Trizec Properties, Inc., which currently manages leasing at Chicago’s Sears Tower, and is scheduled to take over control of the 110-story building next January, is reportedly having second thoughts about the deal due primarily to the buildings high profile “trophy status” that might invite terrorist attacks.
According to a report from Dow Jones Newswires, Trizec originally signed an agreement and invested $70 million in the building in 1997. It also gave the company an option, which expires in January 2003, to acquire the property, subject to an $800 million first mortgage with MetLife.
Trizec, a publicly traded property company, is concerned that after the WTC attacks high profile buildings will be less attractive to potential tenants, thus lowering the rental value of its leaseholds, which have usually commanded a significant premium.
If the company does take over the tower, it will be faced with the 9.3 percent interest on the loan, which comes due in 2005, and could be difficult to refinance, as well as paying the insurance premiums on the property.
The article indicated that while some tenants had recently renewed their leases, others might be reluctant to do so. Employees’ fears of terrorist attacks, coupled with the aggressive efforts of real estate agents to lure tenants into other properties, have combined to make Trizec’s potential investment seem less attractive than it was in 1997.
Topics Catastrophe Natural Disasters
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