Zell gets share of Wacker building

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Updated: June 15, 2011 3:30PM

Financier Sam Zell is part of a partnership that bought a controlling stake in a Chicago office building, his first deal here since he sold Equity Office Properties Trust in 2007.

Zell joined with Transwestern Investment Co. to buy 90 percent ownership of a 40-story building at 200 S. Wacker. The seller was Behringer Harvard REIT I, which will keep 10 percent and continue to manage the building.

A source involved in the deal said the terms valued the 755,000-square-foot building at $106 million. The buyers plan to put about $40 million in upgrades into it, the source said.

Located across the street from Willis Tower, 200 S. Wacker was a distressed property. Its vacancy rate is about 30 percent, and Behringer Harvard had defaulted on a $95.5 million mortgage on it.

Zell, a Chicago billionaire whose acquisition of Tribune Co. is still being unwound in bankruptcy court, has made mostly overseas property investments the last few years.

“We’re beginning to see an increase in investment opportunities as more lenders and owners bring assets for recapitalization into the market,” Zell said in a press release. “The 200 S. Wacker Drive transaction enabled us to acquire an interest in a great asset in a terrific location at below replacement cost, and we did it with strong partners that are focused on improving the asset and positioning it for leasing success.”

Zell made the investment through his Equity Group Investments.

Well-known Chicago architect Harry Weese designed the 200 S. Wacker building, which opened in 1981.

The buyers hired J.F. McKinney & Associates to find tenants. Company President Jack McKinney said he hopes to take the building to about 95 occupancy in a couple of years.

Hitting that mark would produce a much higher payoff for the buyers. Marketing materials said the building currently produces net operating income of about $4.5 million a year.

Tenants at 200 S. Wacker include the University of Illinois, Ziegler Wealth Management and Duff & Phelps Investment Management Co.