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CHICAGO-Trizec Properties Inc. officials had hoped a deal involving Sears Tower could have been struck with Metropolitan Life before the REIT’s second-quarter conference call. While talks between the two lien holders on the tallest building in North America continue, a transfer of the 3.5-million-sf asset’s title may not happen before the end of the summer.

Trizec Properties CEO Timothy H. Callahan says he expects talks to end “over the next month or two” between his company, which once was scheduled to take title to Sears Tower Jan. 1, 2003, and Metropolitan Life, which holds a mortgage of more than $775 million.

Callahan says no appraisal has been done on the building recently. The company’s last appraisal in 2002 estimated the value of the asset downward to $826 million, reflecting increased vacancy in the wake of the Sept. 11, 2001 terrorist attacks.

Market conditions, as well as the prospects of increasing the company’s total $3.15-billion debt by about 25%, has caused Trizec Properties officials to reconsider becoming owners of Sears Tower, which it still manages.

Occupancy at Sears Tower stands at 88%, according to Trizec Properties’ most recent quarterly report. That is 5.4 percentage points lower than occupancy at the company’s other four Downtown Chicago assets, three of which are in the same West Loop submarket as Sears Tower. However, Callahan notes overall vacancy in the Downtown market, including sublease space, stands at 15.3%.

“Leasing activity in Chicago has slowed significantly due to the lack of job growth,” Callahan says, adding the company expects a sluggish market for the next two years as new construction adds space.

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