That may appeal to some investors, but others may be wary of owning property on the Magnificent Mile, which is awash in vacant retail space after the loss of several tenants during the pandemic. The Mag Mile’s vacancy rate jumped to 26% this year, up from 15% in 2019, according to Cushman & Wakefield. The big Macy’s department store at Water Tower Place closed earlier this year.
Yet the Neiman Marcus store has bounced back, according to a marketing brochure from Jones Lang LaSalle, the real estate firm hired to broker its sale. The Mag Mile store is the chain’s second most-profitable location, and its sales year-to-date are 5% higher than they were for the same period in 2019, according to the brochure. The store is on track to post sales of $123 million, or $629 per square foot, this year, the document says.
It’s unclear what an investor would pay for the store considering that so few retail properties on North Michigan Avenue have changed hands the past few years. The Cook County Assessor’s office recently valued the property at $46.1 million.
The property’s value depends heavily on a key piece of information missing from the JLL brochure: how much time is left on Neiman’s lease. Investors will pay more money for a single-tenant property if the tenant is locked into a long-term lease, knowing that they will be able to collect rent for a long time. They’ll usually pay less if the lease is set to expire soon, to account for the risk that the tenant won’t renew.
Another question mark is the property’s development potential. In theory, a developer could tear down the four-story building and construct a luxury hotel or residential high-rise in its place. But the JLL brochure says little to suggest that’s even an option for a buyer, so a redevelopment could be off the table.
JLL and UBS executives didn’t respond to requests for comment.
Hartford, Conn.-based UBS has owned the Neiman Marcus store since 1998, paying $104 million for the property and office space in the adjacent Olympia Center tower, according to Cook County property records. In June 2020, UBS split up the office and retail properties. The JLL listing does not include the office space.
Department store chains suffered badly during the pandemic, which accelerated a decline that had begun years before. Dallas-based Neiman Marcus Group restructured in Chapter 11 last year and closed multiple department stores, but none here. The company continues to operate stores at Oakbrook Center and Northbrook Court malls.
But sales have rebounded in 2021, and Neiman disclosed plans earlier this year to invest more than $500 million in its business over the next three years. That could work in favor of UBS and JLL as they court investors for the Mag Mile property.