And the state is quite serious about it. Blagojevich's budget director, John Filan, said now that the legislative session is over, deciding what to do with the building is on the top of his agenda.
Filan said there is no shortage of qualified buyers out there, estimating that his office has received "25 to 30 calls from people who are ready to do a deal." The 17-story building at 100 W. Randolph cost $173 million when it was new.
But it's doubtful that selling the building outright, or selling it and leasing back the state's office space, will be a snap. There is, first of all, what Filan carefully called the building's "unique" characteristics.
Architect Helmut Jahn, himself no shy and retiring type, designed the building as a statement about modern government. He wanted it to project accessibility, so he arrayed every floor to overlook a huge sunlit atrium. Shops and fast-food stops are included on the lower levels and the building accommodates a CTA L stop, all to ensure a constant traffic flow.
Opinions vary on whether Jahn succeeded. But while his design might be suitable for government, it's a hard sell for any other office occupant.
That atrium, for example, is a giant cost-eater to tenants. State officials said it counts for about 200,000 square feet, which is huge compared to the building's rentable square footage of about one million.
Commercial landlords like small, secure lobbies. They like access, but not pedestrian free-for-alls. And any prospective buyer will ask lots of questions about the building's heating and air-conditioning systems, which failed miserably after the building opened. Millions were spent on improvements, although all those windows still raise energy costs.
For those reasons, most real estate experts argue that the state will be unable to sell the building directly and move its offices elsewhere, which Filan calls his "first choice."
A sale-leaseback makes far more sense, the experts said. That would mean the state offices would go nowhere.
Mark Parrish, senior vice president at real estate firm Grubb & Ellis Co., figures the state will have to agree to a lease of at least 15 years to sell the building. That would provide the buyer enough assurance that the state wouldn't vacate, leaving behind space that can't be filled.
"It would be extremely difficult if not impossible to multi- tenant that building," Parrish said.
Filan said outside experts he's consulted estimate the value of the building at $220 million to $240 million, depending on lease terms. Brokers the Sun-Times consulted offered figures in a similar range.
The state will draw up bid documents specifying certain conditions, and then advertise for responses.
Filan wouldn't guess when that'll happen, but he suspects market conditions are on his side. Still dubious of the stock market, investment funds have been eager buyers of properties they think will deliver secure, if unspectacular, returns.
The state legislation authorizing the building's sale also opens other options to Filan, including taking out a mortgage on the building. But however it's structured, Filan said he believes a buyer ultimately will accept a return of less than 5 percent, just under what the state is paying for the $10 billion bond issue it completed Thursday. |
