Thank you for sharing!

Your article was successfully shared with the contacts you provided.

CHICAGO-Eight months after it was scheduled to become the new owner of the tallest building in North America, Trizec Properties Inc. walked away from the deal with $9 million. MetLife Inc., which held a $766-million first mortgage on the 110-story, 3.5-million-sf office building at 233 S. Wacker Dr., becomes the sole owner after buying out the REIT’s second mortgage, originally worth $70 million, and equity position.

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.

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
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper


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 © 2021 ALM Media Properties, LLC. All Rights Reserved.