Article: Locking onto Key Tower

Atlanta real estate trust wants to buy or buy into the property

December 17, 2005

Christopher Montgomery, Cleveland Plain Dealer

The future of downtown Cleveland's 57-story Key Tower appears to be coming into focus.

Wells Real Estate Investment Trust Inc., based in suburban Atlanta, said in a Dec. 9 Securities and Exchange Commission filing that it is ready to spend $312 million to buy into -- if not buy outright -- Ohio's tallest building.

Westlake's Richard E. Jacobs Group Inc. and the State Teachers Retirement System of Ohio, which each own 50 percent of the property, put the 1.3 million-square-foot Key Tower on the market in April. Included in the deal are the adjacent 403-room Marriott hotel and a 982-space parking garage.

Wells said in the filing that it signed a "recapitalization and reconstitution" agreement with Jacobs and the pension fund on Dec. 1, and the deal is expected to close on Dec. 23. Details of the agreement, including whether Jacobs or the pension fund would retain any ownership in the property, weren't included in the filing. But Wells said that when the deal closes, it "will be entitled to all the benefits of ownership of the Key Center property, including the right to receive all net cash flow from the operation" of the property, less some for the hotel. It has already made a $20 million deposit, according to the filing.

A Wells spokeswoman declined to comment, and a spokesman for Jacobs didn't return phone calls seeking comment.

Pension fund spokeswoman Laura Ecklar would say only that the sale of the fund's stake in the property is on track.

Wells owns 30 million square feet of real estate, most of it office buildings, valued at about $6 billion. Its trophy properties include Chicago's 83-story Aon Center. Locally, it owns a 102,500-square-foot office complex in Mayfield Heights that's occupied by Progressive Casualty Insurance, an arm of Progressive Corp.