Still, the low price is not a huge surprise in the era of COVID-19, which has been cruel for retail businesses. Retailers have closed stores across the country as part of a broad shift in shopping habits, with more consumers embracing the convenience of online shopping and spending less in physical stores. The trend was already underway but accelerated after the pandemic swept across the country in 2020.
It doesn’t help that Webster Place includes a cinema – Regal Cinemas – an area hit hard by the pandemic, and a bookstore – Barnes & Noble – a business that was already in sharp decline before COVID. Another big tenant, the Webster Place Athletic Club, closed in 2019. The mall was only 68.5% occupied last fall, according to a quarterly report from RPT.
With retail facing an uncertain outlook, many investors are wary of the sector these days. But Novak Construction, which bought Webster Place from RPT, is not one of them. Chicago-based Novak is primarily an entrepreneur, but the company has recently taken on retail properties, taking over old Sears stores in Portage Park and Galewood and moving forward with plans to redevelop them. A Novak company also paid $ 25 million for a prominent commercial Loop property about a year ago.
It’s unclear what the company has in mind for Webster Place – Novak executives haven’t returned phone calls – but the property needs an owner with vision and the money. Located near affluent neighborhoods like Lincoln Park, Bucktown and Old Town, this is “phenomenal real estate,” said Mitch Goltz, co-founder and director of GW Properties, a Chicago developer who has considered bid on the property.
“It’s a very well located asset that needs to be in the hands of an owner who can reposition it,” he said. “The bones are there. You just have to find a way to reactivate the parts.
One potential solution: add apartments to the property. In 2018, RPT launched plans to build two 20-story towers just south of the mall that would have included residential, office and retail space.
But the company never went through the process of obtaining zoning for the project. The current zoning allows for the construction of an additional 168,000 square feet at Webster Place, according to a marketing brochure from Jones Lang LaSalle, who negotiated the sale for RPT. That, combined with a neighboring 1.1 acre site that was not included in the sale, could accommodate a major residential project.
JLL and RPT representatives did not return phone calls.
Adding apartments to languid malls has become a popular turnaround strategy for developers, injecting new energy into dreary properties and diversifying their revenue streams beyond risky retail. Novak has stepped into the game, with plans to convert part of the former Portage Park Sears into 207 apartments.
Novak could also fill the existing commercial space of Webster Place with new tenants less vulnerable to competition from e-commerce. Potential uses include medical practices and distribution, according to a JLL marketing brochure aimed at potential tenants.