ALGONQUIN – Ongoing litigation as part of a foreclosure lawsuit against the owners of the Algonquin Commons hasn’t stopped the shopping center from attracting new businesses.
Local and midsize businesses have filled vacancies left by larger national chains, pushing the occupancy rate on the property located in the Randall Road Corridor to more than 95 percent.
“It’s just different now and adds a lot of ambiance to the shopping center by having local businesses alongside brand-name stores,” said Russell Farnum, community development director in Algonquin. “It’s a great opportunity for local businesses to get a location in a regional shopping mecca, which they normally wouldn’t be able to get.”
Oak Brook-based Inland Real Estate Corp. stopped making mortgage payments on the nearly 600,000-square-foot property in the summer of 2012, according to court records.
U.S. Bank National Association then filed a $110 million foreclosure lawsuit against Inland Real Estate Corp. last December in an attempt to persuade the real estate company to restructure its debt.
“The property has not been generating sufficient cash flow to pay both principal and interest on the outstanding mortgage,” the company said in a Security and Exchange Commission filing in January. It also cited vacancies and lease provisions that allowed some tenants to reduce their monthly rent.
Occupancy rates had dipped below the 85 percent mark between 2007 and 2011 as big retailers such as The Sharper Image, Borders, Linens n’ Things, Circuit City and Wickes Furniture closed their doors.
Vacant stores have since been filled by a mix of retailers and restaurants, including Discovery, Gordmans, Ross Dress for Less, Charming Charlie, Tilly’s, Crazy 8, Gourmet Kernel, Niko’s Lodge and Half Price Books, among others.
Half Price Books has been open in the Algonquin Commons for about five months.
In determining a location to expand in the Chicago area, the cost and location in the corridor outweighed concerns over the foreclosure filing, said Laurey Anicka, manager of the company’s Chicago district. The business has seen increased sales each month since opening.
“We did look into [the foreclosure lawsuit],” she said. “But in the end, we ultimately decided it was a good move for us. We are doing very well.”
Other businesses have been less fortunate.
Niko’s Lodge opened more than two years ago, and after having above-average business, the 10,000-square-foot business now is just getting by, said owner Niko Kanakaris, who also owned Thirsty Whale Bar in the Algonquin Commons before selling it about a year ago.
“The weekends are our busiest times, just like everyone else, but during the week, everyone is struggling,” Kanakaris said. “If we were half the size maybe we could sustain it, but I can’t keep dumping money into a place that is just breaking even.”
Kanakaris pointed to a lack of advertising by the owners and property managers, as well as an unwillingness to renegotiate or lower leasing costs.
Inland Real Estate Corp. declined to comment on the ongoing litigation.
The loan is held in a trust – a pool of loans – for which U.S. Bank N.A. was appointed trustee, bank spokeswoman Amy Frantti said. As trustee, the organization is not responsible for any of the individual loans in the trust.
That responsibility has been turned over to Irving, Texas-based C-III Asset Management LLC, which also declined to comment on the lawsuit.
Inland Real Estate Corp. was actively working on refilling tenant space before and after the foreclosure filing, Farnum said. The corporation brought in most of the tenants at 1900 S. Randall Road that are there today.
McKinley Inc., who was unable to be reached for comment, now manages the property.
“The foreclosure filing has nothing to do with the actual performance of the shopping center,” Farnum said. “The Inland management and leasing representatives were extremely open and communicative throughout the entire foreclosure proceedings, and well before that happened.”