“In this environment, having certainty of who your tenants are and the cash flow of those tenants is attractive. We believe in Restoration Hardware as a tenant,” said Alexi Panagiotakopoulos, Fundamental Income’s co-founder and chief investment officer. “We thought this was a good market opportunity to acquire a beautiful building.”
Built in 1914, the roughly 60,000-square-foot building at 1300 N. Dearborn St. operated for almost 90 years as a residence for female artists called the Three Arts Club. Wilson’s firm, Convexity Properties, took over in 2011 and redeveloped it into the swanky RH showroom and restaurant it is today.
The building is Fundamental’s first in the Chicago area, Panagiotakopoulos said. The firm, which is managed by Brookfield Asset Management, owns assets in 26 states.
The building’s sale comes as somewhat of a course change. Convexity had previously planned to sell the four-story building, hiring Cushman & Wakefield to handle the deal. Crain’s reported it had attracted interest. Then, Convexity dropped that plan in the summer of 2020, when it decided to refinance with a $24 million loan.
At the time, RH occupied the whole building under a 20-year lease that expired in 15 years.
When RH opened its opulent showroom, store, wine bar and restaurant in the building in 2015, it was the Corte Madera, Calif-based company’s largest flagship location.
The project was a head turner. Before RH came onto the scene, the building needed major repairs, had been empty since 2003 and was not zoned for retail. The space now is extravagant, with trees growing among the restaurant’s tables, a wine vault, sweeping showrooms and a rooftop patio.
Just last month, RH opened another of its lavish showrooms in Oak Brook. RH Oak Brook, the Gallery at Oakbrook Center, is the company’s 12th gallery location. Though many retailers took a beating during the pandemic as shopping shifted even further online, those that can provide an experience—one a customer can’t get online—have done well.
“We pulled the deal off the market as a result of COVID,” said David Nelson, head of global investments and real estate at DRW, the parent company of Convexity. “We had not planned to market the asset for another year or two, but we received several unsolicited bids and decided that it was the right time to complete the transaction.”
Representatives from RH declined to comment.