Posted by chicagomedia.org on February 25, 2009 at 09:42:32:
Tribune Tower pulled off the market
By: Eddie Baeb
Feb. 25, 2009
(Crain's) -- Tribune Co. has scrapped plans to put the Tribune Tower up for sale because of cratering real estate prices and the company's late-year bankruptcy protection filing.
The media giant hired brokers last summer to sell the landmark tower as well as the Los Angeles Times' headquarters complex, known as Times Mirror Square, and had hoped to get marketing materials to prospective investors early this year. But the moribund real estate investment sales market prompted the company to shelve those plans, says Stephanie Pater, Tribune's director of real estate.
Finding a buyer for the 940,000-square-foot gothic tower at 435 N. Michigan Ave. would be unlikely in a market where no big downtown office building has sold since last July. If Vegas was taking odds, a sale probably would be a much longer shot than Tribune's baseball team ending its 100-year drought and winning the World Series.
"Impossible," Robert Six, executive vice-president with Chicago-based real estate investment firm Zeller Realty Corp., says of the tower's chances of being sold any time soon.
He notes the site includes the tower and a one-acre parking lot. "It would take tremendous patience and deep pockets to be able to acquire the site and wait for the next uptick in the commercial real estate market."
Tribune, which real estate mogul Sam Zell took over and took private in December 2007 in a highly leveraged buyout, was working up plans to pitch the property several ways. Possibilities included a straightforward sale-leaseback deal with Tribune or selling the tower to a developer that would convert it into residences, a hotel or both.
Ultimately, though, Ms. Pater says, the market dictated that there would be little point in marketing the property.
"I don't think anybody is looking to get into any real estate deal - big or small," Ms. Pater says. "Is this a big one? Yes. Is it a development opportunity? It could be."
The sale of the Chicago Cubs, which is pending, along with the sale of other major assets like Tribune Tower and the Times Mirror buildings in downtown Los Angeles were part of Mr. Zell's strategy to raise cash and pay down Tribune's $13-billion debt load. But before such deals could be put together, Tribune was stung by falling ad revenue, and the meltdown of the financial markets meant the company would struggle to restructure its debt outside of Bankruptcy Court.
Ms. Pater says Tribune's December bankruptcy-protection filing also was a factor in the company's decision not to market the two properties, because it would have changed the sales process for the company.
Even in a good market, it would have been difficult to value the properties. Tribune Tower was completed in 1925 and contains about 526,000 square feet of usable office space. The five-building Times Mirror complex totals about 750,000 square feet and was built between the 1930s and the 1970s.
The two brokerage firms handling the assignments, Eastdil Secured for Tribune Tower and Cushman & Wakefield for Times Mirror, are still working for Tribune.
Ms. Pater says she's shuffling Tribune offices within the tower and is interviewing brokers to lease the vacant space in the building. She says Cushman is focusing on finding government tenants to lease vacant space in the Times Mirror complex, which is across the street from Los Angeles' city hall.
Back in Chicago, Tribune plans to hire retail broker Stan Nitzberg of Mid-America Real Estate Corp. to try to find a tenant for the McCormick Foundation's Freedom Museum space in the tower's annex at 445 N. Michigan, formerly the WGN Radio building. The McCormick Foundation is vacating the roughly 10,000-square-foot space at the end of this month.