Blackstone Group LP will pay $1.3 billion to buy the Willis Tower in Chicago, a record for a U.S. office tower outside New York, the Wall Street Journal reported Sunday quoting executives of the private equity company. The deal for the former Sears Tower on the south end of Chicago's Loop was struck during the weekend.
The Journal said Blackstone plans to invest $150 million in the 110-story building's retail portion and upgrade the observation deck, which brought in $25 million in revenue last year, turning the office building into "a comprehensive tourist attraction." The skydeck -- the Ledge -- boasts a see-through floor that gives the sensation of standing in air, 1,353 above the ground, and views spanning four states.
Blackstone is more widely known for leveraged buyouts of chains than individual property purchases. But the company has purchased a number of Chicago properties in recent years, many from real estate mogul Sam Zell's portfolio.
The deal represents a major profit for current owners Landmark Properties of Skokie, Illinois, and New York investors Joseph Chetrit and Jose Moinian, who paid $841 million for the structure in 2004. Willis Group Holdings leased the naming rights in 2009.
The sale price means office space will be going for $340 a square foot, with annual building income at 6 percent to 7 percent of the purchase price, the Journal said. It also generates revenue by hosting broadcast antennaes, more than $13 million in the 12 months that ended in November, the Chicago Tribune said. The building currently has a 16 percent vacancy rate, the Tribune said.
In addition to Willis Group Holdings, the building houses United Airlines' global headquarters and the massive Schiff Hardin LLP law firm among its tenants.
The building was completed in 1973 and was the world's tallest for 23 years.