City to help fund CNA's Loop rehab

City to help fund CNA's Loop rehab $13.5 million subsidy offered to derail move By Thomas A. Corfman Tribune staff reporter Published February 23, 2005 To keep a large employer in the Loop, the Daley administration has agreed to provide a multimillion-dollar subsidy for the redevelopment of CNA Financial Corp.'s headquarters. A city grant of $13.5 million will help offset CNA's estimated $58.5 million cost of renovating the 45-story structure, constructed in 1972, said a spokeswoman for Planning Commissioner Denise Casalino, who confirmed the outline of the agreement. "We are not only retaining the employees that they have but also gathering new ones," the spokeswoman said. The deal staves off a possible move to the suburbs by the commercial property and casualty insurer, which has been advised by the Chicago real estate firm John Buck Co. At the same time, it prevents CNA's distinctive red building at 333 S. Wabash Ave., from turning into a real estate white elephant. As a part of the deal, CNA, which has 3,000 employees in its headquarters, will move about 100 employees from the suburbs to the city and hire an equal number of new workers, the spokeswoman said. The city subsidy, a tax increment financing grant, will allow the 1.1 million-square-foot building, originally designed for a single company, to accommodate multiple tenants. After the renovation is complete, about 300,000 square feet of office space will be available for lease by outside firms, the planning spokeswoman said. Even with the financial assistance, attracting tenants to the building will be challenging, some real estate executives say. "The East Loop is generally slow; it doesn't have a ton of velocity," said Steven Stratton, managing principal with tenant representative Staubach Co. "It's a B-type building, but B pricing is very soft right now," he said, referring to rents and using the real estate industry's practice of giving letter grades to office buildings. Up until now, the Wabash building was best known for a 1999 accident in which a glass pane fell, killing a pedestrian. The building's windows were subsequently replaced. The tax increment financing deal is a key step in a two-year review of its space needs by CNA, which originally occupied two buildings--the Wabash structure and a smaller, adjacent building at 55 E. Jackson, which was sold in 2003. At one point, CNA considered consolidating operations in Downers Grove, where it already has a significant office and where property taxes and real estate costs are substantially less than in the Loop. The real estate review is part of a costly financial restructuring CNA began in 2001, the result of aggressive policy pricing in the late 1990s. But the firm appears to be rebounding, and in 2004 recorded a profit of $441 million, compared with a 2003 loss of $1.43 billion. Based in Chicago since 1900, CNA is a publicly traded company that is 90 percent owned by Loews Corp., a conglomerate controlled by the New York's Tisch family that includes hotels, Bulova watches, an oil-drilling business and Newport cigarette brands. At 23 percent of the total $58.5 million, the city's grant is a particularly large amount, compared with past city deals, said attorney Rolando Acosta, who specializes in zoning and TIF deals. "But not when you consider how many jobs are involved," he added And cities have little choice but to be aggressive with financial incentives when large employers look to cut costs, said Acosta, a partner in Chicago-based Acosta, Kruse & Zemenides LLC. "The back-office jobs can easily be moved out of town," he said.>