In a move symbolic of the coming dissolution of the Pritzker empire, Chicago’s richest family is putting its architecturally acclaimed headquarters building at 71 S. Wacker Dr. up for sale.
The Pritzkers are hoping an 85 percent stake in the 48-story Hyatt Center, designed by architect Henry Cobb of Pei Cobb Freed, will fetch about $600 million, far above its $225 million construction cost, a source familiar with the discussions said. But the sleek stainless steel-and-glass tower could sell for much more than that, real estate experts say.
The market for high-quality commercial real estate is extremely hot right now, and bidders are willing to pay up for signature properties.
“In this type of market, a high-quality property–21st Century construction with triple-A tenants–is a home run,” said Dan Fasulo, director of market analysis for Real Capital Analytics, which tracks real estate sales around the country.
“There is unlimited capital searching for assets like this. There will be significant interest from U.S. and foreign investors.”
The auction comes as Thomas Pritzker, chief executive of the Pritzker Organization, is being pressed by his siblings and cousins to move faster to liquidate the family’s $15 billion-plus empire, which includes the Hyatt hotel chain.
Back in 2001, the family’s fourth generation reached an agreement to sell off the Pritzker businesses and distribute the proceeds among 11 heirs over 10 years. Although half of that period is already gone, few deals have been announced.
In April, the family reached an agreement to sell Conwood, the country’s second-largest smokeless tobacco company, to Reynolds American Inc. for $3.5 billion. But so far, no plans have been announced to sell Hyatt or take it public.
Selling Hyatt’s headquarters building at a hefty profit is likely to placate some impatient heirs and could buy Thomas Pritzker more time to dispose of other assets, sources close to the family said.
For years, the Pritzker Organization was housed in an undistinguished glass office building at 200 W. Madison St. that didn’t bear its name. That fit with the family’s distaste for ostentation and desire for privacy.
But as a new generation took over in the 1990s, a plan evolved to build a lavish corporate headquarters in downtown Chicago that would bear tribute to the family’s sprawling international business holdings.
The development plans were spearheaded by Penny Pritzker, Thomas’ cousin and the president of the Pritzker Realty Group. After 9/11, the plans were scaled back to a no-frills building that could be shared with other tenants. Given only four weeks to come up with a schematic design, architect Cobb devised a 1.5 million-square-foot, column-free building with a curving facade and 45-foot spans from the exterior walls to the core.
Despite the reduced budget, the building was well received by the architectural community and was deemed a fitting home for the family that awards the prestigious Pritzker Architecture Prize.
The Pritzkers plan to retain an ownership and management interest in the building, Penny Pritzker said in a press release. A source familiar with the deal said the family is planning on holding on to a 10 percent to 15 percent stake.
To sell the property, the Pritzkers have retained New York-based investment bank Eastdil Secured. Stephen J. Livaditis, a senior managing director in Chicago, will handle the transaction, the Pritzkers said. Goldman Sachs will act as the financial adviser.
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The Pritzkers are valuing the property at about $465 a square foot, which is more than the record price of $420 a square foot for a Chicago office tower set last June.
The Hyatt Center price does not surprise industry experts because much has changed in the real estate industry since 2004. The cost to develop similar properties has skyrocketed in the past two years. Since mid-2004, the cost of construction materials and labor in Chicago has risen 36 percent.
Also adding to its appeal, the glass high-rise is well located overlooking the Chicago River and is 90 percent leased to creditworthy tenants, such as Goldman Sachs, IBM and law firm Mayer, Brown, Row & Maw among others.
Real Capital Analytics’ Fasulo said he wouldn’t be surprised if Hyatt Center “fetched close to $500 a square foot.”