The parent company of the Chicago Mercantile Exchange said Mondayit closed a property deal that lets it maintain its headquartersalong Wacker Drive even as it moves it trading floors to itsrecently acquired Chicago Board of Trade at 141 W. Jackson.
Terms call for the Merc's two trading floors at 20 S. Wacker tobe converted into office space outfitted with the latest inelectronic equipment. The Merc will lease one of the floors whilethe other will be marketed to financial firms for use as a tradingcenter.
A charitable trust affiliated with the Merc sold the tradingfloors to Tishman Speyer Properties LP. The space connects officetowers at 10 and 30 S. Wacker that Tishman acquired in February aspart of its $1.72 billion absorption of the Chicago buildings thatbelonged to Equity Office Properties Trust.
Sources said the Merc's trust is getting $16 million for thefloors. Terms also allow the Merc to extend its office leases in the10 and 30 S. Wacker towers, with the exchange occupying about360,000 square feet in the complex.
The Tishman-Equity Office transaction is the largest real estatesale in Chicago, and the Merc's piece is a small part of it. Butit's also the most visible part for Chicagoans who wonder how themerger of the city's two premier futures exchanges will change thedowntown business landscape.
Merc Chairman Terry Duffy said the new arrangement will give hiscompany, CME Group Inc., maximum flexibility as it serves the needsof electronic trading operations and those that still use the face-to-face markets in the pits. About 75 percent of the businessconducted at the Merc and Board of Trade now is done via electronictrading.
Support for the electronic markets will be concentrated on Wackerand in a West Loop high-rise at 550 W. Washington, where the Mercplans to occupy about 220,000 square feet by 2011. The trading floorstaff will be centered at 141 W. Jackson.
Having three locations downtown "will be a huge benefit to thecity and to our company," Duffy said. "We have a very close-knitorganization," so coordination among the locations won't be aproblem, he said.
Duffy said the transaction serves as a boost for the Wacker Driveoffice market as well as for the La Salle Street district where theBoard of Trade is a traditional anchor.
Terms of the leases were not disclosed, except that the Merc dealon Wacker runs through 2022. The exchange has targeted the secondquarter of 2008 for the transfer of the floor operations to theBoard of Trade.
The Merc and Board of Trade together will employ almost 2,000people, Duffy said, after a projected layoff of 380 workers by mid-2008.
The Merc's trust will add the sales proceeds to its roughly $64million in assets, said its executive director, Kassie Davis. Shesaid the added cash might allow it to increase the $3 million inannual giving it plans for charities that concentrate on financialeducation and on the well-being of children.
Davis said the trust is evaluating new investment plans for itsholdings. The trust was formed in 1969 to help customers affected bya Merc member's default, but it has never had to pay a claim.
The lease with Tishman will allow substantial renovations for theMerc office space, said Holly Duran, principal of Holly Duran RealEstate Partners LLC, who represented the exchange in thenegotiations. She said Tishman was receptive to "our creative,strategic approach" for space that's efficient in terms of cost andenergy.
The lease will let the Merc reduce its overall occupancy in theWacker complex by about one-third. The trading floors, whichcurrently look like a box between the sawtoothed towers, will getwindows.
Renovations of the space will be directed by the firm FujikawaJohnson Gobel Architects, the original designers of the buildings.The Merc started using the trading floors in November 1983.
Tishman's other Chicago acquisitions from Equity Office includehigh-rises at 161 N. Clark, 1 N. Franklin, 30 N. La Salle and theCivic Opera Building at 20 W. Wacker, just north of the Merc. Thedeal also included the 101 N. Wacker building, but Tishman alreadyhas resold it to Hines Interests LP.
A source said Tishman has no plans to sell the other parts of theportfolio.
droeder@suntimes.com
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