South Barrington's Arboretum mall up for sale

Vacancy rates may be at an all-time low at the Arboretum of South Barrington since it opened in September 2008, but it was the sluggish retail market that proved too damaging for the lifestyle center.

The 600,000-square-foot outdoor mall at routes 59 and 72 is for sale, developer Michael Jaffe of Northbrook-based Jaffe Cos. confirmed Wednesday.

No deal could be reached to refinance or extend the three-year, $91 million construction loan, which is overdue. Crain's Chicago Business reported that real estate sources are saying the loan could sell for just $40 million to $60 million.

But visitors to the center, which has more than 50 tenants including L.L. Bean, Pinstripes and Ruth's Chris Steak House, should see little, if any, change.

“I believe it will be business as usual, a seamless transition and no one will know the difference,” Jaffe said. “For us, it's an event. For the public, it's a nonevent.”

In fact, there may be even more shopping, dining and activity options since the economy is slowly beginning to improve and new ownership would have more latitude in setting rents, according to John Melaniphy, president of the Chicago retail real estate consulting firm Melaniphy & Associates Inc.

He added a new owner likely wouldn't do away with amenities such as the extensive landscaping and holiday ice rink, because they make the shopping center a high-end attraction.

Ground broke on the Arboretum in May 2007, or about six months before experts now say the recession began. Melaniphy said Chicago-area retail sales declined by $13 billion in 2008 and 2009 from 2007.

“(Jaffe) had great ideas and worked really hard, but he's a good developer who got caught in the problems of a terrible recession,” Melaniphy said. “He was never able to complete the leasing cycle.”

Jaffe said the Arboretum has secured between eight and 10 tenants in 2010, and that both attendance and sales are significantly up.

The shopping center is currently more than 86 percent leased the most occupied it's ever been. Typical vacancy rates in a recession are 12 percent and 5 or 6 percent in a normal environment, Melaniphy said.

Jaffe confirmed he's talked with several potential bidders but hopes this will just be a recapitalization, and that his firm will partner with a buyer and remain in an ownership position.

“We've had a wonderful reception despite the economic times, and we expect to be a part of the future,” Jaffe said. “Our hearts are warmed by the connection we've had with the Northwest suburbs, and we believe the best days of the center are ahead.”