Sears Takes Its Tower Off the Market

The “For Sale” sign was officially taken off of the world’s tallest building Wednesday.

Sears, Roebuck & Co., unable to sell the Sears Tower after a yearlong effort, said Wednesday that it had reached an agreement with a Boston partnership to refinance its 110-story corporate headquarters.

The transaction will raise $815 million for Sears, after expenses and adjustments, and likely will postpone the sale of the building for at least 15 years.

AEW Partners L.P., a partnership managed by Aldrich, Eastman & Waltch Inc., will have the option to buy the tower and related properties at market value at that time.

Sears had a difficult time selling the 15-year-old tower, in part because of the company’s $1-billion asking price, real estate experts said.

“Most people felt that was just too rich a price for a building that age, no matter how prestigious it was,” said Harvey Camins, vice chairman of Frain, Camins & Swartchild, a major Chicago commercial real estate broker.

In September, Olympia & York Developments, a large Canadian property developer, dropped out of negotiations to buy the building. The deal reportedly fell through after Sears and O&Y; realized that a sale would result in a reappraisal that would substantially raise property taxes and make it difficult to lease the building at competitive prices.

Goldie B. Wolfe, president of Goldie B. Wolfe Co., a major commercial realtor in Chicago, said it was surprising that the tax question wasn’t settled earlier in the negotiations. “It’s absurd,” she said. “I find it unconscionable that something of that scale, that magnitude and that high profile was not realized up front.”

She speculated that Olympia & York may have balked during negotiations when it realized how difficult and costly it would be to make the property attractive to tenants.

The Sears Tower is considered a high-quality structure with a prime location. It is generally conceded, though, that major renovations would be necessary to attract prospective tenants.

Increased taxes and the cost of necessary renovations could add up to $250 million, real estate experts said.

That task of finding tenants now belongs to Sears, since it will continue to own and manage the properties but is going ahead with plans to relocate to a suburban Chicago site. It plans to begin vacating the building by 1992.

Camins said filling the 1.8 million square feet of space--nearly twice the amount of a normal downtown skyscraper--will be made more difficult by the fact that much of the space is on lower floors, and the large floor sizes--up to 50,000 square feet--are considered unattractive to many tenants.

In addition, Sears will be competing with recently completed office buildings downtown.

Just over a year ago, Sears announced its intention to sell the tower as part of a corporate restructuring designed to halt a slide in its profitability.

The company said that “as a result of lower interest rates and the positive long-term prospects for the commercial real estate market,” the agreement announced Wednesday “offers more net cash and attractive features than alternative structures.”