X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

CHICAGO-Trizec Properties Inc. is trying to convince Metropolitan Life that it may take longer than two years for the Sears Tower to regain enough market value to provide its new owner with sufficient equity. CEO Timothy H. Callahan, whose REIT was poised to assume ownership of the tallest building in North America five months ago, indicated as much during a recent NAREIT investor forum.

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.”

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.