Wednesday, August 22, 2018
Former Sears HQ in Homan Square sold to Chicago investors
The deal could lead to the redevelopment of historic West Side buildings that have been mostly vacant for years and badly in need of investment.
Source: Crain's Chicago BusinessBy Danny Ecker
The owners of a south suburban freight company have purchased a historic property in the Homan Square neighborhood in a bold wager on the future of the city's West Side.
A venture led by the CEO of Markham-based freight carrier Arka Express paid $3.25 million this month for a series of contiguous properties including the former Sears headquarters at 3333 W. Arthington St., according to Cook County property records.
In addition to the landmark five-story building, which served as Sears Roebuck's home from 1905 until the retailer moved to the Sears Tower in 1973, the deal included a dilapidated 11-story building that previously served as the headquarters of Allstate Insurance, as well as a 1,150-space parking structure and a 3.4-acre vacant development site.
It's unclear what the buyer, listed in public records as a venture of Arka CEO Arnold Kozys and Vitalijus Kaleinikovas, will do with the properties, which are situated between Interstate 294 and Roosevelt Road about 4 miles west of downtown. The new owners couldn't be reached.
But their acquisition raises the possibility of redevelopment of properties that have been mostly vacant for years and badly in need of investment.
The sellers in the deal, a venture of Chicago-based Royal Imperial Group, planned a residential development on the site after buying the buildings in 2004. But that vision was thwarted when the market crashed a few years later.
They sold the majority stake in one of the Sears buildings in 2014 to nonprofit affordable housing developer Mercy Housing Lakefront, which last year completed a $65 million conversion of the property into a 181-unit apartment building that is now fully leased. Royal Imperial Group put the balance of the Sears campus, which it rebranded as Sterling Park, up for sale last year.
The site has plenty of upside for redevelopment because of its proximity to the CTA Blue Line and its location in the "path of growth" moving west from downtown, said Mercy Housing Lakefront President Mark Angelini.
The former Sears HQ building and the Allstate building "are the two pieces that need to be redeveloped and recapitalized, so we're excited," he said.
"Certainly putting in any kind of redevelopment that brings additional housing and/or services and/or job-generating ventures would be welcome."
The new owners of the properties will have a menu of tax incentives at their disposal, should they take on a redevelopment.
The entire site is in the Homan Arthington tax-increment financing district, making any new development eligible for significant TIF help. It sits in an Illinois Enterprise Zone that could offer a mix of tax incentives, as well as an Opportunity Zone created by last year's federal tax reform. That program, which allows investors to defer paying taxes on capital gains if they are carried over into developments in designated blighted areas, could open up a major new source of capital for a redevelopment project.
The Sears building is also eligible for Chicago landmark tax benefits and federal tax incentives for preservation of historic buildings, according to a marketing flyer for the site. The vacant and deteriorating Allstate building, which was designated in 2013 by Preservation Chicago as in danger of being lost to demolition or decay, could also be considered for a city landmark designation, the flyer said.
Other developments nearby could also add some wind to the Sears site's sails. A redeveloped 14-story tower next to the Sears building opened in 2015 and is fully leased with a mix of nonprofits and community groups.
The Charles H. Shaw Technology & Learning Center opened a charter school in 2009 at a former Sears power plant next to the HQ building, and a YMCA opened in 2010 just west of the site.
David Levy of NRC Realty & Capital Advisors and independent broker Ted Prillamen represented Royal Imperial Group in the sale of the former Sears properties.