Posted by chicagomedia.org on August 05, 2009 at 14:59:19:
Clear Channel to consolidate in East Loop
By: Eddie Baeb
Aug. 05, 2009
(Crain's) -- Troubled media giant Clear Channel Communications Inc. is consolidating its Chicago offices to an East Loop tower in a cost-cutting move.
The nation's largest radio broadcaster, whose six local stations include WLIT-FM ("Lite FM") and WVAZ-FM ("V103"), signed a lease at 233 N. Michigan Ave. in the Illinois Center complex that expands its space there to 107,000 square feet.
As part of the deal, Clear Channel, which is struggling from a decline in advertising and its heavy debt load, early next year is to move its media-buying subsidiary from nearby NBC Tower at 455 N. Cityfront Plaza Drive.
The subsidiary, Katz Media Group, leases about 40,000 square feet at NBC Tower and is exercising an early-termination option there to move to 233 N. Michigan, where Katz will occupy the entire third floor, about 33,000 square feet.
San Antonio, Texas-based Clear Channel, meanwhile, extended its deal for 10 years for the upper-level floors the company uses at 233 N. Michigan -- pushing the lease out to 2024.
The company gets a lower rental rate per square foot for that space, roughly 74,000 square feet on three floors, in exchange for the extension. Clear Channel also will pay cheaper rent for Katz's space than it was paying at NBC Tower, says Andrew Kelly, a corporate managing director with Studley Inc.'s Chicago office who represented Clear Channel.
Katz, whose space also is leased to 2024, is to move its office in February, with a tenant-improvement allowance from the landlord at 233 N. Michigan to help pay for the buildout of its new space and to renovate Clear Channel's floors.
"This is a prime time to re-evaluate one's real estate, with lower rents, increased availability and increased concessions," Studley's Richard Schuham, who also worked on the deal along with Bruce Rothman in New York, says in a statement.
For 233 N. Michigan, the rent reduction for Clear Channel was "moderate" and the rent for Katz's new space consistent with the market, says Brian Whiting, a senior vice-president with J. F. McKinney & Associates Ltd. who represented the building's owner, Jackson, Miss.-based Parkway Properties Inc.
Mr. Whiting says the addition of Katz and the extension to 2024 means that roughly 11% of the 980,000-square-foot tower is now leased for 15 years.
"Parkway's a very long-term hold on this property," he says.
The 32-story tower is 93% leased, according to CoStar Group Inc. But the building's biggest tenant, the federal government, has two leases for 189,316 square feet that expire in November. Those leases are likely to be extended two years as the U.S. General Services Administration, which manages real estate for the government, explores its options.
Parkway, a publicly held real estate investment trust, saw its stock soar 13% Tuesday to $15.54 a share after the company reported second-quarter results that exceeded expectations. The company also completed an $85-million stock offering that "helps solidify our balance sheet and should allow the company to exit the recession in a position of greater strength," Parkway CEO Steven Rogers said in the earnings statement.
Also Tuesday, Clear Channel's already junk-status credit rating was cut further by Standard & Poor's in the wake of the company's July 31 announcement of a cash tender offer for up to $300 million of its bonds, which a Clear Channel subsidiary would buy at 30% to 50% of par value.
S&P said in a statement that if the bond sale is completed, it would be "tantamount to a default given Clear Channel's highly leveraged financial profile and the uncertainty, in our opinion, surrounding its ability to service its current debt obligations in full over the next several years."
Clear Channel's parent, CC Media Holdings Inc., is to report its second-quarter results next week. In the first quarter, CC Media attributed a loss of $418 million on $1.2 billion of revenue to the weak advertising environment and increased debt costs.
The company, which also owns outdoor-advertising billboards, was taken private last year in a $17.9-billion leveraged buyout by private-equity firms Bain Capital Partners LLC and Thomas H. Lee Partners L.P.