Willis Tower, Chicago's tallest building, may soon have an equally big owner: Blackstone Group, the world's largest private equity real estate owner.

New York-based Blackstone has a preliminary agreement to pay almost $1.5 billion for Willis Tower, according to a person familiar with its plans. Blackstone representatives have been visiting the building to perform due diligence on the 110-story icon, and it is looking to buy the West Loop tower for one of its funds.

Even for a firm with $81 billion of real estate assets under management, buying the 1,451-foot-tall tower is a big deal.

Along with the distinction of owning one of the world's best-known pieces of real estate comes control of a property that reaps about $10,000 of income every hour.

If it happens, the sale would be the 24th office deal in U.S. history to reach the $1 billion mark, but just the fourth outside New York, and the first away from the coasts, according to New York-based research firm Real Capital Analytics. Intense bidding in coastal cities has driven down rates of return and caused many major investors to branch out into other cities.

A billion-plus sale also would shatter the $850 million record for Chicago set last year with the sale of the 60-story tower at 300 N. LaSalle St. The price per square foot, $652, also was a city record.

The projected sale price for Willis Tower is almost $400 per square foot for the nearly 3.8 million square feet of office space. That would represent a hefty profit for the venture of New York investors Joseph Chetrit and Joseph Moinian and Skokie-based American Landmark Properties that bought the building, then known as Sears Tower, for $840 million in 2004.

AN OLDER BUILDING

Willis Tower was completed in 1973 and doesn't command the top-tier rents of newer buildings such as 300 N. LaSalle, which was finished in 2009. It also is 84 percent leased, so a new owner will need to invest money and effort to fill large blocks of space. Because the building is older, it will require significant capital for maintenance and modernization.

Still, it's no coincidence Willis Tower is up for grabs so soon after the LaSalle Street sale. Office sales volume in downtown Chicago is at a seven-year high.

“With so much interest in real estate, now is the time to reap those gains,” says Jim Costello, a senior vice president at Real Capital Analytics. “Now is the time to sell that trophy asset.”

A tower at 353 N. Clark St. in River North recently sold for $715 million and other Chicago landlords have continued to test the waters. The city's second-tallest office tower, the 80-story Aon Center, is set to hit the market. (Trump International Hotel & Tower is the second-tallest building in Chicago.) Johns Creek, Ga.-based owner Piedmont Office Realty Trust recently confirmed it plans to seek a sale, which industry experts believe could fetch about $650 million. At about $240 per square foot, that is far less than Willis Tower's expected return.

Because of Aon Center's location amid several large vacancies in the East Loop, a buyer could decide to convert its upper floors to residential condominiums. Willis Tower's comparatively heftier per-square-foot valuation is due to its more desirable location in the West Loop close to commuter trains, as well as its varied sources of revenue.

A spokesman for the Willis ownership group confirms New York-based Eastdil Secured has been hired to find a buyer, but declines to comment further. He referred questions to New York-based Douglas Harmon, an Eastdil senior managing director who is advising the owners in the sale along with Chicago-based Stephen Livaditis. A Blackstone spokesman said they would have no comment. In an email, Harmon said there is “lots of (preliminary) interest” but added that there's “no deal.”

Livaditis declined to elaborate on Harmon's comments.

SKYDECK REVENUE

In addition to the office space, Willis Tower derives cash flow from the Skydeck observation deck, retail and restaurant space, broadcast space and antennas, and naming rights with tenant Willis Group Holdings.

The 103rd-floor Skydeck, featuring the Ledge tourist attraction, has generated more than $25 million in revenue each of the past three years, according to an offering book prepared by Eastdil. The book estimates $88.6 million in net operating income in 2015, including $28.8 million from the Skydeck; $48.7 million for office, retail and restaurant space, and $11.1 million from broadcasting.

A new owner will have upside on potential naming rights of the Skydeck, as well as for the tower's name, according to Eastdil. Willis pays a below-market $1 million per year to have its name and signage on the building, Eastdil's materials say, although it's unclear how much it would cost to buy out Willis' contract.

On top of the purchase price, the 42-year-old building could require as much as $100 million in repairs and upgrades in the next couple of years, estimate people familiar with the building.

Because of its wide-ranging revenue streams, it's possible Willis Tower's ownership structure one day could resemble that of another Chicago icon: John Hancock Center. The 100-story tower on North Michigan Avenue was sold off in four separate pieces—retail and restaurant, observatory, broadcast antennas, and office and parking garage—totaling about $405 million, concluding in 2013.

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