Brookfield Property Partners seeks buyer for big empty Michigan Avenue retail building across from Water Tower Place

New York-based Brookfield unburdened itself of an even bigger problem across the street in April, when it handed over Water Tower Place, the big vertical mall at 845 N. Michigan Ave., to its lender through a so-called deed-in-lieu of foreclosure. Brookfield had explored a redevelopment of the nine-story mall but ultimately decided that the time, effort and money required for the task weren’t worth it. Water Tower also had lost so much value that it was worth less than the $300 million-plus owed on the property.

Without any tenants, the building at 830 N. Michigan also is worth a lot less than it was. Brookfield took it over through its 2018 acquisition of GGP, which paid $166 million for the property in 2013. The property’s fortunes took a turn for the worse in 2019, when Topshop closed its store there. Another tenant, Columbia Sportswear, closed its ground-floor store there in the early months of the pandemic, followed by the Uniqlo closure last August.

“While we are exploring the sale of the property, there is no buyer identified,” a Brookfield spokeswoman wrote in an email. She declined to answer questions.

Identifying a buyer won’t be easy in the current market. North Michigan Avenue is Chicago’s premier shopping district and one of the city’s biggest tourist destinations, but retailers and investors have soured on the boulevard since the beginning of pandemic. A rise in shootings and other violent crimes in the area have hurt the Mag Mile’s image—a recent panel formed to explore ideas to turn around the shopping district cited public safety as their top concern.

About a quarter of all Mag Mile retail space is vacant today, but optimists can find encouraging signs. Most recently, Aritzia, a Canadian women’s apparel chain, leased the former Gap store at 555 N. Michigan Ave., the biggest retail lease on the boulevard since 2015.

Brookfield also owns the property at 605 N. Michigan Ave., a four-story vintage office and retail property whose tenants include Sephora and Chase. The building is 100% leased, according to real estate information provider CoStar Group.

Though North Michigan Avenue is struggling, 830 N. Michigan is still prime real estate, and it could attract interest from developers interested in tearing down the existing building and constructing a high-rise in its place.

The question is whether the building would fetch a price high enough that would allow Brookfield to pay off its mortgage on the property. The $85 million loan from a unit of New York-based MetLife—also the lender on, and now owner of, Water Tower Place—matured in July 2020, according to Cook County property records. But Brookfield negotiated a one-year extension, also agreeing to pay down the balance of the loan to $73 million. The maturity date has been extended once again, according to a person familiar with the loan who declined to be identified.