June 1, 2011 / 6:52 PM / in 7 years

Exclusive: Owners of former Sears Tower seek investor

NEW YORK (Reuters) - The owners of North America’s tallest building, formerly known as the Sears Tower, are looking for an investor to help recapitalize the building that is an integral part of the Chicago skyline, a spokesman for the group said on Wednesday.

“We can confirm a recapitalization effort has commenced with a select number of qualified investors,” spokesman Bill Utter said.

The owners may consider a complete sale of the 110-story, 4 million square-foot building, now called the Willis Tower, said two sources familiar with the matter. The sources were not authorized to speak publicly.

A group that includes Chicago-based American Landmark Properties Ltd and New York developers Joseph Moinian of the Moinian Group and Joseph Chetrit of the Chetrit Group bought the tower on South Wacker Drive in 2004 for about $900 million.

Many investors who bought U.S. commercial real estate during the boom years of 2003 through 2007 have needed a loan modification or an infusion of capital to hold on to properties because rents or occupancy did not go as planned.

A recapitalization generally gives a new investor a percentage of ownership in the building in exchange for the investment. As U.S. capital and investment interest have waned and prices have declined, investors from China, the Middle East and Canada have stepped up as new investors and buyers in U.S. commercial real estate.

The building carries $780 million of debt on it, said the two sources.

The Sears Tower became the Willis Tower when UK insurer Willis Group Holdings agreed in 2009 to lease 140,000 square feet at $14.50 per square foot.

In addition to Willis, tenants include the Chubb Group of Insurance Cos and United Airlines, now owned by parent United Continental Holdings Inc (UAL.N), which in the process of moving its operations center in Elk Grove Village to the Willis Tower. The airline company has leased 650,000 square feet, the owners’ spokesman said in an email.

Last year over 1 million square feet of office space was leased at the building. Goldman Sachs Group Inc (GS.N) recently moved out of the building, a second source said. The tower is about 22.6 percent vacant, with much of that available on the higher floors, according to the building’s web site.

In addition to the office space, the building includes 250,000 square feet of retail space, said one of the sources. Part of the site also has been approved for the development of a hotel. Playing against the flat Midwest landscape, the building offer views miles long.

    The owners are being represented by Eastdil Secured Senior Managing Director Douglas Harmon, who brokered the sale in 2004. Harmon is responsible for brokering some of the biggest U.S. office building sales, the most recent being Google Inc’s (GOOG.O) $1.8 billion purchase of 111 Eighth Ave. Manhattan.

    Newmark Knight Frank President James Kuhn also represents the owners in brokering a Willis Tower transaction jointly with Harmon, the two sources said.

    Designed by Skidmore Owings and Merrill and built in 1973 the tower originally was the headquarters of Sears Roebuck and Co. Sears moved to Hoffman Estates, Illinois in the early 90s.

    The tower soars 1,442 feet high. With its antennas, which provide broadcasting revenue, it reaches 1,729 feet into the sky.

    In January 2009, the Skydeck on the 103rd floor underwent a major renovation to include the installation of glass balconies, which extend 4.3 feet from the building. Skidmore Owings and also designed the all-glass boxes. About 1.3 million people visit the Skydeck each year, according to the Skydeck web site.

    (Additional reporting by Kyle Peterson in Chicago)

    Reporting by Ilaina Jonas; editing by Carol Bishopric

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