took back the property in its role as trustee for investors in the CMBS loan. A media representative for Houston-based Situs Holdings LLC, a loan servicer that managed the CMBS debt on the property, did not return a call.

Ben Wineman, a principal at Oakbrook Terrace-based Mid-America Real Estate Corp. who handled the sale for Situs, did not respond to a call.

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