CNA may sell, lease back Chicago tower

Real Estate Alert, May 26, 2004

CNA Insurance is mulling a sale-leaseback offering of its 1.1 million-square-foot Chicago headquarters, which is valued at about $200 million.

The potential offering comes at a time when there are signs of an uptick in the Chicago office market. Last week, a Lehman Brothers partnership tapped Jones Lang LaSalle to shop the 1.8 million-square-foot Michigan Plaza, which will likely fetch about $300 million. And last month, Metropolitan Life completed its mammoth $841 million sale of Sears Tower to a partnership led by Joseph Chetrit.

CNA fully occupies its 44-story building, called CNA Plaza. Market players said Eastdil Really may have the inside track on the listing because of its solid relationship with John Buck Co., which advises CNA on the property.

The East Loop building, which CNA built in 1972, is located at 333 South Wabash, between Jackson Boulevard and Van Buren Street. Its distinctive red color makes it easily recognizable on the Chicago skyline. CNA would seek to negotiate a long-term lease with the buyer. It's not clear how much rent it would pay. But in the East Loop submarket, office rents hovel around $24/sf, while the vacancy rate averages 17.5%.

The Lehman partnership's two building complex is also in the East Loop, at 205-225 North Michigan Avenue. The 897,000-sf northern tower, which has 25 floors, was built in 1981. The 939,000-sf southern tower, with 46 floors, was completed four years later. Tenants include graphic-design firm Forcade Associates, Cross Media Services and the law firm Azulay Horn, which signed a 12-year lease last month for 23,000 sf. Retail space on the ground floor is leased at rents ranging from $35/sf to $55/sf. The retail space connects to the Randolph Street station on the city's commuter rail line.

The complex ix part of the 4.7 million-sf Illinois Center, built over a former rail yard. The 12 interconnected buildings stretch from the Chicago River to Grant Park.

Jones Lang was picked for the listing over CB Richard Ellis and Eastdil.