Private Equity firm Blackstone has bought the Willis Tower in Chicago for $1.3 billion, the highest price ever paid for a U.S. office tower outside of the Big apple, according to company execs.
The former Sears Tower, reached over the weekend is one of the highest-profile recent deals for Blackstone, which has a reputation for leveraged buyouts of large retail franchises such as Hilton Worldwide than for individual real estate deals.
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According to MarketWatch, Blackstone management indicated they planned to upgrade the retail portion of the building and the observation deck, believing the sky deck could become a high-dollar tourist attraction like other famous skyscrapers.
The current owners of the Willis Tower are investors Joseph Chetrit, Joseph Moinian and American Landmark Properties. The partners paid $841 million for the tower in 2004, so they’ll make more than a 50% profit on their investment.
Taking a cue from the Empire State Building
The firm is looking at a major revamping of the observation deck, noting the huge popularity of skyscraper decks, due to increasing tourism and changing cultural preferences. The Empire State Building is the top dog. The SB had 4.3 million visitors last year, raking in $82 million in income after expenses. almost 40% of the total income of the building. The Willis Tower took in over $25 million from 1.6 million visitors last year, but the amount that has been increasing over the last several years.
The firm hopes “to really make this more of a comprehensive tourist attraction” as well as an office building, noted Jonathan Gray, Blackstone’s head of real estate.
Sign of strength in commercial real estate market
Commercial property values dropped almost 40% nationwide between 2007 and mid-2009, but they have now soared 14% above 2007 values, based on data from the Green Street Advisors commercial property price index. Commercial real estate industry analysts point out that billions of dollars worth of property that was struggling with debt payments disappeared from the market in the last six years as they were sold or restructured.