Appraised last year at $828 million, the building's value drops by another $53 million as a result of the transaction. Despite backing away from owning the building, Trizec Properties remains at Sears Tower, both as a tenant on the 46th floor as well as property manager and leasing agent. The current version of the company and predecessor TrizecHahn has been property manager and leasing agent since 1997.

Chief executive officer Timothy Callahan, who moved the company's headquarters from New York City earlier this year, believes Sears Tower's value will eventually increase, though not soon enough for Trizec Properties shareholders or by July 2005, when MetLife's loan comes due. "We had to look at this in the context of when we could realize value," Callahan tells GlobeSt.com. "I didn't think we had the luxury of waiting."

Among Trizec Properties' options were getting an extension on the mortgage, but MetLife took a wait-and-see approach during negotiations, Callahan reports. With $543.8 million in mortgage debt already on its balance sheet, Trizec Properties became increasingly reticent in recent months about a deal that would more than double that amount. With its common stock trading at $11.98 per share, the REIT's market capitalization is $1.8 billion.

Although Sears Tower occupancy is relatively healthy at 89%, the value of the asset has declined because of a softer Central Business District office leasing market exacerbated by new buildings under construction or coming on line in the West Loop, as well as tenants balking at high-profile, trophy property in the wake of Sept. 11, 2001.

Trizec Properties' value-creation strategy for MetLife is simple—attract and retain tenants to what Callahan calls a "great building to work in." He believes the company has an advantage with the leasing team led by senior vice president Stephen Budorick. "His team of top professionals has an intimate knowledge of the building. That is value-added in itself," Callahan says.

Trizec Properties officials note their company retains a 950-space parking garage on the 200 block of S. Franklin St., just east of Sears Tower.

Instant Insights /

GlobeSt.com UPDATE: Sears Deal 'Best Possible Outcome' for Trizec

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