One North State Street retail property for sale

Retailers have lost their enthusiasm for the street since the beginning of the pandemic, with big names like Old Navy, DSW and Urban Outfitters closing stores there. The negative narrative won’t make it any easier to sell the property, known as One North State.

But the property has held up so far. The retail space, at the base a vintage office building, is 93.2% leased, with tenants including TJ Maxx and Burlington, according to CBRE, the brokerage hired to sell the property.

A venture led by New York investor Isaac Shalom has owned One North State since 2004, when it paid $54.5 million for the four-level retail property, which wraps around to Wabash Avenue, according to a filing with the Securities & Exchange Commission. Shalom didn’t return a call, and a CBRE executive declined to comment.

Built in 1900 and 1912, the State Street building includes two towers and about 533,000 square feet of office space on its upper floors. San Francisco-based Shorenstein Properties paid about $80 million for the office space in 2016.

TJ Maxx, which occupies 70,000 square feet on the second floor, and Burlington, with 60,100 square feet in the basement, are the retail portion’s largest tenants among a group that includes Chipotle, Dunkin’ and The Body Shop. A Circle K convenience store is opening soon at the corner of Madison and Wabash.

The property’s performance has declined slightly over the past several years. The retail space generated revenue of $7.58 million in 2021, down from $7.68 million in 2015, according to data from Bloomberg. Its net operating income totaled $4.46 million last year, versus $5.31 million in 2015.

One question for a new owner is the status of Burlington. The retailer’s lease expires at the end of February, leaving some risk that the chain could move out. But Shalom representatives have reported that they are “working with the tenant on a lease renewal,” according to Bloomberg.

It’s unclear how much the property would fetch today. It was appraised at $100.1 million in 2013, when Shalom refinanced it with a new $60 million mortgage, according to Bloomberg. The investment has already paid off handsomely for Shalom, who was able to pull $21.3 million out of it through the 2013 refinancing, according to the SEC filing.

But that was well before the pandemic swept into town, pushing the Central Loop vacancy rate up to 23.4% at the end of 2021, up from 14.7% in 2019, according to Stone Real Estate. Though State Street recently has added some retailers, including Five Below and JD Sports, it has lost more than it has gained. One North State could be an attractive buy to an investor that believes the State Street market can only go up from here.