This Week's Chicago Deal Sheet

As the economic recession continues without an end in sight, investors are looking for safe places to put their money, including the favored sector of dollar stores, a retail category that is still going strong.

Competition among potential buyers is increasing, sending cap rates for the dollar store sector to its lowest point in the past three years, according to a new report by The Boulder Group.

Rates for Dollar General, Family Dollar and Dollar Tree, the sector’s three major retailers, compressed by 15, 10 and seven basis points, respectively, since Q2 of 2019, Boulder found, and now stand at 6.9%, 7.15% and 7.03%.

“Throughout the majority of 2020, dollar stores represented an important niche within the net lease sector as they were categorized as essential retailers during the Covid-19 pandemic,” according to the report. “Investors, especially those in 1031 exchanges, pursued dollar store assets over other net lease options as dollar stores were open for business, experienced high sales volumes and had financing available.”

The overall net lease market saw a 20% decline in the number of transactions during the first half of 2020 compared to the same period in 2019. But dollar stores transactions increased by 3% this year, Boulder found.

A poll conducted by Boulder showed 62% of participants expect dollar store transactions to increase in the second half of 2020 when compared to 2019.

“New construction dollar stores will remain in the highest demand and the national expansion plans of the dollar store retailers will keep up supply regardless of their heightened demand,” according to the report.

EXECS

Manulife Investment Management has appointed Christine Choi Moore a director of asset management for the Midwest region. She has been part of the Chicago-based team since 2013.

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Frontline Real Estate Partners has promoted Matthew Tarshis to principal of the Chicago-based firm. Tarshis joined in July 2013 as an associate and most recently held the position of executive vice president. Tarshis began his career as a trader and was a managing partner and director of trading operations at Passaglia Trading for nearly a decade prior to joining RKF Chicago’s retail brokerage team. He also oversees Frontline’s more than 1M SF Chicagoland portfolio.

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Chicago-based architectural and structural engineering firm Klein & Hoffman hired Terry McDonnell as an associate principal. He specializes in glass design and fracture mechanics and will help the firm build a glass engineering solutions team.

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Newcastle Limited expanded its senior leadership team by adding Steve Merchant as managing director of multifamily operations. Merchant will oversee Chicago-based Newcastle's 3,000-unit multifamily portfolio and the 100 management and leasing employees. Most recently, he was managing director of operations with Magnolia Capital, a new national real estate investor.

SALES

An affiliate of STAG Industrial Inc. acquired a 68K SF single-tenant industrial building at 710 East State Parkway in northwest suburban Schaumburg. Advance Auto Parts and its affiliate, Worldpac, occupied the property since 2006 and in 2019 they expanded into the entire building under a new long-term lease. AAP/Worldpac uses the building to provide just-in-time delivery of automotive parts and accessories to the many automotive dealers in the area. Entre Commercial Realty’s Dan Benassi, Dan Jones and Sam Deihs represented the seller.

LEASES

Food packaging company LBP Manufacturing extended its 180K SF lease at 1401 North Cicero Ave. in Chicago, according to officials from landlord ML Realty Partners. Kris Bjorson of JLL represented LBP in the transaction.

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Midwest Custom Case Inc., a designer and manufacturer of store fixture products, signed a lease for 239K SF at 25975 Cleveland Ave. in south suburban Monee. The company will move from 425 Crossing Drive in nearby University Park when the lease commences in fall 2020.

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Patients Choice signed a lease for 10K SF at 3601 Edison Place in Rolling Meadows. Lee & Associates’ Rick Anesi represented the owner, Otto Holdings, and Tom Callahan of Chicagoland Commercial represented Patients Choice. Anesi, along with his colleague Brad Simousek, also represented the owner in Fazio Plumbing’s lease of 4K SF in the multi-tenant building at 55 Garden Ave. in Roselle.

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Reliable High Performance Products leased 10K SF at 123-133 Easy St. in Carol Stream, double the space it has at a location in Arlington Heights. Brown Commercial Group’s Matt Hanson represented the landlord, a private investor.

CONSTRUCTION AND DEVELOPMENT

Developers Hines and McCaffery are on track to complete by late summer The Orchard Private Residences, a luxury condominium development at 2350 North Orchard St. in the Lincoln Park neighborhood. Potential buyers can now take private tours of a fully completed model suite. Designed by Chicago-based architects Antunovich Associates and listed by Jameson Sotheby’s International Realty, the seven-story building features 32 homes.

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ALDI opened a store at 201 West Division St. on July 30 in Chicago’s Old Town neighborhood. The new location is part of the company’s national expansion plan to become the third-largest U.S. grocery retailer by store count by the end of 2022, according to ALDI officials. In the past few years, the grocer, which focuses on providing goods at affordable prices, has invested more than $5B to update existing stores and open hundreds of new locations.

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Kinzie Builders completed Roslyn Meadows, a development of 16 new-construction luxury townhomes in the northwest Chicago suburb of Barrington. Priced from the high $4Ks, the homes range from 2K SF to nearly 2.5K SF. Amenities at Roslyn Meadows include a neighborhood park, walking paths and common areas.

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General contractor Principle Construction Corp. completed an 8K SF addition on the 758K SF warehouse at 23700 West Bluff Road in Channahon. Principle originally constructed the warehouse in 2016. Working on behalf of owner IDIG Channahon LLC, a subsidiary of IDI Logistics, Principle added 101 dock positions to the building and installed 23 acres of concrete paving for additional trailer and car parking.

Principle’s James Brucato serves as principal on the project. Principle’s Darrin Dehmlow and Doug Brucato are senior project manager and senior superintendent, respectively. Sparks Architects is the project architect.

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Trammell Crow held a groundbreaking on July 29 for its 16-story Fulton Labs project at 400 North Aberdeen St. in the Fulton Market neighborhood. The new 400K SF laboratory facility will attempt to meet the intense demand for space from Chicago’s life sciences industry. The vacancy rate for Chicago lab space now stands at 2%.

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Developers Lendlease Development and The John Buck Co., together with partner Intercontinental Real Estate Corp., started move-ins at Porte, a two-tower, mixed-use development at 855 West Madison St. in Chicago’s West Loop. Designed by G|R|E|C Architects, Porte spans a full city block bordered by Madison St. to the north, Monroe St. to the south, Peoria St. to the west and Green St. to the east. It features a total of 586 residences, including a pair of 17-story apartment towers, as well as rental townhomes with private entrances.

THIS AND THAT

Freddie Mac just published its Multifamily 2020 Midyear Outlook and forecasts that coastal markets like New York and San Francisco will get hit hard by the COVID-19 pandemic in the second half of the year. But inland markets like Chicago will see only modest slumps. In 2020, Chicago will see its vacancy rate increase slightly more than 80 basis points, one of the smallest jumps in the U.S., about one-third the national average.

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The industrial sector is considered relatively safe from the ongoing coronavirus pandemic, and investors are pouring in money. The Chicago region has reaped much of the benefit, becoming the nation’s most active industrial market in the first half of 2010, according to a new report from Real Capital Analytics. Investors spent $3.2B on the region’s sector, ahead of second-place Dallas at $2.1B, and Los Angeles and Houston, both at $1.7B. The Chicago region was the nation’s fourth-most-active market in 2019, RCA found.