R2 & Goldman Sachs Join Forces to Sell Chicago River Building

A joint venture of developer R2 Companies and investment giant Goldman Sachs is selling a retail building on the Chicago River that was converted from an industrial facility.

Where and why: The 40,008-square-foot building is leased to REI, an outdoor gear retailer, through 2034. The sellers are hoping that the long-term lease and steady cash flow will attract buyers, even though the commercial real estate market in Chicago is challenging. REI's lease includes a 10% rent increase every five years, with the next hike scheduled for August 2024. The property also offers 58 heated parking spaces in an attached garage.

How much: No asking price has been publicly revealed, but offers are expected to range from $20 million to $25 million. The store's net operating income is projected to top $1.2 million in 2024.

The business: R2 is testing investor interest in net-leased properties, which are characterized by a single long-term tenant covering most operational costs. Such properties gained popularity during the pandemic due to their dependable cash flow, but inflation and hiked interest rates have since reduced their appeal.

JLL, the real estate brokerage handling the sale, is highlighting the financial stability of REI and the property's ideal location along the Chicago River. Despite the challenges facing the commercial real estate market in Chicago, R2 CEO Matt Garrison is optimistic that the offering will stand out as one of the better ones.