Andersen Asks Prime Group for Moving Papers

CHICAGO-Embattled Arthur Andersen, LLP has told Prime Group Realty Trust it will give up most of its 650,000 sf it leases at two Downtown office buildings. Officials of the REIT, whose holdings include 33 W. Monroe St. and IBM Plaza at 330 N. Wabash Ave., reported during a Tuesday conference call that negotiations have begun on an early lease termination with their largest office tenant.

Prime Group officials stress Andersen continues to be current on its rent–$1.4 million a month on 579,982 sf at the 846,759-sf 33 W. Monroe St. and 76,849 sf at the 1.36-million-sf IBM Plaza.

“However, as expected, Andersen has recently informed us of their intention to vacate the vast majority of their space in the near term,” says co-president and chief investment officer Jeffery A. Patterson.

Patterson repeated the company’s view that Andersen’s space is leased at below-market rates. Andersen’s $16.8 million in annual lease payments, which represent 8.68% of the REIT’s total office portfolio, averages out to $25.60 per sf.

While the average rent at the two buildings Andersen occupies is less than $16 per sf, asking gross rents for class B space ranges from $25 per sf to $34 per sf, according to U.S. Equities Realty research. IBM Plaza is a 31-year-old asset while 33 W. Monroe St. was built in 1980.

Talks are underway with potential tenants or subtenants who may replace Andersen in the two buildings, according to the company.

“I don’t think we’re going to fool ourselves,” says co-president and chief financial officer Louis G. Conforti. “It’s a tough market out there.”