The Blackstone Group agreed on Monday to buy the Willis Tower, the former Sears Tower that for 25 years was the world's largest building, in a deal that features an observation deck as a tourist attraction and unique revenue stream.
The acquisition was valued at $1.3bn (€1.2bn), making it the highest price paid for a US office tower outside of New York, according to MarketWatch, which first reported the news.
The 110-story Willis Tower at 233 South Wacker Drive is the second-tallest US office building with (350,000 sq m) 3.8 million square feet of space, and fifth-tallest office building in the world, Blackstone said in a statement..
Blackstone has agreed to buy the property, which features a top Chicago tourist attraction in the Skydeck on the 103rd floor, from New York investors Joseph Chetrit and Joseph Moinian and Skokie, Illinois-based American Landmark Properties, MarketWatch said.
The Skydeck attracts 1.6 million visitors annually, a draw that Blackstone hopes to build on. The Skydeck includes the "Ledge," glass cubes that extend from the Willis Tower with an unobstructed downward view because of the see-through flooring.
"We are bullish on Chicago as companies expand within and move into the city and look for first-class office space," said Jacob Werner, a managing director in Blackstone's real estate group. "We see great potential in further improving both the building's retail operations and the tourist experience."
Blackstone plans to revamp the Skydeck is a nod to the growing popularity of observation decks, MarketWatch said. The Empire State Building took in nearly 40 percent of its revenue from 4.3 million visitors, or about $82m in income after expenses. The Willis Tower gets more than $25m annually.
The agreement was between Blackstone Real Estate Partners VII and 233 South Wacker Drive. The owners paid $841 million for the property in 2004.
On a square-foot basis, the price for the Willis Tower was about $340, a fraction of what trophy towers fetch in major cities, MarketWatch said.
Douglas Harmon of Eastdil Secured was the exclusive representative on the transaction, Blackstone said.
The deal is the latest big move in recent months by Blackstone, already the biggest real estate investor in the world.
Elsewhere, Blackstone is seen as being unlikely to lead a takeover offer for mall owner Macerich., according to industry sources..
Macerich, the third-biggest publicly traded US owner of shopping malls, rejected a $16bn takeover offer from Simon Property Group, the largest company in the industry on Tuesday. REIT Zone, a newsletter, reported last week that Blackstone may be working with other investors to put together a group bid for the Santa Monica, California-based real estate investment trust.
Blackstone hasn't held talks to organize a competing proposal and is unlikely to lead a future bid for Macerich, said the person with knowledge of the matter. The situation remains fluid, the person said.
A Blackstone spokesman, declined to comment.
Blackstone had invested with partners in 2010 to bring General Growth Properties, the number 2 mall owner, out of bankruptcy. It sold its shares at a profit three years later. The New York-based firm also has been expanding in high-quality, well-leased real estate through a new fund to acquire so-called core-plus properties.
Blackstone remains one of the most active firms in the commercial property sector in recent months.
In Ireland it has bought a number of assets including the likes of the Burlington Hotel and the Bloodstone Building office block in the Dublin docklands.
It paid €1.1bn to Nama for loans tied to Cork developer Michael O'Flynn last year - a deal that ended up in court after Blackstone moved to take control of O'Flynn's assets.
That dispute was settled earlier this year after months of talks. (Bloomberg)