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CHICAGO-The former IBM Building at 330 N. Wabash has been one of the biggest success stories in the city. The technology company, which commissioned the famed architect Ludwig Mies van der Rohe to build the 52-story tower, moved out of the building completely in 2006, and tenant Jenner & Block left the top 10 floors in 2010, leaving the building about 50% vacant.

However, in a market with some of the highest office vacancy rates, owner Prime Group Realty Trust captured some great deals, including an anchor spot for the new American Medical Association headquarters. With the help of Langham taking the first 13 floors for a hotel, the 1.5-million-square-foot tower is almost back to its original occupancy. PGRT president and CEO Jeff Patterson recently spoke with GlobeSt.com about the new expectations for the iconic Chicago landmark, which has been renamed AMA Plaza.

GlobeSt.com: The building was about half empty for awhile, and at almost 40 years old, it was make-or-break time. What was the plan?
Patterson: IBM had the building 95% leased for a long time, but it’s been a little off the market since then. We came up with a plan, but it took some alternate thinking...it was just really a lot of space to fill in this market. So, we sought out the hotel, eliminating 13 floors from the occupancy. Also, the hotel will provide amenities that the tenants will want.
The other thing was that we got the building designated as a landmark using Class L, that allowed us to reduce real estate taxes between $3-$4 per square foot for 10 years. By doing that we felt we could put ourselves in position to deliver to tenants new office space at 75% the cost of new building rents. (With Class L, owners can have their property tax assessment levels reduced for a 12-year period provided they invest at least half of the value of the landmark building in an approved rehabilitation project.)

GlobeSt.com: I've heard there's $250 million in renovations being done to the building? Is that right?
Patterson: That’s about right, the renovations are now ongoing. We repositioned the lobby, cleaned all the marble and the terra cotta ceiling, added a new fire and life safety system and put in new elevator cabs. We’re also going through as we redevelop the floors and removing the asbestos, and we’ve built new restrooms and hvac systems.

GlobeSt.com: Okay, so there’s infrastructure changes and cheaper rent. What made the building stand out to prospective tenants?
Patterson: When people got into this building, they realized what a good building IBM had constructed for themselves in the 1970s. It has very efficient 9-foot ceilings, it’s surrounded by three streets, and the river and the plaza, and the views are just tremendous. Mies van der Rohe designed a great building. Once we got people in the building, and they saw the redevelopment program, it’s sold itself. And not all of our deals have been done at below-market rates, we’re talking mid-$20s net.

GlobeSt.com: One main worry when the work started was the new Trump International Hotel and Tower, going up on the old Sun-Times building site right next door, threatening to block the views of Lake Michigan. Was this concern valid?
Patterson: It’s more perception than reality than about view. When we got tenants up into the building and had them look out the window, they saw that not much of the view is affected. Also, the higher you get, the floor plates of the Trump step back further. We think it’s more of a plus to have the Trump building so close, it’s got great amenities and restaurants. Also because it was built we also got a new walkway that connects us directly to Michigan Avenue (a walk that usually would take pedestrians around buildings and up and down stairs).

GlobeSt.com: So more office tenants are coming -- how is the hotel coming along?
Patterson: The hotel is under construction and going full-speed. They intend to open in late first quarter of 2013. I think it’s going to work great. We will have a separate entrance at the southwest corner of the building, they’ll have their own lobby, control of their own elevator bank, though there will be a connection to the office for use by the tenants. They’ll also have their own signage, and two restaurants, including outdoor dining at the existing plaza.
I don’t think people fully understand how nice the hotel is going to be, it will be on par with the Peninsula and the Four Seasons.

GlobeSt.com: Are you yet reaching a pause in leasing announcements?
Patterson: We’re at 86% leased, and we’re running out of space. We do have a couple things in the pipeline that will push the numbers up higher. Medium space users still have a lot of choices, and I think we’ll see movement in the market by those users in the next 12-24 months. We’ve seen where potential tenants have been sitting on their hands the past two years, and they are out now at least making some leasing decisions -- other than renewing for a year or so, like what has been going on. People are getting a little more confident, our economy has more legs than it did last year. The leases we’ve been doing have all been big leases -- in the couple of years before 2010 we didn’t see those deals.

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Six Questions for Prime Group&#146;s Jeff Patterson

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