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CHICAGO-Heitman Capital, which has a lease at 180 N. LaSalle St. into 2003, made some preliminary cuts of potential buildings while meeting with a leasing broker recently. “We said yes to Quaker Tower, no to Sears Tower,” President and CEO Mary Ludgin told the recent National Association of Office and Industrial Properties Conference here, adding, “But somebody will say yes to the Sears Tower.”

While former President George H. Bush called the 110-story Sears Tower “a symbol of our nation’s strength and vitality” during this week’s reopening of the Skydeck observation deck, some of the 10,000 office workers and smaller tenants in the building have considered it a terrorist’s bull’s eye in the wake of the horrific attacks Sept. 11 on the World Trade Center towers.

Those fears were noted in the Federal Reserve’s recent “beige book.” “Reports of anxiety among occupants of some of Chicago’s trophy office properties became more frequent,” after Sept. 11, it noted, perhaps referring to the John Hancock and Aon buildings as well. “According to one contact, ‘more than one’ tenant of a prominent office tower in the city were looking to leave the building, for fear of losing workers left skittish by the World Trade Center attacks. Some tenants noted that workers in high-rise buildings were less productive because of security distractions.”

However, others at the NAIOP conference compared the jitters felt in high-profile, Central Business District trophy office assets to the initial reactions after the 1989 Bay Area earthquake. The Bay Area, specifically Downtown San Francisco, returned to normal in a few years.

“In the short-term, there will be an over-reaction,” Transwestern Investment Co. Chairman Randall Rowe says of Sears Tower. “I think there already is over-reaction.”

For TrizecHahn Corp., which in addition to managing the tallest building in North America owns a subordinated mortgage on the 3.5-million-sf tower as well as an option to purchase, time is on its side. The building at 233 S. Wacker Dr. has a 5.4% vacancy rate now, TrizecHahn won’t have to deal with hearing “no” on lease renewals too often through 2003.

“The Sears Tower has minimal expirees the next two years,” says President and CEO Christopher Mackenzie. “We’ve already leased 170,000 sf of the 200,000 sf coming vacant in ’02, leaving about 30,000 sf to fill next year. In ’03, the expirees are only 148,000 sf. The average lease term is 7.1 years. The Sears Tower remains a highly desirable work place and is probably the finest building in Chicago. We’re comfortable the companies will want to continue to be located there.”

Mackenzie conceded during an earnings conference call that the company has spoken to some tenants about the possibility of their leaving, but those leases all are under 2,000 sf. Meanwhile, tourists’ fear of heights and trophy office towers in the wake of Sept. 11 is affecting TrizecHahn’s Sears Tower bottom line to the tune of $750,000 per year in lost Skydeck revenue, adds Antonio Bismonte, who heads leasing and operations in TrizecHahn’s Sears Tower office. Before Sept. 11, TrizecHahn was projecting Sears Tower net operating income of $73 million this year, rising to $88 million in 2003.

“We did a little haircut assuming the Skydeck would take a bit of time to come back to our normalized level, and also an impact on our retail operations,” Bismonte says. “But for the most part, the bulk of the income is from the leases we have with our tenants, and there’s virtually no rollover in that component.”

Meanwhile, office workers Thursday impressed fire officials by evacuating from the third and fourth floor in less than two minutes. Under a new ordinance passed by the city council, Sears Tower and all other buildings taller than 780 feet will have to file evacuation plans and procedures as well as conduct drills twice a year. Fire officials believe the Sears Tower could be fully evacuated in about an hour.

Concrete barricades, recently painted red, white and blue, surround the base of the building and tow trucks loom for those who park on Adams and Franklin streets as well as Jackson Boulevard and Wacker Drive.

“We’ve always had a regular and extensive cooperation with the police and fire authorities on our safety program,” Mackenzie says. “Immediately after the events of Sept.11, we retained two highly regarded security consultants…to compile an extensive review of the operations of Sears Tower. Based on their findings, we’ve implemented a number of new security measures, including new X-ray machines, metal detectors and upgraded tenant and visitor access procedures.”

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