March 18, 2018

Willis Tower sold for $1.3 billion to Blackstone Group

Blackstone Group, a private equity real estate investor with about $81 billion under management, has reached an agreement to buy Chicago’s iconic Willis Tower, the company announced Monday.

The purchase price is $1.3 billion, according to a source.

The deal for the formerly named Sears Tower, said to have been reached over the weekend, would be the highest price ever paid for a U.S. office tower outside of New York. It would also shatter the Chicago record, $850 million, set by last year’s sale of 300 N. LaSalle.

“We are bullish on Chicago as companies expand within and move into the city and look for first-class office space,” Jacob Werner, a managing director in Blackstone’s real estate group, said in a statement. “Moreover, we see great potential in further improving both the building’s retail operations and the tourist experience for one of the most popular destinations for visitors to Chicago.”

The Wall Street Journal, which first reported the agreement on MarketWatch, said Blackstone plans to invest heavily in the retail portion of the nation’s second-tallest building and in upgrading its 103rd-floor Skydeck, in hopes the deck will become a cash cow like those of other skyscrapers.

Jonathan Gray, Blackstone’s head of real estate, told MarketWatch that the company hopes “to really make this more of a comprehensive tourist attraction” as well as an office building.

The Skydeck is among the tower’s regular revenue streams. It reaped about $25 million in admissions revenue in 2014, an amount that has been climbing annually. Its broadcast antennas brought in more than $13 million in the 12 months ended in November.


The Tribune reported Friday that Blackstone was in talks to buy Willis Tower and has previously reported that commercial real estate broker Eastdil Secured, which is handling the Willis Tower sale, was not marketing the property because of ongoing negotiations with a potential buyer.

Blackstone is best known in Chicago for buying a portfolio of properties assembled by Chicago real estate mogul Sam Zell. Blackstone’s purchase of Equity Office Properties Trust for $39 billion in 2007 was the largest private equity deal in history, according to The New York Times.

Real estate magnate Joseph Chetrit, developer Joseph Moinian and Skokie-based American Landmark Properties bought the tower for $840 million in 2004, a record then. Last year, 300 N. LaSalle sold for $850 million.

Eastdil had advertised untapped revenue streams for Willis’ new owners, including selling naming rights to the Skydeck and building a hotel on the property’s southwest corner at South Wacker Drive and West Jackson Boulevard.

The tower, completed in 1973 as the Sears Tower, is 84 percent leased, down 1 percentage point from March 2009, when Willis announced it had acquired naming rights.

Blackstone’s real estate business was formed in 1991. Among its holdings is the Hilton hotel chain. The firm’s seventh real estate fund will own Willis Tower.


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Copyright © 2015, Chicago Tribune

Original article: 

Willis Tower sold for $1.3 billion to Blackstone Group

Chicago’s Tallest Building Breaks Record With $1.5B Agreement


© Provided by IBT US

Willis Tower, Chicago’s tallest building, is about to break another record. When the world’s largest private equity real estate owner, Blackstone Group, pays $1.5 billion for the 110-story Windy City icon, it will shatter the $850 million record price tag for Chicago set in 2014 with the sale of a nearby 60-story tower across the river.

Blackstone, the New York-based firm, has had its representatives visiting Willis Tower to perform due diligence, Crain’s Chicago Business reported on Friday.

The purchase is significant, even for a firm with $81 billion of real estate assets under its management, according to Crain’s report. Real Capital Analytics, a New York-based research firm, says it would be the 24th office deal in the U.S. to surpass the $1 billion mark, but only the fourth outside of the Big Apple. The 1,451-foot-tall property, formerly known as the Sears Tower, earns about $10,000 of income every hour.

At its projected sale price, Willis Tower is almost $400 per square foot for 3.8 million square feet of office space. For New York investors Joseph Chetrit and Joseph Moinian and the Illinois-based American Landmark Properties, who purchased the tower for $840 million in 2004, there is a hefty profit to be made on the agreement with Blackstone, Crain’s reports.

Willis Tower, which completed construction in 1973, doesn’t command the rent prices of newer Chicago buildings. Only 84 percent of it is leased, and a new owner would need to spend money to attack new leasers to the empty spaces. Also, because the building is more than 40 years old, maintenance and modernization will require significant capital.

The observation deck on the 103rd floor provides a steady cash flow, in addition to retail and restaurant space, broadcast space and antennas, and building naming rights managed by Willis Group Holdings, a building tenant. Skydeck, the building’s popular tourist attraction, generates more than $25 million in revenue annually, according to Crain’s report. Total building operating income for 2015 is estimated at $88.6 million – that breaks down to $48.7 million for office, retail and restaurant space, $11.1 million from broadcasting, and the revenues from the Skydeck.

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Chicago’s Tallest Building Breaks Record With $1.5B Agreement