Like the WTC and Sears Tower, the Hancock is loaded with asbestos, which is extremely costly to remove.
Chicago’s Hancock Center heads for sale block
Crain’s — The owner of the John Hancock Center is taking the first step toward putting the iconic Michigan Avenue skyscraper up for sale.
Shorenstein Properties LLC has hired New York real estate firm Eastdil Secured LLC to study options, including a possible sale, for the 100-story tower, a spokeswoman for the San Francisco-based investment company confirms. The move comes after San Francisco-based Shorenstein entertained offers from developers earlier this year for a hotel conversion of some of the building’s 888,500 square feet of office space.
“Once that evaluation comes in, Shorenstein will make a decision about whether to hold, to entertain these offers, to sell or whatever other possibilities the Eastdil report gives,” the spokeswoman says. The study is expected to be completed next month, she said.
Stephen J. Livaditis, senior managing director in the Chicago office of Eastdil Secured, declines comment.
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The possible sale comes amid signs that the investment market for downtown office towers may be peaking.
“Evidence is mounting that the investment market is calming,” according to a report by New York real estate research firm Real Capital Analytics Inc., citing in part rising interest rates.
“With the frenzy subsiding, institutional buyers are no longer paying such a premium on their acquisitions,” the July report says.
And Hancock Center, built in 1970 and located at 875 N. Michigan Ave., may face its own unique challenges.
Largely because of the unraveling in 2003 of a key tenant, insurance brokerage Near North National Group Inc., about 17% of the Hancock’s office space is available, according to real estate research firm CoStar Group Inc.
Even so, because of strong retail rents and revenues from broadcast antennas and parking, the Hancock Center could sell for $350 million, some sources estimated.
“If it turns out that the building trades at $350 million, that would mandate that the buyer have a solution for the vacancy,” says Chicago developer J. Paul Beitler, who made an unsolicited bid to buy the Hancock earlier this year. “It’s a gemstone building, but an enigma to investors” because of its varied income streams.
One of developers who expressed interest in a hotel redevelopment says he isn’t surprised by the move.
“I would do the same if I were in their shoes,” says John W. Rutledge, chairman and CEO of Chicago-based Oxford Capital Group LLC. He says he remains interested in a deal, “whether it be with the current owner or a new owner, but only if the economics make sense.”
Shorenstein purchased the building in 1998, paying $220 million from the namesake insurance company, now a unit of Toronto-based Manulife Financial Corp.
As a part of the sale, Hancock retained naming rights under an agreement comes up for renewal in 2008.
Despite a weak office market along North Michigan Avenue, office rents only about for about a quarter of the building’s net operating income, some sources say. The building also includes nearly 152,900 square feet of retail space, a 23,900-square-foot observation deck, a 34,300-square-foot broadcast facility for the antennas on top of the tower, and a 716-car garage.
The potential Hancock sales comes just two months after Shorenstein completed the $470 million sale of Prudential Plaza, the 2-million-square-foot office complex overlooking Millennium Park. The company’s other Chicago asset is 500 W. Monroe St., a West Loop office tower.
(source)
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