WORLD PROPERTY CHANNEL ®

Sam Zell

Three big names in the U.S. commercial real estate capital sphere have formed a joint venture to recapitalize 200 South Wacker Drive, a landmark, 40-story, 754,750-square-foot office tower in the West Loop of Chicago's central business district.

Dallas-based Behringer Harvard is partnering with affiliates of Equity Group Investments LLC and Transwestern Investment Co. LLC in the deal. Equity and Transwestern are both based in Chicago.

The tower was acquired by Behringer Harvard in November 2007.  While bringing in additional capital partners for 200 S. Wacker Drive, Behringer Harvard will still retain a 10 percent ownership interest. It will also continue its responsibility for daily management of the property, the company said in a news release.

The proposed multi-million-dollar recapitalization figure was not disclosed in a news release from the parties.  Sources familiar with the deal say it is one of the biggest deals of its kind this year.

J.F. McKinney & Associates will serve as the leasing agent.

"We pursued an extensive competitive process that identified several attractive partner candidates," said  Robert Aisner, President and co-COO of Behringer Harvard.

"We chose to partner with Equity Group Investments and Transwestern Investment Company based on their high statures in the industry, their broad and deep experience, and their track records of success. We believe this joint venture offers us and our new partners a superior opportunity to maximize the value of 200 S. Wacker Drive."

Equity Group Investments invested in the building through the Zell Credit Opportunities Fund, which focuses primarily on debt investments and capital restructurings.

"We're beginning to see an increase in investment opportunities as more lenders and owners bring assets for recapitalization into the market," said Sam Zell, Chairman of Equity Group Investments.

"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 also focused on improving the asset and positioning it for leasing success,".

"As a result of this joint venture, 200 S. Wacker Drive will benefit from enhanced access to capital and a stronger capacity to fund broker commissions and tenant improvements," said Stephen Quazzo, co-founder and CEO of Transwestern Investment Company.

"The new ownership team will continue to pursue the program Behringer Harvard has been implementing for capital improvements expected to further enhance the Class-A appeal of this already desirable property and promote rapid lease-up of available space.

"Moreover, this will be accomplished without disruption to the Behringer Harvard property management team that has established long-standing relationships with the building's tenants."

Quazzo says 200 South Wacker Drive was designed with an efficient floor-plate by the renowned architect Harry Weese, 200 S. Wacker Drive is situated on the southwest corner of Adams Street and Wacker Drive and provides tenants with unobstructed views from the east bank of the Chicago River.

The property is within a few blocks of many public transit options at the Union, Ogilvie and Rock Island commuter rail stations.

Major tenants at 200 S. Wacker Drive include The University of Illinois, Ziegler Wealth Management, Duff & Phelps Investment Management Company, T.Y. Lin International, Regus Business Centers, Russell Reynolds and PNC Bank. Space available for lease includes floor-plates of 22,000 square feet and up to 110,000 square feet of contiguous space.

Behringer Harvard creates and manages global institutional-quality investment programs for individual and institutional investors through its real estate investment trusts, joint ventures and proprietary program structures.

The company also offers strategic advisory, asset management and capital market solutions. Programs sponsored and managed by the Behringer Harvard group of companies have attracted equity of more than $5 billion and investments into more than $11 billion in assets.

Equity Group Investments (EGI) is the private investment firm founded by Sam Zell more than 40 years ago.

The firm has an active portfolio spanning industries and continents with interests in real estate, energy, logistics, transportation, media and health care.

EGI recently established the Zell Credit Opportunities Fund to focus on the recapitalization of over-leveraged assets and companies and to invest opportunistically in loans and credit securities in both the real estate and corporate arenas.

Founded in 1996, Chicago-based Transwestern Investment Co. is a principal investment firm specializing in commercial real estate. The firm has invested in approximately 470 U.S. properties totaling over $11 billion through its sponsored investment fund vehicles.

The investment in 200 S. Wacker Drive is being made through its $440 million Aslan Realty Partners IV fund, which is actively seeking U.S. office, industrial and retail value-add properties for investment.

The Transwestern equity portfolio includes 41 office, seven retail and two industrial properties totaling approximately 23 million square feet, as well as 12 multifamily assets with 3,100 units.

Additionally, in the mezzanine investment area, Transwestern has made 95 loans totaling $1.2 billion in investments with 76 realizations to date.

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