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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (185440)	3/4/2009 11:53:45 PM
From: stockman_scott	Respond to of 306849

Hines misses financing deadline for proposed William Blair tower By Thomas A. Corfman March 04, 2009 -- (Crain’s) -- Hines Interests L.P. has missed a deadline imposed by William Blair & Co. LLC to get construction financing for a $536-million skyscraper to be anchored by the investment firm, intensifying doubts that the riverfront tower will be built. A joint venture led by Houston-based Hines still has a 30-day grace period to arrange financing. But the firm now risks breaking the lease and being forced to pay Chicago-based Blair a hefty, multimillion-dollar penalty. Meanwhile, the two sides are discussing Hines’ request for a 90-day extension of the financing deadline, according to sources familiar with the talks. A spokesman for Blair declined to comment except to say, “We are having ongoing discussions with Hines.” Yet the delay might force both sides to take a hard look at the transaction, observers say. “I don’t know that Hines can make money on the building,” said tenant representative Todd Lippman, an executive vice-president in the Chicago office of CB Richard Ellis Inc., who isn’t involved in the negotiations. Does Blair “just look at it and say, ‘You know what? We don’t want to go forward.’” Even with the delay, the 52-story tower, proposed for a site along the west bank of the Chicago River at 444 W. Lake St., must be completed before July 2011, when Blair’s current lease expires at 222 W. Adams St. Executives in Hines’ Chicago office declined to comment. Missing the financing deadline is likely to set off a chain reaction, observers say. Blair, which signed its lease for 340,000 square feet about a year ago, could demand a space reduction before agreeing to any extension of time. In December, Blair said it was cutting nearly 10% of its 1,000-employee workforce, and many investment firms are projecting slow growth in the future. Rival developers are expected to start wooing Blair with proposals for smaller buildings, claiming they would be easier to finance amid the credit crisis. Blair’s options to move to another existing building are limited, which would give the upper hand to the firm’s current landlord, New York-based Tishman Speyer Properties L.P. Last month, Tishman predictably refused Blair’s request for a short-term lease extension. A spokesman for Tishman declined to comment. Hines has pledged to invest more equity in the development, sources say, but it is uncertain whether the amount is large enough to entice a group of banks to make a construction loan estimated to be more than $300 million. The venture led by Hines has struggled to finance the 1.1-million-square-foot tower despite leasing 60% of the proposed building to Blair, law firm Baker & McKenzie, and a third tenant. Blair, which was the first tenant to sign a lease, required that Hines have financing in place by March 1 as a key condition of Blair’s agreement to take 340,000 square feet, according to people familiar with the agreement. In September, Baker & McKenzie signed a lease for 300,000 square feet, but the giant law firm’s current lease at Prudential Plaza doesn’t expire until 2012. Copyright © 2009 Crain Communications, Inc.