Brokers Buy 500,000 SF Lincoln Mall

While the purchase price remains confidential, the property was acquired for less than the $25 million that a Walnut, Creek, CA-based partnership paid for it in 1998, when Finova financed the deal with an $18-million mortgage. Realty America Group had been marketing the 30-year-old property but decided late last year to make its own bid. The in-line space was generating $2.4 million in net operating income last year, according to Realty America Group's offering.

Regardless of the price, it is a far cry from the $90 million that Colorado Public Employees Retirement System paid for the mall 10 years ago. The pension fund spent another $35 million in improvements, notes Realty America Group principal Webb Sowden III. The quality of the improvements was a key factor in the decision to buy the mall, adds principal Jeffrey C. Berry.

The new owners also have worked on a tax increment financing and sales tax rebate package that could make Lincoln Mall space more attractive. "Tenants who are paying triple-net rent could be in the top 10% in the US in sales but their taxes were killing their bottom line," Sowden explains, adding the incentive package is still in the works. "It's never really been a function of sales for the tenants, but excessive operating costs."

Property taxes for the parcels Realty America Group acquired were $1.17 million last year, down 64% from two years before. The Cook County Assessor's most recent market value for the parcels was $10.5 million, with 80% of that value in the 80 acres of land. Part of the problem, Sowden says, is the rich price paid by the Colorado pension fund skewed assessments in subsequent years.

Demographics in the growing area, including new homes being built in the upper-income range, also were a factor. "We saw tremendous potential, not only because the physical plant was in excellent condition, but the mall had two absentee owners over the last 10 years," Berry adds. "You really need a hands-on owner in there to fix the problem."

The mall's other anchors are Sears, Roebuck & Co. and Carson Pirie Scott, but the retailers own that space, which total 319,000 sf. In addition, an anchor spot formerly occupied by JCPenney may see a return by that retailer.

"We brought in what we believe is the top management and leasing team in the country to start the turn-around," Sowden tells GlobeSt.com, noting that Altanta-based Steve Silverstein led the repositioning of the Ford City shopping center. "Obviously, it will be a challenge. But the demographics of the area are working very strong in our favor."

Sowden tells GlobeSt.com Realty America Group plans to sign the existing anchors to long-term operating covenants and bring back JCPenney.