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MetLife Acquires Sears Tower

The insurer, holder of the first mortgage, buys out Trizec Properties, which is seeking to reduce debt.

August 29, 2003|From Bloomberg News

MetLife Inc. on Thursday acquired the Sears Tower in Chicago, buying Trizec Properties Inc.'s interest in the tallest U.S. building for $9 million. The transaction allowed Trizec to avoid assuming a $766-million mortgage debt.

"It's a terrific building, but it just wasn't right for us to own it at this time," said Rick Matthews, a spokesman for Trizec, the second-largest office real estate investment trust. Toronto-based Trizec, seeking to reduce its $3.2-billion debt, will continue as building manager and leasing agent.

MetLife, the second-biggest U.S. life insurer, held the building's first mortgage and took the title from Sears, Roebuck & Co.

Construction of the Sears Tower, designed by Skidmore, Owings & Merrill, was completed in May 1973 and opened to tenants that fall, Trizec said. Its twin broadcast antennas were added in 1984.

The 103rd-floor Skydeck attracts 1.5 million visitors a year. It was the tallest building in the world for 25 years.

About 10,500 employees work in the building for more than 100 tenants. The current occupancy rate is 87%, reflecting a decline since the Sept. 11, 2001, terrorist attacks that destroyed New York's World Trade Center towers. The Chicago building's occupancy rate was 95% in 2001 before the attacks.

"Occupancy has not been materially affected since 9/11," said Brian Fox, national marketing director for MetLife's real estate investments.

Because of the terrorist attacks and their effect on the marketability of its office space, Trizec wrote down its investment in the building from $70 million -- what it paid for the second mortgage position in 1997 -- to $23.6 million.

Sears, which occupied the building from the outset as its headquarters, moved most of its operations out of the building in 1993.

Chicago-based Trizec was scheduled to take title to the building on Jan. 2 under the terms of the second mortgage. But it began discussions with MetLife to renegotiate its mortgage commitment.

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