Starwood Sells Chicago Ridge Mall to Second Horizon Capital

Barry Sternlicht has offloaded a southwest suburban shopping center that’s been a financial headache for the Miami Beach-based investor for the better part of two years.

A venture led by Sternlicht’s firm, Starwood Capital Group, sold the Chicago Ridge Mall to Florida-based Second Horizon Capital, Crain’s reported.

The Starwood venture failed to pay off an $80 million loan tied to the property by its July 2023 expiration. The firm had already pushed back the original maturity date in July 2022 after negotiating a loan modification with Atlanta-based lender Trimont Real Estate Advisors.

While a sale price was not disclosed, it likely traded for far less than it was once worth, which has become an increasingly common trend in Chicagoland, especially for suburban shopping centers that were pummeled by a rise of e-commerce and reduced foot traffic during the pandemic.

As of August, Chicago Ridge Mall was valued at $63 million, the outlet reported, citing Bloomberg loan data. That’s less than half of its $129.7 million appraisal in 2012. The dramatic drop in value can be attributed to the closures of major department stores, such as Carson’s in 2018 and Sears in 2021.

However, Second Horizon is optimistic about the asset, as it plans to inject substantial capital into renovating the mall to enhance its appeal and bolster occupancy, which stands at 82 percent.

“The center has really good consistency on traffic flow and tenants,” Second Horizon co-founder Camilo Varela told the outlet. “The asset is just a center of the community, just core to the area.”

The sale marks a significant loss for bondholders invested in commercial mortgage-backed securities tied to the property, as it was part of a loan package that included other debts sold to investors. Starwood’s difficulties with Chicago area retail extend beyond Chicago Ridge Mall. It surrendered the Louis Joliet Mall via deed-in-lieu of foreclosure in 2020.

For Second Horizon, Chicago Ridge Mall is the firm’s fourth acquisition, since its founding in 2021, and its first in the Chicago area.

—Quinn Donoghue