A paperwork delay involving a Sears Roebuck & Co. affiliate has been mentioned as a reason for the hold up in transferring the 3.7-million-sf asset to Trizec Properties Inc., which continues to lease and manage the tower at 233 S. Wacker Dr. However, Callahan focused more on talked with Metropolitan Life, which holds a first mortgage of more than $760 million on the property. Trizec Properties Inc., which has held a second mortgage on the property, would assume that debt, which comes due in July 2005.

"If we're going to be in a position where we're going to take $760-plus-million of debt on our balance sheet, we have to be able to show you there's value that's associated with that," says Callahan, whose REIT's debt load already is about 68% of its market capitalization.

A softening West Loop office leasing market as well as security concerns in the wake of Sept. 11, 2001, were factors that have contributed to Sears Tower's value falling to $826 million, according to Trizec Properties, Inc.'s most recent appraisal. While the rest of the REIT's West Loop portfolio outperforms the market, Trizec Properties leasing agents have more than 400,000 sf available, or more than 11% of the 110-story building's space.

"We believe that's a longer term period to regain that value," Callahan says. "We have to make a fundamental decision as to what's right for the shareholders."

Callahan suggests talks with Metropolitan Life could continue for "several months," but adds the REIT and insurance company are "in solid conversations now."